Making College Even More Expensive

CascadeNewLogoGovernor Kitzhaber has decreed that by 2025, 40 percent of Oregonians should have earned at least a four-year college degree, 40 percent should have a two-year degree, and the remaining 20 percent should have a high school diploma or its equivalent.

Now, State Treasurer Ted Wheeler wants taxpayers to help pay the rising cost of those college degrees and offset the “soaring debt” students are incurring. His Opportunity Initiative would create a permanent fund to “….both increase student aid grants in the short-term, and also put Oregon on a path toward a long-term solution to the problem.”

Unfortunately, it likely will do just the opposite. Third-party funding from the state or federal government actually raises higher education costs as institutions increase tuitions to grab that extra cash.

That would be bad enough; but it will be even worse, because the Treasurer proposes to finance this cool new scholarship fund with $500 million in general obligation bonds in 2014 and smaller bond issues over the next thirty years. The revenue generated from the bond proceeds will be dedicated to student assistance, with the hope that in 30 years that revenue can cover the so-called “needs gap” for two years of post-secondary education for every Oregon student. Whether or not the investment assumptions of the proposal work out, taxpayers will be on the hook to repay the bonds plus interest long into the future.

Worse yet, there is even evidence that more government funding of higher education actually translates to slower state economic growth. That’s likely because individuals know their own needs better than politicians do, so leaving the money in private hands produces better economic results.

Academics such as Charles Murray, Richard Vedder, and Carl Bankstron go further, arguing that four-year degrees aren’t what they used to be and that state funding simply wastes precious financial and human resources.

Whatever the value of a college degree to an individual, it’s becoming clear that state funding of those degrees is likely to cost taxpayers more than they gain.

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Posted by at 05:00 | Posted in Uncategorized | 132 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Bob Clark

    The current wave in government is to simply open up its largesse of borrowing and specious money printing and buy more of a good or service (as exemplified by ex-Governor Grey Davis of California and the Western electricity crisis of 2000-2001). Yet all this really does is to introduce a guerrilla sized buyer in a market without much increase in supply to the same market. In fact, current political regimes in Oregon, and federally, encourage the reduction in supply, by forbidding or discouraging the right-to-work and encouraging increased barriers to new supply entrants. So, effectively, Wheeler and Kitzhaber introduce a deep pocketed buyer into the education market but do little to actually boost supply of education services, as they are mostly against more school choice, for instance; and so effectively, they sharply increase money flow floating around available for the snatching by various teachers and public employee unions (where did the federal stimulus II go but mostly to increased public employee benefits and other union worker groups supportive of Obama, and not so much new employment). So, Kitzhaber wants to reduce PERS expense, not because this is what should have occurred via a free education market but rather he needs a cushion against a further jacking up of education prices. If education were the health field with a large private sector share of supply, the Democrat party solution would be to again have government be an ever growing buyer in the market but when prices inevitably sky rocket; to then impose price controls; which in turn, causes a slowing of service or supply.

    For some reason, Oregonians have been buying this sub par governance for decades now, too afraid to allow free markets to continuously test for the optimal level of demand and supply. Nationally, I think the financial crisis of 2008 still has influence over the electorate, allowing snake oil type politicians to sell big government against the evils of capitalism to a naïve electorate still under the influence. But eventually elevated inflation, or stagflation, tarnishes the boorish attributes of over sized government.

    Kitzhaber’s 40% four year college degree and 40% community college degree seems very arbitrary, something ginned up by the so-called experts in the room. Why not let the rigors of market testing find the optimal mix? Do we really have to go through more failed Soviet-Harbor central planning model governance? Government top down solutions lack the continual, rigorous testing markets are great at doing, and therefore, are prone to exponential error. Do we really want to retry the failed soviet top down planning model? Hopefully, the path to waking up from the Kitzhaber and Obamas of the current fad is not as dire. But as individuals I would advocate preparing for subpar outcomes and a breaking of unsustainable government promises. With free markets, negative outcomes are smaller and borne by the individual risk taker, and not society at large. (Big government programs like fannie and Freddie MAC along with allowing banks to wander away from Glass Stegall had a large role in the severity of the ’08 financial crisis. Maybe banks should be split up when they get incredibly large and can make mega sized bets such as big government is prone to put us through.)

