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object(Timber\Post)#3711 (44) { ["ImageClass"]=> string(12) "Timber\Image" ["PostClass"]=> string(11) "Timber\Post" ["TermClass"]=> string(11) "Timber\Term" ["object_type"]=> string(4) "post" ["custom"]=> array(5) { ["_wp_attached_file"]=> string(12) "R_512HJR.pdf" ["wpmf_size"]=> string(7) "2212127" ["wpmf_filetype"]=> string(3) "pdf" ["wpmf_order"]=> string(1) "0" ["searchwp_content"]=> string(41950) "www.ppic.org Defunding Higher Education What Are the Effects on College Enrollment? Hans Johnson with support from Belinda Reyes and David Ezekiel Supported with funding from the Donald Bren Foundation and The James Irvine Foundation SUMMARY C alifornia’s financial commitment to higher education has been compromised by fiscal crises and competing state priorities. Despite large increases in the demand for higher education, state general fund spending in this area has declined notably over the past ten years. California now spends more on corrections than on its public universities. This report examines the effects of this disinvestment on the enrollment rates of recent high school graduates at the University of California (UC), the California State University (CSU), and the California Community Colleges. Key findings include: • Increasingly, h igh s chool g raduates i n C alifornia a re l ess l ikely t o e nroll i n a ny f our-year college. • Enrollment rates a t U C a nd C SU h ave f allen b y o ne-fifth o ver t he p ast fi ve y ears, f rom a bout 22 percent of all high school graduates to below 18 percent. • Among the s tate’s m ost h ighly p repared h igh s chool g raduates, t he e nrollment r ate h as declined even more—from around 67 percent to 55 percent. • Many opt f or o vercrowded c ommunity c olleges, b ut i ncreases i n e nrollment r ates t here d o not make up for the declines at UC and CSU. • A small but n otable s hare o f t hose w ho w ere e ligible a nd e ven a ccepted i nto U C a nd C SU do not attend college anywhere. REUTERS/LUCY NICHOLSON Defunding Higher Education2www.ppic.org These enrollment declines have occurred as California’s public colleges and universities have employed various strategies to balance their budgets. Those strategies include cutting courses, programs, a nd s tudent s ervices, a s w ell a s m aking a dministrative c uts. C ertain p oli- cies and practices have been designed to limit enrollment, including capping enrollment at more desirable campuses. From a student perspective, the increased tuition and fees at UC and CSU campuses have been the most dramatic change, and community college students have faced greater difficulties in finding classes. Increased state f unding f or h igher e ducation w ould a lmost c ertainly r everse t hese trends. A proposed t ax i nitiative c ould l ead t o i ncreased r evenue f or t he s tate, w ith p olicy- makers explicitly i dentifying h igher e ducation a s a p rimary b eneficiary i f t he i nitiative p asses. Regardless of t he s uccess o f t he i nitiative, s teps c ould a nd s hould b e t aken t o e nsure t hat higher education expenditures are allocated in as efficient a manner as possible. One sugges- tion, for example, would fund the state’s colleges on the basis of student outcomes, such as courses and degrees completed, as well as enrollment. But without additional revenue, such steps are not l ikely t o f ully o vercome t he o verall d ecline i n s tate s upport f or h igher e ducation. If current enrollment t rends p ersist, C alifornia f aces a n a larming l oss o f c ollege g raduates— at a time when the state needs to be developing a more highly skilled workforce to ensure its future prosperity. PPIC has projected that the state will fall one million college graduates short of economic demand by 2025 unless enrollment and graduation rates improve substantially. Had enrollment rates not declined over the past few years, California would be on a path toward closing this workforce gap. Instead, it looms as large as ever. Please visit the report’s publication page to find related resources: www.ppic.org/main/publication.asp?i=988 3Defunding Higher Education www.ppic.org Introduction California, once a leader in higher education, is falling behind other states and nations in developing the highly skilled workforce necessary for our future prosperity. By 2025, two of every five jobs in California will require a bachelor’s degree (Reed 2008), and nationwide, more than 60 percent of all new jobs will require some form of postsecondary education (including associate’s degrees and certificates as well as bachelor’s degrees). 1 Yet the enroll- ment rates of recent high school graduates in California’s public colleges and universities have not kept pace with ris - ing demand. For the first time in our state’s history, young adults in California are less likely than older adults to have graduated from college (Johnson 2010). If current trends persist, PPIC projects that the state will fall one million college graduates short of economic demand by 2025. 2 The size of this gap means that the state cannot rely on just one approach to closing it. Rather, the state will need more high school graduates to earn certificates and degrees from technical and community colleges and more to gradu - ate from four-year institutions. Reaching underrepresented groups, particularly the large and growing Latino student population, is key to closing the gap. 3 California’s ongoing budget crises have dramatically reduced state support for higher education. The Univer - sity of California (UC) and the California State University (CSU) have responded by reducing costs, increasing tuition and fees, and limiting enrollment. Along with the Califor - nia Community Colleges (CCC), they have reduced course offerings and other resources for students. 4 These restric - tions vary across institutions and campuses but are likely to be felt most strongly among recent high school gradu - ates as they decide whether to enroll in college. In this report, we examine the effects that these fis - cal crises have had on student enrollment at the state’s public colleges and universities. We focus on the college enrollment of recent high school graduates because this is a pivotal point in an individual’s educational direction. The vast majority of students who earn a college degree, including an associate’s degree, first enter college shortly after graduating from high school. Changes in the share of high school graduates who enroll in college have long-term implications for the state. 5 Declines in enrollment rates mean that California’s future workforce will be less skilled and less able to meet the demands of an economy that increasingly rewards more highly educated workers. Our key finding is that the share of recent California high school graduates enrolling in the state’s public col - leges and universities has declined over the past five years. Enrollment rates to UC and CSU have fallen by one-fifth, from about 22 percent to below 18 percent. Among the state’s most highly prepared high school graduates—those completing the a–g courses required for admission to UC and CSU—the enrollment rate has declined from around 67 percent to 55 percent (Figure 1). California’s budget crises have dramatically reduced state support for higher education. 65.6 67.5 67.9 61.2 54.9 21.5 21.9 21.1 19.9 17.8 Figure 1. Enrollment rates of recent high school graduates to UC and CSU have declined a–g graduates All high school graduates 60 70 80 0 10 20 30 40 50 2006 2009 2008 2007 2010 Percentage SOURCE: Author‘s calculations based on California Postsecondary Education Commission (CPEC) (2010). NOTE: Data are restricted to California high school graduates and residents. Defunding Higher Education4www.ppic.org To understand these declines, we first describe reduc- tions in state support for higher education, then we assess the responses of the state’s public colleges and universities. Finally, we examine trends in student enrollment and con - clude with a discussion of policy implications and recom - mendations. Reductions in State Support for Higher Education Despite large increases in the number of high school graduates, state general fund spending on higher education has declined notably. In 2010–11, the state spent $1.6 bil - lion less on higher education than it did ten years earlier. 6 These declines partly reflect California’s severe recession and lower general fund revenues. But they also reflect changing state priorities: Declines in higher education expenditures have exceeded those for other state func - tions. For example, over the past ten years, general fund expenditures for higher education have fallen 9 percent, whereas general fund expenditures for corrections and rehabilitation have increased 26 percent. 7 Indeed, the state now spends substantially more on corrections and reha - bilitation than it does on its public universities (UC and CSU combined). 8 It is worth noting that between 2003 and 2010, the prison population increased 1 percent, whereas CSU and UC enrollment (full-time-equivalent students) increased 13 percent. 9 This decline in the budgetary priority of higher educa - tion is part of a much longer historical trend. In the mid- 1970s, for example, the state spent almost four times more on higher education than on corrections, and almost 18 percent of all general fund expenditures went to higher education. Today, higher education receives around 12 per - cent (Figure 2). These changing priorities are not the consequence of well thought out planning and priority setting on the part of the state. 10 Nor are they aligned with the desires of most Californians: In the May 2011 PPIC Statewide Survey, 68 percent of respondents opposed spending cuts in higher education to reduce the state budget deficit, and 62 percent supported spending cuts in prisons and corrections to do so (Baldassare et al. 2011). Policymakers often insist that their hands are tied with respect to budgeting and expenditures and that they have relatively little latitude to increase expenditures or even move funding from one area of government function to another. 11 And to a certain extent, the state’s budget priori - ties are driven by federal and state requirements, voter- approved initiatives, court mandates, and caseloads. UC and CSU are especially vulnerable in this context, as there are no mandates or requirements that the state provide funding for its public universities. Community colleges are somewhat more protected, because they are part of the Proposition 98 guarantee for K–14 education. 