The Nuclear Option

Facing a fiscal crisis and little prospect of tax-supported revenue in the near future, Colorado State hypothetically entertains privatization.
October 26, 2009

It was just talk, the chancellor now says. But sometimes talk has a way of turning heads.

That’s what’s happened at Colorado State University recently, when the system’s Board of Governors discussed a series of bleak options for dealing with troubling financial projections. A single PowerPoint slide presented to the board, titled “Changing the Paradigm,” suggested a series of “bold steps” -- including "privatizing a large portion of the CSU system” -- to ensure that the university can "survive."

Even in an age when colleges talk about being more “entrepreneurial,” the “private” word remains taboo in public higher education. So it was of little surprise that the presentation -- first reported on by the Denver Post -- had lawmakers squirming and the recently appointed chancellor quickly distancing himself from the very idea.

“It was more in the hypothetical,” says Joe Blake, the university’s first systemwide chancellor. “Certainly the board did not drill down, get into any sort of discussion. The proposition was what happens in Colorado down the line if we get to a point where there is no serious ability of the state to continue to fund public higher education, and what are the choices therefore that the state would have to look at? These were more in the area of ideas, of options because we felt we needed -- and Colorado needs -- to say are we going to be able to sustain the public in public higher education?”

University of Colorado President Bruce Benson quickly shot down the privatization concept, and lawmakers have expressed skepticism as well. Even so, the very idea of privatization being on the table gives some sense of how university leaders are struggling to find solutions in an increasingly challenging budgetary environment.

Colorado State has been able to delay major budget cuts with help from federal stimulus dollars provided through the American Recovery and Reinvestment Act. But the years ahead look troubling. The system’s Fort Collins campus expects to see $46 million, or about 18 percent, of its state budget cut by the 2014 fiscal year. Blake says the system is essentially operating on borrowed time, staying afloat with federal money that will gradually disappear over the next several years.

“I am awake at 3 a.m. worrying about things that are going to happen in two years,” he says. “I’m focused on everything we can possibly consider. We’re not in a panic mode. We haven’t hit the wall. We haven’t hit the cliff.”

It is perhaps unsurprising that talk of privatization would surface this early in Blake’s short tenure, which began in May. The chancellor spent 10 years as president of the Denver Metro Chamber of Commerce, and comes to the job with a background in business -- not academe. His appointment was not without controversy. Chosen through an opaque process, Rep. Paul Weissmann called Blake "another money guy" with little obvious background applicable to Colorado State's key programs. Blake had, however, served on the university's board prior to his selection.

Details of any prospective privation are sparse, but one of the concepts discussed in the board presentation was placing a cap on the number of Colorado resident students who would be eligible for in-state tuition rates. The university would provide in-state tuition only to the number of students that could be supported with the shrinking pool of state funds, and the rest would “pay market-based rates to enter,” according to the presentation.

While university leaders across the state are not of like mind on talk of privatization, there is consensus among them that they need greater flexibility in setting tuition. Meeting at the state Capitol Thursday, Colorado’s public university leaders discussed legislation that would loosen restrictions on tuition rates. But that proposal has been met with a swift response from the incoming executive director of the state’s Department of Higher Education, Rico Munn, who told the Denver Post that Gov. Bill Ritter would not support any such bill.

Ideally, university leaders would like to see Colorado develop a consistent revenue stream for higher education. That would require a voter-approved tax to fund higher education -- a tough sell in a state with 7 percent unemployment and gloomy fiscal prospects.

“In today’s economy that’s a difficult proposition,” Blake concedes. “That would be a couple of years out.”

University leaders are also discussing whether the state would allow institutions to enroll more nonresidents paying higher tuition rates. Colorado currently requires that state residents comprise 55 percent of any public university’s total enrollment.

In a budget crisis, it’s no wonder that universities are contemplating caps on the number of students who qualify for in-state tuition or considering a greater reliance on nonresidents, according to Marc Bousquet, author of How the University Works. But Bousquet, an associate professor of English at Santa Clara University, says these methods divert public universities from their mission -- providing affordable, high quality education to residents.

“What you’re doing here is saying we’re going to ration the number of reasonably priced education opportunities,” he says. “You are saying all tuition will be offered by merit and need and others will be excluded. No matter how you slice it, it’s a rationing plan.”


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