Policy-Induced Death Spirals - The PASSHE Story - Part 3

Last week’s blog post included the following assertion:  “1) PASSHE has not established conditions and procedures under which its mandated statutory purpose can be realized; 2) PASSHE has not been accomplishing its Act 188 statutory purpose since 2002; and 3) by failing via its new Strategic Plan to commit publicly to its statutory purpose, PASSHE is clearly not committed to achieving its statutory purpose anytime soon.”  This week we will address the obvious question:

Why isn’t PASSHE committed to achieving its Act 188 statutory purpose?

 
The short answer to this question is ‘divided loyalty,’ otherwise known as ‘conflict of interest,’ which Merriam-Webster defines as: “A conflict between the private interests and the official responsibilities of a person in a position of trust.”
 
The best evidence for the validity of this answer was also provided last week as follows:
 
“The most destructive policy decision by the PASSHE Board of Governors has been its insistence since 2002 on maintaining the lowest possible tuition, i.e., sticker price, rather than the lowest possible “bottom line.”  This perverse decision is contrary to law¹ and, together with the rapid defunding of PASSHE universities by the State, has created the death spirals for six PASSHE universities, with eight more soon to follow. That same decision singlehandedly and simultaneously defeats both ends of Act 188’s promise, by denying funds needed for both “high quality education” and “the lowest possible cost to the students.”   Recall also from last week’s blog post that:
 
“According to Act 188, the enabling legislation that created the PASSHE system of 14 universities, “Its purpose shall be to provide high quality education at the lowest possible cost to the students.” From the Merriam-Webster dictionary, when used in law the word ‘shall’ expresses what is mandatory.”
 
To understand how and why the PASSHE Board of Governors (BOG) could have failed to deliver the statutory promise of Act 188—when doing so was made mandatory in Act 188 by the Legislature’s use of the word “shall”—one must look to Act 188 itself, as described in Privatization Without a Plan.²

Act 188

In simple terms Act 188 says—when it comes to funding—that: 1) the Governor and the Legislature get to decide how much State support the Commonwealth can afford to provide to PASSHE in any given year; and 2) The Board of Governors then gets to decide how high the tuition rates must be set in order “To do and perform generally all of those things necessary and required to accomplish the role and objectives of the System,” as the BOG is legally required to do by Section 20-2006-A(a)(15) of Act 188.¹  And, presumably, accomplishing the Act 188 statutory purpose of the PASSHE universities: To provide “High quality education at the lowest possible cost to the students,” would be one of the first “things necessary and required to accomplish the role and objectives of the System.”

Although the Board of Governors has the legal authority, from Section 20-2006-A(a)(11) of Act 188, “To fix the levels of tuition fees,” and despite the fact that the law does not require or even mention any role for the Governor in the tuition-setting process, the Board of Governors has for at least the past 20 years anxiously awaited—together with the 14 PASSHE university presidents, I included—the Governor’s word as to the maximum allowable tuition rate increase for that year! 

Why would 20 different Boards of Governors with slightly varying membership defer every year for at least 20 years to five different governors, both Democrat and Republican—when it came to one of their most important sworn duties—to set tuition rates in such a way as to provide “high quality education at the lowest possible cost to the students?”  Why would they let the Governor decide that, when Act 188 gives that responsibility not to the Governor, but to the Board of Governors?

While the reason must clearly be political—since it always involves the Governor—it is just as clearly not partisan—since it involved governors from both parties serving roughly equal time in office in the 20-year period between 1992 and 2012.

What went wrong?

Act 188 created a two-step process for the annual funding of the 14 PASSHE universities, and from the very beginning, that process was predicated on the need for two very different sources of required funds: 1) State appropriation revenue, provided by the taxpayers; and 2) Tuition+Fees+Other revenue, provided by the PASSHE students, parents and private donors, primarily PASSHE alumni. 

 
In terms of the annual PASSHE budget share, historically speaking, the State provided 90% in 1950, 63% in 1984, and 25% in 2013, while the budget share provided by students, parents and alumni rose from 10% to 37% to 75%!  This huge shift in the costs of “public” higher education from the State to the students, parents and alumni donors has been called “privatization without a plan.”  And clearly, this cost shifting has been happening relentlessly in Pennsylvania and in many other states for decades.
 
Under Act 188’s statutory funding process, Pennsylvania’s elected officials get to decide how much appropriation the State can afford to provide to PASSHE in any given year, and then the Board of Governors gets to decide what the PASSHE tuition rates must be in order to achieve PASSHE’s statutory purpose: “High quality education at the lowest possible cost to the students.”
 
The authors of Act 188 apparently never anticipated that elected officials would insert themselves into the tuition-setting process, with the unfortunate result that the statutory purpose of the 14 PASSHE universities since 2002 has been sacrificed to the political expediency of politicians from both parties. 
 
There is compelling public evidence that proves³ that, for the first 19 years (1984-2002) of PASSHE’s history under Act 188, the Board of Governors adjusted annual tuition rates so as to more than make up for the revenue lost through a steady decline in State funding.  But in the 11 years between 2002 and 2013, as the decline in State funding accelerated rapidly, the annual tuition rate increases were totally insufficient to overcome the losses in State revenue.
 
As shown in the attached chart³, half of the increase in the quality of the education experience delivered to the students by the good policy decisions of the Board of Governors in PASSHE’s first 19 years was eradicated by the poor policy decisions of the PASSHE Board of Governors in the last 11 years.         

¹ https://www.keepandshare.com/doc/6772880/act188-pdf-405k.

² http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=angelo%20armenti.
³ https://www.keepandshare.com/doc/6794551/privatization-without-a-plan-chart-9-and-caption-january-23-2014-pdf-387k.