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Big Goals and Tough Budgets: Strengthening Tennessee’s Colleges and Universities in Times of Fiscal Austerity

Testimony by Jamie P. Merisotis, President/CEO, Lumina Foundation for Education
Senate education committee, Nashville, TN
March 16, 2011

Chair Gresham and members of the Senate Education Committee, thank you for the invitation to testify before you today.

There may be no committee in the Tennessee Senate more vital to the future of your state than the one in this room. The long period of fiscal constraints Tennessee and other states have been going through has been called the “New Normal” for public budgeting. One of the most important issues confronting you in the “New Normal” environment is figuring out how the state can meet its ambitious goals for increasing college degree attainment despite severe limits in the revenue available.

Video includes full testimony and post-testimony discussion with Tennessee general assembly members

This challenge should not be minimized. But I am optimistic you can graduate many more students with available resources if you’re willing to continue to embrace big changes, as you have already done with the landmark Complete College Tennessee Act. Your new public funding formula links 100 percent of state dollars to the results you expect your institutions to achieve. You have further opportunities now to improve college attainment rates by extending the same kind of strategic thinking to your tuition and financial-aid policies. By the time I’m done, my hope is that you will share my optimism and will also understand why I believe that the changes you are considering to financial-aid policy in the state are so vital to meeting the ambitious goals for college completion that you have set.

First, let me take a moment to share some background about Lumina Foundation for Education. Lumina is a national foundation with assets of about a billion dollars. We are committed to one mission: enrolling and graduating more students from college—especially students from low-income families, minorities and students of color, first-generation college-going students and working-age adults. In fact, we are the largest private foundation in America that focuses exclusively on this 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 raising college attainment, what we call “Goal 2025” or simply, the Big Goal.

This Big Goal is that by the year 2025, 60 percent of working-age Americans will hold high-quality college degrees or credentials. Today, the national degree-attainment rate is hovering just below 40 percent, and here in Tennessee the proportion of working-age residents with a college education is even lower: At 32 percent, Tennessee’s education level would rank slightly above that of Poland if Tennessee were a country.

But educational disparities within the state are even more striking. People talk about the three states of Tennessee, but there are even more than three when it comes to economic and educational opportunity. In Williamson County, 56 percent of adults older than 25 have college educations, which is on par with top-performing countries such as Japan. In many rural counties, including Morgan, Campbell or Lauderdale—and in some urban neighborhoods in Memphis and Nashville—lower percentages of adults have college degrees than in Mexico, where the degree-attainment rate for adults over the age of 25 is just 15 percent.

So raising the educational bar is especially urgent in rural areas and low-income urban neighborhoods in Tennessee, particularly since the students growing up there will need to have significantly better opportunities than their parents. Put plainly, without meaningful, high-quality education beyond high school, 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 Tennessee, it’s been estimated that 54 percent of jobs will require postsecondary education by 2018. Between now and 2018, Tennessee will need to fill about 900,000 job openings resulting from job creation, retirements and other factors. Of these expected vacancies, more than half will require workers with college degrees or other postsecondary credentials. You are already seeing that new employers locating in the state, like Volkswagen in Chattanooga and Hemlock Semiconductor in Clarksville, are requiring at least an associate’s degree of their new employees.

Increasing the proportion of college graduates 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.

The performance of global financial and labor markets in recent years has meant that all of us have less to work with than we did a few years ago. So more than ever, we have to ask ourselves—where can our limited resources have the biggest impact on boosting college completion? What are the leverage points where the investments we make can produce the greatest change? Our response has been to invest in helping states and higher education institutions find innovative ways to boost productivity. We have grouped our advice into four categories or “steps.” These are: rewarding institutions for graduating students; rewarding students for completing courses and degrees; expanding new, lower-cost delivery models; and embracing efficient business practices. The foundation wants to be a resource for Tennessee and other states in all of four of these steps. We have been pleased to work with leaders in the state through Tennessee’s productivity grant from Lumina and through your participation in our Productivity Strategy Labs focused on the Four Steps to Finishing First that I referred to earlier. The first two steps are more applicable to Tennessee right now.

In the first category of reform, rewarding institutions for graduating students, the Complete College Tennessee Act has again placed the state at the cutting edge of higher education reform nationally. With this legislation, you wisely made an explicit link between the taxpayer money you provide to colleges and universities each year to the results they are able to achieve for the students and state residents. Tennessee has the longest history of any state with performance funding, and the Tennessee Higher Education Commission’s commitment to learning from and strengthening financial incentives for colleges to see that students graduate has been impressive. Your challenge now is to sustain that momentum in the face of the political pressures that inevitably emerge with any difficult change. A reform as important as the Complete College Tennessee Act is never “finished”. It requires the commitment and leadership of everyone in this room to make it work for each of Tennessee’s colleges and universities, regardless of impact on its budget.

