Big Education Ape: Violating Incentives � The Quick and the Ed

Tuesday, February 23, 2010

Violating Incentives � The Quick and the Ed

Violating Incentives

One of the biggest ongoing fights involving the U.S. Department of Education and for-profit colleges is over what compensation strategies these schools may use to pay their recruiters and admissions counselors for bringing in students. Since 1992, schools that receive federal student aid are banned from offering any compensation based on recruitment incentives, but 2002 regulations provided 12 “safe harbor” conditions in which some form of this payment is allowed. For example, these exemptions permit schools to adjust salaries based on performance so long as changes are not made twice in a year and are not solely based on recruitment targets, are paid through a profit-sharing arrangement, are based on student completion benchmarks, and several other options.

But despite these exemptions, the Department of Education has found 15 schools in violation of the incentive compensation ban from 2002 through December of 2009 and another 17 institutions that fell afoul of this restriction from 1998 through 2002. In addition, another 22 schools reached settlements with the Department over incentive compensation practices.

These figures come from a new report released this afternoon by the U.S. Government Accountability Office (PDF), which provides numbers and specific details on incentive compensation violations from 1998 through December 2009.

Will Schools End up Under the Bus?

from The Quick and the Ed by Rob Manwaring

Governor Schwarzenegger visited Washington DC yesterday as part of the National Governor’s Association (NGA), but he was the only Governor to get a private meeting with the President afterward. Clearly, federal funding/jobs and health care were likely the central issues in the conversation. Schwarzenegger, a moderate Republican is supporting both the Presidents jobs package and his health care proposal. The President certainly needs any help that he can get from Republicans even if it is one who has often bucked his party on the national level.
An additional topic that likely came up is Schwarzenegger’s proposal to reduce K-12 funding below the maintenance-of-effort level to which California committed when it accepted federal stimulus funding. Basically to get stabilization funding, states had to commit to not reduce funding for education below the 2007-08 funding level. But, because California’s budget is in such bad shape – a $21 billion shortfall over the next 18 months – the Governor has proposed spending below the maintenance-of-effort level. John Fensterwald provides some more details on the potentially funny math that California is using to justify the waiver request. For schools in many states facing difficult budget, this maintenance-of-effort requirement is a saving grace that will likely minimize the budget cuts that schools would otherwise face as states balance budgets.