College Finances Act

Introduction

State policymakers usually possess limited power to reform public universities. They don’t know the budget of the public university in detail and they don’t have the ability to veto any individual expenditure within a public university budget. Policymakers can’t rally public opinion effectively to support education reform campaigns if they can’t say how public universities spend their money and they’re not able to require public universities to remove individual expenditures. Effective education reform requires that public universities disclose their operating budgets and that state policymakers have the power to exercise a line-item veto on public university expenditures. A line-item veto also will allow policymakers to remove the politicized bureaucracies from the public universities.

Public universities generally don’t reform themselves because they don’t have a financial incentive to do so. The worst misalignment of incentives is that universities profit from student loans, but aren’t responsible for paying them back. Universities therefore encourage academically unprepared students to attend college, even if they have no reasonable hope of graduating. The students have to pay back their loans, not the universities. Effective education reform also requires that public universities accept co-responsibility for defaulted student loans.

Public university administrators have steered public university expenditures toward their own salaries. The growth in the number of public university administrators in the last two generations far exceeds the growth in the number of faculty and students. Social justice activists also have taken advantage of this growth to pad the universities with radical bureaucrats. Effective education reform requires that universities dedicate a large portion of their expenditures toward full-time faculty instruction, which should benefit students. The more money universities have to spend on faculty salaries and benefits, the less they can waste on administrative spending.

Public universities increasingly have abandoned their mission to serve the citizens of their states. Partly they do so because increasing portions of their tuition revenue come from foreign students. Public universities can make a profit even if they don’t educate their own citizens properly. Partly they do so because they can recruit students from other states for their athletic teams and orchestras. Public universities now feel free to declare themselves “sanctuary campuses” and to accept foreign gifts without disclosing the attached conditions. Effective education reform requires state policymakers to reform public university finances so that the universities rededicate themselves to the interests of the state and of the country.

Our model bill requires public universities to provide budget transparency (Section A) and gives state policymakers a line-item veto on university budgets (Section B). It requires universities to accept partial responsibility for defaulted student loans, and to accept responsibility for a greater portion when they admit students who require remedial coursework (Section C). It dedicates a minimum proportion of university expenditures toward full-time faculty instruction—a proportion calculated to require only modest administrative belt tightening, and which can be increased (Section D). It limits tuition and student enrollment from foreign sources and limits eligibility for special admissions categories to state residents (Section E). It prohibits sanctuary campuses (Section F) and imposes strict transparency on foreign gifts and contracts (Section G). These reforms together will restore policymakers’ financial control over the public universities.

Model Legislative Text

Section A [“Budget Transparency”]

  1. Each institution of higher education that receives state funding shall make available to the public on the institution’s Internet site all budgets, expenditures, vendors, and contracts.
  2. The information listed in Subsection (1) shall include an annual budget that includes anticipated revenues and expenditures for each administrative unit.
  3. The information listed in Subsection (1) shall include a report comparing the budget with actual expenditures that shows the budget, actual revenue and expense transactions, revenue and expense encumbrances, and budget balance information for each administrative unit.
  4. The information listed in Subsection (1) shall include a budgeted salary report that shows the name, title, classifications, Full-Time Equivalent (FTE) %, annual salary, funding sources, and percentage of salary for a specified budget for full-time and part-time positions.
  5. The information listed in Subsection (1) shall declare whether an individual expenditure has contributed to “diversity, equity, and inclusion,” social justice, sustainability, or any similar commitment.
  6. The information listed in Subsection (1) shall include discrete sections that collate all individual expenditures for each of the categories of “diversity, equity, and inclusion,” social justice, sustainability, or any similar commitment, and which sum the aggregate expenditures of the institution of higher education as a whole, and the aggregate expenditures of each administrative unit, for each of these categories.
  7. The information listed in Subsection (1) shall include a transaction register that contains a complete record of all funds expended, from whatever source for whatever purpose.
    1. The register must include for each expenditure:
      1. the transaction amount;
      2. the name of the payee;
      3. the identification number of the transaction; and
      4. a description of the expenditure, including the source of funds, a category title, and an object title for the expenditure.
    2. The register must include all reimbursements for expenses.
    3. The register shall include an entry for salary, wages, or other compensation paid to individual employees.
    4. The register must not include a social security number.
    5. The register must be accompanied by a complete explanation of any codes or acronyms used to identify a payee or an expenditure.
  8. The information listed in Subsection (1) shall include month-end financial statements that show the current status of project budgets, expenditures, commitments, and balances.
  9. Any information that is expressly prohibited from public disclosure by federal or state law or regulation must be redacted from any posting required by this section.
  10. The information posted on the institution’s Internet website must be:
    1. accessible from the institution’s Internet website home page by use of not more than three links;
    2. searchable by keywords and phrases;
    3. accessible to the public without requiring registration or use of a user name, a password, or another user identification;
    4. be updated on a regular basis to present expenditure data for the current fiscal year; and
    5. retain expenditure data until ten (10) years of expenditure data are available, after which the website shall retain at least ten (10) years of expenditure data.
  11. “Administrative units” include all schools, departments, offices, programs. and other administrative subdivisions of an institution of higher education.

Section B [“Line-Item Veto”]

  1. By adoption of a joint resolution, the Legislature may disapprove any proposed individual expenditure listed in Section A and deliver instructions to the {Board of Regents} of the {State} public university system to eliminate that expenditure, provided that such joint resolution becomes law. If the joint resolution is vetoed by the Governor and the veto has not been overridden, the expenditure shall be deemed approved.
  2. If the Legislature’s decision to eliminate a proposed individual expenditure listed in Section A becomes law, that decision shall have the same force and effect of law as agency rules. The {Board of Regents} of the {State} public university system shall put that decision into effect immediately.
  3. The {Board of Regents} of the {State} public university system, and each institution of higher education, shall implement a range of disciplinary sanctions for anyone under its jurisdiction who substantially interferes with compliance with this Section.

