Testimony on Measure 86 to Portland Community College Board

The following testimony was presented to the Portland Community College Board at their meeting on September 18, 2014.  The Board then voted 5 to 2 in favor of a Resolution giving their support to the Oregon Opportunity Initiative, Measure 86 on the November ballot.

Testimony before the Portland Community College Board in Opposition to the Oregon Opportunity Initiative (Measure 86):

Good evening, Chair Palm and members of the Board. My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a public policy research organization based in Portland.
I urge you to reject this Resolution for the following reasons:

First, you have no assurance that any funds generated by the Opportunity Initiative won’t simply replace funds the legislature already allocates to higher education. Plus, there’s no assurance that one community college student will benefit. Decisions about what, if any, funding will benefit specific students will be left to some unnamed public body, subject to the same lobbying efforts the legislature faces now.

Second, even if the Opportunity Initiative helps some students in the short run, it will make the whole system less affordable in the long run. Such third-party payments from states and the federal government are a big part of the reason that college costs and student debt are rising rapidly.

I’m sure you work hard to keep student prices under control. But, to the extent that Measure 86 puts more taxpayer money in student pockets, it will take some pressure off you to do so.

Third, I’m not sure voters understand that even if the Treasurer’s optimistic investment assumptions for Measure 86 work out, income taxpayers will be on the hook to repay all the principal and interest on any bonds issued by the state for decades into the future.

Before asking taxpayers to repay those bonds for the next thirty years, you might consider how technology is beginning to reduce higher education costs.

One Oregonian who recognizes the power of the coming technological revolution is the chief sponsor of the Oregon Opportunity Initiative himself, Treasurer Wheeler. Last October in a public meeting, he criticized the university system for being…

“…very slow to adapt the opportunities around technology.” He said that “there’s a lot of institutional inertia in the university system just as there is in Salem. And, all of these new technologies have opened up new windows to learning that do not require a student to even be in the same state.” He noted that online programs such as iTunes University on his own smartphone “don’t cost…a cent” and are a “game changer” that “undercut the entire economic model of the university system as it currently exists today.” *

So, if technology will put downward pressure on college costs, why saddle Oregon taxpayers with perhaps one hundred million dollars or more in debt over the next 30 years to fund the current high-cost model?

Finally, based on recent ACT test scores, only 30 percent of Oregon’s high school graduates are competent enough at English, reading, math and science to pass freshman college classes. Before you encourage more spending on higher education, shouldn’t we find ways for our public school system to prepare most college-bound students to actually succeed there? Otherwise, we’re just paying twice for remedial courses to teach college students what they should have learned in high school.

Wouldn’t you rather see every new PCC student ready for college-level courses, rather than dump more of your limited budget into teaching them what they should already know?

In conclusion, whatever the value of a college degree is to an individual, it’s becoming clear that Opportunity Initiative state funding of those degrees is likely to cost taxpayers more than they gain. I urge you to reject the Oregon Opportunity Initiative.

Thank you.

* Ted Wheeler, Washington County Public Affairs Forum, October 28, 2013.
59-second answer: youtube.com/watch?v=ZMPMtmEyieg.
Entire hour-long presentation with Q&A: youtube.com/watch?v=l1hYXGA3CLA.
Relevant question starts at 52:16.

Cascade Policy Institute Encourages a ‘No’ Vote on Measure 86

The Board of Directors for the Cascade Policy Institute recently voted to oppose Measure 86, known as the Oregon Opportunity Initiative, on November’s ballot.

Measure 86 would require the creation of a Permanent Fund for Post-Secondary Education, which can be funded a number of ways, including by the state selling general obligation bonds. Earnings on the Fund can be used to subsidize certain students, but it will be taxpayers who are saddled with paying off any bonds for 30 years, with interest.

Further, only 30 percent of Oregon’s 2014 high school graduates showed readiness for college, based on ACT college admissions tests.

