David Schwen for The Chronicle
Here’s a puzzle: The gasoline tax is to transportation as what is to higher education?
What, indeed?
The economic logic of the gas tax is simple. It goes toward the cost of roads, transit, and other transportation improvements, and the people who pay it are the people who benefit from it. For higher education, the answer is tougher. Individual “users” benefit, financially and otherwise, but so does society as a whole. Economists say you could think of tuition as their share of that cost. (Whether tuition covers the right share relative to the benefit is another question.) But what about society’s share? Shouldn’t there be a dedicated tax for that benefit?
The argument for yes seems apparent.
In financial terms alone, the payoffs to society are “astronomical,” says Phillip A. Trostel, a professor of economics at the University of Maine at Orono. Based on what he calls conservative calculations, the returns to the federal and state governments from their spending on higher education over students’ lifetimes amount to 10 times the expenditures.
Yet on a nationwide basis, states’ support for higher education per full-time-equivalent student has fallen to just $6,290, the lowest in 15 years.
The national debate about the cost and worth of college was intensifying even before the economic downturn and isn’t likely to dissipate even after the economy recovers.
Except for a few cases—lotteries in some states, a small slice of sales-tax revenues in others—there is no gas-tax equivalent for higher education’s societal benefits. Taxing things like high-tech companies or the value of intellectual property might be the logical equivalent, if you wanted something closely correlated with higher education. But experts warn that such a targeted approach could discourage the very activities and businesses that states most want to develop.
In fact many policy makers and budget wonks say higher education is better off without its version of a gas tax. For one thing, unless it is broadly based, it would be subject to the vagaries of economic ups and downs—and, as Donald J. Boyd, of the State University of New York at Albany’s Rockefeller Institute of Government, argues, “You don’t really want your revenue to be whipsawed.”
What’s more, that kind of tax is unpopular with lawmakers and budget folks because it ties their hands and could leave higher education even more vulnerable to cuts in its other sources of revenue. Just look at how lawmakers now consider tuition as an alternative to state support.
So a dedicated source of funds for higher education is problematic. But what if state and federal lawmakers applied the impeccable logic of the gas tax to develop a consensus for a higher-education support strategy? For good measure, what if that gas-tax-style consensus also reflected the highest national priorities, like assuring that needy students aren’t shut out of college because of their own or the institutions’ financial strains, and holding colleges accountable for better educating students while keeping costs in check?
It’s a tall order, with as many paths to a solution as there are lawmakers, lobbyists, and advocates.
Here are three principles that should be part of the considerations:
Over students’ lifetimes, the federal and state governments make back more in taxes and saved costs than they spend on higher education, and because the federal government reaps the greater share of that benefit, it should pay a larger proportion of the costs.
This will be an unwelcome argument in Washington, where the federal budget deficit and the national debt are center stage. But it belongs in the debate.
Mr. Trostel estimated in a 2008 study that while the federal government’s share of all government spending on higher education was 19 percent, it received 72 percent of the financial benefits, mostly from increased income taxes and savings in the costs of prisons and health care, among other areas. The states’ share of the spending was 81 percent, but states reaped only 27 percent of the financial benefits.
College leaders who call for a new national strategy on supporting higher education, like Mark G. Yudof, president of the University of California, argue that states’ budget cuts are just part of the problem. Those advocates could look to the gas tax to make their case.
States themselves could do more to consider the measurable improvements to their economic welfare that are connected to higher education, and reward institutions with additional money.
An interesting strategy comes from Arizona State University. Officials there are developing a model keyed in part to an independent measure of state economic conditions produced by the Federal Reserve Bank of Philadelphia. The Arizona officials want to use the reserve bank’s coincident index for Arizona, coupled with an index that measures changes in per capita income in the state, to create a measure that would track the state’s economy. At certain thresholds, the state would be required to provide additional funds to universities, based on how well they had done on performance measures like improving graduation rates and bolstering research.
It is a way to return to higher education some of the societal benefits that it helps to foster.
The strategy is most appropriate, of course, in states where public colleges dominate. In other states, like Massachusetts, private institutions would have a greater effect. Framingham State University, for example, would share in the reward for the economic success of private colleges like the Massachusetts Institute of Technology.
Some of any new government money should be tied to institutions’ performance, including how well they get students in and through college, and how well they serve the growing economic and demographic diversity of American society.
Models like the Complete College Tennessee Act, which ties nearly all of the state’s higher-education spending to its colleges’ success in meeting sector-specific goals—for example, how well two-year institutions do in work-force training and remedial education—may make some college leaders and faculty members uneasy. But the national debate about the cost and worth of college was intensifying even before the economic downturn and isn’t likely to dissipate even after the economy recovers.
Colleges that fear what lawmakers will propose should be suggesting sensible measures of their own.
Those measures should include ways of better serving the kinds of students whom colleges have historically “tripped over and skipped over,” says Travis Reindl, director of higher-education programs at the National Governors Association—be they Latinos in Texas, working adults in New England, or inner-city high-school graduates in New York.
Those concerns about equity, and even more about costs and accountability, are acutely felt in the statehouses, he says. The sentiment is no less apparent on Capitol Hill, where Congress will soon take up legislation that will guide federal spending priorities in higher education for the next half-decade.
One thing is certain, says Mr. Reindl: Patience is wearing thin for the argument of finding new money for higher education “and then shoving it into the existing system.”