12 Furthermore, higher education is seen as a budget area that, unlike other government services, has the ability to compensate for cuts in state expenditures. A common and not incorrect assumption is that public colleges and universities have sources of funds, particularly students and the tuitions they pay, that are not available to other government services. (Prisoners cannot pay for the cost of their own incarceration, and it would be nonsensical for welfare recipients to pay for their welfare.) This assump - Figure 2. Relative spending on higher education has declined 17 18 19 10 11 13 12 14 15 16 Percentage SOURCES: CPEC (2010); LAO (2011). NOTES: Data for 1967–2010 show the higher education share of state general fund expenditures. Figures for 2011–12 are estimates. Higher education share of state general fund expenditures, 1967–2011 1967–68 1969–70 1971–72 1973–74 1975–76 1977–78 1979–80 1981–82 1983–84 1985–86 1987–88 1989–90 1991–92 1993–94 1995–96 1997–98 1999–00 2001–02 2003–04 2005–06 2007–08 2009–10 2011–12 Defunding Higher Education12www.ppic.org overall but with a larger share of those students attending part-time rather than full-time. 36 Overall, the evidence suggests that despite improve - ments in college readiness, the university enrollment rates of recent high school graduates have declined for each of California’s four largest ethnic groups (Latinos, whites, Asians, and African Americans). Declines are sharpest among African Americans and are the lowest among Latinos. 37 The relatively small decline in the likelihood that a Latino high school graduate attends either UC or CSU is notable, given the very large and growing number of Latino high school graduates in California. Where Are Students Going? From the perspective of the state and its future economic outlook, declines in the number of accepted applicants at UC and CSU who actually enroll would not be so problem - atic if students were choosing to pursue some other higher education opportunity. Many do, but overall the evidence suggests that some do not. UC figures show that the primary destination of students who rejected their UC offer in 2010 was a private university (34%), followed by CSU (30%), a California com - munity college (12%), and, finally, an out-of-state public college (8%). However, about one in ten did not appear to enroll in any college. 38 Over the past ten years, CSU has grown slightly as a destination, with no significant change in the other destinations. Among eligible applicants to CSU who were not accepted to their chosen campus, it appears that less than 10 percent did not appear to enroll in any college. 39 We see some evidence of increases in enrollment rates at community colleges. Our best estimate suggests that the enrollment rates of recent high school graduates have slightly increased (from 34.1% in 2006 to 35.4% in 2009). 40 But these very slight changes in community college enroll - ment rates do not make up for the declines in enrollment rates at UC and CSU. That is, even if the community college enrollment rates of recent high school graduates increased 1.3 percent, the enrollment rate decline of 4.2 percent at UC and CSU combined is much larger. 41 We do not see any evidence that recent high school graduates in California are increasingly choosing private institutions in the state. 42 Our best estimates indicate that the share of recent California high school graduates enroll - ing in private colleges in the state has remained at 3.5 per- cent for the past five years. 43 However, the number of recent high school graduates leaving California to attend four-year colleges in other states appears to have increased. By 2008, California was losing about 2,500 more students to other states than it was in 2006. 44 If this trend continued to 2010, the increase in the number of students leaving the state would have been about 5,000. Thus, it seems likely that a small but notable share of the enrollment rate declines observed at UC and CSU between 2007 and 2010 (which amounted to about 20,000 students) can be attributed to an increase in the number of students leaving the state. 45 When we consider enrollment decisions in terms of race and ethnicity, we find that whites, Asians, and African Americans are more likely than Latinos to choose out-of- state or private colleges. But even for those groups, only about 3 percent enroll in accredited private institutions. 46 In sum, California’s recent high school graduates are less likely to find a place at UC or CSU than they were a few years ago. These declines coincide with actions taken to limit enrollment as well as with the most dramatic increases in tuition and fees in the history of those institutions— increases that were substantially higher than those of similar public universities in other states. Indeed, enrollment rates have risen in other states even as they have fallen in Cali- fornia. It appears that sizable numbers of high school graduates in California are increasingly less likely to enroll in any four-year college and that a small but notable share of The number of recent high school graduates leaving California to attend four-year colleges in other states appears to have increased. 13Defunding Higher Education www.ppic.org those who were eligible and even accepted into UC and CSU do not attend college any where. Policy Implications The benefits of higher education are at or near all-time highs, with wages for workers with a bachelor’s degree approaching twice those of a worker with only a high school education. And California’s high school students are making great gains in college readiness. This is important, because economic projections suggest that California will need increasing numbers of college graduates to meet the rising demand for highly educated workers. However, despite these gains, California’s high school graduates are now less likely to enroll in a four-year col - lege than they were just a few years ago. As the state has reduced higher education budgets for UC and CSU, these institutions have dramatically increased tuition and fees and taken other measures that have led to a decline in enrollment rates. This decline represents a significant loss of human capital to California—one that the state can ill afford. Between 2007 and 2010, California lost almost 20,000 new students at UC and CSU. Moreover, the total number of students admitted but not enrolling at UC and CSU has risen by tens of thousands over the past ten years. Discussions of the future of public higher education in California often start with an assumption that the fundamental relationship between the state and its uni- versities has changed, with the state expected to be a less prominent—if not a slowly disappearing—partner. The specter of “privatization” of the state’s public universities arises, especially with regard to UC. In the face of reduced state support, key questions emerge about how best to provide quality higher educational opportunities to the most students possible. The following recommendations offer some initial considerations. Some have characterized the high cost of college as a short-term liquidity crisis. One response is to increase the availability and amount of loans. However, many students resist loans, as they are uncertain about future economic prospects and worry about debt loads. One option is to offer a deferred tuition plan, in which students pay back their tuition after they graduate, with payments based on a share of their wages. 47 In this way, students have certainty that their future payments will be based on their ability to pay, offsetting some of the concern about future debt burdens. Uncertainty about the costs of college could also be resolved by guaranteeing a set, four-year tuition schedule for new students, as is done at some other colleges. Lowering the uncertainty about future costs would help students and their families make financial plans for higher education. Another approach is to prioritize expenditures where they will create the greatest benefits. 48 Identifying and mea - suring those benefits is difficult, but one obvious place to start is with the state’s Cal Grants program (which provides grants of about $1 billion to low-income students in Califor - nia). A complete review of student outcomes at all Cal Grant institutions, including completion, loan default, and indebt - edness, should be conducted to ensure that funds are being spent efficiently and to evaluate which institutions should qualify for Cal Grants. CSAC, which administers the Cal Grant program, should determine whether it could better target aid to institutions that most effectively serve low- income and underrepresented students. In accordance with California needs to find ways to provide quality higher educational opportunities to as many students as possible. HUMBOLDT STATE UNIVERSITY Defunding Higher Education14www.ppic.org Senate Bill 70, CSAC has already prohibited some institu- tions with high student loan default rates from participating in the Cal Grants program. Redirecting Cal Grants to insti - tutions with the best track records of serving students could improve outcomes without generating additional costs. Along the same lines, the state should consider fund - ing public colleges and universities on the basis of, at least partly, student outcomes. Currently, funding is determined by student enrollment. Providing funding based on course and degree or certificate completion in addition to stu - dent enrollment should lead to greater efficiencies and an increased emphasis on improving student outcomes. Finally, community colleges serve a majority of the state’s lower-division undergraduates and do so at a relatively low per-student cost. Policies and practices that improve outcomes for community college students could be especially cost-effective. The California Community College Student Success task force has issued 22 recom - mendations across eight broad areas that include these and other recommendations, all of which could help improve student outcomes including completion of career technical certificates, associate degrees, and transfer. These strategies may help ameliorate some of the difficulties faced by California’s public higher education system. But they cannot completely overcome the hardship brought on by the combination of severe budget cuts and increased student demand. Persistent and continued cuts in state support for California’s public colleges and univer - sities and the commensurate increases in tuition and fees are not sustainable if the state is to meet future demands for a highly educated workforce. In light of enrollment declines at the state’s public universities, policymakers should be especially wary of making further cuts. No one doubts that difficult fiscal decisions lie ahead, with unat - tractive tradeoffs. Setting state priorities and funding those priorities should be the first step in moving forward. The ultimate goal, of providing more opportunities to attend and complete college, is one that California has adopted in the past with great success. With planning and foresight, Californians today can achieve that same goal. ● Technical Appendices to this report are available on the PPIC website: www.ppic.org/content/pubs/other/512HJR_appendix.pdf Acknowledgments The author would like to thank Marsha Hirano-Nakanishi, Kathleen Dettman, Robert Samors, Jill Cannon, and Steven Brint for their helpful and thorough reviews of an earlier draft of this report. Patrick Murphy provided keen and consistent oversight of the entire project. Finally, Richard Greene, Lynette Ubois, and Patricia Bedrosian provided excellent editorial guidance.  