The Paradoxes of Higher Ed Funding in Washington State

by John Stafford

Washington State is characterized by an interesting paradox: it is 46th in the nation in the percentage of its graduating high school seniors that go directly to college; yet it is 12th in the nation in the percentage of its residents that have earned a college degree. One explanation (there are several) for this seeming-inconsistency is that Washington employers hire a considerable number of college degree holders from outside the state. If more of our state's high school students earned college degrees, they would presumably be able to compete for these jobs.

One factor that influences student decisions on whether to attend college is tuition rates. The funding for Washington State's higher education system comes largely from two sources — state support and tuition, meaning that when state funding is decreased, tuition is usually increased. During the recent recession and its aftermath (2008-2013), Washington's budget situation deteriorated dramatically. The state reduced higher education funding per student at its four year institutions by 38% (9th most in the nation), and increased tuition by 61%, or $4,190 per student (2nd most in the nation). Washington now has the 10th highest average tuition for in-state students at four-year public schools in the nation (and is in the top 15 for two-year public schools as well). Obviously, huge tuition increases on an already higher-than average tuition base is exactly the wrong policy for a state plagued with low college participation rates.

In the 2014 legislative session, state funding for higher education was finally stabilized. With an economy that continues to improve and generate additional state revenues, many are calling for increased funding for higher education in the 2015 legislative session. Unfortunately, this will not be easy to do. The reason, of course, is that there are a variety of competing proposals for increased funding — McCleary funding for K-12 education, I-1351 spending for class size reduction, state employee cost of living pay increases, mental health capacity additions, transportation expenditures, etc. In all likelihood, higher education will again be shortchanged in the 2015 session. This is presaged by Governor Inslee's initial budget proposal, which, by calling for a portion of college employee pay hikes to be financed by higher education tuition, adds to the financial stress on higher education. Regarding Inslee's proposed budget, Randy Hodgins, Vice President of External Affairs at the University of Washington, stated, "There is no other way to describe it than we are disappointed."

Washington's higher education finance dilemma — very low college participation rates, a decline in state funding leading to huge tuition increases, and no readily available funds to address the problem — is not likely to be solved in the near future. This major challenge warrants several key observations:

1. Washington State's abysmal performance in higher education funding, K-12 funding, mental health funding, etc. is a direct indictment of our tax system, which (in addition to being extremely regressive) provides an inadequate level of revenue to support state needs. As noted previously (see my September 2, 2014 editorial), Washington fell from 11th to 37th place in state and local taxes as a percentage of personal income between 1995 and 2011. Thus, it is disingenuous to state merely that Washington State has a higher education financing problem; Washington State has a tax structure problem.
2. It is important to consider the impact other taxation proposals on higher education. Governor Inslee's budget calls for a carbon tax (which I support) on the roughly top 130 polluters in the state. However, two of these entities are the University of Washington and Washington State University (due primarily to the natural gas used to generate campus power). One must ask if it makes sense to tax the carbon emissions of our universities at a time when their state revenue has been substantially curtailed.
3. The public education system needs to be managed as an integrated whole, not as a collection of discrete stages. Washington manages pre-K, K-12, and higher education as separate entities, which leads to a variety of suboptimal decisions. For example, one can question whether it is wise to spend money to reduce K-12 class sizes via I-1351 rather than making higher education more affordable. A more integrated approach to educational system management might also allow for efficiencies that would reduce overall system expenditures (for example, the expansion of programs like Running Start, which allows high school students to take college courses that provide both high school and college credits).
4. It is important to acknowledge that high tuition rates disproportionately impact the middle class (insufficiently affluent to be able to readily afford tuition; but insufficiently poor to qualify for financial aid). This is an especially pernicious consequence in an era of ever-increasing income inequalities.
5. The structural problems listed above — a dysfunctional tax structure and the failure to manage K-12 as an integrated entity — largely explain why there is such a multitude of educational issues on this year's state and local policy agendas: higher education funding, K-12 funding via McCleary, I-1351 funding, teacher pay, pre-K in Seattle, the proposal to split Seattle Public Schools into two districts, the medical school debate, etc.
6. It is important to eschew gimmick solutions to the higher education funding dilemma. One such proposal is to accept a significantly higher percentage of out-of-state students, who pay higher tuition rates, for admission to our public institutions in order to improve finances (which defeats the objective of raising college participation rates among Washington students), and/or to charge these students exorbitant tuition (which, beyond a certain level, is unfair). Another proposition is to charge differential tuition rates based on discipline (e.g., charging more for engineering courses than history courses because they are more expensive to provide). This incentivizes degree decisions (and generally away from much-needed STEM disciplines). The state should pursue solutions that deal with the genuine problem — not concocted schemes with significant, negative consequences.
7. Finally, it should be noted that there have been some successes in higher education finance. Last year, the Dream Act (SB 6523) was passed by the State Legislature. This bill provided financial aid for the children of undocumented immigrants, making college far more affordable for this segment of residents. And more broadly, Washington State is a high-ranking state in the provision of financial aid to students in need.

Funding for higher education is one of a number of key priorities in the 2015 state legislative session. This issue needs to be addressed with both short term (e.g., a modest increase in state funding to begin to roll back the damage from the recession cutbacks) and long term (e.g., a reformed tax code and integrated education system management) efforts. Unfortunately, the initial proceedings of this legislative session do not provide encouragement on either front.

John Stafford is a substitute teacher for Seattle Public Schools and a former management consultant in corporate strategy. He recently completed a run for State Senate in the 37th District. He is writing a monthly article on public policy for the South Seattle Emerald.

Sources: Center on Budget and Policy Priorities (2013); College Board (2014-2015); National Center for Higher Education Management Systems (2010); Olympian (12/18/14); United States Census Bureau (2009); Washington State Office of Financial Management (2014).