How to Put College Back Within Reach
Better Uses for State Education Dollars

By James C. Garland
Friday, December 30, 2005

As Education Secretary Margaret Spellings's new Commission on the Future of Higher Education gets to work, it might do well to begin by acknowledging this fact: The historical business model for public higher education is broken and cannot be fixed.

The days are long gone when generous government subsidies allowed public colleges to keep tuition low. Now that a public four-year degree costs more than $50,000, middle-income citizens must either saddle themselves with debt or scale back their college aspirations. Not a shred of evidence suggests this trend will do anything but worsen.

Furthermore, the compact between public universities and state governments has degenerated into a shouting match of accusation and finger-pointing. Legislators see colleges as bastions of inefficiency, while frustrated college presidents see elected officials as buck-passers who use their colleges as whipping boys.

The result is that public colleges are increasingly staring into the abyss. The marching bands, pastoral campuses and dedicated professors shown on TV commercials mask the reality of budget cutbacks, crowded classrooms, dilapidated buildings, angry faculty unions and armies of underpaid temporary instructors. In Ohio, for example, deferred maintenance at public campuses is a $5 billion problem, about 20 times the state's yearly maintenance budget. Elsewhere, professors' salaries at public, doctorate-granting universities lag $30,000 behind comparable private-school salaries. At many schools public funding has fallen below 20 percent of total revenue. At my own school, it is about 10 percent.

With declining state support driving up tuition charges, the trend is absolutely clear: Public higher education is moving down the track toward privatization, and the train is not coming back.

Furthermore, efforts to slow it by using price controls have been a disaster. Revenue-starved campuses cannot endure the double whammy of state cutbacks and government-imposed tuition caps. Unless a different course is charted, the campuses that historically have educated 80 percent of America's college graduates will become higher education's equivalent of failed inner-city schools.

Part of the problem is that state higher-education budgets are not targeted efficiently. By way of comparison, consider the food stamp program, which in 2004 paid out $27 billion directly to 24 million low-income Americans. Imagine if there were, in its place, a food subsidy program by which the government paid that $27 billion directly to supermarkets. Under such a program needy families would benefit little, because most of the savings would be passed on to customers who didn't need help. That would be an inefficient use of public money.

But this is precisely what happens in public higher education. When states pay their universities to hold down tuition charges, they are indirectly subsidizing wealthy and poor students alike.

And as state subsidies dwindle, government regulation grows. My own state of Ohio typifies this pattern. This year Ohio will spend about $1.2 billion subsidizing instruction at its 13 public four-year universities, an amount that has declined over the past five years by 15.5 percent per student. Combine this decline with a file cabinet full of ever-expanding regulations, reporting requirements and tuition controls, and a bleak future seems certain for the state's beleaguered public colleges.

But states could break the cycle by investing their higher education dollars strategically.

First, turn all or part of each public four-year university into a private, nonprofit corporation, with legislation to protect research grants and centers and to honor personnel and pension obligations.

Second, phase out each school's subsidy over, say, six years, to enable campuses to grandfather in current students and adjust to the new environment.

Finally, reallocate the freed-up subsidy dollars to scholarships for new undergraduate and graduate students. The scholarships, valid at any accredited four-year college in the state, would go primarily to middle- and low-income students, with some reserved for engineering majors, math teachers and other groups that meet state needs.

Consider the consequences of this change:

Middle- and low-income students' degree costs would significantly decrease; others would pay a larger share of their college costs.

Universities and colleges would scramble to attract scholarship-holding students. Students would choose schools that offered them the highest-quality programs, the most value and a competitive tuition. Colleges that lost market share would either improve their offerings, lower their prices or risk going out of business.

Lacking an automatic pricing advantage, formerly public colleges would raise tuition to make up their revenue shortfall, but no more than the market would allow.

Competition would force campuses to become increasingly lean, efficient and strategic.

With social forces driving higher education irreversibly toward privatization, Secretary Spellings's commission should focus on smoothing the transition. Doing so creatively would not only ameliorate the college affordability problem but would also advance the fairness and social good that lie at the heart of a stable democracy.

The writer is president of Miami University in Ohio.

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