State policy

Massachusetts Should Tax Harvard

Can you believe that the State of Washington actually wants to tax Microsoft? Doesn’t Washington realize that by taxing Microsoft it risks pushing the company to move its headquarters to a lower tax state? And even if Microsoft doesn’t pay taxes it still contributes to the state in many ways by, for example, promoting knowledge creation. Washington wants Microsoft to pay huge sums in taxes just because Microsoft earns astronomic profits. But Microsoft earned these profits through diligence and intelligence. Does Washington really want to punish Microsoft for its hard-earned success?

Washington State, of course, does tax Microsoft. And if Microsoft tried to get out of paying all taxes many college professors would curse the firm for displaying such naked greed. But Harvard University, the Microsoft of the educational world, feels itself entitled to tax exemption.

Some Massachusetts legislators want to tax rich colleges. Under their proposal, as reported on Inside Higher Ed, Massachusetts colleges would pay a 2.5 percent tax on all assets over $1 billion. (The idea is part of a broader push to question whether some colleges with hefty endowments are inappropriately hoarding wealth while continuing to raise their tuitions sharply.) Nine schools, including Harvard and Smith College (my employer), are wealthy enough to be subject to the tax.

The tax would harm higher education in Massachusetts. But almost all taxes inflict harm. Taxing software companies, for example, reduces their output and increases their prices.

Kevin Casey, Harvard's associate vice president for government, community and public affairs, opposes the tax and was quoted in The Boston Globe as saying, “You'd be taxing success here.” But almost all taxes are taxes on success. For example, I just wrote an economics textbook. If the book sells well it will greatly increase my income and so cause me to pay higher Massachusetts taxes. Massachusetts, therefore, would tax my textbook success. But if you want the wealthy to pay more in taxes than the non-wealthy, then you must support taxing financial success.

Kevin Casey also believes that the tax would harm Massachusetts by damaging “stable bedrock institutions." But organizations such as Microsoft could also use this "bedrock institution" argument to argue for their own tax exemption.

Richard J. Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, correctly pointed out that the tax would damage one of the strongest parts of the Massachusetts economy. He said, “It's like Florida taxing oranges.”

Florida, however, does tax its orange industry. A state that didn’t tax its most successful industries would have to impose higher taxes on less successful businesses and so would further impede these businesses’ fortunes.

Taxes are like poison. Taking a lot is fatal, but exposure to small quantities only moderately harms health. The best way for a government to tax, therefore, is for it to spread around its tax poison broadly so no entity must consume too much of it. If Massachusetts is determined to collect a certain amount of taxes from organizations (such as corporations), then it will do less harm if it forces all organizations to pay a little than if it mandates that a subset pay a lot.

A tax on elite colleges would reduce inequality. Students who attend top schools have vastly higher lifetime incomes than other Americans do. And even if the tax reduced financial aid and so increased student borrowing, it would still reduce inequality because those who graduate from elite schools with large debts are much better off financially than are their peers who do not attend college.

The Harvard economics professor Greg Mankiw has suggested that the tax could cause Harvard to move to another state. But whenever a state taxes a business it risks causing the business to flee.

Colleges, I suspect, are far less likely than businesses are to leave a state because of adverse conditions. Yale and the University of Chicago would surely pay a hefty tax to turn their crime-ridden neighborhoods into versions of Stanford’s Palo Alto. Yet both these schools stay put, even when nearly any similarly situated multi-billion-dollar business that sought to attract the best and the brightest (and often the richest) would have long ago moved to more pleasant surroundings.

In his blog Mankiw also writes of how another Harvard professor thinks his institution should act if taxed: This professor proposes that “Harvard can decide to no longer accept the children of Massachusetts residents.” Well, just imagine the reaction if Microsoft, in its anger over being taxed by Washington state, even joked about boycotting all Washington customers.

Although I support taxing rich colleges, I believe there are better ways of doing it than through imposing a wealth tax on endowments. As Mankiw wrote to me, many economists believe it inefficient for governments to tax savings. I would prefer if Massachusetts imposed a sales tax on tuitions. Such a tax might appeal to politicians who don’t begrudge elite colleges their huge wealth but do feel the schools should spend more of their capital on students by, for example, charging low tuitions.

James D. Miller
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James D. Miller is an associate professor of economics at Smith College and the author of a new Principles of Microeconomics textbook.

Ensuring That States Support Higher Ed

As summer reaches its mid-point, selected high ranking U.S. House and Senate members continue to work on finalizing massive legislation to renew the Higher Education Act, which has already gone through seven extensions this year. One of the few primary issues still being debated is the “State Commitment to Affordable College Education Amendment,” commonly known as the “Maintenance of Effort” provision. The provision seeks to hold states accountable for maintaining certain levels of tax support for higher education, and I believe it is essential for the future of public higher education.

The maintenance of effort provision, which was advanced by Rep. George Miller of California, Rep. John Tierney of Massachusetts and supported by members of both parties on the U.S. House Committee on Education and Labor, is premised on the fact that the most significant factor impacting the rapidly rising cost of college education for nearly 80 percent of the higher education population has been the relentless decline in commitment on the part of most state governments to maintain requisite levels of public funding. The result of this long-term decreasing commitment has been that in many states, as state appropriations have dwindled, public university tuition and fees have skyrocketed. This trend has effectively shifted the burden of funding higher education from the general public to the student.

What Representatives Miller, Tierney and other bipartisan members of the House Education and Labor Committee have figured out is that billions in new student aid dollars will have little effect on the expansion of educational opportunity if state legislatures continue to consistently reduce their fiscal commitment to higher education. Essentially, MOE is a first step in holding states accountable for retaining given levels of appropriations for their own students. The perversity of the present system is that as state legislatures lower their fiscal effort or do not provide adequate support for increasing student populations, tuitions and fees subsequently rise, and as a result most federal student aid programs are tapped at higher levels further indebting ever more students and with greater average debt.

Many state officials have become savvy about the process. In fact, I was told by a very high ranking member of the state legislature in Kentucky a couple of years ago that he did not need to provide additional tax support for public universities since the institutions themselves had the ability to increase their own student tuition and acquire the funds through the federal tuition-based aid programs. This “supplanting” of state support with federal tuition-based program support occurs more readily when state economies are bad or simply when legislators, by whim or fancy, refuse to provide the appropriate levels of public tax support, knowing full well that public universities will in response raise student tuition and fees to provide essential funds.

As a consequence, additional fiscal burdens are placed directly on students and indirectly on the federal government to offset what states fail to provide. This has been a pattern over the last three decades as increases in state legislative appropriations have been unreliable and state institutions are sent scrambling for needed revenues. The maintenance of effort provision has the potential to place pressure, through the secretary of education, to better stabilize state appropriations by means of federal disincentives through the use of Leveraging Educational Assistance Program funds and other programs, or incentives when new federal funds are made available in the future.

Supporters of the MOE provision include the American Association of State Colleges and Universities, which represents the majority of public universities nationwide, and numerous national student organizations. Opposition to the inclusion of the MOE Amendment is spearheaded by the National Governors Association and Council of State Governments, who have the obvious interest in seeing that billions in funding should continue to flow freely without strings. This no-strings approach is, of course, extremely attractive to states that continue to reduce their commitment to public higher education by shifting the financial responsibility away from themselves.

Strong opposition also resonates from the “states’ rights” element that insists that the federal government should not have such fiscal leverage over states. Leading this charge is Sen. Lamar Alexander of Tennessee, who as U.S. secretary of education favored the elimination of the Department of Education and represents a state that is constantly last, or near last, among the 50 states in its tax effort to support public education at virtually all levels.

