May 15, 2013

What Happened to the Great State Universities?

By James Piereson

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According to a new report released by the American Association of University Professors, the gap between the salaries of faculty at private and public universities is widening.  The "Annual Report on the Status of the Profession" found that at the public institutions, full professors averaged $118,054 and assistant professors $69,777, while at the privates full professors' average salary was $157,282 and assistant professors' $86,189.

Even while the rest of the economy struggles, the last decade has been a flush time for private institutions, with endowments surging an average of 19.2 percent in 2011 and 11.9 percent in 2010, according to the National Association of College and University Business Officers. Meanwhile things have gone steeply downhill for public colleges and universities as legislatures across the country have cut back on appropriations for higher education and, at the same time, have imposed ceilings on tuition increases.  The financial squeeze has taken a toll on the quality of instruction offered at some of our best public institutions.  Unfortunately, the situation is likely to get worse in the years ahead, given the condition of state and federal budgets.  

But current financial pressures have only brought out into the open a process that has been ongoing for several decades:  public institutions - especially the so-called "flagship" institutions - have been losing ground to private colleges and universities since the 1970s.   

Holding Their Own with Harvard

There was a time not so long ago when elite public institutions, such as the University of California (Berkeley), the University of Michigan, and the University of Wisconsin, more than held their own against competition from Harvard, Yale, Princeton, Stanford, and other elite private institutions.  Berkeley's reputation for academic excellence in the 1950s and 60s was unsurpassed; indeed, in the 1960s many experts considered Berkeley to be the finest university in the world.  Flagship universities in Michigan, Wisconsin, Illinois, Minnesota, North Carolina, and Virginia earned rankings in the top ten or twenty universities in the country.   Admission to these institutions was widely sought after by out-of-state students willing to pay premium tuition for high-quality education.   With enrollments in excess of 30,000 students, these institutions dwarfed the privates in scale but delivered a great deal of educational "bang for the buck."   

Today the situation is vastly changed. There is not a single public institution listed among the top 20 schools in the 2012 ranking by U.S. News and World Report. Berkeley ranks 21, while Virginia comes in at 24 and Michigan at 29.   The Forbes ranking, which takes into account the both cost of the college and the quality of its educational program, does not list a single public institution in the top 30, and lists just seven in the top 50 - certainly an indictment of the quality of instruction offered at the less costly public institutions.  In that survey, Berkeley comes in at number 50, while flagship universities in Michigan, Wisconsin, Illinois, and Minnesota do not make the cut at all.   For the first time private institutions - and not just the Ivies -- dominate the roster of our top colleges and universities.

Too Slow to Tap Private Wealth

There are undoubtedly many causes that one might cite to account for this far- reaching development in higher education.   Public universities in the Midwest have been forced to cope with population changes and the decline of auto and steel industries in their states.  At the same time, private institutions have benefitted disproportionately from the stock-market boom of the last three decades that has provided them with the resources to recruit top faculty and students while expanding their research and educational programs.  Public universities, long in the habit of relying upon legislative appropriations, have only recently begun to tap into this expanding spigot of private wealth.    

Yet there is a more fundamental cause behind this reversal of fortunes in higher education.  Put simply, big government is killing - has killed - the elite public university.

In the heyday of the flagship universities in the 1950s and 1960s, state governments spent the bulk of their funds on just a few functions - primarily transportation, public safety, welfare, and higher education.   During this period, flagship universities had few competitors for state funds and, indeed, with their alumni well represented in the legislatures and the "baby boom" generation headed off to college, they were well positioned to lay claim to a rising share of state budgets.  Across the nation, between 15 and 20 percent of state budgets flowed into the public universities at a time when public-employee pensions, health insurance, and K-12 education were still minor items in state budgets.   For a brief time, the political environment favored generous investments in elite public education.

That is no longer the case.  The expansion of state governmental functions since the 1960s has created a most unfriendly political environment for the flagship universities. According to a report by The National Association of State Budget Officers, Medicaid and K-12 education together accounted for 44 percent of state government spending in 2012, while public pensions (which claimed less than one percent of state budgets in the 1960s) now account for 11 percent of state expenditures.   By contrast, higher education now lays claim to less than 10 percent of state expenditures, or roughly half the share allocated to this sector in the 1960s.   In the scramble for public dollars, the flagship universities must now contend with public-employee unions demanding funds to pay for salaries and pensions for their members, court orders and referenda directing ever more public funds to K-12 education, and the lure of federal matching funds for Medicaid, welfare, and other federally subsidized programs.   

The Sprawl of Many Campuses

On top of this, the flagship universities today must share public appropriations with an expanding complex of regional campuses and community colleges that barely existed in the 1950s and 1960s.  California created its elaborate and expensive three- tier system of research universities, regional universities, and community colleges in the early 1960s just as the University of California was reaching a pinnacle of influence and prestige.  Other states expanded in parallel ways.  Michigan now supports 45 distinct institutions of higher learning, all in financial competition with the state's two flagship institutions.  All of these second and third tier institutions have representatives in the legislatures demanding their share of state higher education dollars.  In addition, more and more teachers at the lower tier four year universities and community colleges are leveraging their power by joining unions that bargain and lobby in their behalf.  Professors at elite institutions have so far resisted the pressures to unionize out of professional loyalties and convictions about promotion through merit and competence.      

All of this has had the predictable result of forcing flagship universities to look for other sources of financing through federal grants, private philanthropic support, and tuition increases that increasingly are paid for by student debt.  None of these strategies is likely to succeed.  While federal spending on higher education has skyrocketed in recent years (largely by increasing appropriations for Pell Grants), these funds are divided many ways among the 3000-plus colleges and universities across the nation and the expanding for-profit sector of higher education.  Private philanthropy is now seen as a source of funds for institutions like the University of California, the University of Virginia, and the University of Michigan, but this sector is not large enough to fill in for declining public support for these institutions.  Private donors, moreover, have always been skeptical about funding state universities that, when all is said and done, are still largely controlled by state legislatures.  As for tuition increases and student loans - those two sources of revenue long ago passed beyond the threshold of affordability. 

Does any of this matter?  For all their flaws, flagship public institutions in the post-war era provided hundreds of thousands of working class and middle class Americans with a quality education and an affordable avenue of upward mobility.     

They have prepared generations of leaders at the state and national levels.  The great state universities are not going to disappear and many will maintain a standard of excellence, but in an age of lumbering and inefficient governments trying to do all things for all groups they will not have the resources to perform at their former level or to compete with high-performing private institutions.


James Piereson is a senior fellow at The Manhattan Institute and President of the William E. Simon Foundation.

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