15Defunding Higher Education www.ppic.org Notes 1 These projections are not based on job requirements as identi- fied by the Bureau of Labor Statistics but instead rely on the practices of employers. See Reed (2008) for more detail. National projections are to 2018. 2 According to current demographic and education trends, 8.1 million Californians will have bachelor’s or graduate degrees by 2025. See Johnson (2010) for more detail. 3 See Johnson (2010) and Johnson and Sengupta (2009) for detailed analyses and discussions of how California could close the gap. 4 Community college fees have increased to $36 per unit from $26 per unit beginning with the 2011–12 academic year. Fees are currently scheduled to increase again to $46 per unit beginning in the summer 2012 term. 5 In future work we will examine how budget cuts have affected completion and transfer from community colleges to four-year universities. 6 In 2001–02, general fund expenditures on higher education totaled $13.3 billion, compared to $11.7 billion in 2010–11.Unless otherwise noted, all dollar figures are adjusted for inflation. See Technical Appendix A. 7 In real dollars. 8 This threshold was crossed for the first time in 2004–05. In 2003–04, general fund expenditures were about equal between public universities and corrections. Rapid increases in correc - tions and rehabilitation budgets and declines in higher education mean that the state now spends about $1.65 on corrections for every dollar it spends on UC and CSU combined (CPEC 2010). 9 See California Department of Corrections year-end data and CPEC (2010). 10 For example, the California Postsecondary Education Com - mission was eliminated from the state budget in 2011. The Leg - islative Analyst’s Office (LAO) notes that the state currently has no statewide higher education coordinating body (Taylor 2012). 11 For example, California is one of only a few states that require a two-thirds legislative majority to increase taxes. 12 In practice, the Proposition 98 guarantee can be suspended or deferred. 13 Another $1.1 billion was spent on the California Student Aid Commission (CSAC), whose primary expenditure is on higher education grants to students (Cal Grants). Compared to the early 2000s, community colleges received substantially more general fund allocations in 2010–11 (from less than $3 billion per year to almost $4 billion, not adjusted for inflation) whereas CSU received about the same amount (about $2.5 billion) and UC received less (from about $3.2 billion to just less than $3.0 billion) according to CPEC (2010). 14 Based on full-time-equivalent undergraduate students as reported by CPEC (2010). 15 Indeed, despite recommendations by the LAO (2009), legis - lators have been reticent to increase fees paid by community college students. 16 These per-student funding differences partly reflect the differ - ent missions and levels of education of these institutions, which translate into different cost structures. UC serves as the state’s major doctoral granting research university, CSU primarily provides undergraduate education along with some professional graduate programs, and community colleges offer lower divi - sion academic courses as well as nonacademic courses, including career technical education, basic skills, and enrichment classes. 17 A portion of the tuition increases were reserved for grants. A substantial share of UC and CSU students are from low- and moderate-income families, and are, therefore, eligible for grants. 18 Of course, UC and CSU must take into account any political— and potentially fiscal—reactions to tuition increases by the legis - lature and the governor. 19 In nominal dollars. 20 Based on the author’s analysis of data from the Integrated Postsecondary Education Data System (IPEDS). The comparison is restricted to large public research universities (enrollment of at least 10,000 students) with a Carnegie classification of “Mas - ter’s colleges and universities (larger programs).” Nationally, 91 colleges meet these criteria, including 14 CSU campuses. The most recent year available for comparisons across the nation was 2010–11. See Technical Appendix B. 21 Based on system-wide tuition. Defunding Higher Education16www.ppic.org 22 Based on the author’s analysis of IPEDS data. The comparison is restricted to large public research universities (at least 10,000 students), with a Carnegie classification of “very high research activity.” In 2010–11, 71 universities across the nation, including all the UC campuses except Merced, met this classification. Only seven of those universities—Pennsylvania State University (main campus), University of Pittsburgh, Rutgers University, University of Illinois, University of Minnesota (Twin Cities campus), Uni - versity of Massachusetts Amherst, and University of Michigan— exceeded the UC average. Colleges with substantially lower tuition and fees include University of Virginia, University of Texas, University of Wisconsin, and University of Washington. 23 UC developed a tentative plan that would have raised tuition above $20,000 by 2015–16, depending on the level of state support (T. Chea, “UC Tuition Could Nearly Double Under Budget Plan,” Associated Press, September 15, 2011). However, this plan was not sent to the regents and so is not currently being considered. 24 Author’s calculations based on IPEDS data for public two-year colleges. Data for comparison institutions were not available beyond 2010–11. 25 In 2011 constant dollars, as reported by CSU (2012). 26 The 16 impacted campuses enrolled 87 percent of all CSU first- time freshmen in 2010. The CSU Chancellor’s Office provides details on impacted campuses and majors at www.calstate.edu/pa/ News/2011/Release/fall2012.shtml. For details on impaction at CSU Northridge, see w w w.csun.edu/anr/impaction.html. Information on the number of impacted campuses in 2008–09 was provided by Marsha Hirano-Nakanishi of the CSU Chancellor’s Office. 27 The number of eligible but not admitted students is based on a special run of CSU admissions data from the Academic Research Office of the CSU Chancellor’s Office. 28 CSU is working to develop a process that will admit all eligible students to at least one CSU campus. 29 According to the LAO (2011), community colleges report that “many students” are not able to enroll in classes they need; fur - ther research is necessary to gauge the extent of the restrictions and their effect on student enrollment and completion. 30 The percentage reflects the share of community college students who are enrolled in more than one college at the same time. 31 Projections by the California Department of Finance suggest that the number of high school graduates will remain high but decline slightly from the 2010 peak, falling gradually to 380,000 in 2017 before increasing again to 389,000 in 2021. 32 It is possible that the share of high school graduates complet - ing the a–g requirements would have continued to increase were it not for the rapid increases in tuition that began around 2000. 33 The estimate of first-time freshmen enrollment numbers refers to 2010 only. The number of graduates is based on six-year graduation rates at UC and CSU. 34 Students and their families are not especially sensitive to increases in tuition, but higher costs do affect enrollment deci - sions. Recent research examining trends in enrollment and tuition at public higher education institutions across the nation suggests that a 10 percent increase in tuition and fees will lead to a decline in total enrollment of 1.1 percent and a decline in first-time freshmen enrollment of 1.6 percent (Hemelt and Marcotte 2008). That research also suggests that students are more sensitive to tuition increases than they are to increases in aid. In other words, the positive effects of increases in grants do not seem to fully offset the negative effects of increases in tuition. Moreover, selective public research universities, with their higher tuitions and with applicants who have other options, seem most vulnerable to enrollment declines. It is important to note that increases in applications can occur as high school graduating classes increase, as was the case in Cali - fornia up to 2010, and as the number of college applications per high school graduate increases. Our results are generally consis - tent with the elasticities observed in the literature. Specifically, we observe a 43 percent increase in tuition and fees at UC (50% in nominal terms) and a 17 percent decline in the enrollment rates of recent high school graduates between 2007 and 2010; at CSU, tuition and fees increased 46 percent (53% in nominal terms), whereas enrollment rates declined 20 percent. These implied elasticities are higher than those identified by Hemelt and Marcotte (2008) but are similar to the higher elasticities in some previous research. The decline in enrollment rates at UC and CSU reflects student responses to more than just the price increases. A real or perceived reduction in quality, including larger class sizes and reduced student services, as well as admin - istrative actions taken by the universities—such as redirecting more students to less preferred campuses—would also have affected enrollment. 