A statement Gov. Tim Pawlenty made in his State of the State address last month has incited strong reaction between higher education leaders and legislators.

In his speech, Pawlenty proposed directly funding college students instead of higher education institutions, which he said would force the institutions to be more market-driven and accountable to the state and students. The model is similar to one used in Colorado.

That funding plan – which gives two-thirds of the state’s higher education funding to students in the form of tuition stipends worth up to $2,400 – is a model Pawlenty called “intriguing” during his address.

But higher education leaders and some legislators say they feel differently. University President Bob Bruininks called the plan a “desperation move.” During a telephone interview with The Minnesota Daily, Pawlenty said mentioning the Colorado plan was probably a mistake.

Now, he said, everyone is focusing on Colorado. But he said it is merely one model to look at.

“We are not proposing to mimic precisely what Colorado has done,” Pawlenty said.

This summer, Susan Heegaard, the Minnesota Higher Education Services Office director, will lead a task force that will explore ways to change higher education funding, she said.

David Metzen, the Board of Regents chairman, said, “I really respect the governor, but he had this one wrong.”

Metzen said he’s open to conversations on reforming higher education funding, but Colorado is not a plan that should be looked at.

The Colorado plan

This year, Colorado changed the way it funds higher education by giving money to higher education institutions through student stipends. It’s what many leaders are calling the “money follows the student” plan.

Two financial constraints in Colorado led to the funding reform, according to a University of Colorado report.

Colorado has a law – the Taxpayers’ Bill of Rights – which limits the state revenue growth to the rate of population growth plus inflation.

If total state revenues grow at a faster rate than allowed by the law, those revenues have historically been refunded to Colorado residents.

Tuition and fees are considered state “cash” revenues under the law, which limits the amount of tuition a higher education institution can charge.

To increase taxes, a referendum is required.

Another constraint is the lack of state funding for higher education because of other pressures such as health care and transportation.

Pawlenty said that because of the financial environment in which Colorado developed the plan, the model might not be the best for Minnesota.

Bruininks said Colorado’s plan was intended to pressure state legislators into giving more money to higher education in an environment that has unique financial constraints.

He said students might wrongly think money following them to college is appealing.

“It sounds like a good idea, but it isn’t,” he said.

Pawlenty’s vision

Under Pawlenty’s plan, students’ decisions on where to attend college would drive reform and change the higher education marketplace, the governor said.

It would create a more dynamic marketplace in which institutions can respond to student needs better, he said. If the institutions have to compete more to attract students as a way to get funding, they’ll have to focus more on quality and keeping costs down, he said.

Institutions need to be more “customer-focused and customer-friendly,” Pawlenty said.

Another higher education policy that Pawlenty is interested in is the GI Bill.

The 1944 bill was designed to give war veterans access to higher education. The government subsidized education expenses, including tuition, for returning veterans. If they met academic requirements, they could go to the college of their choice.

“Markets work. The GI Bill works,” Pawlenty said.

University of Minnesota impact

The University of Minnesota would suffer from a plan like Colorado’s, University of Minnesota officials said.

If money is taken out of the University of Minnesota’s base budget and given to students through stipends, Bruininks said, tuition will probably increase.

For example, if $100 million is taken away from the budget, he said, tuition will likely increase at least 20 percent. For every percent tuition is increased, the University of Minnesota brings in $4.5 million, Bruininks said.

Bruininks said there are high-cost areas unique to the University of Minnesota that must be funded, such as biomedical sciences and engineering.

Pawlenty said he is aware of the issue and that reforming funding would not hurt core areas, such as research, at the University of Minnesota.

“You have to be careful about how you do it, because, obviously, some institutions have higher costs that need to be maintained,” Pawlenty said.

Though Bruininks does not approve of the Colorado plan, he said, he is open to looking at funding reform.

But Bruininks said there must be more talk about what is valued in higher education instead of how to pay for it.

“It’s not a matter of whether you fund students or you fund the institution,” he said. “It’s a matter of deciding what’s important to do in higher education and make sure the money follows the ideas rather than the money following some simple little mantra.”

Putting money into higher education via student stipends is wrong for Minnesota, because the state already has a grant program, Bruininks said.

Whether funding changes would affect the state’s grant program is something state officials said they cannot answer right now.

Heegaard, whom Pawlenty directed to look at funding reform, said, “My expectation is that it wouldn’t impact financial aid.”

Higher education trends

States trying to change how higher education is funded are part of a national trend. Those states include Arizona, South Carolina, Virginia and Washington.

Kristin Conklin, a senior policy analyst for the National Governors Association, said Minnesota can now be added to the list. She said governors and legislators nationwide are beginning to look at how they can fund higher education institutions without significantly increasing public spending.

The association is a public policy organization that provides a bipartisan forum for solving state issues, according to its Web site.

Conklin said state funding is squeezed for programs such as education, and in the last 10 to 15 years, higher education institutions have had to rely more on tuition as a source of revenue.

“We have to be a little more strategic,” she said.

As far as the Colorado plan goes, Conklin said it’s too early to tell whether it is working.

“Colorado might fit. It might not fit” for Minnesota, she said.

She said Minnesota would be wise to evaluate the programs offered by higher education institutions and to ensure students are graduating in a timely manner.

Discussing higher education funding reform is a “timely and responsible” conversation, she said.