Higher Education……Ohio’s Key to Individual Opportunity, Competitive Advantage, and Economic Prosperity

Before the House Finance and AppropriationsSubcommittee on Higher Education

Representative Cliff RosenbergerChair

Testimony

of

Bruce Johnson, President

INTER-UNIVERSITY COUNCIL OF OHIO

 

March 6, 2013

 1

Median Annual Earnings & Tax Payments of Full Time Workers Age 25 and Older

Source: Education Pays 2010, The College Board

2

The Proportional Relationship Between Educational Attainment and Earnings Education Does Pay

• This is a depiction of the of the earning capacity and tax payments of people with various educational attainment levels.

• College-level learning is a key to economic opportunity and prosperity, for individuals and the state, and to a strong democracy. In tough economic times, college credentials are more valuable than ever.

• According to the 2011 Georgetown University Center on Education and the Workforce report, The College Payoff, workers with Bachelor’s degrees earned 84 percent more over a lifetime than high school graduates in 2009.

• The financial return associated with additional years of schooling beyond high school and the gaps in earnings by education level have increased over time.

• Federal, state, and local governments enjoy increased tax revenues from college graduates and spend less on income support programs for them, providing a direct financial return from investments in postsecondary education.

• College-educated adults are more likely than others to receive health insurance and pension benefits from their employers and to be satisfied with their jobs.

3

Unemployment Rate by Education Level

4

Educational Attainment Impacts Employment

• This is a depiction of how the unemployment of Americans has been impacted by their educational attainment.

• Higher education’s value remains solid and strong, even through the recent recession. By early 2012, only about half, 47 percent, of the jobs lost during the recession had been regained.

• The unemployment rate for college graduates rose sharply, from 2.6 percent to 4.6 percent, between 2008 and 2009. But the unemployment rate for high school graduates rose from 5.7 percent to 9.7 percent at the same time.

• Since then, more than half of the employment increases have gone to workers with a Bachelor’s degree or better, the rest of the gains to those with some college education or an Associate’s degree. Even in the recovery, workers with only a high school diploma or less have continued to lose jobs.

• Those with a high school diploma or less need 5.8 million more jobs to reach their prerecession employment level, while workers with a Bachelor’s degree or better have 2.2 million jobs over their prerecession level.

5

Ohio’s Projected Degree Gap

6

The Gap Won’t Close Unless Some Things Change

• This is a graph provided by the Lumina foundation. It predicts a significant gap between the number of degrees being produced in Ohio and the number needed.

• To win the competition for jobs, Ohio must close the existing “gap” between new and evolving employer needs and workforce knowledge and skills. A substantial majority of new jobs being created (more than 60 percent by 2020) will require postsecondary education credentials.

• Ohio has a nearly one million graduates “gap” between the number of college-educated adults we currently have and the number we are going to need to meet projected demand.

• Colleges/universities are embracing a new statewide “culture of completion” to close the gap. Closing the workplace/workforce gap will require dramatically increasing college completion rates and educational attainment levels in Ohio – so colleges and universities have made increasing course and degree completion rates a strategic priority.

7

Former Chancellor Jim Petro ----

“Projections show that if we do not increase our college-going and college completion rates at all over the next decade, Ohio will have 61,000 fewer adults in the workforce with postsecondary credentials.

Closing this gap will be no easy task. One study, for example, estimates that Ohio’s colleges and universities will need to increase the number of degrees they confer by 10 percent annually to meet workforce needs for 2018”

Complete College Ohio Task Force Report & RecommendationsNovember, 2012

8

Public FTE Enrollment, Educational Appropriations and Total Educational Revenue per FTE, Ohio – Fiscal 1986-2011

Source: SHEEO

9

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000 $

6,63

6

$7,

132

$7,

108

$6,

931

$6,

951

$6,

731

$6,

150

$5,

746

$6,

048

$6,

391

$6,

730

$7,

398

$7,

518

$7,

389

$7,

456

$7,

510

$6,

642

$5,

950

$5,

673

$5,

511

$5,

473

$5,

313

$5,

243

$5,

278

$4,

658

$4,

480

$3,

678

$3,

846

$3,

899

$4,

242

$4,

272

$4,

396

$4,

713

$4,

903

$4,

874

$5,

041

$5,

215

$5,

491

$5,

486

$5,

212

$5,

186

$5,

072

$5,

239

$5,

257

$5,

455

$5,

781

$6,

026

$6,

305

$6,

079

$5,

815

$5,

947

$5,

850

Net Tuition Revenue per FTE (constant $) Educational Appropriations per FTE (constant $) Public FTE Enrollment

Pu

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(Th

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Note: Constant 2011 dollars adjusted by SHEEO Higher Education Cost Adjustment (HECA). Educational Appropriations include ARRA funds.

