Tuesday, April 10, 2007

Tuition freezing is expensive 

Among the many places the Legislature wants to spend money, one of them that has special attention around here is the proposal to freeze tuition. For example, SF 773 fully pays for tuition freeze by an additional amount of money in the higher ed bill. The calls for tuition freeze are notably bi-partisan up here, though I think the Republicans have become more muted over the last month. The bill is laying in wait for the omnibus higher ed spending bill that may come up as earlier as next week. It would be part of the goodies used to buy public support for tax increases.

An object lesson comes from Ohio, where a promise to freeze tuition in return for a 5% increase in the state allocation is still leaving state universities in the red. At Phi Beta Cons, Michael O'Brien puts his finger on the problem.

No one is arguing that many large public universities couldn�t stand to trim some fat from their budgets. But the issue at hand, instead, is the Strickland administration�s imposition of what amounts to a price control on the price of higher education in the state of Ohio. As many of the economists at Ohio�s universities could tell you, the imposition of a price control below market value creates an excess of demand for a scarce supply. That is, there aren�t enough resources to meet the demands of increased numbers of students in Ohio�s universities.

Tuition should reflect the market value of education in the state of Ohio. Schools should be free to set tuition rates without having to kowtow to the demands of politicians. Indeed, it can even be prudent to raise tuition rates substantially�just look at Ohio�s up-and-coming Miami University. After raising its in-state tuition to match out-of-state tuition, the school�s academic standards for admitted students increased.

On this campus, the planning documents have an expectation of a raise in tuition revenue from $66 million to $74 million. (See documents here.) It is unlikely we would attract more students, so the increase has to come from more tuition per credit. Now some of this would come from masters and new applied doctoral programs which naturally charge higher tuition. And the nursing and art programs believe their costs are sufficiently higher that they should charge differential tuition rates for their classes. But it is highly unlikely that the university would get that much from those activities. And each 1% increase in tuition here generates about $1.5 million in additional revenue.

This is why the university (and all other MnSCU schools) have staked their hopes on a big budget bill getting through the legislature. Tuition freezes are a way to sell that, but the universities only want that if you pay for it. Our faculty union's chief negotiator, Rod Henry, testified before the legislature in January:
My organization supports a tuition freeze if the inflation request is fully funded, because otherwise institutions will have to come up with the money from employees or some other source.
Full funding begins with you, dear taxpayer.

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