University of Massachusetts Amherst

From the SelectedWorks of Dan Clawson

March, 2004

Higher Education and PrivatizationNational Education Association, National Education Association

Available at: https://works.bepress.com/dan_clawson/24/

WHAT IS PRIVATIZATION?In its narrowest meaning, priva-tization suggests a movementaway from public financing andtoward private financing. Forhigher education, the term in-cludes a range of activities takingplace on campus. Generally, inthe name of financial necessity,colleges and universities cutservices, undertake aggressiveoutsourcing, reduce the numberof regular tenured teaching slots,and increase tuition. This takesplace against a background ofstate-defined accountability standards as legislators take amore assertive role in settingeducation goals. Privatizationincludes more centralized deci-sion making, declining accept-ance of academic norms, loss offaculty autonomy, and develop-ing private funding sources.

The trend toward privatizationhas been associated with an

historical shift in the populationserved by higher education. Traditionally, colleges and uni-versities were understood asexperiences for an elite few, but,

increasingly, they have become a normal part of the educationalexperience of larger and morediverse student populations. This evolution from elite to massaccessibility has resulted in higher education more closelyresembling a public utility thanan experience reserved for privi-leged elites. Figure 1 shows higher education enrollmentgrowth in the public and privatesectors since 1947.

At the same time enrollmentswere climbing, data from theNational Center for Education

VOLUME 10 • NUMBER 2 • MARCH 2004

Higher Education and PrivatizationINTRODUCTIONThe current political climate is sympathetic to the privatization of a broadrange of public services. A Council of State Governments report found that 59 percent of state agencies had privatized some function in the pastfive years and 55 percent thought that privatization would increase intheir state in the next five years.1 The top three reasons cited for increases in privatization were cost savings, increased support from political decision makers, and greater flexibility. This willingness to privatize public functions extends to higher education.

Figure 1

Post-World War II higher education enrollment growth

SOURCE: National Center for Education Statistics. 2002. Digest of Education Statistics. Washing-ton, D.C.: U.S. Department of Education. Table 172.

Statistics show a decline in thenumber of liberal arts degreesawarded. For example, since1970 the number of degreesearned in English and literaturedropped by about 13,000 and thenumber of degrees in foreignlanguages slipped by 6,000. Atthe same time, more vocationallyoriented degrees, in fields suchas business, accounting and,more recently, computer scienceand mass communications, areflourishing.2

REDEFINING HIGHEREDUCATION'S VALUE The shift to higher education aspublic service has resulted in leg-islators treating it like any otherpublic utility: they demand themost effective service at the mostaffordable price. The languageused to define “effective” and“affordable” derives from a busi-ness model for generating value,where value is linked directly toshort-term monetary gain. Thisredefines the traditional under-standing of higher education'svalue, where value is linkeddirectly to the long-term welfareof communities made up ofinformed citizens actively partici-pating in the democratic process.This latter definition has not onlykept U.S. taxpayers supportinghigher education across two centuries but has made the American system both model and destination throughout theworld.3

PRIVATIZATION'S IMPACTPrivatization increases the pres-sure on traditional higher educa-tion institutions to operate moreefficiently, to pursue goals set byoutside interests, and to marketmore aggressively. While suchefforts can help an institutionfinancially, they can also weakencollegial, knowledge-driven academic culture through the

adoption of management prac-tices more typical of business culture. Practices such as con-tracting out services and restruc-turing workforces represent market-driven attempts to controlpayroll, diversify and stabilizerevenue, and shift costs to con-sumers.

Contracting out services. Colleges and universities useoutside vendors to provide awide range of services. Figure 2shows the percentage of report-ing institutions that indicatedthey outsourced a particularfunction in 2002.

Most colleges indicate they areconsidering outsourcing evenmore services. The top five rea-sons colleges cite for contractingoutside vendors include financial(e.g., cost saving and revenuegeneration), quality improve-ment, equipment (e.g., tech-nological expertise), humanresources and staffing solutions,and safety/liability measures.4

Restructuring the workforce andcontrolling payroll. Most newfull-time faculty positions inhigher education are not tenure-eligible. According to a recentstudy, only about one-quarter ofnew hires receive appointmentsto full-time tenure track positions.One-half of the new hires arepart-time, and the remainingquarter started in non-tenuretracks. The report suggests thatcollege teaching is running therisk of becoming a contingentworkforce.5 One indicator of theexpanding contingent work force in higher education is thisincreasing use of part-time faculty. Over 40 percent of highereducation faculty work part-time.That translates into 378,000 part-time faculty members (excludinggraduate teaching assistants) outof 919,000. Estimates suggest that,on average, part-time faculty

members are paid $2,700 perclass. This is consistent across different types of colleges anduniversities.6

