Sunday, March 10, 2013

Thoughts on the Inadequate State Funding of U.S. Undergraduate College Education


I've grown concerned that the cost of an undergraduate education has grown substantially over the past 15-20 years, primarily due to state budget cuts (thereby forcing tuition and other fees up), but also due to other extrinsic factors. As a result, it appears to me that college is much more expensive for students today, yet at the same time college is so much more necessary to train up our workforce to fit the jobs in this modern economy.

So, please permit me to share some thoughts on the increases seen in college costs. Along the way I set forth a small partial solution - the use of discounted textbooks and/or trade publications instead of costly textbooks. I also suggest a few longer-term solutions, addressing greater revenue (and its use) for colleges.  Yet, greater solutions - especially those which drive down current costs - appear elusive.

STATE BUDGET CUTS AND TUITION INCREASES.  While tuition has increased dramatically at colleges, the cause of these increases has often been debated. This study by two economists demonstrates that the primary cause is decreased state funding of public education. (See

Anecdotally, I have observed this over the past 10-15 years - tuition increases are approved within public college systems in response to state budget cuts which occur, it seems, every 5-10 years.

CLASS SIZE INCREASES.  At many universities over the past 10-20 years, class sizes have also soared. One would think this would have resulted in a lowering of the costs of attending college.

However, I would note that class sizes have not occurred, in any substantial fashion, at Alfred State.  Most of the classes at Alfred State College remain in the 20-35 student range. Moreover, the classes are taught by professors themselves, not teaching assistants. I suspect this is a big part of Alfred State's popularity, although its focus on experiential learning also is likely a factor.

ROOM AND BOARD FEE INCREASES.  While I don't possess statistics for New York State, nationally room and board costs at colleges and universities have seen increases of 2% a year, above and beyond inflation, on average. A good part of this may be attributable to food price increases worldwide over the last decade, attributable to many factors (increased consumption of beef, increased energy prices, etc.). Improvements in the meals served at colleges and universities are also likely a factor - I often hear alumni applaud the substantially improved offerings on the buffet, compared to when they were at the college 10, 15, 20 or more years ago.

MAJOR TEXTBOOK COST INCREASES.  Of course, textbook prices have also soared - much more so than other college costs over the last 20-30 years, according to some studies. What I have not seen is an explanation of "why" these cost increases have occurred, during a time when (overall) book publication costs have generally been trending below the costs of inflation.

The somewhat good news is that this high cost is the one thing I can take action on. Starting next Fall, I'll be using a $25 online textbook (customized by me, through FlatWorldKnowledge) for my Business Law I class. Students may access it only online for $25. If students desire a print version it will cost about $50. This is relatively inexpensive, considering that the current book I'm using costs $260 new (print version), or $90 for online access to the 18 chapters we cover in the course.

I'm also using a trade publication - a 760-page new book, "CFP Board Financial Planning Competency Handbook" (Wiley Finance) by CFP Board (Apr 1, 2013) - which costs $71 through (print edition). (I don't know if a Kindle edition will be available for even less)  I'll be using this one book for two courses - the PFP Capstone Course, and Retirement Planning (supplemented with free outside materials). An added bonus is that this new book will likely be an important resources as students prepare to take the CFP Exam, post-graduation.

In a 2011 study, U.S. PIRG found a majority of students admit to not purchasing at least one textbook required for their classes because the price is too high. I have personally observed this occur. While students borrow textbooks, inevitably there are times when they don't have access to the textbook when they need it, and their education (and grades) suffer. At least I can do something about this, for my own students, starting next Fall.

FOUR PARTIAL SOLUTIONS TO THE HIGH COSTS OF COLLEGE. Other than my personal embrace of lower-cost books for students, where available, I'm not yet possessing of solutions for other reductions in cost, to make college more affordable for students today. Some potential solutions, however, on the revenue side of the equation,  include:

