How Not to Expand Access to College (or further the General Welfare)

Not a Federal Agency (Yet)

In a recent post on BloombergView, Professor Stephen Carter critiques plans by former Secretary of State Hillary Clinton and Vermont Senator Bernie Sanders to reduce the price that some citizens pay at some colleges and universities.  As Carter explains, both plans seek to reduce the costs of attending public colleges and universities, thereby increasing access to higher education and reducing the debt burdens of those who matriculate.  The more ambitious (and more expensive) Sanders plan would provide states with federal grants of $47 billion annually on the condition that such states: (1) increase their yearly spending on higher education by $23 billion and (2) reduce tuition and fees to zero for all students, including those from wealthy families. The more modest Clinton plan would cost a mere $350 Billion over ten years and provide additional aid, in the form of grants, to students who are unable to pay their own way, thereby reducing the costs that such individuals must incur to attend public colleges and universities.  The plan would couple such aid with a requirement that recipients work 10 hours per week.  While the Sanders plan focuses solely on public universities, the Clinton plan sets aside funds to support a small number of private institutions that serve numerous low-income students.  To adopt such plans, a future Congress would have to exercise the power "[t]o lay and collect taxes . . . . to pay the Debts and provide for the common Defense and general Welfare of the United States."  See U.S. Constitution, Article I, § 8.

Professor Carter begins his critique by questioning "the underlying assumption that college is too expensive."  Among other things he notes that a college education is an investment in human capital, and that, for those who complete college, the median return on such investments has "outstripped the rising cost." (See here for a prior elaboration of this point on this blog.) The real problem, Carter says, is that many students who pay such tuition, perhaps taking on debt to do so, never graduate and are thus unable to realize this return. Indeed, as previously explained on this blog, many state flagship universities have four year graduation rates of 25 percent or lower.    Even if college is too costly, Professor Carter says, both plans may well exacerbate the problem, by increasing the demand for such education and thus further increasing college costs.  Carter also suggests that, if enacted, either plan may include implicit price controls to combat increased costs, controls that Carter sagely considers counter-productive.  Indeed, a summary of the Sanders Plan expressly provides that state institutions would have to "meet a number of requirements designed to protect students, ensure quality and reduce ballooning costs," while simultaneously (and inconsistently) "reduc[ing] their reliance on low-paid adjunct faculty."  Secretary Clinton's plan is a little more vague, promising simply to require schools to "control costs" while simultaneously increasing spending on programs designed to increase graduation rates.

Professor Carter is right to be skeptical of these plans, particularly their motivating assumption that public colleges (the target of these proposals) are generally inaccessible to families of modest means. If anything, Carter is too kind to this assumption. After all, and as previously explained on this blog, many such institutions provide generous grant-based financial aid to low income students.  Indeed, some public colleges offer packages that are significantly more generous either the Sanders or Clinton plans, which focus on subsidizing tuition and fees while ignoring room and board.  That is, some public universities provide low income students free tuition, free fees and free room and board, allowing these students to graduate debt-free.  (See here, here, and here, for examples). Others heavily subsidize college costs, ensuring that students graduate with debt far below the actual cost and value of the education that such students receive.  (See here, here and here).   The University of Washington, for instance, has already replicated the result sought by the Sanders plan, providing low income students free tuition and fees, with the result that such students need only assume loans to cover room and board --- the type of expense students would incur whether or not they attended college.  Ditto for Arizona State, Texas A&M and Rutgers-Camden.  The University of Virginia caps student debt for in-state students at $14,000 over four years.    Some such schools also provide significant grant aid to students from middle class families.  Rutgers-Camden, for instance, provides grants equal to one half tuition and fees to students from families with incomes between $60,000 and $100,000 per year.  (See here).  Berkeley offers grant-based aid to students from families earning up to $140,000 annually.  (See here).  Various other institutions offer significant financial aid to middle class families as well.  (See here and here, for instance).

To be sure, students from wealthy families do not qualify for such aid because their families' income and/or assets exceed relevant thresholds.  Such students must pay full tuition and fees plus the cost of room and board.  The Clinton Plan would do nothing to help these individuals, and this omission from her plan is to be commended.  As W. Taylor Reveley III, President of the College of William and Mary recently put it, when speaking of tuition and fees at William and Mary (a public institution): "[I]f you come from a family who can afford to pay full freight, you are still getting excellent value for one of the best undergraduate educations in the world.”  Reveley of course is absolutely correct: tuition and fees at William and Mary, ranked 34th among national universities according to U.S. News, is $16,919, while tuition and fees at the University of Virginia, ranked 26th, is $14,526. By contrast, Tufts (27th), Boston College (30th) and Brandeis (34th) charge triple these amounts or more. Nonetheless, the Sanders plan would shift the cost of educating wealthy individuals at public universities entirely to taxpayers, while providing no additional assistance to students who attend more costly private institutions.  So far as this blogger is aware, Senator Sanders has not explained why American taxpayers must foot the bill so wealthy children can attend public universities for free.

