With rising tuition costs and decreased state funding, is it worth it
for the University to privatize?
By Suhael Mominfl Editorial Page Editor
s the nation expanded
westward at the turn of
the 19th century, the federal
government realized the value
of an advanced education and
passed the Northwest Ordinance,
which included the provision:
"Religion, morality, and knowl-
edge, being necessary to good
government and the happi-
ness of mankind, schools and the means of
education shall forever be encouraged." In
1817, in accordance with that philosophy
- before there was even a state of Michi-
gan - the territorial legislature created The
University of Michigan, in Detroit, to serve the
northern territories that eventually became the
states of Ohio, Indiana, Illinois and Michigan.
So began the state of Michigan's commitment to a system of public
higher education; a system that today boasts 15 public four-year colleges
- including two renowned research universities - that enroll about
275,000 students per year. At the top of Michigan's higher educa-
tion system sits the University of Michigan, which U.S. News and
World Report ranked as the third-best public university in the
country and which The Economist rated as one of the top 20
universities in the world.
In recent years, however, financial crises at the state level
have forced the University - along with its 14 peer institu-
tions within the state - to cope with markedly lower state sup-
port. Whereas, decades ago, the state once provided the majority of
the University's operating budget, state appropriations now only account
for 7 percent of University revenues. In his recent report, "A Roadmap to
Michigan's Future: Meeting the Challenge of a Global Knowledge-Driven
Economy,"former University President James Duderstadt reports that "appro-
priations to Michigan's public universities have declined from $1.62 billion in
fiscal year 2002 to $1.43 billion in fiscal year 2005. State appropriations per
student have dropped from $6,840 to $5,600 over this period, amounting
to a 25 percent loss in state support when inflation is adjusted." When
those cuts are aggregated, Duderstadt mentions, "the state has cut $260
million from the higher-education budget, an amount equal to the
combined support of seven state universities."
In order to maintain quality, the University has turned
to students: When this year's senior class arrived in 2002,
lower-level in-state tuition for the College of Literature,
Science and the Arts was around $7,300 a year. This year's
freshman class was expected to shell out slightly more than
$9,000 - a 23 percent increase. It is this shift in the financial bur-
den of the University, from the state to private citizens, that has been
colloquially named the de facto privatization of higher education.
But while the de facto privatization of higher education has forced uni-
versities to rely more heavily on donors and further tap students' checking
accounts, it has also proven that institutions of higher education have the
ability to finance themselves. Former Provost Paul Courant has suggested
that of the state's three most pressing general fund expenditures - prisons
and corrections, Medicaid and higher education - higher education "is the
one you can get someone else to pay for." Thus, as the state prioritizes
funding in a time of persistent, structural budget shortfalls, the higher
education budget is - and will remain - the first to suffer.
The question this reality raises, Duderstadt suggests, is, "How
do you sustain quality at a time when the state isn't providing
The answer, possibly, is privatization. Could privatiza-
tion - a complete transition to a finance model that does not
rely on state higher education funds - be in the interests of the
University and state?
Privatization: What is it, and why would it be good?
rvatization" often refers to the ongoing
transition from public to private finance at
universities, but full privatization would
represent the University's complete disas-
sociation from the state government. Total
privatization would turn the University
into a Harvard-like nonprofit, private uni-
versity with no links to the state.
Yet because the University is chartered in the state consti-
tution, full privatization would require amending the state
constitution, which, in Michigan, requires majority support
from the state's citizens as well as supermajorities in both
houses of the state Legislature. Alternatively, it could be brought
directly to the state's citizens through a ballot petition, which would
require signatures from 317,757 registered voters.
If the state were to approve such a constitutional change, and the Uni-
versity could finance itself as a fully private institution, privatization could
- according to proponents - benefit both the University and the state in
Most obviously, independence from the state would liberate the University
from the cyclical nature of state higher education funding. The economic
downturn that Michigan is experiencing has no doubt left the state strug-
gling for funds, put pressure on the state to fund competing social
services and pushed higher education to the back burner. Conse-
quently, administrators could plan budgets more accurately; the
Provost's Office presented the University Board of Regents
with multiple budget contingencies for the fiscal year 2006
because it simply was not sure about what level of funding
the state would provide. This regularity would also help stu-
dents; instead of inconsistent tuition increases from year to year,
students could reasonably expect a minor tuition increase each year
to keep up with rising costs and inflation.
Within the state, the Mackinac Center for Public Policy has been a lead-
ing proponent of privatization. Writing for the Center, Michael LaFaive and
Lance Weislak wrote, "It would show true leadership and practical savvy if
Michigan lawmakers were to come up with a plan for making the Univer-
sity of Michigan a private institution, for the benefit of students, professors,
and taxpayers alike."
Speaking on the phone, LaFaive suggested that if the University
privatized, the state could reallocate the school's education appro-
priation of around $315 million toward more productive causes.
Despite what is often claimed, LaFaive suggests that the
state's investment in the University benefits those attend-
ing the school at everyone else's expense. "You're taking
money from entrepreneurs and others ... and giving it to
The University of Michigan's Angell Hall, located on State Street.
The Capitol Building in Lansing.
8B - The Michigan Daily - Thursday, December 8, 2005
The Michigan Daily --