<p>This entire discussion is innane. Why don't we privatize the roads and parks and all schools -K-12? Because the state has an interest in assuring that even the uneconomic areas are served to a decent level. Same for higher ed. The state has many economic interests that may not be served best by hiring some out of state school or company to do them. Believe it or not private enterprise is generally not all that clever or efficient. Most prefer to compete using a monopoly edge or other factors.(see Microsoft) The system is working pretty well overall with states being able to leverage a small investment into a large nearly self-sustaining enterprise. If the residents are not happy with the quality and efficiency of the state U they have many ways to change things.</p>
<p>I think the point has been raised, but i would like to phrase it differently. Public Universities are public policy tools beyond education. This may sound strange considering the primary goal is to offere higher education to the state's students. However, when you step back and look at the influences of the university, one realizes that many of the moves made by these organizaitons affect far beyond students, the campus or education. </p>
<p>I will use the University of California as a example, just because I know the issues there better and can more easily draw conclusions. This University educates a lot of people. So generally the enrollment is about 200,000. Thats huge. The problem isn't where they would but what about everything else. What is everything else, the hospital programs, the high school programs, the extension programs, the museums, the research, the economic engine that drives entire cities and towns. So here is the point, when it comes to universities it is important to have somebody thinking about the public interest. Not just each indivual schools interest. (I know in classical economics it says that if each person pursues their own interest it will all just work out. The problem is that isn't true---read a little game theory.) So there needs to be somebody who says, we are facing a nursing shortage, not enough nurses are coming out of our schools, we need more of them, as a matter of public health and public policy, so what we will do is collectively, potentially as new schools, increase enrollment to produce more nurses. Otherwise we all are left out in the cold. Not enought nurses in hospitals. Its a public policy tool beyond education. </p>
<p>Another example. The economy needs to diversify. So for instance. In San Diego there still is, but it use to be way worse, a reliance on military spending to support the economy. There are many many bases in the area and a substantial amount of defense spending in the local economy. However, UCSD has a tremendous biomedical and engineering programs. So what happens is that the research conducted there inturn spins off local companies which now have created a more diverse economy. Around the campus there is a tremendous amount of hi-tech industry. The greatest example ins Qualcomm. But the overarching public policy question is larger, how to diversify the economy and create new markets that are stable, are produce high quality employment for the people. The best way to do that is to create a stable "localization economies" (essentailly resons to be there) in San Diego. So UCSD has just opened the Rady School of Management whic has special programs in Hi-tech and bio-tech managmenet. Why? because this creates further stability in those industries. This is fulfilling a larger public policy goal that a public university must address, but a private university isn't beholden to. </p>
<p>For hospitals. This is a huge issue in California, and a growing issue around the nation. There are many uninsured people throughout the state. However they still need medical care. Often they end up prolonging their illness and making it worse by not receiving care early. (Why? because they can't afford it). So they are in the emergency room. UC treats a huge number of these cases and reduces the load from private hosiptals. This is a very important thing because private hospitals are closing their emergency rooms because they are losing so much money. If somebody is sick and goes to the emergency room, the doctors must treat them, regardless of wheter the person can afford the care. So UC taking on some of these issues is of huge importance to the state, beyond education. </p>
<p>Research and the economy. Many of these universities have huge economic engines that are able to spur development and so on. In the UC system for example, about 20% of the entire funds for the university come from the state. The rest comes from student fees, federal research grants, private donations, and private research grants. 80%! That means that the state investment of 20% is magnified by that amount in the economy. Now research can be brought to the area whcih produces jobs, but more importantly creates the foundation for private uses that build those spin-off industries. So why can't a private university do this? Well it can. But here is the issue, they can't be coordinated not to compete ineffiecently. (Yes there is such a thing.) So there won't be overallocation or underallocation. That way not every school opens a nursing program, but probably more aptly, not too few open nursing schools. Now State schools should be respsonive and not completely take over everything. Theres is definately a roll for private instutions, just not a role for only private instutions. This way if it looks like private schools will open up enough spaces for nurses, great. Nothing needs to be done. But if it looks they won't then the public institution, as looking out for the public welfare, will do so. </p>
