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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.

It is no secret that state funding to universities has been declining over the last several years, and universities are trying to find ways to make up the loss. One of the more popular ideas is increasing the number of foreign students, who generally pay higher tuition rates than in-state or other US students, even preferring them to higher-achieving US students. 

So, how much is a college education worth? The U.S. Bureau of Labor Statistics reports individuals with just a high school diploma are almost twice as likely to be unemployed as those with a bachelor’s degree. Furthermore, those with four-year degrees earn, on average, more than one-third as much as adults with no college degree or certificate. That amounts to more than $400 per week, or, looked at another way, approximately $900,000 more over a lifetime in today’s dollars.

Stateline Midwest ~ June 2013

Improved state budget conditions and continuing concerns about the cost of higher education have resulted in plans across the Midwest to freeze tuition.

Stateline Midwest ~ June 2013

Ever since he joined the legislature more than a decade ago, North Dakota Sen. Tim Flakoll says, lawmakers have been looking to change how the state funds its higher-education system.

This year, he says, “We were finally able to crack the code.”

Policymakers know America’s educational system must transform to significantly increase the academic achievement of all students. A high-quality education, including content mastery and real world application, is critical to prepare students for college and careers. In order to ensure student success, leaders must tackle these top 5 issues facing states this year.

As states seek to maximize the return on their investment for higher education and continue to seek a more educated and skilled workforce, they likely will turn increasingly to outcome-based funding formulas as a mechanism to accomplish these goals.

Engineering students at Florida’s public universities may soon pay less for tuition than, say, English majors. Physics majors could get a tuition break over psychology students. A task force appointed by Governor Rick Scott has released a report recommending students in so-called STEM fields (science, technology, engineering and mathematics) should receive a break when writing checks or taking out loans to cover their tuition.

Every five years, the Tennessee Higher Education Commission completes a master plan that provides guidance on what universities and colleges should be doing for the state. There was just one problem with it. “It wasn’t paid much attention to by the institutions, I think, because there wasn’t much linkage between the state goals and the funding,” said David Wright, chief policy officer for the higher education commission. “The funding was based on (student) enrollment. The formula itself, even for all of its faults, had not been fully funded since the mid ’90s. Nothing was driving institutional behavior other than their own institutional goals or institutional statistics.

Many states have introduced performance measures into their higher education funding formulas to create institutional incentives to improve productivity. To date, however, only Tennessee has completely rewritten its college funding system to place outcomes at the center of the formula.  In doing so, the state has crafted a program that allows state funding and state policy to be closely aligned across the diversity of publically funded post-secondary institutions in the state.

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