Colorado and the Higher Education Voucher Experiment: Finance Revolution or "Hail Mary Pass?"

Article excerpt

In May 2004, Colorado Governor Bill Owens signed Senate Bill 189 into law, essentially transforming how public higher education is funded in that state. The measure, the first of its kind in the nation, changes the flow of state appropriations from the traditional enrollment-based black grant to institutions into two more market-based streams:

* A per-student undergraduate stipend (authorized at $2,400 per year for resident students at public universities and $1,200 per year for resident students at private universities in the state) that "follows" the student for up to 145 credit hours; and

* A fee-for-service contract between the state and the institution to provide graduate, professional, and developmental education, as well as public service and other mission-related functions.

Eligibility for either stream is contingent upon establishment of a performance agreement between the institution and the state's Commission on Higher Education that will specify institutional performance targets (to be determined).

The law is scheduled to take effect July i, 2005, but the debate over its significance-and wisdom-is already well underway. Some advocates see the measure as a new and important mechanism for promoting access and efficiency in public higher education, while more pragmatic proponents couch it as an essential means to loosen the grip of constitutional revenue/spending limits imposed by the Taxpayer Bill of Rights (TABOR). Critics contend that the law will do little to expand access, and will instead pave the way toward a system of publicly chartered, privately funded institutions, and may even constitute a death sentence for some.

While it is too early to tell which-if either-camp will ultimately be vindicated, pundits and proponents should look critically at the context surrounding the law before pronouncing it "the wave of the future" in higher education finance. Following are three key points to consider in thinking about the impact and future of Senate Bill 189:

* Any potential benefits of a new finance system will not be realized until the state gets its fiscal house in order. Specifically, Colorado is currently hamstrung by the combination of TABOR, which places strict limits on state revenue collections and spending increases, and Amendment 23, another constitutional provision that mandates annual state funding increases for K-12 education (at rate of inflation plus one percent). While Senate Bill 189 provides for some relief for public universities by exempting them from TABOR'S revenue limits,1 the "double whammy" represented by TABOR'S taxing and spending restrictions and Amendment 23's required annual hikes for the state's largest general fund item will likely bring the starvation of other public services (such as higher education) over the long term.

Legislative leaders and the governor are currently working on modifications to TABOR, thus easing half of the squeeze, but have not yet agreed on its provisions. Moreover, anti-tax groups such as the Club for Growth are touting TABOR as a national model, further complicating the political calculus for reform efforts. …