<p>Great value. Now every legislature complains about the price of everything, not just state universities. They complain about the cost of k-12 education, the cost of roads and highways the cost of prisions, and we wouldn't privatize those. The courtsystem? We also wouldn't have vouchers for those? (Granted some argue for k-12 vouchers---also a bad idea but not the subject of this post). As I mentioned before, California only pays for about 20% of the entire system. These systems produce tremendous giving and great benifit overall. What could be better than having UCLA medical school with a donation of 250 million in private funds? It still looks out for the public interest, is educating people regardless of income, and has rescources outside of tax dollars.</p>
<p>Integration, oppertunity, and citizenship. All o these are importnat goals of public universities that aren't necessarily those of private universities. As was mentioned in a previous post, education is the key to democracy. Just as importantly, it is the key to upward moblity. We can accomplish this with a state system. We can provide oppertunities to those that otherwise would not have them, but we can't mandate that of private institutions. Once again we might not accomplish all of our social goals and instead dig ourselves deeper into a system of class stratificaiton. As a society we need to provide the latters to move up, and the public university is one really large latter. </p>
<p>There are also religious issues with voluchers and privatization, but I don't want to go there in this post. </p>
<p>In the end, privatization will cost a tremendous amount of money. 40,000 for each student instead of 12,000 or so. It also won't necessarily improve the quality. Is University of San Diego really that much better than UC Berkeley. I don't think its better at all. </p>
<p>The last point. This is a way of building a qualified and capable workforce. One that is educated. With public education, we can offer that to more people, and fundementally that is better for everybody. California is what it is because of the public educaiton system. Period. Bottom line. The economic power of the state is derived from the public education system. The big problem we have in California is that if we continue to cut at the higher ed system, we won't have that in the next generation. </p>
<p>Here is what I would support however. I would support the state endowing the public universities so they aren't beholden to annual state budgets. I think that would solve a lot of problems. They could be more nimble and more responsive in addressing the issues. The way at least california is set up now, it doesn't matter if UC is planning a new nursing school, if the state doesn't fund additional enrollment thats it. The university should have a much larger endowment or reliable income stream that allows them to better address the problems and implement their form of public policy.</p>
<p>I live in Ohio. Our public schools are losing $$$ a year to charter schools, and vouchers. Charter school students' scores on standardized tests rank very low, along with the weakest large urban districts. IMHO, it's all about the "education entrepreneurs" making a profit. Our state u's aren't great, but I wouldn't trust vouchers.</p>
<p>We also were sold a bill of goods about lottery money going to help our education system. It's a funding system similar to selling swamp real estate in Florida. </p>
<p>Our state gov't leaders are corrupt enough w/o more money to dole out to cronies.</p>
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I would support the state endowing the public universities so they aren't beholden to annual state budgets. I think that would solve a lot of problems.
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This would be nice but do you have any idea how much this would cost? And how would the states create the endowment while presumably also maintaining their annual support til the endowments grew large enough?</p>
<p>A university with, say, a $100m annual budget would need an endowment of ca. $2.5 billion to be self-sustaining. What's the overall budget of the UC campuses?</p>
<p>Just to expand the question, take the overall operating budget of a "typical" large state university. It might be on the order of $1.5 billion (some are much larger, some smaller). Of that budget, at present some $400 million might come from tuition and fees (though $75 million might go back in the form of scholarships); some $450 m from state appropriations; $200 m from federal grants and contracts; $200 m from fees, room and board, activities of departments, etc.; some $50 m from local and private sources. This doesn't quite add up but it's close to realistic for a university I know well.</p>
<p>What would you endow? An endowment to cover the entire operating expense of $1.5 billion would require about 25 x that amount or about $38 billion. That's a whole lot of money, in excess of the current endowment of any university in the country. But of course you might charge some tuition and fees for room and board, I assume. Cut the remaining needed revenue to oh, say, $1.2 billion. Then you'd need an endowment of only $30 billion. OK, so let the university continue to generate external revenue through grants and contracts -- take away $250 m. And you'd need to cover a remaining budget of, say, $950 million. You'd need an endowment of ca. $24 billion. That's still a whole lotta money. No state's going to endow all its universities through the general fund. A better solution is to gradually shift operating costs and responsibility for revenues to the universities themselves, ratcheting up their share over time, and forcing the universities to become entrepreneurial and also to build their own endowments. That's exactly what's happening now, though not explicitly so. And there's a long long way to go.</p>
