Higher tuitions: Harbinger of a Hybrid University?

By Mark G. Yudof
Change (Magazine)
March/April 2002 Issue

Abstract:

As higher education comprises a smaller and smaller portion of state budgets, and as state dollars make up a narrowing slice of university budgets, the central implication is that, for the foreseeable future, public research universities will look to students to pay more of their educational costs. These students will be part of what has been dubbed the hybrid university, an institution with many traditions and functions still within the public realm, but with other characteristics that are more in line with those of private colleges and universities.

In an uncertain economy it is easy to link sluggish growth, meager state coffers, and subsequent tuition increases at public universities. In fact, the revenue shortfalls being faced by states across the United States may explain the magnitude of recent tuition increases at flagship state universities, but this short-term snapshot tells only part of the story. In fact, in good times and bad, under Democrats and under Republicans, the actual story is a long-term trend toward lower or static state support, in relative terms, for public research universities. State support for higher education per $1,000 in personal income dropped from $11.22 to $7.94 - a 30 percent decline - between 1979 and 2000.

As higher education comprises a smaller and smaller portion of state budgets, and as state dollars make up a narrowing slice of university budgets, the central implication is that, for the foreseeable future, public research universities will look to students to pay more of their educational costs. These students will be part of what I have dubbed the hybrid university, an institution with many traditions and functions still within the public realm, but with other characteristics that are more in line with those of private colleges and universities. The challenge for these hybrid institutions will be to retain the best of their public traditions while adapting to a more privatized model.

Public research universities have always served different constituencies, and the two most important ones have been the students they teach and the states in which they are located. As tuition pays more and state dollars pay less of the freight, accountability will shift more toward students and their needs and away from the priorities of legislators and other state leaders. To be sure, students and states have many overlapping expectations and interests, but where the priorities of students and states diverge, the hybrid university will be tugged increasingly to the students' side. For example, state leaders may prefer greater investment in promising areas of applied research, whereas student demand may be focused more on business, arts and humanities, and social sciences.

Major public research universities, of which there are 50 to 60 in the United States, will have to adjust to this new reality, or, I believe, they will cease to be the centers for innovation and significant research that they are today.

For me, the unvarnished truth is that the extraordinary compact between state governments and their flagship universities appears to be dead - or at least on life support. For more than a century, these two parties had a deal: In return for financial support from taxpayers, these universities would keep tuition low and provide broad access for undergraduates from all economic strata; train undergraduate, graduate, and professional students; promote arts and culture; help solve local problems; and perform ground-breaking research.

Unfortunately, the agreement between the states and their flagship universities has deteriorated for 25 years, leaving public research universities in a purgatory of insufficient resources - low tuition and flat appropriations. State appropriations to higher education have generally kept pace with the Consumer Price Index (CPI) inflation, but the rising costs faced by colleges and universities have consistently outstripped this "regular" rate of inflation. Most public research institutions continue to streamline operations and look for cost-savings, but the reality is that they are still extremely labor-intensive, use expensive technologies, and support costly research facilities.

As a result, public research universities find it increasingly difficult to compete with their private peers for the best faculty members - those who have the ability both to create and to effectively disseminate knowledge. In many disciplines, the effort to attract top faculty members is akin to recruiting film stars and top-tier professional athletes; CPI-level salary adjustments simply won't cut it. The gap between professors' salaries at public and private universities has grown from an inflation-adjusted $1,400 in 1980 to $22,100 today, according to a Chronicle of Higher Education analysis of American Association of University Professors data. And that gap has grown even as students at public research universities have paid more and more. For example, at the University of Minnesota, tuition covers nearly two-thirds of the cost of instruction today, compared to the one-third of a quarter-century ago.

So what's driving down the share of state budgets allocated to public research universities? Some observers have posited that the end of the Cold War has turned the nation's attention away from maintaining technological superiority or from turning out an educated and prepared populace ala the National Defense Education Act of 1958. But the decline in state support began at least a decade before the fall of the Berlin Wall; the time frame just doesn't seem to fit. Whether the new "hot" war on terrorism changes the higher education funding equation remains to be seen, but the trend toward lower state funding continued, unrelentingly, through Detente, Glasnost, and the break-up of the Soviet Union.