Legislators, such as Senator Alexander, who argue that states should receive federal funding without a corresponding fiscal commitment to higher education actually perceive that this anti-state tax effort strategy is good public policy. Unfortunately, in this system, the students are the ultimate losers as college affordability declines and federal direct student aid dollars are increasingly rendered less effective.

Many opponents of this amendment also insist that the MOE provision is precedent setting and represents a new dimension of federal encroachment in state sovereignty. In fact, concerns about the federal government holding states fiscally accountable is not new and has been a staple of education and welfare legislation for many decades. In 1965 the Elementary and Secondary Education Act carried with it a maintenance of effort provision that forbade states to supplant their own funding with federal dollars. Over the last four decades, these supplanting provisions have been upheld and enforced by federal courts on numerous occasions. Medicaid, and other federal funding measures operate in similar fashion making it difficult for state legislatures to cut funding without federal fiscal consequences.

In summary, maintenance of effort is an essential component for ensuring that states are held accountable for their funding of higher education. This amendment, if used effectively by blending both fiscal disincentives and incentives, will make states think twice before cutting higher education appropriations and should have an attendant effect of better stabilizing state higher education finding. The true winners will be, of course, the students, but in the broader context the spillover beneficiaries from state fiscal stabilization and enhancements to higher education will be the entire social and economic system.

F. King Alexander
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F. King Alexander is president of California State University at Long Beach.

On 'Real Education' - II

Bell Curve author Charles Murray takes direct aim at higher education in his new book Real Education by asserting that we are wasting our time trying to educate too many people. Murray contends that only 10 to 20 percent of those enrolled in four-year degree programs should actually be there. His pessimistic view of people’s ability to learn ignores not just good evidence to the contrary but the real pressures the American economy is facing. Removing some 80-90 percent of our students in in my state, or just about any state would interrupt the pipeline of skilled workers, making it nearly impossible to meet the needs of a society that has defined postsecondary credentials as an entry point for most professions.

Consider the following:

  • The U.S. Department of Labor reports that the country needs more graduates if we are to keep up with, let alone lead, other nations in the global economy.
  • By the end of the next president’s first term, there will be three million more jobs requiring bachelor’s degrees and not enough college graduates to fill them.
  • 90 percent of the fastest growing job categories, including software engineers, physical therapists, and preschool teachers, 60 percent of all new jobs, and 40 percent of manufacturing jobs will all require some form of postsecondary education.

We need more, not fewer university and community college graduates, even in rural states like mine. South Dakota’s aging population will require 30 percent more health care workers in the coming decades -- and those workers will require degrees. We’re also facing a teacher shortage; educators of all levels need postsecondary education to successfully command and manage a classroom, let alone impart wisdom on elementary and secondary students. Our state also lacks accountants, and the industry has informed us that tomorrow’s professionals will require 150 hours of postsecondary education to successfully complete the Certified Public Accountant’s exam.

Those left out of higher education would have fewer employment options than they do today. Low-wage, low-skill careers are disappearing rapidly, as manufacturing jobs head overseas and American companies are looking for new ways to compete. Those workers who hope to maintain their current standard of living must have some sort of postsecondary credential -- participation in the knowledge-based economy demands it. Without some type of degree, their ability to pay for basics like housing, food, and gas will diminish greatly.

We cannot survive in an international economy by simply working cheaper, as there will always be companies overseas who are willing and able to use unskilled work at a lower cost. If we are to work smarter, our workforce needs to acquire more knowledge and skills that are adaptable in a constantly changing world. The people who have proven to be the most knowledgeable, skilled and adaptable are those with postsecondary credentials. Murray’s suggestions are completely contrary to this. Dummying down our workforce would result in a lower standard of living for most Americans.

The United States has long enjoyed the enviable position as the leader in educational attainment -- just a decade ago, we led all other industrialized nations in this area. That’s no longer the case. Now, we rank tenth behind other nations in the percentage of young adults with postsecondary credentials. The National Center for Higher Education Management Systems indicates that the U.S. will need to produce 63.1 million degrees to match leading nations Canada, Japan and South Korea in the percentage of adults with a college degree by 2025. At our current pace, we would fall short of that threshold by 16 million degrees.

Educating a larger percentage of the population does not amount to “educational romanticism,” as Murray contends. It simply makes sense -- both economically and socially. Higher education allows people of all backgrounds to hone their writing, reading, cognitive and critical thinking skills that enable them to actively participate as citizens. Not everyone who completes a four-year degree will be able to write like William Faulkner -- and some may argue that’s a good thing. But the papers students have to research and write in college are valuable and marketable experiences to future employers who need workers who can craft memos, reports and strategic plans, all valuable skills in the knowledge economy. Moreover, people with postsecondary degrees also tend to be healthier, are more productive throughout their work lives, are more engaged in their communities, more philanthropic and are less likely to be involved in crime.

The State Higher Education Executive Officers are calling on political leaders make college access and success a national priority. To heed this call, SHEEO believes we need to take immediate action by:

  • Targeting low-income and first-generation students (populations who are historically least likely to succeed in college and complete their degree programs), by allocating greater public resources to community colleges and regional four-year institutions, while also providing adequate need-based financial aid.
  • Overhauling the notoriously complex financial aid system. We can start by making most of the required data for the Free Application for Federal Student Aid directly transferable from the federal income tax form. Also, Pell Grants should be pegged to students’ basic living costs, rather than tuition, to highlight the responsibility of states and colleges to moderate tuition and fees and to provide grants for tuition to low-income students.
  • Developing information systems to better track students’ progress and determine whether they are at risk of dropping out.

In South Dakota, we’re committed to raising our graduation rates by 20 percent by 2010, so we can be competitive both nationally and internationally. To do so, the state is reaching out to nontraditional adult learners by offering more university classes in urban centers. The state’s public institutions are opening our doors to more out-of-state students by cutting our non-resident tuition rates in half. So far, the increase in students has offset any potential revenue shortfall. The state is also providing $5,000 scholarships to students who take more rigorous courses in high school, maintain a B average, receive a 24 on their ACT and pursue their education in South Dakota. We also want to make sure that those students who start college, finish college. To that end, our Board of Regents has tied retention rates to a pool of performance dollars; retention rates are on the rise.

To Murray’s point, people do vary in academic ability, and not everyone can handle the rigors of a postsecondary degree program. I’m not suggesting that everyone needs to spend four years at a flagship state institution, or even two years at their local community college. However, everyone should have at least the option to participate successfully in some form of postsecondary experience -- be it a Ph.D. program or a short-term certificate program for dental assistants. Educators need to help more average Americans and educational elite succeed. It’s common sense. And our future depends on it.

Robert T. Perry
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Robert T. Perry is executive director of the South Dakota Board of Regents.

College vs. Employment

In forming a strategy to deal with the severe economic downturn, President-elect Obama and his evolving brain trust of economic advisers should recall the largely successful and innovative efforts by federal and state governments to avoid a projected steep post-World War II recession -- in particular, the key role given to higher education.

Beginning in earnest in 1944, many leaders in Washington and in the state capitals throughout the nation worried about a return to Depression-era unemployment rates -- President Roosevelt included.

There are many reasons that the expected deep recession eventually turned into the beginning of an economic boom in the US after the war, including high saving rates during the war with the result of unanticipated and pent-up consumer demand. But another reason was proactive efforts to mitigate feared unemployment rates, to support industries with growth potential, and to fund yet another round of infrastructure development and expand public services.

One of the most important salves that came out of that era of policy making, one that provides a guide for our present predicament, was the embrace of large-scale investments and innovative policies by both federal and state governments to promote greater access to higher education.

The famed GI Bill, for example, was not simply an effort to open new opportunities for deserving returning veterans -- many of whom had delayed their education or needed new skills to enter the job market. The unprecedented investment by the federal government in providing grants for college had another important purpose: to reduce projected unemployment rolls and, at the same time, help restructure the U.S. labor market by producing a more skilled labor force.