Total Educational Revenue in Ohio is Decreasing Tuition Is Up and State Share of Support Is Down

• This graph shows Ohio’s growth in tuition, it’s reduction in per student state support, and it’s overall enrollment growth.

• In its latest compilation of State Higher Education Finance data, the State Higher Education Executive Officers organization reports that state and local per student support fell to $6,290 in 2011, the lowest level in 25 years.

• The start of the 2012-2013 academic year will see a series of published tuition rate increases at public colleges and universities throughout the U.S., passed in response to state appropriations that were reduced, held flat, or were simply insufficient in meeting student enrollment growth and institutional operational cost increases.

• Over the past decade, The College Board estimates that published in-state tuition rates at public colleges and universities across the country have increased at 5.6 percent beyond the rate of general inflation.

10

State Share of Instruction Per FTE by SectorFY2003-FY2012

Source: Ohio Legislative Service Commission

11

State Share of Instruction is DecliningThere Has Been an Historic Underfunding of Higher Education in Ohio

• The current budget distributes $1.37 billion in FY14 and $1.39 billion in FY15 to state supported university main and regional campuses.

• Funding in FY97 was $1.43 billion and in FY98, $1.50 billion. Higher than the current appropriation level.

• Funding in FY08 was $1.67 billion and in FY09, $1.84 billion. Still higher than the current appropriation level.

• If we are to meet the state’s policy goal of graduating more students, a goal which the IUC supports, we should also see an increase in state funding.

• Medicaid, the $400 billion federal-state health care program for low-income citizens, covers some 60 million people. Across the country, average state spending on Medicaid increased by 20 percent in fiscal 2012, following a 23 percent increase in fiscal 2011.

• The NGA/NASBO fiscal survey reports that while governors’ proposed budgets for fiscal 2013 project a restrained four percent growth rate in state Medicaid spending, expected payments on the program continue to outpace overall growth in general fund expenditures.

12

Average In-State Undergraduate Tuition by SectorFY2003-FY2012

Source: Ohio Legislative Service Commission

13

Percent Change by State in Educational Appropriations and Net Tuition Revenue per FTE by State, Fiscal 1996-2011

14

Tuition Continues to Grow

• The cost of higher education must be contained.• The IUC supports tuition caps at the negotiated level of 2 percent as currently

provided for in H.B. 59.• The IUC supports the option of creative tuition alternatives like the Ohio University

guaranteed tuition proposal.• Nobody argues that tuition in Ohio is high, but tuition in Ohio is growing at below the

national average.• Treatment of tuition rates in Ohio law:

124th General Assembly – Am. Sub. H.B. 94: Eliminated all tuition and fee caps for state universities beginning in FY 2002.

125th General Assembly – Am. Sub. H.B. 95: Established a cap of 6% (9% for The Ohio State University) on annual increases of in-state undergraduate instructional and general fees, but allowed institutions to increase fees an additional 3.9% if the increase was used exclusively to fund scholarships for low-income students.

126th General Assembly – Am. Sub. H.B. 66: Allowed Boards of trustees to increase undergraduate instructional and general fees for Ohio residents by the lesser of 6%, or $500 per full-time student.

127th General Assembly – Am. Sub. H.B. 119: Required boards of trustees to restrain (freeze) increases in in-state undergraduate instructional and general fees.

128th and 129th General Assembly – Am. Sub. H.B. 1, Am. Sub. H.B. 153: Required boards of trustees to limit increases in in-state undergraduate instructional and general fees to 3.5% over what the institution charged the previous year.

