Why Do We Have Taxpayer Subsidized State Universities?

By Richard Vedder

While I often will argue with their conclusions, the Education Trust is a respected and needed advocacy group promoting equal access in higher education. Its president, Kati Haycock, is someone I greatly respect, and she served with distinction with me on the Spellings Commission. So I take notice when Kati issues a new report on the progress of flagship state universities in achieving equal access goals.

Drawing from Doug Lederman's excellent report in yesterday's INSIDE HIGHER ED, I think it is fair to say the trend of flagship state universities to become schools for the affluent is continuing. In 2003, as I calculate it, it was 1.93 times more likely that a kid from an affluent family (top 20 percent of the income distribution) would attend one of the 50 flagships as a poor kid (from the bottom 20 percent). In 2007, that ratio had risen rather dramatically, to 2.31 times as great.

It is true that financial aid increased more for lower income kids than higher income ones --grants got larger, etc. for poor kids. But the bottom line is that the flagship schools are increasingly serving relatively upper income kids. In a world where college admissions were trully blind with respect to income and nothing else (especially academic quality) mattered, we would expect the ratio of high income kids to low income kids to be 1.00 or even less, since presumably the wealthy kids disproportionately would attend private schools. Increasingly, at the elite state schools, we are deviating from that model.

The reason, of course, is that on average kids from wealthy families are better students than kids from poor families. They went to better high schools, had more after school enrichment training with parental support, and, dare I say it, probably on average have at least slightly higher IQs. If meritocracy is the defining admission criterion, the high ratio of affluent kids to non-affluent kids is to be expected.

There is a trade-off at work: schools can emphasize the egalitarian ideal, or they can emphasize the meritocracy ideal --both are part of American traditions and the American Dream. The American Dream does not say "everyone has an equal chance of being rich no matter what they do or how they act," but rather "everyone who works hard and has talent and determination can move up the ladder of economic opportunity." I have some sympathy for the flagships having to deal with the impossible task of trying to meet two goals --meritocracy and equality.

However, Kati and company do have a point. What is the rationale of state government subsidized universities? One is that allegedly universities provide some positive spillover effects to society, a somewhat dubious proposition in our view after researching the issue for many years. The second goal is the egalitarian goal ---rich kids can afford private schools, so state schools are designed to provide a low cost option (that is a laugh these days!) for those otherwise unable to attend college. Increasingly, the flagships are emulating the prestigious private schools. They restrict supply, turning decent if not spectacular students away. They say, "go to lesser, inferior schools." This rather haughty attitude is inconsistent with the egalitarian ideal, which is one reason why the prestige-seeking state universities are losing state support (Jim Duderstadt, former U of Michigan prez, told me last week that only about 5 percent of U of M funding now comes from the state).

Basically, I think too many kids, not too few, go to college. But if you are going to subsidize universities largely on egalitarian motives, then it is not unreasonable to expect that those subsidized schools would meet more closely the goals of the funders, namely the taxpaying public. Alternatively, schools like Michigan, Virgina and Colorado have the option of transitioning to private status, probably the best alternative given the impossibility of meeting incompatible goals.