Sunday, March 15, 2009

Let's Privatize our Universities

A few years ago the Texas legislature decided to allow state Universities to set their own tuition rates. The idea was to introduce market based tuition rates to induce students to make better choices on the college they attend and the major they pursue. Previously, tuition applied to all majors equally and tuition increases had to be approved by the legislature.

However, tuition rates have been rising at a rate unpopular with many citizens. Some groups are now demanding a tuition rate cut.

This puts state universities in a tough position. The state has not increased funding commensurate with costs, and without the ability to raise revenue through tuition costs, they feel that they are not going to maintain the quality education desired. Texas A&M University, in its Vision 2020 plan, explicitly states their desire to raise revenue to enhance the stature of the university along with lip service towards better use of existing resources.

The question most legislators are looking at is whether we should allow state universities to gather more revenue, or should we try to offer a more affordable college education. The question I want to ask is – Should the state be in the university business to begin with?

The fundamental problem that prevents universities from providing a high quality education at a low cost, is the lack of the profit incentive. From top to bottom, state university officials lack the incentives to pursue an efficient allocation of resources. Their incentives are more likely aligned with expanding their budget and increasing the prestige of their individual departments.

There is also an inherent unfairness in government funding of universities in Texas. Generally speaking, Texas heavily subsidizes students who are going to be wealthy and come from homes with above average incomes. Taxes from low-income individuals are going to subsidize the education and income potential of other people’s children. The best and brightest, which are already likely to make substantial incomes, are more likely to graduate, and pursue degrees with the most associated costs as well, such as engineering.

Since our society is probably not ready to do away with all school subsidies, I'm willing to propose that Texas switch to a system of scholarships for high performing and disadvantaged students. Each university would be required through competition to attract the students and their scholarship money to their respective schools.

Going further, to assure that the universities will be forced to economize their resources, I suggest that we begin to privatize public universities across the state. Furthermore, I nominate my own alma mater, Texas A&M, to be the first. It's time to get the state out of education.

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