Friday, May 6, 2011

Who Should Pay for Public Higher Education? Who Will?

On the subject of public higher education, with whom do you agree?

Person A: "Since most of the financial benefits of college go to the student, he or she should pay a large portion of college costs. Even with the large tuition increase, [our tuition is] well below those of many other prestigious flagship public universities. The ... bureaucracy is bloated, teaching loads are low, and most of the budget goes for noninstructional expenses. Most attendees come from moderately to very prosperous families that can shoulder this extra burden. Lower income students are largely protected by aid policies and by an increasingly generous federal student assistance program."

Person B: "The budget situation facing the university... is truly dire. It’s been a long time coming, and while they could have done more to restructure costs to reduce what they now will get from students, no amount of resource planning could have forestalled a crisis at this level. That said, retroactive finger-pointing at the Regents and the administrators isn’t going to solve anything. Strong public universities can survive bad government for a while, but eventually the wheels start to come off. They’re the people who’ve got the job to right this ship, and I hope they will. The bigger problem is with state government, as the lion’s share of the responsibility has to lie with the legislature and Governor, who for decades have been presiding over the erosion of public investments in higher education, while they’re jacking up spending on prisons and the state share of Medicaid. Like it or not, government officials are the investment managers of the portfolio that will pay for our collective future. Too many people seem to think it’s possible to insulate public institutions from the consequences of dysfunctional government. It doesn’t work that way: strong institutions can survive bad government for a while, but eventually the wheels start to come off."

Person C: "For decades states have been unable to provide public research universities with the levels of financial support they need to prosper, and our nation’s current economic problems have dug the holes that they face even deeper...The real danger is that higher tuition levels may lead to decreased public support. Increasingly tuition increases must provide the resources to offset limited increases, or decreases, in state support. To maintain their accessibility to students from all socioeconomic backgrounds, the great public research universities have developed institutional financial aid programs, and they need to annually demonstrate to state government that these programs are working...The real danger from [a tuition] increase is that unless the public can be educated about the great bargain that attending the university...remains, its higher tuition levels may lead to decreased public support for enhanced state funding in the future and thus to a continuous cycle of large tuition increases. Furthermore, absent the large endowments and flows of annual giving that many public research universities have, public comprehensive universities and two-year colleges will not have the institutional financial aid resources to move to a high tuition-high aid policy. Large tuition increases at the public comprehensives and the two-year colleges have the real potential to reduce access, and state governments need to understand the importance of state support to prevent this from happening."

Sound familiar?

Surprise: none of these folks was talking about UW-Madison. All three were speaking of the University of California's crisis back in 2009.

One of the dominant trends in higher education over the last 30-40 years is the rapid shifting of the costs of public higher education from the shoulders of the government onto the backs of students and their families. Many but not all see this as a problem (those that do not tend to underestimate the public returns to higher education and overemphasize the private). And people disagree over the solution.

Is the New Badger Partnership a solution?

Let's ponder some possible scenarios, given the wisdom of the three folks whose perspectives are noted above:

(1) Status quo: UW-Madison has been dealt a large cut in Governor Walker's proposed budget, so the status quo involves a reduction in state funding. Right now the state puts in slightly more than half of the costs of our core mission, with tuition covering the rest. This cut will be offset with increased tuition at a rate determined by the Legislature and the Regents--which will shift the burden onto families, who will then cover slightly more than half the costs. The hike will be restrained by those entities, who must balance the needs of the state and the collective with the needs of individual institutions. To compensate for the remainder of the cut, UW-Madison will be required to either reduce "quality" or find more productive ways to deliver education. After an economic recovery, Madison will remain with UW System and could theoretically become part of a unified effort to gain increased support for public higher education in Wisconsin, holding tuition down. In the meantime, the best case scenario is that the strong incentive to improve productivity will crack the "iron triangle," forcing UW-Madison to maintain quality and access with fewer resources-- in other words, by finding more efficient ways to serve students.

(2) Full NBP, Scenario A: If UW-Madison administrators get what they are asking for, and their numbers are correct, then the cut will be offset with a tuition hike comparable to the one described above, together with savings from the various efficiencies they've proposed. As Darrell Bazzel's projections clearly indicate, the gap between the contribution of families vs. the state in terms of footing the bill will grow over time (see the green and blue lines in the Projected Budget slide). Again, if Admin's numbers are correct, then no additional sacrifices to quality will be required-- and at the same time no increases in productivity will be demanded. After an economic recovery, Madison's tuition will be managed by its new Board of Trustees--if Bazzell's projections are right, and the state continues its modest support and does not divest, then over time the relative burden placed onto families should grow each year. Actually, let's be clear-- the burden will be shifted further and further onto families making more than $80,000 -- those with the most powerful parents, who most often vote. What can we expect that to do for political support for UW-Madison?

(3) Full NBP, Scenario B: However, should Bazzell's numbers be off-- if Foundation or the state doesn't perform as promised-- then there is nothing to stop the BOT from hiking tuition in a few years (especially if Chancellor Martin doesn't stick around). What are the chances that the state will continue to support UW-Madison at the same rate, rather than decrease its support? Over the past decade, state support per student at UVA has declined by one-third! At Virginia's other universities, who don't have UVA's deal but suffer from UVA's decisions, it's declined by 40 percent. Even if you believe the state will continue to kick in, the BOT will have a clear incentive to hike tuition to generate more and more revenue, rather than to demand productivity enhancements-- and given the ability of the Board to demand that, the state has little reason to put in more support---and thus the burden of this public higher education will shift further onto families. It's a vicious cycle.

(4) Partial NBP: Let's say UW-Madison administrators get only part of what they describe -- for example, public authority with a new governance structure and tuition flexibilities, but no flexibilities in any other area. I can easily imagine this happening once DOA does the math on the money it could be giving up by agreeing to flexibilities. In this case, the cut will be offset with a tuition hike of whatever size UW-Madison wants. Madison won't have any of the savings from flexibilities, and there won't be any System oversight to protect the rest of the state from skyrocketing tuition at the flagship. So, boom! The BOT can dramatically shift the burden of costs for public higher education onto families. And once it demonstrates that Madison can still fill seats even at those higher prices (with out-of-state students) it has no reason to lower tuition ever again, and the state has no reason to put in more money (even when it can).

Given these scenarios, if you believe that the Wisconsin families should not foot the majority of the bill for public higher education (beyond paying their taxes), then the only option currently on the table is to reject all forms of the NBP. The status quo is temporary-- once the NBP is off-the-table, a new campaign should begin to get all UW System institutions to identify more cost-effective ways to deliver high quality undergraduate education. In other words, to make opportunity affordable.

The NBP debate has divided people into camps, some perhaps quite unfamiliar to them. And yes they make for strange bedfellows.

So now, consider who of the three people above you agreed with-- and read who they are:

Person A: Richard Vedder, a notoriously conservative economist who once wrote that low-income students are wasting financial aid by partying too much.

Person B: Jane Wellman of the Delta Cost Project, one of the nation's leaders in efforts to improve how colleges and universities spend the money they do have-- to provide a quality higher education

Person C: Ron Ehrenberg, Cornell economist and highly respected scholar. As I understand it, our Chancellor thinks quite well of Ron. Go back and reread his cautions--and those of others. Do you think we are heeding them all?

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