Should Elite Public Universities Eliminate In-State Tuition?

Public universities — especially elite research universities — are struggling. State legislatures typically set their in-state tuition rates and the portion of tuition that goes back to the university. In an era of quickly decreasing state budgets, direct support from legislatures is dwindling.

Yet elite state universities like the the University of Colorado-Boulder, the University of Wisconsin-Madison and UC-Berkeley compete in a global market in terms of faculty, graduate students, facilities, research output and prestige. With dwindling state support and an inability to raise in-state tuition rates for undergraduates — which might apply to up 90% of students — elite state universities are with few options for generating more revenue and filling budget holes. Universities like Colorado, which receive substantial applications from out-of-state students, have tried to make up for the difference by increasing out-of-state tuition to private school levels.

At the Chronicle of Higher Education last month, Roger Pielke Jr, a professor of Environmental Studies at the University of Colorado-Boulder, proposed a compelling idea. Why not eliminate in-state tuition and set one moderate level for tuition that would apply to both in-state and out-of-state students? This would not only start to solve revenue problems but also help state universities like Colorado compete globally for the best and brightest students. Below are key excerpts from Pielke’s proposal at the Chronicle:

At the University of Colorado at Boulder, where I am a professor, the distinction between in-state and out-of-state tuition categories is as familiar, and is as taken for granted, as the difference between engineering and law. It should be, having existed across the nation for generations. The subsidy of tuition for residents is supposed to facilitate state economic growth, based on the idea that high-school students and their parents choose colleges based largely on cost.

But do state tuition subsidies still make sense? No, and in fact, they may actually be harming our institutions by contributing to the budgetary problems of universities, diminishing the academic quality of the undergraduate population, and, ultimately, failing to contribute to state economic growth.

Consider, by way of comparison, university athletic programs. At my institution, we want to field nationally competitive teams, which requires attracting talented players and coaching staff. So the best athletes get scholarships, and the best coaches can demand, and get, obscenely high salaries. But while necessary, such financial enticements are not entirely sufficient for Colorado’s athletic success. Other factors are important, too, including athletics facilities, the university’s record of performance, and a proven ability to train athletes who can go on to great successes in their future careers, both on and off the field.

We might think of the academic side of the university in the same way. Attracting the best professors and students requires competitively priced tuition. But it also requires having the best facilities (for example, research labs), the best research performance (including notable publications, support for start-ups, and participation in important public debates), and a proven ability to develop and train students for successful careers in our complex 21st-century world.

While my university’s administrators like to assert that our peer public institutions are the University of California at Berkeley and the University of Virginia, and express ambitions to be the public academic counterpart of Stanford and Harvard Universities, the harsh reality is that Colorado-Boulder has become better known for its ranking on “party school” lists and as the home to an unauthorized cannabis festival….

…

Of Colorado-Boulder’s approximately 26,000 undergraduates, two-thirds are Colorado residents who will pay about $7,700 in tuition for the 2011-12 school year. The other third—out-of-state residents—will pay about $29,000 per year. The result is that almost two-thirds of the university’s total tuition revenue comes from one-third of its students. Thus, the financial viability of the institution depends upon securing a large proportion of nonresidents, which creates incentives to favor their admission. That is contrary to the very purpose of in-state tuition, which is to favor Colorado residents.

The same total revenue could be raised with a flat tuition rate of about $14,000, which would instantly make Colorado extremely competitive nationally and internationally, and immediately increase the quality of the student body by increasing the size of the applicant pool.

Under current law, the state of Colorado is largely powerless to remedy the institution’s dire fiscal situation because of a constitutional amendment that drastically limited the ability of the state to increase its spending, while other legislation required increases in areas other than higher education. The result has been a serious squeeze on university budgets. So perhaps it’s time for the legislature to recognize that higher education takes place in a national and global market, consider allowing the university to capitalize on its merits, and turn a vicious cycle of decline into a virtuous circle of excellence. It could do that by simply eliminating the outdated distinction between in-state and out-of-state tuition and allow the university to charge what the market will bear.

To the extent that the university is perceived to provide an excellent education, it will be able to sustain higher tuition fees. In turn, higher tuition will enable higher faculty salaries, investments in campus infrastructure, and access to other resources in support of teaching and research that are presently out of reach. A market-based tuition would enhance accountability, create direct incentives for better performance, and, in alignment with superior performance and increased revenues, allow the university to reverse its current decline. If the state legislature still wishes to continue the tradition of subsidizing college education for state residents, it could do so through scholarship funds based on residency, with subsidies given directly to students, not the university.