What Colorado can teach other states about college vouchers: not much

(Image: Flickr/John Dalkin)

Much ado has been made over University of Texas System special adviser Rick O’Donnell’s views on splitting university funding for teaching and research, and the concurrent proposal by the conservative think tank that formerly employed him. Less has been said about another reform suggested by the Texas Public Policy Foundation — vouchers for college students to supplant state funding given directly to institutions — that was implemented in Colorado in 2005, while O’Donnell was executive director of that state’s Department of Higher Education. Even that idea hasn’t worked out as advertised, a policy expert said.

“Conceptually, it was radical. In practice, there is no difference in what Colorado is doing, from the institutions’ point of view and from the students’ point of view, than from what every other state is doing that has block funding,” said Brian Prescott, director of policy research at the Western Interstate Commission for Higher Education (WICHE).

Free-market theorists — among whom Prescott counted O’Donnell — claimed that Colorado’s College Opportunity Fund (COF) would increase college access for low-income and disadvantaged students, and would make colleges better themselves while competing to enroll students (consequences TPPF cites as “major benefits” in its proposal of college vouchers). However, Prescott said that hasn’t been the case. Indeed, enrollment initially dropped as institutions struggled to put the voucher system into place, and free-market forces never materialized, as Colorado legislators adjusted another funding source (called “fee-for-service” contracts) that negated any changes in revenue to institutions that would have resulted from the switch to the voucher system.

“The idea that either vouchers or the fee-for-service contracts have really unleashed market forces in higher education in Colorado, I think would be untrue,” said Prescott, who with David Longanecker conducted an in-depth evaluation of COF.

The third component of Colorado’s plan, performance contracts for institutions based on accountability factors such as graduating more underrepresented students, did not have any funding attached to them, so were in reality “toothless,” he said.

Prescott’s group was commissioned by the Colorado higher education department to evaluate COF and related policies, the results of which were published in May 2009. Prescott wrote a summary of the research that was published in the July-August 2010 issue of Change Magazine.

Though in theory COF was proposed as a radical departure from traditional ways of funding higher education, in practice the program has amounted to little more than an accounting sleight-of-hand that freed Colorado colleges from restraints imposed by the state’s Taxpayers’ Bill of Rights (TABOR), which limits increases in state spending and revenue, according to the budget from the previous year. As long as state funding flowed directly to colleges, revenue from tuition was under TABOR restrictions (applying to all organizations receiving 10 percent or more of revenue from the state). Implementing the voucher system zeroed out state funding to colleges, on paper, allowing institutions more freedom to raise tuition.

Prescott said COF is an unqualified success, in terms of circumventing Colorado’s constitutional restrictions on spending, but has been entirely impotent in terms of reforming institutions’ and students’ approach to higher education in the state.

College vouchers appear as number six on TPPF’s list of “Seven Breakthrough Solutions” for higher education that were presented to Texas’ university regents in 2008, under the auspices of Gov. Rick Perry. The TPPF title is “Put State Funding Directly in the Hands of Students.” The TPPF paper refers to Colorado’s program, though it mentions none of the criticisms of COF or the state-specific circumstances that led to its implementation. Rather, the paper merely states that the program was put into place and remains in place.

According to the paper, “In 2004, Colorado passed a law directing all state funding for undergraduate education be converted into student-directed scholarships (“stipends” is the term used by Colorado). Implemented in 2005, hundreds of thousands of Colorado students have now used and continue to use their stipends. Other states are exploring similar efforts.”

At least in Colorado’s case, benefits of college vouchers cited by TPPF did not result, but some of the “possible objections” raised and dismissed in the TPPF paper actually did. For example, the TPPF proposal states that the voucher system would “greatly simplify financial aid and remove much of the mystery that confounds low-income families.”

In Colorado, the opposite occurred. In the Change article, Prescott writes: “Officials recounted experiences with students who, all but finished with their matriculation paperwork, stormed out of the registration office in frustration, unable to comprehend how the voucher program worked, how to successfully authorize it, or what their share of the costs would be. ”

Additionally, the TPPF paper anticipates that tying funding to students would make it more difficult for lawmakers to reduce college funding in tough economic times.

That also didn’t happen, as Prescott writes in Change: “Proponents of the COF policy hoped that future state policymakers would find it politically difficult to reduce the stipend amounts. As the economy collapsed, the policy faced this test and failed miserably when the state chose to reduce the value of the voucher by more than a quarter between 2008–09 and 2009–10 to help close a massive budget deficit.”

Prescott stressed that his research does not address whether the concept of college vouchers is sound or not, but is limited to the effects of Colorado’s particular program, which, for example, unlike TPPF’s proposal, does not provide vouchers for graduate education.

Additionally, he said the funding situation in Colorado that led to near-universal support of COF’s passage was particular to that state, and he was not sure that college vouchers would be embraced as readily by all people in other states, such as Texas, that already give universities greater flexibility in raising revenue from year to year.

Prescott said, “It is not at all clear to me that the higher education community would have gotten behind the proposal if it wasn’t for the TABOR problem it was getting squeezed by, and I don’t know that there would have been support sufficient to get the voucher proposal passed.”

He pointed to two main conclusions from his research: 1) College voucher programs are not so straightforward to implement as proponents have said; 2) The idea that you can create a free market for colleges like any other product “is not a realistically comprehensive view of how people make choices in higher education,” not factoring in restrictions such as geography.

Prescott said, “It’s not clear to me that a totally free market in undergraduate higher education resembles a free market for something like toothpaste. They are totally different products, and people have a lot more information readily available about toothpaste that you can actually deal with.”

“When people are trying to buy higher education, a lot of people are place-bound. The point was to try to drive people’s choices to institutions that were more efficient and higher quality,” he said. “In effect, they’re place-bound, so that doesn’t matter. The choice is their local institution, and that’s just how it is.”

Meanwhile, a paper co-authored by UT-San Antonio economics professor John Merrifield does not dispute the evaluation by Prescott and WICHE, but argues in the opposite direction from Prescott. Merrifield and retired University of Colorado professor Barry Poulson write:

“The lesson from COF is not that a voucher system for higher education is flawed, The lesson is that the voucher plan introduced in Colorado has failed because it did not change the status quo and require real reform in higher education.

For the voucher plan to work in Colorado the flaws in the COF plan must be corrected, and this will require more than the modest changes recommended by WICHE. All direct subsidies from the state to public higher education institutions, including fee for service contracts, must be replaced by vouchers.”

Prescott said, “Other states should at least learn from the mistakes Colorado has made. I wouldn’t lay the mistakes at anybody’s feet — not [O’Donnell’s], not anyone’s.”