Running head: Financial Equity

Financial Equity in the California Community Colleges:

A Literature Review Paper

Jerry L. Buckley

San Diego State University

College of Education

In Partial Fulfillment

of the Requirements for ED 840

Professor Nan Zhang Hampton

April 12, 2008

 Financial Equity 2

FINANCIAL EQUITY IN THE CALIFORNIA COMMUNITY COLLEGES:

Introduction

Since the adoption of California’s Master Plan for Higher Education in 1960, the

state has sought to provide equal opportunities for higher education to all adults requiring

such services, at a reasonable cost (Zumeta & Frankle, 2007). Community colleges serve

as the foundation for this plan, as they offer open access to students at minimal cost. The

California community colleges have a broad mission, including intersegmental transfer to

four year universities, economic and workforce development through vocational

education and career/technical education, as well lifelong learning in the form of non-

credit continuing education (California Community College System Office strategic plan,

2008). Basic learning skills and English language proficiency have become important

missions of community colleges during the past decade due to increases in immigration

to the United States and needs for remediation among incoming community college

students.

Open access is an important aspect of the community colleges, allowing 2.6

million students in California to enter postsecondary education this past year (California

Community College Systems Office, 2008). The population of students served by

community colleges represents at least 45% of first time college entrants and 37% of

undergraduate students in all American colleges and universities, without counting non-

credit participants (Bragg, 2001). Open access allows community colleges to serve the

most diverse population of students in higher education, including age, gender and race.

Promoting equity and supporting a diverse learning environment to develop an informed

electorate that participates in a global economy is also part of the community college
 Financial Equity 3

mission (California Community College System Office). Bragg noted in 2001 that nearly

60% of all community college enrollments during the past 25 years came from

underrepresented populations. People of color are currently 43% of the total population

California community college students. How will the California community colleges

address the need to improve and maintain financial equity to recruit, retain and facilitate

completion of educational objectives for minority students?

Problem Statement

This paper will review the financial requirements and current limitations to

maintaining open access for racially diverse populations of California community college

students. During the next decade financial limitations created by decreases in available

state funding may negatively impact financial equity, access and opportunity within the

community colleges. Colleges must learn to support financial equity through effective

recruitment, retention and support services that lead to program completion by students

of color.

Rationale

Methods exist to address the financial and educational needs of underrepresented

students. Current practices to establish and maintain racial equity within the community

college system will first be defined through the review of foundational information. The

relative cost of these practices will also be inferred. Financial equity will then be

analyzed from its origins in the K-12 educational system and related to improvements in

completion rates for students of color. An assessment of past and present community
 Financial Equity 4

college funding methodologies will be discussed, followed by a review of proposals and

initiatives to enhance financial equity for students of color in the California community

college system.

Purpose

Community colleges serve as the gateway to higher education for the majority of

California students, providing open access for minorities and immigrants. As such, these

institutions provide an important mechanism to provide upward mobility for under

prepared students, to improve social dynamics and acceptance of diversity in California.

This objective is consistent with the mission of California community colleges, as we

prepare students to participate in a democratic society and global economy. The focus of

this paper is to identify important concepts that can be used to improve and maintain

financial equity for minority students in the California community colleges.

Definition of Terms

For the purposes of this study, the following terms will be used:

Equity. An indicator of racial diversity within the California community colleges.

Financial equity: The availability of funding to support the total cost of

education for students of color.

Horizontal equity: School districts having similar costs of providing basic

education should have comparable levels of funding, primarily determined by the cost of

goods and services provided to students.

 Financial Equity 5

Vertical equity: Providing more funding to those school districts that have

higher costs to educate student populations, focusing on students with special needs.

Minimum foundation plan funding: Provides a fixed amount of funding to

institutions based upon state and local taxes plus a differential amount of funding based

upon enrollments and available tax revenue.

Program-based funding: A cost-based funding model, where colleges are

funded through analysis of specific operation program objectives and costs.

RESEARCH METHODS

Financial equity was researched using San Diego State University library database

search engines, applying primarily the terms “equity,” “educational equity,” “community

college” and “finance” in different combinations. Three search engines were selected

because of their focus on education literature, including the Education Resource

Information Center (ERIC)/First Search, Education Full Text/Wilson Web, and EBSCO

Host.

