Higher-ed funding, college costs once again policy priorities for legislatures in 2014: Ideas include 'affordability compacts,' performance-based funding and new tax deductions

During the first half of 2013, state legislators crafted and passed budgets under much improved fiscal conditions. Later in the year, college students and their parents got a bit of relief of their own: The average cost of tuition and fees at the nation’s public four-year schools had risen by the lowest rate (2.9 percent) in more than 30 years, according to the College Board’s “Trends in College Pricing 2013.” It is a pattern seen time and again: Increases in state higher-education spending (the result, in many cases, of improved fiscal conditions) lead to smaller, or even no, hikes in tuition.

“State appropriations for public education are cyclical,” the report’s authors note, “and tuition increases show similar cycles.”
In the Midwest, for example, tuition was frozen at public universities in states such as Iowa, Minnesota and Nebraska as the result of state budgets that increased funding for these schools. In Nebraska, the agreement between the governor and leaders of the university system was dubbed the “Affordability Compact”: A two-year freeze on tuition in exchange for an annual average increase in state appropriations of at least 4.2 percent.state spending on higher education
Purdue University and The Ohio State University are among the other big schools in the region where tuition did not increase, and in Wisconsin, the Legislature’s current two-year budget requires its universities to freeze resident tuition.
New proposals for year ahead
This trend may continue in 2014.
In advance of the start of Iowa’s legislative session, the state’s Board of Regents approved a tuition freeze for the 2014-15 school year; it is contingent on a 4 percent increase in state appropriations. In South Dakota, the new state budget unveiled by Gov. Dennis Daugaard calls for more funding for the state’s postsecondary schools and a year of no tuition increases for the state’s college students.
“Although South Dakota institutions are less expensive than most in the rest of the country, we should still strive to keep higher education affordable,” Daugaard wrote in a column explaining his proposal.
As Daugaard notes in that same column, national rises in tuition and fees have consistently outpaced inflation for the past two decades. Even for this current school year, the increases — though lower than in previous years — rose at a higher rate than inflation (the inflation-adjusted increase was 0.9 percent).
At the height of the recent state budget crisis, college costs rose by nearly 10 percent in a single year. And as the map below shows, in-state tuition and fees have increased by at least 15 percent over the past five years in nearly every Midwestern state (not adjusted for inflation).
Another factor in affordability is the declining level of federal grant aid; it decreased 9 percent between 2010-11 and 2012-13, according to the College Board. Will states fill some of the gap left by this loss of federal grant aid? Some new policy ideas were already emerging late in 2013.
In Wisconsin, lawmakers unveiled a proposal to allow individuals to deduct student loan payments from their income taxes. Under the same plan, individuals could also refinance their loan debt, at a lower interest rate, through a newly created Wisconsin Student Loan Refinancing Authority.
“[It] will put money back in Wisconsin residents’ pockets, and back into our economy,” says Wisconsin Rep. Cory Mason, a sponsor of AB 498/SB 376.
Michigan lawmakers have been working on plans to boost state funding for the universities, and to tie the increase to performance-based metrics — including measures of how well the schools are holding down costs.
“Under our state Constitution, the universities are completely autonomous,” notes Rep. John Walsh, Michigan House speaker pro tempore. “The Legislature can choose to give them money or not. It really is that stark. So these metrics are an enticement.”