<p>I agree with barrons. We are eating our seed-corn. Funding for public higher education is getting squeezed out by rising costs of prisons, Medicaid, and K-12 education (which in most states is now primarily state-financed, whereas 2 or 3 decades ago it was primarily locally financed), the fastest-growing parts of state budgets (along with state employee health care and pension costs). State funding for post-secondary education is one of the few truly discretionary items in state budgets, so in lean times it’s the state colleges and universities that take the haircut. Until the Great Recession, funding for public higher education was holding pretty steady or even increasing slightly, but basically flat, which meant that state funding represented a declining share of both state budgets and public university budgets. Tuition was rising much faster than state appropriations. With the recession, many states have cut funding for higher education in absolute terms, leaving a huge gap for the public colleges and universities to make up.</p>
<p>The selective state flagships are in the best position to weather this, though not without some belt-tightening There will always be more applicants than there are seats at places like UC-Berkeley, UCLA, Michigan, Virginia, and UIUC. These schools generally are able to make up for cuts in state appropriations by raising tuition, and some of them are pretty far down the road to quasi-privatization. At Michigan, for example, state appropriations now make up around 7% of the university’s budget, so a 10% cut in state appropriations dings the university for 0.7% of its budget–enough to hurt a little, but hardly a crisis. (A number of ill-informed posters here wrongly assume that if it’s a public university it means the taxpayers are paying for the whole thing and the state runs it just like Department of Motor Vehicles or something; not so, many state flagships are constitutionally independent entities answerable to their own Board of Regents or Board of Trustees, who are responsible for their own budgeting and raise most of their own revenues—in Michigan’s case, 93% of revenues—from non-state sources. Michigan is also one of a number of public universities that gives far more back to the state in tuition discounts and financial aid to in-state students than it gets from the legislature in annual appropriations; not to mention the billions in economic activity and tens of millions in tax revenue it generates for the state through its own payrolls, research expenditures, spin-off business enterprises, and the multiplier effects of spending by its students, faculty, and staff, many of whom came from out-of-state and wouldn’t be spending that money in Michigan were it not for the university. The net economic benefit to the state, and the net fiscal benefit to the state government, is enormous). </p>
<p>Unfortunately, making up for diminished state appropriations means public flagship tuition tends to go up fastest during recessions, which has got to have an effect on the socioeconomic composition of the student body, driving away many of those least able to pay if the university can’t make up the difference in increased FA. </p>
<p>But the schools now in the danger zone are not the flagships but the less-selective and non-selective state schools. There, demand for seats is much more price-sensitive, so the schools’ capacity to raise tuition is much less. But they also tend to have far fewer alternative revenue sources to fall back on: little or no endowment, few big federal research grants or corporate research partnerships, little or no intellectual property licensing revenue, and so on. At those schools, state funding makes up a much larger percentage of the budget, so when the state cuts appropriations, people get laid off, programs get cut, courses get cancelled or are oversubscribed, and students are ultimately the ones who take it in the shorts because they get less for their educational dollar and find it harder to complete their degree requirements, and so on. That’s where we’re really killing ourselves: not at the elite private or at the elite public university levels. There’s a reason our top public and private universities rank so high on the league tables of world’s best, and that’s not likely to change anytime soon. But with unskilled jobs vanishing, we’re at risk of killing off the capacity of a generation of young people to get credentialed as dental hygienists, nurses, accountants, K-12 teachers, physical therapists, and in other non-elite, associate- or bachelors-degree level occupations, occupations that are expected to grow in the coming years, and where there may even be labor shortages in the years to come, while millions of unskilled non-college-educated young people sit idle, or fill up the prisons. The private colleges and universities won’t make up that shortfall. We’re shooting ourselves in the foot as a society with short-sighted budget and tax policies.</p>