Rent Seeking, Runaway Higher Ed Costs, and the Middle-Class Squeeze

Source: “Update on Higher Education Affordability”

by James A. Bacon

I don’t know what’s going to happen to Tony Maggio, a fiscal analyst with the House Appropriations Committee since 2001, when Democrats take control of the General Assembly. I wouldn’t be surprised if the new leadership finds his analysis, such as the graph above, to be highly inconvenient.

That graph shows the history of tuition & fees at Virginia’s public four-year institutions for undergraduate, in-state (I/S) students. It is inconvenient because it clearly shows how cuts to state support for higher education account for only a small portion of the increasing unaffordability of higher education. As such, the analysis undermines the argument — that cuts to state support are mainly to blame for higher college costs — advanced by a favorite Democratic Party constituency.

The graph appears in a PowerPoint presentation, “Update on Higher Education Affordability,” that Maggio made during the House Appropriations Committee retreat earlier this week.  That PowerPoint also shows how higher-ed spending, not cuts in state support, is driving the cost increases.

Instructional spending per student grew by about 67% over the 15 years covered, about double the rate of inflation. Spending on academic support increased 68%, on institutional support by 80%, on student services by 93%, and on buildings, facilities and maintenance by an astounding 97%. Overall E&G (educational and general) spending increased 77%.

Another perspective: Compared to the 50 states, Virginia ranked 31st in 2004 in total spending per full-time-equivalent student. By 2018, spending per FTE student had increased to 21st highest in the country.

To counteract rising tuition, the state has significantly increased financial aid — about 211% over the 15-year period analyzed compared to 36% inflation. Needless to say, financial aid goes overwhelmingly to less affluent students. Maggio doesn’t say this, but the implication is clear: Students from middle-class students are getting the shaft. They pay more in tuition, fees, room, and board but get little of the financial aid.

Virginia colleges have done some things to improve efficiency in certain areas, Maggio says:

  • Energy management
  • Business services
  • Purchasing consortia

But they may need to look at academic areas more closely, he suggests.

  • Course loads / class size
  • Adjunct faculty
  • Expanded use of online
  • Course offerings / program review
  • Departmental mergers

In addition to highlighting some existing priorities — reducing time to complete degrees, expanding alternative pathways, increasing use of community colleges — Maggio raises the issue of “right-sizing” institutions, not something we’re likely to hear from the institutions themselves.

Bacon’s bottom line: Pair this post with the previous one about runaway medical insurance costs. Virginia public policy affecting two of the biggest expenses in the middle-class family budget — health care and college — transfers massive wealth from the middle class to the special interests (hospitals, insurers, doctors, college administrators, professors) and the poor.

It’s to be expected that Democrats will do their best to obscure this reality. What’s shocking is how Republicans have failed to exploit it. While fixating on taxes (a legitimate issue but only a small part of the middle class’s plight) and such ephemera as gun control laws (which would marginally curtail the rights of gun owners), the GOP looks on ineffectually while the middle class is plundered.

I have no idea what fate awaits Maggio — I’ll be honest, I have no idea how these things work — but it won’t surprise me if his new House Appropriations Committee overlords replace him with an analyst more sympathetic to the Democrats’ way of thinking. That would be a true loss, for Virginians would be even more in the dark about what’s happening in public higher education than they are today.

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13 responses to “Rent Seeking, Runaway Higher Ed Costs, and the Middle-Class Squeeze

  1. Didn’t the GOP have a bunch of years when they were in charge to “fix” these problems?

    They didn’t fix anything so now it’s the Dems fault?

    😉

  2. I have not seen much of a partisan angle on this, and doubt any of the incoming Democratic leaders would dispute the staff analysis. The “blame the lack of state support” narrative has been fed by the schools themselves, and their allies on SCHEV, while the data have long shown that the growing costs are mostly to blame (with the eroding state support sharing the blame.)

    The big takeaway from Tony’s report I heard was that the living costs (room, board, non-educational mandatory fees) now represent a larger share of the total cost of attendance than the tuition and educational fees do. It is what he calls the “Club Ed” lifestyle costs which are contributing most to the debt.

    And Larry, the GOP did lead this year’s effort to impose a freeze on tuition increases. But both sides were happy to take credit for it.

    Here’s a link to the PPT: http://hac.virginia.gov/Committee/files/2019/11-19-19%20Retreat/VI%20-%20Update%20on%20Higher%20Education%20Affordability%20PRINT%20and%20WEB%20ver.pdf

  3. re: ” And Larry, the GOP did lead this year’s effort to impose a freeze on tuition increases. ”

    Oh they did indeed but folks like Bacon still want to beat that dead horse :

    ” The big takeaway from Tony’s report I heard was that the living costs (room, board, non-educational mandatory fees) now represent a larger share of the total cost of attendance than the tuition and educational fees do. It is what he calls the “Club Ed” lifestyle costs which are contributing most to the debt.”

