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Colorado Gov. Jared Polis stands in the state Capitol ahead of his inauguration Jan. 8, 2019. (Photo by AAron Ontiveroz/The Denver Post/Pool)

Teacher protests and a push for full-day kindergarten are dominating the education debate in Colorado, but policymakers are quietly working to address the state’s other school crisis: higher education.

The problem is significant. Colorado is effectively trying to sustain one of the most educationally demanding economies in the country, while spending the fourth least of any state to educate its residents after high school.

To solve it, Gov. Jared Polis’ administration is working to rewrite the budget formula that determines how more than $900 million in annual funding is distributed among the state’s 31 public colleges and universities each year. The effort – led by the Colorado Department of Higher Education and started under the previous administration – could have sweeping implications for tuition, financial aid and even what degrees schools offer to students.

But doing so will be tricky. The Commission on Higher Education will meet in early March to begin discussions, with hopes of presenting recommendations to the General Assembly in 2020. The challenge is, without new revenue, any effort to boost one school’s funding would mean likely cuts for another campus — or from another budget priority, such as K-12 or transportation.

“It’s a zero-sum game,” said Inta Morris, the higher ed department’s chief operating and financial officer. “If anyone gets more, that means it comes from someone.”

MORE: Colorado’s universities are catering to out-of-state-students. Is their public mission at risk?

The implications stretch far beyond the campus. Colorado needs to see dramatic improvement in college attainment rates in coming years to meet workforce demands.

In the coming years, as many as 74 percent of Colorado job openings could require some form of post-high school education. But just 56 percent of Colorado adults have a college degree or certificate. That includes just 39 percent of African-Americans and 29 percent of Hispanics and Native Americans. And rural Colorado lags behind wealthier urban centers.

Decades of budget cuts are positioning some of the public institutions that serve the populations most in need on the edge of financial collapse. The state’s premier research institutions, meanwhile, are increasingly looking to find students from outside Colorado. And the formula used to divvy up scarce public funding steers the bulk of its dollars to universities that cater predominantly to the wealthy and rely on taxpayer dollars the least.

It’s those large research universities, such as the University of Colorado’s Boulder campus, that are most likely to see cuts if the formula is reworked to benefit the schools in the worst financial shape. However, those involved in the discussions say minor adjustments are more likely than a sweeping rewrite.

It’s not clear if minor changes will be enough. The state’s 2017 higher education master plan called for dramatic action, concluding with a stern warning to lawmakers:

“It is hard to overstate the urgency with which the (state) delivers this master plan,” the report says. “The recommendations offered are not a luxury, but a necessity.”

If the changes fall short, leaders worry the growing disconnect between education and job requirements could leave huge numbers of Coloradans behind, exacerbating the urban-rural divide and threatening the state’s newfound status as an economic leader.

For small schools, the current formula “is just impossible.”

The current method for funding higher education was signed into law five years ago — at the depths of a two-decade-long decline in taxpayer support for higher education.

The stated purpose at the time was to promote transparency. Instead, it has created a frustrating political dynamic that largely plays out behind closed doors: institutions lobbying against each other for crumbs from a shrunken financial pie, with lawmakers on the Joint Budget Committee caught in the middle and forced to pick favorites.

“No one, to my mind, has ever been completely happy with it (the formula). They (the institutions) all have ideas on how it should be changed and those changes would all benefit their particular interests,” said state Sen. Bob Rankin, a Carbondale Republican who serves on the budget-writing committee. “We have heard this at JBC every year, ever since the formula came into play.”

MORE: How the state budget process works in Colorado

The other problem policymakers have with the formula is it doesn’t seem to be accomplishing the state’s master plan goal to increase graduation rates and certificate completions among poor and minority populations.

In the department’s budget briefing, JBC analyst Amanda Bickel noted a troubling trend: The state’s largest schools are growing. Small schools are shrinking. And because the formula is enrollment-driven, it’s resulted in more money for selective research universities, such as the CU Boulder and Colorado State University, and less for community colleges and smaller rural institutions, such as Adams State University and Fort Lewis College, which predominantly serve the populations the state wants to help.

“That’s one of the things that we remind people of,” said Steve Schwartz, vice president for finance and administration at Fort Lewis, where about a fourth of the student body is Native American. “We’re doing a lot toward helping the Department of Higher Education achieve its diversity goals.”

Those smaller schools need more money per student just to survive. They lack a big school’s ability to attract wealthy out-of-state students. And they don’t benefit from the same economies of scale.

The situation is one that lawmakers have tried to mitigate through year-to-year budget adjustments, stepping in to boost funding to smaller schools like Adams State and Fort Lewis.

But Morris, the higher education official, says overruling the formula every year defeats the purpose of having one in the first place. In an ideal world, state officials want colleges to have a stable, transparent and predictable revenue stream. They also want schools to have financial incentives to improve.

