Gov. Rick Perry's Higher Education Reform Proposal 80th Texas Legislature

Gov. Perry proposes an ambitious higher education reform plan that will increase higher education funding by $711 million in general revenue ($1.7 billion all funds), increase financial aid by 60 percent or $362 million, fully fund higher education formulas and substantially change the funding mechanism by eliminating “special items,” or earmarks, so money increasingly follows students instead of schools. These reforms will be achieved by the implementing the following:

Innovative incentive-based performance funding system to prepare students for the 21st century marketplace.
Need-based and performance-driven increase in financial aid.
Creative alternative programs to address nursing shortages.
100 percent funding support of the higher education operations formula.
Understandable and responsible funding patterns for distributing tax dollars to our schools.

INCENTIVE FUNDING

Gov. Perry proposes allocating $350.2 million ($300 million new) to encourage public universities and colleges to meet the statewide goal of increasing the number of students completing bachelor’s degrees, associate degrees and certificates by 171,000 by 2010. Additional funds will be awarded to schools with graduates identified as at-risk, degrees earned in critical fields, and degrees earned by students who do well on either a major field assessment or licensure exam. The incentive program is not designed to reward inputs – it rewards outcomes.

Universities

For universities, the incentive program will reward two measures: degrees awarded and high scores on a major field test. Universities will receive a designated amount for each student receiving a diploma. Additional weight, and therefore more money, is given for students considered at-risk or majoring in the critical fields of engineering, math, physical science, nursing, computer science, allied health, and math and science teacher education. In an effort to increase the number of Texans with master’s, doctoral and professional degrees, an award is given for each diploma in graduate fields as well. Average incentive funding is estimated to be $2,229 per graduate.

Community, technical, and the Lamar State colleges

For community, technical and the Lamar State colleges, the proposed incentive program will reward three measures: certificates earned in approved programs and associate degrees completed; students completing at least 30 hours with a GPA of 2.5 or higher who transfer to a four-year state college; and high scores on a general education or licensure exam. Additional weight will be given for students majoring in engineering technology, computer science, math, physical science, allied health and nursing. Average incentive funding is estimated to be $1,216 per certificate, degree or transfer student.

Health-related Institutions

For health-related institutions, the incentive program will reward two measures: degrees and residencies completed and licensure exams. Additional weight will be given for at-risk students and primary care residencies. Average annual incentive funding is about $8,200 per degree or residency completed.

Exit Exams

To protect integrity of the incentive program, baccalaureate graduates must take an exit exam. Students can still graduate with a low score on the exit exam, but universities receive an additional weight, and more money, for students with higher scores on the exams. Universities receive an additional weight, and more money, for higher scores on the exams. If the student graduates in a field with a licensure exam, that exam is used. In other fields, the Educational Testing Service’s major field tests are available. These exams exist for various degree areas, such as biology, business, criminal justice, education, music and political science.

Other factors that will determine funding for institutions include:

Retention
Time to complete degree
4-, 5-, and 6-year graduation rates
Number of transfers accepted from community colleges
Quality of education
Space utilization
Counseling to reduce credit hours not needed for graduation
Course completion
Remedial education

FINANCIAL AID INCENTIVES AND REORGANIZATION

Gov. Perry proposes historical increases in need-based and performance-based financial aid to help students pay for college. New aid program money follows the student. The manner in which financial aid is administered and delivered is restructured to be more streamlined and student-centered. This proposal increases total aid for all major state programs by $362.8 million, or 60.3 percent.

Tuition Assistance Grant

Three existing aid programs, Texas Grant, Texas Educational Opportunity Grant and Tuition Equalization Grant, are combined into a new Tuition Assistance Grant. The combined programs total $492.2 million, and include funding support to phase out students in the consolidated programs to avoid disrupting their financial planning. Consolidation occurs for equity and consistency. The state currently meets a greater percent of financial need of students attending non-state independent institutions than for full-time students attending public institutions.

To receive a Tuition Assistance Grant, students must be in a certificate or two-, four- or five-year degree program, meet financial assistance criteria, and have a high school GPA of 3.0 or higher in the recommended or distinguished programs. To remain eligible, students must complete at least 75 percent of hours attempted, 24 hours per year, and maintain a 3.0 GPA. If a student does not graduate within the specified time, the grant must be repaid at zero-percent interest. Funds are also included for part-time students who show substantive progress.

