State government puts taxpayers on the hook for college tuition fees, tuition fees go up

Last week I wrote about how, faced with declining college enrollments after decades of above-inflation increases in college tuition fees, colleges ought to be cutting their fees. I also wrote about how the state government, with its new “North Star Promise” program, was going to help them avoid doing that by having the taxpayer pick up the tab.

With this guarantee in their pocket — the state government is effectively using taxpayer dollars to underwrite college enrollments — colleges are freed from the pressure to cut their prices in response to declining demand. Indeed, they can even continue to crank them up: it’s the taxpayer who is paying for it, after all.

Six days after I wrote that, the Star Tribune reported:

University of Minnesota students will pay more in tuition and fees next school year under a budget approved Monday by the system’s regents.

Undergraduate students at the university’s Twin Cities and Rochester campuses face 3.5% tuition increases, while students at Crookston, Duluth and Morris will be charged 1% more.

Many in-state students attending the Twin Cities campus, which has the highest enrollment, can expect tuition to rise by about $500 to $14,496.

Board Chair Janie Mayeron called the system’s $4.5 billion budget “difficult and complex,” noting that state funding accounts for a far smaller portion of the university’s revenue than it did when she was a student about 50 years ago. “Obviously, much of this is falling on students,” she said.

We aren’t told whether state funding is a smaller share of revenue because it has fallen or because revenue from other sources has increased. Adjusting state Higher Education spending for inflation, we see that, per student, Minnesota’s state government higher education spending has risen by 14% in real terms since 2010, as Figure 1 shows. If Minnesota’s colleges are having a hard time making ends meet, it isn’t because the state’s taxpayers aren’t coughing up enough cash.

Figure 1: Minnesota higher education spending per student, 2022 $

It would be interesting to see the spending side of the ledger. Per student state government funding continues to rise, is going to rise further, and yet it still isn’t enough to cover the college’s expenses. The Strib reports that college administrators are “also calling on many departments within the university to take steps to reduce their expenses.” But:

In public meetings, written comments and protests, some students and faculty members raised concerns about proposed changes at the College of Liberal Arts, saying they worried in particular about cuts to programs focusing on gender and ethnic studies and American Indian studies.

This goes back to the point I made last week about some majors being more remunerative than others. Majors like gender and ethnic studies are not going to translate into a particularly high salary after graduation. Put simply, the market, which is just individuals in the aggregate, doesn’t value the skills imparted by these courses all that highly. So, at the margin, these are the course more likely to be ditched by cost-conscious students and cut by cost-conscious colleges. They only way they can be maintained at the current level is by making students less conscious of the cost and one way to do that is to have the taxpayer cover it. When I wrote that taxpayer funded tuition is a bailout to colleges, I should, perhaps, have stressed that it is a bailout to some specific parts of those colleges.

Of course, not all students choose their major based on post-graduation remuneration. Some choose their course because they are passionately interested in it, for example. While this is to be appreciated, it is not clear why the taxpayer should underwrite what is, essentially, a lifestyle choice.