State governments acted as a partner in that macroeconomic strategy. Under the leadership of Gov. Earl Warren, for instance, California expanded markedly the physical capacity of their public higher education systems by establishing new campuses, hiring new faculty, eventually creating their own scholarship programs to supplant the GI Bill, and subsequently reaping tremendous economic and social benefits from the investment in human capital.

The Role of Higher Education in National Economic Recovery Today

That basic strategy of expanding funding for individuals to attend a college or university and to get a degree, and funding the expansion of higher education institutions, is a key component thus far missing in the national debate over the route to economic recovery.

Expanding higher education funding and enrollment capacity may be as important as any other policy lever to cope with an economic downturn, including funding for infrastructure. Any new federal initiative to boost access could also be designed for an immediate impact on the economy.

The overall educational attainment of a nation is, in fact, much more important today than some 60 years ago. Broad access is increasingly viewed as vital for socioeconomic mobility and demand for higher education generally goes up during economic downturns. Individuals who lose their jobs, or fear low prospects for employment in declining economies, see a university or college degree as a means to better employment prospects.

In some significant measure, it is likely that enrollment demand will go up, particularly in the public higher education sector, because tuition costs are generally much lower than in the private independent and for-profit sectors. We are already seeing evidence that many students who had planned to attend private or out-of-state public colleges will turn to cheaper in-state options.

Yet most state and local governments are in the midst of wholesale cutting of their budgets, the initial rounds of large and succeeding cuts to their public higher education systems.

Some 75 percent of all students in the U.S. are in public institutions. Feeling the effects of repeated cuts in budgets, many multi-campus public systems are threatening to cap or event lower enrollment despite growing demand -- including the California State University system, one of the nation’s largest four-year university systems.

To make ends meet, places like CSU simply cannot afford more part-time, let alone full-time, faculty to teach the classes -- this despite a 20 percent increase in freshman applications over last year. In the face of this significant rise in demand, CSU plans to cut its enrollment by some 10,000 students. That would mean a net 10 percent cut in total freshman admitted for 2009-10 over this academic year. Most CSU undergraduates are in their mid-20s, meaning some sizable number of students will be displaced, forced into an eroding labor market.

CSU’s planned limit on enrollment is in reaction to successive years of major budget cuts, including a mid-year cut of some $66 million and probably larger cuts next academic year. CSU already took a $31.3 million cut earlier this year.

The ten-campus University of California system might follow suit. Adjusted for inflation and enrollment growth, state funding on a per-student basis at UC has fallen nearly 40 percent since 1990 -- from $15,860 in 1990 to $9,560 today in current, inflation-adjusted dollars. The UC president and the Board of Regents have made preliminary threats of a similar reduction to that of CSU in freshman admissions that would equate to a 6 percent overall reduction in the universities' system-wide undergraduate enrollment.

Admittedly, such threats in the past have acted as negotiating positions with the state legislature and governor. But these are not ordinary times, and this is not an ordinary recession.

The net effect of any enrollment caps in the public four-year institutions is a seemingly unrealistic expectation that California’s community colleges will act as a buffer, absorbing the spill-off of students denied admission at UC and CSU and the general rise in demand for higher education. That won’t happen.

California’s community colleges are already facing initial cuts of $332.2 million. There will be no additional funding for expanding the community colleges, with one estimate that more than 250,000 students will be turned away -- the colleges will be cutting the number of part-time lecturers in the midst of unprecedented demand for classes. I sense that that number will be much larger without a proactive mitigation.

A similar cascading scenario will occur across the nation. Millions of students are already flocking to community colleges and public universities at a time of midyear cuts that are forcing colleges to lay off faculty members and cut classes; many higher education institutions are already freezing enrollment.

In New York, Gov. David Paterson faces a large budget deficit and plans midyear cuts of some $348 million in the budget for the State University of New York’s 64-campus system and the City University of New York. This comes on top of some $196 million in cuts made earlier in this fiscal year. All of this will have an impact on access and enrollment rates.

After a long period of declining public financing for higher education on a per student basis, most public universities and colleges have little room to yet again do more with less. State budget cuts for higher education already in the works will undoubtedly have a negative impact on student access rates for this academic year. But the largest impact will come in 2009-10 when tumbling state budget allocations will correspond with rising demand for higher education.

Beyond bonds for construction, most states, like California, have severe limits on borrowing. Most must provide balanced budgets under their state constitutions. Some may raise taxes to cover growing real and projected deficits; but most will cut deeply into public expenditures, including education.

Public university and college systems in California and other states are no longer interested in pitching in to expand enrollment without the resources; now they are pushing back under the rubric of self-preservation. Every institution is increasingly sensing that they are on their own, and not part of a collective effort to serve a state, to serve a nation. No one that I am aware of has modeled the potential impact of this cascading effect of the disparate actions of state governments, multi-campus systems, and individual institutions cutting budgets and cutting enrollment.

The traditional lever of public college and universities to help cope with declining state and local revenues is to raise tuition and fees. However, I sense that we are at a point where significant fee increases, matched by rising unemployment rates and continued constrictions in credit markets, will cause a huge, artificial downward pressure on the ability of students to enroll in all types of institutions -- from community colleges to major selective universities. Further, additional tuition revenue will likely not cover the added cost of expanding classes and campus infrastructure required to meet enrollment demand.

Would it be smart to constrict access to higher education just when unemployment rates are potentially peaking?

U.S. Lags Behind Other Nations

The U.S. is already lagging behind many international competitors in the number of students entering and, even more importantly, graduating with a college degree. Less than two decades ago, America had the highest rate not only of students who entered a college or university, but also of those who then actually earned a bachelor’s degree or higher. Now the U.S. ranks a rather meager 16th in the percentage of young people who get a degree – behind Australia, Iceland, New Zealand, Finland, Denmark, Poland, the Netherlands, Italy, Norway, the United Kingdom, Ireland, Sweden, Israel, Hungary, and Japan. Indeed, and sadly, the U.S. is one of the few OECD nations in which the older generation has achieved higher rates of education attainment than the younger generation.

Here is the gist of the problem: too few students who graduate from high school; too many part-time students; too high a proportion of students (nearly 50 percent) in two-year community colleges, most never getting a degree; too many part-time faculty; an absence of long-term goals at the national level and by state governments regarding higher education access and graduation rates; and to date no well-conceived funding models to assure quality.

This is a problem that needs national leadership. The U.S. continues to grow in population. Today, the U.S. enrolls about 19 million students in degree-granting colleges and universities. If current participation rates remain flat, and states and federal governments don’t cut further the budgets for higher education, we would grow by about 2.5 million students over the next 15 years. But if the U.S. were to match the progress of our economic competitors and expand access to its growing population, one study indicates it would need to grow by more than 10 million students.

The deleterious effects of further and large-scale cuts to higher education, combined with modest improvements to an already inadequate financial aid system for low- and middle-income students, would pose a triple hit for the U.S.

First, access and graduate rates would decline in the near and possibly long term, depending on the depth of the economic collapse and the actions of government. The U.S. already has the highest percentage of part-time students among those enrolled in higher education when compared to economic competitors -- not by choice largely, but a result of personal economic necessity. This indicates the fragility of current access rates.

Second, unemployment rates would climb higher and probably have disproportionate effects on working- and middle-class students

Third, depending on the actions of other economic competitors, most of whom have concrete national policies to expand higher education access and graduation rates (the U.S. has no such policy), the U.S. will accelerate its international decline in overall educational attainment.

A Happier Scenario

Another and much happier scenario, however, would be that the federal government, in partnership with state governments, view higher education as a vital component for economic recovery and long-term prosperity -- on par with new investments in infrastructure and stop-gap measures to stabilize housing and credit markets.

