Michigan needs a better university funding playbook

James Hohman
| Detroit news

Residents compete against each other in Saturday’s football game between Michigan State and the University of Michigan. Since everyone knows the other side’s fan, the rivalry is more chivalrous than the others. We will have to live with opposition fans to at least be neighbors.

But people should be good to their opponents for another reason. As a Michigan resident, you own both schools.

Universities are state institutions owned by the people and operating for their benefit. And we will all vote for their boards a few weeks after the game.

Under public ownership, even die-hard Spartans will be forced to donate to the University of Michigan and vice versa. Legislators tax residents and give both schools hundreds of millions of dollars.

But how much each school receives is up for debate every year. A large number of voters are green and white, and many others are maize and blue, so there needs to be pressure not to favor one university over another.

But if you look at taxpayer support, state officials absolutely love the University of Michigan. Not so much Michigan.

The latest budget provides the University of Michigan with $11,695 per year-round student. This is the highest funding per student among state universities. The statewide average is $8,451.

Michigan, on the other hand, ranks just above the state average of $8,475.

This averages taxpayer support over the number of residents each university educates. However, lawmakers do not give money to state universities based on the number of Michigan students attending them. They give it based on politics.

Still, the University of Michigan comes out on top no matter how you slice it. It will receive $424.7 million in the latest budget, or about $106 per Michigan household. MSU receives $326.8 million, or $82 per household. 13 other state universities shared $932.3 million, or $233 per household.

The legislature debates taxpayer payments to universities every year. Universities ask for more money, and lawmakers decide whether to give it to them. There are several factors that determine how much lawmakers allow.

The most important of these is the state’s fiscal trends. Lawmakers don’t have money to give to universities without taxing residents first. The money comes largely from state income and sales taxes, so the state has more money to give to universities when residents earn more and buy more.

University results are irrelevant. It doesn’t matter whether they charge students higher tuition fees, whether students obtain degrees and well-paying jobs after graduation, whether they master ancient Greek, contribute to the academic literature, make scientific discoveries, or achieve any other academic achievement.

It doesn’t even matter how many Michiganders attend that school – that’s supposedly the thing lawmakers want to encourage.

Even the school’s popularity among residents does not translate into greater funding.

It’s unfair, doesn’t provide accountability for good results, and is a waste of money.

There is a better way. Thirteen states use admissions-based formulas to determine how much taxpayer money state universities receive. States can encourage schools to award higher-quality degrees at lower costs.

Changing a policy-based financing system to one that incentivizes better performance will require political will on the part of elected officials.

Lawmakers often take small steps toward more equitable financing. They sometimes use state funds to encourage lower tuition increases. The new scholarship program funds students directly and in equal amounts, rather than through unfair state subsidies to universities.

I will suggest one more small change. People are interested in football. Set aside state funds in a separate investment account, then pay them out to the next state college to win a national championship.

Sounds stupid? This is. But contrast this with the arbitrary current policies that only encourage universities to lobby lawmakers for more funding. Residents are not interested in the level of lobbying at universities. But they care about the national soccer championship. It would be a policy that encourages people to do something they want.

The competition between countries shows that people want fair competition between schools. A funding formula that encourages residents to meet expectations from universities would be better than what lawmakers are currently doing.

James M. Hohman is director of fiscal policy at the Mackinac Center for Public Policy.