Section C [“Student Loan Co-Responsibility”]

  1. Each institution of higher education that receives state funding shall inform students of the expected total cost burden of attending the institution.
  2. Each institution of higher education that receives state funding shall accept responsibility for 5% of federally funded student loans (including accruing interest) defaulted on by students at their institution who took no remedial coursework.
  3. Each institution of higher education that receives state funding shall accept responsibility for 10% of federally funded student loans (including accruing interest) defaulted on by students at their institution who took remedial coursework.
  4. “Remedial coursework” is defined as “below-college-level courses and training in reading, writing, and math that provide the competencies necessary for a student to succeed in college-level coursework.”

Section D [“Full-Time Faculty Instruction”]

  1. Each institution of higher education that receives state funding shall calculate the proportion of its total non-hospital expenditures that it devotes to Full-Time Faculty Instruction, and make this information available to the public on its Internet site. This information must be accessible from the institution’s Internet website home page by use of not more than three links; searchable by keywords and phrases; and accessible to the public without requiring registration or use of a user name, a password, or another user identification.
  2. Each institution of higher education that receives state funding must dedicate at least 35% of their non-hospital expenditures to Full-Time Faculty Instruction.
  3. “Instruction” shall be defined as “Instructional expenses (primarily faculty salary and benefits) of the colleges, schools, departments, and other instructional divisions of the institution for credit activities, which may not include academic administration, community education, departmental research, financial aid, general administration, institutional support, noncredit activities, overhead, preparatory and adult basic education, public service, remedial education, research, service-learning, student services, or tutorial instruction.”
  4. “Full-Time Faculty Instruction” shall be defined as “Instruction expenses for instructional faculty who teach at least 12 semester credit hours each academic year.

Section E [“Citizen Priority”]

  1. The {Board of Regents} of the {State} public university system, and each institution of higher education that receives state funding, shall only include students who are American citizens when they calculate their enrollment statistics for all federal and state funding and reimbursement formulas.
  2. The {Board of Regents} of the {State} public university system, and each institution of higher education that receives state funding, shall only allow students who are American citizens and who have been resident in {State} for twelve months to qualify for in-state tuition rates.
  3. The {Board of Regents} of the {State} public university system, and each institution of higher education that receives state funding, shall limit eligibility for all special admissions categories, including for athletics and music, to applicants who qualify for in-state tuition rates.
  4. Each institution of higher education that receives state funding may receive no more than 20% of its tuition revenues from students who are not American citizens.
  5. Each institution of higher education that receives state funding may receive no more than 5% of its tuition revenues from students who are citizens of any one foreign country.
  6. Each institution of higher education that receives state funding may enroll no more than 5% of its undergraduate students who are not American citizens.
  7. Each institution of higher education that receives state funding may enroll no more than 65% of its graduate students in any department who are not American citizens.

Section F [“Sanctuary Campus Prohibition”]

  1. The {Board of Regents} of the {State} public university system, and each institution of higher education that receives state funding, may not:
    1. declare themselves or operate either formally or informally to carry out any “sanctuary campus” policies;
    2. provide admission, employment, or financial support for illegal aliens; or
    3. fail to cooperate fully and promptly with all requests by the Department of Immigration and Nationalization.
  2. “Illegal aliens” includes all individuals present in the United States of America who entered the country illegally, including individuals enrolled in the Deferred Action for Childhood Arrivals (DACA) program.

Section G [“Foreign Gift Disclosure”]

  1. When any institution of higher education that receives state funding receives a gift from or enters into a contract with a foreign source, including foreign individuals, foreign organizations, and foreign states, the value of which is $10,000 or more, considered alone or in combination with all other gifts from or contracts with that foreign source within a calendar year, the institution shall post that information prominently on its Internet website, including the name of the foreign source (including the name of a foreign government agency), as well as the purpose of the gift or contract, the full text of the gift or contract, and the full text of any conditions attached to the gift or contract, and deliver to the {Board of Regents} of the {State} public university system, an annual report of all such gifts and contracts. The information posted on the institution’s Internet website must be accessible from the institution’s Internet website home page by use of not more than three links; searchable by keywords and phrases; and accessible to the public without requiring registration or use of a user name, a password, or another user identification.
  2. The reporting requirements in Section C, Subsection 1, shall apply to gifts made by registered foreign agents.
  3. The reporting requirements in Section C, Subsection 1, shall apply to gifts conveyed from a foreign source to any institution of higher education by means of an intermediary individual or entity.
  4. The reporting requirements in Section C, Subsection 1, shall apply to in-kind gifts, which shall count toward the disclosure threshold.
  5. The {Board of Regents} of the {State} public university system shall post on its Internet website a database of all information they receive to fulfill the reporting requirements in Section C, Subsection 1. The information posted on the institution’s Internet website must be accessible from the institution’s Internet website home page by use of not more than three links; searchable by keywords and phrases; and accessible to the public without requiring registration or use of a user name, a password, or another user identification.

Section H [“Severability”]

If any provision of this chapter, or the application of any provision to any person or circumstance, is held to be invalid, the remainder of this chapter and the application of its provisions to any other person or circumstance shall not be affected thereby.

Existing State Statutes

Arkansas: ACA § 6-61-137 [Presentation of expenditure data by state-supported institutions of higher education]

South Carolina: SC Code § 59-101-670 [Transaction register of funds expended]

Existing Financial Reports: Examples

Arkansas: University of Arkansas, Expenditures Database

Idaho: University of Idaho, Budget Books

South Carolina: Winthrop University, Transaction Register

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