JEFFERSON CITY – Higher education funding would follow the student if legislation proposed by Representative Carl Bearden (R-St. Charles), Speaker Pro Tem, is adopted.

The portable funding is only one aspect of House Bill 742 presented to the House Higher Education Committee on April 5.

“Funding of higher education is not an easy process,” Bearden said. “The intent [of the bill] is to provide public institutions a base foundation funding rate of around $1 billion and after that we begin focusing on the students. The student then has portable money to take to any approved institution they would like in the state.”

The base foundation level in the legislation is the fiscal year 2002 higher education funding allocation level. In 2002, the highest level the state has ever had for higher education was set.

As a result of state withholdings, this level has yet to be met. The financial aspects of this legislation would not take effect until the state fully funds the base foundation level.

“I don’t anticipate that to happen for the next three to five years,” Bearden said.

The Coordinating Board for Higher Education would be directed to work with the institutions in the state to revamp the financial aid programs in the state.

Three current financial aid programs would be used as models, including the A+ Program, Bright Flight for merit based aid and the Gallagher Program for need based aid.

Performance measures for institutions would be required with this legislation.

Bearden said most institutions he has talked to have been working to develop performance measures.

“The bill would establish performance contracts predicated on those goals and measures after we get past the basic foundation [funding rate],” Bearden said.

State institutions who have met performance contracts would be eligible to receive the additional portable money for each student.

“Our money starts following the student,” Bearden said.

Appearing in support of Bearden’s legislation was Richard Vedder, a distinguished professor of economics at Ohio University.

Vedder began his testimony by provoking laughter from observers and lawmakers at the expense of the lawmakers after Representative Gayle Kingery (R-Poplar Bluff) set a time limit for each witness.

“I will try to stay within the time limits although I will point out to members of the committee that I am a college professor with tenure and you have term limits, so I have the upper hand in this regard,” Vedder said.

Vedder described aspects of his research on the cause of the rapid increase in cost of higher education.

“There has been a huge increase in third party payments to higher education,” Vedder said.

Much of the increase in payments by a person other than the student themselves has to do with federal scholarship and loan programs, such as the Stafford loans.

“Kids borrow a large amount of money to go to school,” Vedder said. “This increases the demand for higher education. Students become less sensitive about the cost of tuition. They say, ‘ok, I will take a bigger and bigger loan.”

Universities have used this extra money primarily for purposes other than education.

Since the mid-1970s, institutions have reported spending the additional money at a rate of 20 to 22 cents of every new dollar on instruction. The remaining 78 to 80 cents is spent on student services, financial aid and administration.

Vedder said in 1929, close to 8 cents of every higher education dollar was spent on administration. Today, 15 to 20 cents is spent on administration.

“We are humans,” Vedder said. “When we get more money, we spend it. The issue is how we spend it.”

He said there is evidence when state appropriations go up, the number of students remains the same.

Vedder suggested to the lawmakers to “provide greater institutional autonomy, but make them more accountable to market forces.”