| April 3, 2012

State could save millions by reforming Higher Ed

Following is an excerpt from OCPA’s Proposed State Budget for the Fiscal Year ending June 30, 2013.

With Oklahoma government spending at an all-time high (see chart), the time has come to set priorities and to exercise spending discipline.

No area of government is more in need of reform than higher education.

Jeff Sandefer, a successful entrepreneur and former University of Oklahoma professor, recently wrote:

The truth is that over the next decade, many universities may bankrupt themselves by clinging to an educational approach that confuses lecturing with learning and protects highly paid, tenured faculties and administrators from a tsunami of technological change that soon will deliver transformational learning at a fraction of today’s costs. There’s a word for business models that have high and increasing fixed costs, and are faced by disruptive strategies that offer better results at a lower price. That word is “doomed.” ...

The real problems in higher education are more fundamental than tuition increases alone:

1. A public that increasingly questions the value of a college degree. …
2. High and rising fixed costs from tenured faculty, bloated administrative staffs, and expensive new buildings at a time when tenured-faculty teaching productivity is falling ...
3. A tsunami of technologically enabled educational change promises to deliver transformational learning at a fraction of today’s costs.

These problems exist in Oklahoma. Since the Legislature granted the state regents authority to approve tuition and fee increases in 2003, undergraduate resident tuition and fees have increased by 100.59 percent during the last nine fiscal years, according to the state regents. During the same time period, inflation has only increased by approximately 25 percent, while private earnings rose only about 45 percent. During that time, when comparing each year of higher education appropriations to FY 2004, even after adjusting for inflation and including budget cuts, the Legislature has maintained total appropriations to higher education and in several years substantially exceeded that level.

According to the state regents, total student (headcount) enrollment at public colleges and universities was 228,249 for 2002-03 (FY 2003). Allocating the FY 2003 budget to enrollment for 2002-03 equals an E&G [Education and General] budget of $6,028.83. The headcount for 2011-12 (assuming the average of growth the last 3 years) is 262,413. Allocating the FY 2012 budget to enrollment for 2011-12 equals an E&G budget of $8,116.97. Analyzing these data, public colleges and universities in Oklahoma have increased the E&G budget per student by $2,088.14, or approximately $547.9 million, in nine years.

Concerning the number of colleges and universities in Oklahoma (25) and the total number of “higher education” centers (52), it is time for the administrative and “back office” functions of the colleges and universities to be consolidated into the two research universities. These larger institutions have achieved economies of scale, and their better graduation rates (though still low) are just one example of why it is time to end the political patronage approach to the number of colleges and universities in Oklahoma and their control. It is also time for the State Board of Regents and lawmakers, in coordination with the two research institutions, to consolidate many of the regional and community colleges to vertically achieve efficiency, cost savings, better degree quality, and better graduation rates. One need only to look at the salaries of the college and university presidents, and the corresponding graduation rates, to see these reforms are needed.

The enormity of evidence concerning the unsustainable cost growth of higher education is not discussed by OCPA alone. For example, state Treasurer Ken Miller’s most recent “Oklahoma Economic Report” pointed out: “Sometime last year, outstanding student loan debt topped $1 trillion ($1,000,000,000,000), according to the Consumer Financial Protection Bureau (CFPB). That is roughly 16 percent higher than an estimate earlier this year by the Federal Reserve Bank of New York.” As the Oklahoma College Savings Plan board of trustees correctly notes: “The cost of college is a barrier for many families and is increasing every year.”

The case for cost reductions in higher education can be found here, here, here, here, here, here, and here, among other places. Unfortunately, the response from higher education entities has been to purchase misleading advertising to fool taxpayers.

It is time for Oklahoma to decrease government spending on higher education. The potential savings from implementing such reforms would be more than $216 million annually.

Submitted each year by the Oklahoma Council of Public Affairs, Inc. to the taxpayers of the State of Oklahoma and their elected Officials, the OCPA “Budget Book” is carefully crafted by Fiscal Policy Director Jonathan Small to help lawmakers set priorities and exercise spending discipline while creating a state budget that respects your family budget. Offering unmatched fiscal policy analysis and recommendations, Small draws on his experiences as a former budget analyst for the Oklahoma Office of State Finance, former fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and former director of government affairs for the Oklahoma Insurance Department to provide perspective on the state budget that you cannot find anywhere else.

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