How to adequately assess options and their costs and benefits is a complicated question. For example, what would be the potential impact of greater, or lower, access to college on, for instance, unemployment rates?

At the same time, the incoming Obama administration must decide among a growing number of economic recovery initiatives, each with their own interest groups and heartfelt supporters. Everyone has his or her hand out. Weighing the benefits and costs of competing demands for federal tax dollars will be increasingly difficult.

An exploratory Commission on Higher Education, not unlike what President Harry Truman formed in 1946 but with more urgency, and possibly an initial budget overseen by the new secretary of education, could provide a larger vision and contemplate a range of options -- big-picture analysis that the myopic Spellings Commission simply ignored in its fixation with creating new accountability regimes. Accountability is not an end, but a means, and that was seemingly lost on Education Secretary Margaret Spellings, the commission’s leadership, and a cadre of higher education pundits.

President-elect Barack Obama has repeatedly noted the importance of raising educational attainment rates, and improving the quality of education in the U.S.. The Obama campaign did offer a number of important policy initiatives related to higher education. These included greater reliance on direct loans from the federal government (instead of subsidizing private bank loans), a long-overdue simplification of federal financial aid forms by linking applications to tax filings, marginal funding for community colleges to create more job- oriented programs, indexing Pell Grant maximum awards to the rate of inflation, and offering a one-time refundable tax credit of $4,000 to a student who agrees to 100 hours of public service over two years.

These are all good ideas. But they are simply not enough in light of mega-trends in the economy and America’s underperformance in education.

1. Short-Term

Short-term and immediate policies could include significant directed subsidization via state governments of their public higher education sectors relative to projected near term enrollment demand -- to essentially stop states or major public universities from capping enrollment or turning away large numbers of students. Federal Pell Grants for low-income students, already severely underfunded relative to demand, could be increased significantly in the amount awarded and the number of students receiving aid.

Resources for direct loans could be substantially expanded and made more generous with the possibility of a one-time grant for middle-income students to attend a participating public or accredited private institution that would also receive a small federal allocation. In return, these institutions would promise to reduce tuition for students enrolled in the federal program -- perhaps by 5 percent for publics, and 10 percent for selective privates. Such programs, like the GI Bill, helped to galvanize the higher education institutions in the nation, public and private, into understanding their distinct and significant role in real and anticipated hard times.

Another idea might be to tie federal unemployment compensation with access to an accredited higher education institution -- perhaps targeted to certain groups as an option.

Any infrastructure investment initiative should also focus a portion of its portfolio to support public college and university building programs that expand enrollment capacity, like classrooms, or meet research and faculty needs -- such as offices and research labs. Such a program would reflect the federal government’s brief but important investment in university and college building programs during the mid-1960s and could require matching funding from state governments or private enterprise.

There is always the question of whether to fund the individual students or institutions. Past federal policy has focused on funding of grants and loans to individuals. But there is urgency to venture, at least on a temporary basis, into funding key and largely public institutions -- the main providers who have explicit public purposes.

2. Long-Term

Long-term goals need to assess the overall health of the U.S.’s still famous, but strained, higher education system and what national and state goals might be conjured. In states with projected long-term and large population growth, like Florida, California and Texas, there has been no coordinated assessment of actual enrollment capacity. Can they grow to meet ambitious efforts to increase educational attainment levels? What would constitute a “smart growth” approach to capacity building?

Cost containment in higher education, particularly among selective institutions, and how to finance public higher education is also an important long-term policy issue that needs a macro-view. But the vast majority of public higher education, I would argue, is vastly underfunded, and not, as many critics like to crow, overtly inefficient.

What alternative models are there for financing public higher education? A national consideration of alternative funding models could help guide states, and public and private institutions, toward a funding scheme that aligns with a national goal for educational attainment. This could include providing states with guidelines and models of best practices. Issues related to fees and tuition in public colleges and universities, for instance, are almost hopelessly mired in state politics, and often misguided analysis on affordability.

For good and bad, the U.S. higher education system has been relatively stable over the past 50-plus years, subject to only marginal efforts at reform and reorganization. Stability is important for institution-building and focusing on the quality of what institutions are designated to do within their respective state network of public and private colleges and universities. But the lack of innovation and serious consideration of the overall fit of the current system with current and future economic and socio-economic mobility needs of society is already proving to be a significant problem for the U.S. -- one among many.

States should not be left on their own to reinvigorate and use their higher education systems to mitigate the economic downturn or to, essentially, chart the future labor force and, ultimately, competitiveness of the US. Simply stated, they are not now capable of charting aggressive and enlightened policies related to higher education like they did in the now very distant past. As noted, they are hampered by growing and competing demands for the tax dollar including health care, prisons, and they face significant limits on their ability to launch a spending program suitable for meeting rising enrollment demand.

Further, states generally lack a broad understanding or concern regarding issues related to national competitiveness and the larger problems of growing social and economic stratification. Arguably, now is the time for strategic period of federal government investment, targeted to individual students and supporting colleges and universities.

What will other nations do with their network of universities and colleges in the midst of the unprecedented turn in the global economy? The jury is out. Perhaps a few nations, and in particular their ministries of education, have grasped the role of higher education for mitigating the severe economic swing we are experiencing now. They will redouble their efforts to expand the role of higher education during the economic downturn, or at least protect that sector from large cuts in funding.

Those nations that resort to uncoordinated and reactionary cutting of funding, and reductions in access, will find themselves at a disadvantage for dealing with impact of the worldwide recession, and will lose ground in the race to develop human capital suitable for the modern era.

Like the Roosevelt and later Truman presidential administrations, the incoming Obama administration should more fully integrate higher education policy into its economic recovery strategy. The U.S. is at a critical juncture in effectively combating the severity of the economic downturn, and higher education will either be an important mitigation, or a large-scale drag on economic recovery. What is missing thus far is the national leadership that can do something proactive.

John Aubrey Douglass
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John Aubrey Douglass’ most recent book is The Conditions for Admissions: Access, Equity, and the Social Contract of Public Universities (Stanford Press). He writes about global trends in higher education. A version of this paper was published by UC Berkeley’s Center for Studies in Higher Education in its on-line Research and Occasional Paper Series.

Fixing the Babel of Multi-State Licensure

From time to time there is discussion in higher ed circles about the desirability of developing a system of college approval using interstate reciprocity based on a model code. The reason this subject comes up more and more often is that more colleges are operating outside their original state of licensure. Schools end up complying with a dozen different sets of state laws and, in many cases, pay significant fees to multiple jurisdictions. All of this has the net effect of increasing the cost of serving students.

Because of the exceptionally decentralized system of college operations and approvals in the U.S., there is no meaningful federal approval that can be relied on to guarantee that certain standards are met.

Reliance on accrediting bodies does not work for a number of reasons. First, accreditors are membership-based organizations; they are not set up to operate as enforcement agents. Also, they are not structurally or legally capable of resolving student complaints, which is a significant role that states currently handle. They have standards that vary somewhat from group to group. In many cases they do not have frequent enough contact with schools. Finally, they are not answerable to the public in any reasonably direct way.

I have heard college leaders argue that they should not be answerable to the public. It is important to remember that although faculty require the freedom to pursue truth where it may lead them without political interference, colleges as a whole are indeed answerable to the public. In fact, only a government can give them degree-granting power, under U.S. law. This is our only bulwark against diploma mills, and the admirable recent actions by Wyoming and Alabama governments to snuff some dubious colleges demonstrates its necessity.