However, institutions are only one side of the performance equation. Students are the other, which is why another reform “step” we emphasize is rewarding students for completing courses and degrees. In the same way you have made a bold statement about how your appropriations to colleges and universities will be allocated, you must think in similar terms about tuition and financial aid. These, too, must become part of your strategic arsenal in tackling the completion challenge.

There are proposals on the table to reform your biggest statewide financial-aid program, the Tennessee Education Lottery Scholarships. Along with the Complete College Tennessee Act, this represents a huge opportunity to ensure that your dollars are going where they will make the biggest difference in the numbers of students who complete high-quality college degrees and credentials. Some of the proposals under consideration would advance the state’s completion agenda, but some could unintentionally set it back. Let me speak about a few of the ideas under consideration.

First, allowing lottery scholarships to be used for summer courses is highly consistent with your agenda. Right now, the fact that students cannot receive lottery scholarships to cover these courses creates a disincentive to take advantage of summers to get through programs more quickly. Increasing summer enrollments is also good business practice that allows you to make better use of institutional capacity year-round.

Second, capping the scholarship at 120 credits is one of the best ways to reduce program expenses when resources are tight. It creates a clear incentive not to take more courses than necessary, and thus ensures that as many students as possible will have access to those core 120 credits. Students may want to double major or enroll in programs longer than 120 credits. But you are not precluding students from doing so if you stick to a 120-credit limit and they pay regular tuition; you are simply ensuring that everyone gets a basic level of financial aid before anyone gets more than the core allotment of 120 hours.

Third, reducing program expenses by raising the ACT or SAT score to qualify initially may be counterproductive to your efforts to graduate more students with educations beyond highs school. Such a policy shift would tend to disproportionately cut out the lower-income students who, research shows, are most likely to respond to completion incentives and to change their behaviors as a result of financial aid. Many of the top-performing students getting lottery scholarships will complete a degree with or without the program. The program offers the greatest benefits when it assists those students on the margins.

A better alternative would be to reduce the amount of the award for the most-affluent recipients, so their achievements are still acknowledged but the bulk of the resources are focused on students for whom they will help the most. If this solution is politically unpalatable, it would still be better—in terms of the likelihood of increasing student completion—to reduce the award for all students rather than raise the ACT or SAT scores needed to qualify for this aid.

Fourth, if you are considering changes to lottery scholarship renewal requirements, be cautious about raising the grade requirements too high. Focus instead on whether students are making progress toward their degrees. For a student who is struggling to maintain a 2.75 GPA, but is passing every course, losing financial aid could be the final straw. In its January 2011 report on the lottery scholarship program, the Tennessee Higher Education Commission found that retention rates for low-income and minority students increases significantly when the GPA is adjusted from 3.0 to 2.75.

To ensure students are making progress, a continuous enrollment policy—or “no failure, no withdrawal”—would be a better way to tighten renewal requirements. Florida recently changed its policy to base continuing eligibility on the number of credits students earn, not the number they attempt, and to require that students refund scholarship dollars used to pay for withdrawn courses. In the first year, course withdrawals among recipients were cut by half, and the state was repaid $15 million that could be used to maintain funding for courses students actually finished.

In essence, following this logic would create incentives for students to complete, just as you have done for years for colleges and universities. Overall, Tennessee is on the right track. In truth, you are an exemplar among the states actively addressing college attainment challenges and its implications for the economic future. I want to again commend your leadership and vision in the adoption of the Complete College Tennessee Act. You have expressed a clear intent to reward institutions for completion as you make funding allocations in a challenging budget environment. Now, what the state needs is for you to apply the same determination in building the most-effective possible financial-aid program for those who will make a difference in your state’s future.

We know we’re aiming high, and so are you. We also know it will not be an easy path to success. We all have a long way to go to reach that 60 percent goal, in Tennessee and throughout the nation. But in our view, the achievement of these goals 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.

Thank you again for the invitation to address the committee on matters of importance to Tennessee and the nation. Raising the education attainment of all Tennessee citizens represents the best investment possible to ensure this state’s economic and social well-being, and I commend you for your commitment to achieving that outcome.

Tracy Chen
Lumina Foundation: Working to ensure a quality education for all Americans
Lumina Foundation: Working to ensure a quality education for all Americans
August 8, 2019

Lumina Foundation is an independent, private foundation in the United States that is committed to making opportunities for learning beyond high school available to all.