According to Philip Arthur Fisher, twentieth century super-investor and all-around smarty pants, “the stock market is filled with individuals who know the price of everything, but the value of nothing.” These days it’s not just the stock market infested with such philistine philosophies. Fiduciary myopia, the propensity to be all penny eyed and pound mulish, dominates the public sector.
Here’s an example. Let’s say I know of an investment opportunity with a guaranteed annual return of 800 percent. Sure, it sounds like too-good-to-be-true Bernie Madoff bunkum. But it’s not a Ponzi swindle, it’s real. For every buck you put in, you get eight bucks back. Year. After. Year. After. Year. You’d probably say sign me up for some of that action. So you’re clearly not an elected official, especially a state governor with a business background. Then you’d basically be saying, “A whole buck? Let’s make it 75 cents and save a quarter!” And then you could boast to the taxpayer about saving them four bits. Or, to put it another way, cost them two dollars.
The investment whereof I speak is higher education, which is being shorted big time by the wolves of Bawl Street. Indeed, it’s gotten so bad that some public universities are essentially being privatized by the governments that own them. This huge disinvestment in higher education–I’ll get to the numbers in a bit—has, no doubt, saved some governments some dough and cut the tax dunnage of the average Jane and Joe by a few pennies. But it’s costing the lot of them more than they can imagine.
Public universities are kind of astonishing institutions. Most people think of them as academies of advanced learning. And, yeah, they do a lot of educatin’. Right now, roughly three-quarters of students in college are enrolled in dear old State U or its equivalent. But public universities do a lot more. For instance, they are also in the bidness of bidness. In a single year public research universities will spin off more than 500 start-ups, apply for more than 10,000 patents, and generate untold billions in local business sales.
Public universities are also prodigious idea factories, with tons of useful stuff constantly percolating out of their R and D shops. The internet, for example, which was birthed in Leonard Kleinrock’s lab at UCLA. Other stuff we find useful that was significantly or primarily developed by public research universities include LEDs, ATMs, laser eye surgery, bar codes, and sonic toothbrushes. Whatever the problem or challenge society faces—anything from a need for a longer lasting lightbulb to better dental hygiene—you can bet your bippy some public university is all over the search for a solution. They’ve developed new antibiotics, gene therapy and the wetsuit. They came up with the McRib sandwich fer cryin’ out lout (you’re welcome).
Oh yeah, they are also the closet thing American society has to an escalator to the middle class. The median mid-career salary of a graduate at a university like mine is eighty-two grand. True, on that salary you won’t be swilling cocktails at this weekend’s Mar-a-Largo crass bash. But that’ll get you a reasonably comfy middle-class billet. These days a college degree may be no golden ticket to easy street, but it’s still the closest thing to an all access pass to main street.
Add all this up and it’s clear that public universities are a good deal. Especially for the states that house them. The eight-to-one bang for buck ratio mentioned above is based on an economic analysis of the impact of the University of Nebraska. Now, NU is a big expense for the state – it dumps in north of a half-billion dollars annually into the university system, which is somewhere between eleven and twelve grand per student. The economic impact of that system, though, is roughly $4 billion – an 800-percent return. The university accounts for about 4 percent of state GDP, accounts for one out of every 36 jobs, provides most of the doctors and nurses, and it also houses the most sacred religious site in all of Husker Land – Memorial Stadium, a football temple that, no foolin’, becomes the state’s third largest city on football Saturdays.
Keep in mind that 800-percent return is just the economic impact. The social and cultural impact of educating a huge swath of citizenry, sparking innovation, launching careers, and generally opening eyes and minds is tougher to monetize. While I haven’t got an exact number to point to here, it’s safe to say that in technical terms the impact here is, like, mega-big.
While any honest crunching of numbers shows public universities to be a good deal, many state governments no longer consider them a good investment. Pretty much every state in the union has been dis-investing in higher education over the past decade, in some cases drastically. Here at the University of Nebraska, for example, per-pupil state funding has dropped by a fifth in inflation-adjusted terms since the turn of the century, and higher education spending a proportion of the budget has been in a pretty linear nosedive for a couple of decades.
And public universities in Nebraska, comparatively speaking, are doing well. Nationally, states are spending about 20 percent less per-student than they were eight or nine years ago, and higher education spending as a proportion of state budgets has shrunk nearly a third over the past 15 or 20 years. Some big flagship state universities already get so little support they are already effectively privatized. For example, only about 16 percent of the University of Michigan’s general fund budget is taxpayer supported.
State leaders are not exactly hiding what they’ve been up to with higher education budgets. Some of the squeeze was unavoidable (we had that whole Great Recession thing), but some governors wear their cheeseparing as a sort of ideological merit badge. Scott Walker in Wisconsin, Susana Marinez in New Mexico, Sam Brownback in Kansas, Pete Ricketts in Nebraska—there’s a long list of state leaders loudly and proudly pinching pennies in ways that inevitably lead to unburdening their constituents of untold pounds.
The most obvious effects of all this budget beggaring is program cuts and tuition increases—the two primary options public universities have to deal with eroding state support. The end result is not just that we’re producing an entire generation of loan drones, millennials whose social and economic opportunities are pretty severely constricted by debt taken on to pay for school. It also means that for many, college is just not an option. Economic diversity is shrinking at public universities, primarily because those on the lower end of the economic scale can’t afford it. We’re taking the most powerful engine of upward mobility our society has devised and restricting the fuel intake to two cylinders.
Now there is a legitimate debate to be had on whether the average Joe or Jane should be coughing up an extra few bucks so the kegger brigade down at the U can keep itself solvent. Fair enough. What about sonic toothbrushes, though, what are they worth to the average taxpayer? LEDs? The internet? The antibiotics that might save that same Joe and Jane? What about the dang doctor you need to administer those antibiotics? What about the thousands of indirectly supported jobs that help keep the economy humming? What about the football team for chrissake? (There, I said it).
The point is public universities are worth a lot more to the states that own them than people realize. That includes a lot of elected officials. This crowd often knows what higher education costs. They are often clueless about its real value.