Revamping the Ivory Tower.

• Author: McCluskey, Neal
• Position: ECONOMIC OBSERVER - Column

IT COMMONLY IS ASSERTED, especially by people within higher education, that the American Ivory Tower is swapped for cash and tightfisted taxpayers are to blame. Taxpayer support for postsecondary education long has been in decline, this narrative goes, and has forced schools to raise tuition continually to make up for the losses. Tallying taxpayer-backed expenditures on higher education over the last quarter-century, and separately adding 15 years of taxpayer burdens after accounting for student loans being paid back, reveals that this narrative is inaccurate. No matter how you slice it, the burden of funding the Ivory Tower has grown even heavier on the backs of U.S. citizens. Whether one examines taxpayer dollars in total, per enrollee, per degree, or per tax-paying citizen, real spending has gone up.

Moreover, financial costs only are part of the story. While the evidence is not conclusive, it appears that the additional spending and the added students and degrees it has helped to fund ultimately do not constitute a net societal gain. Instead, all the coerced, third-party support likely has produced several damaging, unintended consequences: credential inflation; sky-high noncompletion rates; and rampant tuition hikes. In other words, the money taken from taxpayers--in total and on an individual basis--to "invest" in higher education has been on the rise, and it appears to be hurting both taxpayers individually and society as a whole. We have taken money from people who would have used it more efficiently than has the system to which it was given.

"Over several decades there has been a material and progressive disinvestment by states in higher education." That statement, in a 2009 op-ed by Chancellor Robert J. Birgeneau and Vice Chancellor Frank D. Yeary of the University of California, Berkeley, is something most people likely have heard in some form in the last few years--but is it true? Have states been in a long process of disinvesting from colleges and universities? How is that determined? These are critical questions, but they all too often are left unasked in the public discourse on the state of the nation's universities and colleges.

To measure taxpayer investment, analysts often will use state and local government funding as a share of overall school revenues, then argue that state and local funding has been decreasing. Other times they will look at changes in appropriations at the peak and trough of a business cycle, when...