The first search utilized ERIC/First Search using the terms “educational equity”

and “finance” which resulted in a total of 2,474 records located. Using the addition of

“full text” and a date range of 1998 to 2008 as filters, the search was narrowed to 11

records. Articles were considered relevant if they addressed financial equity in either

community colleges or the K-12 system. A second search utilized ERIC/First Search and

the terms “community colleges” and “equity,” which resulted in 463 records located.

Applying “full text,” “English,” and the date range 1998-2008 as filters, the search was

narrowed to 65 records. Articles were considered relevant if they addressed racial or

 Financial Equity 6

ethnic diversity, or topics which were judged to directly impact racial or ethnic diversity

in the community colleges.

A third search again utilized ERIC/First Search and the terms “community

college,” “equalization,” and “California” which resulted in 17 records located. Articles

were considered relevant if they addressed financial equity in the California community

colleges. A fourth search utilized ERIC/First Search and the term “Proposition 98” with

a “full text” delimitation, which resulted in 13 references located. Articles were selected

for review if they addressed financial impact on the California community colleges.

Additional searches were conducted with Education Full Text/Wilson Web, first

using the term “vertical equity” which resulted in 17 records located. Applying filters for

“page image” set to “PDF” and a date range of 1998-2008 resulted in 8 articles located.

Articles were considered relevant if they addressed financial equity in either community

college or the K-12 system and defined terminology or concepts. A second search

utilizing Education Full Text/Wilson Web and the terms “equity,” and “community

college” with filters for “page image” set to “PDF” and a date range of 1998-2008

resulted in fifteen records located. Articles were considered relevant if they addressed

racial or ethnic diversity, or topics which were judged to directly impact racial or ethnic

diversity in the community colleges. A third search utilizing Education Full Text/Wilson

Web and the terms “finance,” ”educational equity,” and “community college” with filters

for “page image” set to “PDF” and a date range of 1998-2008 resulted in one record

located.

The world-wide web was searched using Google to locate government reference

articles or other information related the California Basic Skills Initiative (BSI), the
 Financial Equity 7

California community colleges’ strategic plan, and statistics for the California community

colleges at their Systems Office web site. Additional community college statistics were

located at the Community College League of California (CCLC) web site. Electronic

materials describing California senate bill (SB) 361 were also located at the CCLC web

site.

RESULTS

Recruiting and Retaining Diverse Students

The demographics of students enrolled in the California community colleges

should reflect that of the communities they serve. Attaining equity in student enrollments

requires that colleges develop and maintain recruiting practices that attract diverse

populations. Identification of specific recruiting practices will help establish a cost to the

community colleges for maintaining cultural diversity and equity. Recruiting practices

reviewed by Opp in 2001 described a number of techniques found to increase enrollments

by students of color in community colleges, including offering mentoring and enrichment

programs, opportunities for dual enrollment, as well as developing partnerships between

schools and corporate sponsors. The author also presented original research that pointed

to other variables which enhance diverse student enrollments, specifically offering a

diverse faculty, staff and administration as role models for students. Publishing

recruiting information in a student’s native language also correlated strongly with

increased enrollments. Colleges that worked with local minority high schools to enhance

curriculum and delivery observed increased participation by students of color. Also of

note was the correlation between having a diverse board of trustees for a college and a
 Financial Equity 8

diverse student enrollment. Many of the strategies listed above require community

colleges to invest funding to develop and maintain a diverse student population.

Similarly, Opp in 2002 reviewed literature that defined barriers for the retention

of students of color and made several important observations. First, the author identified

a lack of comprehensive institutional research data to support retention and achievement

of minority students. Opp also identified that inadequate financial aide was a major

factor in the loss of minority students. Other critical factors affecting culturally diverse

student retention included inadequate college funding to support interventional programs

for at risk students. Lack of faculty diversity and the opportunities to have campus-based

cultural and social activities for students of color also impacted retention. Opp provided

original research that strongly suggested that an important method of enhancing

completion rates for students of color is to introduce minority peer tutoring programs.