<p>The numbers can be a little sunnier. A major research U spending $1.5 Billion or so can have $600 million a year in contracts for research of which 40% off the top goes to overhead which is the rest of the U. That's $240 million freed up. Tution could be $500-$600 million less $100 fin aid--so say $450 net. room and board is a wash as are athletics and student services--paid out of fees etc. The actual budget net of research and self-funded items is closer to a Billion of which $700 million is already covered. You need $300 million which at a 5% payout means $6 Billion endowment. A doable number with effort.</p>
<p>I suppose this is so, but your tuition costs would be much higher than current levels -- and at the university I was thinking of they're already high -- so I think you're being optimistic and already commiting to a substantial tuition increase from current levels. Also, $600 m for research and contracts is on the high end and far from typical. </p>
<p>So let's move things back to a more realistic level using your other assumptions, and the "need" might be $700 m, not $300 m. I'm told not to "rely" on a 5% payout -- I used 4% as I do for a safe estimate for my own retirement fund, given that it's subject to market fluctuation.</p>
<p>So, with $700K, at a 4% payout you would need $17.5 billion, and at a 5% payout you would need $14 billion. A lot more than $6 billion.</p>
<p>Anyway, this is all a big speculation.</p>
<p>You wouldn't endow all of the expenses. The idea would be so the university wouldn't be beholden to the state budget process. So you would endow the state input. It doesn't need to be perfect, just some of it would help. Just like everything else state revenues are cyclical based on the economy. Therefore, I when times are good, i would increase approprations for the state university for the purposes of endowment. They would keep puting it away until times flattened out. When things are normal, I would have some of the state budget process stuff. This would allow time for the endowment to grow. If times were bad, I would tap some of the interest to fill the gap until economic times improved. As the cycle returned to normal times and then boom times I would repeat the process over several decades. Within a several decades, the system would be endowed. Then all appropraitions from the state would be supplemental. I would endow the federal research and all. That way the there would be double money running around. </p>
<p>Or if the state was California, where Californians pay out something like 50 billion dollars a year more to the federal government than they receive back in services and investments, I would just ask for that back. In one year, 50 billion, UC would be done. Even have a little extra for padding.</p>
<p>From my observation of how state legislatures work, whether times are good or bad they aren't going to be putting money into an endowment. They live hand-to-mouth; there are always budget crunches of one kind or another. And the big 6 expenditure areas are always in competition: K-12 education, Higher educ, Medicaid, prisons/corrections, state government operations, and revenue sharing with local governments.</p>
<p>Also, higher education costs aren't a constant, but increase for a variety of reasons including the costs of salaries, health care and other fringe benefits, energy, plant and upkeep, etc. </p>
<p>I work in higher educ, and would love to be insulated from the variations in state revenues. But if you watch the track of college endowments in the last 10 years or so, you will see that both public and private college endowments go up and down with the stock market and other investments. Last year, endowments grew an average of 13% or so; in the previous three or four years they increased by an average of 1-2% (and many went down by 10-25% in 2001-2003 if the investment managers took too risky an approach). There's just no sure way to insulate college budgets from the economy.</p>
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UMich has become a relative safety for Berkelely and UCLA rejects since that school needs to fill spots to offset declining residential enrollment.
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</p>
<p>Okay, this is a hijack, but I just saw this and I about spewed coffee all over the place when I read this.</p>
<p>UMich may be "a safety" for other schools, but it has nothing--nothing at all--to do with "declining state enrollment." Michigan could readily fill its campus with state residents; it elects to have a 1/3 non-resident enrollment and this has been the case for decades. That pool is fairly deep, too, but the state would flip if U-M raised the nonresident ratio much higher (they've wrangled over this for decades, too). Enrollment is not declining on either front--go talk to Michigan's strung-out housing director about these last two freshmen classes. </p>
<p>Safety school Michigan may be, but it's not because no residents want to attend there.</p>
<p>You're absolutely right. That was a crazy comment. As I mentioned above, there has been an "informal" quota on out of state students at UMich because of pressure from the state legislature over the years. But that quota is still higher than that at, say, UNC or UVa. And so UMich is able to reap the benefits of its outstanding national reputation by getting more high-paying (and highly qualified) out of staters.</p>
<p>The point wasn't that public schools could every really be fully endowed, or that they could be insulated from the economy (politics maybe). The point was that I would support that as a way insulating state schools not privatizing them.</p>
<p>It would be great if alumni would contribute more to the Publics and if the state legislature would reward this type of contribution instead of using it to justify reductions in state aid.</p>