'Saving Alma Mater'

The system for financing public higher education is broken -- and not just because of the recession, according to James C. Garland. Having served 10 years as president of Miami University of Ohio, from which he retired in 2006, and 26 years as a professor and administrator at Ohio State University, Garland spent his career in public higher education. And that left him convinced that the sector is absolutely essential -- and operating under many of the wrong incentives.

October 23, 2009

The system for financing public higher education is broken -- and not just because of the recession, according to James C. Garland. Having served 10 years as president of Miami University of Ohio, from which he retired in 2006, and 26 years as a professor and administrator at Ohio State University, Garland spent his career in public higher education. And that left him convinced that the sector is absolutely essential -- and operating under many of the wrong incentives. He outlines his critique and his reform ideas in Saving Alma Mater: A Rescue Plan for America's Public Universities (University of Chicago Press), and he is also discussing related issues on a new blog. Garland responded to questions about his new book in an e-mail interview.

Q: This year, everyone would agree that the system for supporting public higher ed isn't working, but many hope that when the economy recovers, so will funding levels. Why are you convinced the system is broken in a fundamental way, and that it's not just this economic downturn at play?

A: Back in 1961, the year after I graduated from high school, University of Minnesota undergrads often worked summer jobs to pay their $213 yearly tuition. Last year, Minnesota students paid $9,621 for the same experience, an increase of 4,400 percent. Ironically, in 1961, when a college degree was still considered a luxury, the cost was not a major consideration for families. Today, a college education is increasingly vital to one’s future, but the price has become an unaffordable obstacle for low and middle income Americans.

Despite decades of rising tuition charges, public universities are in financial straits. And I’m talking about the situation before the current economic crisis. The symptoms are everywhere: Faculty salaries, once higher than those at private colleges, now lag by almost $30,000. Low-paid contingent instructors now teach a majority of college courses. Deferred maintenance at public campuses far exceeds state renovation budgets. Public sector professors increasingly form faculty unions to stave off deteriorating salaries and working conditions. And critics of public universities become ever more vocal and angry.

Appropriation cutbacks by states obviously have a lot do with the problems, but so does the inability of public universities to control costs, act strategically, stay focused on mission, resist corporate and political pressures, and adapt to a changing environment. The forces pushing public universities into disrepair are not going away. My book is based on the premise that the historic economic model – ample public subsidies resulting in affordable tuition – has broken down and cannot be fixed. The current economic crisis has obviously accelerated the decline, but even after the economy recovers I believe there will be no turning back the clock.

Q: Would you describe your new model for state support for public higher education?

A: At the outset, let me emphasize that my book is not a scholarly contribution to the literature of higher education policy and economics. Rather I see it partly as a tutorial about university financing and the academic culture, aimed at governing boards, elected officials, campus administrators, and lay readers concerned about the future of public universities. And partly it is a collection of practical recommendations for reform, learned from the school of hard knocks during my years as a professor, department head, dean, and university president.

There are four elements to my “rescue plan.” The first is a proposal to deregulate (not privatize) state universities by turning them into autonomous state-owned entities governed by independent boards of trustees. Like their private sector counterparts, these trustees would have final authority to approve admission requirements, compensation schedules for faculty and administration, curriculums, and tuition and fee schedules.

Second, I propose that states phase out the operating subsidy to public four-year campuses, replacing it with a need based scholarship fund for in-state students. (This is actually an old idea. Economist Richard Vedder credits it to a 1968 paper by Milton Friedman. Vedder has himself endorsed the idea of “progressive vouchers” instead of subsidies in his 2004 book, Going Broke by Degree: Why College Costs Too Much.) Thus, taxpayer dollars that previously subsidized campuses would now be redirected as grants to eligible students. State-supported institutes, centers, research projects, and vital but low-enrollment academic programs (for example, in agriculture or nursing) would not be affected by my proposal.

