Funding models of community colleges in 10 Midwest states

Community College Review, Winter, 2004 by Carol Piper Kenton, John H. Schuh, Mary E. Huba, Mack C. Shelley, II

The extent to which community colleges in 10 Midwest states relied on 12 current funds revenue sources between 1990 and 2000 is presented in this study. Four models of funding were identified and evaluated. All models generated revenue in excess of the change in the Higher Education Price Index (HEPI), a measure of inflation over the period studied. Implications for practice are discussed.

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Because community colleges were created in part to make higher education

financially accessible to the populace, it has been necessary for their primary funding to come from sources other than tuition and fees. According to Stringer, Cunningham, Merisotis, Wellman, and O'Brien (1999), enrollment tends to drop when tuition and fees increase. Stringer et al. observed a 0.5% to 1.0% decrease in college enrollment for every $100 increase in tuition, a finding that leads to the conclusion that the mission of the community college can be compromised when tuition and tees increase disproportionately.

Shifting proportions of revenue from local taxes, state aid, federal aid, and tuition have marked the funding of two-year colleges over the years. For example, for the years 1918, 1950, and 1999, revenues from local sources such as property taxes declined from 94%, to 49%, to 18%, respectively (Cohen & Brawer, 1996; Vaughan, 2000). In 1918, no state aid was provided to public two-year institutions, but by 1950 and 1999 states were contributing 26% and 39%, respectively, to community college revenue (Cohen & Brawer, 1996; Vaughan, 2000). Federal aid to community colleges was just 1% in 1950, but it grew to 13% in 1999 (Cohen & Brawer, 1996; Vaughan, 2000). Reliance on tuition and fees increased between 1929 and 1968 (Lombardi, 1976), although tuition was low as a proportion of all revenues (Martorana, 1958).

Although current information about community college revenue sources is limited, it appears that costs and funding patterns have changed in recent years. Harvey, Williams, Kirshstein, O'Malley, and Wellman (1998) reported that for public two-year colleges, "... total costs per student increased by 52 percent between 1987 and 1996, from an average of $5,197 to $7,916. Sticker prices increased 85 percent, from $710 to $1,316 ... [while] subsidies ... declined for part of this period" (p. 5). Watkins (2000) examined the effect of the 1991 recession on the inflation-adjusted current funds revenues of public community colleges by analyzing data from the annual Integrated Postsecondary Education Data System (IPEDS) Finance Surveys for the years 1989 through 1994. He found that while community colleges experienced a loss of governmental appropriations per student, the average community college made up for this decline through increased revenue from tuition and fees and governmental grants and contracts. In a study of 212 Midwest community colleges between 1990 and 2000, Kenton (2003) found that tuition and fees tended to increase as government appropriations went down.

The funding mix for community colleges varies considerably by state. Kenton (2003) found that some states rely heavily on tuition and fees for income (Ohio, Minnesota, North Dakota, Indiana, and Iowa), whereas others do not (especially Nebraska, Kansas, Illinois, and Wisconsin). Some states, including Minnesota, Indiana, Ohio, and North Dakota, receive comparatively generous state appropriations, while others receive less funding from this source. Local appropriations are an important revenue source in Wisconsin, Kansas, Illinois, and Michigan, but almost no income is derived from local appropriations in Indiana, North Dakota, Minnesota, and Ohio. The reasons for these differences in funding formulas may be diverse, such as historical patterns of community college finance in the various states, the philosophy of a state (e.g., whether community colleges are perceived as grades 13 and 14 or are regarded as the first 2 years of college and therefore separate from the K-12 school system), or the culture of the state. Governance also may be an issue in that no specific model for the governance of community colleges has been adopted by the various states.

The key issue guiding the current investigation was to determine if states employ different models of funding community colleges. Funding models can be of particular interest to community college leaders. Pennsylvania, for example, has struggled with a funding formula that places responsibilities for a substantial proportion of funding commitments on local sponsors who "historically have fallen short in fulfilling their commitments to provide two-thirds of community college operating costs" (Myers, 1999, p. 297). Moreover, the relationship between funding models and mission is important because, according to Wattenbarger (1985), "... most researchers have not attempted to establish a connection between the special mission of the community college and the financial support of these institutions" (p. 65).

A second and related issue guiding this study was that if different funding models could be identified, do some yield more robust funding than others? If administrators can utilize a planning process that ties the mission of the institution to its financial resources, they may be able to meet the goal of keeping college affordable and accessible while at the same time achieving financial accountability (Hay, 1990).