Banging the Bucket - Controversy

University Business, July-August, 2002

[Name withheld by request]

[Ed. Note: Though this submission is published later than originally planned, the topic remains timely.]

SOME OBSERVATIONS ON "There's a Hole in the Bucket" by Tim Goral [March 2002]: Although we may wish it were otherwise, everything does not revolve around education--and particularly, higher education. The cries of anguish by higher ed because of reductions in state funding appear to presuppose that adequate funds exist and it is only because the anti-intellectuals, rednecks, and reactionaries in state and local government are somehow "punishing" education, that adequate funding is not being made available. This is a very limited view from the ivory tower through a tiny peephole.

The facts are that American governments at all levels have serious cash-flow problems, and funds to maintain existing services and service their enormous debts are simply not available--no matter how worthy the service. At the same time, rapidly escalating demands are placed on these governments for the most basic necessities (food, shelter, clothing) for the increasingly large numbers of marginalized families and individuals. This is not bleeding heart liberalism, but rather an example of Maslow's Hierarchy of Needs: The hungry individual (and society) does not waste its time on self-actualization, but spends its available resources on getting something to eat.

From a larger and more productive perspective, we should be asking: (1) Why are American governments not only experiencing shortfalls in current revenue, but going ever more deeply into debt? (2) In the "Brave New World" order, can--and will--higher education in the United States contribute (in the long run) to increasing governmental revenues, which will allow funding?

It is fact--based on data from the U.S. Treasury Department and the Bureau of Economic Analysis--that in the 1950s, corporations paid about 39 percent of all federal income taxes collected. By the mid-'80s, this had decreased to about 17 percent; currently, it's only about 13 percent. It is also fact that most education through the community college level is funded by local property taxes. As documented in Bartlett and Steele's America: Who Pays the Taxes? (Andrews and McMell, 1996), corporations paid about 45 percent of local property taxes in 1957, and only 16 percent by 1987. Today that rate is lower.

There is also serious question, based on anecdotal evidence, about the efficacy of education in improving overall income for socioeconomic groups rather than selected individuals within these groups. Aggregate data from the U. S. Bureau of the Census [Ouintile Annual Family Real Income Distribution 1948-1996] seem to indicate that "education "--at least through the 80th percentile of population--does not result in an overall increase in inflation-adjusted (real) income, but rather a redistribution of income within this group, thus resulting in no net gain in overall income. Indeed, when other factors such as the increase in annual working time over this period (c. 2.5 work weeks per year), and reductions in benefits such as health insurance and retirement are considered, there appears to be a substantial reduction in real income--despite massive investments of time and money in "education" by individuals and society.

It is vital that we face facts and formulate plans and policies accordingly. The problem does not seem to be "education" (over which we have control; more testing, for example), but rather the society/economy in which education is now embedded.

We need to look at the overall question (possibly via a committee which includes actuaries, accountants, demographers, statisticians, and educators) to examine in depth the underlying assumptions about education, and perform internal rate of return, cumulative discounted cash flow, and net present value calculations on the value of an education for students and society. We may find that higher education in its present form is economically obsolete. The typical baccalaureate graduate now invests about five years of his life and $20,000 of debt in his diploma. It is not ethical to continue to encourage investment by student, family, and society--without some indication of a reasonable return to the investors.