Reality Check: The Privatization of Public Higher Education

By Travis Reindl

For the better part of the last decade, the higher education community has debated the question of whether public colleges and universities are on the path to privatization. Will state support for public institutions sag to the point where they are not really public? Should these institutions be given greater autonomy to do things like build buildings and raise tuition? This conversation usually follows the ebb and flow of the state budget cycle, intensifying understandably during downturns.

The current state fiscal meltdown, which has prompted steep funding cuts and tuition hikes for higher education, has breathed new life into the issue of privatization. College presidents, researchers, and even campus newspapers are pondering whether the current fiscal slump is severe enough to force a revisiting of the state-campus relationship. The old joke among college presidents about their institutions moving from state supported to state molested is enjoying a comeback on the conference circuit.

Having watched this conversation for the better part of a decade, I've come to realize that a reality check is in order. To evaluate these claims, I believe that there are several important questions that need to be answered:

• Are we really that close to losing the "public" in public higher education?

• Is there some threshold below which a public university can or should be relieved of its public mission?

• Does it matter if major public universities become quasi-public enterprises? Will they operate any differently than they do now?

The answer to the first question is "Not as close as some might think." Leaders of major public research universities frequently talk about the trend of state disinvestment in higher education and cite statistics showing that the state supplies less than 10 percent of their revenue. True enough; higher education's share of the state budget has declined in recent years, as has the state's share of institutional revenues.

But what they fail to note is that these figures include income colleges earn from hospitals and enterprises such as bookstores, which have little if anything to do with their core teaching and research functions. Subtract those revenue sources from the picture, and the state's contribution doubles. According to the Delta Cost Project , state appropriations are the second-largest source of revenue per full-time student at public research universities, and on average comprise one-third of revenues (net of auxiliary enterprises). The bottom line: there is still a lot of state money in the basic functions of public universities.

The answer to the second question is "No." As noted higher education researchers Dennis Jones and Jane Wellman point out in their recent essay on top myths in higher education finance, shareholders in publicly traded corporations have exerted considerable influence over management performance with as little as three percent of voting stock. Moreover, there is the question of which should count more in determining the degree to which universities' bonds with the state should be loosened -- percentage of total revenue or dollars received. For example, the University of Michigan receives nearly twice as much per full-time student in state appropriations as Eastern Michigan University, so why should it be subject to less regulation? The point is that governors and legislators should be wary of deregulation discussions that are based on the "minority shareholder" argument.

The answer to the third question is "Absolutely yes." The conversation about privatization in public higher education matters because it is really not about autonomy, regulation, or accountability -- it is about revenue maximization. It is about whether some of the nation's wealthiest public universities will be allowed to have their cake and eat it, too, staying public enough to receive annual appropriations from the state and private enough to charge whatever the market will bear in terms of tuition. That scenario works out well for the institutions, but what does that mean for providing an affordable university education for state residents or meeting state needs?

At a time when President Obama has challenged the nation to regain world leadership in college attainment and more Americans than ever believe that qualified students are being denied college opportunity, we need affordable and accessible higher education at all levels. Talking about how much of the public's money is needed to call a university public is simply the wrong conversation at this critical juncture. Instead, we need to be focusing on what the public's investment in higher education is -- and should -- be buying.

Travis Reindl is the state policy and campaigns director at CommunicationWorks, a public affairs firm that specializes in educational improvement. Prior to joining the firm, he had 15 years of experience in higher education policy and advocacy. Most recently, he served as program director at Jobs for the Future, where he led a national initiative focused on increasing productivity in higher education. Before that, he headed the state policy analysis unit at the American Association of State Colleges and Universities. He has written extensively on issues of college affordability, accountability, and governance. His views are his own and do not necessarily reflect those of the New America Foundation.