0 0 T A Clean Break 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 support?" 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 many ways. 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 FILE PHOTO 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 --