University of Virginia Library

Operating Cost Problem

Success Bankrupts Universities

Reprinted from The Economist,
October 26, 1968.

To most American university
administrators, the crisis in higher
education means not the noisy demands
of student demonstrators,
but the quiet swish of bills through
their letter-boxes - bills which are
becoming harder and harder to
meet. There are about 2,200 universities
and colleges (including two-year
and four-year institutions) in
the country, some supported privately,
some by the states and
cities, often with substantial help
from private sources. Almost all of
them are feeling the pinch. A year
ago Mr. McGeorge Bundy, the president
of the Ford Foundation, who
was urging the university to be
more candid about their "imminent
bankruptcy," recognized that the
public might be hard to convince,
since the American university has
every appearance of success.

Tidal Wave

Certainly in scholarship the best
have few rivals, while in terms of
accessibility the record is unique.
Over half of America's graduates
from secondary school go to college,
a university population twice
that of western Europe and more
than double America's own enrolment
in 1955. Nor has the trend
toward higher education for the
masses worked itself out. President
Johnson hopes that by 1976 two-thirds
of all secondary school graduates
will go on to colleges of some
kind, turning today's six million
into nine million or more.

This tidal wave means more
classrooms, more staff, more dormitories
and facilities. The great problem
is operating costs. In spite of
all the talk about computers and
television, productivity in higher
education has grown little. Besides
inflation, which takes its steady
toll, new technologies and new
areas of study have opened up, such
as African history and molecular
biology. Meanwhile the great increase
in the number of graduate
students, who require specialist
staff and equipment, gives the
screw another turn, even though
universities receive a federal grant
for each Ph.D. student. Federal
loans and grants for undergraduates
have cased the problems of young
people but have sharpened those of
the universities, for tuition and fees
provide well under half of the cost
of instruction. In 1966-67 the academic
deficit on current account
was put at nearly $4 billion.

Federal Aid

This spring the Association of
American Universities, speaking for
42 leading institutions, both private
and public, appealed for comprehensive
support from the federal
government - something which the
same association scorned in the
nineteen-fifties. Its report argues
that no other source of support can
be expected, realistically, to grow
fast enough to fill the gap, particularly
if spending on higher education
is to rise from two per cent
of the gross national product to
three per cent in the decade ahead.
State tax systems are inelastic; competition
from other fields for private
giving is growing; charges for
tuition are rising fast and to raise
them much more would exclude
many of the underprivileged.

Block grants are sought from
Washington to supplement, not to
take the place of, these present
sources of income; diversity of
support is regarded as a safeguard
of academic freedom and autonomy,
even when it is only a
diversity in the sources of federal
funds. (At present every federal
department but the Post Office and
Treasury has relations with the universities,
mainly through contracts
for research.) Mr. Alan Pifer, the
president of the Carnegie Foundation
expects that by 1975 the federal
contribution, now about 23
per cent, will rise to 50 per cent of
the costs of higher education.

Because distinguished experts
believe that more federal help is
needed, it should not be imagined
that the institutions have got off
scot-free. Mr. Bunday has scolded
them for not managing their endowments
better and for not
making their accounts understandable
to the public; when he
examined private colleges in New
York State he found their plight
less desperate than he had been led
to believe and recommended only a
modest subsidy. Mr. Pifer has
spoken of the "almost total irrationality,
complexity and disorderliness"
of American higher education,
with its 2,200 institutions
of widely varying types and wildly
varying standards, its failure to add
up to anything like a national
system or to agree on any policies
to guarantee that the country's
needs are met. He was equally
scathing about the lack of federal
co-ordination.

Long-range Plan

When in February the President
asked a high-level government committee
to prepare a long-range plan
for the support of higher education,
he laid down his aims: elimination
of race and income as bars to
advanced study; efficient use of
educational resources; promotion
of high quality: the blending of
support for students with that for
institutions; the safeguarding of the
independence of colleges and universities,
and the continuance of
support for them from state and
private sources. A few years ago
this committee might have been
concerned with issues that have
faded considerably - the controversy
over government aid to
church-related colleges and fear of
federal control. If today the real
issues are different, they are not
less far-reaching or controversial. If
there is to be federal aid that is not
tied to specific uses as it is today
(building of classrooms, libraries,
research work for the government),
should it go in equal measure to all
institutions? Private institutions,
which in general spend more on
each student than the public ones
do, insist that there must be an
allowance for quality.

As examples of other questions
involved, Mr. Harold Howe, the
Commissioner of Education, asks
whether federal aid should be confined
to existing institutions (which
would perpetuate any defects or
omissions) or whether it should be
used in part to aunc new ones.
Perhaps the geographical distribution
of higher education needs
changing, with more opportunities
in the metropolitan areas where
most people live today. How can
the government make sure that all
sections of society, including minority
groups, get their fair share?
Are more graduate schools needed
and is there not a risk that, if more
were created (and the money for
them spread more thinly), some
would be second-rate?

Those who know the political
process suspect that any additional
aid to federal education is almost
bound to be spread evenly (and
meagerly) over the whole country
(indeed, unless every state is to get
something, there is unlikely to be
enough political steam to push the
Bill through Congress). Many experts
would consider this regrettable.
Mr. Pifer suggests deliberate
discrimination in favour of the institutions
which are already distinguished,
to create a group of "national
universities;" these would
provide superb training for professionals
of all kinds. Mr. Clark Kerr,
now chairman of the Carnegie Commission
on the Future of Higher
Education, agrees that there must
be incentives for the improvement
of quality and that the growing
number of American universities of
world rank is among the country's
greatest resources. On the other
side of the coin there is some doubt
about whether the federal aid now
going to "developing institutions"
- chiefly the small and poor Negro
colleges in the South - is likely to
do much good.

Apart from giving block grants,
the ways in which the federal government
can help are roughly
four: tax credits to parents, grants
to the states, more of what is called
categorical aid (in categories laid
down by Congress) and more assistance
for students. Not many
college administrators favour the
first two. Tax credits would be
costly to the Treasury, of no direct
aid to the universities and would
help the rich most, the poor least.
Grants to the states would concentrate
too much power in state
hands. More categorical aid has its
proponents; it has been responsive
to quality and has supported diversity.
In fact, these are the major
charges against it.

Opportunity Bank

Expanded aid to students can be
of many types; what they have in
common is that they would advance
equality of opportunity and
would pose no threat to the independence
of universities - except
that the universities would be
forced to cater to a greater degree
to the students' desires; this might
not be a bad thing. But to solve the
universities' financial problem, each
student grant would have to be
accompanied by a grant to his
institution, unless tuition charges
went up.

Although there is some talk of a
system of universal grants, most of
the discussion revolves around a
much broader system of student
loans. Last year a presidential study
group proposed an Equal
Opportunity Bank, which would
finance the whole cost of college;
the recipient would repay the loan
through his income tax when he
began to earn: No one would, in
theory, he burdened by debt until
he was in a position to discharge it.
But what about women who never
enter paid employment? Would
they approach marriage with a
negative dowry? Would students
who never expected to earn much
flood the scheme while those who
expected to do well stayed out?