21 August 2012

Why Levelized Tuition is Inevitable

From the California State University system comes this remarkable news:
The California State University system is embroiled in a controversy over plans to admit higher-paying out-of-state and international students to its undergraduate and graduate programs next spring while barring California residents because of state funding cuts.

The issue has become so heated that department leaders on some campuses are saying that rather than turn away Californians, they will not accept any students into their programs.
State budget cuts combined with differential tuition for in-state and out-of-state students is leading universities to act in the direction of their economic interests. The Cal State decision to ban in-state students may be a highly visible publicity gambit, but it does show the consequences of the current incentive structure.

A Cal State spokesman explains:
“We need to make appropriate enrollment cuts and that, unfortunately, has to be California residents,” Cal State spokesman Mike Uhlenkamp said to the Times. “If a campus has a program with the capacity to bring in students who are not subsidized and who are paying for the entirety of instruction, they could … bring in additional revenue that could go to benefit state residents.”
Cal State provides more evidence that the days of in-state tuition appear numbered.

H/T MattL in the comments.


  1. Roger--

    I'd like to hear more about why you consider this remarkable. My understanding is that Cal State has few out-of-state students in the system and this change will move this up only slightly. Nothing close to CU-Boulder. The state legislature has decided to significantly cut state support. The CSU system is responding rationally by looking for other sources of funding--otherwise they are raising fees on Calif students.

  2. -1-Mike

    Thanks ... the action is not as important budgetary as symbolically. A state university not allowing in-state applicants? Remarkable.

  3. Roger, yes that is remarkable. And if I'm a California resident I'm quite likely to support laws reversing this. I'd think those laws would be an easy sell. Of course I also think that universities should just cut their budgets and live within their means like everyone else, and we know that's not going to happen until the whole system falls down.

  4. -3-Skip

    Thanks ... actually, the issue is not one of universities living within their means. The larger issue is not profligate spending but a dramatic shift of the burden of university costs from out-of-sight state subsidies to students/parents.

    If you ask universities to provide services at tuition levels of the heretofore subsidized tuition rates (or close), then you will find that universities will be very different institutions, and not for the better.


  5. Thanks Roger, that makes more sense. The substantive effect of this change is minimal on actual enrollment numbers/ratios. I do agree that it is a bit remarkable that is an announced policy, but this could be Fall tax vote politics. But here are two things even more remarkable. First is how poorly the Chancellor has handled this--you'd think he would have some data that shows why this isn't a big change and why it is a good deal for CA taxpayers. Second, its is remarkable how poorly informed the CA public is on how higher education funding works (e.g., Skip).

  6. -4- Roger Pielke, Jr.

    This is just one of many market distorting policies which serves to dissociate people from risk and challenges accountability. Another is the permissiveness of our immigration policy, but especially a lack of effort to control unmeasured immigration (i.e. illegal). Then there is the matter of maintaining the illusion of a viable society, not the least of which is due to a majority of Americans reproducing in the minority.

    What do you think of our federal deficit, which is running at 10% of GDP? It is effectively a covert tax on ever American and other taxable entity. If it were not for inexpensive goods and cheap labor to compensate, and an overly generous (but, interestingly, selective welfare system) most Americans would have already responded to this progressive and regressive tax.

    The problem is comprehensive and our desire to avoid addressing causes has lead to corruption of individuals and society. Everyone wants everything, and have been promised this outcome, but reality (and historical evidence) dictates that a few will have everything and most will have an ordered distribution assigned not by merit, but by political expediency.

  7. The law makers who set this up, the leaders of the university systems, and the boards that guide them are all highly educated people. Most of them have at least attended the schools impacted by this idiocy. These are not ignorant people. Yet they have boxed themselves in in a way diplomatically described as less than bright. This is a parallel to what happened in Wall St., is happening in our government around the world, and in other sectors of society.
    It is time to face the facts: The best and brightest of today are not meeting the challenge effectively.

  8. A big part of this has been the over subsidy of student loans. Universities have not had any pricing pressure at all over the last decade or two. It has been a badge of honor for parents to send children to schools with annual tuitions of $30,000, $40,000 and even higher. Students have been deceived into thinking that even if they get a degree whose carer path will lead to modest financial results, it is OK to graduate with $25,000, $50,0000 or even much higher levels of personal debt.
    University systems have become Ducal feifdoms, subsidized by state and local tax payers and insulated from the larger society. This is unsustainable over time. California is only the beginning.

  9. #8

    "Students have been deceived into thinking that even if they get a degree whose carer path will lead to modest financial results, it is OK to graduate with $25,000, $50,0000 or even much higher levels of personal debt."

    My youngest is at Harvard Law. Try $150,000 in debt. If she doesn't get a job at a top law firm she is totally screwed.

    There is actually a class action lawsuit brought by students against some second tier law schools for promoting inflated future employment expectations.

  10. Roger @4, you can say that, but the numbers don't bear that out. Based on this:


    Tuition at CU-Boulder has increased at several times the rate of inflation, with most of that increase happening since 2000. Now, as a free market guy I have no problems with this - charge what the traffic will bear. Just as long as we're willing to get rid of the student loan subsidies that make the market non-free.

    Is there any other industry anywhere that, since 2000, has been able to raise their prices as much as higher ed?

  11. -10-Skip

    Thanks ... think of it this way:

    University revenue per student =

    A = tuition paid by student


    B = State subsidy per student

    You are only looking at A without considering B.

    When you look at A+B you get the whole picture.

    Here is data on B:

    When you look at A+B you see that in 2001 the university operated at a total cost per student of $9.677 and in 2011 $10,511

    But that neglects inflation. With inflation factored in, to 2011$ the comparison is

    2001 = $12,289
    2011 = $10,511

    So the cost of an education at Colorado dropped by 14% while inflation increased by 27%.

    One of high eds big problems is that people are utterly unaware of this math.

    Worth a top line post, thanks for the motivation!

    PS. CPI data: