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Thursday, February 21, 2008 Disputed Plan Would Let Congress Weigh In on State Budgets for Colleges By SARA HEBEL <mailto:[log in to unmask]> Washington Some federal lawmakers are trying to press states to provide consistent spending increases to their higher-education systems, saying they recognize that the level of state aid colleges receive plays a critical role in how much institutions are able to rein in tuition increases and spend on improving their quality. The proposal would insert the federal government into state decisions about higher-education budgets, a new role that some colleges would welcome but that governors and state legislators call a dangerous precedent that might actually lead to less spending on higher education. The proposal, which was included in the version of legislation to renew the Higher Education Act that the U.S. House of Representatives passed this month (The Chronicle, <http://chronicle.com/daily/2008/02/1568n.htm> February 8), would ask states to increase spending on higher education each year by at least as much as they increased it, on average, over the previous five years. States that failed to do so would not receive any new matching funds from the federal government under the Leveraging Educational Assistance Partnership program, which matches funds that states commit to provide grants to financially needy students. The Senate version of the higher-education bill does not include the proposal, and House and Senate negotiators are now meeting to hash out that difference and others between their two bills. As Congress seeks to apply pressure on colleges to keep costs down, proponents of the House-approved measure say states need to be held accountable, too, for the role they play in driving up the price of college when appropriations falter. "There's been so much attention on the institutions themselves, and they are taking the hit" as Congress and the Bush administration raise concerns about rising college costs, said Daniel J. Hurley, director of state relations and policy analysis for the American Association of State Colleges and Universities, which supports the proposal. "We're pleased that Congress, for the first time, is looking to states and tasking states with some responsibility." Too Much Meddling? But the idea of the federal government meddling in state budget decisions does not sit well with governors, state legislators, and state-budget officers, who are vigorously lobbying against the measure. Moreover, they say, the approach would end up hurting students and colleges because states would be pressured to curb increases for higher education when their economies were strong, for fear that they could not keep up with federally required levels of spending if their fiscal circumstances weakened. An analysis by the National Association of State Budget Officers found that the new provision might result in states spending close to 10.6-percent, or $197.8-billion, less than they otherwise would on higher education from the 2008 budget year through 2012. The analysis assumed that, if the provision were not enacted and current law did not change, state spending would continue to grow annually at the same 5.7-percent rate as it has, on average, over the past 10 years. For its calculations of how state spending would increase if the measure did take effect, the group assumed that states would limit their growth in aid to colleges to the minimum increases required under the federal provision. "While this mandate would reduce the cyclical nature of state higher-education funding, it would have the unintended consequence of slowing the growth of state higher-education funding over the long run," the National Governors Association argued in a statement laying out its opposition to the provision. Raymond C. Scheppach, executive director of the governors' group, said the House-passed measure employed a "whole new use of the word 'maintenance of effort.'" Congress has appropriately imposed such a minimum-spending requirement on states before, he said, in cases where the federal government was taking over more responsibility from states for financing a particular government program and wanted to make sure states didn't shirk their obligations in response. Such a requirement was imposed, for instance, in 2003, when Congress temporarily changed the rules of the Medicaid program so that the federal government paid a greater share of the costs when states' economies were weak, he said. But it would be inappropriate for the federal government to dictate how states spent large portions of their budgets in a general area, Mr. Scheppach said. On average, 11 percent of state budgets go to higher education, he said. When combined with current federal requirements of states to spend certain amounts on Medicaid, that would mean more than one-third of state budgets would be tied up in priorities set by the federal government, he said. Potential Harm Minimized Advocates of the House-passed provision, though, argue that the fears opponents have raised about tying the hands of state lawmakers are overblown. Preventing states from receiving new funds from the Leveraging Educational Assistance Partnership, or LEAP, program, would not be a particularly strong punishment, Mr. Hurley argued. LEAP, he said, is relatively small when compared with many other federal student-aid programs. Last year the federal government appropriated $65-million for the grants. States would be able to make do without that money, if they had to, he said, at times when they struggled economically and might not be able to meet the federally required level of spending. One of the main proponents of the measure, Rep. John F. Tierney, Democrat of Massachusetts, wrote in a January commentary for The Chronicle that he and other supporters specifically did not want to threaten states with losing "fundamental student-aid monies," such as those the federal government provides through Pell Grants. LEAP grants, he wrote, "were selected because they are presumably important enough to garner the attention of the states, yet are not part of the existing base student aid—and thus a better incentive than other punitive proposals suggested." The bill also provides a waiver for states that are experiencing especially severe economic downturns. Nevertheless, RaeAnn G. Kelsch, chairwoman of the standing committee on education of the National Conference of State Legislatures, wrote in the same issue of The Chronicle that the choice of LEAP funds was problematic and counterproductive to the goals of improving college affordability. "The penalty for a state facing a fiscal crisis would be to deny poor students access to need-based grants and work-study assistance," she wrote. More broadly, she and other opponents of the House plan also worried about the new ground the House plan might break. "It would set a dangerous precedent for federal intrusion into state policy and appropriations authority," wrote Ms. Kelsch, who is a Republican legislator in North Dakota. Mr. Scheppach, of the governors' association, argues that mandating spending levels is the wrong approach to accountability anyway. State officials, university regents, and private businesses in the local communities need to be at the table together to discuss standards and financing if meaningful changes are to take hold, he says. He is encouraged, he said, by what he is hearing so far from senators who have been meeting this week with their House counterparts to reconcile their differences over the higher-education bill. His group and other opponents seem to have significantly more support from negotiators on the Senate side, Mr. Scheppach said. A spokeswoman for Sen. Edward M. Kennedy, Democrat of Massachusetts and chairman of the Senate Education Committee, said that Mr. Kennedy was continuing to examine the proposal. House members appear to feel pretty strongly about the provision, however, having adopted it despite the outcry from their governors and legislators. That, Mr. Hurley said, "is quite striking."