Thursday, December 18, 2008

Hail to the Victors!!!

By Richard Vedder

I burst out singing the first line of the University of Michigan fight song this morning after my friend Mike LaFaive of the Mackinac Center in Midland, Michigan sent me a news story from the Ann Arbor Daily News. A committee of the state legislature has put the privatization of the U of M on a list of possible ways the state can save money.

The State of Michigan is in deep trouble. No state is suffering more in the current downturn than Michigan. Top iconic companies are teetering on bankruptcy. The biggest city, Detroit, is a desolate, horrible place. Yet Michigan has one of the premier American universities in Ann Arbor. I have a lot of affection for the place, as my father is a graduate of the school and grew up nearby. I enjoyed immensely my friend Jim Duderstadt's memoir of his years as president. I have visited the school and wallowed in its traditions, speaking at the venerable Michigan Union on one occasion.

The University of Michigan gets only about one tenth of its budget from the state. Eliminating state status would probably be a net wash financially for the college, because the school could increase out of state enrollments more (they are constrained somewhat politically from doing so now) and the out-of-state tuition is triple the in-state rate. As Mike points out, they could take privatization even one step farther — turn over housing, food operations, etc., to private operators. If done correctly, taxpayers could save a bundle, the University would gain some freedom from the political morass that is Michigan politics, resources would stay about the same, and a win-win situation would provide a little light in an otherwise grim situation in the Wolverine State.

In his book, Prof. Duderstadt pointed out the Board of Trustees at Michigan is selected in a totally dysfunctional manner, via elections. A privatization move would allow it to move to an alternative form of governance.

What about the fact that now many Michigan residents get a great education at the U of M, at a modest cost? That need not change, as Mike LaFaive notes. Moreover, if the state were truly worried about access, they could require, as a condition of privatization, that the University accept up to, say, 10,000 undergraduates annually, each of whom will receive state scholarships for up to, say, $15,000 of their tuition and averaging $10,000. The state would still be aiding a large number of the best and brightest who attend Ann Arbor, would assure that the institution maintained a strong "Michigan" character, and would save almost 70 percent of the current institutional appropriation (spending $100 million vs. $327 million a year). This might be a way around the political problem of cutting the state knot, while still providing a good deal of financial relief.

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