“We shouldn’t spend more money on higher education until our public school system prepares most college-bound students to actually succeed there,” said Cascade Founder and Senior Policy Analyst Steve Buckstein. “Otherwise, we’re just paying twice for remedial courses to teach college students what they should have learned in high school.”

Measure 86 is based on what one researcher calls “one of America’s most durable myths…that the more people who graduate from college, the more the economy will grow.” However, Richard Vedder, author of the book “Going Broke by Degree: Why College Costs Too Much,” notes that conclusion may depend on how those educations are paid for. He found statistical evidence that states which provide more higher education funding actually have slightly lower economic growth rates than states which provide less.

“Individuals know their needs better than politicians do, so leaving the money in private hands produces better results,” said Buckstein.

Finally, even the chief sponsor of Measure 86, State Treasurer Ted Wheeler,  criticized the university system for being slow to adapt to new opportunities in technology which can make education cheaper and easier for students*.

“As technology drives down higher education costs, why saddle Oregon taxpayers with perhaps $100 million or more in debt for the next 30 years to subsidize the old, high-cost economic model? The answer is we shouldn’t,” said Buckstein.

* Video of Treasurer Wheeler’s statement is online at:
youtube.com/watch?v=ZMPMtmEyieg

School Choice Fosters Students’ “Profound Gratitude,” Author Says

Students everywhere are back in school, including grade school children from low-income families who are attending Oregon private schools thanks to the Children’s Scholarship Fund-Portland.

New York Post columnist Naomi Schaefer Riley recently interviewed a diverse group of students who have graduated from Children’s Scholarship Fund programs across the country. Her book, Opportunity and Hope: Transforming Children’s Lives through Scholarships, shows what a good education means to young people who have a better chance in life because of private scholarships, and she makes a compelling case for the power of school choice. The scholarship alumni profiled in the book are representative of thousands of others, including more than 650 students who have received scholarships here in Oregon.

Riley wrote: “The recurring themes I heard…were ones of improved academic outcomes, solid foundations for high school, college, and beyond, and a profound gratitude and desire to give back….Together, these children will ensure that the next generation gets its shot at the middle class.”

For many children in America, one-size-fits-all public schools fail to let them truly learn and excel; and many low-income parents want access to schools that match their children’s needs. Children’s Scholarship Fund students are living proof of what is possible when families are empowered to choose the schools that are right for their children. For more information about real-world education solutions that are getting results for kids, visit SchoolChoiceForOregon.com.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

Why Literature Lovers Hate Common Core

Please join us for Cascade’s monthly Policy Picnic led by publications director Kathryn Hickok on September 17, at noon.

Kathryn will discuss reasons many teachers say the Common Core State Standards are taking the language out of language arts and the love out of literacy. Common Core supporters argue the new standards will improve students’ literacy, but will they do the opposite instead? What can parents do about it?

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

Sponsored By

The Votes Are In: Small Scholarships Have a Big Impact

The Children’s Scholarship Fund is a nationally recognized, privately funded scholarship program which has helped more than 139,000 low-income children attend tuition-based elementary schools nationwide since 1998. The program recently surveyed scholarship families in New York about their experiences. The results include:

• 98.5 percent said their CSF scholarships help them make the best educational choices for their child.

• 73.1 percent reported they could not afford to send their child to their chosen school without a CSF scholarship.

• 70.3 percent noticed an improvement in their child’s academic performance and/or engagement since enrolling in their current school.

While New York City public schools spend about $20,000 per student, an average CSF scholarship grant of $1,600 is enough to empower these low-income parents to obtain a private school education for their kids.

Cascade Policy Institute runs the Oregon partner program of the Children’s Scholarship Fund. The New York program’s poll results are consistent with the informal feedback Cascade receives from scholarship parents here. “I wish that the education system could understand that not every child fits into the same sized box, and everyone needs to do what is right for their family,” said one Portland-area CSF parent.

