In-state Tuiton--Subsidy or Social Contract?

This weekend the Washington Post had a provocative column by Fred Hiatt arguing that in-state tuition is basically a subsidy for the rich.

Say what?

Well, as Hiatt sees it, in-state tuition is a subsidy in as much as the state spends about $19,000 per student per semester but only charges him/her $9,400 a semester for tuition.  And, since wealthy kids go to college at much higher rates than their poor and working class peers, this is a "regressive" subsidy.  It helps the rich more than the poor. 

On the face of it, this sounds like a reasonable argument.  Shouldn't the governments be concentrating its subsidies on the people who need them the most?

There are two problems with this line of thinking.  (There are actually quite a few problems, but hey, this is a blog, not a college essay, so I'll spare you).

First, subsidies don't just have to be for poor people.  Subsidies can also be used to build up and support social goods.  Social goods are meant to be 'consumed' by as many people as possible, and as such have an impact across society.  If we adopt the idea that subsidies should only be for the poor, then we'd never have interstate highways, fire departments, police, or any number of services built for and used by the entire populace.   

Second, social goods tend to bind people together from across society at large.  In the realm of education, that means that a subsidized state university becomes something that belongs to all of us--rich and poor, black and white, young and old.  If you don't treat education as a public good, then it becomes just another consumer good--like a television, a car, or even an extended vacation.  Those who can afford to buy it can.  Those that can't, don't. 

Of course, those rich kids in Potomac that Hiatt thinks are getting unnecessary handouts will still be able to afford unsubsidized tuition and will still go to college.  But, those at the bottom of the economic ladder, who may already find the $9,400 tuition hard to pay, will be locked out of the system entirely.  And, that will just be the way it is, because after all, when something becomes a commodity, it isn't something everyone should have, or that benefits us all.  It is just something you buy.   

There's also the unfortunate fact that when you only subsidize the neediest, the better-offs tend to point fingers and make moral judgements.  And, then they'll fight to undo them, on the grounds that the recipients are undeserving.

Hiatt may fancy himself a progressive tax maven, but what he's really doing is regressive.  He's abandoning the notion that there are things government should provide for all of us.  It is an attack, however implicit, on the whole notion of the social contract.

Think I'm exaggerating?  I wish I were.  But, Hiatt shows his hand at the end of his essay when he argues that the in-state tuition 'subsidy' "mirrors" entitlements like "tax deductions for mortgages [and] charitable giving".   

Seriously.  

Take that one in.

Subsidized public education is no different than a middle class tax write off.  

I guess I missed all those inspirational PSAs during Saturday morning cartoons that encouraged me to aim high because a mortgage tax deduction could be in my future.       

p.s. there's nothing stopping the state of Maryland, or universities themselves from providing subsidies to low income students to attend college.  In fact, if universities want to create a more progressive subsidy system, I'd suggest cutting upper level administration salaries (presidents and provosts making over 200k a year) and applying the savings to students in need.    

Maryland Colleges are Cheap (sort of).

Yesterday the Washington Post's GovBeat Blog gave Maryland its weekly 'top state' award.  Why?  Because Maryland has managed to keep increases in its in-state tuition rates in check for several years.  

How did Maryland do this?  Big props go to Governor Martin O'Malley.  After he took office he enacted a 4 year tuition freeze at all Maryland state schools.  After the 4 year freeze was over, the General Assembly kept annual tuition hikes at 3%.  O'Malley was also willing to increase the money the state spent on higher ed (34% according to the WAPO article) by raising some taxes and moving money from other parts of the state budget.

Let's pause for a minute to consider just how remarkable this is.  Most states are slashing higher education budgets.  A 34% increase is virtually unheard of.  Many states have also seen tuition rates more than double in the last decade.  In 7 states (New Hampshire, Arizona, Kentucky, Alabama, Hawaii, Louisiana, Illinois) tuition increases were over 100%.  The highest increase (a whopping 162%) was in New Hampshire.  Virginia's rate managed not to double (97.6% increase), but just barely.   

This is a win for Maryland, but only in a relative sense.  Why?  Because Maryland's behavior only looks exceptional by comparison.  Tuition still increased by 47% in Maryland over the last decade.  And, that rate is still huge when you consider that earnings haven't kept pace.  In fact, they're mostly flat when you adjust for inflation.  It is also worth noting that Maryland's yearly tuition plus fees, room and board (for the 2012-2013 academic year) was about 18k a year.  That means a person who pays the full price tag will go 72k into debt.  That's a lot of debt to saddle graduates with.  Not everyone can work on Wall Street loot and pillagewhen they graduate.

So, what else can we cut so Maryland can freeze tuition again?  I'd suggest Maryland's next governor and its General Assembly start by looking at the salaries of its university's top level administrators.  Over the last 20 years university administrators have started compensating themselves as if they work on Wall Street (ok, maybe 'off-Wall Street').  According to a Chronicle of Higher Education survey the median presidential salary at public universities was $421,395 in 2011.  You can search here for Maryland's figures.

Universities have also increased the number of upper level administrators on their staffs.  Apparently, provosts and deans now multiply like rabbits.  Just ask their offspring--the vice provosts, associate deans, assistant deans, and chief research officers that now litter higher ed's upper management ranks.   Not surprisingly, these guys are also compensated well enough to afford something besides tweed jackets with threadbare elbow patches (see here).

Universities will tell you they need these people, and this is the price it takes to get them.  That sounds awfully self-serving when you realize these are the same people who presided over the 'crisis in higher ed'--defined here as the toxic combination of state retrenchment and ballooning tuition.

So, Maryland, why not cut some administrators' salaries, or cut some upper level administrator positions.  Hell, you could even cut both.  I suspect we'd all be better off without the extra layer of fat cat bureaucracy.     

Note:  in the first edition of this post I mistakenly put Maryland's average annual tuition at 12k.  That amount was for the 2002-2003 year.  The correct figure for 2012-2013 is 18k.