Going Private: Why Public Institutions Are Considering Crossing Over (Part 1)

Over the past several years, there has been much discussion about the decline in public support for higher education. Following the Great Recession of 2008, the State Higher Education Executive Officers (SHEEO) organization reported that “educational appropriations per full-time equivalent (FTE) students fell to a 25-year low (in inflation-adjusted dollars).” This was partially offset by tuition, which increased at five percent per year between 2009 and 2011, and then by more than eight percent in 2012. [1]

The accelerating decrease in tax funding has prompted one public university president to famously declare that, “At one time we were state supported. Then we were state assisted. Now we are state located.” In support of this observation, the president of a public university in Vermont recently noted that only one percent of his annual budget now comes from Montpellier.

But while state legislatures retreat from the idea that higher education is a public good, they have not relaxed their oversight and regulation of state schools in any way. In fact, a prominent Colorado legislator once told me that, “so long as the state’s colleges receive as little as one dollar of tax payer money they should expect to be held publically accountable for their actions.” Toward that end, Colorado provides its public colleges and universities with oversight from both chambers of its legislature, from a Department of Higher Education, a Higher Education Commission, and various “system” structures, all at a cost to the Colorado tax payer.

With money for oversight but not for operational support, it is not surprising that many public institutions are asking whether it makes sense to remain on the public dole. After all, administrators must deal with ebbing support, but a flood of rules, and navigate regulations and requirements that restrict decision-making, flexibility and speed of action.

Today’s higher education environment is one of rapid and continuous change. Experience has shown that those able to read the needs of the market place, and respond quickly, are growing, often at the expense of older, slower, more traditional institutions. This, at a time when the supply of traditional aged students is starting to decline. [2]

Against such a landscape, it is little wonder that the president of the University of Maryland’s University College (UMUC) has been quoted as considering the benefits of transforming UMUC into a private institution. With declining income and enrollments, the college appears to be reaping the bitter fruits that come with overdependence on a single market (the U.S. Armed Forces), growing student demand for online programs (rendering its global network of expensive classrooms obsolete), and a state regulatory environment that controls its program offerings, pricing and procurement. UMUC’s inability to offer its highly regarded doctorate in community college leadership to students in Maryland (due to anachronistic restrictions around competition between state institutions) is an excellent example of state interference.

Over the course of nearly 30 years in higher education, I have served in two public universities — UC Berkeley and CSU Fort Collins — and three private universities — John F. Kennedy, Boston and Excelsior. The difference between the two models is dramatic. Even if “self-supporting” as was the case at Berkeley Extension, the rules for hiring, compensating and dismissing a unionized staff were the same as for the larger university. Decisions related to new ventures, revenue shares, business development activities and program offerings (and their location) were similarly restricted. For instance, Berkeley could not offer classes north of Marin or Contra Costa counties nor south of San Mateo County because of State restrictions on competition (as with UMUC). Encroachment on the turf of either UC Davis or UC Santa Cruz was strictly forbidden.

Whatever happened to the idea that competition in the market is actually good for the consumer, or, in this case, the student?

This is the first of a two-part series by John Ebersole discussing the challenges modern public institutions face and UMUC’s consideration of moving to a not-for-profit private model. In the second installment, Ebersole reflect on his own experience on both sides of the public/private divide and will discuss his own institution’s experience “crossing over.” To read the second part, please click here.

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References

[1] State Higher Education Executive Officers Association, “State Higher Education Finance FY12.” All documentation accessible at http://www.sheeo.org/resources/publications/shef-%E2%80%94-state-higher-education-finance-fy12

[2] Scott Carlson, “Goals for Enrollment and Tuition Revenue Elude Many Colleges,” The Chronicle of Higher Education, October 13, 2014. Accessed at http://chronicle.com/article/Goals-for-Enrollment-and/149349/