Schools turn tables on Metro

Nebraska's six community colleges will receive their first state aid checks of the school year this week, the beginning of an annual — and normally boring — allocation.

This year, though, those checks come at the end of a budgetary process marked by reality TV-worthy plot twists, marred by threats of legal action and, at one point, muddied by an extended argument over the definition of the word “tuition.”

Metropolitan Community College leaders accuse the five other community colleges of knowingly defrauding the state government by reporting concocted tuition figures designed only to grab a larger share of state aid.

Metro President Randy Schmailzl calls it a “manufacturing of numbers” that has cost Omaha taxpayers. Metro raised its property tax rate by 26 percent last week to make up for a $4.47 million loss in state aid that Metro leaders blame largely on the other schools.

Other community college leaders acknowledge playing rough, but only to counteract what they say is a Metro budgetary move meant to give the Omaha college more money than they say it deserves.

It was Metro, they argue, not the other schools, that lowered the process into the muck.

Metro's board chairman accuses state leaders, including the chairman of the Legislature's Education Committee, of favoring Lincoln's Southeast Community College and conspiring against Metro. Southeast gained $8.56 million in state aid this year at the same time Metro was losing millions.

The director of the Nebraska Community College Association — which Metro quit this year — and others say Metro board members don't care about students attending community colleges in western Nebraska.

Metro leaders have openly speculated about suing the community college association, the other schools and the state.

Southeast Community College's president wondered aloud why the Metro board wasn't as furious last year, when the aid formula gave Metro a sizable increase while other schools got nothing more.

The colleges' only point of agreement: Things have gotten very, very ugly.

“A game with no rules,” said Dave Newell, Metro's board chairman. “Anarchy,” said Jack Huck, president of Southeast.

“No good way to allocate $88 million,” said Marshall Hill, director of Nebraska's Coordinating Commission for Postsecondary Education.

The controversy started years ago, when a new community college funding formula made its way through the Nebraska Legislature, passing over Metro's objections.

The new formula, which went into full effect this year, seeks to push some state aid money toward community colleges that lack the property tax base of a metro area, said State Sen. Greg Adams of York, the Education Committee chairman.

Metro leaders say that formula pushes too much money away from Metro, the state's largest community college. It also forces Metro to raise property taxes to adequately fund the school, Newell said.

But things really exploded this summer, after Metro turned in its “tuition and fees” number, which is used in figuring the funding formula. Generally speaking, the lower the tuition number reported, the more state aid a community college will receive.

Before Metro reported its number, it moved $13.5 million in tuition money from its general fund to a capital fund for the construction and renovation of campus buildings.

The move was consistent with existing audit guidelines that all six community colleges agreed to, in writing, in the summer of 2007, said Gordon Jensen, Metro's coordinator of budget projects. It was also a move Metro has made routinely for several years, Jensen said.

Metro got its board's approval, a public process during which leaders explained the reasons for the move: more construction to house a growing student body, for example.

“These are the rules we've always followed,” Jensen said.

But Metro's actions angered the other community colleges, because Metro had moved nearly $10 million more than it had in 2008.

None of the other schools had moved money in that way. They feared that Metro's actions would nearly bankrupt some of the state's smaller community colleges.

For example, Mid-Plains Community College in McCook and North Platte was set to lose $1.5 million in state aid if Metro's move wasn't challenged, President Michael Chipps said. That college's total budget is $20 million, he said.

The other community college presidents also disagree with the rationale behind Metro's funds shift, contending that Metro is misinterpreting what “tuition and fees” means in the state statute detailing the funding formula.

To Dennis Baack, executive director of the Nebraska Community College Association, state law made it clear.

“It says to report tuition and fees, not just tuition in the general fund. That's the total tuition and fees,” Baack said.

Over the summer, the state's other community college presidents spoke via conference call several times, gradually coming up with a plan to get back what they saw as their state aid.

Early this month, they turned in amended tuition figures to the coordinating commission — figures strikingly lower than their June estimates.

Northeast Community College reported tuition of $1 million, down $5.1 million from its June estimate. The tuition figure that Mid-Plains reported was $450,000, down from $3.3 million.

Southeast's tuition figure dropped most of all.

In June, it was $19.8 million.

In August, it was $1.7 million.

Metro leaders were flabbergasted. They suspected that the other schools weren't moving money for actual construction projects. Some already had property tax money to pay for new buildings, while others weren't building much at all.

And the numbers didn't seem to make any accounting sense, the Metro leaders said.

“I can't tell you how they got to these numbers,” Schmailzl said. “But are they aboveboard? No, they are not.”

Said Newell: “It's like we were playing a game of liar's poker, and we had to put our card up on our forehead so they could see it. Then they rifled through the deck to find the best card.”

Huck, Southeast Community College's president, acknowledged that the revised tuition numbers Southeast reported have little to do with an actual movement of money for any purpose.

Rather, he said, Southeast's financial officer engineered its numbers to neutralize Metro's movement of money. Every other school in the state did likewise, he said.

In effect, Huck said, the new tuition figures would cause the state aid to be divided the way it would have been divided if all the colleges had simply reported their total tuition and fees in the first place.

In this case, the end justifies the means, Huck figured.

“My personal preference is everyone would've done this the way statute says, which is to report the (total) tuition and fees,” Huck said. “But am I going to fall on my sword over this? No.”

Hill, director of the post-secondary commission, confirmed that the new, lower tuition numbers divided the state money just as it would have if everyone had reported total tuition figures.

Hill said he tried to broker two compromises, either of which would have resulted in Metro receiving more state aid, but those potential deals quickly fell apart.

The coordinating commission dutifully reported the figures to the Nebraska Department of Revenue, which accepted them.

Neither the commission nor the Revenue Department has authority to decide the validity of those numbers.

The Nebraska Attorney General's Office also declined when asked to define the term “tuition and fees” in the new funding formula, explaining that any definition must come from the Legislature.

“By golly, it better be fixed in January,” Hill said.

Sen. Adams said he hopes to tweak the funding formula during the next session, in part by specifically defining the term “tuition and fees.”

The Legislature also will look at granting the coordinating commission or another group some oversight authority over the colleges' accounting processes.

In the meantime, Metro doesn't seem interested in accepting its fate.

At their meeting last week, Metro board members repeatedly asked Schmailzl and the college's attorney what legal action they could take to recoup what they see as stolen state funds.

Metro financial officers are eagerly awaiting mid-October audits, which might detail exactly how the state's other community colleges reached their lowered tuition figures.

Newell said the school won't accept its first state aid check and move on.

“Metro acquiesced until recently,” Newell said. “But when they started stealing it all, it really unified the board to fight. So that's what we're going to do. Fight.”

Contact the writer:

444-1064, matthew.hansen@owh.com

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