James Hohman is the director of fiscal policy at the Mackinac Center for Public Policy, a research and educational institute located in Midland.
State universities spend more, year after year, and want the state taxpayer to cover their increases, rather than students. That’s their stated preference, as mentioned by public university association president Dan Hurley in a Bridge guest commentary, and covered in a Bridge Magazine article on a recent study about alleged disinvestment in higher education.
Back in 1991, resident students at Michigan’s state universities were paying an average of $5,000 per year in tuition and fees, when adjusted for inflation. Since then, that price has risen 168 percent more than inflation, to $13,400.
What do students get for this price increase? Not much. There are more administrators, nicer campuses and there are lots of new buildings.
The value of a college education has not increased as drastically, however, and there is a debate over the value of a college degree. Some people think it signals that the person who has one will be a better worker and others think that students learn valuable things in college. But regardless of the reason a degree may be worth something, the wage differential for college grads hasn’t increased as much as tuition has.
And if state residents are supposed to get something out of the money they spend on higher education through government, it is supposed to be a better educated population. But paying a higher price for the same product only increases the cost without improving the benefit.
Michigan university spokespeople blame state lawmakers for tuition hikes. And it’s true that state taxpayer support for universities was down during the 2000s. The state’s finances were struggling from a historic decade-long recession, and state universities could survive with less money from taxpayers and more money from their students. As the Michigan economy has recovered, lawmakers have sent more money to state universities. This has done little to stop tuition rates from increasing.
Appropriations have little effect on tuition: Massive increases in the late ‘90s didn’t keep tuition down, either. From 1996 to 2002, taxpayer support for higher education increased 36 percent. Average resident tuition increased 34 percent anyway.
The kind of money universities would need to keep resident students’ tuition constant is not worth it. Lawmakers would need to increase subsidies from the current $1.4 billion to $5.0 billion to get tuition back to where it was in 2000. And support would need to increase by 7.3 percent each year after that to keep it at that level.
The money would have to come from somewhere, either in the form of increased taxes or reductions in other budget priorities. And there are plenty of better uses for taxpayer dollars than to hide the mushrooming costs of a college degree.
It’s not worth it for taxpayers to pay for the constant increase in university costs. But students do not seem to be bothered that much by ever-increasing tuition. Their acceptance of tuition increases is bolstered by a cultural expectation that a college degree is worth it. And it is solidified by federally subsidized student loans which keep students from leaving due to the high cost of tuition.
When students don’t care about costs, universities compete on things other than costs. A freshly polished campus is part of it, but so are administrators and support staff who cater to their needs and help to ensure they don’t drop out. That costs money, as do the strings attached to federal grants and lending programs.
State universities respond to the incentives of the environment they’re in. University administrators will keep hiking tuition until prospective students move away from high-cost schools into low-cost ones.
State policy can do something to encourage universities to care about their costs. It can withhold funding from universities that keep hiking tuition. Michigan already requires tuition increases to be limited, but that applies only to a small portion of the state’s regular support. Lawmakers can tie more of the state’s payments to tuition restraint and tolerate less of an increase.
Lawmakers ought to consider reducing the amount of money they transfer from taxpayers to universities. It is more likely that universities will compete over costs when their students bear more of the costs.
Which puts lawmakers in a conundrum. If they want to improve the public benefits of higher education, then they ought to care about what universities charge students in tuition. While universities prefer for taxpayers to cover their costs, lawmakers ought to encourage them to bend their cost curves. That is better encouraged with less money from taxpayers, not more.