Ron Knecht: Fee hikes for college remain a flawed idea
March 6, 2014
Friday, Nevada regents vote on general fee increases for our colleges and universities. Administrators seek four percent annual hikes for four years for resident undergraduates and lower percentages for non-resident and graduate students, who pay much higher fees.
As I've done for three years on general fee increases, I'll oppose them.
The key fact is this: In-state fees at UNR and UNLV doubled in real (inflation-adjusted) terms in the past dozen years, but real incomes of Nevada families paying those fees declined slightly. (Fees at our other colleges increased 50 percent to 80 percent.)
Two things have driven the increases: weak cost management in higher education and cuts in state support. So, administrators and regents have compensated by raising fees.
In the private sector, market competition decreases real costs over time and increases the value of goods and services delivered. (If it didn't lead to continually doing more with less, we'd still live in caves and trees.) For example, 90 years ago, 25 percent of the average family budget was spent on food. Today, food takes less than 10 percent and we get more convenience, more nutritious and varied diets, and much more dining out.
Government and education (the sector most controlled by government) do not reap good long-term gains. Instead, they are slow in technological progress, innovation and business-model change. These cost-management problems cause them to consume ever-growing fractions of our incomes. Why? They lack the discipline of market competition, and run instead on the political allocation of resources that favors resistance to change, administrative bloat, and incumbent providers over challengers and consumers.
In Nevada, state spending on the two largest budget sectors — K-12 schools and health and human services — and total state spending have all increased significantly, especially in the Great Recession and wretched recovery caused by government excess. However, higher education and the rest of the state budget have joined the incomes of families and businesses in real decline. Tax cuts played no role because taxes actually rose.
That the recent decline in total instructional spending, adjusted for changing university and college enrollments, approximates the rate of decrease in Nevadans' incomes is appropriate. But it's only a start to remedying long-term poor cost management.
One can argue that a decade ago taxpayers were paying too much of higher education's freight — about two-thirds, with students' families paying one-third. However, because of fee increases and cuts in state support, the burden is now roughly evenly split.
Research shows that higher education delivers public benefits to society at large and not just private benefits to students. So, it is reasonable for taxpayers to carry perhaps half the load. K-12 costs are overwhelmingly subsidized by the public for just this reason.
Apologists for the allegedly "moderate" increases note that other states have adopted similar hikes and that Nevada's fees are in the mainstream for comparable institutions. Besides the fact that some of the high-cost allegedly comparable universities — California, Washington and others — are not comparable to UNLV and UNR, there's a more basic problem. Namely, all those institutions also suffer the same weak cost-management problems and undue favoritism for K-12 and HHS that Nevada colleges do; that standard is too low.
American higher education may lead the world, but recent polls show that business leaders and the public do not share our sanguine view of our performance. Considering the hikes of recent years, we need to skip the increases and focus on innovation, improved value and cost management.
Ron Knecht is an economist, law school graduate and Nevada higher education regent.