Programs like the Children’s Scholarship Fund respect the decision-making processes of families and support parents in directing their children’s education. School choice programs like CSF prove that good things happen when parents can vote with their feet on behalf of their own kids.


 

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

Will Parent Rebellion Spell Doom for Common Core?

By Lance Izumi

If one asked most people a couple years ago about the Common Core national education standards, the response would have been a blank stare. Now, Common Core is a front-burner political issue because parents are discovering that their children are struggling under the new standards.

Common Core is a set of national math and English standards, which most states, including Oregon and California, have adopted because of the funding incentives and strong-arm tactics used by the Obama Administration. There have been many “big picture” criticisms of Common Core: the lack of transparency and public input when Common Core was developed, the middling quality of Common Core, the high cost of implementing Common Core, and nationalization of education under Common Core. Yet, these critiques are now being overshadowed by the anger of parents at how Common Core is negatively affecting the learning of their children.

Columnist and former Reagan speechwriter Peggy Noonan has written that Common Core’s Achilles heel is implementation: “implementation―how a thing is done day by day in the real world―is everything.” Take, for example, new Common Core-aligned curricula and associated teaching methods.

Core Connections is a Common Core-aligned math curriculum that is starting to be implemented in classrooms and which emphasizes the use of cooperative learning. The curriculum tells the student: “Learning math [through cooperative teamwork] has an advantage: as long as you actively participate, make sure everyone in your study team is involved, and ask good questions, you will find yourself understanding mathematics at a deeper level than ever before.” While such utopian pronouncements sound impressive, the reality is quite different.

Bryce is a sixth grader at a public school in Northern California. He is a very bright student, achieving several perfect scores on the state’s math exam and consistently receiving A+ grades in math. Yet, Core Connections has had a discernible negative impact on Bryce.

Under Core Connections, Bryce and his fellow students are organized into teams of three to four students. Bryce says that there is unequal participation among team members, with more advanced students being more involved and carrying more of the work.

Further, not all the groups finish at the same time. Those that finish early can’t go on to harder problems, but have to wait until other teams finish. Oddly, Bryce says that his teacher doesn’t want early finishers to read because that’s English language arts, and not math.

Since the teamwork method started, the class usually doesn’t finish math lessons in time, and sometime it cuts into their science time or the math is simply not completed. Bryce emphasized that this situation happens a lot. When asked if the class starts the next day where they left off the day before, he answers “no,” saying that the class simply goes on to the next new concept.

When asked his thoughts on the new teamwork method, Bryce said that he thought that working in teams was distracting: different ideas were talked about at the same time; there was too much noise from other groups; and, worst of all, much of the conversations were not about math.

Whereas his prior math curriculum allowed him to do math at his own pace, so he was doing eighth-grade math while still a fifth grader, now Bryce says he has to spend a lot of time explaining his answers and go at the same pace as his team.

Bryce’s frustrations with the new Common Core curriculum are having a negative impact on his achievement. According to his mother, for the first time Bryce’s grades are starting to falter, which is worrying her greatly.

Bryce’s problems with the new Common Core curriculum are not unique. Children and parents across the nation are up in arms over the confusion inherent in Common Core curricula. A recent PACE/University of Southern California poll found that 41 percent of Californians surveyed were opposed to Common Core, while only 32 percent supported it, a flip from the poll numbers recorded last year.

As Peggy Noonan observes: “Life isn’t lived in some abstract universe; it’s lived on the ground, in this case with harried parents trying, to the degree they can or are willing, to help the kids with homework and study for tests.” Parents seeing their children struggle under Common Core’s liberal teaching methods and philosophy are rebelling, and that rebellion likely spells eventual doom for Common Core.


 

Lance Izumi is Koret senior fellow and senior director of education studies at the Pacific Research Institute and a guest contributor for Cascade Policy Institute.

Is There a More Flexible Way for Students to Invest in Themselves?

