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Free College? Minter Proposes; Scott Skeptical


Published October 12, 2016 at 10:00 a.m.
Updated October 12, 2016 at 5:18 p.m.

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Two Castleton University students were among those asking questions at a gubernatorial debate last month in Rutland, so the conversation naturally turned to higher education.

"What do you see as the primary factor contributing to the large gap between high school graduation and college attendance rates in Vermont?" asked Vanessa Robertson, a senior political science major from Rutland.

Democratic candidate Sue Minter could hardly wait to answer. "Thank you for this question," she said. "We have the highest high school graduation rates in the country, but when it comes to continuing beyond, we're actually near the bottom."

Minter then described her proposal to underwrite the first two years of college tuition for Vermonters who attend Community College of Vermont or Vermont Technical College. Her initiative, called Vermont Promise, is one of the most ambitious plans either candidate has proposed in the 2016 governor's race.

Republican gubernatorial candidate Phil Scott said his priority is to grow the state's economy and, after that happens, to increase support of the state colleges. Scott's campaign said he also plans to work with the state treasurer to determine ways to provide more affordable student loans to Vermonters. "Nothing is free," he told the debate audience. "We're all going to pay for it. It's going to raise the cost of living in Vermont."

The idea of free college has been a popular one in the 2016 presidential election. Sen. Bernie Sanders (I-Vt.) wooed voters with his call to make tuition free at all public colleges and universities. Democratic presidential nominee Hillary Clinton has followed with a plan to allow students from families that earn less than $125,000 a year to attend public colleges without paying. Late last month, Sanders and Clinton touted her proposal together in New Hampshire.

Meanwhile, free, state-sponsored tuition programs have started popping up around the country. Tennessee, Minnesota and Oregon have launched scholarships within the last couple years. Kentucky has passed legislation to join them, and 12 other states have similar legislation pending, according to the National Conference of State Legislatures.

Minter used Tennessee's year-old program as the model for her $12 million-a-year scholarship plan — and Vermontified the name. The Green Mountain version of the Tennessee Promise would begin by spending $6 million to cover one freshman class, then double that investment to reach two classes at a time. The money would come from increasing a franchise tax on the five largest banks operating in Vermont.

But is "free" tuition viable? Should banks have to pay for it? How would subsidized tuition at the state's two-year colleges affect its cash-strapped four-year colleges? And are legislators inclined to embrace the idea?

With those questions swirling, Minter's plan doesn't seem to be generating much vocal support, even among those in her own party.

Former Vermont State Colleges chancellor Tim Donovan stood beside Minter in June when she launched her free tuition plan at a Winooski press conference. He bemoaned state leaders' decisions over the last 30 years that "let Vermont's investment in postsecondary education decline to dead last in the country by nearly every measure. And then we lament the very results of that public policy: the cost of college, decline in college continuation, exodus of our youth and absence of a prepared workforce," he said.

Two weeks ago, Donovan reiterated that he applauds Minter for raising college affordability as a campaign issue.

"Damn right," he said.

But he cautioned that he wasn't endorsing Minter or her specific Vermont Promise idea. He just wants to see it on the state's political agenda.

There is little debate that college affordability is a growing problem in Vermont. In 2014, the average student debt for public and private four-year institutions in Vermont was $29,060, according to the Institute for College Access & Success. Vermont ranks 49th among states for in-state public college tuition costs; only New Hampshire comes in costlier. A year's tuition at CCV for 15 credits per semester runs $7,658. At VTC, it's $12,960, not including room, board and books.

Minter argues that her Vermont Promise plan will encourage more students to try college, prepare them for available jobs and let them graduate with less debt. She said she turned to the Tennessee model because it was the first to offer free tuition to two-year public colleges — and it appears to be succeeding. There's no income limit to qualify.

Tennessee, which has a Republican governor and Republican-controlled legislature, opted to expand a private tuition program that started in Knoxville to create the statewide public Tennessee Promise last year.

Gov. Bill Haslam, a former Knoxville mayor, views it as a key economic development tool, spokesman David Smith said. "It's an incredible selling point to be able to tell employers they'll have the trained workforce they need," Smith said.

In fall 2015, 16,291 Tennessee high school students filled out the federal financial aid form and qualified for Promise scholarships that averaged around $900, according to Kate Derrick, director of external relations at the Tennessee Higher Education Commission. The money covered tuition balances after the application of all other federal, state and private aid. Students still had to pay for room, board and books and complete eight hours of community service per semester.

Eighty percent of those scholarship students returned for the second semester, the same rate as first-year students in the past, said Derrick. The state does not yet have statistics on how many of the students came back this fall for a second year, she said.

But Tennessee did see a 10 percent increase in freshman student enrollment at its public colleges during the program's first year, according to Derrick. "That's huge," she said.

Tennessee funds the $20 million-a-year program with money from the state's lottery reserve, which is required by law to be invested in higher education, Derrick said. Because the lottery had surplus money available, the decision to use it for this purpose was not controversial, she said.

Oregon's legislature financed its brand-new tuition program with a $10 million appropriation from the general fund. There, 19,223 students applied for aid this year, and 10,459 received it, said Endi Hartigan, communications and policy specialist at the Oregon Higher Education Coordinating Commission.

