Guest Columnists

Higher tuition does not imply higher educational revenues

Pedestrians walk among CyRide busses Tuesday, Sept. 17, 2013, on the Iowa State University Campus in Ames. (Scott Morgan/Photos for The Gazette)
Pedestrians walk among CyRide busses Tuesday, Sept. 17, 2013, on the Iowa State University Campus in Ames. (Scott Morgan/Photos for The Gazette)
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Iowa Regents have asked the three reporting universities to develop plans for determining the future tuition structure. While it is a good idea to plan, this exercise will likely generate ideas for increasing average tuition.

For example, some, including University of Iowa President Bruce Harreld, suggest resident tuition be increased to the average tuition of selected peer universities. The problem is that increases in tuition revenue will likely be offset by reductions in the state appropriation.

To claim real expenditure per student in Iowa has been flat for the last 25 years is not far off the mark. Using data provided by the State Higher Education Executive Officers for the period 1991-2006, the average growth rate of real educational revenues per full-time student in all Iowa public colleges and universities was 0.38 percent a year (the U.S. average was 0.5 percent).

What changed is: “Who pays?” Over this 25 year period, the real state appropriation per student in Iowa declined by per year, while real tuition revenue per student increased by a year. Using relative weights for 1991 (55.3 percent appropriation), the weighted-average annual growth rate is the modest 0.38 percent.

Thus, we have observed increases in average tuition for decades, but these increases have largely been offset by decreases in the level of state support. Does tuition rise because state support declines? Or, does state support decline because tuition rises? My view is that tuitions and subsidies are the outcomes of decisions made by legislatures, regents, universities, and students. A coherent financial plan requires considering all these decision-making fronts.

Sensible suggestions have been made for increasing average tuition. The pay-what-you-can-afford model, suggested by the American Academy of Arts and Sciences (currently headed by Mary Sue Coleman), is one promising approach. The idea is to set all tuitions at the non-resident rate, reduce resident tuition by the state appropriation per resident, and use the resulting proceeds to subsidize low-income students (Something similar was recently suggested by Professor Chris Morphew as being suitable for the UI). Again, there is no guarantee that state support will not decline to offset tuition gains.

In planning new tuition structures, we need to identify ways to ensure that our planning isn’t undone by reductions in taxpayer support. The legislature must be included in the conversation. It is possible to gain ground. At Michigan, total revenues per student has increased; there was a smaller decline in state support (per year) accompanied by a much larger increase in tuition revenue (a year). It’s possible to lose ground. At Wisconsin, the decline in state support was not offset by increases in tuition, and revenue per student declined by a year.

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Many of us believe there are important sustaining and differentiating roles played by continued taxpayer support of higher education. While recognizing how difficult it is for legislatures to make credible future funding commitments, we require an informed, ongoing, and open conversation with legislators and regents to determine the feasibly of retaining a public-private balance of university finances. Modest changes in tuition structures that are offset by declines in taxpayer support are not balance-sustaining outcomes, unless we embrace inevitable privatization of our “public” universities.

• Gary Fethke was dean of the University of Iowa’s Henry B. Tippie College of Business from 1994 to 2006, the UI interim President from 2006 to 2007, and is currently professor emeritus of management sciences and economics. He is the author of “Public No More: A New Path to Excellence for America’s Public Universities.”

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