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Our Broke Public Universities: The Consequences for Equity

Our Broke Public Universities: The Consequences for Equity

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In an opinion piece called “Our Broke Public Universities,” published in The Chronicle of Higher Education, academics Laura Hamilton and Kelly Nielsen write that beyond flagship state universities, the privatization of public universities in general has had a devastating consequence for racial and social equity.

According to the authors, state systems around the U.S. are heavily segregated. The university branches that support racially marginalized students from low-income backgrounds are often penalized financially.

In most states, the flagship universities receive the highest level of funding for their research goals and different ways of contributing to the state’s reputation. Regional universities are relegated to lower levels of funding; that occurs in theory because their focus is less on research and more on teaching.

The authors chose to use the University of California system as an example to study the allocation of resources among its nine undergraduate campuses. All of the campuses are classified as research universities, which means they are theoretically equal in importance. In addition, each UC campus receives the same amount of state funding per undergraduate student except UC Merced, which funded its campus construction through debt.

In California, state contributions are so low that they only make up a fraction of the overall system revenue. “Privatization” has entered the picture and made the racial disparity greater, despite the equal contributions.

Two campuses in the UC system, UC-Riverside and UC-Merced, have become the standard bearers for diversity in the system. Systemwide, the percentage of California residents has declined from 94% in 2010 to 83% today. At three campuses (Berkeley, Los Angeles, and San Diego), nearly 25% of students were non-residents in 2020. At Riverside and Merced, the non-resident enrollment was less than 5% and less than 1% in 2020, respectively.

The UC system guarantees that California residents with an annual family income of up to $80,000 will have their tuition and fee fully covered. In the fall of 2020, approximately 35% of the system’s undergraduates were Pell Grant recipients. Only 25% of students at UC-Berkeley and UCLA were Pell Grant recipients, while Pell Grant recipients comprised 49% of Riverside students and 63% of Merced students. According to the authors, the system chooses to use the latter two institutions as a crutch for supporting their case for diversification.

Posing the question “Why does racial and class segregation in the UC system matter so much?”, the authors write that access to private funding streams is increasingly linked to student-body composition. With state universities receiving less financial support (a fact buttressed by the most recent SHEEO reports as I reported by my recent blog article, many educational institutions have relied on private sources of funding that include admitting increasing numbers of non-resident students (who pay three times the tuition and fees that resident students pay in California and where most of the revenue stays on the campus where the non-residents attend).

Another “privatization trend” cited is the influence on the system to borrow funds. Between 2003 and 2015, the system’s debt tripled from $5 billion to $15 billion.

The authors provide an example of a UC alum who worked for Lehman Brothers as a reason for this increase in borrowing. Without knowing the use of proceeds from the debt (was it for new building construction or to cover deficits?), I would argue that the approval process for incurring debt at state institutions has to leap over a number of hurdles that would normally limit the influence of a single alum who happened to be an investment banker.

A statement by Moody’s — that UC could “leverage its powerful student market position to compensate for state-funding cuts by raising tuition dramatically and by growing nonresident tuition, differentiating tuition by campus or degree, and increasing online course offerings” — is cited by the authors as a private market solution that came at the expense of equity goals.

Sales and services revenue and research grants are other sources of revenue where funds generally remain on the campuses where they were incurred or received. In these financial streams as well as the nonresident tuition streams, there is greater potential for revenue at higher-status campuses.

Campuses located in wealthier communities and with more affluent student bodies and alums have increased their donations. The examples cited by the authors are UCLA’s success with a $4 billion fundraising campaign, UC-San Diego with a successful $1.5 billion campaign and UC-Riverside’s $200 million campaign that began two years before UCLA’s campaign.

If private resources were distributed more equally, the authors claim that the uneven distribution of racially and economically marginalized students would be less problematic. Ideally, campuses would receive greater state funding for students with more financial need and less funding for students with less need. They acknowledge that this is not likely to work “given how things work now.”

Several states (Illinois, Michigan, Virginia, and Wisconsin) have discussed fully privatizing state flagship universities with the thinking that universities outside of the state system may be able to increase their alumni and philanthropic contributions as well as lobby more effectively for their specific interests. In 2015, the Oregon University System was disbanded.

There are reasons to believe, according to the authors, that cracks are appearing in the UC system. UCLA’s Anderson School of Management became privately funded in 2014 when it converted to self-supported. But UC-Merced and UC-Riverside depend on system support and resource distribution and would be decimated if the UC system chose to unbundle.

The op-ed, which was adapted from their book, Broke: The Racial Consequences of Underfunding Public Universities, ends with the following sentences:

“The gradual state disinvestment in higher education concentrates resources at the most advantaged universities and thus among the most privileged students. Yet, public institutions should serve all of their public. More, not less state and federal support is needed to give students from economically and racially marginalized families – and the universities that serve them – a fighting chance.”

Professor Hamilton and Ms. Nielsen make many salient points. I agree that more state and federal support should be given to families who need it most. At the same time, I think it is nearly impossible to redirect private sources of funding for many of the reasons cited by the authors in their op-ed.

The question for many states will be how much funding can we afford to provide to higher education. As I pointed out in my recent blog article, higher education is not a mandated benefit. When state budgets shrink because of a recession, the mandated funding (typically K-12 education and Medicaid) cannot be cut, so higher ed funding often finds itself on the chopping block. Reducing state support at institutions like the Universities of Michigan, Virginia, and Wisconsin usually means fewer resident students are admitted so that more students paying nonresident tuition can cover the reduction in funding.

The situation will get worse, not better. A shrinking pool of traditional-age students as well as increasing options such as boot camps, employer training, apprenticeships, and providers of certificates will lead for calls for consolidation of some state-funded colleges and universities. Those with flagship status or those located in affluent communities will likely prevail. It will take bold leaders at the state system as well as in the legislature to build a system that can accomplish what the authors call for.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.

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