State funding for universities benefits everyone

BY JOSÉ LUIS SANTOS

A recent report by the Michigan-based Mackinac Center for Public Policy, which offers economic policy recommendations, argues that state governments should decrease funding for public universities because it is wasteful.

The report, "Michigan Higher Education: Facts and Fiction," has two primary findings. First, that from 2000 to 2004, a period of sharpest cutbacks in appropriations for public higher education in Michigan, the state's public universities did just fine financially. And second, higher state appropriations are not conducive to a state's economic growth.

Not only are these findings counter-intuitive, they fail to sensibly account for the fact that when state appropriations are combined with other revenue streams, such as tuition, fees, and private fundraising, they may have a larger impact on a state's gross domestic product, and, in the aggregate, have a positive relationship with economic growth.

Besides, any meaningful analysis of state appropriations needs to take into account a host of political, economic and social considerations resulting from appropriations. For instance, high-tech companies often choose to locate near research universities, thus bringing jobs and tax revenues to a region.

The report claims that "the observed shrinkage in state appropriations over the first half of the decade was a positive development." This is consistent with an ideological belief rooted in the idea that public higher education is a cost to a state and that it is not a necessary or positive investment yielding returns to individuals and to a state's gross domestic product.

In an arbitrary comparison of two sets of states from 1980 to 2000, the report exalts the "10 states with the most rapid economic growth (which) expanded their spending on higher education on average at a modest pace, from 1.31% to 1.44% of personal income." And it disparages the "10 slowest growing states (whose) higher education spending grew rapidly on average, from 1.80% to 2.21% of personal income."

Yet higher education spending is merely a sliver of what explains economic growth. For instance, the report does not address the implication of the two economic recessions during 1980-2000 (and it never addresses whether the results might be different if the post-2001 recession had been included).

The report states that the "benefits of higher education accrue primarily to the users (students) ... wherever they choose to make their homes after graduation." This suggests that a state should not invest in higher education because that particular state may not benefit. The reality is that whether a state is an importer or exporter of college graduates, it does benefit from higher education investments.

Many researchers and policymakers would agree that the financing of public universities is an important issue worthy of investigation. But this study, rooted as it is in a strong, ideologically based conceptual framework, would be a faulty starting point for such an exercise.

Finally, because this report is sure to be cited in the usually contentious budget appropriation deliberations among governors and legislatures across the country, its recommendations should be viewed with great caution.

Santos is an assistant professor at the Graduate School of Education & Information Studies. The Mackinac Center report can be found at www.mackinac.org. To read a longer rebuttal by Santos, go to http://epsl.asu.edu/epru/eprunews.htm.