    AND – now that the Dems are in charge – it’s OF COURSE – THEIR FAULT!

    right?

    I mean after a while this gets to be verbal taffy… right?

    The TRUTH – tuition has not gone up that much and THAT’s the part that the State does fund…

    but as I said before – the blue plate special on BR sometimes is the Conflation Special!

    So what exactly are the schools supposed to do about room and board and similar if they are in competition with other Higher Ed – and the customer wants the upscale amenities – AND they are willing to go into decades-long debt to pay for it – and ……… it’s Higher Eds fault… good Gawd O’mighty!

  4. I agree with Steve. Most of the public anger has been aimed at tuition increases, but it has been the increases in other areas that have been the major drivers of the increase in the cost of a college education. A large part of the blame can be assigned to the “Club Ed” mentality in which dining halls offer myriad choices of cuisines, ranging from pizza to Thai, served up by national caterers, such as Marriott. Then there are the housing units, with single rooms in clusters, each with kitchenettes and common areas. Supposedly, the modern students demand these amenities and the higher ed institutions feel they must provide them in order to be competitive.

    Another cost driver has been the hidden, mandatory fees. A large component of those fees is the debt service for the multitude of non-academic buildings constructed by higher ed in the past couple of decades. Two examples from this year’s batch of capital submissions can serve to illustrate the types of facilities involved. Virginia Tech has requested authorization to issue $31 million in bonds to construct a Corps Leadership and Military Science Building. Debt service on those bonds would be partially paid through a $250 annual cadet facility fee. William and Mary wants to issue $55 million in bonds to renovate the Kaplan Arena and Construct a Sports Performance Center. The college says that it will use donations to service the debt. To the extent that donations fall short, the college would turn to student fees “in order to make these modifications to improve the student experience.”

  5. What is the basis for the assertion that students from middle class families get “little of the financial aid”? I guess it depends on how one defines “middle class”. Defining this term is sort of like the children of Lake Wobegon: everyone thinks he is in the middle class.

  6. A big problem with university funding is that no-one wants to pay for the lights. Universities once relied on states to pay for more general operations (See Pew Report below). As state dollars shrunk, universities shifted more operating costs to students. It was not possible to tap federal funds, because Uncle Sam earmarks money for specific people or purposes (mainly research.) Another problem is that it’s expensive to provide a valuable education. Colleges are increasingly committed to student graduation, job placement, hands-on learning, and serving disadvantaged students. These commitments are, in my opinion, awesome, but cost much more than packing kids in a lecture hall (as was common in 2004). Then there’s the rising cost of health care for faculty/ staff/ students… Comparing education ten years ago today is a bit of an apples-to-oranges scenario. At the same time, the topic is extremely relevant. We need to find a better way to help all Virginians to have an affordable education. I will be financing my own well into my 50’s.

    • You should add to your excellent list another factor: credential inflation in the workplace. It simply did not used to be the case that one needed an advanced degree acquired through additional debt to get a decent first job, let alone a decent career. Now even a PHd won’t always cut it.

    • Dick says:
      “Another cost driver has been the hidden, mandatory fees. A large component of those fees is the debt service for the multitude of non-academic buildings constructed by higher ed in the past couple of decades …”

      Yes, the madness of UVA costs explosions serving only those running their Ivory Towers has only just begun. See UVa. president James Ryan’s wild spending that extends far as the eye can see beyond his own $10,000,000.oo+ house renovation:

      https://illimitable.virginia.edu/construction-on-grounds/?utm_source=UVAThisMonth&utm_medium=email&utm_campaign=UVAThisMonth_11-19

      • If ever you had any doubt that the exploding costs of higher education were going to end any time soon, without strong intervention by those outside a thoroughly corrupt systems, please read carefully UVa. President Jame’s Ryan’s new plans for construction at UVa., including his $10,000,000.00++ renovation of his own house there, which he calls a small project on his remarkable list with all of its grandiose, and faddish descriptions and details.

        https://illimitable.virginia.edu/construction-on-grounds/?utm_source=UVAThisMonth&utm_medium=email&utm_campaign=UVAThisMonth_11-19

        In reviewing these plans, note how little of these vast expenditures by UVa. actually go to educating students. Here we find instead massive mission creep to enrich the institution at the great cost of students whose futures now are severely hobbled by these explosive costs of their higher education.

        The damage nationwide is alarming. Whole generations now have to postpone their getting married and buying their own homes. Many kids who attend many institutions of higher learning now are losing the financial ability to ever be able to afford those essential steps that are critical to their future and to that of our nation.

        Higher education is now destroying our children’s future while grossly violating its sacred obligation to empower their future. This is now plain to see all around us.

  7. While agreeing generally with the post, I could not but laugh at . . .

    “While fixating on taxes (a legitimate issue but only a small part of the middle class’s plight) and such ephemera as gun control laws (which would marginally curtail the rights of gun owners),”

    . . . ah, well if it is only a MARGINAL curtail of my rights

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