Trouble is, about 90 percent of the money the state gives out through the funding formula is based on student volume, according to a Lumina Foundation Strategy Labs study. That means enrollment changes at larger schools like CU Boulder, which has more than 29,000 students, play a much bigger role in how dollars are divvied up than what’s happening at a place like Adams State, which has just 2,600 students.

In other words, the single biggest factor in a small school’s share of the pie is whether enrollment is growing or falling at schools 10 times their size.

“It’s just impossible for them to make the magnitude of change that would be required to actually increase their funding by any significant amount,” Morris said.

And small-school officials say what they’re receiving now is not enough. Since the Great Recession, CU and CSU have grown, resulting in more funding, which allows them to invest in new programs and new facilities, and attract even more students. Fort Lewis, meanwhile, has shrunk, leading to budget cuts that make the school less attractive to prospective students.

“It’s a self-perpetuating phenomenon,” said Schwartz, the Fort Lewis administrator. “Smaller institutions are going into this vicious decline.”

But taking money from large schools isn’t an attractive option, either. Colorado’s largest research institutions responded to prior budget cuts by dramatically increasing tuition, and increasing out-of-state enrollment. Further cuts would likely result in more of the same, while diminishing their ability to fund aid for those who can’t afford the rising costs.

Major construction projects at the University of Colorado have included improvements to Folsom Field and practice and training facilities on the Boulder campus. (Doug Conarroe, Special to The Colorado Sun)

Higher education dollars don’t align with state goals

The higher education department’s primary goal in reworking the formula is to align it with the state’s master plan.

They want colleges to have financial incentives to improve on key metrics, like graduating minority and low-income students. They want colleges to be more affordable. And they want colleges training more students in fields that are essential to Colorado’s economy — science, technology and math, and the teaching profession, which faces a growing shortage.

But that might be too much to ask from a funding formula when Colorado’s spending ranks 47th in the nation, even after large increases in recent years.

“It’s no secret that Colorado does not fund its higher education system to the level that other states do,” Morris said. “The challenge is figuring out a transparent way and a satisfactory way to underfund every institution in the state. That’s sort of what it comes down to.”

In interviews, school officials all expressed support for the department’s efforts. But some are also content with current formula, which may make significant changes difficult.

“It was a compromise and it did not please everyone,” said Todd Saliman, the chief financial officer for CU’s system of four schools. “It did not please anyone. … But it was a give and take and it was something that we were willing to live with and we continue to be willing to live with.”

Saliman, a former state lawmaker and budget writer, agrees that smaller schools need financial help — but he says lawmakers should consider providing that aid through direct appropriations outside the formula instead.

“To build a model that recognizes the strengths of CU and the strengths of a smaller 4-year college and the strengths of a community college is very difficult,” Saliman said. “I think those smaller institutions do need help. But trying to help them through the model is close to impossible.”

Democratic state Sens. Dominick Moreno, left, and Rachel Zenzinger, both budget writers, speaker to reporters Jan. 15, 2019. (Jesse Paul, The Colorado Sun)

A zero-sum financial game for campuses

The Joint Budget Committee is expected to consider higher education spending for next year’s budget in mid-March, and budget staffers have recommended immediate reforms to how the money is distributed.

But committee Chairman Dominick Moreno, D-Commerce City, told The Sun that budget writers likely will wait for the department to finish its review before considering wholesale changes to the formula.

Meanwhile, no one expects state budget writers to come up with the money to reverse two decades of cuts. Even if they could, Colorado can’t solve its higher education problems through college funding alone.

As the master plan notes, “the pipeline of public education in Colorado has leaks throughout.” And the two biggest pipes — K-12 and higher education — have long been in competition for limited state dollars.

In next year’s budget, the Polis administration wants to fund both, requesting $227 million for full-day kindergarten, on top of $121 million to freeze higher education in-state tuition requested by his predecessor, Gov. John Hickenlooper.

But Polis is the first to admit the additional dollars are merely a stop-gap for now. “That is not a long term solution for the high costs of higher education,” Polis said in January when he unveiled his budget plan. “We are ready to go to work to dig down and identify the cost drivers in higher ed, but for this year, we are including a zero percent increase in tuition.”

Top Democrats so far appear skeptical that they can afford both big-ticket budget requests, despite recent rapid growth in state revenue.

But even if they agree to do so this year, there’s no guarantee that a familiar dynamic won’t emerge during the next economic recession, leaving lawmakers a lose-lose choice: cut funding that could help children graduate high school or cut funding that could help them afford college.

It’s the same zero-sum game colleges face when it come to spending — only they’re competing not against one another, but against the schools that provide them qualified students to teach.

Staff writer John Frank contributed to this report.

Special to The Colorado Sun Twitter: @brianeason