Minnesota started a smaller-scale two-year free-tuition pilot project targeting certain college majors this year and saw 800 students apply, said Thomas Sanford, finance and accountability manager at the Minnesota Office of Higher Education. The first year's $5 million came from state's general fund, and there's a $90,000 household income limit to qualify.

All of these programs are so new, there's no solid statistical evidence of how well the investments are paying off. Nor do any two states have the same political, demographic or educational landscape.

For example, Vermont's state college system is tiny compared to the others. And, unlike Tennessee, the state isn't sitting on a pot of unspoken-for lottery revenues — a portion of which already funds secondary education — and new general fund appropriations are scarce. Minter has instead proposed financing her plan by increasing a tax the state charges on bank deposits. Targeting institutions with more than $750 million in deposits, her tax would hit the largest banks that do business in Vermont.

"I would like to partner with them," Minter said.

Partnership is probably not the word the banks would use to describe it, said Chris D'Elia, president and treasurer of the Vermont Bankers Association, which represents 20 financial institutions.

D'Elia said he's been trying to arrange a meeting with Minter to talk about her plan since early August: "I've been told by her scheduler that she's not available."

"I don't know why that is," Minter responded. "I know that meeting's going to occur."

Minter's plan would affect only five banks: People's United, Merchants, Citizens, Key and TD banks. But all banks in the state are unified in opposing the plan for fear it would later include them, D'Elia said. "We're going to work our butts off to make sure this doesn't pass," he said.

When asked about the proposed tax increase, Minter initially objected to the wording. "This proposal isn't a tax increase," she said. "It's a fee."

The state Department of Taxes refers to it as a "bank franchise tax." Minter conceded the point and revised her characterization: "It's a tax, primarily on out-of-state banks."

Revenue from the bank franchise tax has been virtually flat in recent years, making it ripe for an increase, she argued. Indeed, Gov. Peter Shumlin and lawmakers have in recent years proposed increasing the tax to fill budget gaps, but each time those proposals were dropped.

D'Elia said the state enacted the franchise tax years ago as an alternative to charging banks a corporate income tax. That's because a tax on bank deposit levels represented a more stable revenue source, he said. In 2005, the tax generated $11.2 million in revenue; in 2015, $13.8 million.

One of the reasons the tax appears to be a flat revenue source for the general fund is that the state legislature has chosen to divert an increasing amount of it to pay for affordable housing and downtown tax credits, D'Elia said — from $383,000 in 2005 to $3.1 million in 2015.

Scott, Minter's Republican opponent, said at last week's debate that he opposed increasing the tax because banks would simply pass the expense to their customers.

That's true, D'Elia said. "They can't absorb $2 to $3 million without some consequence," he said, suggesting layoffs, branch closures, fewer loans and less charitable giving would be likely.

Beyond the funding source, Minter's free tuition plan raises other concerns, even among those sold on the idea that something must be done to make college more affordable.

James Black, chair of the Business & Economics Department at Johnson State College, argued that offering two years of free tuition at CCV and VTC would kill the state's four-year colleges. "You could come and pay $10,000 at Johnson, or go to CCV for free," Black said.

Declining enrollment is already forcing Johnson and Lyndon State College to merge.

Minter countered that her plan would attract new students, helping the Vermont State Colleges system as a whole.

Black also questioned whether making college free is a sound idea. "There needs to be skin in the game," he said, noting that students who were offered free tuition to an external degree program at Johnson last year had a higher incidence of failing to complete their work.

Black, who described himself as a Republican disinclined to support Minter, said he agrees that college debt is out of hand. But he would prefer that the state offer income tax credits to Vermont students who stay in the state after completing their degrees.

He's not the only one who questions the free-tuition strategy. Though he is passionate about making higher ed more affordable, Donovan agreed with Black that students need to make some financial commitment to college in order to succeed.

Donovan also suggested that tuition assistance should be targeted to those who need it the most. "I think there are families that can and should afford college tuition for their kids and themselves," he said.

Minter mentions Vermont Promise amid other proposals on the campaign trail but isn't pushing it hard enough to get any real momentum. It's not featured prominently in her ads or on her website, and legislative candidates don't appear to be lining up behind it.

"That's going to change when I'm the governor," Minter declared.

But members of Minter's own party appear to be lowering expectations.

"I'm not going to say we're committing to do this," said House Majority Leader Sarah Copeland Hanzas (D-Bradford), who is a candidate to be the next House speaker. "I don't get the sense that this is what people are driving for."

Sen. Tim Ashe (D/P-Chittenden), chair of the Senate Finance Committee and a candidate to be the next Senate leader, acknowledged that college affordability is an issue but said he wants to see who's elected U.S. president. If Clinton wins, her college tuition plan could affect what Vermont does, he said.

"I can't say I'm wildly familiar with the specifics of Sue Minter's proposal," he said, noting that past efforts to raise the bank franchise fee met opposition in the Senate in part because Vermont-based Merchants Bank would be affected.

But he gives Minter credit. "Sue Minter is putting it out there as a goal. That's a good thing," Ashe said.

Disclosure: Tim Ashe is the domestic partner of Seven Days publisher and coeditor Paula Routly.