Peer-to-peer interactions were viewed as not only a way to enhance academic

achievement, but to build a sense of identity within the college.

Opp also observed that consistent interaction between the chief student affairs

officer (CSAO) and students of color and improved retention and completion within two-

year colleges. Another important factor impacting retention and program completion for

students of color is the availability of diverse role models, represented by people of color

participating in the college as members of the board of trustees, the college

administration, or as faculty and staff, directly demonstrating that the institution

supported equity and cultural diversity. A cost can be identified for the recruitment and

retention of diverse role models, as well development of cultural diversity and tutoring

programs, all of which can be considered part of financial equity. A major contributor to
 Financial Equity 9

financial equity is also the provision of adequate financial aide to support students of

color.

The Alliance for Equity in Higher Education, made up of the American Indian

Higher Education Consortium (AIHEC), the Hispanic Association of Colleges and

Universities (HACU), and the National Association for Equal Opportunity in Higher

Education (NAFEO), was founded to establish collaboration on common public policy

objectives and to manage federal funding available to students of color (Merisotas &

Goulian, 2004). The Alliance has established cooperation among institutions of higher

education that serve racially diverse students, promoting the term “Minority-Serving

Institution (MSI). As of 2000, 11% of college students were enrolled in Minority-

Serving Institutions, represented by 340 colleges and universities, 43% of which are two-

year colleges.

Merisotas and Goulian (2004) stated that the Alliance supports a number of

projects to enhance retention and completion of students of color, including the Building

Engagement and Attainment of Minority Students (BEAMS) project. The W.K. Kellogg

Foundation provided a four-year, $6 million grant to the Alliance in 2002 to help train the

next generation of leaders for MSIs (Merisotas & Goulian, 2004). The Kellogg MSI

Leadership Fellows Program prepares students using fundamental managerial and

leadership training, but also addresses the cultural diversity issues unique to MSIs. The

Alliance also had an impact during the 2003 reauthorization of the Higher Education Act

in areas such as recommendations doubling the amount for Pell grant funding and

increasing the authorization levels for Title III and Title V grants to encourage additional

growth in MSIs. Merisotas and Goulian’s 2004 writings stated that “the Alliance’s
 Financial Equity 10

public policy agenda has emphasized two themes: eliminating the technology gap

between disadvantaged and more well off students and institutions; and reducing the

performance gap between minority and white students.” It is evident from the writing of

Opp, Merisotas, and Goulian that financial and governmental policy support is necessary

for community colleges to improve diversity and equity on their campuses and allow

under prepared students of color the opportunity to persist in school.

Under prepared students must have opportunities to work with skilled faculty and

staff to develop appropriate study skills that complement individual learning styles to

reach their educational goals. Kisker and Outcalt (2005) studied the characteristics of

faculty that support community college honors and developmental education programs.

The authors found that faculty serving each of these programs demonstrated specialized

skills and dedication to their students. Honors faculty were characterized as performing

more scholarly tasks such as grant research and publishing, much like four-year

university professors, whereas developmental faculty collaborate frequently with K-12

instructors, adopting their ideas and teaching methods.

Unlike honors faculty, Kisker and Outcalt (2005) found African American and

Hispanic faculty more frequently taught developmental courses. Conversely, higher

percentage of full-time white faculty taught in honors classes. Each of the two programs

was described as serving an important role for community college students whose goal

was transfer to a four-year university. Kisker and Outcalt (2005) stated that

developmental math and English courses provide an advantage to under prepared

students, allowing them to persist in college at a rate significantly higher than similarly

prepared students not enrolled in such courses. The authors also found that significant
 Financial Equity 11

numbers of African American and Hispanic students enrolled in remedial community

college courses across the United States, inferring that these student populations can

benefit most from the affects of developmental education programs. California has

recognized the benefits of developmental education to the mission of community colleges

by funding the Basic Skills Initiative started in 2005. This initiative is additional

evidence that community colleges must address the cost of equity by preparing at risk

students to enter postsecondary education using enhanced funding to assist this student

population.