I have heard accreditors argue that because their standards are acceptable to the U.S. Department of Education, states should treat those standards as automatically acceptable. This assumes that the Department of Education has sufficient academic standards that it requires accreditors to enforce, which it does not. The feds do a fairly good job of making sure that colleges who get federal aid are capable of handling it, but they are not in the academic program oversight business. I do not think that any discussion of interstate standards or reciprocity should get tangled up in a discussion of what accreditors or the feds do.

But what do the states do? I work as principal college evaluator for Oregon, and have also done evaluations for several other states. The things that states focus on, and which any interstate agreements would have to incorporate, tend to be detailed and prescriptive, unlike the bulk of accreditation standards.

For example, every three years Oregon requires our approved private-college programs to provide my office with detailed qualification information for every faculty member, full-time and part-time. We look at exactly what their degrees are, what their experience is, and what courses they teach. We often find colleges using faculty to teach in fields in which they are not qualified. We fix that problem.

That is just one example, but it is something that no other type of agency, state or federal, does, except in certain narrow contexts such as evaluation of grant applicants. Why do we do it? Because states are legally responsible for the quality of the educational programs at all colleges, public and private, that operate in our jurisdiction, and in many cases only the state has that responsibility. We have to do it because no one else does or can. We take that role seriously and for the most part (California and Hawaii being the most obvious exceptions) we do it well.

It is time for states to look carefully at each other’s laws and figure out a way to recognize each other’s work when it meets certain minimum standards. What should those standards include? Although there are many possible things to evaluate about a college, the core of any model code upon which reciprocity could be based would have to include the following.

Faculty qualifications. Without a careful look at who is teaching what, and whether they are qualified to do so, meaningful evaluation of a college’s quality is not possible.

Curriculum. Are the programs in each field structured in a reasonable way, comparable to the norm at similar institutions?

Award of credit. Is credit awarded based on an appropriate amount of student work (for example, are schools prevented from giving a degree based on a weekend’s work)? Is credit awarded primarily based on teaching by the school’s own faculty? Is transfer credit limited to schools of demonstrably similar quality? Is credit by examination limited? Is so-called “life experience” credit strictly limited and carefully evaluated?

Admissions. Are admitted students capable of performing college-level work? Are they provided accurate information during the recruitment and admission process? Are any job placement claims backed by solid data?

Finances. Is the college solvent? Does it have adequate reserves to get through periods of falling enrollment? Are fees established and assessed in an appropriate manner, and only on a term-by-term basis? Are refunds available on an appropriate schedule, also term-by-term?

Are there other issues? Certainly, among which are student services, library access and the experience of college managers. However, the five categories shown above have proven to be the crucial ones in my years of experience as an evaluator. The reason is that a failure of performance in any one of these five almost certainly means that the college is not acting appropriately, cannot succeed and is likely to founder. Indeed, a major failure in any of these five should lead the responsible state government to take action to make certain that the college cleans up its act or is closed.

If I could be certain that another state was doing a good job of enforcement in the five core categories, would I be willing to allow a college based in that state to operate in Oregon without going through my own state’s detailed and expensive evaluation process? Yes, with a couple of provisos.

First, faculty teaching only at Oregon’s branch would have to be evaluated by someone, either my office or the state of origin. That is a fairly straightforward task and could be handled by either state, though if they are local residents it probably makes more sense for them to be screened by the state where they teach.

The larger issue is that of student complaints. One of the reasons that offices like mine exist is to provide students who have a bad experience owing to inappropriate actions by a college with a way to get complaints resolved without resorting to litigation. In effect, we are a mediator with a very large stick in the closet. In my ten years as Oregon’s chief evaluator, I have rarely had to use the stick, though I have occasionally cast an ostentatious glance in its direction for effect. Sometimes student complaints are simply not justified or don’t violate any state rule. Sometimes a student complaint uncovers a very significant issue that a college needs to fix. A state can compel corrective action.

It is impractical to expect a student in Oregon to get complaints resolved by a state agency in Indiana or Texas. It seems clear that any streamlined state approval reciprocity would need to leave a significant chunk of problem-solving in the hands of the state where the problem happened. That in turn would require that a model code and reciprocity agreement include arrangements for interstate cooperation in such issues. In practice, I work with my colleagues in other states (and several Canadian provinces) quite often already. We help each other with various kinds of issues. I have no doubt that states willing to sign a reciprocity agreement would be willing to help each other make it work.

So how do we begin? Well-meaning education organizations with little knowledge of the practicalities of how state approvals actually work will decide that they should simply invent such a system without bothering to involve actual regulators. To preclude this kind of bumblehandedness, we need the states to simply get to work on this project and develop a workable model code. An attempt to do this happened in the 1970s, but it was not timely. Today, with so many schools operating across state lines, the need has never been greater.

Alan Contreras
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Alan Contreras works for the State of Oregon. His views do not necessarily represent those of his employer.

History We Can't Afford to Repeat

For the 11th time since World War II, boom has turned to bust in our economy. Recession brings change in both the public and private sectors, as industries and government are forced to rethink how and to whom they deliver products and services. The current recession will be no exception.

Higher education’s response to economic downturns, however, has changed little. States and their colleges and universities have used the same strategy in every recession of the past generation, doing less of the same -- reducing access, cutting programs and services -- and charging students and their families more. During each of the last three recessions, average tuition and fees at public colleges and universities have climbed nearly 25 percent, and enrollment has fallen in two of these recessions.

Choosing retrenchment over reform has helped to make college more expensive and less accessible and affordable. Since the last recession of 2001, the U.S. has fallen to tenth in the percentage of young adults with a college degree, the share of income needed for the poorest family to pay public college expenses after financial aid has jumped from 39 percent to 55 percent, and student loan borrowing has nearly doubled.

The world surrounding higher education has changed significantly since the last recession, in ways that make a repeat of past behavior riskier than before.

Eight years ago, the knowledge economy was still developing, and the Baby Boomers -- our best-educated generation -- were still in the prime of their working lives. Today, half of the fastest-growing jobs require education beyond high school, and the first of the Baby Boomers will reach retirement age in just two years. This means that millions of college-educated workers will be needed to fill new and existing jobs, and our current completion rates won’t meet that need.

Eight years ago, two-thirds of Americans believed that success in the work force didn’t require a college degree and a majority thought that qualified students could get to and through college. Today, more than half of Americans say that a college education is essential, and two-thirds say that eligible students are being shut out of college. The public’s demand for access to higher education and their confidence in colleges’ and universities’ ability to deliver it are on a collision course.

Despite these warning signs, we’re already seeing history repeat itself. Lawmakers in Florida are moving to allow every public university to increase tuition by as much as 15 percent per year despite widespread public opposition. Three of the nation’s largest public university systems -- the University of California, California State University, and Arizona State University -- are proceeding with plans to cap or cut enrollment amid rapid growth in their states’ college-going populations.

How do we break this cycle and redefine higher education’s response to financial crisis? It will require strong leadership at the state, system, and campus levels, focusing on priorities, productivity, and innovation.

Setting priorities involves hard choices. We believe that in the current financial crisis, ensuring accessible and affordable undergraduate education must be the highest priority. States should not cut higher education disproportionately compared to other state services and rely on students to make up the difference through tuition hikes. Colleges and universities should share resources to ensure that every eligible student can enroll, and redirect resources from high cost, low need graduate and research programs to undergraduate instruction. Both should make financial need the top priority for their student aid funds.

We see encouraging signs on this front. Governors in Maryland, Michigan, and Missouri have proposed shielding higher education from cuts in exchange for tuition freezes. In Pennsylvania, Gov. Ed Rendell has proposed a bold effort to increase need-based aid for students attending community and state colleges.

Gauging and increasing productivity is also a must. State, system, and campus leaders need to look at how money is being spent and the results of that spending, rather than simply focusing on revenues. They must also set clear expectations for institutions to regularly review these data and use them to reform or eliminate high cost, low performing programs and reinvest the savings in areas consistent with state needs and priorities.

