The Economic Impacts of Global Strategies to Increase Graduation Rates on MSIs and Minority Communities The Big Picture (3)

In this role, increasing graduation rates at MSIs is not an end in itself, but a means to increasing the number of graduates in order to achieve the ultimate end of promoting sustained

PREFACE

This study grew out of the author’s concern that many educators adopt strategies to

raise admissions standards, as a first resort, for increasing graduation rates, perhaps

because it is the easiest and least-cost strategy to implement In December 2005, one of only two Florida Universities that accepted remedial students also made the decision to raise admissions standards, despite its acknowledgement of the adverse impact of this decision on access for minorities The recent report by Tom Mortenson (May 2006)

entitled, Inherited Opportunity for Higher Education, demonstrates the need to increase

participation and completion rates of minorities in higher education in order to maintain the global competitiveness of the U.S economy Therefore, both Minority Serving Institutions (MSIs) and Predominantly White Institutions (PWIs) must be seriously

engaged in strategies to increase both the graduation rate and the number of minority

graduates in order to promote the global competitiveness of the U.S economy, and the economic development of minority communities

Selecting the best global strategy for increasing graduation rates and the number of

graduates at MSIs requires an understanding of the role of higher education in economic

development, i.e., the big picture In this role, increasing graduation rates at MSIs is not

an end in itself, but a means to increasing the number of graduates in order to achieve the

ultimate end of promoting sustained economic development in minority communities Therefore, the main purpose of this study is to analyze the economic impacts of global strategies for increasing graduation rates on MSIs, minority students, and minority communities Similar economic impacts apply for the national economy as well

Herman I Brann, Ph.D.

Associate Vice President for Institutional Research

Florida A&M University

E-mail: herman.brann@famu.edu

OIR Web Site: www.famu.edu/oir

CONTENTS

Page

Preface ……… iExecutive Summary ……… iii

Summary of Results ……… ix Conclusion ……… xii Recommendations ………xiii

1.0 Introduction ……… 12.0 Economic Development and Economic Impacts ……… ……… 3 3.0 Economic Impacts of Alternative Global Strategies for Increasing

Graduation Rates ……… 6 3.1 Global Strategy 1: Raising Admissions Standards ……… 6

3.2 Global Strategy 2: Reporting the Graduation Rates of College-Ready

and Remedial Students Separately …… ……… 7

4.0 On the Costs of Remedial Education at MSIs……… 125.0 External Environmental Scan for Increasing the Recruitment of Highly

Qualified Minorities to FAMU……… 14 References ………17

FIGURES & TABLES

Figure 1 Sequence of Impacts Associated with Enrollment Reducing Policies … 2Table 1: A Summary of the Economic Impacts of Global Strategies to

Increase Graduation Rates ……… 11Table 2: External Environmental Scan for Increasing the Recruitment of Highly Qualified Minorities to FAMU ……… 14

ii

THE ECONOMIC IMPACT OF GLOBAL STRATEGIES TO INCREASE

GRADUATION RATES ON MSIs AND MINORITY COMMUNITIES:

THE BIG PICTURE

Executive Summary

The main purpose of this study was to examine the economic impacts of different

global strategies for improving graduation rates, in the context of the dual mission of

MSIs to provide educational opportunities to both college-ready and remedial students, inorder to promote sustained economic development in minority communities, and improvethe relatively low economic status of minorities This analysis is conducted with the

understanding that it is the number of qualified minority graduates, and not necessarily the graduation rate, that is more important in promoting sustained economic development

in minority communities Therefore, the graduation rate is not seen as an end in itself, but a means to achieving the ultimate end of promoting sustained economic development

in minority communities, by increasing the number of qualified graduates

Remedial students were defined as those required to complete at least one college preparatory course, while college-ready students are not required to complete any collegepreparatory courses Global strategies were defined as broad strategies for improving graduation rates that do not require specific interventions such as academic advising, tutoring, etc Two types of global strategies were analyzed: (1) Raising admissions standards; and (2) Reporting graduation rates for college-ready and remedial students, separately These strategies were analyzed from the perspective of promoting sustained economic development in minority communities

