Freedom in public universities comes with private money

Public universities such as Portland State are naturally accountable to their primary source of revenue: governments both state and local, whereas private institutions are mainly accountable to private donors and tuition-payers. As tuition in public universities continues to rise as a percentage of revenue, public universities are essentially becoming more privatized.

If, though, as proponents have said, this is a natural, unstoppable force, one the best ways to keep public universities affordable is to see as much feasible deregulation as possible.

Again, as institutions accountable to the public, regulations naturally make sense. For instance, in making financial aid decisions, Portland State must diligently fill out federal reports, ensuring the intended people are recipients of aid. Dee Wendler, Portland State’s associate vice president for finance, explains that extensive reporting is ultimately a function of showing that Portland State is a good steward of public money.

Federal and state grant research money also comes with its own set of regulations, which Wendler describes as the “layers of an onion,” as PSU must meet several levels of requirements in carrying out research. If research requires faculty to travel, or equipment to be purchased, these things have to be signed off at not only federal levels, but also several stipulations under Oregon law must be met. And if PSU can finally do the desired research under the leftover budget, it has the allowance to.

Some may see this as simply the quid pro quo in accepting public money, but some also have to admit that the requirements eat research money. Additionally, universities are under audit by the Department of Education, to again ensure proper use of public money.

The good news is that there are places that have stood for deregulation. The Oregon Senate bill 271, the Higher Efficiency Act, in part allowed Oregon universities to make purchases under $25,000 without state approval, and purchases from $25,000-$100,000 with only three quotes, in addition to freeing up universities to make other autonomous spending decisions.

Wendler told me that as a result, while individual purchases may not always be the cheapest available, the savings comes in the form of freeing up university personnel, which is the most expensive cost.

In fact, Dr. Jay Kenton, vice chancellor for Finance and Administration of the Oregon University System, says, “After [the bill] was passed, OUS was asked to report on savings achieved.

In that report, OUS noted savings in the millions of dollars annually,” and summarizes its effect saying the bill, “provided the impetus for OUS and its member institutions to re-engineer its business practices resulting in significant savings by reducing the number of approvals and other check-offs needed.” This type of bill is definitely a success for university spending freedom.

Likewise, Katharine C. Lyall and Kathleen R. Sell, both state-level university system administrators, wrote an article in Change, a magazine about issues of higher education, “recognizing the need to decrease state regulation of universities in which they have an increasingly smaller stake, some states have undertaken significant experiments to restructure or re-conceive the relationship between the state and its public institutions.”

Virginia therefore recently successfully adopted new regulations that allow “greater operating autonomy in exchange for meeting specified state performance goals.”

It seems that the more competent administrators and departments have hands free from government, the better.

There is one catch though: Wendler told me that a benefit of submitting to government regulation is the proof it gives to potential donors that PSU meets certain standards.

MSN columnist Tamim Ansary says that much general university spending (i.e. financial aid, high faculty numbers and athletics) is aimed at increasing private giving, and hence there is little chance of convincing administrators and presidents to make cuts to these high-cost items.

I’m not as pessimistic. First, as the pendulum swings toward private support of public universities, I think donors will recognize a university’s success in other ways than spending sprees, and hopefully more than meeting a host of federal standards.

Second, PSU, Wendler says, has managed to keep personnel levels relatively low, compared to doubling the student body in the last 20 years. It is this culture of thrift that will prevent massive tuition hikes, to PSU’s credit.

And the more private rather than government funding PSU and other public universities can receive, the more continued freedom universities will have. The Miller Foundation sustainability grant, for example, while limited in scope, still allows PSU great freedom to use the matching funds and suit its particular needs. This freedom aids a more efficient use of the money, and makes for less reliance on government oversight.

Administrators and department heads are different from bureaucracy; the more freedom given to trusted administrators to decide how money should be spent, the cheaper college will be, while the more regulations and limitations are heaped on universities via government money, the more it will continue to cost.

So even if you are pro regulation, do you trust the government to spend money at a local level more wisely, or administrators and faculty who are in the thick of university business? In this instance, going with the administrators and faculty yields the best results.