We Can't Afford to Let the Engines of Our Economy Fail

March 14, 2010

The mood on campuses is rather bleak these days. The recession has created financial and management challenges for virtually every type of American college and university. Those challenges are in some ways similar to and in other ways quite different from what higher education has confronted in the past.

Community colleges face constrained budgets and, at the same time, record enrollments as people seek skills and retraining to help them enter or return to the work force. I have seen that firsthand as a trustee of Durham Technical Community College. State appropriations have been held back at the same time that record numbers of students are beating down the college's doors.

Private liberal-arts colleges—like my alma mater Franklin & Marshall, where I am also a trustee—are significantly increasing financial aid at the same time that they are working hard to ensure enrollments and the tuition dollars that are the foundation of their budgets.

And Duke University, the research institution where I have worked for almost two decades, is having to find some $100-million in operating-budget reductions—having frozen salaries of all but the lowest-paid employees, put in place early-retirement packages with more than 400 faculty and staff members, and stopped dead in its tracks the development of a long-planned new campus and a capital campaign to help finance it.

Yet nowhere are the financial difficulties more pronounced than at the great public-land-grant universities. Not only have they seen the value of their endowments decline, they have also had unprecedented sustained cuts in state support, including multiple in-year reductions as the result of lower state tax revenues and competing demands from prisons, Medicaid, social services, and other state functions.

A case in point is the University of California, including the Berkeley campus, which has long been an exemplar of excellence in American higher education. The university is projected to have more than a $1.2-billion budget hole. The federal stimulus bill provided one-time relief for over $600-million of that hole, but that support will soon end. With California in free fall, the university is experiencing layoffs, furloughs, and record tuition increases. Students cannot get the classes they need to graduate, extending their costs and making a mockery of legislative interest in improved graduation rates.

Already California students are enrolling in huge numbers in institutions outside the state because they have lost confidence that they will get the classes they need in California. Further, the robust financial aid that many private universities now offer can make it less expensive for students to attend those institutions than University of California campuses. Meanwhile, institutions in states that are better off are taking advantage of the situation: In Texas, which has not been as hard hit because of burgeoning energy revenues, the University of Texas system's Board of Regents has established a special fund to help the system recruit leading professors from universities in other parts of the country to its health institutions.

Of course, universities have faced hard times before, and it is useful to have some historical perspective. In 1983, when I was associate chancellor at the University of Illinois at Urbana-Champaign, the Reagan recession had hit the states in the "rust belt" particularly hard. Danville, a community within an hour of Urbana, had seen its unemployment rolls approach 40 percent, and pressures on state leaders in the face of declining tax revenues were enormous. Interest rates were unimaginably high by today's standards. (My wife and I purchased our first home with a 13-percent mortgage rate and a three-year balloon to 16 percent. And that was a good deal back then.)

Illinois had one of the lowest income-tax rates in the nation, having had no increase for some 13 years. The university's new president, Stanley O. Ikenberry, who went on to become president of the American Council on Education in the 1990s, had persuaded Gov. James R. Thompson and leaders of the Illinois General Assembly to seek a tax increase specifically to support public higher education. That was a time when elected leaders occasionally showed the kind of political courage and understanding of strategic investment that seem in short supply in today's politics.

The University of Illinois's faculty included Nobel laureates and numerous members of the National Academy of Sciences and the National Academy of Engineering. John Bardeen had won a Nobel Prize for his role in the invention of the transistor, and Nick Holonyak had invented the light-emitting diode. Their research in developing technologies had created and transformed entire industries and helped place America at the forefront of innovation and technological growth. The university attracted extraordinary talent from across the globe to East Central Illinois, and not only the state but the entire nation benefited.

But institutions in the Sun Belt—many of which ironically are now suffering from the very economic situation that benefited them in the 80s—were coveting Illinois faculty members. Years of relatively modest budgets and deteriorating facilities had made Illinois vulnerable to raids. Officials estimated that as many as 150 tenured faculty members left in just two years.

Such a challenge was not unique. Other powerful engines of innovation and economic and social progress—the University of Wisconsin at Madison, the University of Michigan at Ann Arbor, the University of California at Berkeley—all faced similar challenges as a result of declining state support and the recession.

Perhaps because those giant institutions had developed their strengths over decades and seemed so resilient, the news media had not focused on the long-term implications associated with the multiple challenges facing the great public universities. In 1983, at a lunch in New York with Time magazine's education editor, Susan Tifft, I raised concerns about the long-term implications of the decline of such great public institutions for both the people of their states and the nation. She agreed that this was a potential national story. The next day I received a call from Time's Chicago bureau chief saying the magazine was doing an article on the impact of the recession on the rust belt and its leading public universities—and asking if I could put her in touch with key people at the university.