B-on-Time

The B-on-Time zero-interest forgivable loan program will increase from $20.7 million in 2006-07 to $405.3 million in 2008-09. Current requirements remain the same – students must attend a two- or four-year institution and be eligible for federal financial aid; no minimum GPA is required, but students must have graduated from the recommended high school program. Continued eligibility requires satisfactory academic progress in the first year, and subsequent completion of at least 75 percent of hours attempted in the most recent academic year with a cumulative GPA of at least 2.5. The loan is forgiven if the student graduates with a 3.0 GPA in the time allotted for the degree or certificate program, exceeding no more than six hours for their specific degree program. If students, due to GPA or income, do not qualify for the Tuition Assistance Grant but meet certain academic requirements, they may receive financial assistance through the B-on-Time program.

Texas Technology Grant

A new Texas Technology Grant is created with $43.7 million to increase the number of electrical engineering, engineering technology and computer science graduates from about 5,500 to 11,000 per year. To be eligible, students must have completed the recommended high school program, and be enrolled in a public or private two-, four- or five-year degree program. If enrolled in a baccalaureate program, students must have completed at least 30 hours, including two calculus and two science courses with an overall GPA of at least 2.5. Continued eligibility requires completion of 75 percent of hours attempted, 24 hours per year and maintaining a 2.5 GPA or higher. Students may receive the award for up to 120 hours beyond the initial 30 hours needed for entry until they can earn a bachelor’s degree, or for four years beyond the entry requirements. Students not graduating within the specified time or not maintaining eligibility requirements must repay the grant, with exceptions for hardships.

Texas College Work Study Program

Funding for the existing Texas College Work Study Program will increase from $10 million in 2006-07 to $23 million in 2008-09.

Administration of financial aid programs

Significant changes will occur in the administration of all state financial aid programs. Although appropriated to the Texas Higher Education Coordinating Board, the Board will contract with the Texas Guaranteed Student Loan Corporation (TGSLC) for administration. All eligibility determination for state programs will shift during the biennium from individual campuses to TGSLC. Beginning in the fall semester 2008, TGSLC will determine state financial aid eligibility and develop procedures for individual student debit cards with which students pay tuition and fees at the schools of their choice. Therefore, financial aid is distributed to students for tuition payment to the Texas college or university they attend. Colleges and universities will continue to control local, institutionally-based aid.

NURSING INITIATIVES

Texas Nursing Excellence Initiative

The Texas Nursing Excellence Initiative is a $56.8 million effort to increase the number of nursing graduates and address the growing nursing shortage in innovative ways. The first component is a pilot, non-traditional program for accredited registered and licensed vocational nurse degrees. Through this program, non-state hospitals provide nursing education separate from programs attached to public or private universities. The Coordinating Board will allocate $40 million through an expedited request for the proposal process. Proposals may be from standalone hospitals or submitted jointly with community colleges or universities; however, alternative ideas are encouraged. It is anticipated that the first pilot will begin in January 2008.

Nursing Innovation Grant Program

The second component of Governor Perry’s nursing initiatives will allocate $16.8 million for the Nursing Innovation Grant Program to promote creative ways to educate, recruit and retain nursing students and faculty. The funding is comprised of a reallocation of $4 million in tobacco lawsuit settlement proceeds; $5.7 million from the Professional Nursing Shortage Reduction Program allocated to the grant program; and $7 million in new general revenue.

FUNDING FORMULAS

Funding one hundred percent (100%) of the education formulas recommended by the Texas Higher Education Coordinating Board will focus higher education institutions on meeting statewide goals.

BUDGET TRANSPARENCY

Governor Perry proposes the establishment of a clear and unambiguous appropriations format for all institutions of higher education and recommends repealing general law to require lump sum appropriations to institutions of higher education. These actions increase accountability and transparency in the budgetary process. The new pattern will also help institutions identify statewide trends to justify requests for funding to address specific operational needs. These efforts will reduce the need for non-statewide requests through institutionally-oriented special items and lead to greater equity in appropriations to address statewide goals.

The new budgetary format breaks down vague line items such as “Operations Support” into easily understandable elements such as “Faculty Salaries,” “Library,” “Building Maintenance” and “Utilities.” Not only does this new budget format provide greater clarity for how tax dollars are to be used, it also allows increased precision in allocating dollars for needy purposes.