By Joel Grey

State Treasurer Ted Wheeler has proposed a new program intended to help Oregon students go to college in spite of the quickly ballooning cost of tuition. Under the proposed “Oregon Opportunity Initiative,” the state of Oregon could borrow money by selling general obligation bonds and then invest the proceeds. Students could receive grants or other subsidies from the earnings on this investment each year, while taxpayers would be responsible for paying back the bonds. The state must use all discretionary spending necessary to pay back bondholders with interest over thirty years. Bonds issued for this purpose likely would reduce the opportunity to bond for other critical needs of the state such as roads and bridges.

This proposal is potentially a costly mistake for Oregon and fails to prevent the inflated cost of education from growing even faster.

Even with the increased cost of college, higher education can still be a good investment for individual students. People with bachelor’s degrees likely will see their incomes increase by more than the cost of attendance over their careers. Because of this, it is unwise to eliminate part of the cost to the student by having taxpayers help fund their education. Students should pay for their own education, even if they are not paying at the time they are enrolled.

If the cost of college to the student is reduced, it creates a third-party payer problem: Because they are not directly affected by cost increases, students will worry less about the price of college, allowing it to inflate more over time. Conversely, if students are expected to pay for their education, they are more cautious about expenses and debt.

Even traditional loans have a third-party payer problem because costs are externalized to the future. Students have to pay eventually, but they don’t necessarily fully consider this because it is a long-term issue. While traditional loans lead to problematic student debt, there are other ways of financing education that don’t lead to third-party payer problems.

One viable solution to student debt was proposed almost sixty years ago by Milton Friedman: human capital contracts. A private person or institution, such as a bank or investment firm, pays for a student’s education. In exchange, the student pays a fixed percentage of income over a certain period of time. Human capital contracts would be more flexible than traditional loans. As a percentage of income rather than a fixed dollar amount, they would be less likely to be financially burdensome to the borrower and would thereby lower the rate of default.

Human capital contracts are also more flexible for the lender. Current federal loans treat all students equally in rates and borrowing limits. Private institutions could offer lower or higher rates based on an individual student’s career path or academic performance, allowing certain students to receive lower rates while riskier students are given higher rates.

Human capital contracts are likely to benefit lower-income students the most. It is very unlikely that those students could afford to pay for college up front, but they would have the same earning potential as anyone else in their field upon graduating. Human capital contracts would allow them to use these future earnings to make college attainable in the present.

While human capital contracts are also a third-party payer system, the private nature of the funding gives lenders an incentive to control their costs. They will need to ensure that students can pay back what they borrowed. The federal government doesn’t have the same incentive with its student loans because it doesn’t need to earn a profit.

Human capital contracts are not a silver bullet; nothing is. For example, they likely wouldn’t be useful for students who only intend to work part time or to become stay-at-home parents because lenders couldn’t recoup their investments. However, human capital contracts are a better choice overall for students and Oregonians when compared with the taxpayer-funded Oregon Opportunity Initiative. They would eliminate many problems of current loans, provide an incentive to view education as an investment, and control costs. All of this would help manage the expense of college long-term while still allowing students from any income bracket to attend college.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Portland Public Schools’ New Ombudsman Should Be Independent

By Joel Grey

In response to parent complaints, Portland Public Schools will create a new ombudsman position. An ombudsman is a person within an organization who provides accountability and investigates complaints.

It’s a good thing for public schools to have an ombudsman. An ombudsman is dedicated to listening to parents’ concerns and preventing abuses within the system. Accountability is important because people will often get away with whatever they are able to, and an ombudsman makes it harder to escape independent oversight.

The problem here is that the school district has placed the ombudsman within the public relations department, reporting directly to chief of community involvement and public affairs, rather than to the superintendent. The job of public relations isn’t to investigate and stop abuses within the system; it’s to improve the public’s view of the schools. Placing an ombudsman in a PR department makes it appear to parents that the position is just for show.