35 See Technical Appendix D for a–g course data. 36 See Technical Appendix E for a discussion of community college enrollment rates. 17Defunding Higher Education www.ppic.org 37 The data show that relatively few California high school graduates opt for out-of-state and private colleges. Whites, Asians, and African Americans are more likely to do so than Latinos, but only about 3 percent enroll in accredited private institutions. (These assumptions are based on our analysis of data from CPEC and CDE. Enrollment rates are restricted to California public high school graduates and include only schools accredited by the Western Association of Schools and Colleges [ WA S C ] .) 38 The unadjusted estimate is 16 percent, but this is probably overstated because of the difficulty of matching students. Assuming a match rate of 95 percent, a more plausible figure would be about 11 percent of admitted applicants not enrolling in any U.S. college. These University of California Office of the President estimates are based on National Clearinghouse data on individuals enrolling in college in the United States. 39 Based on data provided by Marsha Hirano-Nakanishi of the CSU Chancellor’s Office. If we assume a 95 percent match rate, then the estimate would be only 5 percent. 40 According to CPEC data, the share of California high school graduates (ages 19 and under) enrolling in community colleges declined from 30.6 percent in 2006 to 28.3 percent in 2010. How - ever, enrollment data are missing for quite a few colleges. Our best estimate adjusts for missing data by linearly interpolating between known enrollment values. 41 The 4.2 percent decline in enrollment rates is calculated as the difference between the 22 percent share of recent high school graduates enrolling in UC or CSU in 2007 and the 18 percent share in 2010. 42 California’s selective private universities have not appreciably enlarged their freshmen classes despite high numbers of applications. 43 Based on our adjustments of CPEC data. Unadjusted data show even fewer high school graduates choosing private colleges and a downward trend. We adjusted the data for missing values. For institutions with missing values for enrollment of recent high school graduates, we interpolated between known values. Analyses were conducted using both CPEC and IPEDS data, and trends were similar between the two data sources. 44 Data on student migration are available only every other year. 45 It is not possible to determine what share of these students had been admitted at UC or CSU. 46 Based on our analysis of CPEC and CDE data. Enrollment rates are restricted to California public high school graduates and include WASC accredited institutions only. 47 One recent proposal by UC Riverside students would require no upfront tuition; instead, students would agree to pay the uni - versity 5 percent of their income for 20 years after graduation. 48 In California, identifying costs and benefits is especially dif - ficult because of the lack of an integrated longitudinal student data system linking student records from K–12 to college. Ide - ally, such a data system would include employment and wage data as well as student records. References Baldassare, Mark, Dean Bonner, Sonja Petek, and Jui Shrestha. 2010. PPIC Statewide Survey: Californians and Higher Education (November). San Francisco: Public Policy Institute of California. Available at w w w.ppic.org/main/publication.asp?i=963. Baldassare, Mark, Dean Bonner, Sonja Petek, and Jui Shrestha. 2 011. PPIC Statewide Survey: Californians and Their Govern - ment (May). San Francisco: Public Policy Institute of California. Available at w w w.ppic.org/main/publication.asp?i=981. Baron, Kathryn. 2011. “The Community College Swirl: Students Hit the Road to Bypass Course Cuts.” Posted on 11/08/11 on TOP-Ed. Available at http://toped.svefoundation.org/2011/11/08/ the-community-college-swirl. California Department of Finance: Demographic Research Unit. 2 011. California Public K–12 Graded Enrollment Projections Table, 2011 Series. Available at w w w.dof.ca.gov/research/ demographic/reports/projections/k-12/view.php. California Postsecondary Education Commission. 2010. Fiscal Profiles 2010 . Report 10-22. Sacramento: California Postsecond - ary Education Commission. California State University. 2010. Statistical Abstract 2009–2010. Available at w w w.calstate.edu/AS/stat_abstract/stat0910/index.shtml. Defunding Higher Education18www.ppic.org California State University. 2011a. Committee on Finance Agenda. Available at w w w.calstate.edu/bot/agendas/Nov11/Fin.pdf. California State University. 2011b. 2011–12 CSU Support Budget— Presentation to Board of Trustees Committee on Finance . Available at w w w.calstate.edu/budget/fybudget/presentations- communications/documents/1112-presentation-Budget-Declining- Support.pdf. California State University. 2012. 2012–13 Governor’s Support Budget—Presentation to Board of Trustees . Available at www.calstate.edu/pa/BudgetCentral/Jan2012Budget.pdf. Desrochers, Donna M., and Jane V. Wellman. 2011. “Trends in College Spending 1999–2009.” Delta Cost Project. Available at w w w.deltacostproject.org/analyses/delta_reports.asp. Hemelt, Steven W., and Dave E. Marcotte. 2008. “Rising Tuition and Enrollment in Public Higher Education.” IZA Discussion Paper. Johnson, Hans. 2010. Higher Education in California: New Goals for the Master Plan . San Francisco: Public Policy Institute of California. Available at www.ppic.org/content/pubs/report/ R _ 410HJ R .pd f. Johnson, Hans, and Ria Sengupta. 2009. Closing the Gap: Meet- ing California’s Need for College Graduates , San Francisco: Public Policy Institute of California. Available at www.ppic.org/ content/pubs/report/R _409HJR.pdf. Kane, T. J., and P. R. Orszag. 2004. Financing Public Higher Edu- cation: Short-Term and Long-Term Challenges . Ford Policy Forum. Available at www.educause.edu/ir/library/pdf/ffpfp045.pdf. LAO (Legislative Analyst’s Office). 2009. California Community Colleges: Raising Fees Could Mitigate Program Cuts and Leverage More Federal Aid . Available at www.lao.ca.gov/2009/edu/ccc_ fees/ccc_fees_061109.aspx. LAO (Legislative Analyst’s Office). 2011. Summary Tables 2011–12 Budget Package . Available at www.lao.ca.gov/handouts/ Econ/2011/Summary_Tables.pdf. Long, Bridget T., and Michal Kurlaender. 2009. “Do Community Colleges Provide a Viable Pathway to a Baccalaureate Degree?” Educational Evaluation and Policy Analysis 31 (1): 30–53. National Center for Education Statistics. Integrated Postsecond- ary Education Data System . IPEDS Data Center. Available at http://nces.ed.gov/ipeds/datacenter. Reed, Deborah. 2008. California’s Future Workforce: Will There Be Enough College Graduates? San Francisco: Public Policy Insti - tute of California. Available at w w w.ppic.org/main/publication. asp?i=809. Taylor, Mac. 2011. The 2011–12 Budget: Higher Education Budget in Context . Legislative Analyst’s Office. Taylor, Mac. 2012. Improving Higher Education Oversight . Legis- lative Analyst’s Office. Available at www.lao.ca.gov/reports/2012/ edu/ihe/improving-higher-education-010612.pdf. UCOP (University of California Office of the President). 2011. “The Facts: UC Budget Basics.” Available at www.universityof - california.edu/news/factsheets/thefacts_budget_11_17_10.pdf. About the Author Hans Johnson is a Bren policy fellow at PPIC. His work focuses on the dynamics of population change in California and policy implications of the state’s changing demography, with a focus on higher education. At PPIC, he has conducted research on education projections and work - force skills, population projections, international and domestic migra - tion, and housing. Before joining PPIC, he was senior demographer at the California Research Bureau, where he conducted research on popula - tion issues for the state legislature and the governor’s office. He has also worked as a demographer at the California Department of Finance, specializing in population projections. He holds a Ph.D. in demography from the University of California, Berkeley. www.ppic.org Board of Directors GARY K. HART, C HAIRFormer State Senator and Secretary of EducationState of California MARK BALDASSAREPresident and CEOPublic Policy Institute of California RUBEN BARRALESPresident and CEOSan Diego Regional Chamber of Commerce MARÍA BLANCOVice President, Civic E ngagementCalifornia Community Foundation BRIGITTE BRENChief Executive OfficerInternational Strategic Planning, Inc. ROBERT M. HE RTZBERGPartnerMayer Brown LLP WALTER B. HEWLET TChair, Board of Directors William and Flora Hewlett Foundation DONNA LUCASChief Executive OfficerLucas Public Affairs DAVID MAS MASUMOTOAuthor and farmer STEVEN A. MERKSAMERSenior PartnerNielsen, Merksamer, Parrinello, Gross & Leoni, LLP KIM POLESEChairmanClearStreet, In c. THOMAS C. SUT TONRetired Chairman and CEOPacific Life Insurance Company PPIC is a private o perating f oundation. I t d oes n ot t ake o r s upport p ositions o n a ny b allot m easures o r o n a ny local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office. PPIC was established in 1994 with an endowment from William R. Hewlett. © 2012 Public Policy Institute of California. All rights reserved. San Francisco, CA Short sections of text, not to exceed three paragraphs, may be quoted without written permission provided that full attribution is given to the source and the above copyright notice is included. Research publications reflect the views of the authors and do not necessarily reflect the views of the staff, officers, or Board of Directors of the Public Policy Institute of California. Library of Congress Cataloging-in-Publication Data are available for this publication. I S B N 978 -1-5 8213 -149 - 8 PUBLIC POLICY INSTITUTE OF CALIFORNIA 500 Washington Street, Suite 600 ● San Francisco, California 94111 Telephone 415.291.4400 ● Fa x 415 . 2 91. 4 4 01 PPIC SACRAMENTO CENTER Senator Office Building ● 1121 L Street, Suite 801 ● Sacramento, California 95814 Telephone 916.440.1120 ● Fax 916.440.1121 Additional resources related to higher education policy are available at www.ppic.org. The Public Policy Institute of California is dedicated to informing and improving public policy in California through independent, objective, nonpartisan research." } ["___content":protected]=> string(102) "

