Testimony by Jamie P. Merisotis, President/CEO, Lumina Foundation for Education
Arizona House of Representatives Higher Education, Innovation and Reform Committee, Phoenix, AZ
February 23, 2011

Representative Court, Representative Forese, and members of the committee, thank you for the opportunity to address the Higher Education, Innovation and Reform Committee today.

I’m here to talk about what is quite possibly the single most important economic growth issue of our time: the critical connection between college success and economic prosperity. That connection is direct, real, and more important than ever before as our country faces the “New Normal” in economic growth and state appropriations. And, perhaps more than in any other time in this nation’s history, that connection needs to be addressed through concrete steps taken by state policymakers and public colleges and universities.

Lumina Foundation believes Arizona can grow its economy by focusing on its higher education strengths and opportunities—strengths like “no frills” degrees and advising, the Getting Ahead Initiative, and the continued engagement of the state’s community colleges. And opportunities like paying institutions for the students they graduate and creating a statewide virtual university to award bachelor’s degrees.

Before I get into specifics, let me take a moment to provide a bit of background on Lumina Foundation. Lumina is a national foundation with assets of about a billion dollars. We are committed to one cause: enrolling and graduating more students from college—especially low-income students, students of color, first-generation students and adult learners. In fact, we are the largest private foundation in America that focuses exclusively on that mission. We pursue our mission in a very targeted way. All of our energy and resources are focused on achieving one ambitious but specific goal for college attainment, what we call “Goal 2025” or simply, the Big Goal.

Our Big Goal is that by the year 2025, we want 60 percent of Americans to hold high-quality college degrees and credentials. Today, the national degree-attainment rate is hovering just below 40 percent, and here in Arizona the attainment rate among working-age citizens is even lower—just 34 percent.

Facts show clearly that increasing higher education attainment is essential to the nation. Why? Because, without college-level learning, workers simply won’t have the knowledge and skills they need to succeed in today’s global economy.

The Georgetown University Center on Education and the Workforce has estimated that by 2018, 63 percent of all of the nation’s jobs will require some form of postsecondary education or training. That’s a huge increase since the mid-’70s, when less than 30 percent of jobs required any education beyond high school. Here in Arizona, it’s estimated that 61 percent of jobs will require postsecondary education by 2018. Between now and 2018, Arizona will need to fill about 900,000 vacancies resulting from job creation, worker retirements and other factors. Of these expected vacancies, then, more than half will require postsecondary credentials.

Increasing college attainment isn’t just a way to fill job vacancies; it’s actually a proven means to stimulate job creation. Economists tell us that much of the nation’s economic growth over the last half-century is largely attributable to two things: technology and increased educational attainment. Why are these two so important? It’s because they increase productivity, and productivity growth is the engine that drives all advanced economies.

When employers are given a more highly educated workforce, they actually organize the work in more efficient and productive ways. They have learned through experience that hiring better-educated workers increases productivity and enhances workplace creativity. This, in turn, helps fuel the innovation that leads to new products and services, new markets … and new jobs to serve those markets.

The key to the nation’s long-term economic success, then, is a 21st century labor force, one with adaptable workers who possess high-level skills and relevant knowledge. Those skills … that type of knowledge … can only be offered in well-designed and rigorous postsecondary programs. And that’s why the Big Goal is all about ensuring that many more students enroll in and complete such programs.

This is where Arizona’s higher education system can play a key role. The state’s colleges and universities can spark this economic growth and educate the state’s growing population.

The work we’re doing at Lumina—and, really, all that I’ve learned in more than two decades of work in the higher education arena—convinces me that the current model of higher education won’t get us there. Fundamental changes are needed. Despite its many strengths—strengths that, no doubt, served this nation well for many decades—the current system simply cannot get us where we need to be in the 21st century.

During past economic slumps, higher education has met budget challenges through spending cuts and tuition increases. We have again seen the use of these tactics in this recession: cutting programs, implementing furloughs and layoffs, increasing class sizes, and reducing the number of classes. Last year, following the trend around the country, the Board of Regents increased tuition 20 percent for incoming freshmen at Arizona’s universities. Not only do these changes hurt degree attainment, they are no longer enough.

This recession is an economic earthquake like none since the Great Depression. Further budget cuts are on the way. In order to close Arizona’s 11.5 percent budget shortfall, the governor has proposed additional cuts to higher education this year including 20 percent to the public universities and nearly 50 percent to the community college system. These cuts would be on top of the 46 percent cut in state funding over the last 4 years. The federal stimulus funds that have cushioned the cuts have now come to an end and state revenues could take 10 years to recover. This budget situation is the “New Normal”.

States and institutions must find ways to deal with these difficult circumstances by doing things differently. By innovating. By taking the opportunity to align spending with the goals of access, quality, and attainment. By reevaluating costs to increase efficiency and effectiveness. The mantra of the moment is that the “cost model is broken” and that the new normal will require new attention on cost management and efficiency.

