(Editor’s Note: A slightly different version of this article was published on January 17, 2011, in the Raleigh News & Observer.)
With an anticipated revenue shortfall of $3.7 billion dominating the North Carolina legislative horizon this spring, the air will soon be filled with previously unthinkable ideas on how to cut the state budget. One such idea is that there is no reason why the 17-campus UNC system must retain its current structure.
Recently retired president Erskine Bowles even alluded to the possibility of closing a campus. However, a less drastic idea is to encourage one school to gradually become more self-supporting in exchange for greater autonomy. This concept has been gathering steam around the country in recent years, and UNC has the perfect campus to do so—Chapel Hill.
UNC-Chapel Hill’s presence in the state system—as first among equals—is becoming problematic for both the state and for the school. As long as money flowed freely from legislative coffers, Chapel Hill could strive to be one of the nation’s premier universities, with other UNC schools simultaneously sharing the state’s generosity. But with huge cuts looming, either Chapel Hill’s pursuit of excellence will be hampered by budgetary limitations, or the other schools will have a legitimate gripe about Chapel Hill’s favorable treatment.
Loosening the state’s grip on Chapel Hill would neutralize that unwelcome trade-off. Reducing Chapel Hill’s $297.6 million annual appropriation could account for much of the UNC system’s share of budget cuts. In return, Chapel Hill would gain the kind of autonomy likely to improve its standing in the world of academia.
Chapel Hill is different from the other UNC schools, even N.C. State. It has Nobel Prize-winners on its faculty and future Rhodes Scholars for students. Its incoming freshmen average between 125 to 450 points higher than its UNC counterparts on combined math and reading SAT scores; in many ways, it resembles Duke or Wake Forest more than other UNC schools.
It also gets a relatively small percentage of its operating revenues from state appropriations—only 21 percent. That amount can easily be replaced by raising its tuition and also by boosting the percentage of out-of-state students, for they pay the full cost of their educations.
Critics of this proposal will be quick to cite the oft-repeated clause in the North Carolina constitution that says the university system must provide its education “as free as practicable.” If tuitions rise, won’t that price Chapel Hill beyond the ability of some families to pay?
It doesn’t have to. First of all, Chapel Hill’s students are generally a well-heeled lot. While statistics on family incomes are not easily available, a 1999 UNC report said that the median family income of Chapel Hill students was $75,000 in 1998, which translated to $98,245 in 2009. In fact, it is where many of the state’s elite—who could certainly afford private schools—send their talented offspring. (As long as Chapel Hill’s tuition remains low, the state’s middle and working class taxpayers are actually forced to subsidize many well-off students at a high rate, since the current tuition only covers a small portion of their education.)
Additionally, Chapel Hill is the one UNC school with enough resources to raise tuitions significantly without losing middle-income students. Because many of its students are from prosperous families, higher tuition can be charged to subsidize their less prosperous classmates, as at private colleges. Also, its sizeable endowment earnings can help with scholarships.
Furthermore, the above-mentioned clause in the state constitution only directs the system to provide an education at a reasonable cost. It does not guarantee attendance at a particular school in the system. There are other fine UNC schools to attend should Chapel Hill prove out of reach—and they would benefit from the increasing applicants with Chapel Hill-like qualifications.
While no American public flagship school has gone completely private, many states are incrementally giving their flagship universities greater autonomy. For instance, in 2005, the Virginia public university system made a number of such changes, permitting all schools more latitude in purchasing and setting internal policies. The four top schools—University of Virginia, Virginia Tech, William and Mary, and Virginia-Commonwealth—were given the ability to set their own tuitions and to accept more out-of-state students.
And in Pennsylvania, Penn State University has undergone a de facto privatization. It is now designated as a “state-related” school with considerable autonomy and gets only 6 percent of its revenue from the state.
Accepting more out-of-state students is a key part of the equation for greater autonomy, since their higher tuition rates increase per-student revenues and because it expands the pool of high-achieving applicants. UNC-CH is currently limited to having only 18 percent of its students from other states, but both the University of Michigan and the University of Virginia have more than double that amount. Some might object to UNC following their lead on the grounds that UNC is meant to serve the state first. But the out-of-staters pay their own way, and the only potential negative impact of this change is that some in-state students will have to attend another school in the system—not a serious drawback.
Certainly, full autonomy is not the right move for all schools. Miami University of Ohio tried it several years ago. Yet it had to revert back to greater state support when higher in-state tuitions chased many students away. However, that is very unlikely at Chapel Hill, where two applicants are turned away for every successful one, and many out-of-state students are eager to attend.
Naysayers may bemoan the potential adverse effects wrought by the loss of government control, particularly to the economy. But consider two states that are synonymous with higher education. One of them is California, which led the post-WW II expansion of public university systems. Today, California is teetering on the edge of an economic catastrophe, and was forced to raise tuition rates in its university system over 30 percent in a single year.
The other state is Massachusetts, home to Harvard, MIT, Northeastern, and many small prestigious colleges. They are all private institutions; the public University of Massachusetts system is merely a second-tier afterthought. MIT by itself has a tremendous positive effect on the Massachusetts economy. Economist Nancy Dorfman wrote in 1983 that MIT’s staff and graduates are the “single most important source of entrepreneurs to the region,” and she cited a researcher who discovered “more than 175 new Massachusetts firms that had been founded by former full-time employees” of MIT “during the 1960s alone.”
If Massachusetts can prosper with a higher education system based primarily on private schools—and it has—North Carolina can afford a more self-sufficient UNC-Chapel Hill. The school can certainly thrive and achieve greatness on its own, without burdening taxpayers further, and should therefore do so.