So where do the reasons lie for the reshuffling of states' priorities? To my mind, a large part of the answer is demographics. Legistators and governors can't help but be influenced by the graying of America. The number of Americans between the ages of 45 and 65 grew by a third over the last decade, and the portion of U.S. households with children at home dropped from one-half to one-third between 1960 and the present. (Are people now watching their stock portfolios instead of raising kids? Fifty percent of the population owns stock today, a fivefold increase over 1965.)

As a result, the public's attention has shifted toward services that affect it directly, mainly health care and public safety, and away from education in general. State spending on higher education fell 14 percent between 1986 and 1996 as a share of states' total budgets, while Medicaid's share nearly doubled, and corrections' share increased by more than 25 percent. Tellingly, the slowly declining share of state spending for higher education intersected with the steep incline in Medicaid's share right around 1990.

Another factor in states' changing priorities is the increasing value of education to individual students. Over a lifetime, a college graduate today will earn an average of $1 million more than a high school graduate, and those with professional degrees increase the gap on average to $3 million. The difference between the wages of the college educated and the non-college educated has widened considerably since the early 1970s. The private return on investment in higher education to each individual, then, has risen significantly.

Though we believers in the civic value of education may lament it greatly, with the wage premium widening, education today is increasingly seen as a private, rather than a public, good. Consequently, many legislators appear more comfortable with students' paying higher tuition than they did in the past, tacitly encouraging students to borrow today and pay back later. Others continue to embrace the populism of low tuition, willfully ignoring higher education's diminished public good status.

Along the same lines, lawmakers are more inclined to emphasize direct aid - such as grants, loans, and now tax breaks - to individual students rather than aid to institutions; arguably the most important federal legislation affecting higher education in recent years has been the new $3,000 deduction for college tuition signed into law by President Bush, and its forerunner, the "HOPE Scholarship" tax credit signed by President Clinton. Pell Grants also have continued to grow. Of course, to cover their increased costs, universities can only capitalize on these direct student subsidies and tax benefits in one way: by raising tuition.

Regents, trustees, and administrators of public research universities are faced with contradictory signals from legislators. A growing number of lawmakers prefer market accountability to traditional legislative oversight for universities, saying, in essence, you're doing the right thing as a university if you are attracting students because of your quality, reputation, and service to students. This emerging paradigm relies on higher user fees (tuition), competition for students (with the market ensuring quality), and the availability of financial aid and targeted tax breaks roughly equivalent to income-adjusted vouchers.

At the same time, lawmakers advocate strongly for their local public colleges and universities, even if these institutions are not competitive or well-used under this market model. This is especially true in rural areas where the economy is weak and the population thinning. Over the past 30 years, as the number of postsecondary institutions has grown and as more students have enrolled in higher education, the state funding available for statewide public research universities has been diluted. This "regionalization" of higher education has exacerbated regional and urban-rural splits within states, as legislators seek to protect local colleges or universities, ones that often lack a significant research component.

Another of public research universities' major constituencies has been weakened as globalization, mergers, and takeovers move corporate headquarters or executives from state to state and country to country. Today's peripatetic global business elite has less and less stake in the nearby research institutions; business leaders are less likely to be home-grown, and they often are more interested in a tax system that enhances productivity and profit than they are in encouraging state appropriations for higher education.

Although corporations continue to make donations and forge partnerships with public research universities, the mutually reinforcing ties between what used to be "local" industry and these institutions have weakened. The emergence of corporate educational institutions, such as Motorola University or Dell University, which focus on corporate-specific workforce needs, also has reduced reliance on local higher education institutions.

In order to adapt successfully to the current environment, public research universities will have to evolve into the new model of institutions I have mentioned, charging higher tuition - though still much less than what their private peers charge - and looking to private sources for funds and partnerships. And they must do so while retaining their essential public character.

If I am right - and in many ways, I still hope that I am not - the first challenge for hybrid universities will be to increase tuition dramatically in order to remain viable and competitive with the eminent private research universities. The challenge will be to convince students, lawmakers, and the public that having more expensive but higher-quality public research universities is preferable to having inexpensive ones without a substantial research capacity.

Paradoxically, to continue the long tradition of broad access for students to public research universities, these institutions will have to become more like their private peers; to ensure the access for low-income and historically disadvantaged students that low-cost tuition once allowed, I believe that public research universities will have to work hard to augment funds for student aid and scholarships. This will likely mean an accelerated push for philanthropic support, but it may also extend to lending stronger political support for new public initiatives that direct aid and tax benefits to students. In the last analysis, and consistent with the increased private returns on an investment in education, students may also end up borrowing more to support their education.

