Private College Under Siege.

• Author: Wolfram, Gary
• Position: Need to end direct subsidies to public universities

State-owned and -operated schools have altered the structure of private education and threatened its long-term independence.

STATE GOVERNMENTS heavily are committed to their college and university systems. They spent in excess of $44,000,000,000 for ongoing higher education operations in Fiscal Year 1995-96 at more than 1,600 public colleges and universities enrolling more than 11,000,000 students. Alongside this system of state government-controlled higher education, there exist more than 2,000 private colleges and universities with more than 3,000,000 students. This combination of state-run and private, independent higher education is an important characteristic of the American system. As George Roche, president of Hillsdale College, has pointed out, "There is, simply, no other system like ours. By contrast, Great Britain has one private university; Germany has one; Australia has none. France and Japan together have a few hundred, but they are highly subsidized and/or regulated by the state. With all its faults, our system is the freest and most independent...."

Since these two systems are, in many ways, substitutes for one another, state government higher education policy has had a profound effect on independent colleges and universities. State government subsidies to public colleges and universities allow them to charge tuition that is substantially less than the cost of education and to underprice the private sector. This tuition differential is a substantial threat to independent higher education in the U.S. and, in turn, to civil society.

The effect on tuition. The data demonstrate that policies of providing revenue directly to state-run institutions allow public colleges and universities to underprice their private counterparts. Over the last 20 years, state governments have been the source of two out of every five dollars for operating revenue for public institutions of higher education. Although state governments gradually declined since 1985-86 as a source of current-fund revenue, from 45 to 35.9% in 1994-95, the contribution has risen from slightly less than $29,000,000,000 to $42,800,000,000.

On the other hand, state governments are a minor source of revenue for private colleges and universities, rising slightly from 1.8% of current-fund revenue in 1979-80 to 2.1% in 1994-95. In current dollar amounts, state governments provided slightly more than $400,000,000 to private colleges and universities in 1979-80, rising to slightly less than $1,500,000,000 in 1994-95.

This state government subsidization of the public higher education system results in a wide divergence in reliance on tuition and fees. At state institutions, they increased from 12.5% of current-fund revenue in 1979-80, but still made up less than one dollar in five in 1994-95. In dollar terms, they rose from $4,900,000,000 to $21,900,000,000 over the same period, but still are only half as important as a revenue source as state government subsidies.

For private colleges and universities, tuition and fees are the major source of revenue. Since 1979-80, they went from 35.9% of current-fund revenue to 42.4% in 1994-95. In current dollar amounts over this time, they rose...