Predictability and Its Costs

January 7, 2005

The chancellor of the State University of New York proposed Thursday that the state adopt a new tuition policy: Each year, tuition would go up for freshmen by the rate of the Higher Education Price Index (an inflation measure for colleges), and then be frozen for those students for four years.

The proposal, modeled on a 2003 Illinois law, is likely to be popular politically. Students and parents hate the unpredictability of tuition increases. In New York, as in many other states, tuition may remain relatively level for a few years, followed by years of double-digit increases. Pure luck can determine whether a family gets by with relatively flat rates or massive bills.

SUNY's chancellor, Robert L. King, says his plan would "protect" students and their families from such increases. But a look at the history of state tuition policies  suggests that the protection may not be all it appears.

States regularly adopt tuition policies, limiting the rate of increase or even freezing tuition, and lift those policies during the same kinds of financial crises that prompt states to adopt double-digit tuition increases. If King's policy wins approval, it could easily be undone the next time the state faces a deficit and the governor doesn't want to raise taxes (a not infrequent event).

More broadly, the Illinois plan prompted some concern in that state that colleges would seek to set their rates artificially high, so they could cover unanticipated expenses during the four years that a given class would be assured the same rate. Colleges have many set expenses: Professors must be paid, libraries stocked, buildings heated and maintained, etc. In theory, King's plan would also require the state to keep up support for the university system. But if that doesn't happen, does the university system cut back or renege on its pledge to students?

And there's one other question, too: Tuition predictability is great for families with decent levels of income and savings. But does a plan like this really do anything for those for whom the only thing predictable about tuition is that they can't afford it?

It will be interesting to see how this plays out in New York. Judging from
this report,  the debate will be fun to watch.

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