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" ["_permalink":protected]=> string(112) "https://www.ppic.org/publication/defunding-higher-education-what-are-the-effects-on-college-enrollment/r_512hjr/" ["_next":protected]=> array(0) { } ["_prev":protected]=> array(0) { } ["_css_class":protected]=> NULL ["id"]=> int(8806) ["ID"]=> int(8806) ["post_author"]=> string(1) "1" ["post_content"]=> string(0) "" ["post_date"]=> string(19) "2017-05-20 02:41:01" ["post_excerpt"]=> string(0) "" ["post_parent"]=> int(4160) ["post_status"]=> string(7) "inherit" ["post_title"]=> string(8) "R 512HJR" ["post_type"]=> string(10) "attachment" ["slug"]=> string(8) "r_512hjr" ["__type":protected]=> NULL ["_wp_attached_file"]=> string(12) "R_512HJR.pdf" ["wpmf_size"]=> string(7) "2212127" ["wpmf_filetype"]=> string(3) "pdf" ["wpmf_order"]=> string(1) "0" ["searchwp_content"]=> string(41950) "www.ppic.org Defunding Higher Education What Are the Effects on College Enrollment? Hans Johnson with support from Belinda Reyes and David Ezekiel Supported with funding from the Donald Bren Foundation and The James Irvine Foundation SUMMARY C alifornia’s financial commitment to higher education has been compromised by fiscal crises and competing state priorities. Despite large increases in the demand for higher education, state general fund spending in this area has declined notably over the past ten years. California now spends more on corrections than on its public universities. This report examines the effects of this disinvestment on the enrollment rates of recent high school graduates at the University of California (UC), the California State University (CSU), and the California Community Colleges. Key findings include: • Increasingly, h igh s chool g raduates i n C alifornia a re l ess l ikely t o e nroll i n a ny f our-year college. • Enrollment rates a t U C a nd C SU h ave f allen b y o ne-fifth o ver t he p ast fi ve y ears, f rom a bout 22 percent of all high school graduates to below 18 percent. • Among the s tate’s m ost h ighly p repared h igh s chool g raduates, t he e nrollment r ate h as declined even more—from around 67 percent to 55 percent. • Many opt f or o vercrowded c ommunity c olleges, b ut i ncreases i n e nrollment r ates t here d o not make up for the declines at UC and CSU. • A small but n otable s hare o f t hose w ho w ere e ligible a nd e ven a ccepted i nto U C a nd C SU do not attend college anywhere. REUTERS/LUCY NICHOLSON Defunding Higher Education2www.ppic.org These enrollment declines have occurred as California’s public colleges and universities have employed various strategies to balance their budgets. Those strategies include cutting courses, programs, a nd s tudent s ervices, a s w ell a s m aking a dministrative c uts. C ertain p oli- cies and practices have been designed to limit enrollment, including capping enrollment at more desirable campuses. From a student perspective, the increased tuition and fees at UC and CSU campuses have been the most dramatic change, and community college students have faced greater difficulties in finding classes. Increased state f unding f or h igher e ducation w ould a lmost c ertainly r everse t hese trends. A proposed t ax i nitiative c ould l ead t o i ncreased r evenue f or t he s tate, w ith p olicy- makers explicitly i dentifying h igher e ducation a s a p rimary b eneficiary i f t he i nitiative p asses. Regardless of t he s uccess o f t he i nitiative, s teps c ould a nd s hould b e t aken t o e nsure t hat higher education expenditures are allocated in as efficient a manner as possible. One sugges- tion, for example, would fund the state’s colleges on the basis of student outcomes, such as courses and degrees completed, as well as enrollment. But without additional revenue, such steps are not l ikely t o f ully o vercome t he o verall d ecline i n s tate s upport f or h igher e ducation. If current enrollment t rends p ersist, C alifornia f aces a n a larming l oss o f c ollege g raduates— at a time when the state needs to be developing a more highly skilled workforce to ensure its future prosperity. PPIC has projected that the state will fall one million college graduates short of economic demand by 2025 unless enrollment and graduation rates improve substantially. Had enrollment rates not declined over the past few years, California would be on a path toward closing this workforce gap. Instead, it looms as large as ever. Please visit the report’s publication page to find related resources: www.ppic.org/main/publication.asp?i=988 3Defunding Higher Education www.ppic.org Introduction California, once a leader in higher education, is falling behind other states and nations in developing the highly skilled workforce necessary for our future prosperity. By 2025, two of every five jobs in California will require a bachelor’s degree (Reed 2008), and nationwide, more than 60 percent of all new jobs will require some form of postsecondary education (including associate’s degrees and certificates as well as bachelor’s degrees). 1 Yet the enroll- ment rates of recent high school graduates in California’s public colleges and universities have not kept pace with ris - ing demand. For the first time in our state’s history, young adults in California are less likely than older adults to have graduated from college (Johnson 2010). If current trends persist, PPIC projects that the state will fall one million college graduates short of economic demand by 2025. 2 The size of this gap means that the state cannot rely on just one approach to closing it. Rather, the state will need more high school graduates to earn certificates and degrees from technical and community colleges and more to gradu - ate from four-year institutions. Reaching underrepresented groups, particularly the large and growing Latino student population, is key to closing the gap. 3 California’s ongoing budget crises have dramatically reduced state support for higher education. The Univer - sity of California (UC) and the California State University (CSU) have responded by reducing costs, increasing tuition and fees, and limiting enrollment. Along with the Califor - nia Community Colleges (CCC), they have reduced course offerings and other resources for students. 4 These restric - tions vary across institutions and campuses but are likely to be felt most strongly among recent high school gradu - ates as they decide whether to enroll in college. In this report, we examine the effects that these fis - cal crises have had on student enrollment at the state’s public colleges and universities. We focus on the college enrollment of recent high school graduates because this is a pivotal point in an individual’s educational direction. The vast majority of students who earn a college degree, including an associate’s degree, first enter college shortly after graduating from high school. Changes in the share of high school graduates who enroll in college have long-term implications for the state. 5 Declines in enrollment rates mean that California’s future workforce will be less skilled and less able to meet the demands of an economy that increasingly rewards more highly educated workers. Our key finding is that the share of recent California high school graduates enrolling in the state’s public col - leges and universities has declined over the past five years. Enrollment rates to UC and CSU have fallen by one-fifth, from about 22 percent to below 18 percent. Among the state’s most highly prepared high school graduates—those completing the a–g courses required for admission to UC and CSU—the enrollment rate has declined from around 67 percent to 55 percent (Figure 1). California’s budget crises have dramatically reduced state support for higher education. 65.6 67.5 67.9 61.2 54.9 21.5 21.9 21.1 19.9 17.8 Figure 1. Enrollment rates of recent high school graduates to UC and CSU have declined a–g graduates All high school graduates 60 70 80 0 10 20 30 40 50 2006 2009 2008 2007 2010 Percentage SOURCE: Author‘s calculations based on California Postsecondary Education Commission (CPEC) (2010). NOTE: Data are restricted to California high school graduates and residents. Defunding Higher Education4www.ppic.org To understand these declines, we first describe reduc- tions in state support for higher education, then we assess the responses of the state’s public colleges and universities. Finally, we examine trends in student enrollment and con - clude with a discussion of policy implications and recom - mendations. Reductions in State Support for Higher Education Despite large increases in the number of high school graduates, state general fund spending on higher education has declined notably. In 2010–11, the state spent $1.6 bil - lion less on higher education than it did ten years earlier. 6 These declines partly reflect California’s severe recession and lower general fund revenues. But they also reflect changing state priorities: Declines in higher education expenditures have exceeded those for other state func - tions. For example, over the past ten years, general fund expenditures for higher education have fallen 9 percent, whereas general fund expenditures for corrections and rehabilitation have increased 26 percent. 7 Indeed, the state now spends substantially more on corrections and reha - bilitation than it does on its public universities (UC and CSU combined). 8 It is worth noting that between 2003 and 2010, the prison population increased 1 percent, whereas CSU and UC enrollment (full-time-equivalent students) increased 13 percent. 9 This decline in the budgetary priority of higher educa - tion is part of a much longer historical trend. In the mid- 1970s, for example, the state spent almost four times more on higher education than on corrections, and almost 18 percent of all general fund expenditures went to higher education. Today, higher education receives around 12 per - cent (Figure 2). These changing priorities are not the consequence of well thought out planning and priority setting on the part of the state. 10 Nor are they aligned with the desires of most Californians: In the May 2011 PPIC Statewide Survey, 68 percent of respondents opposed spending cuts in higher education to reduce the state budget deficit, and 62 percent supported spending cuts in prisons and corrections to do so (Baldassare et al. 2011). Policymakers often insist that their hands are tied with respect to budgeting and expenditures and that they have relatively little latitude to increase expenditures or even move funding from one area of government function to another. 