that of the program gift. In the case where one donor makes both contributions, this will mean that one-third of the funds will represent the endowment component, while the rest will be for program support. In relation to the current aid pattern the requirement of an endowment building component means that a subsidy equal to a predetermined amount will have to be contributed in one payment, rather than in periodic installments equal to a portion of the interest rate on the loan. It is believed that donors, public and private, will be willing to make this grant in this manner in view of its impact on endowment building. Moreover, it is the type of aid that is compatible with the present pattern of assistance from these sources: it is for a specific and welldefined purpose, to be given once, rather than on a continuous basis, and in combination with funds from other sources. II. CONTRIBUTION OF THE CEFP TO THE FINANCING OF INSTITUTIONS Beyond the specific advantage of the Plan as a means of ensuring that the new level of expenditures, resulting from restricted gifts, can be met without additional contributions, there is the long-term impact that the CEFP can have on the financing of higher education institutions. Over the years, the repeated inclusion under the Plan of all restricted gifts will result in the accumulation of a substantial endowment. This will mean that an increasing part of an institution's revenues will be from endowment earnings. As Massey stated, such a revenue pattern can compensate for the productivity gap faced by colleges and universities. That is, by placing a greater emphasis on endowment income, institutions can realize productivity related gains in their revenues to counteract the effects that such gains have on the level of their expenditures. In addition to the problems of obtaining funds for basic operations and of closing the widening gap between revenues and expenditures, the CEFP addresses itself to another question that each type of institution has to face in its fund-raising efforts. Namely, how to obtain money from both private and public sources without undesirably modifying its major thrust of control. Private institutions in seeking public funds wish to obtain them under conditions that will leave them as autonomous entities, free from political control. On the other hand, private monies to public institutions should not lessen the state's responsibility for major support for basic operations. Money from private sources can best be given and managed through the foundations now being developed by many public institutions. The CEFP by relying on existing funding mechanisms and procedures does not alter the basic thrust of institutional support. It merely adds to it, in order to avoid cases of extreme hardship that could disrupt it. The Plan is a funding scheme that can be used by any institution in order to eliminate the adverse effects of restricted gifts from any source and to counteract the forces affecting their expenditures. It is the aim of the CEFP to strengthen the fundamental character of institutions by making them economically viable through endowment. The Plan attempts to assist specifically those colleges and universities with limited or no endowment. Only those having endowment earnings per student below a certain level are eligible to participate. In this way, the CEFP can have the greatest impact on the institutions with the greatest need. In the case of public colleges and universities, the aim is to create a source of funds to complement those received from the State. Such funds should help meet any part of the cost of education per student not covered by appropriations, as well as those other expenditures affecting the quality of education, but not included under the definition of "cost of education." 5 The term "cost of education" per student is used to indicate the educational and general expenditures of institutions (EGE) per student-as opposed to those for auxillary enterprise, such as dormitories, student aid and major public service, such as federally funded research and development centers. The educational and general expenditures of institutions are for: (a) Student education-general administration, instruction and departmental research, extension and public service libraries operation and maintenance of the physical plant and sponsored activities, such as training institutes; (b) Organized research-all sponsored research except federally funded centers; (c) Related activities-laboratory and medical schools, hospitals, dental clinics, home economics cafeterias, and other expenditures for student location not included under (a). Source: Office of Education, Projections of Educational Statistics to 1981-2, 1972, pp. 99-102. For private institutions, it is the objective of the creators of the CEFP to ensure endowment earnings of about $1,000 per student at participating institutions. This amount, when combined with unrestricted income from other sources, should equal 60 percent of the cost of education per student-the rest to be provided by tuition and fee charges. The choice of $1,000 in endowment income and its relation to other revenues is based on research in the costs of small private colleges. It was revealed that the average cost of education per student is approximately $4,000. The aim is to ensure that no more than 40 percent of that, or $1,600, is provided from tuition, with endowment accounting for almost half of the other revenues. Thus, assuming that 5 percent of the endowment is used in the budget, an institution with 1,000 in enrollment will need an endowment of $20,000,000 in order to provide $1,000 per student. It is expected that the rate of return from the investment of the endowment