FISCAL ENVIRONMENT

1

State Tax Capacity & EffortIndexed to U.S. Average

Source: State Higher Education Executive Officers (SHEEO)

AL

AK

AZ

AR

CACO

CT

DE

GA HI

IL

IN IAKS

KYLA

ME

MD

MA

MS

MT

NE

NV

NJ

NY

NC

ND

OH

OK

PA

RI

SC

SD

UT

VT

VA

WA

FL

ID

MI

MN

MO

NH

NM

TNTX

WV

WI

WY

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

0.6 0.8 1.0 1.2 1.4

Sta

te T

ax C

apacity

(Tota

l Taxable

Reso

urce

s Per C

apita

)

State Tax Effort (Effective Tax Rate)

US

OR

slide 2

Projected State and Local Budget Surplus (Gap) as a Percent of Revenues, 2016

slide 3Source: NCHEMS; Don Boyd (Rockefeller Institute of Government), 2009

-2-2

.1-2

.1-2

.2-2

.3-2

.5-2

.5-2

.9-3

.2-3

.4-3

.6-3

.8-3

.9-4

.4-4

.6-4

.7-4

.8-4

.9 -5-5

.3-5

.5-5

.6-5

.6-6 -6

-6.1

-6.3

-6.5

-6.7

-6.9

-7.2

-7.3

-7.3

-7.4

-7.5

-7.6

-8 -8-8

.1-8

.4-8

.4-8

.6-8

.6-8

.7-9

-9.2

-9.4

-9.6

-10.

6-1

0.8

-11

-12

-10

-8

-6

-4

-2

0

Verm

ont

Mar

ylan

dM

aine

New

Jers

eyCo

nnec

ticut

Rhod

e Is

land

New

Ham

pshi

reW

isco

nsin

Mas

sach

usett

sM

ichi

gan

Calif

orni

aN

orth

Dak

ota

Ohi

oD

elaw

are

Kans

asO

rego

nVi

rgin

iaN

ew Y

ork

Min

neso

taPe

nnsy

lvan

iaW

est V

irgi

nia

Neb

rask

aIll

inoi

sU

nite

d St

ates

Mon

tana

Indi

ana

Haw

aii

Loui

sian

aM

isso

uri

Okl

ahom

aA

lask

aKe

ntuc

kyW

yom

ing

Iow

aN

ew M

exic

oSo

uth

Dak

ota

Was

hing

ton

Flor

ida

Sout

h Ca

rolin

aA

rkan

sas

Geo

rgia

Colo

rado

Tenn

esse

eN

orth

Car

olin

aId

aho

Uta

hA

rizo

naN

evad

aA

laba

ma

Mis

siss

ippi

Texa

s

After stimulus wanes, gaps could approximate 4% of spending, or $70 billion, even under the “Low-Gap”

Scenario

Source: Don Boyd (Rockefeller Institute of Government), 2009slide 4

After stimulus wanes, gaps could approach 7% of spending or $120 billion under the “High-Gap”

scenario

Source: Don Boyd (Rockefeller Institute of Government), 2009slide 5

FINANCE: ALIGNMENT WITH STRATEGIC PLANNING6

May 10, 2001

7

The Management Cycle in a Public University System

System

Planning

Institution

System

Assessment

Institution

System

Resource Allocation

Institution

The Flow of Funds - State

8

Federal Government

Tax Policy

Appropriations/GrantsStudent Aid

Tuition

Scholarships &Waivers

Available State and Local

Govt. Funds

Higher Education

Students Institutions

Economy

• K-12• Corrections• Health Care• Other Govt.

Stimulus

Funds

FINANCE POLICY

9

The Two Purposes of State Funding Policy

• Build Core Capacity—General Purpose Funding

• Promote Capacity Utilization Around State Priorities—Special Purpose Funding

Criteria for Effective Higher Education Finance Policy

• Create and Maintain Necessary Institutional Capacity

• Reinforce Utilization of Capacity to Achieve State Goals

• Contributions Required Are Affordable—To Both State and Students

• Viewed as Being Fair

• Transparent

Finance Policy—The Options

Institution Focused

Student Focused

Core Capacity

Capacity Utilization/Public Agenda

Tuition and Aid PolicyFocused on

Attainment ofSpecified Outcomes

Base-Plus

Formulas

Investment Funds

Performance

Funding

Tuition and Aid Policy

Focused on

Revenue Generation

Basic Questions at State Level

• How Much to Allocate

• To Which Recipients—Students or Institutions

• Using Which Mechanisms

A Key Distinction

• Investment Funds

– Capacity Building

– A Priori

• Incentive Funds

– Capacity Utilization

– Post Facto

Remember—All Funding Mechanisms

Provide Incentives for Behavior

Central Question:

Are the Behaviors Elicited

the Ones You Want?

Components of a Higher Education Funding Model (the Institutional Piece)

• Base Institutional Funding

– The Largest Portion, by far

– The Current Mississippi Funding Formula Fits in this Category

• Special Purpose Funds—Resources Set Aside Explicitly to Provide Incentives for Certain Outcomes

One Set of Trade-Offs

Unit Total Total RevenuesQuantity Characteristics Utilization Cost Cost $ Rev. $ Sources

AssetsPersonnelFacilitiesEquipmentCollectionsStudentsFinancesProgram

ConsumablesServicesSuppliesUtilities

Contingency

New Initiatives

=

TuitionAppropriationsGovt. GrantsPrivate GiftsEndowmentSales & ServicesOtherReserves

Illustrations of Peer Comparisons from University of Maine System

18