I was more than happy to do so, and the result was an extensive article documenting the extent of the crisis at leading institutions in several states. Holonyak was pictured in his outmoded lab where the ceiling was virtually falling down. Larry R. Faulkner, a distinguished electrochemist, was among those recruited away by the University of Texas at Austin with a higher salary and long-term commitments that gave him confidence in his future. Faulkner, who later became president of his new university, crystallized the issue in the Time article: "Stability makes the difference between an absolutely first-class state university and a mediocre one. You are able to congregate a great faculty because of a certain atmosphere—and when that gets destroyed, it's hard to put it back together again." Happily, with strong support from Illinois's business community, the tax increase was enacted and millions of new dollars were made available to stem the immediate damage.

James Fallows's article "How America Can Rise Again" in the January-February issue of The Atlantic argues that the "peculiarly American cycle of crisis and renewal" is nothing new and that the emerging threats from other countries will be countered by "the continuing strength of the forces that have made the country great: our university system, our receptiveness to immigration, our culture of innovation." It is true that research papers by scientists at American universities continue to be the most cited, although there is evidence of a decline in publications by researchers at public universities as state appropriations for higher education have been sluggish in recent decades. Our leading universities still attract the world's best students and dominate international rankings.

But today the great public universities of the nation are challenged as never before. The good news at Illinois in 1983 was followed by persistent declines in state support relative to the universities' needs and overall budget, an all-too-common experience among public universities across the nation. That has been exacerbated in recent years by the competitive challenges created by other nations' significant investments in strengthening their research institutions.

Charles M. Vest, president of the National Academy of Engineering and the former president of the Massachusetts Institute of Technology, said in The Chronicle (October 5, 2009) that the American people do not feel the same sense of urgency as other countries do to reinvigorate and reinvest in higher education as a means of better positioning themselves in a competitive and shifting global economy. "China, Korea, Singapore—they're going for broke," he said. "I'm worried that we won't realize what's at stake until it's too late." The same article describes how universities in states that are weathering the current recession may take the opportunity to poach top researchers from institutions in hard-hit states. Such actions might benefit individual states, but not the country's relative position.

Berkeley's current chancellor, Robert J. Birgeneau, has argued that the nation cannot afford for the excellence developed over more than a century at Berkeley to be destroyed. He calls for the federal government to designate his university and a handful of others of highest quality as national institutions with corresponding federal support. I question whether today's Washington leaders would have the courage to create such a program without supporting institutions in every state to meet political realities. Nonetheless, given the global economic challenges, the arguments made in 1983 for the great publics are even more valid today.

U.S. Sen. Lamar Alexander, a former secretary of education and university president, has called for the National Academy of Sciences to conduct a comprehensive review of the university-government partnership and our universities' ability to continue to provide world leadership in basic research—the foundation of innovation and technological advancement that is the key to future economic growth. Robert M. Berdahl, president of the Association of American Universities, has also suggested steps that should be taken, and for me one stands out: the need for a national strategy to support the education of graduate students who are the seed corn for the future of research and technology.

Simply put, states take little responsibility to support graduate education. And, in general, except for supporting graduate students on research grants, federal support for young scientists and engineers has not been systematic. Yet in the current economic climate, the great public universities cannot thrive without national attention and support for the scientists and engineers of the future.

Our nation's business leaders should champion the issue, which, as Berdahl points out, is worthy of a long-overdue national discussion. While public institutions regularly work with the businesses in their communities to garner state support for their annual budgets, both public and private universities should educate local and state business leaders about the financial crisis in graduate education. They should work with those leaders to undertake a broad, aggressive national business effort to urge Congress to establish a federal program to systematically support the future generations of young scientists and engineers on whom our national competitiveness depends.

Vest got it right: We need to rediscover the sense of urgency to save the great institutions that continue to be the key to our nation's future economic leadership. As one of my colleagues recently remarked, Berkeley is like the canary in the coal mine. The United States cannot afford to have it and other major public institutions deteriorate. It is time for a national discussion of what's at stake, not just for California but for the whole country.

John F. Burness is a visiting professor of the practice of public policy at the DeWitt Wallace Center for Media & Democracy in Duke University's Sanford School of Public Policy. He previously served as senior vice president for public affairs and government relations at the university.