State policy

Mend, Don't End, State Systems

In this very chaotic and difficult budget year, where funding cuts in the neighborhood of 20 percent are becoming commonplace for higher education, another troubling movement is under way: to use the funding crisis to further dilute the public responsibilities of some of the country’s leading universities.

In the name of deregulation, a number of flagship institutions are seeking to be exempted from complying with state funding and personnel regulations, as well as to be allowed to live outside of the higher education governance systems in their states. They argue that they need this autonomy to compete in the national and international markets, and that their special status is justified because of the reductions in state appropriations.

They’ve got half of this right. Relief from obsolete and ineffective state controls is appropriate for all of higher education, not just a few of the research universities, and not just because of funding reductions. The myriad rules and regulations still operating in many states were developed in another time and place, before the universities grew into multi-billion dollar enterprises with hundreds of thousands of students and tens of thousands of employees.

Yet to this day, many states still require prior approval for purchasing, dictate line-item funding in silos, and maintain fund management requirements that perpetuate bad habits such as year-end spending sprees rather than building prudent contingency reserves. There is no question that these bureaucratic mandates hurt rather than help the institutions to be accountable for efficiency and effectiveness.

But this is no time to weaken the public responsibilities of the flagship institutions, to allow them to opt out of obligations to meet state needs. It’s true that state funds are now the minority of resources in research universities, and in some cases a very small fraction. But the disinvestment of state revenues hasn’t happened to the research universities alone; it has also hurt the regional institutions and the community colleges.

More to the point, the flagship institutions got to where they are through the state investments of billions of dollars over the last century and more, giving them a funding advantage over the other publics, in total revenues, in assets and often in state funding per student, an advantage they certainly aren’t offering to give up as part of the new privatized state they envision.

While system boards work imperfectly, their core purpose is more important now than ever before: to balance institutional aspirations with broader public needs, through planning, differentiation of missions, program review, and attention to student flow across institutions. Weakening the authority of higher education system boards will only serve to advantage the already privileged. The institutions will inevitably gravitate even more away from public needs, and toward institutional self-interest: selective admissions, merit rather than need-based aid, more research, and greater academic specialization. The teaching function and service to poor and working students and to underserved geographic areas lose out in this equation. This will accelerate the declines in educational attainment our country is already experiencing.

We have to increase college access and degree production for all students. To do that the relationship between state government and public institutions needs to be reestablished on a different basis. States need to mend their budgeting systems, to put greater responsibility for fiscal management in the hands of the institutions, and to focus their own attention on how to stabilize state subsidies to meet public priorities. Institutions need to do more to improve efficiency and effectiveness, and to generate savings to build investment pools for things that won’t be coming from "new money" any more.

Both sides need to get away from the year-at-a-time focus that is killing public institutions, toward more of a multi-year investment approach that recognizes that state funds are just one of the many sources of revenue that will be needed to accomplish public purposes. And everyone needs to do more to remove barriers between institutions that keep them from serving students well, not to find ways to drive them apart.

The regulatory and funding model for higher education needs to be mended, not ended.

Jane Wellman and Charles B. Reed
Author's email:

Jane Wellman is executive director of the National Association of System Heads and executive director of the Delta Project on Postsecondary Costs, Productivity, and Accountability. Charles B. Reed is chancellor of the California State University System and president of NASH.

The Equity Gap in State Funding

In 1971, a lawsuit was filed in Los Angeles County Superior Court that would have a profound impact on the way American schools are funded. Serrano v. Priest was the first in a wave of elementary and secondary school finance cases that would touch nearly every state in the nation and continues to this day. Existing funding regimes have been torn down, constitutional crises provoked, and billions of dollars spent in the name of achieving financial equity between school districts that serve the rich and the poor.

Nothing similar has ever happened in higher education. Desegregation lawsuits have brought some increased equity, but states have never had to defend the fairness of their higher education financing systems in court -- at least not on grounds of economic discrimination as opposed to racial bias.

Why not?

It's certainly not because no inequities exist. Nationally, public four-year universities whose students arrive with an average SAT score (or ACT equivalent) greater than 1050 spend roughly $3,725, or 45 percent, more per student than universities where student scores fall below that cutoff. These numbers only include spending on instruction, academic support, and student services -- not research.

Because SAT scores track closely with family income, first-generation status, and the quality of high school preparation, they're a good proxy for how states choose to allocate resources between advantaged and disadvantaged students.

And as the table below shows, some states disparities are far above the national average. (My methodology is available here.)


Per Student Funding Gap
at Institutions With Lower SAT Averages

California -$10,421 Oklahoma -$4,042 Idaho -$1,689
Minnesota -$9,046 Kansas -$3,931 Indiana -$1,589
South Dakota -$8,822 North Dakota -$3,893 Maryland -$1,579
Vermont -$8,001 Tennessee -$3,844 Maine -$1,457
Connecticut -$7,515 Arizona -$3,755 Alaska -$1,165
Washington -$7,139 New Hampshire -$3,220 Mississippi -$706
Nevada -$6,971 Nebraska -$3,111 Illinois -$417
Colorado -$6,301 Virginia -$3,073 Arkansas -$404
Utah -$5,968 Texas -$2,786 New York -$281
Kentucky -$5,914 Wisconsin -$2,727 Florida -$236
North Carolina -$5,467 Oregon -$2,594 Montana +$145
Alabama -$5,387 Rhode Island -$2,563 Pennsylvania +216
Hawaii -$5,243 West Virginia -$2,465 Delaware n/a
Massachusetts -$5,003 Louisiana -$2,440 D.C. n/a
New Jersey -$4,370 Missouri -$2,382 New Mexico n/a
Ohio -$4,251 South Carolina -$2,286 Iowa n/a
Michigan -$4,150 Georgia -$2,002 Wyoming n/a

This kind of analysis works better in some states than others. In Iowa, all three institutions are above the threshold. In Washington, D.C., the one public university is well below. (Overall, the ratio of students attending public four-year institutions where median student SAT scores above 1050 to those attending institutions at or below that threshold is about 3 to 2).

