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Research & Commentary: Minnesota Higher Education

January 27, 2015

Minnesota starts the 2015 legislative year with a $1 billion surplus, but Gov. Mark Dayton (DFL) reports he has already received $3 billion in spending requests.

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Minnesota starts the 2015 legislative year with a $1 billion surplus, but Gov. Mark Dayton (DFL) reports he has already received $3 billion in spending requests. One of these is from University of Minnesota President Eric Kaler, who argues the two-year tuition freeze passed in the 2014 budget will require additional taxpayer funds to sustain.

Critics of increasing government funding for higher education say increases don’t necessarily lead to better instruction or lower tuition. This point has been bolstered by reports of universities installing luxurious recreational amenities such as hot tubs and “lazy rivers” to attract wealthy students. In addition, full-time administrative positions grew by 369 percent between 1975 and 2011, according to the American Association of University Professors’ annual report.

A Wall Street Journal analysis of University of Minnesota salary and employment records found the system added more than 1,000 administrators between 2001 and 2012, nearly double the rate of growth in the student body. Authors of the analysis argue growing administrative costs in U.S. higher education are a key reason tuition has risen much faster than inflation. According to the Bureau of Labor Statistics, college tuition and fees have risen by 1,134 percent since 1978, far outpacing medical costs, which went up by 607 percent, and energy costs, which rose 359 percent.

Another reason higher-education institutions have become less cost-efficient is students pay only part of the costs of their education, with third-party payers making up the bulk through government subsidies, loan programs, and private gifts. The increase in the availability of third-party money has encouraged an increase in tuition costs while reducing the incentive for institutions to use money efficiently or serve their customers well. Some legislators argue the government holds institutions accountable by enforcing performance goals, but such goals wouldn’t be necessary if the institutions were more dependent on serving student interests rather than political interests.

Subsidization is an important problem that must be addressed. Phasing out subsidies will help ease tuition inflation in the long-term by increasing consumer demand for efficient education, getting non-classroom costs under control, and realigning the total costs associated with higher education with the benefits of those who attend. Legislators should reduce state appropriations to higher education institutions and offer greater autonomy over their operations in exchange. This has been proven to work in Michigan, which was able to reduce the budget of the University of Michigan-Ann Arbor from 70 percent state-funded in 1965 to just 10 percent state-subsidized in 2003; the institution remained a top-ranked university throughout the period.

The following documents provide additional information about college affordability and student loan debt.

 

Ten Principles of Higher Education Reform
http://heartland.org/policy-documents/ten-principles-higher-education-reform
In this Heartland Institute Legislative Principles booklet, Policy Advisor Richard Vedder and Matthew Denhart explain why higher education costs are increasing rapidly while student learning outcomes have steadily declined. The authors identify the reforms states should take to jumpstart higher education, which is notoriously resistant to change. 

The Privately Financed Public University: A Case Study of the University of Michigan
http://heartland.org/policy-documents/privately-financed-public-university-case-study-university-michigan
In a case study by the Goldwater Institute (2005), the authors examined how the University of Michigan-Ann Arbor was able to become essentially a privately funded public university able to offer high-quality education on par with elite private universities at about one-third the price to students, without gouging taxpayers. 

Dean’s List: Hiring Spree Fattens College Bureaucracy—And Tuition
http://www.wsj.com/news/articles/SB10001424127887323316804578161490716042814?mod=WSJ_hps_LEFTTopStories&mg=reno64-wsj
The Wall Street Journal (2012) covered an exclusive analysis of the University of Minnesota’s soaring administrative costs and found those costs have been a major reason college tuition increases have greatly outpaced inflation at the university. 

State Tax Cut Roundup: 2014 Legislative Session
http://heartland.org/policy-documents/state-tax-cut-roundup-2014-legislative-session
The American Legislative Exchange Council examines (December 2014) the 14 states that cut taxes during the 2014 legislative year, finding a majority were led by Democrats, including Minnesota. Although the tax cut amounts do not completely offset the tax hikes that took place during the 2013 legislative year, the authors write states like Minnesota are on the right path to improve state business climates, particularly those in competitive regions of the country. 

Percentage Change in the Number of Employees in Higher Education Institutions, by Category of Employee, 1975 and 1976 to 2011
http://www.aaup.org/list-tables-and-figures-2013-14-annual-report-economic-status-profession
Figure 1 from the American Association of University Professors’ “Annual Report on the Economic Status of the Profession” shows full-time non-faculty positions in higher education institutions have increased 369 percent since the 1970s, far more than any other category. 

‘Free’ Education
http://heartland.org/policy-documents/free-education
In a February 1967 column for Newsweek, Nobel laureate economist Milton Friedman argues publicly subsidized higher education is effectively a wealth transfer from low-income taxpayers to high-income taxpayers. In addition to being inequitable, such distortion lowers the quality of higher education by giving in-state public schools an unfair competitive cost advantage over private and out-of-state schools, which may be a better fit for some students. Friedman notes this dependence on subsidies from the state rather than direct payments from the students encourages schools to be less responsive to student needs and more responsive to the whims of government. Friedman argues higher learning should be available to all, provided the student is “willing to pay for it either currently or out of the higher income the schooling will enable him to earn.” 

States are Still Funding Higher Education below Pre-Recession Levels
http://www.cbpp.org/cms/index.cfm?fa=view&id=4135
The Center for Budget and Policy Priorities argues in a May 2014 report higher education funding remains “well below pre-recession levels.” The authors recommend state governments raise taxes to create new revenue for increased higher education spending to offset tuition increases. They claim a more educated workforce is a better recipe for economic growth than tax cuts. 

University of Wisconsin Doctoral Candidate Complains to His Supervisor about the School-Mandated Diversity Training
http://www.thecollegefix.com/post/14698/
Jason Morgan, a University of Wisconsin-Madison Ph.D. student, wrote an e-mail to his supervisor arguing the ideological and educationally pointless training sessions he and his colleagues are required to attend and taxpayers are forced to pay for are completely unnecessary and should be abolished.  

Colleges Drift Away from their Academic Priorities
http://www.washingtonpost.com/opinions/charles-lane-colleges-drift-away-from-their-academic-priorities/2014/09/24/30efcda2-4409-11e4-9a15-137aa0153527_story.html
Writing in The Washington Post (September 24, 2014), Charles Lane highlights a growing trend among colleges: constructing luxurious recreational amenities such as hot tubs, “lazy rivers,” water slides, and zip lines in an effort to recruit and retain students. Lane says such amenities appeal to wealthier and less-motivated students who value the social appeal of college over academic development. Lane cites research showing high-end amenities do not increase student learning or cognitive ability. He concludes colleges and universities should reemphasize academic rigor.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the website of School Reform News at http://news.heartland.org/education, The Heartland Institute’s website at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Logan Pike, Heartland’s state government relations manager, at lpike@heartland.org or 312/377-4000.

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Education
Author
Taylor Smith was a policy analyst for The Heartland Institute specializing in energy, climate, and environmental regulation. He is coauthor with James M.
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