Who’s the Boss?

University presidents serve many masters, but presidents of public universities serve an additional master unique from all the rest. This master makes greater demands, is less flexible, is less predictable, and often begrudges its support of the university. This master is the state, and public universities would do well to minimize its impact.

Politicians, taxpayers, contributing alumni, grantors and students all want some level of control over university activities and priorities. The state is particularly difficult for universities to deal with because of its unique nature. Unlike the other parties, the money offered universities by the state comes from many individuals, many times against their will, via taxation. These taxpayers in turn make broad demands of universities, forcing them to change even the most fundamental policies. Last fall’s passage of Proposal 2 is an example of this, with voters demanding that state universities eliminate race- and gender-based admissions criteria.

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It is true that other donors may make demands of universities, but in almost every case it is negotiable. State demands are not. Typically, a donor is making demands only regarding the particular use of the donated money, whereas the state often makes demands on every area of university operations.

The state also is an unpredictable funding source. Budget and political concerns can dramatically change funding with little notice, placing continual stress on university administrators. When university presidents court a potential private donor, they know they must please that donor. When they seek funds from a lawmaker, they find themselves trying to please someone who is also trying to please the roughly 90,000 masters in his or her district — not to mention the lawmaker’s legislative colleagues and all of their constituents.

Again, unlike private donors, the state policymakers placing demands on the university may even be opposed to the institution altogether. This often leaves university presidents confused about who really is in charge, and certainly leaves the most direct customer — the student — with diminished influence on the education he or she is purchasing.

In contrast, businesses know the customer is in charge. Businesses must respond to market demands; the customer is the sole bearer of the money that businesses need to succeed. The market’s price system lets customers and businesses clearly see how well they are meeting each other’s needs.

Public universities do not operate under the same conditions.

According to the Michigan House Fiscal Agency, about 46 percent of Michigan public universities’ general funds come from sources other than tuition. Of the remaining 54 percent that comes from tuition, students pay less than half (47 percent) themselves, often with low-interest federal loans. That means only about 25 percent of the cost is paid directly by students. The rest comes from state funding, grants, aid and scholarships. Naturally, universities are less concerned with students than with the major sources of their funding — primarily state and federal government, donors and private and public research grants.

This complex funding structure has made universities less responsive to students. It also has made students less responsive to universities. When someone else is paying the bulk of a student’s tuition, the student is less likely to be keenly aware of waste, inefficiency and poor educational practices at the university. The lack of a fully visible price makes it impossible for students to know if they’re getting a good deal and for universities to know if they’re effectively meeting students’ needs.

Michigan’s 15 public universities should wean themselves from state funding. Simply by forgoing annual state funding increases, or even accepting small decreases, state universities could slowly regain their academic independence and give students more control.

Many people assume that less state funding means automatic tuition increases and fewer college grads, ultimately leading to slower long-term economic growth. This is not necessarily the case. Ohio University economist Dr. Richard Vedder has shown in his book "Going Broke by Degree" that more state funding does not lower tuition or create economic growth; indeed state funding increases may well have the opposite effect.

Universities are supposed to serve a vital role in a free society — the uninhibited pursuit and dissemination of knowledge. By gradually making government a less important source of funding, Michigan’s public universities can free themselves from trying to please politicians and focus more on students; in turn, students might even focus more on them.

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Isaac M. Morehouse is director of Students for a Free Economy, a project of 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.