A version of this essay was published in the Detroit News on Sunday, March 7,
Gov. Granholm wants to end $64.8 million in direct annual subsidies to
Michigan private college and university students. The move will eliminate just a
fraction of the state’s projected $1.3 billion deficit, but it illustrates
precisely the type of restraint necessary to correct years of state overspending
and opens an opportunity to improve the way higher education is funded.
The Tuition Grant program is a 37-year-old fixture of the state budget. The
program’s $2,000 annual grants are very popular among the low-income students
who get them and the 39 private, nonprofit colleges and universities where the
money is spent.
Those who favor extending these subsidies point to the college students who
benefit from each of the more than 40,000 checks. But there are always benefits
on at least one side of any transfer of wealth. The cost side of the ledger must
also be considered.
Not only must somebody pay every penny of Michigan’s $39.7 billion budget
that is received by someone else, every dollar spent on one state program must
be weighed against the value of spending it on another program. Not all state
priorities are created equal.
State officials have already eliminated some non-core spending, including
funding for such items as "equestrian princess pageants," "Horse of the Year"
balls, and free fruit and vegetable distributions at a highway rest stop. They
closed last year’s spending gap without resorting to broad-based tax increases.
But more cuts are needed to avoid a disastrous repeat of the 38 percent income
tax hike imposed the last time a Democratic Michigan governor faced large
Defenders of private tuition subsidies should expand their arguments beyond
the undisputed fact that some students benefit from them. They should recommend
precisely what other state spending should be cut in order to preserve their
Tuition Grant program.
The cuts can be made; the Mackinac Center for Public Policy has recommended
more than $2 billion in lower spending and sales of unneeded state assets. In
some cases, just a rule change would produce mammoth savings. Repeal of the
state’s prevailing wage law for school construction alone, as Ohio has done,
would stop the annual waste of more than $150 million.
Even if money were no object, private-college tuition subsidies for poor
students may not be a proper function of the state. The hallmark of civil
society is the voluntary, mutual benefit derived by both parties to a
transaction. Yet, no matter how much or how little benefit is gained by the
grant recipients, the state makes no effort to determine how much benefit is
forgone by individual taxpayers who would have spent the $65 million on
voluntary priorities no less worthy than the private-college students they are
forced to support.
Such subsidies can be culturally, as well as economically, divisive. Although
the program restricts some courses of study, several of the qualifying schools
are religiously affiliated or explicitly sectarian. Should either atheists or
devout Catholics be required to directly subsidize tuition at thoroughly
Protestant Grace Bible College?
If the state were not already overspending, and if private college tuition subsidies
were a proper function of the state, there would still remain the question, "Is
our Tuition Grant program effective?" Two features of the program suggest it is
more costly than necessary.
The tuition grants do not have to be repaid. There are income requirements
(lower incomes qualify), but there is no requirement for students to first tap
into available student loans, nor even to seek summer employment, before
receiving the full grant. This means that middle-class college students who
don’t qualify for the grants are taking out student loans and working summer
jobs to pay for school, while their parents pay taxes to support low-income,
nonworking private-college students who can graduate debt-free. This is unfair,
and it raises the program’s cost by encouraging students to go after the "free"
In 2000, private colleges and universities provided nearly $8 billion in
private assistance to students who needed help with tuition. Students of all
income ranges can still receive heavily subsidized schooling at well-regarded
state universities. Michigan’s current overspending problem, coupled with
questions about the fairness and effectiveness of the Tuition Grant program,
make private-school tuition subsidies a good candidate for elimination.
Joseph G. Lehman is executive vice president of the Mackinac Center for
Public Policy, a research and educational institute in Midland.