In sum, the current landscape of higher education pricing for students of modest means hardly justifies centralized intervention and a resulting one-sized fits all solution that both candidates advocate to some degree.  Indeed, if enacted, the Sanders plan in particular risks preempting state institutions from offering free room and board and thus ensuring that students graduate debt free, as some schools currently do.  After all, schools generally rely upon tuition revenue to fund part of such aid, and the Sanders plan would eliminate this source of revenue.  Moreover, the Sanders Plan's ban on tuition and other forms of over-regulation that Professor Carter sagely predicts will place public institutions at a decided disadvantage vis a vis private institutions, who will be free of such federal micromanagement.   As previously explained on this blog, the decentralized nature of America's system of higher education, including competitive federalism, is its main strength.  Transforming America's public colleges and universities into quasi-federal agencies in furtherance of a new federal entitlement will undermine this strength.  If, as both candidates assume, the Nation can afford to spend many billions more each year on education, it would be far better to allocate such resources to K-12 education, preferably via a system of vouchers that would empower students and their families to exercise meaningful educational choice in a free market.  Such reform would help better prepare millions of students for college, enhance college graduation rates and do far more than either candidate's plan to advance the General Welfare.  

A Victory for Choice and Competition in North Carolina

Pro-Choice

Anti-Choice

Earlier this week the North Carolina Supreme Court struck a blow for choice and competition in K-12 Education. In Hart et al. v. State of North Carolina and Richardson et al. v. North Carolina,  the Court rejected challenges to the state's Opportunity Scholarship Program in a well-reasoned opinion by Chief Justice Martin.  Like a similar program in Washington D.C. previously discussed on this blog, the program provides financial assistance --- $4,200 per student --- to low income families who choose to enroll their children in certain private schools.  Sometimes called "vouchers," such scholarships implement  the vision of Nobel Laureate Milton Friedman, who articulated the powerful case for educational choice in his now-famous essay "The Role of Government in Education," reproduced here at the website of the Friedman Foundation for Educational Choice.

North Carolina imposes various regulatory requirements on its non-public schools.  (See here).  In addition, schools that enroll students who receive such assistance must employ nationally-recognized standardized tests annually in the third grade and afterwards to evaluate the progress of students in "grammar, reading, spelling and mathematics" and submit the results of such tests to the State's Educational Assistance Authority. ("Authority")  Such schools must also provide the parents or guardians of such students with annual progress reports, including the results of standardized tests and inform the Authority of the graduation rates of such students.  A school that enrolls 25 or more such students must report the aggregate standardized test scores of such students to the Authority, and such aggregate scores are available to the public.     Schools that enroll such students cannot discriminate based on race, color or national origin.  Moreover, the Authority must annually retain an independent research organization to assess the "learning gains or losses" of students who receive such grants as well as the "competitive effects" of the program upon the learning outcomes of students who remain in public schools.  (See N.C.G.S. Section 115C-562.1-7, found here).  

The Authority selected about 2,300 students from more than 5,500 applicants to participate in the program in its first year, at a total cost to the state of $10.8 million.

Plaintiffs, backed by the North Carolina ACLU, raised numerous objections to program.  Most notably, the plaintiffs claimed that the spending authorized by the program did not serve a "public purpose" because some of the schools in which beneficiaries enrolled are not accredited by one or more accrediting agencies and/or employed some teachers that are not certified.  See North Carolina Constitution Article V, Section 2(1) ("The power of taxation shall be exercised in a just and equitable manner, for public purposes only, and shall never be surrendered, suspended, or contracted away.") Plaintiffs also made a related claim that the program failed to "guard and maintain" the privilege of education guaranteed by Article I, Section 15 of the state constitution.  Indeed, a lower court had ruled that the "General Assembly fails the children of North Carolina when they are sent with taxpayer money to private schools that have no legal obligation to teach them anything." (Emphasis added).

The North Carolina Supreme Court properly rejected these and other claims.  As explained above, the Opportunity Scholarship Program contains numerous features, including annual testing, reports of the results to the state, and annual progress reports to parents and reports on graduation rates that enhance the accountability of private schools to families and the public.  The most important such mechanism, however, is market competition, the institution on which free societies ordinarily rely to ensure the production of high quality products and services.  Such competition, bolstered by background rules of contract and tort law, includes rivalry among various private schools as well as rivalry between private schools and their public counterparts, including the State's 147 Public Charter Schools.  Contrary to the implication of the district court's reasoning quoted above, no North Carolina children "are sent" by the state to a private school. Instead, parents or guardians voluntarily choose such schools over the free public school, and any public charter school, the child is entitled to attend.  Many middle class families already have sufficient financial resources to choose private schools for their children, and the U.S. Constitution guarantees them that right.  The Opportunity Scholarship Program increases the number of competitive options available to low income families, thereby facilitating their participation in the same educational markets, and attendance at the same schools, that middle class families have enjoyed for decades. Absent some substantial market failure, and none is apparent, there is no reason to believe that educational outcomes will suffer.  Organizations such as the ACLU, which purports to stand for "choice" and even invokes the Statue of Liberty on its logo, would do well to reconsider prior opposition to such programs, opposition that, when successful, entrenches anti-liberty state monopolies subsidized by the taxpayers, many of whom would prefer to send their children to private schools.

