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Since its
founding in 1817, the University of Michigan has
attained a global reputation as an academic and
research powerhouse, attracting some of the world’s
brightest students and top faculty. Its ranking
among other universities, however, has dropped
sharply in recent years, and the school has seen top
faculty lured away by more generous offers from
private universities.
One way to
reverse this trend, and perhaps to beat the private
competition, is for the University of Michigan to go
private itself. The idea isn’t as drastic as it may
sound. While the amount of state money going to the
University is substantial — some $320 million per
year — this amounts to less than 8 percent of the
2004 operating budget of the university and its
health system. In fact, James Duderstadt, U of M’s
president emeritus, has described the school as “a
privately supported public university.”
Were U of
M to go private, taxpayers would save that $320
million per year, plus millions in construction
costs. Capital outlay expenditures by the state for
the Ann Arbor campus have totaled $160 million since
1993.
Converting
the university to private status would place
Michigan
on the forefront of what appears to be a developing
trend. In December 2003, South Carolina gave all 13
of its universities permission to go private;
Colorado’s university system is preparing a contingency plan to
convert all four of its universities to private
status in 2009; and the trustees of
Michigan’s own Lake
Superior State University have discussed the idea.
Though it
would require a change in Michigan’s Constitution,
privatization would liberate U of M from many of its
political hassles with Lansing. State-sponsored
universities nationwide are coping with deep cuts in
state subsidies and find it difficult to plan not
knowing what state governments are going to do.
During 2003, the Granholm administration cut state
university general operations support by $193
million.
At the
same time, private universities have been poaching
professorial talent from the best public
universities. In the past decade, New York
University, a private institution, has spent close
to $1 billion to attract star faculty from other
institutions and establish prestigious research
institutes.
Both of
these factors may be contributing to U of M’s recent
decline in rankings among other universities and
colleges. In 1987, U of M was ranked the No. 8
national university by U.S. News & World Report,
ahead of such schools as Columbia and the
Massachusetts Institute of Technology. In 2003, and
in the same category, U of M ranks No. 25.
A
privatized University of Michigan would almost
certainly raise its tuition rates to help compensate
for the loss of state revenue, as well it should. It
is not unfair to ask those who benefit directly from
earning the highly valued U of M degree to bear a
greater burden to pay for it, especially considering
the financial background of most of the school’s
students.
A 2003
Detroit Free Press story reported that over 51
percent of the University of Michigan’s freshman
class comes from households with incomes above
$100,000 per year. Yet, only 12.7 percent of
Michigan households earn such incomes, according to
calculations using 2000 Census figures.
Tuition
hikes could actually help those students who truly
need help — by enabling the school to offer greater
outright gift aid and tuition reductions to students
from low-income families, as is often the practice
at private universities. Needy students at public
institutions currently rely more on loans and work
study programs.
A private
U of M could also strengthen its financial outlook
by selling its hospital — whose assets alone are
valued at more than $600 million, and would likely
sell for much more — and adding that revenue to its
$3.5 billion endowment. Further, campus institutions
such as the Nursing and Kinesiology schools could
continue to be taxpayer supported, under contract
with a privatized U of M.
Cuts in state support are pushing public
universities toward more private models of operation
whether they like it or not. It would show true
leadership and practical savvy if Michigan lawmakers
were to come up with a plan for making the
University of Michigan a private institution, for
the benefit of students, professors, and taxpayers
alike.
Lance J.
Weislak, a University of Michigan graduate and MBA
candidate at the University of Chicago, is an
adjunct scholar with the
Mackinac Center for Public
Policy; Michael LaFaive is director of
fiscal policy at the
Mackinac Center, a
research and educational institute headquartered in
Midland, Mich. More
information is available at
www.mackinac.org.
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