(The following is an edited version of an
Op-Ed that appeared the May 10, 2006, Detroit News.)
"K-16 Coalition" promoting a ballot initiative to mandate annual public school
and college spending increases is now the "K-14 Coalition," according to recent
reports. The state’s four-year universities have dropped out.
Perhaps they looked at a recent poll showing that 56 percent of voters favor the
proposal — until they’re told what it would do, when support drops to 39
percent. Or maybe the universities don’t want the close scrutiny a contentious
political battle would trigger, given recent audits showing unusually generous
sabbatical leave practices for professors, inefficient use of instructional
resources and unauthorized capital spending.
peccadilloes are symptoms of the much larger problem of out-of-control higher
education cost increases, which for decades have galloped far ahead of
inflation. This growth applies to the total spending of universities, not just
tuition (up again an average 11.7 percent this year).
Universities like to blame tuition hikes on stagnant state funding, but that
doesn’t hold water, since tuition increased at double-digit rates even when
state aid was rising. For example, from 1992 to 2001 the average tuition
at four-year Michigan public universities rose 59
percent, more than double the inflation rate. During the same period,
appropriations grew 46 percent.
college costs rise so much faster than everything else, and what can be done
about it? As with health care, to a large extent the culprit is third-party
payers that insulate universities from the competitive forces that have
increased productivity and lowered costs in other areas of the economy.
Colleges have little incentive to cut costs, so they don’t try very hard to do
so. Faculty members receive ever-higher salaries (up 50 percent in
inflation-adjusted terms since 1980) and ever-lighter workloads.
number of administrators, service and professional staff per student grows
steadily in a process a House Fiscal Agency analyst described as the
"development of an administrative ‘lattice.’" At the University of Michigan,
Michigan State University and Wayne State, there was an average of one
nonfaculty employee for every nine students in 1977. By 2002, the ratio had
increased to one for every seven students.
things could be done to improve the situation. First, the Michigan Legislature
should shift to a "foundation grant" system similar to K-12 education, where the
money follows the student. Second, lawmakers should equalize state spending so
this per-pupil grant is the same whichever university a student chooses.
Currently, each university’s state funding is determined by what amounts to
legislative mud-wrestling. The colleges send their lobbyists into the
appropriations pit, and each battles for a bigger piece of the pie. Decades of
this process have created a bizarre range of state appropriations per in-state
student, from a low of $3,887 at Saginaw Valley State University to a high of
$15,369 at U-M-Ann Arbor in fiscal 2003. With tuition added, the annual cost per
student ranged from $8,268 at Saginaw Valley to $23,369 at U‑M-Ann Arbor.
a key point: A university gets its money whether it has more students or fewer.
If appropriations were equalized on the basis of how many students attend each
school (rather than which has the best lobbyist), every Michigan resident who
attends a state university would bring the school about $6,300 in additional
effect would this have on university costs? In competing for students, schools
would sharpen their pencils and seek to offer either lower prices, higher
quality or both. For example, Central Michigan University might entice students
with annual tuition of just $2,694 (its total cost minus the $6,300 state
"foundation grant"). U-M, in contrast, could claim that
it may cost more, but its graduates earn more.
Schools that failed to attract enough students to cover their costs could do
what private-sector enterprises do in a similar situation: Cut costs, or go out
Consumers benefit from such incentives in delightful ways. Why shouldn’t
universities similarly seek to delight students (and taxpayers) with outstanding
foundation grant could be phased in over several years and have safeguards to
prevent universities from "gaming the system" by admitting a raft of students
who have little chance of graduating.
MSU and Wayne State will complain that they are different because their budgets
include research projects and medical schools. Whatever system is used, such
programs should be separated into separate budgets and judged on their own
merits, rather than co-mingled with operations funding. The result will be
Incentives matter. Under the current system, universities’ incentives to
contain costs are weak. If the universities were
subjected much more directly to competition, costs and tuition would rise much
more slowly. They might even — take a deep breath — come down.
Jack McHugh is a legislative analyst for the Mackinac
Center for Public Policy, a research and educational institute headquartered in
Midland, Mich. Permission to reprint in whole or in part is hereby granted,
provided that the author and the Center are properly cited.