The face of higher education is changing, with the distinction between public and private universities blurring, according to President Graham B. Spanier.
“There is a shifting landscape in funding of the nation's top public research universities,” Spanier said in an address to the Faculty Senate on March 16. “This is leading to the increased privatization of public higher education. The reality is that while we are becoming more like our private counterparts, they are also becoming more like us.”
Part of the reason for this change, according to Spanier, is that many people, including many elected officials, now see postsecondary education as a private benefit, rather than a public good. That enables them to justify smaller appropriations, shifting the cost burden to students.
“Reduced state support, increased competition for resources and students, and a heavier emphasis on fundraising are making public institutions more private,” said Spanier. “At the same time, higher tuition has caused public universities to anguish over our public responsibilities in the face of these critical challenges.”
Penn State always has been expected to do more with less, and has been extraordinarily successful in that endeavor.
“To those outside the University, I'm not sure it appears as if we're facing a crossroads,” Spanier said. “But we are indeed at a juncture in our history where maintaining our public mission and remaining a quality institution will require all of us to be more entrepreneurial and more judicious in our use of resources.”
Pennsylvania ranks second in the nation, after New York, in the number of public, four-year institutions, and third, following California and New York, in the number of private, four-year institutions, that are part of its higher-education system. More than 600,000 students are enrolled in Pennsylvania's degree-granting institutions, with about 60 percent of them at public institutions.
“But because of its dense population of private institutions with their deep roots in the state, Pennsylvania has a long history of providing a significant portion of its funding to private colleges and universities,” Spanier said.
The Pennsylvania budget for fiscal year 2002-03 shows seven “private, state-aided” institutions—the University of Pennsylvania, Drexel, MCP Hahnemann, Thomas Jefferson, Philadelphia College of Osteopathic Medicine, the Pennsylvania College of Optometry, and the Philadelphia University of the Arts—received a total of nearly $82 million in direct appropriations.
Other private institutions that do not receive direct appropriations were given more than $40 million through Institutional Assistance Grants, or IAGs, which are funds provided through the Pennsylvania Higher Education Assistance Act to schools as per-capita grants based on the number of student grant recipients enrolled in that institution.
The IAG program, created in 1974, was started to “help preserve and develop the diverse system of higher education in Pennsylvania by allowing private colleges and universities to stabilize their educational costs and maintain enrollments.”
“In other words,” Spanier said, “the state decided to use public funds to subsidize the operations of private institutions. In addition, nearly $133 million in PHEAA grants went to students attending private institutions.”
Pennsylvania's support of higher education has for decades lagged behind other states, staying near the bottom of the 50 states in financial commitment to higher education.
The last time such data were collected, Pennsylvania ranked third in the nation for its support of private colleges and universities for revenue it provided per full-time student. By contrast, when the same measures are applied to public universities in the state, Pennsylvania ranks near the bottom in its support.
“The unmistakable trend of flagging state support and the associated privatization of public higher education is not related to any political party, any governor, or any legislative leader. But it is happening, nonetheless,” Spanier said.
The costs of running Penn State that are not covered by public funds must be made up with tuition dollars. In 1970, the state appropriation covered 62 percent of the University's general funds budget, with tuition contributing 32 percent. In 1984, those lines crossed and the gap has widened in the other direction every year since.
“For 2003-04, tuition and fees make up 69 percent of our general funds, or instructional budget, with only 25 percent coming from state appropriations,” said Spanier. “Currently, only 12 percent of Penn State's total budget comes from state appropriations, and this could soon fall below 10 percent. This gap reflects long-term policy decisions to move funding away from higher education to other sources.”
The gap is not a result of increases in the University's spending.
“Adjusted for inflation, our most recent data show that we are spending only $71 more per student than we did in 1970,” he said.
As states continue to hold back their funding support for public universities, those institutions must turn to tuition to absorb the burden. Public institutions still are a bargain, compared with their private counterparts. On average, students spend about $15,000 a year less in tuition and fees at public institutions than at private schools. However, the increasing tuition burden being placed on students in both the public and private sectors has the potential to limit access for qualified students—a major attribute of public higher education.
