Does Public Higher Ed Funding Drive Economic Growth

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Examining What We Spend
A Presentation for the Cato Policy Forum
Does Public Higher Ed Funding Drive Economic
Growth?
Neal McCluskey
Associate Director, Center for Educational Freedom
Cato Institute
January 14, 2009
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Examining What We Spend
A major contention of those who want greater
public investment in higher education is that
public funding has been severely cut
Public university tuition has increased because
real per student appropriations have
declined. - University Tuition, Consumer Choice
and College Affordability, NASULGC, November 2008
After a long period of declining public
financing for higher education on a per student
basis, most public universities and colleges have
little room to yet again do more with less. -
College vs. Unemployment, CSHE, November 2008
Q Is this accurate?
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Examining What We Spend
A Barely, at best!
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Examining What We Spend
State and Local Appropriations per FTE (Natl.)
Source SHEEO SHEF
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Examining What We Spend
Tuition Revenue per FTE (Natl.)
Source SHEEO SHEF
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Examining What We Spend
Maryland
Historically, Maryland schools have lacked
adequate state support and depended too much on
relatively high tuition rates. - Baltimore
Sun, responding to Bohanan Commission
recommendation to increase state higher ed
funding by 760 million
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Examining What We Spend
Maryland (Cont.)
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Examining What We Spend
State and Local Appropriations per FTE (MD)
Source SHEEO SHEF
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Examining What We Spend
Tuition Revenue per FTE (MD)
Source SHEEO SHEF
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Examining What We Spend
California
Over the last three decades the state's
investment in public higher education has dropped
40 percent ... It's a collapse, folks, said
Tom Mortensen, author of the report California
at the Edge of a Cliff The Failure to Invest in
Public Higher Education is Crushing the Economy
and Crippling our Kids' Futures. This is a
staggering commentary on this state's commitment
to higher education. - LA Daily News,
California falls in education ranks, 1/7/09
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Examining What We Spend
California (Cont.)
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Examining What We Spend
State and Local Appropriations per FTE (CA)
Source SHEEO SHEF
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Examining What We Spend
Tuition Revenue per FTE (CA)
Source SHEEO SHEF
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Examining What We Spend
Total Local and State Taxpayer Support (In
millions of 2006 dollars)
Source The College Board, Trends in College
Pricing 2007, Figure 10b.
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Examining What We Spend
Student Aid
Q Declining public support for colleges clearly
does not create the need to raise tuition and
fees. So what explains the big price increases?
A At least in part, that students can pay the
increases, and that is thanks largely to
ever-growing public and other third-party
dollars.
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Examining What We Spend
Avg. Grant Aid per Undergraduate FTE (In constant
2007 dollars)
Source The College Board, Trends in College
Pricing 2007, Figure 11a.
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Examining What We Spend
What are the results of all this spending?
Anecdotally, a lot of extravagance
Massage Stuff, Holy Cross (Source Inside Higher
Ed)
Smoothies all around, Tiger Grotto, U of
M. (Source Sportsillustrated.com)
5 Story climbing wall, U of H. (Source New York
Times)
Earhart Dining Court, Purdue (Source Purdue
University)
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Examining What We Spend
and a lot of excess
Source Baltimore Collegetown Network, Economic
and Community Impact Study, February 2008, Figure
8.
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Examining What We Spend
and in the aggregate, a lot of bloat.
Source U.S. Department of Education, Digest of
Education Statistics, 2007, Table 234.
Source Strong American Schools, Diploma to
Nowhere, 2008, p. 9.
Source U.S. Department of Education, Literacy in
Everyday Life, April 2007, fig. 3-1b.
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Examining What We Spend
More public money leads not to efficiency or
student savings, but excess
Universities share one characteristic with
compulsive gamblers and exiled royalty there is
never enough money to satisfy their desires. -
Former Harvard University President Derek Bok,
Universities in the Marketplace, 2003, p. 9.
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Examining What We Spend
All of which explains why Prof. Richard Vedder
has found, after attempting to control for
opportunity costs, that
Increases in the proportion of a states
income used to support higher education are
associated with lower rates of economic
growth. - Going Broke by Degree, 2004, p. 135.
Ultimately, letting taxpayers keep their money is
better than giving it to students and schools.
Taxpayers know their needs best, and are much
less wasteful with their money.