Monday, May 9, 2011

A better business model than the shell game

It doesn't have to be a full-on, for-profit business model, it just has to be better than the current shell game. Inside Higher Ed reports that a number of state governments took stimulus money in 2009 and poured it into higher education, while actually cutting higher ed budgets. And those cuts are going to be exposed very soon.

The stimulus package "opened up the ability for states to reallocate dollars away from education and mask it with federal money." Why did they do this? Because overall budgets were crunched and the feds were offering windfalls for education. It seemed good to state lawmakers to take their own local tax revenues and redirect them into budget areas that weren't being so lavishly supported by Washington. A shell game? Robbing Peter to pay Paul? Call it what you will, but don't call it a sound business plan.

I suppose it's barking up the wrong tree, or perhaps the wrong tower, to make the modest suggestion that universities (and state legislatures) might examine their education revenues and plan ways to increase them without relying so heavily on taxpayers' dwindling dollars. I understand the monumental nature of this suggestion, but I also know that there are places to start. Like, perhaps going to online options that can actually compete with the online, for-profit brands.

After all, the for-profit schools have managed to do well enough with a model that creates a positive cushion between expenses and income, even while growing. Yes, growing! The state schools (surprise) lose money on every student, so when their budgets are cut, they have to consider reducing enrollments. Unlike anything at all in the private sector, the solution is not more paying customers--it's fewer. Think about that a moment, and take it to its logical extreme: State schools would be at their financial best if they had no students at all. Amazing, but unfortunately, quite true.

Any business model improvement would be a positive one for the university system, and for our economy, and for our wallets as taxpayers. As it is, some mad scrambles are ahead for many university systems. Maybe someone, some brave soul somewhere within academia, will think about the free market as a possible solution. And if not, maybe a legislator or two will speak up?

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