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Why Public Colleges Cost More

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The term return on investment is now part of the higher ed lexicon -- parents who will be paying for students' college educations use the term, as do educators and administrators who seek to give good value for the price of attendance. Most of the discussion of ROI that I have seen focuses on the "return" part of the equation, with parents asking what kinds of jobs, pay and careers will be available to students when they graduate.

But just as important is the "investment" end of the equation. Here America's public institutions have historically led the way, offering quality education at prices lower than the privates. But the latest trend sees public universities losing their pricing advantage as their sticker prices keep rising.

As the president of the University of Mary Washington, a public four-year university in Virginia, I can speak directly to the strain of trying to contain our pricing. Less than a decade ago, in 2005-06, our tuition for in-state students was $5,634. Today it is $9,660. Room and board has also risen sharply, so the cost of attending my school for in-state students has increased more than 60 percent in a decade, to $18,782 a year. Costs have risen similarly -- and in some cases much more -- at the other public universities in my state and nationwide.

What's pushing our costs up? Obviously, inflation is a factor. So is the age of our buildings: the older the college, the creakier its buildings, the higher the maintenance. But the biggest part of our budget -- 75 percent -- goes to personnel costs. Since our employees are state employees, we are held to increases in their pay and benefits voted by our state legislature. Our contribution to the Virginia state retirement fund rose 40 percent this year. Our share of employee health insurance rose 5 percent this year, 18 percent the year before. This year, in a move long overdue, our state-employed faculty were given a 3 percent pay raise.

Meanwhile, we are suffering from huge cuts in state funding driven by the recession of 2008. In 2009, we lost 20 percent of our state support, and even deeper cuts followed. Fortunately, state funding has increased recently, but Virginia's fiscal support for higher education is still down 6.7 percent since 2009. When costs go up and fiscal support shrinks, someone (the student) has to foot the bill.

The cost of private colleges continues to rise as well. Private schools have their own worries, but they have not seen their main source of support shrink like ours has, so their prices in the last few years have not risen as sharply as ours.

We have four ways to close the gap: increase enrollment, increase tuition and fees, decrease expenditures, and create new revenue streams. For various reasons, our school works best with its current enrollment, about 5,000 students. So our only short-term options are raising tuition and cutting costs -- and that's what you see happening at most public universities across the country. In our case, tuition has risen 5 percent a year for the past two years.

Like other schools, we are also looking at long-term solutions. Fund-raising is one, but growth of endowment principal takes years to build. A number of institutions have also begun to develop cash flows from commercial real estate ventures, and we have as well. We see the likelihood of long-term reward here, but these efforts do not address our short term budget pressures.

So we turn to the cost side. Believe me, at Mary Washington, we are doing all we can to trim our overhead. We are engaged in a top-to-bottom strategic scrub of everything we do, looking for cuts, trims and efficiencies. We have done the little things, like ink cartridge recycling and reducing application paperwork, and the big things, like shrinking our auto fleet and implementing just-in-time purchasing practices. When employees leave, we postpone filling their positions. We have turned to technology to help us teach and administer more efficiently. But we are still staring at the tough questions: Do we really need this course, that program? How can we best increase our ROI?

Is there any good news here? Looking at the big picture, of increasing costs and decreasing state support, one is tempted to say, "Not much." But as we review and trim and cut and find new revenues and efficiencies, we are becoming a very lean machine. Indeed, U.S. News & World Report has ranked our university as "highly efficient" in terms of what we spend to achieve a quality education.

In the face of rising costs, perhaps those seeking value from their college investment will take a closer look at an institution's efficiency. It seems to me, when you see medium-sized four-year private liberal arts colleges costing $50,000, and even other Virginia public institutions costing nearly half that, a Mary Washington education costing $18,782 a year is a very good investment.