The concept of economic impact measures the changes in economic activity - - incomes, employment, and the output of goods and services - - associated with any significant changes in spending by students, faculty, staff, and the MSI Global strategiesmay affect student enrollments, which, in turn, may affect revenues and employment at MSIs, and spending by students, faculty, and staff Therefore, the best global strategies will provide the greatest economic impacts, or the least adverse economic impacts on

student enrollments and the number of graduates; MSI revenues; faculty and staff employment and incomes; and employment, investments, and output of goods and services in the local communities The diagram below illustrates the economic impacts

of any global strategies that significantly affect student enrollments, such as raising admissions standards

Sequence of Impacts Associated with Enrollment-Reducing Policies

the criteria for evaluating these global strategies is justified by the critical role of higher education in promoting sustained economic development in minority communities, and

the relatively low economic and educational status of minorities as reported in the

Decreased

Incomes, Investments, and Employment in the Local Community

National Urban League Report entitled, The State of Black America, 2005 For

simplicity, the concept of economic development is measured in terms of increases in percapita incomes over time, that is, average incomes per person

Descriptive analyses of the economic impacts of these global strategies were conducted on: (1) student enrollments, the number of graduates, and student spending; (2)faculty and staff employment and spending; (3) employment and investments in the local communities, and (4) MSI revenues The table on the next page summarizes the main findings on the economic impacts of global strategies to increase graduation rates on students, faculty and staff, MSIs, and the local communities

Summary of the Economic Impacts of Global Strategies to Increase Graduation Rates

Global Strategies Economic Impacts On:

_ (1) Students (2) Faculty & Staff (3) Local Community (4) MSI Revenues Enroll Grads Spending Jobs Spending Jobs Investments State Tuition

_ Raising Admissions Down1 Down1 Down1 Down2 Down2 Down3 Down3 Down1 Down1

Standards

Reporting Grad Rates U-n–c–h–a–n–g–e– d U-n-c-h-a-n-g-e-d U-n-c-h-a-n-g-e-d U-n-c-h-a-n-g-e-d

for College-Ready and

Remedial Students

Separately

1Student enrollment, spending, and MSI revenues will decrease, unless there is an increase in the number of better-qualified students

to offset the loss of less-qualified students 2If student enrollment declines significantly, faculty and staff employment and spending will also decline, unless investments of similar magnitudes are made to offset the spending lost by retrenched faculty and staff

3Employment and investments in the local community will decline if either student enrollment or university expenditures to offset the loss of faculty and staff spending decline

vi

Since strategies to raise admissions standards will require the replacement of qualified minorities by more-qualified minorities, an external environmental scan was conducted to examine the prospects of recruiting more qualified minorities to an MSI such as Florida A&M University (FAMU) The table below provides the summary of an external environmental scan that supports the view that the prospects for increasing the recruitment of highly qualified minorities to offset the loss of less-qualified minorities at FAMU are not very promising Other MSIs that recruit a high percentage of low-incomeminorities may realize similar outcomes This type of external environmental scan, supported by an internal environmental scan, can also be used to provide the context for developing Enrollment Management Plans for MSIs

MSIs are at a competitive disadvantage for attracting highly qualified minorities through financial aid strategies given their relatively low endowments However, there are some opportunities to compete based on an improved image Nevertheless, while the loss of better-qualified, minorities to Predominantly White Institutions (PWIs) is likely tohave a negative impact on the graduation rates of MSIs, this loss may have a positive economic impact on the ultimate goal of promoting sustained economic development in minority communities, if these students achieve at least similar success rates at the PWIs

Since the pool of highly qualified minorities is very small, in the absence of

increased financial aid, MSIs must be prepared to work with large numbers of qualified students in order to continue to maximize their contributions to the ultimate goal of promoting sustained economic development in minority communities Again, it

less-is the number of qualified graduates, rather than the graduation rate, which less-is the driving force in promoting sustained economic development in minority communities This has implications for the types of global strategies that MSIs must select to increase both the graduation rate and the number of qualified graduates

