A radical proposal for funding public colleges

The current system for supporting and overseeing public colleges and universities is out of date. Better to give the money directly to students in the form of scholarships. And get the legislature out of the business of running universities.

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Red Square at Western Washington University

The current system for supporting and overseeing public colleges and universities is out of date. Better to give the money directly to students in the form of scholarships. And get the legislature out of the business of running universities.

Public higher education is an engine of prosperity for the nation, the state of Washington, and most importantly for the individual young people of the state. Too bad we have the wrong model for funding it.

The historic funding model hands resources to public colleges and universities, with numerous strings attached. In periods in which few students attended college, when public resources were not overly constrained, and when the cost of providing an education was relatively low, this model worked well. Because not one of these three conditions is true today and none is likely to be true in the near future, this traditional funding model is broken. It's time for a disruptive new idea.

Public higher education traditionally serves three purposes: education, research, and generating jobs. The state’s interest in the first of these, education, far outweighs the other two. In light of current conditions, I'd like to propose a radical but simple restructuring of higher education finance to redirect limited resources toward the most important charge: students. Here are the components of the proposal:

1. The four-year college and university portion of the higher education budget of the state should be eliminated completely, and the funds released would be used in their entirety to provide scholarships to Washington students, to be used at any four-year Washington public college or university of their choice.

2. The four four-year colleges and two research universities would continue to be public institutions with governing boards appointed by the governor and with graduate program approval remaining with the Higher Education Coordinating (HEC) Board, but most other supervision would be eliminated. Specifically, tuition and scholarship policies would be entirely in the hands of each institution.

One reason for this proposal is that, in a time of limited resources, students are best served by putting choices in the hands of students and their families. Competition for students will help generate innovation and efficiency. While scholarship levels may differ among students, reflecting academic merit and financial need, scholarships would not differ according to the institution attended. (The student gets the grant, not the college.) More expensive institutions, like the University of Washington, where the state scholarships would not fully cover costs, would have to compete by providing a more desirable product and additional sources of scholarship support.

The proposal reflects a philosophy in which the principal interest of the public lies in educating its students rather than in supporting the institutions of higher education as such. Both the funds and the expertise of the state government are best directed to those students directly, rather than in managing the internal arrangements of the institutions or in refereeing among them.The quid pro quo for adopting this new policy would be to allow the public colleges to set tuition themselves, as private colleges do. Further, the colleges might choose to develop a very different structure of charges, which could include differential tuition for different majors.

If this proposal seems radical, unprecedented, and unworkable, remember that it's long been tested by private institutions. What’s added to the mix is the public subsidy for students.

In addition to deregulating tuition, this model would also involve a major loosening of constraints and regulations within higher education generally. Institutions would be empowered to manage their own enterprises as publicly-supported businesses. They would be free (and  encouraged) to use innovative techniques in deciding on the time, place, and manner for delivering educational offerings.

Central control and planning at the state level are poorly serving our citizens. Perhaps this more market-based approach will provide a better model for the coming decades.

Another welcome change that this model would prompt concerns the relationship of the institutions to the state. No longer would institutions individually lobby the Legislature for what they view as their fair share of the state’s operating budget. Instead, their lobbying  would be focused on growing the whole pie for higher education: they would lobbying with one another rather than against one another.

The Legislature itself would decide on how much money to allocate annually to each qualifying student. The public's perception would be altered, as the higher education budget would explicitly be all about students. For example, in tight budget times it might be harder to make deep cuts in higher education because of the promise made to students once they have entered a college and university that they would be allowed to continue with their education and that the rug won’t be pulled out from under them.

It is possible that this approach over time would lead to greater stability and possibly increased public pressure for expanded support of higher education, as the number of students supported became an explicit part of the public debate.Today, Washington hands about two-thirds of general-fund, higher-education spending directly to the four-year institutions, giving the remaining one-third out in the form of student financial aid. At UW and WSU, the tuition and fees are much larger than state support. At the other four-year schools, student payments and state support are roughly equal.

How should state support be given out? While I’d like to see enough financial aid to enable every qualified student to attend the school of their choice, Washington isn’t going to do that any time soon. To start things off, let’s split the current money into three pots. Pot 1 provides a basic scholarship to every Washington state high school grad who attends a public, four-year, Washington school. Pot 2 is given out on the basis of financial need. The third pot offers merit scholarships to the best performing Washington students. We will, of course, have to have a merry argument on just how large each pot should be. (Note that this proposal does not affect community colleges.)

Will this “solve” the higher education funding crisis? No, because a solution requires more money as well as a wiser allocation method. But when money is short, that’s the most important time to see that what funds we do have are directed to those with the greatest interest in the wise spending of limited money: the students and their families.

Note: The author teaches economics at the University of Washington but he most definitely does not speak for the University.


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