There are positive developments in this area as well. The National Association of System Heads is working with public university systems in nearly 20 states to better measure and manage costs as part of a broader push to improve participation and completion rates for underrepresented students. One of the participating systems -- Mississippi Institutions of Higher Learning -- has changed its budget development process to include a focus on institutional spending, not just campus wish lists.

The third -- and perhaps most important -- element is innovation. Our colleges and universities are renowned for the innovations that they bring to other fields, but they focus relatively little on their own reinvention. Many promising initiatives, including dual high school/college enrollment and course redesign, operate on marginal dollars in good times and are the first to be cut when budgets tighten.

Here again, some states are showing leadership. Policy makers in Indiana, Ohio, Tennessee, and Texas are exploring new funding models that would include real incentives for retaining and graduating students, not just enrolling them.

Recessions are inevitable, but our responses to them are not. Policy makers and higher education leaders who once again decide to do less of the same and charge more for it will tell us that they had no other choice. But we know that just isn’t true.

Patrick M. Callan and Robert H. Atwell
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Patrick M. Callan is president of the non-profit, non-partisan National Center for Public Policy and Higher Education. Robert H. Atwell is president emeritus of the American Council on Education, serves on the National Center’s board of directors, and chairs the board of directors of the Delta Project on Postsecondary Costs, Productivity, and Accountability.

Saving Public Higher Ed

Our nation’s system of public higher education is in crisis. Unprecedented funding cuts give us several reasons to be concerned: First, about 70 percent of American college students attend public colleges and universities, which means more than 12 million students may be directly affected. Second, many public institutions produce a wealth of valuable research that serves as an engine for both regional and national economic growth.

Less well known is that the crisis in the publics has the potential to undermine the high quality of American higher education as a whole. While state budget cuts may appear to be aimed at the publics, we will all be poorer if our renowned system is allowed to falter. As a result, everyone in the academy -- even those of us in private institutions -- should be thinking of ways to revitalize public higher education.

While there is talk in academic circles of various reforms, two specific changes would go a long way toward helping public institutions strengthen their positions: revamping public university governance, and establishing a progressive tuition structure.

A diversified model

Anyone who spends time outside the U.S. knows that American higher education remains the envy of the world. One of the characteristics that distinguishes our system from others is that the U.S. does not have a centralized approach to higher education. There is no government minister who provides a uniform curriculum or one national research agenda.

The American system is decentralized, which allows for a diversity of approaches and a significant amount of experimentation and innovation. It also fosters healthy competition. Small schools compete with large schools; publics compete with privates; comprehensive universities compete with liberal arts colleges. And there is spirited competition within these groups.

The result is an educational richness not found in other parts of the world. Some liberal arts programs specialize in teaching great books, while others excel in music and the arts. Other institutions become known for their scientific or technical degrees. There are different learning models as well, ranging from traditional classroom education to experiential learning, which involves the integration of classroom study and real-world experience.

There is no one-size-fits-all -- our students are free to choose from a wide range of educational models best suited to their learning styles and future aspirations.

The same dynamic is present in research. Although federal support for university research is a key component -- and there are certainly government research priorities -- there is ample room for faculty- and institution-driven initiatives. Myriad government and private funding sources provide support for a range of different priorities and possibilities. Some institutions are powerhouses in energy or life sciences, while others focus research efforts on economics, agriculture or urban issues.

A threat to our leadership position

Like most competitive models, the American approach to higher education works best when there is a degree of equilibrium within the system -- robust peer groups that force creativity and innovation. When a substantial sector of the group is weakened, disequilibrium is introduced, which threatens the competitive dynamic.

This is what we’re seeing today as the nation’s public institutions struggle financially. Nearly 40 percent of the nation’s colleges and universities are public institutions -- a substantial share of the overall system.

It is certainly true that private institutions have not been immune from the current downturn. We’re all aware that endowments have plummeted, fundraising is flat, and demand for financial aid has increased, putting additional pressure on strained budgets. But the public crisis appears to be both broader and deeper, with the potential to be with us for years to come.

The state of California provides the starkest example. This year, $800 million in funding cuts have forced furloughs of faculty and staff in both the UC and Cal State systems. This means that classes will become even more crowded and faculty members -- already stretched thin -- will have less time to work closely with students.

There will also be an increase in the number of students turned away. The UC system alone (not including Cal State schools or community colleges) is planning to reduce freshman enrollment by 6 percent. In a system of 220,000 students this amounts to more than 13,000 people who will be denied access.

The pain is by no means limited to California. Across the country -- from Michigan to Wisconsin to Virginia -- states are facing revenue shortfalls and making significant cuts to higher education. Even $825 million in federal stimulus -- the portion targeted for all of higher education -- is not enough to offset the extensive cuts made by state governments.

The timing could not be worse. President Obama has underscored what those of us in higher education know to be true: the nation’s economic prosperity is dependent on our system of higher education. The president has noted that jobs requiring a college degree are growing at twice the rate of jobs that require no higher education.

It is the quality of the American system that will develop the human capital needed for our economy to recover and prosper over the long term.

Opportunities for change

Of course, with every crisis comes opportunity. The current situation can pave the way for public higher education to gain some much-needed flexibility and autonomy. By unshackling these systems from some state-mandated controls, they can be revitalized and continue to play an essential role in ensuring the success of American higher education.

We will see a range of innovations such as three-year degree programs, the concept of “cyber campuses,” and more nonresidential education. Each has the potential to reduce costs or generate revenue -- or both.

More fundamental changes will be needed. Two in particular will give public institutions greater control over their own destinies. The first will be effective in the short term, while the second will empower public institutions to introduce and support long-term innovations:

  1. Progressive tuition: We are seeing many public systems raise fees as one way to shore up their finances. But this regressive approach runs the risk of reducing access for those already struggling to pay for college. Another option would be for publics to raise tuition, while providing more need-based financial aid. By pledging that students from families earning under a certain amount -- say $100,000 -- can attend at no cost (and those above a certain threshold would pay on a sliding scale) public colleges can generate valuable revenue, while maintaining the all-important mission of access.
  2. Reform governance: Board members at public institutions are primarily political appointees. While most are knowledgeable and dedicated, the political process by which they are appointed often results in a divergence of views and priorities. Allowing presidents, chancellors, and existing board members to appoint trustees -- standard practice at most private colleges and universities -- would strengthen the ability of public boards to play a strategic role in guiding their institutions.

More than ever, the country needs higher education to do what it does best: develop human and intellectual capital, and be the engine of progress for the nation. The future of American higher education -- and indeed the nation -- will depend on our ability to maintain a vibrant, diverse and competitive model of higher learning.

Both private and public institutions are critical in this endeavor and must be empowered to succeed.

Joseph E. Aoun
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Joseph E. Aoun is president of Northeastern University.

So What Do They Want From Us, Anyway?

When I was a kid growing up in Washington Heights at the northern end of Manhattan, a common rhetorical question indicating frustrated annoyance was: “So whadya wan’ frumme?”

Those of us who work in higher education sometimes evince that same attitude when we feel besieged by increasingly insistent stakeholders — students, parents, alumni, trustees, sports boosters, business leaders, and donors, as well as local, state, and federal elected and appointed officials — about what we have done for them lately.

We have some ideas about what people want, and we can answer this rhetorical question if we choose. We have flippant responses at the ready, such as, sports for the alumni, parties for the students, and parking for faculty. I would argue that we do not take the question seriously enough, and therefore are often surprised — and truth be told a bit hurt — that our audiences do not always sufficiently appreciate what we provide.