Summary of an External Environmental Scan for Increasing the Recruitment of Highly Qualified Minorities to Florida A&M University (FAMU)

External Opportunities Implications

1.0 Growth in the number of Florida public Growth in FAMU’s prospect pool high school graduates, in general, and of Florida public high school

Black high school graduates, in particular graduates

2.0 Growth in the number of Florida public Growth in FAMU’s prospect poolcommunity college graduates, in general, of Florida public community

and Black community college graduates, in college graduates

particular

3.0 Florida Board of Governors (BOG) While this initiative is intended to diversity initiatives improve access and success of

minorities, its success will

depend on the ability of

universities to report the

graduation rates of

ready and remedial students

Separately

External Threats Implications

1.0 Tuition increases offsetting increases Reduced access and retention of

in financial aid lower income minorities in higher education

2.0 Approx one half of the African American Given the positive correlation between

at FAMU come from families with family incomes and student success, incomes of $30,000 or less FAMU will continue to be at a

competitive disadvantage for

recruiting highly qualified minorities

3.0 SAT/ACT scores for African- FAMU must increase competition Americans at FAMU are declining for college-ready minorities Among Florida State Universities, based on image, and be preparedFAMU has the lowest percent of new to work with more remedial

students (38%) passing all three subjects students

on the Florida College Placement Test

viii

4.0 Tuition increases for out-of-state under- While this is likely to reduce

graduate students are reducing the quality FAMU’s graduation and

of the pool of students applying to FAMU retention rates, and increase

hours to degree, FAMU must compete for in-state students

more aggressively

3.0 Tuition increases for both in-state and This will affect FAMU’s

out-of-state graduate students seem to be graduate programs and reducing the enrollments of both in-state research capabilities, and the

and out-of-state graduate students ability of FAMU to meet the

BOG goals relating to Building World Class Capacity

Summary of Results

1.0 In order to improve the relatively low economic status of minorities, MSI educators must begin to view the role of higher education in the larger context of providing the improved human resources (graduates) required to promote sustained economic

development in minority communities This is particularly important for MSIs whose

dual mission require them to serve both college-ready and remedial students from

communities with relatively low incomes, high poverty levels, and inadequate

investments in public schools and community infrastructure Increasing the number of minority graduates is also a national imperative if we are to maintain the global

competitiveness of the U.S Economy

2.0 The recent report by Tom Mortenson entitled, Inherited Opportunity for Higher Education, reveals that minorities and minority high school graduates are increasing at a

much faster rate than Whites and White high school graduates, while college

participation and completion rates for minorities have been relatively low This has serious implications for the global competitiveness of the U.S economy; therefore, the burden of educating the rapidly increasing numbers of minorities cannot be left to MSIs and community colleges alone PWIs must become seriously involved in assisting MSIs

and community colleges in promoting access and support for minorities in higher

education

3.0 In the context of the critical role of higher education for MSIs and minority

communities, graduation rates cannot be viewed as an end in itself, but as a means to

maximizing the number of qualified minority graduates required to promote sustained economic development in minority communities Therefore, MSIs must select strategies

to increase graduation rates that do not significantly reduce the number of minority graduates Appropriate global strategies for increasing graduation rates at MSIs will be

those that maximize enrollments, the number of graduates, and economic activity in the MSIs and local communities

4.0 FAMU’s six-year graduation rates for college-ready and remedial students were 50% and 34%, respectively, for the 1998 FTIC cohort The composite graduation rate was 46% In order to maximize economic impacts, this study reveals that the best global strategy for increasing graduation rates and the number of graduates is to report the graduation rates of college-ready and remedial students separately This is the only globalstrategy in which the economic impacts on MSI revenues, student enrollments, the number of graduates, spending by students, faculty and staff, and employment in the MSIand local economies are likely to be unchanged by the strategy

