States around the nation, facing severe budget shortfalls, are cutting public services, raising fees, and using public service privatization as a means to bridge budget busting funding gaps.
Historically, during boom times higher education is one of the largest recipients of increased funding from the State, conversely during economic downturns it is higher education that receives the steepest reductions to funding.
Oregon is no exception to the budget woes befalling states post the great recession. However, unlike Michigan and Wisconsin, the Oregon legislature has sought to strike a balance between fiscal responsibility and public access to higher education.
Facing record reductions in federal institutional funding and subsidies, the state legislature has set out to, through Senate Bill 270, fundamentally restructure its University system in order to ensure access for residents while controlling costs.
The bill, which has been approved by the legislature and awaits the Governor’s signature, devolves power from the centralized Oregon Board of Higher Education to localized independent boards. This is a step towards potential privatization of Oregon’s State universities, but there are safeguards to protect smaller regional universities and public access to higher education for marginalized populations.
In return for reductions in State funding, and thus State influence, institutional boards will have the authority to write their own budgets, subject to the review of the legislature, raise in-state-tuition without the approval of any outside body by up to 5% annually, seek new revenue streams through private investment, fundraising, and bond issuance and will have increased flexibility in regards to management of university property.
The plan promises to bring the benefits of market competition, namely accountability, to the Oregon University system. Through market forces, “public” Universities will have to demonstrate to their students, and private investors, that they are providing actual value instead of relying on the never ending flow of government subsidies.
The plan is not without its detractors though, Western Oregon University President Mark Weiss, in testimony before the Oregon Senate expressed fears that stoking competition for scarce state funding between the universities would only serve to limit access by creating winners and losers in the academic arena and that Oregon couldn’t afford that.
The American University system is the envy of the world, and historically it has not been funded on the backs of students or out of the pockets of private investors but by the state. As funding sources shift, so too will priorities and that is the real risk to changing the structure of the Oregon University System.
Pitfalls of Privatization
According to research from Association for Education Finance and Policy, “Increased “entrepreneurialism” or “privatization” implies a substitution effect whereby public universities respond to declines in state support by growing alternative revenue sources.” SB 220 effectively legislates this kind of entrepreneurialism in the institutional boards with the intent of limiting the need for state funding without reducing access.
However, because Non-resident students are both more profitable to the university and also less likely to remain in the state, any program that disproportionately benefits out of state student access, as seemed to be the case with OSU’s veterinarian program, risks hollowing out Oregon’s educated workforce.
A 2010 study from Vanderbilt University found that, states with a single board responsible for all four-year universities had higher average completion rates. So while the independent boards may bridge the current funding gap through private investment, and may improve innovation, they may also slow Oregon’s progress towards its 40-40-20 goal by reducing completion rates.
Safeguards Protecting the Public
While the bill empowers institutional boards to raise instate tuition, it does require them to “limit annual increases in tuition and mandatory enrollment fees for undergraduate students who have established residency in Oregon to a percentage that is not greater than the percentage increase in the Higher Education Price Index”. It also requires that they submit their budget for legislative approval, so while they will have more autonomy, there will still be state oversight.
The bill also maintains that institutional boards should not negatively impact public universities that do not have governing boards.
The bill will also establish a “Work Group on University Shared Services to assist in making recommendations for shared services among Oregon’s public universities. This will ensure that regional universities are not pushed out of the marketplace via program duplication at the larger
Despite their increased profitability, these boards cannot disproportionately favor out of state students at the expense of in-state resident access.
Though only one student will be on the board, the process surrounding increases to tuition, and mandatory fees “must allow for the participation of enrolled students and the recognized student government of the university.” This should ensure that student voices are part of the discussion in how the university funds itself.
As an ultimate safeguard against profiteering, all title to real and personal property of the University is held in the name of the State of Oregon and may not be used by a governing board “in a manner that would give rise to private business use”. “Nor may it be sold, transferred,or otherwise disposed of by a governing board without prior approval from the Treasury.” These two provisions act as strong barriers to private financial interests using public universities as vehicles for personal gain.
By William Tatum