The Corner That State Universities Have Backed Themselves Into

For schools to do the right thing would be financial suicide.

Alexi Rosenfeld / Getty

Updated at 12:40 p.m. ET on August 28, 2020.

The COVID-19 disaster has come to college with startling speed. Within a week of reopening, the University of North Carolina at Chapel Hill had reported four clusters of five or more cases in two residence halls, a private apartment complex housing some students, and a fraternity, forcing the school to frantically backtrack on its plans. Michigan State was not far behind, suspending in-person classes in the face of COVID-19 concerns.*

This crisis was not only predictable; it was predicted. And yet even now, many other public universities across the country appear to be holding to the same plans, praying that the plague of COVID-19 will pass them over. Why have so many colleges, despite all the warnings, chosen to reopen anyway? To understand how they worked themselves into this impossible situation, one must look to the web of institutional and economic conditions that were slowly ruining American universities before the pandemic.

The first issue is an economic concept: Baumol’s cost disease. In an economy where productivity is increasing because of new technologies, the financial cost of providing services that cannot be made more efficient rises rapidly. The best professors can teach only so many students at once, much like the best live-show jazz musician can play only one saxophone to one audience at a time. If universities want to teach more students, they need more instructors, which drives up costs. Online courses and other self-directed learning options are not solutions. With online classes, learning outcomes often disappoint, and virtual instruction runs counter to the most important asset at a major university: personal interaction with highly qualified experts. Consequently, universities need more teachers and the cost of providing an education rises higher and higher.

This would not be fatal if not for declining state funds, which have not returned to their pre–Great Recession levels. According to a study by the Center on Budget and Policy Priorities, inflation-adjusted per-student state funding has declined in 41 states since 2008. Much of this shortfall has been made up for with higher federal funding, particularly through Pell Grants to students, along with rising tuition, especially for out-of-state and international students. While the tuition costs for in-state students have remained somewhat flat, public colleges have responded to the declining state funds by admitting more affluent out-of-state students over in-state students with more limited means. So, these funding channels are dependent on enrolling students who can pay full-freight.

This leads to another problem: the business model of education. This phrase does not mean, as one might imagine, a university’s financial plan. Rather, it refers to the efforts to impose a business-style management system on the university. One of the hallmarks of this approach is treating students as customers and competing with other universities to attract those customers.

The emphasis on enticing students to enroll has led to a focus on what universities can advertise. But how does one advertise an education, or the quality of a school’s faculty? Most students are, almost by definition, not in a position to assess a professor’s expertise. Undergraduate tour guides rarely speak to the quality of teaching they experience, especially compared with that at competitor universities they have almost certainly not attended.

What a school can advertise, through glossy pamphlets, professionally produced websites, and those iconic tours, are campus amenities: rock-climbing walls, state-of-the-art gyms, and ample dining options. University leadership, looking to compete for students, promises a fun student life, in place of an educational one. And, of course, those amenities cost money.

Students keep paying because their costs are subsidized with loans. High-school seniors turn out to be fairly poor at assessing the long-term costs and benefits of taking on debt in order to briefly enjoy campus amenities. Offer them a fun time now for money paid in the future and most will take it. This is not a slight against the current generation of college students; we were all 18 once.

But even as tuitions rise, almost none of this money is funneled back into instruction or professors. Quite to the contrary, more and more instructors are poorly paid, overworked part-time adjuncts. In 1970, more than 77 percent of university faculty were full-time instructors. Today, 46 percent of faculty are part-time adjuncts; nearly 75 percent are non-tenure-track, effectively an inversion of the old system.

While most adjuncts (including this one) work hard and are skilled teachers, teaching heavy course loads at pitiably low pay makes it difficult to offer the sort of high-quality education they would wish to provide to students. In essence, the business model of education has led university administrators to cannibalize the core thing a university is supposed to provide. At the same time, the amenities arms race and the bloated administrations that come with it impose massive fixed operational costs on the university, compensated for by charging students more to attend, often in the form of fees for all of those on-campus amenities.

Now that universities face the emergency of a pandemic, they are stuck. Calling a halt to on-campus operations and going totally online, thereby waiving on-campus fees, was the right, moral choice. And yet it was the option that this reckless system could never take, because those inflated fees were needed to pay the fixed costs of the business model. Without sufficient state funds, universities are reliant on federal grant money, which requires students to enroll. If online courses drive away even a fraction of those students, the house of cards will collapse. For the university to do the right thing would be financial suicide.

This problem doesn’t exist just for big state schools. Even smaller schools are caught in the trap, because they are forced to compete in the ecosystem created by the state schools. What is to be done?

The first step is to abandon the business model of education. States need to be willing to reverse the endless budget cuts that have left universities so reliant on stratospheric tuition. Any new funds, however, need to be flagged for instructional budgets and conditioned on tenure-track hires, not more rock-climbing walls, further adjunctification, or empty-chair administrators.

States should also move to cap tuition. Indexing the cap against a mix of inflation, instructional costs, and teacher pay (counted as an average per credit so that it fully reflects the pay of adjuncts and graduate instructors, not merely tenure-track faculty) might serve to tether tuition to the real cost of an education. That way, if universities do want to raise tuition, they will need to reinvest that money into their operational mission of education.

It is too late to apply these solutions to the current pandemic. That damage is done. Universities must give up the false hope of reopening and for now shift to online instruction. Enrollments will likely fall. Some schools will absorb the blow; some will close forever. But putting our 50-state university systems back on firm footing is necessary both to keep college affordable in normal years and to keep the systems robust enough to weather the next crisis.

* An earlier version of this article mischaracterized why Michigan State suspended in-person classes.