5.0 Reporting the graduation rates for college-ready and remedial students, separately, may also encourage Predominantly White Institutions (PWIs) to promote diversity, since their graduation rates are not penalized for doing so This conclusion is supported by the recent decision by one Florida University to increase admissions standards, and, in effect,abandon its diversity policy, while acknowledging the adverse impact on minorities

6.0 More important than graduation rates is the number of minority graduates produced

for promoting economic development in minority communities In this regard, FAMU

ranked first, among all colleges and universities in the nation, by awarding 1,522

baccalaureate degrees to African-Americans during the academic year 2003- 2004 This

x

statistic matters most in promoting sustained economic development in minority

communities and improving the relatively low economic status of minorities

7.0 Raising admissions standards is likely to have the most adverse economic impacts on MSIs and minority communities, unless MSIs are able to recruit more

qualified minorities to offset those lost by higher admissions standards, and also offset expenditures lost by retrenched faculty and staff with equally productive investments The status of MSI revenues will depend on the success of MSIs with replacing less-qualified students with more-qualified students, while the faith of the local communities will depend on both MSI success with student replacements, and the reinvestment of funds saved from retrenched faculty and staff

8.0 If admissions standards are raised to eliminate remedial students only, then the graduation rates of this strategy will be the same as the higher graduation rates for

college-ready students, assuming no significant change in the number of higher-quality students To achieve even higher graduation rates will require raising admissions

standards beyond eliminating remedial students only, and at a significant loss in student enrollments, and even greater adverse economic impacts on minorities and minority communities

9.0 The decision concerning the additional costs of remedial students to MSIs must be viewed in terms of the additional benefits to minorities, minority communities, and the global competitiveness of the national economy In any cost/benefit analysis of this type,the long-term benefits to society (individuals, local communities, and the national

economy) are likely to exceed the short-term costs of remedial education to MSIs

10.0 MSI educators must also view the additional costs associated with remedial students

as deferred public investments in the K-12 public school system and associated

infrastructure in the communities in which most of the low-income, remedial students live Therefore, the decision for MSI educators is how much of their public and private funds they can afford to allocate to remedy the prior problem of public disinvestments in

minority communities, considering the graduation rates of remedial students, and the ultimate goal of producing more minority graduates for promoting sustained economic development in minority communities As stated earlier, FAMUs six-year graduation rate for the 1998 cohort of FTICs was 34% for remedial students and 50% for college-ready students

11.0 For any State University System to promote diversity, increase graduation rates, and the number of graduates at the same time, will require the adoption of a policy to report the graduation rates of college-ready and remedial students, separately, to avoid

penalizing universities for recruiting less-qualified minorities to meet diversity goals

Conclusion

The economic impact analysis conducted in this study reveals that of the two

global strategies analyzed, the better strategy for increasing graduation rates for MSIs is

to report the graduation rates for college-ready and remedial students separately This strategy provided the most positive economic impacts for MSIs, minority students, and minority communities This strategy also avoids the pitfalls of comparing apples and grapefruits when comparing the graduation rates of other universities This strategy should be adopted by any State University System to encourage state universities to promote diversity

Strategies to raise admissions standards will yield the same graduation rates as reporting the rates for college-ready and remedial students separately, if admissions standards are raised to eliminate all remedial students, and a significant number of

higher-quality students do not replace these students However, the net economic impact will depend on the difference between the number of remedial students eliminated and the number of higher-quality students recruited Raising admissions standards beyond eliminating remedial students may increase graduation rates beyond those for college-ready students, but at the cost of even greater, adverse economic impacts on MSIs, minorities, and minority communities, if the students eliminated cannot be replaced

xii

Recommendations

Perhaps, the most important recommendation of this study is that, given the

national imperative to maintain the global competitiveness of the U.S economy, PWIs

must become more involved by utilizing more of their resources to assist MSIs and community colleges to promote access and support for minorities in higher education

