​Comments to the Higher Education Coordinating Commission

Mr. Chairman and members of the Commission, for the record I am John Kitzhaber, Governor of the State of Oregon.

First, I want to congratulate and thank you on nearly a year in service as the Higher Education Coordinating Commission. I know that you have been busy. I appreciate the budget recommendations that you made to me and the OEIB last month as part of your Agency Request Budget and, in particular, the thoughtful emphasis that you have placed on focusing state dollars on making higher education truly affordable for Oregon students. This cannot be an afterthought in our 2015-17 budget. And knowing that the state's resources will not be unlimited, I especially appreciate your recommendations about how to focus them in order to maximize their impact. Our budget must create a path toward the goal that cost is not a barrier to the college aspirations of Oregon students. Your recommendations for expanding the Opportunity Grant have provided a great place for us to begin to have that conversation.

When I addressed you at your first meeting almost a year ago, I emphasized that the very name of your commission puts the idea of coordination front and center. I acknowledged that the state has provided a high degree of operational autonomy to our public colleges and universities, but I asked you to demand from them a high degree of coordination of missions, programs, budgets, and pathways for students.

I want to return again today to this theme -- with a particular emphasis on our public universities and the HECC's responsibilities for approving their missions and allocating their state funding.

As you know, we have now completed a complex political and policymaking process to establish independent boards at Oregon's seven universities. The boards for the University of Oregon, Oregon State University, and Portland State University were confirmed last year and became responsible for their respective institutions on July 1. Confirmation of the boards of the other four institutions (OIT, EOU, SOU and WOU) will begin in September and will be completed in December.

Now it is time for the individual boards and their institutions to do their part to ensure the success of our larger educational endeavor.

-Building a system that supports a statewide mission

We have never really had a university system -- even when there was a lot more state financial support. The focus has traditionally been on each institutional mission and competition for funds and students more than on any larger statewide mission or goal. Therefore, as each institutional board brings its mission to the HECC for approval they need to not lose sight of the larger state mission, which is not only excellence but also equity and diversity in enrollment, and access and affordability for Oregon undergraduate students. The individual institutional missions should all serve the state missions (as well as their own) and be greater that the sum of their parts in terms of moving toward 40:40:20.

40:40:20 is the right goal. We need to significantly boost the number of Oregonians who have earned post-secondary certificates and degrees. Public universities will be central to that project. They should be called on to deepen their partnerships with K-12 schools, with community colleges, and with each other to forge new, smoother pathways to degree completion for the many new students -- especially non-traditional ones -- that 40-40-20 requires us to serve.

But our public universities are responsible for much more than just increasing undergraduate degree attainment. Quality matters. Graduate education matters. Research matters.

Institutions like UO and OSU should be commended for the drive they have exhibited to improve their status as world-class research universities. But we should not blindly jump on this bandwagon without addressing some of the challenging questions that these efforts raise, particularly in the context of the imperative for statewide coordination. For example:

-What implications does a push by one institution to become a world-class research university have for our other public universities?

-If an institution aspires to be a world-class university, will it seek to do so in all disciplines or just in some disciplines?

-Are institutions willing to eliminate or scale back disciplines in which they will not be on a level of excellence as other institutions?

-How do we minimize competition and maximize collaboration?

-How will access, affordability, and equity be enhanced for Oregon students in the face of pressures that tend to drive aspirational public universities to dedicate increasing amounts of resources on attracting top-flight students from around the country and world?

These are the kinds of questions that we should be intentionally raising, discussing and answering.

-Financial sustainability

One of the reasons we went to institutional boards is because of the new fiscal reality. The independent boards have the potential to bring private money to the universities. But at the same time we want to ensure that we have created boards of directors, not just boards of donors.

Certainly one of the reasons we moved to create independent boards was an intentional effort to leverage philanthropy to help bring new and much needed resources to our universities. This is, and remains, an important goal.

At the same time, however, these new boards are now the fiduciary stewards of the institutions they oversee and, as such, have serious financial and fiduciary responsibility for their respective institutions. Indeed, one of the statutory charges for the institutional boards is to "provide transparency and public accountability." Therefore, they need to demand much more fiscal accountability and transparency in the cost structure.

So, for example, if a CFO tells the board that the institution will need to charge $X per credit hour offered, the CFO should also able to answer the question of how much is cost to provide a credit hour. In other words, how much does it cost to educate a student? Is there a difference between majors and between students? If the institution states its basis for income needed, the board needs to know what the cost is and what the margin is.

When responding to the HECC's request for budget recommendations earlier this year, the public universities described the modest improvements in outcomes that would result from total increases in state funding that ran as large as 50%. I appreciate that universities have found ways over the last several decades -- and in particular over the past several years -- to do significantly more for students with significantly less from the state. But the institutional boards need to be challenged to independently find sustainable fiscal solutions, and not to presume that all improvements necessarily require significant increases in state investments. We need to stretch the talents and resources of each institution and board. We need to challenge them to determine what more can be done under a scenario of modest increases to current funding levels.

Let me be clear. I am not suggesting that the universities do not need or deserve better funding. They do. I expect that your work this fall on the "10-year budget" will show that a significant state reinvestment will be necessary to meet our higher education goals through improved access, affordability, productivity, and equity. However, we will never know the full capability of each institution to solve their competitive and fiscal problems, on their own, if the state is perceived to be an open wallet that can be leaned on to balance current budgets.

Part of the way we do this should be to allocate state resources differently. Our allocation formulas should create incentives for institutions not merely to maximize enrollment, but to maximize student success. I am heartened by the willingness that university leaders have shown so far to being part of this conversation with you, and I will be watching their work with you on this with great interest over the next several months. While I believe the shift to an outcomes-focused allocation formula is appropriate at any funding level, it is clear that any significant reinvestment in our public universities should be matched by a corresponding commitment that those resources will be allocated in ways that reinforce the priorities that we share around completion, quality, and equity.

These approaches to budget development and funding allocations should result in the application of better planning and budgeting processes, identification and focused pursuit of sustainable differentiation strategies, better operating efficiency and diversified revenue streams that will serve to improve institutional credit ratings and access to capital.

Mr. Chairman and members of the Commission, I thank you for your service. I also want to thank and acknowledge the hard work of the members of the new institutional boards and the leadership of our university presidents. I am confident that together we are ushering in a new and brighter era for post secondary education in Oregon.

Thank you.

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