At the same time, university advocates also will have to work hard to retain their existing level of state subsidy - still a crucial source of funding that is largely unrestricted. Education, even under the new university, still has enormous public benefits, and advocates will have to find more ways to demonstrate what they are.

Providing for these public goods in an increasingly tuition-dependent environment will be a challenge. Especially at our land-grant institutions, asking for student tuition dollars to pay for outreach activities that may not directly impact students' education is a difficult proposition. Also problematic are professional degree programs that cost far more than tuition could ever generate, but which turn out the doctors, dentists, and veterinarians - to name just a few professionals - our states rely upon.

In regions that lack private research universities, the public benefits that state research universities provide are all the more critical. States such as Minnesota, Iowa, Wisconsin, Virginia, and Washington rely heavily on their flagship campuses to attract and retain bright people in those states, and to lay the foundation for economic growth. The private sector is not likely to pick up the slack in expensive program areas like medicine, for example; the country's newest private medical school opened 23 years ago.

New partnerships with foundations, school districts, non-profit organizations, and corporations will have to be explored in order to better leverage resources. Perhaps the new hybrid universities will have to begin charging fees for outreach programs traditionally provided for free, such as design or horticultural services to communities. (Of course, if these outreach programs are part of the core educational function, then using tuition dollars would be far easier to justify. A law clinic for indigent people, for example, gives law students hands-on experience with the legal system at the same time that it provides a valuable service to its clients.)

As I've described it here, the hybrid public university faces the tension of serving both the student and the broader community. To compete in the postsecondary market, it will have to become more efficiently operated, and it will have to radically improve student services, from accommodations and advising to online access to registration and financial aid. It will have to look more methodically at whether units and programs can support themselves through tuition dollars, and whether cross-subsidizing other programs or functions is either appropriate or sustainable. In the past, cross-subsidization has been widespread, but it has often gone unscrutinized, reflecting historical patterns of resource allocation rather than deliberate decisions in the present. The answers will vary within and among different institutions, but the rationale for cross-subsidies will be more critically examined and the decisions more purposeful.

At the same time - and despite the relative decline in public support - more and more states are requiring public universities to measure their performance and to be more accountable for public dollars. This is true for a number of reasons. Legislatures and universities, influenced by increased private-sector efforts to emphasize quality and employ continuous-improvement models, now have the tools to benchmark achievements and lapses, even if, as I often find myself compelled to point out, students are not widgets.

In addition, with flat public support, universities have incentives to be more efficient if they are to adjust their institutional priorities. Good legislators always look for cost savings. And finally, accountability provides a way for some policymakers to dodge a bullet; they can justify waning appropriations by saying that legislative expectations have not been met, rather than admitting that higher education is simply a lower priority for them.

To be a great learning institution, the hybrid university will also have to continue to nurture and preserve learning for its own sake, retaining responsibility for cultural transmission, civic understanding, and other less quantifiable (but still valuable) activities emphasized in the past. Market forces, as represented by what students want, are not necessarily antithetical to these pursuits, but we must guard against the vulgarization of learning!

On a more encouraging note, if public research universities are freed from some state regulation - for example, gaining the ability to set tuition on their own and to move funds to new priorities more easily - the liberal arts and humanities could end up benefiting. Most of the country's prestigious small private colleges have made their academic reputations in these areas. With an eye toward market competition, perhaps public research universities can invest a relatively modest amount in these departments (when compared to the sums required for a first-class molecular and cellular biology department, say) and improve their national rankings and standing among current and prospective students in the process.

For too long, most public research universities and their supporters have written off our funding predicament to the circumstances of the day - if only the economy were better, if only this candidate had won an election rather than that one, if only a certain legislator chaired a certain committee, if only we had done a better job of explaining our importance to the state's economy and society during the legislative session, and so on. In some cases our regret may be well-placed - for example, higher education often has come up short in publicly articulating its purposes and benefits - but the data over more than two decades belie optimism that state subsidies will improve. Perhaps it's time that we adjust to the long-term political realities and revise the compact with our taxpayers and students to keep public research universities operating at the highest levels of excellence in the decades ahead.

Note:

Mark G. Yudof is the 14th president of the University of Minnesota. He is a law professor and co-author of Educational Policy and the Law. A version of this article appeared in the Chronicle of Higher Education in January.