12.12.07

A LAYMAN CONTEMPLATES REGRESSIVE TRANSFERS.

Any resource allocation involves trade-offs.
When we look at Florida’s flagship schools, we find that most students come from middle-class or affluent families. According to an article in the St. Petersburg Times (Feb. 5, 2007) a “voluntary survey” in 2004 reported that the median family income of in-state freshmen at the University of Florida was between $95,000 and $100,000 – many families earned more than $150,000. Furthermore, said the Times, 95 percent of in-state freshmen have Bright Futures scholarships, which cover a large portion of their tuition, sometimes all of it. (Under the new law, however, Bright Futures scholarships will not cover the tuition increases, except for low-income students.)

The median family income in Florida was $45,625 in 2004. And, according to the U.S. Census, 25 per cent of the adults in Florida have college degrees.

Putting these facts together reveals that many taxpayers who never went to college – welders and retail clerks and construction workers -- are paying to send students to college, even students who come from families earning much more than they do.
Perhaps the proper role of the government is to make possible the conditions under which people might prosper, though it might smell of picking winners and it does involve subsidies to the middle class and the well-to-do.

On one hand, I understand the regressive transfer argument. On the other hand, I benefitted by the help of taxpayers, back when one could earn enough money on a full-time summer job and a half-time commissary job during the school year to make tuition, books, and the dorm bill. Beyond that, perhaps the state subsidies induce some people to substitute away from those fifty claimants to the best 20.

There's also a reason we consider the deadweight losses of prices that differ from marginal cost.
A $20,000 loan for a student who doesn’t finish college is another story, however, and that brings us to another reason why low tuition may not be good public policy. Many students in the Florida university system don’t finish college. Although the board of governors boasts that its 57 per cent overall rate is better than many state university systems, graduation rates at the 11 state university institutions vary dramatically. The six-year graduation rate for Florida International is 44.8 per cent; for University of South Florida, 46 percent; and for the University of Western Florida, 37.6 percent. (Rates vary slightly depending on which year one is using,)

Pulling up the average are the University of Florida’s 76.6 percent rate and Florida State’s 61.9 percent. Yet are even these rates all that impressive? Again, consider that the taxpayer is funding about two-thirds of the cost, maybe more, for each student who doesn’t graduate. Although some students may benefit from taking courses even though they don’t graduate, think about the buildings that are built and the teachers who are hired in order to educate students who never get a degree.
The passage is a jumble of points. Spare a moment or two to consider how demoralized some faculty might be that they are engaged in remedial studies, and that much of the work might devolve to freeway flyers because that looks more productive and cost-effective.

Perhaps the state gets what it pays for.
Why are graduation rates so poor? Ironically, low tuition may be a contributing factor. With tuition costing around $3,400 per year, students can drift – take a few courses, stop and work awhile, then go back to school, puttering along. Students who really shouldn’t be in college because they lack either the motivation or the ability are seduced into going by relatively low tuition and the availability of aid that they don’t have to pay for until they leave school.

Indeed, experts are becoming concerned about the number of students attending college who don’t really want to learn. Peter Sacks, who returned to college as an adult and wrote about what he saw in Generation X Goes to College, found “a generation of students who had become increasingly disengaged from anything resembling an intellectual life.”
Thus my continued focus on the wrong kind of excess capacity. Interesting. The Florida system keeps turning up. The essayist, however, changes the subject.
Low tuition poses problems for students in another way. It changes the incentives of university administrators. Forced to seek most of their operating funds from the state legislature and the federal government, public universities do not make the needs of the student the highest priority.
To some extent, those closed class hassles are the Washington Monument Syndrome at work. I keep alerting Northern Illinois students that the administration is starving enrollment-impacted departments of resources in the hopes that students and their parents will put more pressure on the legislature to provide more money. The best the essayist can do, however, is disregard, completely, the regressive transfer argument with which the essay began.
There is evidence already that student instruction is declining in importance. Economist Richard Vedder, in his [slapdash] book Going Broke by Degree, uses federal statistics to point out that the proportion of public universities’ spending going to instruction has fallen over the past thirty years. During the 1976-77 academic year, about 40 per cent of public university spending was devoted to instruction. In 1999-2000, that figure had fallen to 34 per cent.
Wait a minute, isn't that in the interest of those welders and retail clerks? The essayist suggests that the increased spending is going to buildings and research centers (what, no mention of student affairs or weight rooms or climbing walls?) in a variation on the Navy's love for aircraft carriers and lots of flag officers to command them. The essay, however, returns to its main theme, suggesting recognition of the benefit principle in setting tuition would encourage favorable self-selection among students and greater effort in teaching by the faculty.

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