In his state-of-the-commonwealth speech last month, Gov. Deval Patrick proposed a $1.9 billion tax increase, partially linked to the idea of “raising our investment in public colleges and universities.” The rationale for the proposed increase in public higher education spending is “to accelerate [economic] growth and expand opportunity throughout the commonwealth.”
As a professor of public policy at a public university, I am inclined to think that this is a good idea, but at the same time, as someone familiar with the internal operations of the higher education establishment, I find it necessary to suggest an amendment to the governor’s proposal.
Patrick indicated that he was proud of the improvements and reforms in K-12 education and the community college system, where increased funding has been based to high standards and accountability. Surprisingly, however, the governor’s proposal for increased public higher education funding was not based on a similar stipulation. While I am skeptical about whether the legislature will actually pass a tax increase as large as the one proposed by the governor, in the event that it eventually passes a scaled-back version of the governor’s plan, I suggest that any increases in public higher education funding be earmarked to an account administered by the Board of Higher Education (BHE) and distributed to individual higher education institutions on the basis of a performance-based formula, rather than as incremental increases to base budgets established on the basis of prior political arrangements.
Competitiveness Indicators
For example, one useful set of “competitiveness indicators” should measure where students choose to attend a college or university. Enrollments are a measure of the extent to which colleges and universities offer an appropriate mix of programs at an acceptable level of quality as measured by individuals’ willingness to pay the established price (tuition and fees) for them. In most states with formula-funding for higher education, the most basic criteria for allocating public funds is the number of students enrolled on the principle that funding should gravitate toward those institutions that have more students, retain their students and graduate their students. Notwithstanding demographic fluctuations, there is absolutely no reason to provide increased funding to colleges or universities that are losing enrollments compared with their peers.
In addition to enrollments, performance indicators could be established to measure entering freshmen’s SAT scores, class standing, high school grade point average, the percentage of entering freshmen retained for a second year and the six-year graduate rate. These factors could be used to reward individual institutions for attracting high-quality students to high-quality programs and for offering programs that retain students. There could be some modification to the formula, as is done in many other states, to account for the differential cost of graduate and undergraduate education and perhaps the types of programs offered by an institution. However, formula funding of this type will require strict regulations and oversight by the BHE, because those of us on the inside know very well that university administrations already deploy an array of tricks and deceptions to inflate “performance,” for example, when reporting similar data to U.S. News and World Report Best Colleges, and even to the federal government. The proposed system will only work if there are strict reporting criteria and independent verification or data checking by a regulatory agency.
Financial Indicators
Furthermore, it would be foolish to reward public colleges and universities for financial malfeasance, so it is imperative that a distribution formula include financial performance indicators, including indicators that insure funding is allocated to instruction, research and public service – the core mission of any public university. The most basic indicator of financial performance is whether or not an institution maintains a balanced budget. An institution that consistently runs a structural deficit should be required to put its financial house in order before being rewarded with additional funding. Other financial indicators that are frequently used to measure the financial health of colleges and universities include reserve ratios (to cushion budgets during fiscal downturns), long-term indebtedness per student, private donations per student, student loan default rates, and the percentage of the budget spent on instruction, research, and public service.
Here too, the BHE would need to develop strict rules for implementation. Benjamin Ginsberg has pointed out in his recent book, “The Fall of the Faculty and the Rise of the All-Administrative University,” that the greatest scandal of the last 20 years in higher education has been the proliferation of “deanlets” – assistants, associates, assistant associates, special assistants, etc. – who have consumed the vast majority of new spending on higher education, even as faculties are downsized and de-professionalized through the use of more part-time faculty without doctorates. Again, as someone on the inside, I know very well the misleading accounting classifications that are often used to mislead trustees about the percentage of the budget devoted to administration versus the percentage devoted to instruction, research and public service.
If in the end, one or two public colleges or universities go bankrupt and defunct, or get wrung through a system of state receivership, then so much the better for public higher education.
Clyde W. Barrow is chancellor professor of public policy at UMass Dartmouth and director of its Center for Policy Analysis.
