The State of Arkansas Financial Aid

At the end of WWII, the U.S made a bold decision to invest in the future of its economy by providing $1.9 billion annually to the education of returning veterans of the war. This commitment to human capital helped enable the WWII generation to become the “greatest generation.”

Possibly, Arkansas’s greatest generation is at the schoolhouse door waiting for the opportunity to propel Arkansas into the global economy.

Three things

• 30% to 15% proposal

• Scholarship fund balance

• Lottery questions

Preparation: Revisions to policies and legislation that impedes “Speed to Market and Close to Customer”

• Finance– 90/10: 90% course enrollment/ 10% complete term– Legislation to reduce institutional E&G scholarships– Annual Report of Institutional Financial Health– Revised calculation for bonds

• Academic– Program Viability threshold– Academic Program review

12

3

45

Business Leaders• Strengths

– Access– Access– Access– Many colleges– Geographic location of colleges– The two-year colleges are able to make changes

quicker to accommodate business and industry.– Increased efforts to collaborate across institutions,

focus on teaching, recent priority on retention – Providing “local” access to higher education

opportunities

• Weaknesses– Cost of attendance

– Turf battles, everyone not always on the same page about what is best for the state.

– Unhealthy in-state competition

– Need for improved coordination duplication of curriculum

– Lack of accountability

– Higher education seems to have no accountability or ability to control costs. Annual tuition increases of 7 – 10% seem to be the norm while inflation is 3% or less.  

– Graduation rates/retention – there is no incentive for higher education to graduate students.  Their funding incentive is only to enroll them

– Not customer focused to business/manufacturing needs - seem more concerned about turf.

Business Leaders

State Per Capita Personal Income v. Share of AdultPopulation with Bachelor's Degree or Higher (2007)

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000

$30,000

$32,000

$34,000

$36,000

$38,000

15% 20% 25% 30% 35% 40% 45% 50%

Percentage of Adult Population with a Bachelor's Degree or Higher

Per

Cap

ita

Inco

me

Source: U.S. Census Bureau, ACS 2006

DC

TX

NM

FL

NDNC

AL

IN

LA

MIWI

SD

WY

TN

NV

AR

IAOH

ID

SCKY

MS

WV

MOME

AZ

VA

NJ

PA

MD

MT

CT

MA

CO

NE

AK

GAHI

KSOR

DE

IL

RI MN

WA

UT

VT

NHNY

CA

OK

No state with a low proportion of

Bachelor’s degrees has a high per capita

income.

No state with a high proportion of

Bachelor’s degrees has a low per capita

income.

2007= 19.3%

2002= 19.7%

2006 2005 20022007

Growth in Associate Degrees Awarded by Public Institutions by State from 1999-2000 to 2004-2005

36.6%

22.1%

-6.6%

68.1%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Geo

rgia

K

entu

cky

Ari

zon

a T

exas

M

inn

eso

ta

Nev

ada

Ark

ansa

s N

ort

h C

aro

lina

Idah

o

Okl

aho

ma

Mar

ylan

d

Mis

sou

ri

New

Jer

sey

Wes

t V

irg

inia

F

lori

da

Ind

ian

a W

yom

ing

M

issi

ssip

pi

Co

lora

do

V

irg

inia

U

tah

O

reg

on

M

ich

igan

Io

wa

Un

ited

Sta

tes

New

Mex

ico

M

on

tan

a W

isco

nsi

n

Mas

sach

use

tts

Cal

ifo

rnia

W

ash

ing

ton

S

ou

th C

aro

lina

Ten

nes

see

Mai

ne

Pen

nsy

lvan

ia

Ala

bam

a C

on

nec

ticu

t O

hio

N

ebra

ska

So

uth

Dak

ota

V

erm

on

t D

C

Kan

sas

Del

awar

e Ill

ino

is

New

Ala

ska

New

Yo

rk

Haw

aii

Lo

uis

ian

a N

ort

h D

ako

ta

Rh

od

e Is

lan

d

SOURCE: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), "Completions" survey.