11 And to a certain extent, the state’s budget priori - ties are driven by federal and state requirements, voter- approved initiatives, court mandates, and caseloads. UC and CSU are especially vulnerable in this context, as there are no mandates or requirements that the state provide funding for its public universities. Community colleges are somewhat more protected, because they are part of the Proposition 98 guarantee for K–14 education. 12 Furthermore, higher education is seen as a budget area that, unlike other government services, has the ability to compensate for cuts in state expenditures. A common and not incorrect assumption is that public colleges and universities have sources of funds, particularly students and the tuitions they pay, that are not available to other government services. (Prisoners cannot pay for the cost of their own incarceration, and it would be nonsensical for welfare recipients to pay for their welfare.) This assump - Figure 2. Relative spending on higher education has declined 17 18 19 10 11 13 12 14 15 16 Percentage SOURCES: CPEC (2010); LAO (2011). NOTES: Data for 1967–2010 show the higher education share of state general fund expenditures. Figures for 2011–12 are estimates. Higher education share of state general fund expenditures, 1967–2011 1967–68 1969–70 1971–72 1973–74 1975–76 1977–78 1979–80 1981–82 1983–84 1985–86 1987–88 1989–90 1991–92 1993–94 1995–96 1997–98 1999–00 2001–02 2003–04 2005–06 2007–08 2009–10 2011–12 Defunding Higher Education12www.ppic.org overall but with a larger share of those students attending part-time rather than full-time. 36 Overall, the evidence suggests that despite improve - ments in college readiness, the university enrollment rates of recent high school graduates have declined for each of California’s four largest ethnic groups (Latinos, whites, Asians, and African Americans). Declines are sharpest among African Americans and are the lowest among Latinos. 37 The relatively small decline in the likelihood that a Latino high school graduate attends either UC or CSU is notable, given the very large and growing number of Latino high school graduates in California. Where Are Students Going? From the perspective of the state and its future economic outlook, declines in the number of accepted applicants at UC and CSU who actually enroll would not be so problem - atic if students were choosing to pursue some other higher education opportunity. Many do, but overall the evidence suggests that some do not. UC figures show that the primary destination of students who rejected their UC offer in 2010 was a private university (34%), followed by CSU (30%), a California com - munity college (12%), and, finally, an out-of-state public college (8%). However, about one in ten did not appear to enroll in any college. 38 Over the past ten years, CSU has grown slightly as a destination, with no significant change in the other destinations. Among eligible applicants to CSU who were not accepted to their chosen campus, it appears that less than 10 percent did not appear to enroll in any college. 39 We see some evidence of increases in enrollment rates at community colleges. Our best estimate suggests that the enrollment rates of recent high school graduates have slightly increased (from 34.1% in 2006 to 35.4% in 2009). 40 But these very slight changes in community college enroll - ment rates do not make up for the declines in enrollment rates at UC and CSU. That is, even if the community college enrollment rates of recent high school graduates increased 1.3 percent, the enrollment rate decline of 4.2 percent at UC and CSU combined is much larger. 41 We do not see any evidence that recent high school graduates in California are increasingly choosing private institutions in the state. 42 Our best estimates indicate that the share of recent California high school graduates enroll - ing in private colleges in the state has remained at 3.5 per- cent for the past five years. 43 However, the number of recent high school graduates leaving California to attend four-year colleges in other states appears to have increased. By 2008, California was losing about 2,500 more students to other states than it was in 2006. 44 If this trend continued to 2010, the increase in the number of students leaving the state would have been about 5,000. Thus, it seems likely that a small but notable share of the enrollment rate declines observed at UC and CSU between 2007 and 2010 (which amounted to about 20,000 students) can be attributed to an increase in the number of students leaving the state. 45 When we consider enrollment decisions in terms of race and ethnicity, we find that whites, Asians, and African Americans are more likely than Latinos to choose out-of- state or private colleges. But even for those groups, only about 3 percent enroll in accredited private institutions. 46 In sum, California’s recent high school graduates are less likely to find a place at UC or CSU than they were a few years ago. These declines coincide with actions taken to limit enrollment as well as with the most dramatic increases in tuition and fees in the history of those institutions— increases that were substantially higher than those of similar public universities in other states. Indeed, enrollment rates have risen in other states even as they have fallen in Cali- fornia. It appears that sizable numbers of high school graduates in California are increasingly less likely to enroll in any four-year college and that a small but notable share of The number of recent high school graduates leaving California to attend four-year colleges in other states appears to have increased. 13Defunding Higher Education www.ppic.org those who were eligible and even accepted into UC and CSU do not attend college any where. Policy Implications The benefits of higher education are at or near all-time highs, with wages for workers with a bachelor’s degree approaching twice those of a worker with only a high school education. And California’s high school students are making great gains in college readiness. This is important, because economic projections suggest that California will need increasing numbers of college graduates to meet the rising demand for highly educated workers. However, despite these gains, California’s high school graduates are now less likely to enroll in a four-year col - lege than they were just a few years ago. As the state has reduced higher education budgets for UC and CSU, these institutions have dramatically increased tuition and fees and taken other measures that have led to a decline in enrollment rates. This decline represents a significant loss of human capital to California—one that the state can ill afford. Between 2007 and 2010, California lost almost 20,000 new students at UC and CSU. Moreover, the total number of students admitted but not enrolling at UC and CSU has risen by tens of thousands over the past ten years. Discussions of the future of public higher education in California often start with an assumption that the fundamental relationship between the state and its uni- versities has changed, with the state expected to be a less prominent—if not a slowly disappearing—partner. The specter of “privatization” of the state’s public universities arises, especially with regard to UC. In the face of reduced state support, key questions emerge about how best to provide quality higher educational opportunities to the most students possible. The following recommendations offer some initial considerations. Some have characterized the high cost of college as a short-term liquidity crisis. One response is to increase the availability and amount of loans. However, many students resist loans, as they are uncertain about future economic prospects and worry about debt loads. One option is to offer a deferred tuition plan, in which students pay back their tuition after they graduate, with payments based on a share of their wages. 47 In this way, students have certainty that their future payments will be based on their ability to pay, offsetting some of the concern about future debt burdens. Uncertainty about the costs of college could also be resolved by guaranteeing a set, four-year tuition schedule for new students, as is done at some other colleges. Lowering the uncertainty about future costs would help students and their families make financial plans for higher education. Another approach is to prioritize expenditures where they will create the greatest benefits. 48 Identifying and mea - suring those benefits is difficult, but one obvious place to start is with the state’s Cal Grants program (which provides grants of about $1 billion to low-income students in Califor - nia). A complete review of student outcomes at all Cal Grant institutions, including completion, loan default, and indebt - edness, should be conducted to ensure that funds are being spent efficiently and to evaluate which institutions should qualify for Cal Grants. CSAC, which administers the Cal Grant program, should determine whether it could better target aid to institutions that most effectively serve low- income and underrepresented students. In accordance with California needs to find ways to provide quality higher educational opportunities to as many students as possible. HUMBOLDT STATE UNIVERSITY Defunding Higher Education14www.ppic.org Senate Bill 70, CSAC has already prohibited some institu- tions with high student loan default rates from participating in the Cal Grants program. Redirecting Cal Grants to insti - tutions with the best track records of serving students could improve outcomes without generating additional costs. Along the same lines, the state should consider fund - ing public colleges and universities on the basis of, at least partly, student outcomes. Currently, funding is determined by student enrollment. Providing funding based on course and degree or certificate completion in addition to stu - dent enrollment should lead to greater efficiencies and an increased emphasis on improving student outcomes. Finally, community colleges serve a majority of the state’s lower-division undergraduates and do so at a relatively low per-student cost. Policies and practices that improve outcomes for community college students could be especially cost-effective. The California Community College Student Success task force has issued 22 recom - mendations across eight broad areas that include these and other recommendations, all of which could help improve student outcomes including completion of career technical certificates, associate degrees, and transfer. These strategies may help ameliorate some of the difficulties faced by California’s public higher education system. But they cannot completely overcome the hardship brought on by the combination of severe budget cuts and increased student demand. Persistent and continued cuts in state support for California’s public colleges and univer - sities and the commensurate increases in tuition and fees are not sustainable if the state is to meet future demands for a highly educated workforce. In light of enrollment declines at the state’s public universities, policymakers should be especially wary of making further cuts. No one doubts that difficult fiscal decisions lie ahead, with unat - tractive tradeoffs. Setting state priorities and funding those priorities should be the first step in moving forward. The ultimate goal, of providing more opportunities to attend and complete college, is one that California has adopted in the past with great success. With planning and foresight, Californians today can achieve that same goal. ● Technical Appendices to this report are available on the PPIC website: www.ppic.org/content/pubs/other/512HJR_appendix.pdf Acknowledgments The author would like to thank Marsha Hirano-Nakanishi, Kathleen Dettman, Robert Samors, Jill Cannon, and Steven Brint for their helpful and thorough reviews of an earlier draft of this report. Patrick Murphy provided keen and consistent oversight of the entire project. Finally, Richard Greene, Lynette Ubois, and Patricia Bedrosian provided excellent editorial guidance.  