Under this scenario, the same state dollars would end up at public campuses, but the route taken would be different. Instead of counting on a state appropriation, schools would have to compete with each other for the money. Those schools that offered the greatest value to students – attentive faculty, attractive programs, affordable prices, excellent student services – would prosper and see their enrollments (and revenues) grow. Those that failed to do so would see their enrollments shrink. Lacking a government lifeline, they would either learn to adapt or eventually be forced to shut their doors.

Public campuses would have to raise undergraduate tuition (by typically $4,000-$5,000 per year, depending on the state) in order to make up for their lost revenue. Upper income students would pay the full tab, but because their price sensitivity is weak (as observed recently by Bowen, Chingos and McPherson in Crossing the Finish Line: Completing College at America’s Public Universities), this tuition bump would have little impact on their college choice. Low and middle income students would be armed with scholarships that more than made up for the tuition increase. For them, college would become more affordable because their “discounted net tuition” would go down. The end result would be an increase in college participation rates, a key educational goal of all state governments.

Third, my proposals address the wastefulness and inefficiency of academia that is a favorite target of higher education critics. Here my approach is to streamline campus decision-making through a variety of voluntary financial incentives to encourage professors and administrators to use their time more productively. Since personnel costs are the largest item in a university’s budget, significant savings can result from reducing committee sizes, and eliminating marginally useful committees, and unnecessary and wasteful administrative practices. My suggestions are intended to reap the positive benefits of increased efficiency without jeopardizing academic values and traditions of shared governance.

And finally, I propose revamping the methods for selecting presidents, chancellors, and trustees. In these times, public universities must be headed by courageous, experienced, and sophisticated leaders. However, huge search committees that draw in multiple campus constituencies often have members who lack the experience and knowledge to evaluate candidates properly. I recommend that public universities become more like their private counterparts in conducting searches.

Similarly, I propose revising the way trustees are appointed. Public campus presidents frequently complain about fractious, politicized governing boards, whose members are ideologically driven and lack a nuanced understanding of the institutions they oversee. Here, my suggestions are primarily intended as practical advice for governors, who typically appoint trustees.

Q: Your book talks a lot about incentives (and the flaws with incentives in the current system). Might there be flaws in such an enrollment-driven system? Wouldn't colleges have incentives to focus more on what students may want over what they may need? Wouldn't the college with luxury dorms fare better than the college with Spartan dorms and tough science or language requirements?

A: Although reasonable, these concerns are easily answered. Private universities, which receive no instructional subsidy and depend mostly on tuition revenue, have generally done a better job than the publics at not watering down standards and catering to student whims. Safeguarding academic values and setting curricular standards are faculty responsibilities, and there is nothing in my model that would subvert that responsibility. If anything, by decreasing campus dependency on part-time faculty, the model would strengthen faculty influence. Furthermore, because the model’s incentives discourage mission drift into peripheral ventures, public campuses would be more motivated than now to emphasize academics.

Luxury dorms, sushi-serving dining halls, and the like reflect campus efforts to recruit high income (and full fee-paying) students. My model would weaken this need, because more public universities would find it financially desirable to recruit price-sensitive, low and middle income students who did not value such amenities.

Q: How would this system benefit or change institutions that educate most students (the non-flagships), and especially institutions that serve many low-income students?

A: I anticipate a significant amount of market segmentation under my proposed system, as universities learned to focus on their competitive strengths. Currently, regional universities that serve low-income students (e.g., Cleveland State University) struggle to remain economically viable. Their students can’t afford high fees, and as state appropriations have dwindled, the schools are left with few other revenue sources. The new system would benefit such schools, because their low and middle income students would be armed with need-based grants that would more than reimburse their campuses for the loss of public subsidy.

Flagships and other selective universities (e.g., William and Mary) would also benefit from the new system, but in a different way. These schools tend to attract relatively high income students, whose college expenses are indirectly subsidized by their school’s state subsidy. Although upper income students could afford to pay a higher share of their college expenses, state mandated tuition caps prevent them from being charged a realistic market tuition. Under my proposed model, campuses would be freed from tuition caps and could exploit fully their competitive strengths. Furthermore, low and middle income students, with their new need-based grants, would find such schools more affordable, even after allowing for the higher tuition charges. The tuition model for these schools would more nearly resemble the high tuition/high aid practices of selective private universities.