The joking answer to what “they” want makes a serious point. Different clients want different things, so providing serious answers can be difficult. When I hone the answer down to its fundamental parts, I identify four essential items that America wants and needs from its public universities in today’s globally competitive knowledge economy. I call them higher education’s “Four Pillars of Promise.”

Better Preparation

Unlike most major American industries, higher education has paid relatively little attention to preparing potential customers to desire and use its product. While importing the language of the marketplace into academic discourse unsettles some, colleges and universities constitute a large national enterprise with its own set of potential clients who regularly make decisions to pay for services rendered. We know that higher per capita incomes correlate strongly with higher levels of educational attainment, so we all have a stake in urging more young people to engage in some form of postsecondary education that advances their goals. Whether it takes the form of a technical certificate in computer programming, an associate degree in an allied health field, or a baccalaureate degree in history or engineering, we all have a stake in seeing that students come to these experiences ready to succeed, and earn the credential emblematic of that success.

To have more secondary students graduate, and do so better prepared for postsecondary success, colleges and universities will need to redouble longstanding partnerships with the schools. This also includes changing the higher education culture so that we act as a compelling magnet for talent earlier in students’ lives, even if that requires that we cross some well established boundaries that we have grown all too comfortable respecting. Beyond traditional approaches, we need to reach pre-college students directly through their families, computer screens, cell phones, and iPods. We also will need to create thoroughgoing relationships with local community and religious organizations that serve as trusted interlocutors for many first generation and minority Americans and their children.

Ramping up investments in these outreach activities will stress further our already stressed out budgets, but success in this area may reduce ever larger amounts now devoted to remedial costs in a wasteful cycle of “repeat” instruction. Furthermore, we will have more students coming to our campuses, paying tuition, persisting through graduation, and supporting our institutions as generous alumni.

Better preparation for college is about a number of things – raising families’ aspiration, demanding students’ perspiration, and assuring help with subsidization of tuition costs.

More Graduates

In his first address to a joint session of Congress, President Obama set a stretch goal for higher education and the nation, asking every American to commit to at least one year of higher education. “Dropping out of high school is no longer an option,” the President said, “It’s not just quitting on yourself, it’s quitting on your country – and this country needs and values the talents of every American.”

In President Obama’s vision, America will once again have the highest proportion of college educated citizens by 2020. Sadly, many of our fellow citizens do not realize how ambitious a goal that may be. In just about one decade, the U.S. has relinquished the top spot, falling all the way to 10th place in the education race. China and India have not yet surpassed us, but will if current trends continue.

In the world’s most educated nations — Canada and Japan — about 55 percent of the young adult population (25-34) have associate or baccalaureate degrees. To push beyond the U.S. plateau of 39 percent will require serious rethinking and restructuring in such areas as audience, retention, and financial aid.

The traditional audience for higher education in the United States is shifting. Our students are increasingly first generation college-goers of color, older, from disadvantaged and underserved backgrounds. A larger group of racially and ethnically diverse military veterans is arriving at our campuses with the new GI Bill in hand. Given the demographics of the country, we know we need to enable still more of this broader, deeper slice of American youngsters and young adults to pursue and succeed at higher education if we are to have any hope of meeting the president’s challenge.

When it comes to retention of college students, the United States does a worse job than many other nations. There likely are a number of reasons for this poor performance, ranging from inadequate preparation for college in some K-12 schools, to data systems that do not account for students who leave to complete desired majors elsewhere, to apples-to-oranges comparisons with credentialing protocols in other nations.

Nonetheless, when our national six-year graduation rate is 59 percent, we need to acknowledge a postsecondary pipeline leak that approaches gusher status.

Innovative approaches to financial aid are essential. At the University of Wisconsin System, we are working to double the amount of private, need-based financial aid. Focusing more fundraising on need-based aid will require a shift in culture and strategy for advancement offices, where need-blind merit scholarships and building naming opportunities have long held sway.

More Research

In the years since World War II, more and more of the nation’s research and development has taken place at universities. The major corporate and industrial research labs have waned, while companies have increasingly turned to universities to enhance their product lines or create entirely new ones. In today’s innovation economy, success requires a critical mass of interdisciplinary subject matter experts who are experienced in research design and methodology, with free access to each other, the latest equipment, and large federal grants. In that environment, universities are positioned for R & D success.

The public/private and nonprofit/for-profit collaborations now necessary for “big science” raise complex issues for the academy, relating to freedom of inquiry, basic vs. applied research, and conflicts of interest. We simply must work through them, however, if the United States is to burnish its reputation in the 21st century as the home of discoveries that make a difference in the lives of millions across the globe. Given our demographics, the standard of living we have come to expect, and wage structures in this country, we must compete internationally at this high end of new knowledge and the new industries that grow out of it, or we will not be competitive.

Universities both public and private need to ramp up further their research enterprise.

Indeed, we have to start thinking of university research as an expanding industry in its own right. In a report released earlier this year, the Wisconsin Technology Council, an independent 501(c)(3), asserts that academic research and development is a $1.1 billion industry in the state. The spending by that industry translates into more than 38,000 direct and indirect jobs. That’s more people than employed by the plastics and rubber products industry (32,380), or by wood product manufacturing (23,790) in Wisconsin.

As we build robust research cultures on all university campuses nationwide, what of the much heralded conflict between faculty research and undergraduate education? There can of course be tension between a faculty member’s need to push the envelope of her discipline and publish the results, and a freshman’s need to learn how to craft a compelling paragraph and master “the elements of style.” We need to ensure that the basics are well taught and fully learned, to be sure. Once they are, we should recognize that an undergraduate’s engagement is deepened immensely by becoming part of a larger research project. There is simply no substitute in education – no greater learning tool – than adding to what is known in your discipline as well as merely studying it.

Better Dissemination and Commercialization

If the university research engine runs out of steam at the campus border, long-term economic success is at high risk. Much of the generation of whole new industries and new greener, higher paying jobs “with legs” will have to come out of the university in an information age, where knowledge is capital and technology puts capital to work. Ramping up university jobs generation will require greater focus in two areas.

First, we must find ways to remove barriers and accelerate the process for moving intellectual property down the chain from discovery to patenting to licensure to commercialization. This could include freeing up a faculty member’s teaching time or engaging help for writing grant proposals. Second, we need to develop more of an entrepreneurial culture on our regional comprehensive campuses so that faculty who may not now think in terms of the commercial potential inherent in their work start to do so.

Flagship Research I universities will continue to provide much of the academic R&D activity. Other campuses clearly have a role that can and should be expanded. That’s why the UW System formed the WiSys Technology Foundation, to build up the entrepreneurial culture on our comprehensive campuses and help faculty navigate the unfamiliar shoals of patenting, licensing, and startups.

Since its inception, WiSys has worked with 146 UW inventors, including 15 students, and obtained 57 foreign and domestic patents. Just as important for the long haul, WiSys has pulled together a research consortium for our comprehensive campuses.

In effect, we are forming a virtual research faculty that often cuts across not only the old disciplinary lines, but campus and geographical borders, collaborating with each other and colleagues at the two research campuses in Madison and Milwaukee as well. No state that intends to be as competitive as it can be can afford to ignore the largely untapped R&D possibilities on its state college campuses.


Taken together, the four pillars of better preparation, more graduates, more research, and better dissemination and commercialization constitute my “More Better” prescription for American higher education to address our society’s most pressing challenges.

The two pillars in the middle are at the traditional core of higher education’s mission. Educating and credentialing our students, and carrying out cutting-edge research, define who we are. On either side of these central functions stand two others that we have not embraced as fully as we now must. What we do to shore up the two “bookend” pillars – preparing youth for postsecondary achievement and leveraging the results of our research – will increasingly define our success as 21st century institutions of higher learning.

