Debating Privatization of US Public Higher Ed

The Objectivist
SHOULD SUNY BE PRIVATIZED?
Dunkirk-Fredonia Observer
3/1/06

Both fairness and efficiency warrant privatizing the SUNY system. Nationwide taxpayers pay through the nose for higher education. In 2004, states spent $5,721 per student at public universities. In total they spent $69 billion, thereby providing 64% of public universities’ revenue. Over the last ten years federal student aid, adjusted for inflation, more than doubled to $90 billion per year. In return, the public universities have raised tuition from 2000-01 to 2004-05 by 36% despite the fact that the consumer price index rose about 11%.

It is unfair to ask some taxpayers to pay for the education of other adults. The U.S. Commerce Department reports that college graduates make nearly $1 million dollars more over their working life than those with merely a high school degree. I’m guessing this underestimates the differences since it likely doesn’t take into account the fact that college graduates likely gain even more via higher-earning spouses. Persons with a professional degree make $3.2 million more than persons with only a high school degree. There is nothing fair about requiring taxpayers to give such valuable assets to other adults, the vast majority of whom could pay for it via loans. Since less than a third of the population 25-29 had bachelor’s degrees (2002 figure), having government colleges and universities involves a substantial transfer of money from people who don’t have the advantages of a college degree to persons who do or will. Worse yet, over half the families who attend the SUNY system are middle class or better. Why do they need educational welfare? Even if taxpayers should pay for other adults’ education, the transfer involved in state professional schools is simply obscene.

If the concern is to provide opportunities for the poor, this can be done more cheaply by giving the poor vouchers for college. This is how we give other benefits to them. For example, the poor receive subsidized food and medical care via payments to private supermarkets and physicians. It is hard to believe that anyone really thinks that taxpayers would be better off if we instead set up government supermarkets. Would you want the Department of Motor Vehicles to run Wegmans?

Nor is the government very efficient in terms of how it runs universities. For example, at SUNY Fredonia more than a third of the students don’t graduate in six years and it is not clear that this is worse than competitor state colleges. One reason for this is that many students who don’t have the skills or the work habits to graduate don’t bear the full costs of going to college, thereby wasting their time and taxpayer money. Similarly, the administrative bloat at many of these colleges and universities is truly impressive. For example, again at Fredonia, there is one president, four vice-presidents, six associate vice presidents, four deans, and one associate dean. It is hard to believe that a private institution would have so many high-level administrators.

***

The Constructivist
SUNY IS A GOOD INVESTMENT FOR NEW YORK
Dunkirk-Fredonia Observer
3/1/06

Those advocating privatization of public higher education have difficulty supporting their case. The supposed benefits of privatization—increased competition, expanded choice, lower costs, and higher quality—either already exist or are hard to find.

Take competition and choice: there are well over 3,000 U.S. colleges and universities of all kinds, all competing for students, faculty, financing, and reputation. Traditions of tenure, academic freedom, shared governance, and faculty responsibility for curricula have established the relative autonomy of these institutions from their funders—individual donors, corporations, or the state.

How about lower costs and higher quality? Total annual student fees at Hamilton College and Princeton University, from which I graduated, top $41,000 at each school. Still, they covered only 22% of Princeton’s $920 million operating budget last year (of which 14% was devoted to student aid). Hamilton emphasizes in its mailings to alumni that student fees cover less than half of its annual operating costs and that the 60% of its students who receive financial aid average $26,000.

In higher education, quality costs. Wealthier students bear these costs upfront and most graduates offset these costs with a lifetime of donations. As a result, the best private colleges and universities have used their tax-exempt status to build astronomical endowments over the centuries they’ve existed. Investment income on Princeton’s $10.8 billion dollar endowment covered roughly one-third of its budget last year while gifts and sponsored research covered another third. Hamilton has to get by with a mere half-billion-dollar endowment.

With our $80 million operating budget and $16 million endowment, it’s going to take decades for SUNY Fredonia to even begin thinking about competing with such schools. Yet to continue to operate without state funds, the economies of scale that being part of SUNY brings, and the protections of a union contract, Fredonia would have to answer a series of tough questions: how high to raise tuition and class sizes? how many fewer students to admit? how many faculty and staff to fire? how many building projects to cancel? how many student services to abolish? We’d have to offer less for more just to stay in business. Is this what privatization advocates want?

Ultimately, though, this debate is less about motives than arguments. The case for privatization rests on the notion that state funding of higher education puts undue burdens on taxpayers even as it privileges college graduates. What’s left out of this equation is any understanding that higher education is a public good that provides a high rate of return on both individual and state investments.

The individual returns on higher education are fairly easy to track—and they lead directly to the public returns. The 2000 census and subsequent samplings provide strong evidence that college graduates earn an average of $1 million more over the course of their working lives than high school graduates (and double their annual family income). According to SUNY, 80% of its graduates stay in the state; hence, all New Yorkers benefit from the work they do, the jobs they create, the goods, services, and properties they buy, and the taxes they pay.

But this is just the tip of the iceberg. SUNY Chancellor John Ryan testified to the New York legislature in January that every dollar of direct state support for SUNY generates more than eight dollars for the state’s economy and that every $1 million in grant money brought in by a full-time faculty member creates 29 jobs. In addition to being among the largest employers in many counties, SUNY schools help attract new people, businesses, and investments to New York. When you also account for “intangible” returns on public higher education—contributions of an educated and engaged citizenry, expanded opportunities for upward mobility, and fostering the creativity necessary for the state and nation to prosper in a global economy—it’s clear that SUNY deserves more funding, not less. Yet according to the NYSUT Higher Education Data Project, New York commits only 2.2% of its general fund spending to SUNY. So until Fredonia’s endowment produces revenues significant enough to offset any further reductions in state investments, privatization is just a pipe dream.