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Mitchell’s Musing 12-27-10 Who Is Going to Pay for Higher Education? It has become a truism that education is a key element in labor-market success. Although some critics have complained about creeping credentialism and over-education, there is generally agreement that increased education raises lifetime earnings and reduces the risk of unemployment. Beyond that benefit, however, is the question of who pays for education, particularly higher education, and especially public higher education. The Great Recession has stressed the fiscal situation of state and local governments. Public universities and community colleges depend on state and local finance for varying proportions of their expenditures. With public fiscal resources diminished, higher educational institutions have been raising tuition as an alternative source of funding. There has been talk over the years about privatizing such institutions. While complete privatization would raise complicated legal issues, it can be argued that a shift toward tuition and away from public subsidy is a kind of de facto privatization. Often held out as a compromise approach is the so-called “Michigan Model,” involving the University of Michigan and the State of Michigan. An accord with the Michigan powers-that-be and the University gives the University authority to charge more-or-less market levels (that is, private levels) of tuition with cross subsidies to Michigan residents, especially those of lower income. Out-of-state students pay full freight and thus help provide the cross subsidy. The University of Virginia is often depicted as having a similar arrangement with its state powersthat-be. High-tuition/high aid is another descriptor of this model. In some cases, university administrators seem to be too timid to talk openly about options such as the Michigan Model. At the University of California, tuition has been rising as the state deals with its ongoing budget crisis. But the issue has been handled in a reactive way. As the state cuts back support, the Regents of the University raise tuition – often accompanied by predictable student protests. But there are also protests from some of the same legislators who voted for the state budgets that have squeezed University funding. That is, absent any official accord with the state, the University and/or its Regents become the villains. And legislators are free to have it both ways; they can cut support and complain about the consequences. California is not alone; there have been similar developments elsewhere. Tuition increases at Virginia Commonwealth University (not the University of Virginia) have been met with retaliatory cutbacks in state aid. See: http://www2.timesdispatch.com/news/2010/dec/18/tdmain01-mcdonnell-punishes-vcu-fortuition-increa-ar-723886/ At McGill, an increase in MBA tuition has produced a retaliatory reaction from the Quebec provincial government.

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See: http://www.theglobeandmail.com/news/national/quebec/mcgill-mba-students-left-out-todry-by-tuition-fight/article1845280/ Of course, there can be controversy within academic institutions – and resistance to changes in the funding model – absent some kind of overall policy. The UCLA Anderson School of Management developed a plan for financial “self sufficiency” with support of a significant majority of its faculty and seeming support from campus administrators. But, at the moment, the campus Academic Senate is opposing the move, fearing (apparently) that the idea would spread to other departments. See: http://www.senate.ucla.edu/documents/AGSMFSS_AcademicSenateResponse.pdf Most economic forecasts suggest that the U.S. economy will be experiencing a prolonged period of sluggish growth with high unemployment remaining an issue. In that environment, state and local governments cannot expect robust tax revenues. Many state and local governments managed to delay the full impact of the Great Recession, in part by using federal stimulus funding that is now disappearing. The outlook, therefore, is for continued funding difficulties for public higher education, despite the commonly-heard rhetoric about the need to prepare the workforce of the future. It seems unlikely that Washington will be in a political position to come to the rescue of public higher education. But there could be an initiative from Washington at least to foster some kind of public forums on who will pay for higher education. Is anyone in DC listening?

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MitchellMusings 12-27-10