But some states have a lot of both kinds of university, and spending on students is almost uniformly higher in the institutions with higher SATs. And no state has a larger disparity than in California, the home of Serrano v. Priest, where the elite public universities spend over $10,000 more per student than the rest. That's more than the total amount of student spending at most public four-year institutions. This analysis, moreover, doesn't include the community colleges that enroll nearly half of all new freshmen every year. If it did, the disparities would be larger still, particularly in states like California where the majority of students begin in low-spending two-year institutions. Yet nobody is agitating for a higher education spending lawsuit in the Golden State.

This is partly because the legal hurdles are lower for elementary and secondary students seeking redress. While all state constitutions have an "education clause" mandating the provision of free K–12 schools, they don’t offer similar guarantees of postsecondary education. Serrano, however, was based on the California constitution's equal protection clause. States might contend that college students, unlike their K–12 counterparts, aren't bound to under-funded local schools. But it's hard to argue that disadvantaged undergraduates have equal access to high-spending public universities that limit admission to the "top" 10 percent of high school graduates -- students who are disproportionately well-off -- and routinely cite the number of applicants they reject as a measure of their success.

But the true causes of complacency run deeper. Money and opportunity are distributed this way because many people believe it is right and just to do so. Indeed, the California system has served as a model since it was developed by Clark Kerr and others 50 years ago. It reflects the ideals of meritocracy, of great universities open to all who are willing to work hard enough to merit admission. There's truth in this, of course, as first-generation college students enrolled at Berkeley, UCLA, and other University of California campuses can surely attest. People also believe that the best and brightest represent a wise place to invest resources, to ensure that the nation's future political, economic, and cultural leaders are properly educated and trained.

But in the long run, the great pyramid of American higher education, which gives more to those who arrive with more and less to those with less, represents an ethos and theory of resource allocation whose time is passing. There are few -- if any -- opportunities today for students who stop learning once they reach adulthood. Higher education is for everyone now. That's why nearly 70 percent of high school graduates are going directly to college -- a record high. If the wise men who enshrined education into state constitutions as an inalienable right in the 19th century confronted the same task today, they might well conclude that those guarantees should extend beyond the secondary years.

And everything we know from educational research -- at both the K–12 and higher education level -- suggests that academically at-risk students are more sensitive than their higher-achieving peers to differences in the quality of education they receive. Elite institutions packed to the gills with valedictorians are showering resources on students whose abundance of economic, academic, and social capital all but guarantee success, regardless of where they go to college.

Low-wealth, less-selective institutions, by contrast, serve many students with only a tenuous grasp on the ladder of opportunity. Many of those students got a lousy high school education, struggle to pay for college, and contend with multiple demands of employment and family. These are people for whom higher education is everything, the difference between one kind of life and another. And while there are surely countless professors at their colleges who are giving them a fantastic education, they do so in spite of our current financial priorities, not because of them.

These inequities are partly an artifact of history. The K–12 schools developed from the ground up, with tens of thousands of local districts serving all classes of students. The higher education sector, by contrast, was built from the top down, starting with the most well-off students and expanding to include the masses only in the last 60 years or so. Long-established institutions like Berkeley have had many decades to accumulate resources, and in some ways it's hard to blame universities for striving to be bigger, richer, and better.

But the leading institutions are failing to meet their obligation to the greater public good. Instead, the flagship universities routinely throw their weight around in statehouses, seducing politicians with promises of the next Silicon Valley or Research Triangle while gobbling up a disproportionate share of public dollars and leaving crumbs for the community colleges, regional campuses, and former normal schools that actually educate most undergraduates. Their lobbyists in Washington pursue a similar agenda at the national level.

And instead of working to make the higher education pyramid a little less steep, many less-elite institutions are trying to climb it, funneling money to marketing campaigns and enrollment management consultants in an effort to attract "better" students -- even as more and more students (who are by that way of thinking, "worse") are arriving at the front door of the academy, desperately needing to learn. These institutions are responding to the reigning system of values and institutional incentives, driven by popular college rankings and a sense that institutional quality is a function of how smart students are when they arrive, not how much they learn before they leave. As F. King Alexander, president of California State Long Beach, recently said in explaining why he wants to buck this trend, "all of the pressure flows in one way -- to do a good job with the best prepared students."

Last year, the state of New York settled a contentious, decade-long school finance lawsuit, a direct descendent of the original Serrano litigation. Despite millions spent on expensive lawyers, attorneys for the state couldn't convince New York's highest court that routinely providing thousands of dollars less per student to the mostly-poor, mostly-minority students in New York City was constitutionally permissible. The resulting billion-dollar settlement will provide smaller class sizes, better early education, and competitive teacher salaries in schools serving disadvantaged students. Advocates and civil rights groups praised the ruling as justice, delayed but certainly deserved.

In many states, students who have benefited from similar efforts at the K-12 level will enter a higher education system with a very different attitude toward economic fairness. Nobody is standing at the courthouse door waiting to petition on their behalf. At least, not yet.

Kevin Carey
Author's email:

Kevin Carey is research and policy manager at Education Sector.

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