15Defunding Higher Education www.ppic.org Notes 1 These projections are not based on job requirements as identi- fied by the Bureau of Labor Statistics but instead rely on the practices of employers. See Reed (2008) for more detail. National projections are to 2018. 2 According to current demographic and education trends, 8.1 million Californians will have bachelor’s or graduate degrees by 2025. See Johnson (2010) for more detail. 3 See Johnson (2010) and Johnson and Sengupta (2009) for detailed analyses and discussions of how California could close the gap. 4 Community college fees have increased to $36 per unit from $26 per unit beginning with the 2011–12 academic year. Fees are currently scheduled to increase again to $46 per unit beginning in the summer 2012 term. 5 In future work we will examine how budget cuts have affected completion and transfer from community colleges to four-year universities. 6 In 2001–02, general fund expenditures on higher education totaled $13.3 billion, compared to $11.7 billion in 2010–11.Unless otherwise noted, all dollar figures are adjusted for inflation. See Technical Appendix A. 7 In real dollars. 8 This threshold was crossed for the first time in 2004–05. In 2003–04, general fund expenditures were about equal between public universities and corrections. Rapid increases in correc - tions and rehabilitation budgets and declines in higher education mean that the state now spends about $1.65 on corrections for every dollar it spends on UC and CSU combined (CPEC 2010). 9 See California Department of Corrections year-end data and CPEC (2010). 10 For example, the California Postsecondary Education Com - mission was eliminated from the state budget in 2011. The Leg - islative Analyst’s Office (LAO) notes that the state currently has no statewide higher education coordinating body (Taylor 2012). 11 For example, California is one of only a few states that require a two-thirds legislative majority to increase taxes. 12 In practice, the Proposition 98 guarantee can be suspended or deferred. 13 Another $1.1 billion was spent on the California Student Aid Commission (CSAC), whose primary expenditure is on higher education grants to students (Cal Grants). Compared to the early 2000s, community colleges received substantially more general fund allocations in 2010–11 (from less than $3 billion per year to almost $4 billion, not adjusted for inflation) whereas CSU received about the same amount (about $2.5 billion) and UC received less (from about $3.2 billion to just less than $3.0 billion) according to CPEC (2010). 14 Based on full-time-equivalent undergraduate students as reported by CPEC (2010). 15 Indeed, despite recommendations by the LAO (2009), legis - lators have been reticent to increase fees paid by community college students. 16 These per-student funding differences partly reflect the differ - ent missions and levels of education of these institutions, which translate into different cost structures. UC serves as the state’s major doctoral granting research university, CSU primarily provides undergraduate education along with some professional graduate programs, and community colleges offer lower divi - sion academic courses as well as nonacademic courses, including career technical education, basic skills, and enrichment classes. 17 A portion of the tuition increases were reserved for grants. A substantial share of UC and CSU students are from low- and moderate-income families, and are, therefore, eligible for grants. 18 Of course, UC and CSU must take into account any political— and potentially fiscal—reactions to tuition increases by the legis - lature and the governor. 19 In nominal dollars. 20 Based on the author’s analysis of data from the Integrated Postsecondary Education Data System (IPEDS). The comparison is restricted to large public research universities (enrollment of at least 10,000 students) with a Carnegie classification of “Mas - ter’s colleges and universities (larger programs).” Nationally, 91 colleges meet these criteria, including 14 CSU campuses. The most recent year available for comparisons across the nation was 2010–11. See Technical Appendix B. 21 Based on system-wide tuition. Defunding Higher Education16www.ppic.org 22 Based on the author’s analysis of IPEDS data. The comparison is restricted to large public research universities (at least 10,000 students), with a Carnegie classification of “very high research activity.” In 2010–11, 71 universities across the nation, including all the UC campuses except Merced, met this classification. Only seven of those universities—Pennsylvania State University (main campus), University of Pittsburgh, Rutgers University, University of Illinois, University of Minnesota (Twin Cities campus), Uni - versity of Massachusetts Amherst, and University of Michigan— exceeded the UC average. Colleges with substantially lower tuition and fees include University of Virginia, University of Texas, University of Wisconsin, and University of Washington. 23 UC developed a tentative plan that would have raised tuition above $20,000 by 2015–16, depending on the level of state support (T. Chea, “UC Tuition Could Nearly Double Under Budget Plan,” Associated Press, September 15, 2011). However, this plan was not sent to the regents and so is not currently being considered. 24 Author’s calculations based on IPEDS data for public two-year colleges. Data for comparison institutions were not available beyond 2010–11. 25 In 2011 constant dollars, as reported by CSU (2012). 26 The 16 impacted campuses enrolled 87 percent of all CSU first- time freshmen in 2010. The CSU Chancellor’s Office provides details on impacted campuses and majors at www.calstate.edu/pa/ News/2011/Release/fall2012.shtml. For details on impaction at CSU Northridge, see w w w.csun.edu/anr/impaction.html. Information on the number of impacted campuses in 2008–09 was provided by Marsha Hirano-Nakanishi of the CSU Chancellor’s Office. 27 The number of eligible but not admitted students is based on a special run of CSU admissions data from the Academic Research Office of the CSU Chancellor’s Office. 28 CSU is working to develop a process that will admit all eligible students to at least one CSU campus. 29 According to the LAO (2011), community colleges report that “many students” are not able to enroll in classes they need; fur - ther research is necessary to gauge the extent of the restrictions and their effect on student enrollment and completion. 30 The percentage reflects the share of community college students who are enrolled in more than one college at the same time. 31 Projections by the California Department of Finance suggest that the number of high school graduates will remain high but decline slightly from the 2010 peak, falling gradually to 380,000 in 2017 before increasing again to 389,000 in 2021. 32 It is possible that the share of high school graduates complet - ing the a–g requirements would have continued to increase were it not for the rapid increases in tuition that began around 2000. 33 The estimate of first-time freshmen enrollment numbers refers to 2010 only. The number of graduates is based on six-year graduation rates at UC and CSU. 34 Students and their families are not especially sensitive to increases in tuition, but higher costs do affect enrollment deci - sions. Recent research examining trends in enrollment and tuition at public higher education institutions across the nation suggests that a 10 percent increase in tuition and fees will lead to a decline in total enrollment of 1.1 percent and a decline in first-time freshmen enrollment of 1.6 percent (Hemelt and Marcotte 2008). That research also suggests that students are more sensitive to tuition increases than they are to increases in aid. In other words, the positive effects of increases in grants do not seem to fully offset the negative effects of increases in tuition. Moreover, selective public research universities, with their higher tuitions and with applicants who have other options, seem most vulnerable to enrollment declines. It is important to note that increases in applications can occur as high school graduating classes increase, as was the case in Cali - fornia up to 2010, and as the number of college applications per high school graduate increases. Our results are generally consis - tent with the elasticities observed in the literature. Specifically, we observe a 43 percent increase in tuition and fees at UC (50% in nominal terms) and a 17 percent decline in the enrollment rates of recent high school graduates between 2007 and 2010; at CSU, tuition and fees increased 46 percent (53% in nominal terms), whereas enrollment rates declined 20 percent. These implied elasticities are higher than those identified by Hemelt and Marcotte (2008) but are similar to the higher elasticities in some previous research. The decline in enrollment rates at UC and CSU reflects student responses to more than just the price increases. A real or perceived reduction in quality, including larger class sizes and reduced student services, as well as admin - istrative actions taken by the universities—such as redirecting more students to less preferred campuses—would also have affected enrollment. 