Origins of Financial Equity

Community colleges have adopted concepts and terminology in financial equity

first developed in public schools early in the 1970’s. Two types of financial equity have

been defined in K-12 school funding (Toutkoushian & Michael, 2007). The first is

horizontal equity, in which school districts having similar costs of providing basic

education should have comparable levels of funding. This form of financial equity is

commonly referred to as the equal treatment of equals in school finance literature.

Vertical equity, a second type of financial equity, defines equitable school funding as

providing more funding to those school districts that have higher costs to educate student

populations, focusing on students with special needs. This is referred to as the unequal

treatment of unequals. Toutkoushian and Michael (2007) stated that constructing valid

measures of horizontal and vertical equity have proven difficult. The authors reviewed

various univariate, bivariate and multivariate statistical models used to calculate

horizontal and vertical equity. Horizontal equity was described to be primarily

 Financial Equity 12

determined by the cost of goods and services provided to students. Some states were

noted to address vertical equity factors based upon family income, educational attainment,

marital status and English proficiency of students.

Rolle and Liu (2007) noted that states using vertical equity measures tend to adopt

cultural deficit modeling which ignores the complexity of instruction and fails to fund

strategies used to address differential student needs. Conversely, Rodriguez (2004) noted

the importance of vertical equity measures in supporting the responsiveness of school

systems to the needs of students and staff. Vesely and Crampton (2004) also described

the importance of vertical equity factors in supporting at risk children through

supplements to basic aid and categorical funding. Public education has made attempts to

improve funding formulae by including measures of efficiency and estimates of

educational adequacy (Rolle & Liu, 2007). These same authors also noted a shift in

public education policy with the adoption of outcomes to measure performance in K-12

school systems. Similar characteristics of public school equity funding and outcome

assessment can now be found in California community colleges.

Funding Constraints and Mechanisms

Financial equity requires that institutions have adequate budgets to meet the needs

of the students they serve. Funding for community colleges in California has always

been linked with the K-12 public school system. In 1979 Proposition 13 reduced

property tax funding to k-14 by over one billion dollars per year (McFadden & Rhoads,

2004). Funding for California’s public education system fell from 9th in the nation to 44th

within five years after passage of Proposition 13. To compensate for the negative
 Financial Equity 13

financial impact of Proposition 13 and AB 8, California citizens approved Proposition 98

in 1988 to establish an acceptable minimum for school funding and provide financial

stability for school budgets (McFadden and Rhoads (2004). Unfortunately, the California

Community Colleges have not faired well under Proposition 98 during the past ten years,

as the legislature has suspended a portion of the bill that guarantees community colleges a

percentage of all state receipts (Murphy, 2004). California Community Colleges have

grown only 4% in funding per full-time equivalent student (FTES) during the period of

1971 to 2001, compared to 24% growth for the California State Universities, and 23% for

the University of California during this same time according to Murphy (2004). The

author also noted that community colleges in California receive approximately 44% less

per FTES than the K-12 public schools, and also rank 45th out of forty-nine states in

community college funding per FTES. Although California’s community colleges

provide open access, they evidently do not have the same financial resources as other

institutions to support their diverse mission and student population.

Basic funding mechanisms can either enhance or limit and institution’s ability to

provide financial equity to disadvantaged students, but Dowd (2004) noted that geo-

political factors may also impact revenue distributions. The author noted that large urban

community colleges tended to have less success in securing governmental and

entrepreneurial funding than suburban or rural institutions, where economic factors do

not adequately explain revenue disparities for colleges with similar demographics and

enrollments. Suburban and rural colleges have generated up to 14% more entrepreneurial

funding than their urban counterparts (Dowd, 2004). The author inferred that inequities

in distribution of funding in Texas border towns and California community colleges were
 Financial Equity 14

related to political influence affecting legislative actions. Dowd emphasized that

financial equity for two-year colleges may depend upon their ability to successfully

compete for entrepreneurial funding, regardless of their state funding models.

Community colleges are typically funded through one of four general models

(Henry, 2000). First, a state may create a negotiated budget each year with community

colleges based upon available funding and outcome expectations. Second, states may

utilize a unit rate formula that allocates funding based upon the number of FTES or the

square footage of existing or planned facilities. Third, states may allocate funds though a

minimum foundation plan that provides a fixed amount of funding to institutions based

upon state and local taxes plus a differential amount based upon enrollments and

additional tax revenue. Last, states may use a cost-based funding model, where colleges

are funded through analysis of specific operation program objectives and costs.

