The Tuition Time Bomb

Even with the next legislative session a year away, state Rep. Dan Branch, chair of the Higher Education Committee, has been visiting college presidents, delivering a frank warning: Texas families can’t take any more big tuition hikes, and neither can the cash-strapped state bail out bulging college budgets.

Since 2003, when the Legislature deregulated tuition by allowing individual boards of regents to set prices for each school, tuition and fees at four-year state schools has skyrocketed by an average of 63 percent, from $1,934 per semester to $3,150 according to the last state figures, from 2008. At some schools, such as Stephen F. Austin, Prairie View A&M, and Texas A&M Galveston, the cost of an education nearly doubled in that five-year span.

“Somebody’s got to give the higher education community a signal,” said Branch, R-Dallas. “Realistically, when we’re looking at sales tax revenues being off 12, 15 or even 20 percent … it’s going to be rough. I’ve seen some university presidents’ eyes get big when I say it, but I’m telling them they better start storing up nuts for the winter.”

Branch and other policy makers describe converging factors that could combine to either deplete state coffers or drive down quality, imperiling the state’s long-term vision to boost both enrollment and graduation rates. Two factors loom large in the troubling landscape. First, the sagging economy is pushing more people who can’t get jobs back into school, driving up the costs to the state. And second, the better universities perform at both attracting and graduating students, the more they will cost taxpayers, students, or both.

“In higher education, there’s an escape valve: Tuition. We [the state] can’t give you enough money, but you [the university] can still take it out on the backs of poor families,” said state Rep. Scott Hochberg, D-Houston.

Watching California

Politicians and educators have warily watched the budgetary bloodletting of universities in California this year, hoping it doesn’t portend fiscal trouble in Texas. California tuition recently spiked by a third, even amid aggressive cost-cutting in both academia and administration.

Meanwhile, at the University of Texas at Austin, tuition and fees now account for nearly two-thirds of total revenue — compared to only about 40 percent in 2002. At Texas Tech, which has held post-deregulation increases to relatively low rates, administrators tried freezing tuition in 2008, only to come back with a whopping 10 percent hike this year.

As the next session approaches, the main question facing educators and policy makers is who will pay, how much, and how much universities can slash from their budgets without cutting too deeply into quality. In the last session, several attempts to curtail the cost of higher education and tuition failed; even so, several universities, including the flagship in Austin, have abided by legislative guidance in a non-binding resolution that called for limiting next year’s hike to less than 4 percent.

Such relative frugality will be a stopgap at best in addressing more systemic cost issues, said Texas Commissioner of Higher Education Raymund Paredes. Another inflation driver: The state’s new plan to transform seven additional universities to top-tier research institutions.

“If you look at the increases in the cost of higher education, and the economic characteristics of the Texas population, you quickly determine we’re at the edge,” Paredes said.

Some argue the state remains at national averages in tuition costs, even with the rapid increases. But family and student incomes are below the national average, making higher education less accessible here, Paredes said. Another troubling statistic: Rising student debt. Today, the average student graduates with about $20,000 in student loans, a figure he said has roughly doubled in the last decade.

“That doesn’t include students who don’t graduate, and there are lot who struggle, flunk out, and end up with no degree and a lot of debt,” Paredes said.

Screen-to-screen solutions?

The state’s budget crisis might or might not pass quickly, but some policy makers nonetheless see the higher education business model on the cusp of collapse. With the bulk of any college’s cost wrapped up in salaries, which recently have spiked, cutting the budget means cutting people. Professors will have to teach more and research less, they say, and take advantage of the ever-growing array of available technologies.

Borrowing a page from their strategy to reduce the long-term costs of dead-tree textbooks in K-12 schools, both Branch and Hochberg suggested technology could provide huge efficiencies, and maybe even a better education.

“If you’ve got interactive video of the best lecture on X subject, and it's provided online constantly, you don’t need to go hire the best lecturer, and you certainly don’t need to go get a mediocre lecturer,” Branch said. “You can have a graduate student proctor the class and share the cost with another university.”

Such offerings could also cut through bureaucratic tangles that ensnare many college students, Hochberg said. “If I hear one more anecdote of a student trying to graduate in four years, but can’t because the university doesn’t offer the class he needs that semester … Those things are maddening — and expensive,” he said. “And it’s tied to poor planning and attitudes. We need to decide if we’re going to have customer-centered institutions or those that exist for faculty and administrators.”

At the University of Texas at Austin, the administration has taken an opposite path in recent years, adding rather than cutting faculty, and paying ever-higher salaries to compete with major universities nationally, said Chief Financial Officer Kevin Hegarty. In the last ten years, he said, the university has added 30 faculty members a year, in addition to replacing those who leave.

Hegarty doesn’t buy that canned, screen-to-screen classes can replace more intimate connections between students and professors.

“If you view education as a commodity to be videotaped and delivered to 100,000 students — which we don’t — sure, you can cut costs,” he said. “But education at this level is a human interaction, face-to-face.”

Hegarty spent 25 years in corporate America, much of it at Dell, where he dealt strictly in commodities. “The name of the game there was to squeeze cost out of the box, out of the product you made,” he said. “So you looked at manufacturing offshore and automation. At any university, you can automate some administrative processes, but it still takes a lot of people.”

Pinpointing blame, sharing pain

State Rep. Patrick Rose, D-Dripping Springs, wants to put budgetary responsibility squarely at the door of the Legislature. His proposal, among several that failed to garner support last session, would have allowed universities to increase tuition if — and only if — the state failed to appropriate sufficient financing to maintain educational quality. He puts the necessary increase somewhere between 4 and 6 percent per year.

Since deregulation in 2003, the share of college costs shouldered by students has shot up while the state’s portion has inched up, he said. At UT-Austin, for instance, the students collectively paid $259 million in 2003 — compared to $491 million this year. Meanwhile, the state paid $286 million in 2003 and $323 million this year.

Rose, who plans to push his legislation again next session, wants to cut a path between two extremes of “bad policy”: Inflexible state mandates to cut tuition, and legislative failure to properly finance colleges.

“This would put the blame on the Legislature if tuition goes up, and makes sure universities can continue their march toward excellence,” Rose said.

Paredes, the higher education chief, said it may not matter whether the state was right or wrong to reign in its financing of universities — come next session, the money may simply not exist, particularly as legislators weigh hundreds of other dire needs.

“If you’re talking about shifting a larger share from students to the state, that’s not likely to happen if any of the (revenue) projections I hear are accurate,” he said. “The more typical consequence is what’s happening in California: raising tuition and fees dramatically.”

At UT-Austin, Hegarty said the market, at least so far, has shown it can bear the load.

“I didn’t like it when my property tax bill went up this year, but it did,” he said. “For most parents, it comes down to value: What’s the quality of the degree compared to what I pay? And most students think of the value proposition, too, which is why we had 34,000 applications for 7,000 seats.”