HCS HB 742 -- HIGHER EDUCATION STUDENT FUNDING ACT

SPONSOR:  Bearden

COMMITTEE ACTION:  Voted "do pass" by the Committee on Higher
Education by a vote of 8 to 2.

This substitute changes the laws regarding state funding of
higher education.  By August 28, 2006, the Department of Higher
Education is required to do a study of financial aid programs
recommending necessary changes to the law for the 2007
legislative session for implementation by July 1, 2008, and
report the results to the Governor, General Assembly, and Joint
Committee on Higher Education.  The review assumes, but does not
mandate, that the A+ Program will be a model for the first two
years of any financial aid program, with Bright Flight as the
model for a merit-based component and the Gallagher Program as
the model for need-based aid.  Aid should be portable, and no
combination of forms of aid that contains state aid can result in
more than the actual costs.  Public institutions must disclose
the amount of aid coming from non-state sources.  When
per-student funding becomes effective, 20% of any additional
revenues must be directed to increased financial aid, with 75% of
that amount going to need-based aid.

Beginning July 1, 2006, the Coordinating Board for Higher
Education will provide certain services through fee-for-services
contracts, including services in rural areas, delivery of basic
courses prerequisite for post-secondary work, services needed to
meet reciprocal agreements, and services to increase economic
development opportunities.  These contracts will not increase the
per-student reimbursement rate and must be consistent with
performance contracts.  The board will make funding
recommendations that take fee-for-service contracts into account.

When state higher education operating appropriations reach their
Fiscal Year 2002 level, public institutions will qualify for
additional funding only if they establish performance measures;
establish performance contracts predicated on the performance
measures; and, where applicable, establish fee-for-services
contracts for non-self-supporting programs.  The substitute
contains instructions for notice to the Revisor of Statutes of
the fulfillment of contingencies.

Upon the substitute's effective date, higher education services
to students will be reimbursed by the state at a rate per student
for the first two years and a different rate for the second two
years, as established by the board in conjunction with the
institutions.  The first two-years' rate will be no more than the
lowest community college tuition and required fees, and the
second two-years' rate will be no more than the lowest tuition
and required fees charged at a public four-year institution.  The
board will annually request additional funding for inflation and
for unfunded enrollment growth, as specified in the substitute.

Performance contracts of up to five years, based on improving
access, quality, efficiency, and addressing state needs, must be
entered into by public higher education institutions and by any
qualified private institution providing services under a
fee-for-services contract.  Performance contracts will exempt an
institution from certain purchasing regulations.  Proposed
tuition increases must be reported to the board.

The substitute also establishes the Joint Committee on Higher
Education with 14 members, to meet at least every two years,
beginning in 2006.  The committee will review the progress of
higher education reform and conduct studies, as it deems
necessary, on higher education finance in order to make
recommendations to the General Assembly.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $68,838
in FY 2006, $127,270 in FY 2007, and $173,880 to Unknown in FY
2008.  No impact on Other State Funds in FY 2006, FY 2007, and FY
2008.

PROPONENTS:  Supporters say that higher education institutions
have no built-in mechanism to ensure that the majority of
increased revenues go to instruction.  The bill puts in place a
time line and a mechanism for higher education moneys to be
directed primarily towards students.  It frees institutions from
some requirements, putting additional moneys beyond the base
level on a performance contract or fee-for-service basis.

Testifying for the bill were Representative Bearden; American
Legislative Exchange Council; and Charles Stodtland.

OPPONENTS:  There was no opposition voiced to the committee.

OTHERS:  Others testifying on the bill say that the intent of it
is admirable and coincides with some higher education initiatives
that are already underway, but it will take more study and effort
to develop the concept.  It would be preferable to give
institutions flexibility in identifying their own performance
measures.  The per-student rate funding proposal does not mesh
well with the variety of institutional missions already
established or with the requirements imposed by accreditors.

Others testifying on the bill were Department of Higher
Education; University of Missouri; and Council on Public Higher
Education.

Becky DeNeve, Senior Legislative Analyst

Missouri House of Representatives
93rd General Assembly, 1st Regular Session
Last Updated August 25, 2005 at 1:20 pm