Colleges Warned of a Fiscal ‘Time Bomb’

The nation’s colleges and universities could be forced to turn away half the potential student population by 2015, according to a new report that says budget shortfalls threaten to shut out the poor.

The report, “Breaking the Social Contract: The Fiscal Crisis in Higher Education,” urges far-reaching reforms for post-secondary institutions and calls for increased public funding to keep down tuition. Americans ignore these problems at their peril, the report concludes.

“What we found was a time bomb ticking under the nation’s social and economic foundations,” said Roger Benjamin, president of the Council for Aid to Education, a subsidiary of the Rand Corp., which commissioned the report.

The report is by no means the first to identify the twin problems of rising college costs and limited access to higher education. Last year, for example, the California Higher Education Policy Center identified the same crises in the Golden State, where a surge in college enrollment--dubbed “Tidal Wave II”--is expected over the next decade.

But the latest report--which took 18 top academicians, scholars and business leaders two years to complete--is national in scope and may be the most blunt assessment yet.

How big is the problem? “In our view,” write the report’s authors, “the enormous deficits facing the higher education sector in the near future are more critical than the much-publicized crisis in the Social Security system.”

How is college leadership responding? “It is floundering,” the report says.

And what if solutions are not found? “The wage disparity between the rich and the poor will become so large,” according to the report, “that it will threaten both America’s social stability and its core democratic values.”

Though it projects that the wages of college graduates will remain flat, those with less education--from “some college” to “less than high school”--are expected to drop sharply through the year 2015.

The report’s central message--that a college degree has replaced the high school diploma as the entry card into rewarding employment--is one being stressed at the highest levels of government. President Clinton has vowed to make completion of at least two years of college a common American experience.

But meeting that goal will cost big money and will boost an already burgeoning demand for a college education. College enrollment has increased sevenfold since World War II, the report noted, while operating costs have escalated and public-sector financial support has flattened. As a result, many colleges and universities have raised tuition sharply.

The report makes two central recommendations. The first: America’s political leaders must reallocate public resources and invest more public money in education.

“The nation should not be allowed to continue to drift toward educational mediocrity and the ominous levels of economic inequality,” warns the report, which says education must come first, “even if that means reducing the level of support for other public sectors.”

But that rejiggering of priorities will not occur, the report predicts, unless schools change the way they operate, undergoing the kind of restructuring and streamlining already undertaken in parts of the corporate world.

The report calls for faculty to be evaluated on productivity, creating an “incentive system” to improve performance. It also calls for accounting practices that enable colleges to analyze what sectors make and lose money and where belt-tightening might be needed.

The report also urges colleges to strive to clearly differentiate themselves to respond to the changing needs of students. Individual institutions and parts of statewide systems “should focus on their points of comparative advantage rather than all striving to become full-service campuses,” the report says.

For California’s educational leaders--including two, California State University Chancellor Barry Munitz and Santa Monica Community College President Piedad Robertson, who helped write the report--some recommendations are not new. University of California President Richard C. Atkinson, for example, has long held that UC’s campuses should develop specialties instead of competing among themselves.

“Different departments will have emphases in different areas,” Atkinson said on his first day as president in 1995, when he also called for cost-cutting and increased productivity at the university.

The new report, however, aims not just at the leaders who deal with these realities every day, but at the American people, who many observers worry are unaware of how dire the situation has become.

“If the American people had known how the educational requirements of the work force were going to grow in the 20 years from 1976 to 1995, it is doubtful that they would have allowed public funding to stagnate as it has,” the report concludes, adding this call to arms: “We believe Americans should no longer tolerate inaction.”

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Education and Income

Education is the most important factor in determining income level. From 1976 to 1995 the wages of men with a college education kept pace with inflation. Men who attended some college saw a decline in real income of 14%, and men with only a high school diploma lost 18%. The real wages of college dropouts declined 25%.