Contingent and part-time facultymembers are less likely to partici-pate in management decisions.Shared governance is a system in which those affected by thedecisions participate in the deci-sion making. In colleges, sharedgovernance includes governingboards, administration, and faculty, with the participation ofstaff and students. This approachrecognizes the contributions andrequirements of all members in agroup consensus process. Theresults of this approach mayinclude empowerment, equalpartnership, and a vested interest

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Figure 2

Percentage of colleges anduniversities outsourcing particular functions

Program Percentage

Vending 76.4

Food Services 63.3

Laundry Services 51.7

Bookstores 40.8

Concessions 39.0

Travel Services 39.0

Printing 22.5

Entertainment 14.2

Day Care 13.9

Health Services 12.4

Safety, Security 9.4

ID Card Services 6.0

Post Office/Mail Services 5.2

Computing Services 3.7

Conferences 3.4

Parking/Transportation 3.4

Physical Plant 3.4

Housing 3.0SOURCE: Wertz, Richard D. 2000. Issues andConcerns in the Privatization and Outsourcingof Campus Services in Higher Education. NewYork, New York: National Center for the Study ofPrivatization in Higher Education.

in successful outcomes. This is atthe heart of the academic tradi-tion and supports the faculty’srole in shaping institutional poli-cies and programs. Erosion of faculty participation in decisionmaking is one possible result ofrestructuring the higher educa-tion workforce.7

Diversifying revenue streamsand stabilizing income. In thepast, education was place bound.With few exceptions, studentshad to come to campus to takeclasses, and colleges could counton maintaining the marketbecause of the huge develop-ment costs necessary to build anew campus. That geographicprotection is challenged by thematuration of computer technol-ogy and the Internet, making it possible to deliver collegecourses anywhere at any time.More typically, technology sup-ports a hybrid model of web-enhanced education that allowsa college or university to rent aclassroom, hire some part-timefaculty members, and deliver acanned class at a very low priceto whomever enrolls. These col-leges centralize library holdings,student records, student aidprocesses, and other administra-tive functions on a web-basedsystem. The price of entry into anew higher education commu-nity is negligible.

The portable college can offercourses and programs with alarge potential enrollment, target-ing students who otherwisemight attend traditional collegesin the region. Many, but not all,such colleges are operated as for-profit enterprises. They receive nofunding from states, but utilizestudent aid packages to attractstudents. While portable collegeswill not replace traditional col-leges, they will and do competefor students among place-boundcolleges. This new class of institu-

tion adds to the market pressureson traditional higher educationinstitutions.

Contract training and other entre-preneurial efforts represent addi-tional strategies, not only fordiversifying revenue streams butalso for stabilizing income. Theseefforts include counteractingunpredictable state support byshifting the focus of institutionsaway from the core educationalmission toward efforts at revenueenhancement. Again, the priorityof economic objectives displacesthe academy's traditional goals.

The effect of shifting attentiontoward other revenue sources isto take time and attention awayfrom the core functions of theinstitution. Figure 3 shows thegrowth in such alternativesources of revenue. These otherforms of income include all theincidental income raised by aninstitution, but do not include traditional revenue from govern-ment, tuition, endowment, and

traditional operations such asdormitories.

State funding of higher educationis erratic, going up in good yearsand dropping in bad. Public col-leges and universities cultivateother streams of income to com-pensate for the shrinking of statesupport in bad years.8 Figure 4shows the most recent two-yearchange in state support for highereducation. Between 2001 and2003, higher education lost statesupport in twenty-nine states(bold italics).

Shifting costs to consumers. Weare reallocating public fundingfor higher education away fromsupport to institutions andtoward individual student aid.The admissions office, businessoffice, and student aid office havegrown in importance on everycampus, and business conceptsand their expression—such asmarket share, efficient pricing,and the student as customer—have crept into the enrollment

NEA Update / 3

Figure 3

Growth in non-traditional revenue among higher education institutions: 1992–93 to 2000–01

SOURCE: Integrated Postsecondary Education Data System. Annual. Finance Survey Data.Washington, D.C.: U.S. Department of Education.

conversation. Loans haveincreased as an overall share ofthe student aid package, whichcan serve to make students acutely aware of the need forimmediate employment upongraduation to pay them back.Because it can affect students’institutional choices—as well astheir decisions about whether topursue a liberal arts education—this dynamic amplifies theincreasingly market-driven character of higher education. Figure 5 shows growth trends instate and federal student aid.

TACTICS FOR PROMOTING PRIVATIZATIONHigher education's evolution intoa publicly funded, increasinglynecessary event in people’s liveshas made it easy for detractors tocriticize, and operational cost istheir primary focus. The argu-ment is made that goals must beset for higher education institu-tions and that such institutionsmust measure up to those goals or be held accountable. In thename of “accountability,” somestate legislatures have beguntying public funding directly to an institution’s performance inmeasuring up to prescribed goals.