Wellman (2003) reviewed that standard method of budgeting developed for

colleges and universities based upon the average cost per FTES and teaching space

allocated by square foot for instructional activities, which serves as a foundation for

establishing educational program costs. Henry (2000) reviewed a fifth theoretical

funding model that addressed efficiency and equity in community colleges determined

through an analysis of economic resources, along with identification of who should

receive such resources , and agreement upon what the local economy should be

producing and for whom. This model also considered the distribution of financial burden

to support community colleges, including students, federal, state and local governments,

and other interested parties. Dowd and Grant (2006) researched locally funded

community colleges in 35 states and reported a mean funding of $5,000 per FTES with an
 Financial Equity 15

average variance of $1,000 per student. They reported that the potential for financial

inequity exists for community colleges that primarily rely upon local funding, as

economic performance in any region determines tax revenues available to fund these

institutions (Dowd & Grant, 2006).

Financial Equity within the California Community Colleges

California community colleges utilized program-based funding (Murphy, 2004)

up until 2006, when SB 361 changed the state funding model to a minimum foundation

plan that provides each college with a foundation grant, plus additional revenue based

upon enrollment (Community College League of California, 2003). The majority of

funding for the colleges comes from the state’s general fund and local property taxes,

with approximately 4% coming from federal resources, and only 3% from enrollment

fees (Murphy, 2004). An important component of SB 361 was the introduction of

equalization of funding between each of the 109 community college campuses,

paralleling to the introduction of horizontal equity in the K-12 system. SB 361 also funds

a new category of non-credit classes for career development and college preparation of

students. This later feature of SB 361, introducing an additional funding category of non-

credit classes, combined with the recent funding of the Basic Skills Initiative in

California are both steps toward providing financial equity for under prepared, racially

diverse students.

The California Basic Skills Initiative has created an emphasis on developmental

education in the California Community College system (Basic Skills Initiative, 2007).

Three allocations of funding have occurred in support of this initiative (California

 Financial Equity 16

Community College Systems Office, 2008). Initially, the System Office invested

$750,000 to research basic skills needs in 2005-06, followed by an allocation of

$29,974,000 to begin development of curriculum and programs at each of the community

college campuses. An additional $33,110,000 was allocated to colleges in 2006-07,

followed by a third allocation of $31,500,000 in 2007-08. The allocation of state-wide

funds and development of comprehensive programs in basic learning skills is proof of

California’s short term commitment to financial equity for under prepared students and to

improve success rates for the colleges’ racially diverse student population.

Controversies

A major factor in establishing financial equity for students of color is addressing

the full cost of education. Zumeta and Frankle (2007) documented that community

college fees are not a barrier to students in California, as they represent less than 5% of

the total expense of attending college for students living independently. Roughly 52% of

full-time California community college students have their fees waived because of

financial need. Similarly, 29% of all students in California community colleges have fees

waived. However, other college expenses rose sharply for these students between 2000

and 2005, including textbooks and supplies up 31%, housing up 25%, also health care

and child care (Zumeta & Frankle, 2007). Access grants under Cal Grant B have not kept

pace with rising costs, only serving 18% of eligible community college students due to a

lack of funding. One area of growth for state-funded financial assistance to community

college students has been the Board Financial Aid Program (BFAP) which began in

2003-2004. Unfortunately, California community college students are less likely to apply
 Financial Equity 17

for and receive federal assistance, compared with their peers in other states. Only 15% of

California community college students receive Pell grants, compared to 25% in other

states. Additionally, only 6% of California students obtain federal loans, compared to

17% elsewhere. California community college students will miss out on $20 million in

annual Pell grant funding due to college enrollment fees that are too low to qualify them

for federal assistance (Zumeta & Frankle, 2007).

Another significant observation made by Zumeta and Frankle (2007) was that

students with less financial assistance were forced to prioritize work over school,

resulting in lowered educational outcomes. Students employed more than 15 to 20 hours

per week demonstrated statistically lower achievement than those working fewer hours.