will be greater than 5 percent and that the portion of the earnings not spent will be reinvested. III. ADVANTAGES OF THE PLAN The CEFP as a concept manifests a unique set of important advantages. It is a method of institutional assistance the most fundamental kind of support, that ensures the survival of institutions and enhances the contribution of other non-institutional programs such as student aid. It is a method of creating revenues that does not alter, or compromise, the fundamental character of colleges and universities, public or private. It provides a continuous flow of budget income to the institution in predetermined amounts and over a specified period. At the same time, it is a means of capital formation through the establishment and investment of endowment funds. This in turn ensures a future flow of unrestricted revenues that will help institutions meet part of the rising expenditures. Most important, while satisfying the revenue needs of colleges and universities, the CEFP also respects the wishes of the donors. It operates within the established framework of higher education finance and relies on proven funding mechanisms. Private donors are provided with an additional incentive to contribute, because of the matching and leveraging of their contribution. Thus a gift for current use will not only support a specific program, but will also help build an endowment fund. On the other hand an endowment gift will eventually create a larger fund. Because of the inherent flexibility of the CEFP, with respect to varying the "packaging" of its elements, an institution can design the Plan to best meet its educational objectives, budgetary requirements and the financial environment within which it operates. The plan also allows for arrangements that include the government, either through the granting of the endowment building component or the loan. In these cases, the impact of the governments' contribution (federal or state) is greatly enhanced by the leverage and yield of endowment funds. Moreover, the CEFP as an institutional endowment building method of support is compatible with the current pattern of government assistance. By creating a stable flow of current and future income, it complements the specific pattern of federal aid and the basic support of public institutions by the states. A less direct, but equally important effect is that institutions will be encouraged to developed and exercise their own private fund-raising capabilities in order to be able to participate in the Plan. There will also be an incentive to formulate long-term institutional development plans as a key factor in convincing donors of the importance of their contribution. Moreover, the increasing importance of endowment will encourage colleges and universities to provide more effective financial management of their portfolios and budgets. Finally, by enlarging the base of institutional support the CEFP reduces the pressure for drastic tuition increases. This benefits not only those students able to pay, but those in need as well, for they will require smaller amounts of financial aid. There are also benefits for the colleges and universities, since fewer students will need assistance and lower amounts of aid per student will have to be provided. The reduction of the pressure to accelerate the rate of tuition increase is -especially important for private institutions. Since they, as a group have tradi tionally received most of the philanthropic support, the CEFP enables them to increase the impact of these funds and to reduce their dependence on tuition increases. Moreover, recognizing the unequal distribution of endowment among institutions, the Plan also provides for the participation of only those colleges and universities having endowment per student below a certain level. For public institutions, adoption of the Plan will ensure that quality education, above the level permitted by state appropriations, can be provided. Although most of them receive relatively little private support, the existence of the Plan can become an incentive for alumni and other donors to increase their contributions. Indeed, it is the goal of the CEFP to diversify as well as enlarge the revenue base of private and public institutions so as to minimize the adverse effects that changes in any source of funds can have. The aid is to preserve the diversity that exists among colleges and universities and the quality of the programs they offer in order to allow students improved access to quality education at costs they can afford. After all, "excellence in education is not merely a matter of limiting admissions to select students, providing conditional academic programs and upholding traditional standards. Rather, excellence is providing varied kinds of education that are relevant and helpful for persons of many different backgrounds, abilities and aspirations." Howard R. Bowen, "The Effective Use of Financial Resources", Speech presented at the 1974 National Conference on Trusteeship. Reprinted by the Association of Governing Boards of Universities and Colleges, p. 19. HIGHER EDUCATION ACT AMENDMENTS OF 1976 WEDNESDAY, SEPTEMBER 24, 1975 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON POSTSECONDARY EDUCATION OF THE COMMITTEE ON EDUCATION AND LABOR, Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 2257, Rayburn House Office Building, Hon. James G. O'Hara (chairman of the committee), presiding. Members present: Representatives O'Hara, Mottl and Quie. Also present: Webster Buell, counsel, Elnora Teets, clerk, William Diefenderfer, minority staff, Robert Andringa, minority staff director. Mr. O'HARA. The subcommittee will come to order. Today, we are continuing our hearings on H.R. 3470, a