This definition of accountabilitychanges the locus of decisionmaking from internal to externalgroups. With their economicallydetermined vision of higher education, such legislators wanthigher education institutions todemonstrate accountability inresponse to state fiscal needs andnot to the needs of the academy. Arecent NEA report confirms thatthe propensity of state legislatorsasking for more accountabilityfrom public colleges and universi-ties is bipartisan.9

According to an annual survey,all but four states (Delaware,Nevada, New York, and Rhode

NEA Update / 4

STATE CHANGE

Alabama 4.3%

Alaska 6.1%

Arizona -2.8%

Arkansas 5.7%

California -9.6%

Colorado -21.8%

Connecticut -0.4%

Delaware 2.6%

Florida 5.4%

Georgia -2.1%

Hawaii 14.2%

Idaho -2.5%

Illinois -6.9%

Indiana 3.0%

Iowa -4.2%

Kansas -3.8%

Kentucky 7.3%

STATE CHANGE

Louisiana 10.1%

Maine 0.0%

Maryland -11.1%

Massachusetts -23.0%

Michigan -7.9%

Minnesota -6.7%

Mississippi 4.2%

Missouri -14.0%

Montana 0.5%

Nebraska -3.4%

Nevada 39.2%

New Hampshire 4.6%

New Jersey -1.2%

New Mexico 6.5%

New York 3.1%

North Carolina 0.2%

North Dakota 0.0%

STATE CHANGE

Ohio -0.2%

Oklahoma -8.2%

Oregon -11.4%

Pennsylvania -3.8%

Rhode Island -0.9%

South Carolina -20.4%

South Dakota 6.4%

Tennessee -2.4%

Texas -5.6%

Utah -4.0%

Vermont 7.7%

Virginia -17.8%

Washington -3.5%

West Virginia -8.7%

Wisconsin -6.5%

Wyoming 21.6%

TOTALS -4.0%

Figure 4

Two-year change in state support of higher education, 2001-2003

SOURCE: Retrieved January 11, 2004, from Grapevine, the website of Illinois State University'sCenter for the Study of Education Policy, at http://www.coe.ilstu.edu/grapevine/

Figure 5

Growth of state and federal student aid since 1970

SOURCE: The College Board. 2003. Trends in Student Aid. New York, New York: author.

Island) require some form of performance reporting fromhigher education institutions.The number of states that linkfunding to performance hasdeclined from 18 to 15 due large-ly to recent state declines in sup-port. The 15 states with perform-ance funding in 2003 were:

Colorado OhioConnecticut OklahomaFlorida OregonIdaho PennsylvaniaKansas South CarolinaLouisiana South DakotaNew York Tennessee(SUNY Texassystem only)

Five more states reported thatthey are likely to adopt perform-ance funding (Alaska, Missouri,New Mexico, Utah, and West Virginia).10

While performance funding hasnot been particularly successful, it does put consistent pressure onpublic institutions to operate withconsideration for very specificexternal requirements. The demand to show progress onmeasurable outcomes overridesthe non-measurable outcomes ofhigher education. Performancefunding has the potential to dis-tort the operation of institutionsto maximize more easily meas-ured, vocationally useful func-tions, while ignoring the less easily measured liberal arts activities.11

Proprietary sector growth.Proprietary colleges are growingat a rapid rate. They still repre-sent a small share of the educa-tion market, but they are growingat a time when public collegesand universities are being starvedfinancially due to large state andfederal budget deficits. Accordingto the National Center for Education Statistics, the numberof degree granting proprietaryinstitutions rose from 316 to 721

between 1990 and 2000, a 128 per-cent increase. These proprietarycolleges are the pure expressionof privatization in higher educa-tion. Typical attributes includethe fact that they:

� are market driven;� are profit sensitive; � rely on strong marketing

efforts; � prize centralized decision

making; and� weaken the collective voice of

faculty.

The narrowly focused institutionsin this sector represent a growingcompetitor for institutions with a broader scope. The former aresmaller and more specializedthan the latter, and they offer programs of study that lead tospecific occupations. They do notprovide the traditional broadrange of student services andprograms, such as athletics, residence halls, cultural events,and recreation facilities. Nor do they undertake research orprovide community service pro-grams. As a result, they are cost-efficient and provide a minimalrange of educational offerings.

