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Research & Commentary: Wisconsin Higher Education Subsidies

March 23, 2015

Wisconsin has a $283 million budget deficit for the fiscal year ending June 30. That shortfall is expected to balloon to approximately $2 billion in 2015–17, according to the Legislative Fiscal Bureau, which spurred Gov.

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Wisconsin has a $283 million budget deficit for the fiscal year ending June 30. That shortfall is expected to balloon to approximately $2 billion in 2015–17, according to the Legislative Fiscal Bureau, which spurred Gov. Scott Walker (R) to introduce significant money-saving changes to the operation of the University of Wisconsin System (UWS).

Walker proposes a $300 million funding cut to UWS over the next two years, equivalent to a 2.5 percent cut in total public funding. In exchange for the funding reduction, the state will grant the public universities more autonomy.

University of Wisconsin–Madison Chancellor Rebecca Blank told a joint meeting of employee governance groups the cuts will jeopardize educational quality. Blanks said, “We could not operate without the researchers, teachers, custodians, outreach specialists, administrative assistants, steamfitters, and student services staff – to name just a few. Everybody plays a role, and the university needs all of you.”

According to the MacIver Institute, UWS has added more than 1,200 full-time positions from 2010 to 2014 while student enrollment declined by more than 2,000 students. According to The Wall Street Journal, such spending sprees were common among universities in the past decade. The University of Minnesota, for example, added more than 1,000 administrators in 2001–12, nearly twice as fast as student body growth.

Wall Street Journal analysts argue unnecessary staffing costs in U.S. higher education is 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 parties taking on significant costs through government subsidies, loan programs, and private gifts. The increase in the availability of third-party money has encouraged an increase in tuition costs and reduced the incentive for institutions to use money efficiently or serve their customers well.

Reducing state higher-education funding after a period of aggressive spending is reasonable, especially if greater autonomy is granted in exchange. This has been proven to work in Michigan, which was able to reduce taxpayer support 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, Heartland Policy Advisor Richard Vedder and George W. Bush Institute Research Fellow 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. 

UW Increases Hiring During Time of Declining Enrollment

http://www.maciverinstitute.com/2015/02/uw-increases-hiring-during-declining-enrollment-trend/

The Madison-based MacIver Institute found the University of Wisconsin System (UWS) increased hiring during a time the student headcount dropped significantly. That casts doubt on claims UWS has no room to cut, as critics of Gov. Scott Walker’s (R) 2015–17 budget proposal claim.

Scott Walker’s School Days

http://www.wsj.com/articles/scott-walkers-school-days-1424646041

The Wall Street Journal examines Wisconsin Gov. Scott Walker’s (R) plan for higher education reform and the claims of critics. The writers find claims of university administrations having absolutely “no fat to trim” are questionable and that greater flexibility to become more efficient is exactly what University of Wisconsin colleges need. The writers also identify the reform strategies employed by leaders at Purdue University and Dartmouth College as good examples of how to reduce spending while encouraging innovation.

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

The Goldwater Institute examines 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 identifies the University of Minnesota’s soaring administrative costs as a major reason the college’s tuition increases greatly outpaced inflation.

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 the number of full-time non-faculty positions in higher education institutions has 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 people. 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 says 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.”

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, 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 Nathan Makla, Heartland’s state government relations manager, at nmakla@heartland.org or 312/377-4000.

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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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