Monday, November 06, 2006

 

Recessions

IHE had a piece last week about how long it takes for states' funding of higher ed to return to pre-recession levels after a recession ends. The gist of the report is that for the last twenty-five years or so, each post-recession recovery ends at a slightly lower level than the previous one in most states, with the net result that most states have cut their higher ed funding in real terms over the years. The effects on, say, faculty hiring are utterly predictable.

Why would this be?

For all of the conspiracy theories I've heard (It's an attack on critical thought! It's the religious right out to get liberal academics!), the easiest explanation still strikes me as the most persuasive: unlike most other agencies of the state, we have alternate revenue sources. We charge tuition.

Looking at the cost items facing state and local governments, very few offer alternative revenue sources. There's a limit, politically, to how many speeding tickets and parking tickets can be issued. Prisons aren't exactly self-sustaining, and the incarceration binge of the last 25 years has taken its toll on state and local government budgets. The K-12 system doesn't charge tuition. Most public parks are free. Most roads don't charge tolls (especially once you get off the East Coast). The health sector consumes ever-more-resources, both upfront (public employee benefits) and through the back door (paying for emergency treatment for the uninsured, medicaid/medicare, etc.). Public colleges and universities are among the few agencies of the state (or county) that have substantial sources of outside revenue.

During tough times, we get cut because they aren't about to let prisoners out or shut down kindergartens (and rightly so). During better times, we get some funding restored, but the faster-than-inflation rates of growth in prison populations and health-care costs squeeze us. So we get told to find other ways to stay afloat, then incur the public wrath for seemingly out-of-control tuition increases.

Absent some strikingly far-sighted public leadership and/or a long economic boom, it's hard to imagine what would reverse this trend. Add to this trend the well-known rigidities of academia (tenure) and the less-well-understood quirk of academia and healthcare that we have to incorporate technology whether it improves productivity or not, and you get a bleak financial picture.

Last week I attended yet another of those circular-table chicken-in-white-sauce events in which Very Important Figures get together to 'network' and listen to Even More Important Figures talk about The World Today. (One of the speakers was a very well-known politician for whom I have voted more than once. He gave possibly the worst, least-organized speech I've ever seen a public figure give. I was embarrassed for him.) The most interesting speaker was an economist from one of the major banks. She did a presentation on the keys to economic development in this region, and it was revealing to see what 'counted' and what didn't. She dwelled extensively on tax rates, business regulations, and the cost of living. Left unmentioned were Richard Florida's ā€œ3 t'sā€ of technology, talent, and tolerance.

Nobody commented on her choices. They seemed to be received as if they were all common sense, which, in a way, they are, and that's the problem.

If tax rates were all-determining, then I'd expect to see New York City circling the drain and Jackson, Mississippi thriving. Boston would be dying and Little Rock exploding. Well, no.

There's an economic development case to be made for higher ed that goes beyond 'training the high-tech workforce' and 'technology incubators,' although those both have value. Places like Madison and Ann Arbor thrive not just because they attract federal funding, although that's certainly not to be sneezed at. They also attract young people with ambition because they see action there. The upper reaches of higher ed are a kind of regional bait for talented, ambitious young people. (Imagine Boston without colleges!) The lower echelons of higher ed, such as community colleges, are great assets for workforce development and low-cost access to transfer courses; in some states, cc's are consciously used as feeders for the state four-year systems, since we're cheaper. All of higher ed helps attract (and/or keep) talented young people in an area. Without that, the best a region can do is coast on capital, which is getting harder as technological change accelerates.

Economic development helps pay for all those other public goods over the long run, but at a short-term cost. As we slough more of that short-term cost off onto students, I'm concerned that we'll have to start watering-down what we do to meet what they can afford. As that happens, we lose our reason to exist.

I don't have an easy answer to this one. Perversely, the main consolation is that there's a limit to how low budget cuts can go. As the government's share of a college's budget goes lower and lower, the prospective future damage of additional cuts starts to become, well, finite. We've had our state support cut, again, and it hurts. But the more it drops, the less relevant it becomes. At some point, given current trends, state government won't be able to cut us any more, because its support will be zero. (Some colleges in some states have already started talking about emancipating themselves in a sort of academic secession.) I think a state would be insane to let that happen, but that doesn't mean it won't.

Recessions are short, but the payoff from higher ed shows up over time. We need to find ways to make that clear, rather than just diluting our product until there's no gain to show.

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