Arkansas ranks 7th in the growth of associate degrees since 1999-2000

18.9%

35.6%

15.0%

-20.6%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

Uta

h

Nev

ada

Min

nes

ota

G

eorg

ia

Flo

rid

a C

alif

orn

ia

Mai

ne

Ore

go

n

Mar

ylan

d

Pen

nsy

lvan

ia

Ark

ansa

s T

exas

In

dia

na

Okl

aho

ma

New

Jer

sey

Co

lora

do

A

rizo

na

So

uth

Car

olin

a

Kan

sas

Un

ited

Sta

tes

Oh

io

Idah

o

No

rth

Car

olin

a

Wis

con

sin

W

ash

ing

ton

C

on

nec

ticu

t K

entu

cky

Mic

hig

an

Ten

nes

see

Mis

sou

ri

New

Yo

rk

Vir

gin

ia

Iow

a W

est

Vir

gin

ia

Mas

sach

use

tts

N

ort

h D

ako

ta

New

Mex

ico

D

elaw

are

Mis

siss

ipp

i R

ho

de

Isla

nd

H

awai

i L

ou

isia

na

Ala

ska

Illin

ois

N

ew H

amp

shir

e M

on

tan

a N

ebra

ska

Ver

mo

nt

Ala

bam

a W

yom

ing

S

ou

th D

ako

ta

DC

Growth in Bachelor’s Degrees Awarded by Public Institutions by State from 1999-2000 to 2004-2005

SOURCE: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), "Completions" survey.

Arkansas ranks 11th in the growth of bachelor’s degrees since 1999-2000

Legislation to reduce Institutional E&G Scholarships

• From 30% of Tuition revenue to 15%

• Not a new idea: October, 1999Dr. Steven Gamble, president of SAU and Dr. Win

Thompson, president of UCA, addressed the AHECB concerning resolution of the issue of the excessive amount of money being expended by four-year institutions for scholarships in the competition for students.

Gamble and Thompson told the board that the four-year presidents and chancellors could not resolve the issue and requested that the board intervene to establish a policy to limit the percentage of E&G funds that four-year institutions may use for scholarships.

Legislation to reduce Institutional E&G Scholarships

The academic arms race… “In an arms race, there is a lot of action, a lot of spending, a lot of worry, but if it’s a successful arms race, nothing much changes. The essence of an arms race is position—how a country or university stands relative to others. No single institution alone can safely quit the race, even though all institutions, together, would be better off if everyone did. Unilateral disarmament will swiftly be punished by loss of position and increased vulnerability.” (Winston, 2003)

Institutional E@G Funded Scholarships are great for students receiving a scholarship, but expensive for those who do not receive the scholarship

Sources of E&G Revenue• Tuition/Fees and State Funds• State Funding formula determines institutional need

– Need includes:• Faculty salaries, operating supplies, Library, equipment • Utilities, on-going maintenance• Student support, staffing• Does not include scholarships• Does not include debt service

• Legislature allocates funds according to formula with assumption funds will go to address institutional needs determined by the formula

• Quality instruction and quality student experiences diminish if institutions use these funds for unintended purposes.

• Prior to1997 -- 15% cap in board policy

• No cap from 1997-2005

• < 30% in 2005 by legislation, No repercussions

Impact of Scholarships on Tuition

$324

$403

$427

$513

$960

$1,111

$1,200

$1,225

$1,589

$2,433

$4,817

$2,727

$5,381

$3,513

$2,950

$4,299

$3,390

$3,670

$3,012

$3,232

0% 20% 40% 60% 80% 100%

UALR

UAFS

UAF

UAPB

UAM

ASUJ

SAUM

HSU

ATU

UCA

Portion of Tuition & Fees for Scholarships

Net Tuition & Fee Income

FY 2007

$5,665

$4,601

$4,895

$4,590

$5,410

$3,910

$4,027

$5,808

$3,130

$5,141

Academic Challenge/Governor's Scholarship, State Need-Based Aid, Institutional Scholarships, Student Loans

(in $millions)

3.23 3.7

13.924.97 24.83 28.7734.77

66.2185.85

95.8

141.59

215.42

330.92

395.73

4.99

454.03

$0

$100

$200

$300

$400

$500

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

State Need-Based Aid Academic Challenge/Governor's Scholarship

Institutional Scholarships Student Loans

Institutional E@G Funded Scholarships are great for students receiving a scholarship, but expensive for those who do not receive the scholarship

FY 2008 Expendable Fund Balances (Without Accounts Receivable, Inventories or Encumberances)

($10,000,000)

($5,000,000)

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

ASUJ ATU HSU SAUM UAF UAFS UALR UAM UAPB UCA

FY08 Fund Balance

Expendable Fund Balance

ASUJ Fund Balance is Consolidated Fund Balance In this Chart Only

Expendable Fund Balances should not be interpreted as an indication of an institution’s cash funds or that an institution has difficulty in meeting payroll or accounts payable.