bill to extend and amend the Higher Education Act, and our first witnesses today will be Dr. Julia P. Davidson, director of the Mission-Moton Educational Opportunity Center, and Dr. Merrill C. Beyerl, vice president of student affairs at Ball State University. Both Dr. Davidson and Dr. Beyer will be speaking on behalf of the American Personnel and Guidance Association. Would you please proceed with your testimony. STATEMENT OF DR. JULIA P. DAVIDSON, DIRECTOR, NATIONAL Ms. DAVIDSON. Good morning, Mr. Chairman and distinguished members of the Subcommittee on Postsecondary Education. I am Dr. Julia P. Davidson, director of Mission-Moton Educational Opportunity Center in Washington, D.C. Seated with me today is a distinguished colleague of mine, Dr. M. C. Beyerl, vice president for student affairs at Ball State University, Muncie, Ind., who will also present testimony on the Higher Education Act. Mr. Chairman, the text which I am going to read this morning is a brief summary of the total testimony which I would like to submit. I would like to ask that the total written testimony be submitted into the record. Mr. OHARA. Without objection, the text of your full statement will be entered into the record. [Prepared statement of Dr. Julia P. Davidson follows:] PREPARED STATEMENT OF DR. JULIA P. DAVIDSON, DIRECTOR, MISSION-MOTON EDUCATIONAL OPPORTUNITY CENTER, WASHINGTON, D.C. Good morning Mr. Chairman and distinguished members of the Subcommittee on Post-Secondary Education. I am Dr. Julia P. Davidson, Director of Mission-Moton Educational Opportunity Center, in Washington, D.C. It is indeed an honor to have the opportunity to testify before you this morning on behalf of the 39,000 members of the American Personnel and Guidance Association and the 8,800 members of the American College Personnel Association. The American Personnel and Guidance Association is composed of 12 divisions, and 52 state branches including D.C. and Europe, representing professional counselors and student personnel workers from pre-school through graduate education programs and including Vocational Rehabilitation Employment Services and Public Offenders Counselors. I speak to you from a background of 10 years of active involvement in the development and implementation of higher education programs designed to improve the quality of education as well as to provide access and choice for those students previously under-represented in post-secondary education. I have worked as a counselor at Morgan State University and the University of Maryland Upward Bound Program. Until October 1974, I served as Director of the Intensive Educational Development Program at the University of Maryland College Park Campus. This program was one of the forerunners of "special" minority programs, which I helped initiate in 1968 two years prior to the funding of Special Services for the Disadvantaged in 1970. As a follow-up to Upward Bound, it was designed as one program by which the University of Maryland could make a genuine commitment to the educational and psychological development of black and other minority students. I have also participated in the National Work Conference on Special Programs for the Disadvantaged and PostSecondary Education; the National Work Conference on the Institutional-StateFederal Partnership in student assistance and the Minority Managers Workshop of the National Academy of Engineering. I have served as an evaluator of proposals for the Office of Education and Maryland State Department of Education and site evaluator for Pennsylvania State Act 101 Programs. At the present time I am director of one of the 12 Educational Opportunity Centers created through the Title IV amendments of 1972, which are also forerunners in that they are comprehensive post-secondary delivery systems. From these experiences I am keenly aware of and encouraged by the role which Congress has taken in shaping higher eduction policy. BACKGROUND Since the passage of the Educational Amendments of 1968, we have witnessed a new responsiveness from institutions who have made significant structural and environmental changes to meet the needs of heretofore under-represented minorites, as well as the development of new accessibility to educational opportunities through congressional programs. It is obvious in the past decade that public disenchantment with the lack of leadership and initiative from educational institutions, in directing the resources of the academic world to the resolution of social and educational problems, has led inevitably to a greater emphasis being placed on asigning educational opportunities and educational supportive services a higher priority to the nation's unfinished agenda. I appear before you today to emphasize that our task is not complete and to underscore the importance of developing legislation and its funding to mobilize and coordinate efforts to improve the quality of education in this country. For the improvement of that quality assures an improvement of the quality of life for all citizens. At the present time, we are critically aware of a trend that views education as a lifetime pursuant rather than a task completed between ages 6 & 21, for individuals. The complexity of our society including the continuing shifts and expansions of populations and its highly mobile characteristics; changes in the social unit and institutions; the changing priorities of a ever-present technological, scientific and intellectual revolution; the effects of war and peace, the continuing spectre of poverty in this land of plenty; racial and sexual discrimination; the continued pollution of our environment and its ecological results, calls for a restructuring and a redefinition of education. Doesn't education have |