CONCLUSIONThe emphasis on accountability,market financing, and a politicalbelief in the ineffectiveness ofpublicly managed enterprises has combined to challenge theunderlying assumptions uponwhich colleges and universitiesoperate. The facts that collegegraduates get better jobs thanthose without a college degreeand that society benefits fromhaving well-trained, engaged citizens have been traditional andsuccessful selling points whencolleges and universities ask forpublic support.12

Public funding of higher educa-tion is grounded in taxpayers’

willingness to support highereducation because it contributesto the overall economic welfareof entire communities and,indeed, the nation. Yet state legislators, applying a businessmodel of return on investment,are demanding more proof of“effectiveness” because they perceive traditional higher educa-tion as inefficient. The autonomythat has allowed American highereducation the freedom to evolveand diversify may be restricted in the name of accountability. The autonomy that has enabledAmerican higher education tobecome the model for the world13

—a world where students aspireincreasingly to attend Americancolleges and universities—isbeing challenged by private interests in the name of accounta-bility. Indeed, the rising cry foraccountability is the principaltactic market-driven privatizationinterests use to challenge higher education.14

The evidence is compelling thatthe current privatization of higher education will continue.15

As state legislators continue toperceive higher education as apublic utility, the public commit-ment to basic research, opendebate, academic freedom, andfaculty autonomy will continue tobe minimized. Replacing full-time teachers with part-time faculty and outsourcing supporttasks to contractors are likely toweaken the collegial environmentof higher education institutions.

The most probable outcome ofthe confluence of these trends is a greater bifurcation of highereducation, wherein some institu-tions provide a time-honored liberal arts program to conven-tional students, while othersenroll students interested inobtaining skills necessary forimmediate employment. Theselatter institutions will be much

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more privatized in character than is the case for most collegestoday.

This new wave of pragmatic colleges has been developing foryears. As colleges and universi-ties add applied degrees in newlyemerging technical fields, studentinterest in degrees representingthe traditional liberal arts de-clines. In part, this trend repre-sents the natural evolution ofknowledge and social realities,but it also signals the develop-ment of colleges and universitiesas job preparation academies.

A case can be made for estab-lishing a balance between theautonomous and the privatizedacademy. Both are appropriate toand have a place in Americanhigher education. But, while colleges and universities need tobe able to demonstrate that theyprovide an important contribu-tion to society at a fair price, thatdoes not mean the attributes that have traditionally madeAmerican colleges and universi-ties unique should be sacrificed inthe name of efficiency.

Office of Higher Education1201 Sixteenth Street N.W.Washington, D.C. 20036202-822-7100E-mail: Highered@NEA.org

Higher Education StaffRachel Hendrickson Sollie ManalaysayRex Costanzo Cathie Sheffield-ThompsonDarrel Drury Valerie Wilk

This issue prepared by: John Lee, JBL Associates

To view back issues of Update, go to www.nea.org/he/

NOTES1 Chi, Keon S., and Cindy Jasper. 1998. Private Practices: A Review of Commercializationin State Government. Lexington, Kentucky: Council of State Governments.

2 National Center for Education Statistics. 2002. Digest of Education Statistics. Wash-ington, D.C.: U.S. Department of Education.

3 Retrieved February 11, 2003, from the Educational Testing Service website, athttp://www.ets.org/news/03061810.html.

4 Wertz, Richard D. 2000. Issues and Concerns in the Privatization and Outsourcing ofCampus Services in Higher Education. New York, New York: National Center for theStudy of Privatization in Higher Education.

5 Finkelstein, Martin. 2003. “The Morphing of the American Academic Profession.”Liberal Education 89(4).

6 Based on data from the National Center for Education Statistics. 2000. National Sur-vey of Postsecondary Faculty: 1999. Washington, D.C.: U.S. Department of Education.

7 Lau, R. 1996. “Shared Governance and Compton Community College District.”EDIM 710. Malibu, California: Pepperdine University, Organizational Management& Governance.

8 Retrieved January 11, 2004, from Grapevine, the website of Illinois State University’sCenter for the Study of Education Policy, at http://www.coe.ilstu.edu/grapevine/.

9 National Education Association. 2004. Challenges and Opportunities: State LegislativeViews On Higher Education, Results of the 2003 Higher Education Issues Survey. Wash-ington, D.C.: author.

10 Burke, Joseph C., and Henrik Minassians. 2003. Performance Reporting: Real Account-ability or Accountability “Lite.” Albany, New York: Nelson A. Rockefeller Institute ofGovernment.

11 Ibid.12 Retrieved February 12, 2004, from the Postsecondary Education Opportunity web-

site, at http://www.postsecondary.org.13 McPherson, Michael, and Morton Shapiro. 2002. Global Issues in Higher Education:

What American Colleges Should Learn. Washington, D.C.: Educause.14 Grantham, Martha. 1999. Accountability in Higher Education: Are there ‘Fatal Flaws’

Embedded in Current U.S. Policies Affecting Higher Education? Fairhaven, Massachu-setts: American Evaluation Association.

15 National Education Association. 2004. Challenges and Opportunities: State LegislativeViews On Higher Education, Results of the 2003 Higher Education Issues Survey. Wash-ington, D.C.: author.