UAF Fund Balance is Consolidated UA Fund Balance

UniversityTuition and Fee Revenue

22%78%

Institutional Scholarships

Actual Tuition and fees

Revised calculation for bonds

Community College Tuition and Fee Revenue

7%93%

InstitutionalScholarships

Actual Tuition and fees

Revised calculation for bonds

Academic and Performance Scholarship Expenditures for Fiscal 2007-08

Scholarships Scholarships

as a Percent as a PercentInstitution of Tuition & Fees Institution of Tuition & Fees

ASUJ 14.1% ANC 4.4%ATU 31.1% ASUB 10.4%HSU 22.1% ASUMH 3.6%SAUM 25.6% ASUN 3.1%UAF 9.7% BRTC 2.8%UAFS 12.3% CCCUA 0.0%UALR 11.3% EACC 5.9%UAM 15.9% MSCC 4.0%UAPB 19.6% NAC 4.1%UCA 26.3% NPCC 5.1%University Total 16.7% NWACC 1.7%

OTC 16.2%OZC 6.6%PCCUA 4.4%PTC 3.0%RMCC 10.1%SACC 1.8%SAUT 3.3%SEAC 2.0%UACCB 4.7%UACCH 17.4%UACCM 7.1%College Total 4.7%

GRAND TOTAL 14.5%

Recommend that the legislature reduce E&G scholarship threshold to 15%

• (b) Beginning with the 2013-2014 fiscal year, no public college or university’s educational and general spending for academic and performance scholarships shall exceed fifteen percent (15%) of its unrestricted educational and general tuition and mandatory fee income.

• (c) Any expenditure for academic and performance scholarships over fifteen percent 15% of unrestricted educational and general tuition and mandatory fee income will be deducted from the state funding recommendations as determined by the appropriate funding formula model for each fiscal year in the following biennium.

Repercussion:

What can we do to improve

our performance? Plenty

• Performance Measures:– Accountability, Oversight, Repercussions– Incentives connected to student success– Remove impediments to student success– Target particular workforce needs

• Greater State Support– Imbalance in Tuition/State Funding ratio– Low tuition

• Enhance Scholarships

What can we do to improve

our performance? Plenty

• Performance Measures:– Accountability, Oversight, Repercussions– Incentives connected to student success– Remove impediments to student success– Target particular workforce needs

• Greater State Support– Imbalance in Tuition/State Funding ratio– Low tuition

• Enhance ScholarshipsHistorically there has been no enthusiasm for any of these measures

IF you could develop a scholarship system for a state, what would it look like?

The scholarship should:• Motivate/reward students to be prepared for college. –

Smart core? More prepared? Less? • Allow students to choose where to attend college. • Encourage students to complete their degree.• Encourage students to major in disciplines important to

Arkansas. • Address student merit.• Address student need.• Easy to understand rules and regulations.• Financially stable.

21 Scholarship Programs: difficult to qualify, difficult to keep.

FY08 Scholarship Fund Balance?

• ADHE authorized by the legislature to spend up to X amount for each scholarship

• Each scholarship has strict criteria

• Unawarded funds are deferred for future years in fund balance as required by law

• Every student who applied and met the current scholarship criteria was awarded the funds

$ 51,854,906How in blazing saddles could that happen?What in tarnation are you going to do to fix it?

Exacerbating Factors/Excuses

• Advertising funds are not authorized for all programs (Only for GO and Academic Challenge)

• Very precise qualifications for many scholarships• Paperwork, paperwork • Inability to adjust as needed

$ 51,854,906

How did we get such a large fund balance?

Scholarships (21 programs)

Academic Challenge

Governor’s

Go Grant

Teachers (4)

WIG

Other

51,854,906

26 M

8 M

6 M

5 M

Need- Merit

MeritNeedTargeted

Adults - w/ Need

Of Those that lose AC: 20% Lose Academics

27% Lose Hours

53% Both

Other

How did we get such a large fund balance?

Scholarships (21 programs)

2002 - 2003

2004

2005

2006

2007

2008

51,854,906

13 M

10 M

8 M

-1 M

15 M

5 M

Does ADHE want to spend these funds on scholarships? YES

Should we be careful in doing this? YES

And we will. Based upon future projections the fund balance will be needed to cover current scholarships.

Absolutely. We need to be careful. We do not want to have an inability to pay our scholarship obligations such as happened in 2002-2003. The next three charts illustrate our concerns.