The quest for international competitiveness requires American colleges and universities to ramp up productivity in our core functions. To do that, we will have to get much more effective at positively influencing these “bookend” pillars. More in the core, better at the intake and output. I believe that’s what they want, and need, from us.

Kevin P. Reilly
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Kevin P. Reilly has been president of the University of Wisconsin System since 2004. The system’s 2 doctoral universities, 11 comprehensive universities, 13 freshman-sophomore colleges, and statewide UW-Extension annually serve more than 175,000 students.

Institutional Interests, Statewide Concerns

Good public policy for higher education is more than the sum total of individual college and university interests and aspirations. That statement has particular salience for state responsibilities in the present situation, in which some states have been cutting back on funding for public institutions. As the state share of institutional revenue declines, the competition between institutions becomes ever more ferocious.

Without a state capacity for analysis and planning, this competition brings on a Darwinian struggle in which the more politically connected and savvy institutions win, even though there may be a better case for others.

Florida is a poster child for the chaos that results from a weak or nonexistent state level capacity. The 10 senior institutions and the community colleges in Florida are in constant competition for the small crumbs of state appropriations remaining after prisons, Medicaid, and other mandatory programs get theirs. I mention Florida because it is now my home state, and it is sad to see the chaos that results from the absence of a capacity to look at the needs of the state and to hold institutions accountable for results including improved graduation rates, access for low income and minority students and the contribution of colleges and universities to economic growth.

This tension is now being played out at the federal level. The U.S. House of Representatives has passed H.R. 3221, the Student Aid and Fiscal Responsibility Act, and the Senate is considering similar legislation. The bill contains many important provisions for existing programs and some new ones. One of the new ones -- The College Access and Completion Fund -- would provide significant funding for higher education reform through state governments.

Predictably, the American Council on Education and several other associations have joined forces to oppose channeling the money through the states. These associations represent colleges and universities, so it is understandable that they would prefer the funds to go directly to institutions.

But I would argue that over the long run institutions would be better served by a robust state policy analysis and planning capacity that would try to slow down the “mission creep” by which regional institutions aspire inappropriately to become research universities, and would promote programs that better assure student access and retention through new and innovative funding approaches.

Institutions fear that a robust statewide capacity to oversee higher education would degenerate into regulatory approaches that would compromise their autonomy and dampen their aspirations to move up in the pecking order where research universities are at the top. There have been instances -- historically, the State University of New York (SUNY) is illustrative -- where an excessively regulatory approach has not been in the interest of either the state or the institutions.

The needed state capacity should not degenerate into regulatory approaches. Rather, institutions should be accountable for results such as graduation rates, improved access, and cost reductions.

Four years ago I was honored to serve as chair of a working group convened by the National Center for Public Policy and Higher Education. That led to the adoption by the center’s Board of Directors of a paper on "The Need for State Policy Leadership," which set forth the need for a statewide capacity to address several critical areas.

First, the states need to have the capacity to produce the quantity, quality and levels of educational attainment needed for economic development and individual opportunity. Secondly, states should reach broad-based agreement on state priorities for improving performance in postsecondary education. Third, there needs to be a statewide capacity with sufficient resources to articulate state goals and the strategies to achieve those goals. Finally, the oversight responsibilities of state and institutional governing boards should be clearly defined and differentiated.

Unfortunately, few states have followed these recommendations, and a number have eliminated or weakened existing agencies. To reiterate, we should not look on this as a regulatory approach but a move to focus on accountability for meeting statewide goals.

I believe that H.R. 3221 is a step in the right direction and I hope that Congress will stay the course, despite the institutions’ push to the contrary.

Robert H. Atwell
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Robert H. Atwell is president emeritus of the American Council on Education.

Calling the 'Inertia Busters'

Education Secretary Arne Duncan delivered a tough message to state colleges last month: Despite the cascading effects of the recession falling hardest on state governments, states should not expect the federal government to provide stopgap money to maintain business as usual. Duncan advised states to get creative.

Lumina Foundation for Education agrees. To increase the percentage of Americans with high-quality degrees and credentials to 60 percent by 2025, as President Obama aims to do, the nation needs quantum improvements in productivity.

We believe states must lead the way. In our experience working in and with state government, the first and hardest step toward productive creativity is penetrating inertia. When the going gets tough, there is comfort in the status quo. Working with HCM Strategists, a public policy consulting firm, we have made $9 million in grants to states as a testament to creative, courageous state leaders, and a talented, fresh team of “inertia busters.”

The “inertia busters” embody the skill set we believe is necessary to promote and deliver on the state higher education policy changes this nation needs.

This means assembling a team that included a former chief of staff to a governor, Jimmy Clarke, who knows how to run interference for politicians; a grass-roots advocate for change Ellyn Artis; a higher education faculty member Mario Martinez; and a director of a federal regional education lab, Rob Muller.

Their role was to promote and advance innovative ideas and strong leadership. As constructive critics and fierce advocates, the inertia busters helped open the door for elected officials to seize the incredible moment for change posed by the confluence of a deep recession and ambitious national degree attainment goals. By simply focusing on the change that is needed now, this team busted inertia in several ways.

1. Maintaining momentum in the face of leadership change. If the economy weren’t enough bad news, Arizona reeled after the White House took Gov. Janet Napolitano and the two education committee chairs left office. Enter an inertia buster, Darcy Renfro, who used her strong policy reputation in Arizona and legal skills to lift up the Board of Regents’ leadership while energizing a new crop of leaders. Arizona’s ambitious agenda promises a new funding model and an array of innovative ways to get Arizonans bachelor’s degrees at much lower costs.

2. Asking states the critical questions so new policies engage institutions. Maryland and Wisconsin are states where policy solutions start with institutions. Greg Nichols, a former state higher education exec, encouraged Maryland’s review of 40,000 student transcripts to understand at which colleges and in which courses productivity was most affected. Now, the community and independent colleges will join with the University System of Maryland to redesign the top 24 introductory courses and turn these courses into money-saving, student-excelling models for the entire state.

In Wisconsin, Rob Muller encouraged the institutions to identify the state policies that stand in the way of their efforts to promote swifter student progress toward a degree.

Advisers Nate Johnson, Jeff Stanley and Amy Sebring have campus level and state government experience that helped their state teams in Tennessee, Ohio and Texas, respectively, grapple with how to design and use powerful new funding incentives for course and degree completion. All three states are now poised to be national models for how campuses and legislators learn and work together to align spending with completion goals.

3. Pushing states to take the hard steps now, when resources are down, versus waiting for a sunnier day. Like most states, budget straits left Montana and Indiana struggling to maintain the most basic services. Inertia busters Judy Heiman and Jeff Stanley saw opportunity in this crisis.

Judy’s experience in the governor’s office and legislature in states on both coasts and Jeff’s career on Indiana’s campuses and state higher education commission afforded them a unique perspective to affirm the importance of a potentially unpopular change.

Both states used funds from the federal American Recovery and Reinvestment Act to make higher education more cost-effective now. For example, Montana halted all new construction and used federal stimulus dollars to develop a university portal and online infrastructure that will serve far more students with high-quality courses that are available more hours and in more places. Indiana used stimulus funds to expand its share of total state funding dedicated to completion incentives.

The contribution of the inertia busters and seed grants are small in proportion to that of elected leaders who deserve the ultimate credit for the work to date. Governors and state legislators will continue to take the heat and muster the courage to change deeply embedded policy and practice.

But the “inertia buster” difference maker is so important that we are commending this role to others looking to promote state policy change.

Kristin D. Conklin and Suzanne Walsh
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Suzanne Walsh is a senior program director at Lumina Foundation for Education where she leads the foundation’s productivity work. Kristin Conklin, a founding partner of HCM Strategists and principal lead for Lumina's state productivity grants, has spent 15 years working on college readiness and success with state and federal policy makers.


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