  • Restoration of state funding of college and university costs, from the 50% or so it is currently, to 75% (as a target) - as it existed about a decade ago. Undertake tuition rate decreases as this restoration of funding occurs. Of course, with state budgets under pressure, still, this is unlikely to occur - at least anytime in the future.
  • The creation and funding of better endowments at colleges and universities - perhaps to target student-paid expenses. Imagine an endowment which subsidizes, for deserving students (or all students), on-campus housing and/or food costs.
  • The funding of endowments in the form of general scholarship funds, perhaps with the purpose of lowering tuition costs for all students. In other words, let the 5% annual distributions from such a fund lower tuition fees for all students, across the board. In recent years colleges have tended to award much of their scholarship funds to top applicants, with those without high test scores and GPAs left to wrestle with high costs (and/or large student loan debt).
  • Better investment of endowment funds is required. Despite the academic research which demonstrates the long-term benefits of a low-cost, passively managed investment portfolio, and the use of a "layer-cake" approach to leveling distributions when market volatility exists, I still see many endowment funds which are poorly managed. Many endowments do not invest to take into account the Fama-French multi-factor model; quite a surprise given the inherently long-term nature of endowment funds and the extremely high probabilities that value and small cap premia will exist over the very long term. Endowment fund managers also need to employ investment advisers for a flat fee, and get away from the percentage-of-assets-managed model.  In summary, endowment fund managers need to wake up!

ONLINE EDUCATION?  There is a large movement toward the use of online education offerings. The advantage is, of course, flexibility (for students who are working full-time jobs, for example) and reduced costs.  Without a doubt, I'm in favor of this trend - for it increases educational opportunities for Americans and for the world population.

Recent innovations to cut down on cheating in online courses (through the use of proctored online exams) may remove most of one of my potential objections to online education, at least for undergraduates. But I continue to possess other concerns.

We must realize that so much of what college provides students is NOT JUST technical education. Rather, it is hands-on, experiential and/or project based learning. Moreover, it is providing tools and an environment to enable each student to mature and expand their comfort zone. In short, it is developing the "total person" - not just equipping them with knowledge. That is what employers desire (and need) today. Far too often I get the sense that online students "miss out" on an important part of their educational experience, if they mainly take online classes.

(As an extreme example, I see students in dire need of improving their public speaking abilities and confidence take an online course in Public Speaking - precisely to avoid the in-person interactions so necessary in a course like this.)

Hence, I worry that online educational offerings are not able to successfully duplicate the overall residential college experience. I personally believe that most students are better served, at least as undergraduates, in a residential college setting. (Provided, of course, that the class sizes remain small, to facilitate interactive learning. And provided, further, that faculty members are dedicated to developing all of the personal traits of a student, as I see with my fellow Business Department faculty here at Alfred State.)

Please don't get me wrong. I believe online education, both currently and in the future, has a large place in our overall educational system. But I worry that the current techniques I've seen used in online education result in a somewhat diminished overall educational experience. Perhaps there are advantages I'm not seeing, that enable a good "trade-off" to ensue. I'm certain I'll be giving this much more thought, as time goes by.

LARGER CLASS SIZES?  Similarly, perhaps larger class sizes may be required. But at what cost? When a class size gets above 30, interactive learning through class discussion becomes much more difficult. And larger class sizes means greater time spent by professors undertaking grading - and less tie spent on all-important advisement and other student support activities.

THREE YEARS OF COLLEGE, INSTEAD OF FOUR?  There is also a move on to reduce the baccalaureate degree in the U.S. to 3 years, instead of 4 years, as it exists in many other countries. Yet, many of these countries achieve this by reducing the amount of general education, and focusing only on technical education. This does not provide for development of the "whole person" - which employers desire.

IN SUMMARY, I'm in search of solutions. The few solutions I set forth are all designed to alter the revenue sources available, in hopes of lowering costs for students. There are means to make education more "efficient," but I worry that such efforts at efficiency may well undermine the best aspects of a U.S. college education. I remain open to learning more, however, and to exploring new ideas in the area of "efficiency."

All my best.
  - Ron

ADDENDUM: NEW YORK BUDGET CUTS HURT RE: CAPITAL EXPENDITURES. Sadly, New York State is cutting out capital expenditures this year - so necessary to refurbish existing buildings over a reasonable time period.

I can attest that Alfred State College, at least, has used funds for improvements quite wisely. Yet, the process is ongoing, and an interruption in capital funding will impact the quality of the educational environment.

Even on my floor of my academic building, for example, there exists old tiles in need of replacement (which are costly to replace, given the asbestos present and the need for safety during removal). Thankfully over the past winter break the Alfred State Administration was able to cull together some funds to replace tiles on the floor below, and stairwells. But more needs to be done, both to keep these older buildings safe, and to keep the buildings up-to-date and functional for a high-quality learning environment.

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