Massive Disinvestment?

Andrew Delbanco has written a thorough and fair-minded article in the New York Review of Books about how the current economic crisis is exposing the way our higher education system is one "in which 'merit' is the ubiquitous slogan but disparity of opportunity is often the reality." He makes one point, however, that deserves some scrutiny:

These institutions—long before the current crisis—were seeing what Peter Sacks, in an indignant and informative book, Tearing Down the Gates: Confronting the Class Divide in American Education, calls "massive disinvestment" by the states. The University of Virginia now receives a mere 8 percent of its funding from the state of Virginia, down from nearly 30 percent a quarter-century ago. At the University of Wisconsin, in a state with a long progressive tradition, only about 19 percent comes from public funds—also down from around 30 percent just a decade ago. To make up for the decline in public money, tuition rates at public universities have been climbing even faster than at private institutions—a trend likely to accelerate, at least in the short run.

It's not that simple. The chart below, from David Longanecker, President of the Western Interstate Commission on Higher Education, shows public appropriations and net tuition revenue per FTE student, adjusted for inflation, from 1984 to 2008. This clearly illustrates the well-known role of higher education as the budgetary balance wheel in state appropriations. When fiscal times are bad, you can't just close down the prisons and let murderers run free, while you can cut funding for the universities and expect that tuition will make up the difference. When times are good, by contrast, state policymakers would rather spend the extra money on things that everyone feels good about, like universities, instead of more problematic services like welfare, incarceration, etc.

Thus, you see public money (the blue bars) flowing into higher education during the economic good times and out during the bad. The net result has been mostly a wash--real appropriations per FTE are higher than they were in 1983, albeit lower than the peak in the go-go years of the late 1990s, when states were swimming in unexpected revenue. One could reasonably argue that this is still a cut because higher education shrunk as a percent of all government spending, which tends pick up a portion of productivity gains and thus rise faster than inflation. True. But a lot of that was a function of other trends, most notably skyrocketing health care costs and an aging population, both of which put huge pressure on state Medicaid budgets. The other important factor is college enrollment, the red line on the chart. From 2001 to 2005, public institutions were hit with the unfortunate two-fer of a recession-induced funding pullback just as the baby boom echo was cresting. Thus, the sharp decline in revenues per student. But they made a lot of that back in the later years of the expansion as enrollment levelled off and revenues increased, the normal historical pattern.

So, overall, "massive disinvestment" is inaccurate. The government is hanging in there. (This varies a lot by state, of course, some are much worse, others better.) Not what many (myself included) would wish in an era that values information and learning more than ever, but not a total walkback by any means.

A related but distinct phenomenon is the issue of (as Delbanco frames it) public investment as a percentage of higher education revenues. Even as public revenues have been flat in absolute terms over the long haul, they've declined significantly relative to all higher education revenues. Why? Because colleges and universities have boosted spending much faster than inflation, and they're making up the difference by hiking tuition. Thus, you see the yellow bars (real per FTE net tuition revenue) doubling in absolute terms while also comprising a larger percentage of the whole, and as such making public revenues (the blue bars) a smaller percentage of the whole.

Of course, all of this could look much worse in a few years, depending on how things go with the economy. The decision to funnel a big chunk of federal and state stimulus funding into K-12 and higher education will help.

The question Delbanco doesn't address is whether the long-term trend of higher education spending running far ahead of inflation, economic growth, family income, public appropriations, and everything else is an unavoidable fact of life that needs to be accommodated or a public policy problem that can be substantially addressed. I think it's the latter, and as public coffers and family pocketbooks are increasingly barren, I think others will too.