According to Zumeta and Frankle (2007), 80% of community college students in

California work an average of 32 hours per week. Community colleges in California

must balance the cost of enrollment fees with the potential for students to qualify for

additional state and federal aide to offset non-fee college expenses as a way of improving

financial equity and educational outcomes.

Future Considerations

Beyond the existing achievements to advance financial equity within the

California community colleges, some authors propose additional funding reforms. An

analysis of English further education colleges by Jaquette (2006) reveals an alternate

method of funding that could be applied to community colleges, emphasizing

components of both performance and equity. English further education colleges have a

similar mission to the California community colleges, serving primarily low income adult
 Financial Equity 18

students. These colleges implemented a new funding model during the 1990’s that tied

10% of funding to performance outcomes while additional funding was granted for

serving disadvantaged students. A performance review of further education colleges over

a five year period from 1997-1998 to 2003-2004 showed that student success rates

improved by 18% for all graduates, including ethnic minorities, Adult basic Education

(ABE) students, disadvantaged citizens, and students with learning disabilities.

Harbour and Jaquette (2007) reviewed and adapted the English further education

college experience, publishing an alternate model known as “Comprehensive Purpose

Funding” which includes four funding components that address enrollment, equity,

programs, and performance. The majority of college funding in this plan would be

generated through college enrollments (FTES). Additional funding would be generated

through serving underrepresented students, such as ethnic minorities, as well as operating

cost-intensive college programs, like allied health programs, but would also receive

funding for attaining performance goals or institutional outcomes. Such a funding model

could further enhance financial equity in California community colleges by providing

financial support for programs for basic skills education, improved counseling functions

and peer-tutoring opportunities.

California community college leaders may benefit from a review of the English

further education college experience, as this model addresses both performance funding

and incentives for improving equity. Future research could focus on financial models or

pilot studies that incorporate comprehensive purpose funding to test the potential benefits

to students and institutions in California. This study revealed a significant body of

literature on the topic of financial equity. The primary limitation to this research was the
 Financial Equity 19

relative lack of recent peer reviewed literature addressing alternative funding models to

achieve financial equity within community colleges. The vast majority of literature

related to financial equity has been developed for public schools, providing an excellent

foundation for new research within post-secondary education.

CONCLUSIONS

Financial equity in the California community colleges directly impacts the

diversity of students. Recruiting and supporting students of color requires financial

investment by colleges in several areas. The production of culturally diverse, language

specific advertising, creation of programs to attract and support ethnic minorities, and

establishment of basic skills programs all require commitment of either categorical or

general fund resources. The availability of appropriate levels of student aide is a critical

component in determining retention and program completion for minority and

economically disadvantaged students needed to address the total cost of education.

The mission of preparing students to participate in a global economy dictates that

community colleges address cultural competence as an institutional objective. Colleges

should reflect the demographics of the regions they serve, working to support students of

color from recruitment through graduation or transfer. Establishing and maintaining

racial diversity on community college campuses requires financial investment to recruit

and mentor diverse candidates for faculty, staff and administrative positions. Providing

appropriate role models for students enhances success rates for students of color.

California community colleges have enhanced funding to support at risk students,

including students of color. The implementation of SB 361 has provided equalization

 Financial Equity 20

funding such that all community colleges are funded at or above the 90th percentile per

FTES. This accomplishment is equivalent to achieving horizontal equity within K-12

public schools. Recent introduction of the California Basic Skills Initiative has also

addressed the need for additional funding to support under prepared students through

creation of support programs and infusion skills for the community college curriculum

that addresses racially diverse learning needs. The Basic Skills Initiative is an example

of vertical equity such as seen within the public school system. Additional funding

reforms could further enhance financial equity within the California community colleges,

by providing incremental funding for enrollment growth, equity, cost-intensive programs,

and achievement of performance benchmarks. Future considerations for California

community colleges should include external resource development to supplement state

funding and ensure that financial equity for students will not be jeopardized.
 Financial Equity 21

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 Financial Equity 22

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 Financial Equity 23

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