Commentary: Should Public Universities Behave Like Private Colleges?
They're hiking tuition and becoming more elitist - ducking a key social role
By William C. Symonds
Business Week Online
November 15, 2004
Ever since Thomas Jefferson founded the University of Virginia in 1825, it has been a leader among the nation's public universities. But in recent years, Richmond's contribution to one of its best-known institutions has been steadily shrinking. Today, the state provides just 8% of UVA's $1.7 billion annual operating budget, down from 28% two decades ago.
No wonder UVA -- along with the College of William & Mary and Virginia Polytechnic Institute -- wants to cut some of the strings that bind it to the state. Virginia's three flagship universities have asked the General Assembly to make them "chartered" universities. If Richmond agrees, they would get more freedom to set tuition and run themselves, making them more like Harvard, Princeton, or other private colleges.
America's public institutions still educate some 80% of the nation's 14 million undergraduate students. But increasingly, the crown jewels in this system, the state flagship universities such as UVA, Pennsylvania State, and the University of Colorado, are aiming to break out of the mold that traditionally has differentiated them from private universities.
To date, no major public university has been fully privatized. But as the states foot a smaller share of their budgets, the flagships have become more dependent on tuition and other sources of funds. They may still be publicly owned, but increasingly they're privately financed. So a number of the flagships are seeking more freedom from state control. In July, University of Colorado President Elizabeth Hoffman won "enterprise status" for her school, which means it's no longer governed by the same rules as state agencies. Miami University of Ohio recently became the first major public campus to adopt the high-price, high-financial-aid tuition model used by elite private colleges. That means all students across the board are now charged $19,642, although Ohio residents receive scholarships of at least $10,000. "We are becoming more like our private counterparts," says Penn State President Graham B. Spanier.
This is a powerful yet troubling trend. On the one hand, the flagships are being forced to rely more on fund-raising, research grants, and other private or nonstate money. Given this reality, it makes sense to free them up from state rules that could impede their ability to become efficient and competitive. Such moves could help to insulate them from meddling politicians, as well.
Squeezing the Poor
At the same time, creeping privatization accelerates a broader movement by the top 100 or so flagships to hike their tuitions at a double-digit rate. The result is that a public good designed to give all Americans access to higher ed is turning into something more like a private one, open primarily to those whose families can afford it. Already, the student body at some flagship campuses is more affluent than at elite private schools: At Ohio's Miami, for one, the median family income tops $100,000 a year.
Moreover, as flagships break free, support could erode for less prestigious state schools that remain more dependent on public funds. Privatization "will accelerate the social stratification of higher education, in which the elite [public colleges] are primarily filled with kids from privileged backgrounds, and the kids from poorer families are concentrated in less prestigious schools," says David W. Breneman, dean of the Curry School of Education at UVA. At the nation's 146 most selective colleges -- including the top flagships -- just 3% of entering freshman come from the bottom socioeconomic quarter, while a staggering 74% come from the top quarter.
The flagships say they have little choice. Although state and local governments still cover 64% of the cost of public higher education, other sources fund a much larger share at most elite public colleges. Today, Ohio provides only 15% of Miami's total revenues. At Penn State, only 12% of the budget comes from state funds, says Spanier. At Colorado, Denver kicks in just 9%.
To raise funds elsewhere, most look to students. This year, four-year public colleges raised tuition by nearly 11%, more than three times the overall rate of inflation, to an average of $5,132 for in-state students, according to the College Board. Over the past decade, tuition has climbed 90%. With room and board, the annual tab at public colleges averages more than $11,000. Although those costs are less than the $27,500 at private colleges, the hikes reflect a view that flagships should seek funds from those willing -- and able -- to pay. Take UVA, where the state froze tuition in four of the past eight years. If it's granted charter status, UVA could raise in-state tuition to $10,200 over the next five years, up from $6,600 now, says UVA Chief Operating Officer Leonard W. Sandridge. UVA, however, is launching a more generous financial-aid program.
The fear is that the flagships will use their market power to price poor and middle-class students out of their classrooms. Penn State already charges in-state students more than $10,000 a year, although it also provides significant financial aid to poorer students. A more typical approach is to hit up out-of-state students. UVA charges nonresidents more than three times as much as Virginians. "In effect, they're paying 150% of the cost of their education," concedes Sandridge. At Colorado, whose Boulder campus is a magnet for affluent nonresidents, out-of-state students generate 72% of total tuition revenue even though they're only 30% of the student body.
The danger is that ever-rising tuitions will exacerbate inequities in higher education. Because out-of-state students tend to be affluent, public flagships that rely on them already are serving fewer low-income students. Indeed, less than 9% of students at UVA and William & Mary received federal Pell Grants for poor students in 2000, vs. 10% at Yale University and 16% at Amherst College, according to a study by the Century Foundation, a New York research group. Already, "many flagships are not serving their traditional role of providing broad access to the brightest from all economic backgrounds," says Century senior fellow Richard D. Kahlenberg.
One solution is for flagships to adopt a variable pricing model similar to the one that's used at private colleges. Miami recently began offering larger scholarships to Ohio students from needier families while charging more to affluent ones. The gap is only $1,200 a year, but President James C. Garland intends to widen it sharply. Already, he says, the university has seen a large increase in applications from moderate-income students.
North Dakota has found a more comprehensive solution. Historically, the legislature micromanaged the 43,000-student university system. But in 2001, it scrapped moste controls, giving colleges lump sums that they could spend as they saw fit, plus complete pricing flexibility. In return, the universities agreed to meet accountability measures that include graduation rates, student retention, and economic benefits.
The result has been far more entrepreneurial behavior. Distance learning has increased, and research work has doubled at the two flagship schools, the University of North Dakota and North Dakota State. There's also a new emphasis on recruiting out-of-state students to offset an expected drop in North Dakota high school grads because of the declining population. "The university system is now viewed as a primary economic engine for the state," says University System Chancellor Robert Potts.
Still, North Dakota is an exception. In other states, the flagships often try to solve their problems with little regard for the rest of the state system. "Each of these decisions is being made piecemeal," worries Stanley O. Ikenberry, the former president of the University of Illinois. "What's absent is any national dialogue about what these changes will mean for America."
What's more, public universities seem reluctant to give up their public funding altogether. Earlier this year, South Carolina Governor Mark Sanford offered his state's universities the chance to become fully private, meaning they actually would own their campuses. But because they would also have had to give up all direct state support, none stepped forward.
Public universities have played a fundamental role in American society, from spurring technology to helping create and expand the country's middle class. But without better planning, the move to keep them competitive could widen the already growing class divide in higher ed.