Diversity of Funding Models

Community college funding models are the most diverse among public higher education institutions. Each state employs a different funding formula that dictate the allocation of financial resources to community colleges. As community colleges have grown and state budget processes have become more complicated, four general models have emerged:
Funding Model
Negotiated budget funding
individual community colleges or systems lobby the state legislative branch for an appropriation.
Unit-rate formula funding
based on measures associated with university operation
Minimum foundation funding
provides a minimum level of state support after measuring the community college locality's wealth and considering local tax revenue.
Cost-based program funding
allocated funding to institutions based on operating costs.
During the recent economic downturn, state tax revenues have decreased and community colleges continue to adapt to the growing demand for their services, these established funding models may begin to grow outdated. State legislatures have relied more upon broad cuts to higher education than raising taxes in order to sustain funding levels for community colleges that often aid displaced workers in finding employment after layoffs.However, some states have recognized the importance of community colleges to economic recovery have begun evolving their funding formulas as operating costs have risen due to increased enrollment.

Funding Inequality

According to Association of American Community Colleges, the nation's community colleges serve 43% of undergraduate students in the nation. However, these institutions receive only 27% of total federal state and local appropriations to public higher education institutions. This inequality of funding leads community colleges to offer limited services to their students and concentrate the majority of the funding they receive on instruction. Despite this emphasis on instruction, community college professors are compensated far less than professors at four-year public and private institutions even though community college instructors spend more time in the classroom than their peers. As funding pools available to community colleges decrease, resources begin to dwindle. This noticeably affects access by vulnerable populations to high-quality low cost education. First, as colleges are forced to raise tuition, thus pricing classes beyond the means of many families - even with the help of financial aid. Second, the inability of the college to hire enough professors to teach basic core classes cause students to be unable to be admitted to classes due to overcrowding and prolong their time in community college and preventing them from attaining their degree or transferring. This dilemma is increasingly worsening community college completion rates.

Threats to Pell Grants and Financial Aid

Cohen & Brawer (2008) noted that 38% of students enrolled at community colleges received financial aid through Pell grants, private loan capital and Supplemental Educational Opportunity grant program. Community colleges are still the least expensive compared to four-year institutions (Trends in College Aid ). Therefore, students begin at the community college due to lower tuition rates and then transfer to a four-year college. In recent budget negotiations on Capitol Hill, one line item targeted for elimination is the Pell grant program. This cut could worsen the problem of community college retention and significantly affect the dwindling completion rate as this program is the largest source of aid to low-income college students in the nation.

Recent studies by the Stanford School of Education found that affordability are the primary factor in determining whether a student graduates. The same study suggested that students receiving Pell grants are less likely to withdraw from college. While cutting the program would save the federal government $10 billion dollars, the Department of Education estimates that it would make going to college more difficult for 45% of the undergraduate population.

According to the 2009-2010 College Board Report (Trends in College Pricing) tuition and fees at public four-year institutions rose at an average annual rate of 4.9% per year. This rate is beyond the general inflation rate from 1999-2000 to 2009-2010 (4.9%). The rate of growth of published tuition and fees at both private four-year institutions (2.6%) and public two-year colleges (1.8%) was lower from 1999-2000 to 2009-2010. Due to expenses incurred for full-time unemployed students (room and board) precipitates serious financial challenge for these students in the area of tuition and fees. Tuition and fees account for 67% of the average estimated budget for students living on campus at private four-year colleges, but only 36% for in-state public four-year college students and 18% for students not living with parents and commuting to public two-year colleges.

Another change in the funding system from tuition monies received in relationship with student's loans, President Obama signed a new law on March 30, 2010 stating "the law strips banks of their role as middlemen in federal student loans and puts the government in change." Furthermore, the President said "that change would save more than $60 billion over the next 10 years, which in turn would be used to boost Pell Grants for students and reinvest in community colleges" (Murphy, 2010). Community colleges have had to rely on political stakeholders to determine what allocation of funding they would receive (Cohen & Brawer, 2008). These funding portions come from local taxes, state revenues and tuition.

Foundations Picking Up the Slack

Community college foundations have become a mainstay for urban and rural community college campuses across the country. In the 1970’s, the American Association of Community Colleges encouraged two-year institutions to develop fundraising initiatives amid dwindling government funds. By 1998, more than 90% of community colleges had established foundations. With the recent economic downturn, the importance and scope of community college foundations and fundraising have increased. The most prominent use of funds raised by these organizations is student aid and scholarships awarded to allow students to take classes when financial aid is not an option.

To offset downturns in funding, most colleges are generating alternative resources other than the traditional option of increasing tuition and fees. The most common strategies are to: increase partnerships through contracts with private industries for training programs and research; seek contracts with other state and local agencies to provide services to their clients such as job readiness skills to welfare recipients; write proposals to the state and federal governments for grants; develop international programs and recruit international students; and sell college-trademarked products and services.

Cohen, A.M., & Brawer, F.B. (2008). The American community college (5th ed.). San Francisco: Jossey-Bass.College Board. (n.d.) Trends in college pricing. Retrieved from www.collegeboard.com/press/releases.College Board. (n.d.). Trends in student aid. Retrieved from www.collegeboard.com/press/releases.Murphy, P. (2010, March 30). Obama signs health fix-it bill with loan overhaul. Politics Daily. Retrieved fromwww.whitehouse.gov/