Percentage of Incoming Freshmen Receiving Academic Challenge Scholarships (Fall Semester)

0

10

20

30

40

2001 2002 2003 2004 2005 2006 2007

PUBLIC 2-YEAR

PUBLIC 4-YEAR

INDEPENDENTLower income limits

Higher award

No Awards

Higher Income limits

Higher award

Financial Aid Growth

-$10,000,000

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

2009 2010 2011 2012 2013 2014 2015 2016

Expense General Revenue Carry Forward

$16 million

Expense

General Revenue

Carry Forward

Financial Aid Growth Projections

2016

General Revenue

Expense

Fund Balance

16 M

Expanding current scholarships will impact the fund balance even more than the above scenario illustrates.

cFinancial Aid Growth Scenario

Fiscal year Expense Increase Balance General

RevenueCarry Forward

2009 46,500,000 3,470,000 1,100,000

47,600,000 52,900,000

2010 49,290,000 2,790,000 (1,690,000)

47,600,000 51,210,000

2011 51,754,500 2,464,500 (4,154,500)

47,600,000 47,055,500

2012 53,824,680 2,070,180 (6,224,680)

47,600,000 40,830,820

2013 55,977,667 2,152,987 (8,377,667)

47,600,000 32,453,153

2014 58,216,774 2,239,107 (10,616,774)

47,600,000 21,836,379

2015 60,545,445 2,328,671 (12,945,445)

47,600,000 8,890,934

2016 62,967,263 2,421,818 (15,367,263)

47,600,000 (6,476,329)

Appropriation levels assumed flat at fiscal 2009 levelsGR Funding assumed flat at fiscal 2009 levels Programs rules, eligibility unchanged from fiscal 2009Fiscal 2010 -2011 growth = 5% Fiscal 2012-2016 flat

4%

Student Aid Performance: Then, Now and Going Forward

Students Dollars

7,5478,306

7,196 18.9 M

19.5

23.4 MAcademic Challenge

2003 2008 2013 2003 2008 2013

Student Aid Performance: Then, Now and Going Forward

Students Dollars

705

1,350

1,118

7.0 M9.3 M

10.7 M

Governor’s Scholars

2003 2008 2013 2003 2008 2013

Student Aid Performance: Then, Now and Going Forward

Students Dollars

3,695 3,600 3,422 3.7 M

3.9 M 3.9 M

WIG

2006 2008 2013 2006 2008 2013

Student Aid Performance: Then, Now and Going Forward

Students Dollars

5,000

1,1701.1 M

5.0 M

Go Grant

2008 2013 2003 2008 20132003

Student Aid Performance: Then, Now and Going Forward

Students Dollars

535

1,250

999

0.9 M

6.6 M

7.9 M

Teacher Programs

2003 2008 2013 2003 2008 2013

* STAR added 2004

Minority Teachers

Minority Masters

STAR

TOP

SREB Doctoral Scholars

Arkansas Geographical Critical Shortage Minority Teacher Scholarship

Faculty Admin Fellows

• Streamline Programs - Common application for all programs

• Simplify process for applicants• Improve efficiency

• GO! Opportunities Grant – expand• Expand eligibility to all students enrolled in college that meet the

income guidelines ($25,000 or less)

• Consolidate Teacher Programs – (STAR, Minority Teachers Scholars & Minority Masters)

• Simplify process for applicants• Convert from a loan forgiveness program to a loan repayment

program that will assist teachers in paying outstanding federal students loans

• Increase award or income requirement for academic Challenge

Proposed Scholarship Changes

Use 800k of fund balance to do this

Current allocation for this program should cover this

Current allocation for this program should cover this

May draw from current fund balance in future years

College Access Challenge Grant Week of February 16-22

ADHE has a grant from US DOE and Winthrop Rockefeller Foundation to promote college going and scholarships

Lottery Scholarship Questions

• How many $$$ will the lottery create for scholarships? $30-50-100-120 million?

• Smart core or not smart core? – Will there be a preparation component?

• Expand current programs?– Add a separate lottery scholarship?– Merge most programs into one big program?

• Do you want to target funds for particular workforce needs? How much?

• Need? Merit? Both? Income cap? • How many $$$ should reside in the fund balance?• Is the legislature willing to address shortages, if scholarships

out spend the lottery/fund balance?

Many groups have suggested different lottery ideas. ADHE feels we should budget 40-50 million as projected revenue for lottery and should use the funds to expand current aid programs. Here are the questions that groups have been wrestling with:

Nearly all economic growth and prosperity for individuals, families, cities, states, and the country is now driven by college educated workers.

Those individuals, families, cities, states and –increasingly—countries with the most education are prospering, while those with the least higher education are experiencing relative and often absolute economic decline.

--Postsecondary Education OPPORTUNITY, June 2005.

Time and Place