Fiscal Mapping: A Start
Longer ago than I want to admit, Suzanne Vega released an album that started with an unadorned a capella track. That song, “Tom’s Diner,” later took on a life of its own. Because it was only a vocal track, and Vega’s vocals weren’t multi-tracked or particularly showy, other people had an easy time appropriating it for their own purposes. A technopop duo added 1990-ish electronic sounds to it where instruments normally would have been, and created a dance hit. The creators of the mp3 used it as their test track, since a single vocal track with nothing else was relatively simple. Vega eventually issued an album of cover versions by other people, all of whom took what she had done and embellished it in their own way. A relatively simple song became a building block for other things.
Reading the new report from HCM Strategists and the CCRC, “Mapping Community College Finance Systems to Develop Equitable and Effective Finance Policy,” reminded me of “Tom’s Diner.” It’s something to build on.
The report sets out to map the community college funding systems in three states – Texas, Ohio, and California – to show the ways that various funding streams intersect. The stated goal of the report is to highlight the ways that the various systems make equitable outcomes (both between institutions and between students) more or less likely. The longer-term goal is to offer advice to policymakers on ways to design funding streams that are likely to have the desired effects.
As a mapping project, it’s quite good. It delineates the various funding streams for credit-bearing classes, showing relevant differences among the states. As part one of a much larger project, that’s helpful.
I’ll offer a few thoughts on the instruments that could fill out the vocal track.
First, address expenses as well as revenues. The report seems to assume that revenues are determined externally, but expenses are determined internally. That assumption is substantially incorrect. In my own state, for example, the state determines what institutions must pay towards employee health insurance. The governor’s proposal for the coming fiscal year includes a $0 increase in operating funding – again – while charging the community colleges $12 million more in health insurance premiums. The net impact is a $12 million cut even before accounting for inflation. We’re working with legislators to develop a counterproposal, but the illustration makes the point: when unfunded mandates consume ever more of the budget, talk of ‘incentives’ misses the point. This isn’t even zero-sum; it’s negative-sum.
It isn’t just about health insurance. The state disallows community colleges from offering retirement incentives. WIth voluntary cuts off the table, involuntary cuts have to make up the difference. Those cuts are unlikely to improve student success, but they’re necessary when the alternative is insolvency. In this case, rules that don’t have dollar figures attached still have real costs, and those costs have impacts on student performance.
Next, include both non-credit enrollment – which is actually growing in many places – and dual enrollment. Admittedly, tracking the finances of dual enrollment is a daunting ask, given how local and idiosyncratic they can be, but it’s a double-digit percentage of community college credit enrollment and it’s growing. If ever financial mapping were needed, it’s needed there.
But there’s a more basic issue.
The report correctly notes that in all three states studied, community colleges are financially incentivized to increase enrollment. So, are enrollments going up?
In a word, no. Which means it’s not primarily about incentives. The core of the issue is something else.
Colleges face fixed costs and variable costs. In a sustainable system, fixed revenues would cover fixed costs, and variable revenues would rise and fall with variable costs. Over the years, though, colleges have been forced to cover ever more of their fixed costs through variable revenues. That can work, sort of, when enrollments are increasing. But when they fall, the model falls apart. Conditioning variable support on performance in a zero-sum or negative-sum system essentially guarantees death spirals for some (which the report notes in passing). That’s not a glitch; it’s a mathematically inevitable structural feature of a zero-sum (or negative sum) performance-based system. For some to gain, others must lose. If you care about equity among institutions, that’s disastrous,
Again, this is meant in the spirit of building on the report. If we had a good idea of how much it should cost in a given state or region to provide a solid community college education, and then included costs in the model, we could see where the gaps are. Even better, if the maps broke out costs and revenues by whether they’re fixed or variable, and then applied some basic demographic projections, we could see what’s built to last and what’s heading for a cliff. It would vary by state, but in theory, we could identify sets of rules that are more congenial for sustainability and use those insights in other states. Connecting the dots could be incredibly useful if we include the right dots.
Admittedly, that’s a more complicated project. It’s more like the dance version of “Tom’s Diner” than the original. But we could really use a dance version right about now. Thank you to HCM Strategists and the CCRC for offering the simple version; I hope there’s a more filled-out version to follow. Or maybe many versions, like a compilation album with a track for each state. It might not be a dance hit, but it could do a lot of good.