Reporting the graduation rates of college-ready and remedial students, separately, will

ensure that PWIs are not penalized in this effort Agencies involved in the ranking of

colleges and universities may also need to revisit their criteria, to avoid penalizing

institutions for promoting diversity and the global competitiveness of the U.S economy

1.0 For any decisions involving a significant change in student enrollment, MSI educatorsshould conduct a simple descriptive economic impact analysis, as described in Table 1, togauge the likely impact of those decisions on the ultimate goal of promoting sustained economic development in minority communities

2.0 MSI planners should incorporate, explicitly, in appropriate sections of their strategic

and enrollment management plans, statements recognizing their dual mission, and their

role in promoting sustained economic development in minority communities Integratingthis value throughout their plans is a pre-requisite for strategic decision-making to

achieve any type of long-term, sustained progress in the economic status of minorities and minority communities In doing so, planners will be required to develop separate goals, objectives, strategies, budgets, and outcomes for college-ready and remedial

students, and avoid the pitfalls of combining outcomes, including graduation rates, when

evaluating the separate missions

3.0 In the context of supporting a dual mission, MSI planners may wish to consider an Honors College both as an image-booster to attract more highly qualified students, in addition to increasing student engagement by providing more challenging academic courses for the higher achieving college-ready students

4.0 In addition to building world-class research capacity, State Boards of Education should also include the building of world-class minority communities in their Strategic and Accountability Plans In this way, MSIs will be encouraged to focus some of their research capacity to promote the economic development of minority communities, and improve the global competitiveness of the U.S economy at the same time

5.0 MSI social science faculty should identify and rank appropriate refereed journals addressing minority issues, and recognize faculty publications in these journals in its promotion and tenure decisions

6.0 MSI social science faculty and graduate students should research the critical social, political, and economic issues, at the state and county levels, and use the research

findings, in a pro-active way, to inform state and county government decision-making Reports by the Pell Institute, the National Urban League, and other public policy

publications provide examples of some of the research than can be conducted at the state and county levels In other words, MSI social science faculty must develop “Think Tanks” to support pro-active, legislative issues for minorities and minority communities

7.0 MSI faculty must integrate classroom and community activities, at both the graduate and undergraduate levels, in order to provide minority students with practical experiences

in addressing the social and economic problems of minority communities Not only will students be able to make a direct contribution to the economic development of minority communities, but these Enriching Educational Experiences will also promote increased student engagement

8.0 MSI social science faculty and graduate students must meet regularly, as a group, to identify appropriate research issues, and discuss research proposals and completed research reports of interest to the development of minority communities Social Science faculty at MSIs should also meet for a national conference at least once per year

xiv

9.0 MSI leaders must also meet regularly to share ideas and develop strategies to enhancethe role of MSIs in promoting the development of minority communities In the final analysis, the personal income and assets to support higher education for future

generations of minorities will depend on the effectiveness of decisions by MSI educators

to increase the number of qualified minority graduates to promote sustained economic

development in minority communities

graduates, and (iii) increase graduation rates, simultaneously

Many educators select strategies to raise admissions standards as a first resort for increasing graduation rates The logic here is that by increasing the number of better-qualified students, the higher the probability of graduation, hence, higher graduation rates While this logic is valid, there are other effects, beyond increasing graduation rates, associated with strategies to raise admissions standards These associated effects may vary widely among universities depending on the characteristics of the student population, and the economic status of the communities from which these students originate

Figure 1 illustrates the sequence of impacts that may be associated with

enrollment-reducing policies such as raising admissions standards The first direct impact is on student enrollments Enrollments are likely to decrease unless it is possible

to replace the less-qualified students by better-qualified students Decreased student enrollments are associated with four other impacts: (1) decreased revenues to the

university (2) decreased spending by students, (3) decreased employment and spending

by faculty and staff, and (4) decreased incomes, investments, and employment in the local communities The severity of all of these impacts will depend on the magnitude of the net loss in student enrollments, the economic health of the university, the economic status of university employees, and the economic stability of the local communities

1