The Perfect Storm and the Privatization of Public Higher Education
Published on: Aug 17, 2006

Flagship public universities have far more applicants than they have positions in their first-year student bodies. So large tuition increases are unlikely to leave them with unfilled seats. What they do have to worry about is maintaining the selectivity of their undergraduate student bodies, since large tuition increases may make private competitors seem more attractive to many of their top applicants who do not have financial need. Hence a share of the extra tuition revenues that the public institutions receive from substantially increasing tuition would most certainly be directed towards merit-based scholarships. Given all the other uses that they have for the extra tuition revenues as well (for example, building back full-time faculty size and increasing faculty and staff compensation), they may or may not have generated the necessary extra institutional funds to compensate for decreased appropriations once they hit their market limits on the price of tuition.

Nevertheless, the flagships are the public institutions that will prosper the most from moving to a high tuition/low state appropriations model, because the demand for their seats is likely to be much less sensitive to price than for those at the public comprehensives, which already admit a high percentage of their applicants. Attempts to raise tuition substantially there may well result in lower enrollments and less net tuition coming in, as some potential students instead enroll in private four-year or public two-year colleges or simply fail to enroll in college at all.

It is absolutely essential that the public flagships remain accessible to students from lower- and lower-middle-income families. But data on the share of Pell Grant recipients among the undergraduate student bodies at our nation's major public universities suggests that a number of these institutions already enroll relatively few students from these groups (some flagships, such as the University of California campuses, are notable exceptions). For example, Donald Heller has estimated that in 2001-2002 Pell Grant recipients were 19 percent of the undergraduate student bodies at our nation's most selective public universities, whereas they were about 27 percent of the undergraduate student bodies nationally at four-year public institutions.

With privatization, we run the risk of public higher education's becoming even more stratified, with upper- and upper-middle-income students studying at relatively well-funded flagship campuses and lower- and lower-middle income students studying at less well-funded public comprehensive institutions and two-year colleges. The flagships will have not only more room to raise tuition but a much greater ability to increase their other sources of revenue (such as endowments, annual giving, indirect costs on research grants, and revenues from commercialization of research findings). Large funding differentials already exist between these institutions, and they will get worse. For example, in 2000-2001, instructional expenditures per full-time student averaged $9,673 at public flagship (doctoral-extensive) campuses, $4,903 at public comprehensive institutions, and $3,979 at public two-year colleges. And having access to the flagships makes a long-term difference to students: Research has shown that those who attend better-funded institutions have higher earnings after graduation.

Such increasing stratification is not socially desirable. Any "compact" to allow the public flagships to increase their tuition levels substantially must include a commitment to ensure that they are accessible to students from throughout the spectrum of family incomes. Examples of public flagships that already have undertaken such commitments are the University of North Carolina Chapel Hill, with its "Carolina Covenant," and the University of Virginia, with its "Access UVA" program. Both programs guarantee that students from families with incomes less than twice the federal poverty level can attend the institution without incurring any debt. Both programs include comprehensive efforts by the universities to recruit more students from lower-income families and, in the case of Virginia, a promise to report to the state each year on the socioeconomic distribution of its student body.

Public Higher Education is More Than Undergraduate Education

Advocates of privatizing public higher education assume that cutbacks in state support can be made up by increases in tuition paid by students who will reap the economic return from their investments in education. This is at least partially true for undergraduate education and for graduate programs that train students for professional careers. But high tuition levels coupled with the need to take out loans may well discourage students from majoring in lower-paying fields that are important to society, such as education, social work, and nursing. If tuitions do increase sharply at public higher education institutions, it will be incumbent upon states to develop or expand scholarship or loan-forgiveness programs for graduates of their public institutions who remain in the state after graduation and work in fields deemed to be important to the state.

Most doctoral students at major American universities are supported by their institutions through fellowships, research assistantships, and teaching assistantships, all of which typically provide for tuition remission. Funds for these forms of support at public universities come largely from federal research grants and state appropriations. It will be difficult to make up for cutbacks in state support for doctoral education by raising graduate tuition levels. Faculty with external research grants that cover tuition for graduate students will suddenly see the real value of their grants reduced, and tuition remission for teaching assistants reduces institutional net revenue.

So absent raising tuition for undergraduates still further to subsidize the cost of doctoral education, a politically and morally unpalatable move, reduced state support for public higher education will lead to less well-funded doctoral students. This will reduce the attractiveness to top American undergraduates of doctoral study at the public universities and adversely affect the quality of the graduate students who are serving as teaching assistants at those institutions, which in turn will adversely affect the quality of undergraduate education.

Doctoral students are an important input into research at the public universities. Fewer and lower-quality students will reduce the quantity and quality of the research that is produced at these universities. Studies suggest that the level of research conducted at a university affects the level of innovation and economic growth in the area surrounding it. Most state support for research that public universities receive takes the form of lower teaching loads for faculty to allow them more time for research. If less state support for research is translated into higher teaching loads for faculty (and fewer faculty), this will not only reduce their research productivity but further increase the difficulty that the public flagships have in attracting and retaining high-quality faculty.