35 See Technical Appendix D for a–g course data. 36 See Technical Appendix E for a discussion of community college enrollment rates. 17Defunding Higher Education www.ppic.org 37 The data show that relatively few California high school graduates opt for out-of-state and private colleges. Whites, Asians, and African Americans are more likely to do so than Latinos, but only about 3 percent enroll in accredited private institutions. (These assumptions are based on our analysis of data from CPEC and CDE. Enrollment rates are restricted to California public high school graduates and include only schools accredited by the Western Association of Schools and Colleges [ WA S C ] .) 38 The unadjusted estimate is 16 percent, but this is probably overstated because of the difficulty of matching students. Assuming a match rate of 95 percent, a more plausible figure would be about 11 percent of admitted applicants not enrolling in any U.S. college. These University of California Office of the President estimates are based on National Clearinghouse data on individuals enrolling in college in the United States. 39 Based on data provided by Marsha Hirano-Nakanishi of the CSU Chancellor’s Office. If we assume a 95 percent match rate, then the estimate would be only 5 percent. 40 According to CPEC data, the share of California high school graduates (ages 19 and under) enrolling in community colleges declined from 30.6 percent in 2006 to 28.3 percent in 2010. How - ever, enrollment data are missing for quite a few colleges. Our best estimate adjusts for missing data by linearly interpolating between known enrollment values. 41 The 4.2 percent decline in enrollment rates is calculated as the difference between the 22 percent share of recent high school graduates enrolling in UC or CSU in 2007 and the 18 percent share in 2010. 42 California’s selective private universities have not appreciably enlarged their freshmen classes despite high numbers of applications. 43 Based on our adjustments of CPEC data. Unadjusted data show even fewer high school graduates choosing private colleges and a downward trend. We adjusted the data for missing values. For institutions with missing values for enrollment of recent high school graduates, we interpolated between known values. Analyses were conducted using both CPEC and IPEDS data, and trends were similar between the two data sources. 44 Data on student migration are available only every other year. 45 It is not possible to determine what share of these students had been admitted at UC or CSU. 46 Based on our analysis of CPEC and CDE data. Enrollment rates are restricted to California public high school graduates and include WASC accredited institutions only. 47 One recent proposal by UC Riverside students would require no upfront tuition; instead, students would agree to pay the uni - versity 5 percent of their income for 20 years after graduation. 48 In California, identifying costs and benefits is especially dif - ficult because of the lack of an integrated longitudinal student data system linking student records from K–12 to college. Ide - ally, such a data system would include employment and wage data as well as student records. References Baldassare, Mark, Dean Bonner, Sonja Petek, and Jui Shrestha. 2010. PPIC Statewide Survey: Californians and Higher Education (November). San Francisco: Public Policy Institute of California. Available at w w w.ppic.org/main/publication.asp?i=963. Baldassare, Mark, Dean Bonner, Sonja Petek, and Jui Shrestha. 2 011. PPIC Statewide Survey: Californians and Their Govern - ment (May). San Francisco: Public Policy Institute of California. Available at w w w.ppic.org/main/publication.asp?i=981. Baron, Kathryn. 2011. “The Community College Swirl: Students Hit the Road to Bypass Course Cuts.” Posted on 11/08/11 on TOP-Ed. Available at http://toped.svefoundation.org/2011/11/08/ the-community-college-swirl. California Department of Finance: Demographic Research Unit. 2 011. California Public K–12 Graded Enrollment Projections Table, 2011 Series. Available at w w w.dof.ca.gov/research/ demographic/reports/projections/k-12/view.php. California Postsecondary Education Commission. 2010. Fiscal Profiles 2010 . Report 10-22. Sacramento: California Postsecond - ary Education Commission. California State University. 2010. Statistical Abstract 2009–2010. Available at w w w.calstate.edu/AS/stat_abstract/stat0910/index.shtml. Defunding Higher Education18www.ppic.org California State University. 2011a. Committee on Finance Agenda. Available at w w w.calstate.edu/bot/agendas/Nov11/Fin.pdf. California State University. 2011b. 2011–12 CSU Support Budget— Presentation to Board of Trustees Committee on Finance . Available at w w w.calstate.edu/budget/fybudget/presentations- communications/documents/1112-presentation-Budget-Declining- Support.pdf. California State University. 2012. 2012–13 Governor’s Support Budget—Presentation to Board of Trustees . Available at www.calstate.edu/pa/BudgetCentral/Jan2012Budget.pdf. Desrochers, Donna M., and Jane V. Wellman. 2011. “Trends in College Spending 1999–2009.” Delta Cost Project. Available at w w w.deltacostproject.org/analyses/delta_reports.asp. Hemelt, Steven W., and Dave E. Marcotte. 2008. “Rising Tuition and Enrollment in Public Higher Education.” IZA Discussion Paper. Johnson, Hans. 2010. Higher Education in California: New Goals for the Master Plan . San Francisco: Public Policy Institute of California. Available at www.ppic.org/content/pubs/report/ R _ 410HJ R .pd f. Johnson, Hans, and Ria Sengupta. 2009. Closing the Gap: Meet- ing California’s Need for College Graduates , San Francisco: Public Policy Institute of California. Available at www.ppic.org/ content/pubs/report/R _409HJR.pdf. Kane, T. J., and P. R. Orszag. 2004. Financing Public Higher Edu- cation: Short-Term and Long-Term Challenges . Ford Policy Forum. Available at www.educause.edu/ir/library/pdf/ffpfp045.pdf. LAO (Legislative Analyst’s Office). 2009. California Community Colleges: Raising Fees Could Mitigate Program Cuts and Leverage More Federal Aid . Available at www.lao.ca.gov/2009/edu/ccc_ fees/ccc_fees_061109.aspx. LAO (Legislative Analyst’s Office). 2011. Summary Tables 2011–12 Budget Package . Available at www.lao.ca.gov/handouts/ Econ/2011/Summary_Tables.pdf. Long, Bridget T., and Michal Kurlaender. 2009. “Do Community Colleges Provide a Viable Pathway to a Baccalaureate Degree?” Educational Evaluation and Policy Analysis 31 (1): 30–53. National Center for Education Statistics. Integrated Postsecond- ary Education Data System . IPEDS Data Center. Available at http://nces.ed.gov/ipeds/datacenter. Reed, Deborah. 2008. California’s Future Workforce: Will There Be Enough College Graduates? San Francisco: Public Policy Insti - tute of California. Available at w w w.ppic.org/main/publication. asp?i=809. Taylor, Mac. 2011. The 2011–12 Budget: Higher Education Budget in Context . Legislative Analyst’s Office. Taylor, Mac. 2012. Improving Higher Education Oversight . Legis- lative Analyst’s Office. Available at www.lao.ca.gov/reports/2012/ edu/ihe/improving-higher-education-010612.pdf. UCOP (University of California Office of the President). 2011. “The Facts: UC Budget Basics.” Available at www.universityof - california.edu/news/factsheets/thefacts_budget_11_17_10.pdf. About the Author Hans Johnson is a Bren policy fellow at PPIC. His work focuses on the dynamics of population change in California and policy implications of the state’s changing demography, with a focus on higher education. At PPIC, he has conducted research on education projections and work - force skills, population projections, international and domestic migra - tion, and housing. Before joining PPIC, he was senior demographer at the California Research Bureau, where he conducted research on popula - tion issues for the state legislature and the governor’s office. He has also worked as a demographer at the California Department of Finance, specializing in population projections. He holds a Ph.D. in demography from the University of California, Berkeley. www.ppic.org Board of Directors GARY K. HART, C HAIRFormer State Senator and Secretary of EducationState of California MARK BALDASSAREPresident and CEOPublic Policy Institute of California RUBEN BARRALESPresident and CEOSan Diego Regional Chamber of Commerce MARÍA BLANCOVice President, Civic E ngagementCalifornia Community Foundation BRIGITTE BRENChief Executive OfficerInternational Strategic Planning, Inc. ROBERT M. HE RTZBERGPartnerMayer Brown LLP WALTER B. HEWLET TChair, Board of Directors William and Flora Hewlett Foundation DONNA LUCASChief Executive OfficerLucas Public Affairs DAVID MAS MASUMOTOAuthor and farmer STEVEN A. MERKSAMERSenior PartnerNielsen, Merksamer, Parrinello, Gross & Leoni, LLP KIM POLESEChairmanClearStreet, In c. THOMAS C. SUT TONRetired Chairman and CEOPacific Life Insurance Company PPIC is a private o perating f oundation. I t d oes n ot t ake o r s upport p ositions o n a ny b allot m easures o r o n a ny local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office. PPIC was established in 1994 with an endowment from William R. Hewlett. © 2012 Public Policy Institute of California. All rights reserved. San Francisco, CA Short sections of text, not to exceed three paragraphs, may be quoted without written permission provided that full attribution is given to the source and the above copyright notice is included. Research publications reflect the views of the authors and do not necessarily reflect the views of the staff, officers, or Board of Directors of the Public Policy Institute of California. Library of Congress Cataloging-in-Publication Data are available for this publication. I S B N 978 -1-5 8213 -149 - 8 PUBLIC POLICY INSTITUTE OF CALIFORNIA 500 Washington Street, Suite 600 ● San Francisco, California 94111 Telephone 415.291.4400 ● Fa x 415 . 2 91. 4 4 01 PPIC SACRAMENTO CENTER Senator Office Building ● 1121 L Street, Suite 801 ● Sacramento, California 95814 Telephone 916.440.1120 ● Fax 916.440.1121 Additional resources related to higher education policy are available at www.ppic.org. The Public Policy Institute of California is dedicated to informing and improving public policy in California through independent, objective, nonpartisan research." 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