An ombudsman should be as independent as possible and report to the highest level of an organization―in this case, directly to the superintendent. This is what Newark Public Schools does, and it is a common practice. Without independence, the ombudsman may appear to parents to be simply a tool to placate their criticisms without effecting real reform.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Private Lenders Could “Pay-It-Forward” in Oregon

By Everet Rummel

The Oregon Higher Education Coordinating Commission is proposing a pilot program called “Pay-It-Forward.” Oregon residents could attend an in-state public university or community college tuition-free in exchange for paying a portion of their income annually for 20 years after graduation. The program, set to cover 1,000 students, is projected to cost the state between $5 million and $20 million per year for the next 20 years before becoming self-sustaining.

Proponents of “Pay-It-Forward” want to alleviate the problem of overwhelming student debt loads and make a college education more affordable. But should taxpayers cover students’ tuition when they are already directly funding public universities and student aid programs? Instead of microscopic pilot programs that throw more public money at the problem of rapidly rising tuition, there is a potential private solution to help finance higher education.

Milton Friedman originally proposed the concept of human capital contracts (HCCs) for the purpose of financing higher education. HCCs are privately funded financial instruments through which students receive funding for their tuition. In exchange, they pledge to pay a set percentage of their income annually for a set period of time after graduation. If they are ever unemployed or unable to pay, then they pay nothing until they have an income. If the payback period ends before the student has paid back the entirety of the sum loaned, the rest of the debt is forgiven. HCCs would go far beyond publicly funded “Pay-It-Forward”-type programs and traditional student loans by incentivizing informed educational decisions, forcing institutions to compete by controlling costs, and transferring financial risk to those who are better able to bear it.

HCC rates, the percentage of income that students must pay annually, and funds loaned would vary by the school attended, program of study, and academic achievement. Students attending schools and programs whose graduates tend to do poorly in the labor market would face lower rates but fewer funds. Students with lower academic achievement may have access to less funding. Those attending more expensive schools would receive more funds and higher rates only if their expected earnings are high relative to the costs of the education. Thus, rates and funds would incentivize students to seek more bang for their buck. Institutions, no longer reliant on seemingly unlimited government (taxpayer-funded) aid, would have to rein in costs and focus on improving academic quality. In sum, the availability of HCCs alone would tell consumers a lot about the economic value of various degree programs.

Most importantly, risk and financial burden would be borne by borrowers and lenders, not the state and taxpayers. The majority of the risk would be transferred to lenders, who are in a better position than student borrowers to bear it. Meanwhile, students would be free to pursue their chosen career paths without worrying about fixed monthly payments that could ruin their future financial prospects. The risk of default would be arguably lower than what we face now. These points should be remembered as policymakers in Oregon and across the country consider the crisis of higher education debt. Perhaps the market―not the government―has  solutions. Human capital contracts may be one of them.


 

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

“Pay-It-Forward” Is a Step Back

By Joel Grey

The Oregon Higher Education Coordinating Commission is considering a proposal called “Pay-It-Forward.” This pilot program would give free tuition at a state university to one thousand high school graduates each year, beginning in 2016. In exchange for free tuition, students would cede 3-5% of their paychecks over a twenty-year period. Although the program is intended to become self-sustaining, it would cost between $6.5 and $20 million each year for the first twenty years until that happened.

This is an example of a government proposal that is not well thought out. Yale tried a similar experiment in the 1970s and eventually forgave much of the debt years later. Many students overpaid for their education, while 20% defaulted. Oregon shouldn’t repeat Yale’s mistake.

Furthermore, having a third-party payer for college reduces students’ incentive to decide whether to attend college or to pursue other options, like technical schools. It also makes students less sensitive to the prices of institutions, likely increasing the cost of college over the long run.

Education should be an investment, but students and their families should invest and then reap the benefits. That way, talented students can succeed based on merit, rather than government funding students at great cost to taxpayers, with no guarantee a pilot program like “Pay-It-Forward” will work as intended.

Government simply can’t make decisions as well as the individuals who are affected by those decisions.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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