15

State Spending/Appropriation Need Based Financial AidFY2000-FY2015

Source: Ohio Legislative Service Commission

16

FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

OCOG OIG

$ in m

illions

Net Tuition Revenue per FTE and State-Funded Tuition Aid per FTE by State, Fiscal 2011 (Public Institutions Only)

17

Student Debt Levels Must be Contained

• OCOG funding is insufficient.

• Michigan and Ohio reduced expenditures on undergraduate state grant aid by over 50 percent between 2005‑06 and 2010‑11.

• Over these five years, nine states more than doubled their expenditures — including six states that more than tripled their expenditures (Alaska, Arizona, Arkansas, Hawaii, North Dakota, Wyoming).

18

State Tax Advantage for 529 College Savings PlanSource: Peterson's Staff updated on Friday, January 25, 2013

• Illinois – Up to $10,000 for single filers / $20,000 for joint filers.

• Indiana – 20 percent tax credit up to $5,000 in contributions per individual tax return per year. The maximum yearly credit is $1,000.

• Michigan – Up to $5,000 for single filers / $10,000 for joint filers.

• Ohio – Up to $2,000 per beneficiary.

• Pennsylvania – Up to $12,000 per beneficiary per taxpayer (any state plan).

• West Virginia – Full amount of contribution.

• Kentucky – Does not provide tax advantages for investment in college savings plans.  

19

Incentives to Reduce Student Debt

• About 57 percent of students who earned bachelor’s degrees in 2010-11 from the public four-year colleges at which they began their studies graduated with debt. The average debt per borrower was $23,800, up from $20,100 (in 2011 dollars) a decade earlier.

• Tax advantages in Ohio are relatively low and could be increased to provide incentive for savings.

• Education tax credits and deductions are “tax expenditures.” They reduce federal income tax liabilities. Their impact on the federal budget is the same as the impact of direct expenditures.

• The number of taxpayers benefiting from the tuition tax deduction declined from 3 million in 2008 to 1.2 million in 2010, as the number of filers benefiting from education tax credits increased from 5.2 million to 11.9 million.

• The number of taxpayers benefiting from the tuition tax deduction declined from 3.0 million in 2008 to 1.2 million in 2010, as the number of filers benefiting from education tax credits increased from 5.2 million to 11.9 million.

20

Co-op/Internship & Workforce Development

Source: 2012 Student Survey, National Association of Colleges and Employers

• Approximately 60 percent of 2012 college graduates who took part in paid internships received at least one job offer.

• Among those interning for for-profit employers, 64 percent earned job offers compared to 38.3 percent of their unpaid peers.

• Paid interns spent 42 percent of their time on professional duties (analysis and project management) and just 25 percent on clerical and non-essential functions.

21

Sector  Offer Rate –  Paid Intern 

Offer Rate –  Unpaid Intern

Offer Rate –  No Internship

For Profit 64.0% 38.3% *

Non-Profit 42.4% 36.8% *

Federal Govt 59.0% 39.5% *

State/Local Govt 49.1% 31.9% *

Overall 59.9% 37.1% 35.7%

Workforce Development and Higher Education Must be Aligned

• The IUC supports the Co-op and Internship Program.

• The IUC supports the mission of the program to promote and encourage cooperative education programs and internship programs at Ohio institutions of higher education in order to support the growth of Ohio's businesses by providing businesses with Ohio's most talented students and providing Ohio graduates with job opportunities with Ohio's growing companies.

• The IUC is willing to work with the Governor’s Office of Workforce Transformation to align internship programs with targeted areas identified by business at a regional level.

• The IUC respectfully requests that the current funding level of at least $11 million in each fiscal year be restored to the Co-op and Internship Program so that the program may remain a viable program.

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Conclusion

• The IUC thanks the Governor for his support of higher education in this budget.

• The IUC supports his effort to align funding with the compelling goal to increase the production of highly skilled workers by encouraging graduations at state universities.

• The IUC encourages policy makers to reaffirm their commitment to the SSI, the Co-op and Internship Program, and OCOG by increasing funding for each of these programs.

• The IUC encourages policy makers to consider strengthening the tax benefits for college savings to assist students and to help lower the overall debt burden.

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Questions