“We are in fact replicating a pattern of high tuition/high aid, which started in the private sector some years ago,” Spanier said. “This trend troubles those of us who believe higher education is a public good, not just a private benefit.”
Another concern is the disparity in available financial aid. A recent analysis reported that aid from two key federal programs—Perkins Loans and work study—was higher for wealthier colleges, which are less likely to have students from low-income homes.
“Students from public institutions with low tuition are not eligible for as much aid, so lower-cost universities—and their students—are at a historic disadvantage.”
The Pennsylvania Higher Education Assistance Agency, PHEAA, also provides grants to Pennsylvania students. Again, however, the lion's share of the money goes to four-year, private institutions. In 2002-03, PHEAA distributed more than $332 million in grants, with about 40 percent of that total going to private college students. State-related university students received 27 percent of the available funds.
Penn State and other public institutions have attempted to make up the shortfall by creating endowments. In 1996, Penn State raised about $83 million through philanthropy and received about $281 million in operating funds through its state appropriation. This past year, the University raised $181 million and received about $316 million from the state.
“The ratio of state to private dollars used to be 3.5 to 1; the current ratio is about 1.75 state dollars to every dollar in private support. The ratio has been halved in just seven years, again demonstrating the privatization of public higher education.”
Spanier said that Penn State actively pursues federal money and private industry support for research and has been very successful in that area, more than doubling research funding since 1990.
“Considering federal support for research, instruction, and other services, as well as federal student aid, Penn State now receives more funds from the federal government than from the state government,” Spanier said.
As Pennsylvania's only land-grant institution, Penn State has a strong mission of service to the Commonwealth. The University is home to the largest unified outreach organization in American higher education, with hundreds of centers and programs that fulfill its outreach mission.
“Public service is one of our greatest strengths, but sustaining these initiatives in the face of lagging state support has become difficult,” Spanier said. “We may have reached a crossroad in our history where financial considerations will force us to refine our mission.”
Penn State has lobbied the legislature for more funding, and has taken its message to the public, but has not been able to turn around this funding trend that began in the late 1970s. It is clear that the burden lies with Penn State to close the resource gap and remain accessible.
“While we reaffirm our three-part mission of teaching, research, and service, we will become more entrepreneurial,” Spanier said. “As a public institution, we are still committed to the public good—but how we go about investing in that part of our mission could change if state support becomes unavailable for our public service mission.”
Spanier said the University must explore different financial models that rely less on state dollars, and continue forming partnerships with the private sector.
“We will persist in cutting unnecessary costs and will look for ways to use our existing resources more efficiently. Creative uses of technology, which have helped trim expenditures in many areas, can provide us even more flexibility.”
The University will continue to emphasize fundraising and building its endowment to accomplish initiatives that have been left unfunded and create scholarships for more students. In addition, the University will continue to make the best case possible in Harrisburg for more funding.
“If they are unable to fund us at the level we need to be funded, we will have to trim back our services,” Spanier said. “What we will NOT do, however, is sacrifice quality. We are not going to become mediocre. We are going to focus on areas where we have been identified as national leaders and on areas where we wish to achieve excellence.”
For details, download Spanier's report on the Web at http://president.psu.edu/presentations/privatization_031604.pdf
Article courtesy of Penn State Live (March 17, 2004)
If the privatization of high education alarms you, you’re not alone. Access to quality higher education, especially at the state's flagship university, must be protected. Members of the Penn State Grassroots Network are doing something about it. When activated by e-mail, Network volunteers contact their elected officials with messages about the need to support Penn State with adequate state funding. Launched in October 2002, the Network has enrolled more than 33,000 Penn Staters in a unified effort to promote the University’s interests and garner greater support in Harrisburg for Penn State. For more information, or to join this growing network, please visit http://www.alumni.psu.edu/grassroots.
