You asked about state-funded capital grant programs for private colleges and universities. You want to know (1) what states provide this type of financing, (2) how much they provide, (3) whether they limit the types of projects, (4) how they allocate the funds, and (5) their rationale.

SUMMARY

Through an internet search we found that Maryland, New Jersey, and most recently New York, are the only states that provide state-funded bonds for construction projects at private colleges and universities. The Pennsylvania legislature took up this issue in the 2005 legislative session, but the bill died in the Senate. The states' vary in how much money they provide and the types of projects eligible for financing. But most require private colleges to match a portion of the state capital grants.

Maryland's program is unique in that the Maryland Independent College and University Association (MICUA) coordinates the grant requests for its members and prioritizes the requests before submitting its recommendations to the Higher Education Commission. New Jersey's capital grants include a capital lease program for instructional and research equipment. And New York's program allocates the grants based on a formula that considers campus size and the family income of the student body.

The Connecticut Health and Educational Facilities Authority (CHEFA) issues tax-exempt bonds on behalf of nonprofit colleges to support construction of facilities such as dormitories, academic buildings, and athletic facilities. While CHEFA is a quasi-public agency, its bonds are not financed with state funds. Rather, CHEFA makes low-interest loans to nonprofit colleges.

MARYLAND

Maryland's capital improvement program for private colleges began in 1976. The capital grant program, which is not in statute, supports academic facilities and requires at least a dollar-for-dollar match by the institution. (Student centers, dorms, and parking facilities are not eligible for funding) The MICUA coordinates the grant requests for its members. According to Diane Hampton, Director of Institutional Relations at MICUA, MICUA prioritizes the requests through an internal selection process and submits its annual recommendations to the Maryland Higher Education Commission.

The commission submits its consolidated capital budget recommendations to the governor, who in turn submits his or her capital budget to the legislature. The legislature has final approval. In the 2007 legislative session, MICUA requested $ 12 million for projects at four independent colleges; the legislature appropriated $ 8 million for them. Hampton noted that at this level of funding, the most MICUA will approve for any one project is $ 3 million.

According to MICUA's 2007 legislative proposal, “the capital grant program is a cost-effective means for the State to accommodate enrollment growth and support economic competitiveness. ” In its 2008 Consolidated Capital Budget Recommendations to the Finance Policy Committee, the Maryland Higher Education Commission noted that the state capital grants to independent colleges and universities “leverage private donations and help the institutions maintain financial stability. ”

New Jersey

New Jersey has a long history of state support for private colleges and universities. Independent colleges are eligible for state funds under the Independent College and University Assistance Act of 1979 that asserts that “independent institutions make an important contribution to higher education in the State and it is in the public interest to assist these institutions in the provision and maintenance of quality academic programs. ” This rationale was also repeated in the 1981 Statewide Plan for Higher Education, “The State should continue to provide New Jersey residents, regardless of socioeconomic status, a reasonable opportunity to attend independent institutions by maintaining an evenhanded fiscal policy with respect to public and independent institutions. ”

The New Jersey Educational Facilities Authority (NJEFA) is similar to CHEFA in that it also issues tax-exempt bonds for nonprofit colleges to support capital improvements. But unlike CHEFA, the NJEFA administers several state-funded grant programs that provide capital support to public and private colleges (N. J. Admin. Code 9A: 12-15):

1. Capital Improvement Fund – enacted in 1999 to finance improvements and expansions to the technological infrastructures at participating institutions. The state pays two-thirds of debt service for public colleges and one-half for private colleges. Private colleges were allocated $ 50 million of the total $ 550 million in authorized bonds. (A 2002 amendment increased the percentage of funds, from 5% to 20%, that could be used for auxiliary student facilities)

2. Equipment Leasing Fund – enacted in 1994 to finance the purchase of instructional and research equipment to be leased by NJEFA to participating institutions. Institutions must pay 25% of the debt service. Private colleges were allocated $ 10. 5 million of the total $ 100 million authorized.

3. Higher Education Facilities Trust Act – enacted in 1995 to finance improvements to academic, research, and communication facilities. The grants are financed by bond proceeds and an annual appropriation from the net proceeds of the state lottery. Private colleges were allocated $ 21 million of the $ 220 million authorized.

4. Technology Infrastructure Fund – enacted in 1998 to finance enhancements to technology infrastructure. Institutions must provide matching funds equal to the grant requested. Private colleges were allocated $ 4. 95 million of the total $ 55 million authorized.

The NJEFA finances the bonds, but the program rules and regulations are set by the New Jersey Commission on Higher Education. The commission must approve the grant applications and the agreements between the institution and the NJEFA for the disbursement of funds. (Grants made under the Capital Improvement Fund must be approved by the commission and forwarded to the Senate president and the speaker of the Assembly. The legislature has 45 days to disapprove the application. )

NEW YORK

In 2005, New York became the third state to provide public financing for private colleges (Chronicle of Higher Education, April 14, 2005). Under the five-year Higher Education Capital Matching Grants Program (HECAP), more than 100 private, nonprofit colleges and universities qualify for a share of $ 150 million in matching grant funds. Institutions must raise $ 3 for every $ 1 they receive from the state for construction. The funds are specifically for construction or renovation of core academic facilities that relate to economic development, high technology, or urban renewal and historic preservation.

New York's Dormitory Authority administers the program (Public Authorities Law § 1680-j). Participating institutions are allocated the grants based on a formula that considers campus size and the family income of the student body. New York's Commission on Independent Colleges and Universities (CICU) expects the state investment to spur more than $ 2 billion in projects over five-years.

The New York Times reported that support for the proposal was due in part to arguments that private colleges serve a public mission by enrolling large numbers of low-income students (“New York's Private Colleges to Get State Aid From New Fund,” April 19, 2005). According to the CICU, in 2002 16% of New York students at private colleges came from families that earned less than $ 20,000, compared with 13% at the state's public 4-year universities. CICU also argued that the capital investments stimulate short- and long-term job growth in the state.

RP: ro