To face this reality, we need a more productive higher education system. Such a system should provide simplified, technology driven ways for students to earn degrees. That system should reward institutions for helping students complete these high quality education programs rather than just enrolling them. That system should provide aid to students that create incentives for them to complete their programs.

In Arizona, there are many ways that higher education and policymakers are coming together to increase the education levels of the state.

One thing Arizona does well is innovative, online education. Rio Salado Community College is an online community college that, from its Tempe headquarters, utilizes technology and forges partnerships with corporations, government agencies, and other schools to deliver lower cost education. Rio offers online certificates and associate degrees as well as in-person and hybrid classes at college sites and places of employment throughout Maricopa Community Colleges. Rio works to transform the learning experience in many ways. It emphasizes choice, access, and flexibility. It delivers customized, high-quality learning design. And it offers personalized service and organizational responsiveness. Rio Salado is so innovative that Lumina Foundation’s Higher Education Productivity Strategy Labs are organizing a site visit in March for other states to learn from what the community college has done.

Along this same line, the Getting AHEAD initiative has pushed towards innovative, lower cost higher education models and an online advising system. The initiative is an integrated, statewide vehicle for the state’s effort to create a more efficient, harmonized, and productive structure of higher education. It aims to address challenges facing higher education through collaborations between the four-year sector, the community colleges and K-12. Arizona State University has created 181 bachelor’s degree pathways with 10 community college districts. Students earning their bachelor’s degree between New Pima Community College and the University of Arizona save between 37-50% in tuition. Northern Arizona University and Yavapai Community College have collaborated to create close to 80 2+2 degree programs and close to a dozen 3+1 programs. We are proud to have funded this work and are glad to see that by engaging the community colleges, Arizona has strengthened new institutional structures that will help graduate more students for existing dollars. The strong team behind this deserves recognition for their effort in creating continuity and persistence in this work. I thank them all, especially co-leaders Regent DuVal and Chancellor Glasper, Governor Brewer, Speaker Adams, and other legislative and business leaders.

There are also places where Arizona needs to continue to push despite—or perhaps because—of the new normal in state appropriations. These are the tightly integrated areas of funding student success at universities and creating a need based aid program that incentivizes completion.

Arizona’s community colleges and universities have been looking at ways to revise their funding formulas to include incentives for course and degree completion, rather than traditional methods based solely on enrollment, peer comparisons, and prior-year funding levels. Such funding policies are an important element of a statewide completion agenda as they reward institutions that are finding ways to help students succeed. Difficult budget times should not stall these efforts. In fact, Indiana used performance criteria to allocate necessary budget cuts in early 2010, sending a clear and consistent signal to institutions: increasing completion and attainment is a priority for Indiana. As a result, colleges and universities that were doing a better job in meeting the state goal of increasing completion saw their budgets cut less than others.

We have also seen indications that performance-based funding works in other contexts. Pennsylvania has been implementing performance funding over the last decade. They’ve seen encouraging results: increasing graduation rates by nearly 10 percentage points. Persistence to the second year has also increased, especially for Hispanic students, whose rates have jumped nearly 15 points.

Using performance criteria to allocate base funds—not just funds on the margin—sends an unmistakable message that colleges and universities are expected to respond to public priorities and goals, and will be supported for doing so.

Another vital strategy for graduating more students, especially the adult students that Arizona needs, is creating a comprehensive, statewide online institution to grant bachelor’s degrees. Currently, even if Arizona equaled the highest performing states in college going and college completion, the state would still have to significantly increase adult enrollment in higher education in order to reach the Big Goal. New strategies and models to help accomplish this could augment the good work of Rio Salado with its associates and certificates programs.

One such model is Western Governors University Indiana. Policymakers in Indiana–a state that also needs to dramatically increase the postsecondary education levels of its adult population– decided that rather than spending millions of dollars the state didn’t have into a new institution or into online learning structures at existing institutions, they would essentially subcontract the job out to Western Governors University, a nonprofit institution based in Salt Lake City.

WGU Indiana is, in essence, Indiana’s eighth state university. In contrast to the millions the state would have spent to create a new entity, Indiana did not directly invest funds to create WGU Indiana. The only significant change the state made was to allow students to use their state-funded financial aid to attend the virtual institution. WGU Indiana’s tuition is under $3,000 per six-month term, roughly comparable to most of Indiana’s public universities. The institution will be self-sustaining on that low tuition. And WGU has not increased tuition in four years. Both Texas and Washington state are currently exploring this model.

I hope these illustrations give you a sense of the possible. We know we’re aiming high. We know it is not easy. We know we have a long way to go to reach that 60 percent goal, in Arizona and throughout the nation. But in our view, the achievement of this Big Goal is vital—not only to maintain a good quality of life for individual Americans, but to ensure the long-term stability and security of our society as a whole. What’s more, we at Lumina are convinced that this ambitious goal is achievable—so long as we all take steps to align policy and practice that ultimately focuses on supporting and graduating students.

Thank you again for the honor of being with you.

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