Meeting the Demand for Higher Education without Breaking the Bank: A Framework for the Design of State Higher Education Policies for an Era of Increasing Demand

Abstract

Introduction This article seeks to present and illuminate empirically a model of policymaking in an area of emerging, if little appreciated, importance, namely, state policies affecting private (nonprofit) higher education. Further, it shows the interesting implications of this model and the associated empirical results for policy in this area now as many states enter an era of sharply increased demand for higher education but limited resources to pay for new capacity [65, 67]. The basic idea is that state policy postures toward private higher education can tend toward one of three nodes: * laissez-faire, in which state policies largely ignore the private sector; * central planning, in which state policies involve the private sector substantially, use private institutions to play carefully planned and enforced roles in the state system and pay for this involvement financially via such means as direct subventions to private institutions and aid to their students; * market-competitive, in which state policies also seek to take account of and utilize the private collegiate sector, but in which the state plays much less of a planning, allocative, and regulatory role than under central planning and instead employs market forces and signals (e.g., portable student aid grants, lower subsidies built into public institution tuitions, information policies) to guide allocation of programs, students, and resources. The analysis matches individual states' policies empirically to these constructs (or in some cases to hybrids of them) and then considers how well each policy set fits the circumstances of the states that employ it. The key broad conclusion of the empirical analysis is that the market-competitive constellation of policies is associated with the most attractive combination of policy outcomes: high participation rates in higher education, reasonable quality in public higher education, and a healthy private sector providing choice to students, all at only average levels of taxpayer spending (per capita) on higher education and well below-average levels of taxation overall. Assuming these associations are some guide to the future, then the market-competitive states seem to be well positioned to face the emerging era of rapid growth in demand for higher education that many states will encounter without depending solely on costly expansion of public colleges and universities. This conclusion squares with the common-sense idea that it should be cheaper to meet some part of large new enrollment capacity requirements by directing some students toward private higher education (even at some financial cost to the state) than to meet all the demand by expanding space in the public sector. The laissez-faire states, in contrast, though they also include a number of states that face rapid growth in demand for higher education, appear to be poorly positioned by virtue of their policy histories and current policies to cope with such a period of growth cost-effectively. These states have generally experienced rapid population growth in recent years but only slow growth in their private higher education enrollments (which tend to be relatively small, though in most cases not insignificant). Their spending on public higher education per student (a crude indicator of quality) and their overall participation rates in higher education tend to be near the national average, but it seems unlikely that these performances can be sustained in the face of strong demand growth, for this is both the poorest group of states and the one already making on average the highest overall effort. Yet these states also spend well above average per capita on higher education. Thus, the analysis suggests that these states need to rethink their higher education policies, particularly those affecting the private sector, if they are to cope effectively in the new era of increased demands and tightly constrained state tax revenues. …