Ultimately, the new model proposes financial incentives for public campuses to enhance competition, focus on priorities, and better serve students. But whenever money is redistributed, some people benefit and others do not. In this case, those who do not are upper income students who would be required to shoulder more of their educational expenses. (Indirectly, even these students would benefit from attending universities that were financially stronger and more focused on academic priorities.) To me, in these difficult times, it is equitable to ask upper income students to pay more, so that taxpayer dollars can be efficiently redirected to those who are unable to do so.

Q: Under your plan, what share of colleges do you think might go under? Why doesn't that worry you?

A: Of course, I hope that no colleges would ever go under. Nobody would wish that for a school’s employees, students and alumni. In the private college sector, bankruptcy is fortunately a rare event; private institutions have shown themselves to be remarkably resilient, even in the face of great economic uncertainty.

I would expect public universities to be similarly resilient, and I predict failures would also be rare, probably less so than for private colleges, which are unable to benefit from the publics’ economies of scale. However, in my model, the potential for bankruptcy, even if remote, is extremely important, because it places the final responsibility for an institution’s survival on the shoulders of the trustees and administration.

Under the current system, governors and state legislatures determine public university appropriations and tuition charges, and campuses have precious little influence over their decisions. Upgrading the curriculum, creating new majors and programs, enhancing student services, and generally doing a better job raises expenditures but reaps no new income. So all the incentives point in the wrong direction. A major shortcoming of public higher education’s funding model is that income from the state is largely decoupled from campus performance.

My proposals would reverse the direction of the incentive arrow. Schools that invested wisely in improving themselves, that carefully shepherded their resources, focused on mission, and made hard decisions to prune weak programs and trim their bureaucracy, would thrive because they could grow their revenue and reinvest it in making themselves better. And the schools which did not make these adjustments, despite the new incentives, would in the end have themselves mostly to blame for their failure. And so while I do “worry” about colleges going under, especially in disastrous economic times like the present, I am more concerned with protecting the overall health of the system.

Q: Do you think your plan has a chance of being enacted?

A: People often use the frog-in-the-pot metaphor to describe how public universities have allowed themselves slowly to be boiled alive without noticing that the water keeps getting hotter. Well, the current economic crisis has clearly awakened the frog and highlighted the need for it to jump out of the pot before it’s too late.

So, yes, I think some kind of systemic reform is in the offing, and because the alternative is so grim I hope everybody else in public higher education thinks so too. If I had my druthers, I’d go back to the model when college students could pay for their education by working summer jobs, when state legislatures footed most of the expenses, and when classes were taught by full time professors on well-maintained campuses. But those days are never to return, and it is futile to flail around hoping that they will.

So the question is which systemic reform? I think we can all rule out several possibilities. I can’t imagine that the federal government will rescue state universities, at least not in any substantive way, nor will corporations and businesses. The money isn’t there, nor the political will, and even if they were the negatives are too great.

In my opinion, any viable reform plan has to meet several requirements. First, it has to be respectful of the other demands on public funds, demands which aren’t going away. Second, it has to address the chronic and increasingly vociferous complaints by the public (and their elected representatives) about excessive university spending, inefficiency and resistance to change. Third, it has to bring tuition increases under control. And finally, it has to gain the support of university faculty by demonstrating that academic freedom and core academic values won’t be compromised.

Are there better proposals than mine out there? Perhaps, and if so it’s time for people to step forward with them. But even if somebody comes up with the perfect plan, there’s still no guarantee it will come to pass. I’ve been reading Robert Zemsky’s breathtakingly candid (and equally sobering) new book, Making Reform Work: The Case for Transforming American Higher Education. “The history of American higher education,” he writes, “is well supplied with reform movements that have gone nowhere. Despite fervent calls for change… nothing much happens… .” To implement my plan, and presumably any others as well, will require courage and vision on the part of governors and state legislators. But I agree with Zemsky that, ultimately, nothing will happen if professors and campus administrators don’t get on board first. I hope they do, because the water is approaching the boiling point.


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