I have long subscribed to the view that there's an element of regressive transfer in state subsidies to universities, particularly the flagship campuses.  Perhaps, though, as stingy legislatures give admissions offices reasons to chase out-of-state students who pay full freight, the regressive element diminishes.  Two researchers, writing under the imprimatur of Brookings, offer confirmation.  The regressive element, ceteris paribus, ought emerge at the state flagship universities.
The basic argument [American Enterprise's Jason] Delisle and [New America's Kim] Dancy sought to test starts with the idea that states shell out larger appropriations to their top public universities than they do to their less competitive institutions that enroll higher levels of low-income students. Those universities in turn enroll more students from high-income families, and they spend more per student. At the same time, less selective schools draw a higher percentage of their students from lower-income backgrounds while receiving less in appropriations and spending less per student.
The value proposition the flagships have offered out-of-state students, a price break compared to the Ivies, appears to be working to the benefit of lower-income, in-state students.
High-income students are much more likely to attend out-of-state institutions, the report said. In doing so, many forgo government subsidies. Students from the wealthiest backgrounds actually averaged a negative subsidy, meaning on average they paid more tuition than universities spent on education services, even after factoring in scholarships and aid.

“What you have is essentially rich students opting to pay three times as much as the in-state rate,” Delisle said. “That frees up a bunch of resources for universities to keep tuition low for in-state students.”
Three times the in-state rate might still be less than the private university rate. The onus remains, however, on the flagship universities to offer comparable intellectual challenges in order for the employers to come to the job fairs and the graduate and professional schools, to the extend that such things matter any more, to accept their graduates.

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