    Small is beautiful, especially when it comes to governance.

  • Rupert in Springfield

    I can understand bonds to pay off a fixed asset, like a new school. Everyone going into debt to make it so someone getting a degree goes less in debt? That doesn’t make a lot of sense.

    Where is the obligation on the part of the student? If Oregon taxpayers assume the bond, pay for someones education, and they take that degree and move to Florida is there really a benefit to Oregon?

    Obviously the same attends to any public funding of education, but expanding it in this manner seems a little absurd.

    How about some caveats? Like the student pays up front, and gets reimbursed on an annual basis in the form of a tax credit on their Oregon taxes?

    That eliminates two problems with one stone – Oregon gets the benefit of an educated populace, no tax credit if they move, without the costs of assuming debt.

    • DavidAppell

      Q: If Oregon taxpayers assume the bond, pay for someones education, and they take that degree and move to Florida is there really a benefit to Oregon?

      A: Yes — there won’t be quite as much stupidity coming out of Florida as would otherwise be, and that would benefit the entire galaxy.

  • mike

    I don’t know about you, but I prefer all my waiters and waitresses have at least a Master’s Degree.

  • Tim Lyman

    Wonder why our young people are accruing horrific levels of student loan debt?

    In 1980 the cost of a credit hour (in 2013 dollars) at PCC was $24 ($8 then). Anyone could afford to take classes without going into debt. Today that same credit hour (including all the BS fees) is about $100. Cost per undergraduate credit hour in 1980 at Oregon’s universities was $70 (in 2013 dollars); graduate tuition was $115 (2013 dollars) per credit hour. Today it’s $180 (with fees) and $375, respectively. That increase is not due to funding cutbacks, it’s due to administrative incompetence manifested by inflation of non-teaching staff, outrageous union contracts for those non-teaching staff, and profligate spending.

    Our college students should be descending on their institution’s administrative offices with tar, feathers, and pitchforks.

    • DavidAppell

      The dollar is worth 2.7 times less than in 1980, so these increases are in line with inflation + increased demand.

      • Appell Sauce

        He accounted for that for that. Notice how he says “in 2013 dollars” about a dozen times. Idiot.

        • DavidAppell

          My bad.

    • valley person

      Tuition has gone up as state tax support has gone down. Thank yourselves for cutting taxes,

  • DavidAppell

    “If you think education is expensive, try ignorance.”
    — Derek Bok

    • Appell Sauce

      You must be in debt up to your eyeballs

  • valley person

    The verdict is in. Oregon Catalyst and its contributors vote against any effort to help people achieve higher education.

    • DavidAppell

      A cynic might wonder if keeping them uneducated is part of their strategy….

      • valley person

        Its not a strategy. Its simply reactive. Every sign of social, environmental, or economic progress has to be stopped and reversed if possible. And since educated liberals are part of the problem, well then cut off their education allowance.

    • DavidAppell

      “It’s also true that young college graduates are somewhat more likely to identify as liberal and to hold more liberal attitudes on social issues than their non-college-educated peers.”
      — Neil Gross, NY Times 3/3/12

  • Tim Lyman

    The proposed solution is to continue throwing money at a broken system. The first question we have to answer is “why does college cost 3-4 times what it did thirty years ago?” Until we know this, we cannot begin to formulate an effective solution.

    While I do not know, and am only guessing, I suspect it comes down to a few issues:

    – The explosion in the number of non-teaching administrative staff

    – Overly generous compensation packages for non-teaching staff

    – Vanity building projects

    – Departments that owe their existence solely to “me too” political correctness, not to student demand.

    – University Studies departments (as in they should not exist)

    – Crony appointments – PSU’s Urban Studies department is full of former politicians and friends of politicians who provide no value to students, but have A+ benefit packages and offices at students’ expense. PSU’s Hatfield School of Government is the same thing on a smaller scale with higher profile has beens. OSU and U of O have similar ‘slush’ departments. U of O has the Labor and Education Research Center, basically a student subsidized think tank and training center for Oregon unions.

    One thing I do know is that it is not going into professors’ salaries. PCC instructors get paid crap. PSU professors get paid crap. U of O profs do OK, Don’t know about OSU.

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