To be sure, accreditation and professional certification can sometimes improve the quality of products offered by some market actors.  Any such improvements come with countervailing costs, however. Such costs include the out-of-pocket cost of compliance, the cost of monitoring such compliance, the reduction in innovation resulting from regulatory mandates, and the exclusion of otherwise qualified individuals from the occupation in question.  See generally Milton Friedman, Capitalism and Freedom, Ch. 9 (1962).  At the same time, many markets for complex products function quite well without such governmental intrusion.   No certification agency decides what apps Apple will include on its latest I-Phone or whether and how Amazon will attempt to compete with Wal-Mart.  Indeed, Wake Forest University, founded in 1834, was first accredited in 1921. Davidson, founded in 1837, was first accredited in 1917.  So far as this blogger is aware, faculty who have taught at such institutions were never "certified" by any independent body.  It's hard to imagine that these institutions did not serve "public purposes" until 1921 and 1917, respectively.

Presumably the North Carolina Legislature understood the role that markets play in ensuring educational quality and took account of the costs and benefits of additional regulatory intrusion.   The legislature obviously decided that, on balance, the Opportunity Scholarship Program enhanced the public welfare by facilitating individual choice, bolstering educational competition and enhancing educational outcomes. Indeed, the State has long declined to impose stringent regulatory oversight on its private schools, trusting market competition to assure quality, and the Opportunity Scholarship Program imposes additional regulatory requirements on those schools that accept scholarship recipients.  As Chief Justice Martin eloquently explained for the Court, this determination was a quintessentially legislative judgment and, of course, subject to legislative revision as new facts about the operation of the program become available.  Hopefully the Court's decision will clear the way for an expansion of the program and thus additional reliance upon choice and competition in the provision of education in the Tar Heel State.

Mark Warner Supports Vouchers !

Mark Warner (pictured on the right), Virginia's former Governor and now junior Senator, has bucked his party and voted to revive a voucher program for D.C. School Children that many Democrats in Congress apparently want to kill. The Richmond Times-Dispatch quite rightly praises Senator Warner's vote here.

The "D.C. Opportunity Scholarship Program" provides up to $7,500 for students from families with incomes less than 185 percent of the poverty standard. More than sixty private schools participate in the program, and about 1,800 children currently receive such vouchers.

The Washington Post recently opined that Congressional opponents of vouchers have "step[ed] between 1,800 D.C. Children and a good education." The Post also concludes that these opponents won't "let fairness and the interests of low income, minority children stand in the way of their politics." Translation: politics is trumping the interests of schoolchildren who lack the means to escape a substandard school system.  Here is the Post Editorial.

One commentator has estimated that Washington D.C. spends more than $24,000 per pupil on its K-12 schools.  The same commentator estimates that the average tuition at the private schools in the District to be far less.  Here are the relevant figures for the District's private schools:

Average tuition actually paid: $11,627;

Median tuition actually paid: $10,043;

Estimated average total per pupil spending: $14,534;

Estimated median total per pupil spending: $12,534

Presumably private endowments make up the difference between tuition and actual spending at these schools.

The arguments for vouchers are powerful and, I think, irrefutable. Take food stamps as an analogy. Most Americans believe that taxpayers should feed the hungry. This obviously requires the government to raise revenue and spend the proceeds. When it comes to feeding the hungry, such spending takes the form of a food voucher -- food stamps. The government need not, however, take over the grocery stores that sell the food, the farms that produce it, the factories that package it, or the trucks or trains that transport the final product from factory to the grocery store. Instead, a free society rightly depends upon the private market, based on property and free contract, to produce and distribute such goods, subject of course to valid police power regulation, e.g., state-enforced labeling requirements and health-related inspections. Redistribution to feed the hungry is one thing. Coercive state monopoly is something else entirely. Support for the former in no way justifies the latter.

If food stamps are the right answer when it comes to feeding the hungry, why not apply the same logic to educating individuals who cannot afford to send their children to private schools? This, of course, was the approach taken by the "GI Bill," which provided vouchers to returning GIs who then applied such vouchers at the private or public University of their choice. Ditto for ROTC scholarships, which recipients may spend at any school with an ROTC program, so long as the recipient meets the school's admissions standards. No one, I hope, would have argued that the federal government should have nationalized universities after World War II to ensure that returning GIs would have sufficient educational opportunities.

Perhaps that's why so many Nobel Prize winning economists, including F.A. Hayek (pictured above-left) have supported vouchers.