While I was serving as the Strategic Staffing Manager at Intel Corporation, I had a mentor who was the Human Resource Manager for another large company.
Every time I stepped into his office I was confronted by a cardboard cutout of a kitten.
The kitten was crouched over a bowl of milk. The caption read “there is no such thing as a free lunch”.
When any Presidential candidate promises you something “free” in exchange for your vote, you need to ask yourself: “how much am I willing to pay for it in perpetuity – both in taxes and in diminished opportunity?”
Free Tuition Just Shifts the Burden
“A free college education for every student at every public college or university in America” is as likely as being swept up in a tornado, landing on your head still holding your dog, and living to tell about it – i.e. assuming the Wizard of OZ is a true story!
It is campaign fairy dust. Even Hillary Clinton agreed during the Wisconsin Democratic Debate Hillary Clinton.
The National Center for Public Policy and Higher Education recently published an e-book, American Higher Education: Journalistic and Policy, that documents how our states are already struggling to maintain their quality higher education programs.
Our top ranked universities are already under continuing stress: Universities of California, Oregon, Washington, Pennsylvania, and New York train a significant number of our doctors, lawyers, scientists and entrepreneurs.
What happens to these economically essential programs when funds are diverted to an open-ended commitment to undergraduate tuition?
State budgets are funded by taxes – principally income taxes, small business taxes, and real estate taxes.
As state tax revenues tumbled following the 2008 recession and states scrambled to balance their budgets, their public college budgets contracted proportionately.
The recovery, beginning in 2010, has not produced enough revenue to restore most of the drastic cuts.
The University of California, as an example, gets about 40% of its funding from state general tax revenues – the rest from federal government and private research grants, endowments, and student tuition and fees.
Undergraduate, in-state tuition has risen from around $7500 in 2005 to more than $12,000 for the current academic year.
Increased tuition has resulted in an explosion of student loan debt – easy to incur and very hard to repay.
The promise of “free tuition” has obvious appeal for both students and their parents, but is it sound policy?
“Free Tuition” Puts the Tax Burden on College Graduates
Bernie Sander’s free tuition plan is estimated to Sanders Plan cost $100 Billion in the first year of full implementation.
The plan would be funded by a $75 Billion a year tax on Wall Street. To pay the tax, Wall Street would increase fees on the investment tools used by large and small investors alike.
Taxing investment instruments reduces the amount of investment capital available for business formation and expansion around the country. The result would be a contraction of the economy and the creation of fewer new jobs.
Most small investors are parents or grandparents of college kids – or someday will be. The new fees will be added to the income and capital gains taxes these investors already pay. That will reduce the after tax income of retirees, for example.
Mr. Sanders would fund the balance of his plan through increased state taxes – raising taxes on small investors still further.
Students will begin to “pay forward” their “free tuition” in the form of higher taxes from their very first pay check until they die.
Public Colleges Need Incentives to Modernize
The objective of “free tuition” is laudable. A more realistic approach is to make college more affordable by driving down costs and embracing innovation.
Colleges and universities need to join the new America. They’ve got to learn to do more with less!
What if public colleges switched from negotiating reductions in faculty compensation and retirement benefits, and put more emphasis on faculty teaching hours.
If each professor taught 10 hours a week rather than 6 – a third more students could be accommodated at nearly the same cost.
Some studies estimate that as many as 70 percent of entering freshmen are not “college ready”.
What if colleges required freshmen to take and pass remedial courses over the Internet before arriving on campus?
Students – on average – would save a year of tuition and campus living expenses. Colleges would save staff and classroom space.
Millions upon millions of dollars are spent on college athletics.
What if the professional sports leagues that depend on college athletic departments as their “farm team” – paid for the management and maintenance of these athletic programs?
Student athletes would still get funding they need to underwrite their education.
Students and alumni would still participate in the rituals of college athletics.
They’d cheer proceeds from ticket sales, gear, and television rights going to reduce the cost of every student’s education.
And isn’t that the objective after all?
The tuition burden on students will start to decrease as soon as colleges and universities step up to the plate and focus on reducing their internal operating costs.
PHOTO CREDIT: Berkeley Lab