16 August 2011

In-State Tuition Reform Continued

[UPDATE: The AM760 interview is now online here.]

Today I'll be on AM 760 Colorado Progressive Talk Radio today at 9AM to discuss the issue of in-state tuition reform.  Later, I'll be on Colorado Matters on Colorado Public Radio (I will update with broadcast time when I know it).  Who knew that in-state tuition reform was such a hot topic?

In the many reactions I received yesterday to the front page Camera article on my recent CHE piece-- ranging from emails to comments at the bus stop -- it is clear that most people fail to distinguish between (a) the sticker price of tuition and (b) the state subsidy of tuition. What this means is that people really have no idea that tuition for in-state residents is actually subsidized, but at a level that does not allow the books to balance. It also means that some Colorado residents, when they hear a call for a levelized tuition for in-state and out-of-state students, think that the cost to them will double.  This is not necessarily the case.
Have a look at the graph above (source), which shows Colorado state funding per resident student.  In round numbers, the state provides about $3,000 per student.  If the state allows the university to charge about $8,000 per student in tuition, and the cost of running the university requires a break-even tuition of about $14,000, then you can see that the result is a loss of $3,000 per in-state student.  That adds up fast -- it is a  $60 million shortfall.

How does the university make up the difference?  Answer: Out-of-state students!  In 2010 the proportion of out-of-state students at CU was larger than at any time since 1975 (data, it was 34.5% in fall, 2010 and state law allows it to go to as much as 45%).  From 2005 to 2010 the number of CU in-state undergraduates shrunk by 1% while the number from out-of-state increased by 17%.

If the state were to allow a levelized tuition, then it could still subsidize the costs of attending CU for state residents -- at whatever rate it deemed appropriate by subsidizing directly those residents accepted to the university. Imagine what would happen if the university charged the full cost of tuition ($14,000) and the state provided individual students with a check for its current subsidy per student ($2,800) -- Colorado residents would immediately see that the subsidy does not go very far, and it might lead to a different conversation about the state role in higher education. In addition, subsidizing the student rather than the institution would also allow for a greater focus on need-based support rather than simple geographic residency. Of course, there would be no requirement for each state university to follow the same tuition model, a diversity of approaches would probably make sense,
It is worth saying something about cutting costs. Some might argue that the university should simply cut $60 million of fat from its budget in order to balance the books. There are two responses to this. One is that all the fat has been cut and the university is now actually deep into bone (see, e.g., graph above). The second is that while academia is far from a perfect market, at some level you do get what you pay for -- consider that Stanford charges about $38,000 per year in tuition. CU simply cannot compete with the Stanfords of the nation by charging one third as much in tuition. Now perhaps Colorado residents or its legislature do not want CU competing with the nation's top research schools for students, faculty, research, etc. -- an open debate about where the state schools (all 12 of them) ought to aspire to in a national context would be a valuable contribution to the discussion.

The bottom line is that the current model for state university support is badly broken in a number of ways.  University performance is disconnected from its market price. Admissions decisions are increasingly based on who can pay the most.  Budgets have been cut to the bone. Ultimately, something has to give, and in the end it will be the quality of education and research at the institution. For those wishing for a cheap university, be careful what you wish for, as you might just get it.


  1. I haven't thoroughly looked into the issue or the numbers, but I have some thoughts on this:

    The idea that CU can't compete with schools like Stanford if the tuition rate is lower seems a bit arbitrary. I don't think there is *that* strong of a link between high tuition costs and undergraduate education. I assume that higher tuition would go toward improving research facilities and retaining higher quality researchers. The assumption that better research being done means undergraduate students are being better educated is highly suspect.

    There seems to be a constant push in Universities to promote research, as that is what matters for securing funding and publishing papers, yet it does not have as much of an impact on undergraduate education. By favoring researcher over professors that focus on teaching (as higher tuition might allow to happen), it seems that the value of education for undergraduates would decline.

    Also, it's possible that lower tuition rate for in-state students has inspired innovation within the departments to obtain more funding. CU is great at inspiring startups from research being done in the labs, and it seems that better funded schools do not necessarily do this as well.

    Anyway, just some thoughts. I am also strongly opposed to the idea of removing in-state tuition as I don't think the value of undergraduate education you receive at private schools is worth the cost.

  2. "One is that all the fat has been cut"

    According to the budget document I found on the CU website, the total revenues for FY 2010-2011 were a hair under two point seven billion dollars.

    Are you seriously trying to contend that cutting spending by a measly 2.2 percent, much, much less than most Americans have had to do in the past couple of years, can't be done? Really? I doubt it would be even noticed if it were across the board.

  3. I wonder if the increased costs is going to have some people asking some hard questions about the non educational missions of state universities. I noticed my local community college has started offering Bachelor's Degrees and even their out of state tuition rates are starting to look pretty reasonable.

  4. -2-Skip

    Thanks, I wish it worked that way. Most of that money in the CU budget is federal grant money which is highly restricted in use, e.g., cannot be used for instructional purposes.

  5. Last year, while we had our annual whine-fest about parking charges at the Academic Senate meeting, I broached what I thought was a perfectly reasonable question: why are universities in the business of renting parking spaces, even to their own faculty and students? No one in administration has any experience running parking lots. We can compete with the private market mostly because we can issue tax-free bonds for construction and they can't. But we're not very good at it.

    The reaction was simple amazement. How can anyone question that the university should be providing (exorbitantly priced) parking to the faculty?

    When you think about it, the diversity of services provided by a public university is far beyond what any private enterprise would try to provide. We rent rooms; we sell food; we sell sports entertainment; we do contract research; we provide free agricultural advice; and, oh yes, we teach. No business would try to do all this.

    The in-state/out-of-state issue only scratches the surface of the mess. Public universities are an ill-conceived conglomerate whose business plan can be summed up in one word: 'inertia'. We do these things because we did them 100 years ago. Any private enterprise would have spun most of this off years ago.

    I agree about in-state/out-of-state tuition. If the state wants to subsidize public education, give a scholarship to state residents who meet the right criteria, and charge the going rate for the tuition. Of course, U Colorado (like U Nebraska) would never go for it, because some of the scholarship money would be spent in private institutions.

    But then, you might ask, why not just privatize the darn place entirely? :-)

  6. .

    It appears this became an issue only after the state cut the subsidy from about $7,000 per student to a bit less than $3,000 per student.