Some experts see 'higher education bubble'
An amendment to an appropriations budget authorizes an increase in state debt to pay for state university construction projects. But some experts see a "higher education bubble" on the horizon and said more taxpayer debt for more buildings is a bad idea.
House Bill 4112 is the appropriations budget for the 2012-13 fiscal year. On June 19-20, the House and Senate voted nearly unanimously to add language to the bill that "authorizes increasing government debt by $81.5 million to pay for proposed state university and college construction projects," according to MichiganVotes.org.
Some of this funding will go to universities with some of the highest endowments in the nation.
This expansion of building funds comes a year after a similar bill passed a year ago. House Bill 5541 of 2012 approved $304.5 million in state funds for colleges and universities in the state. The bill allows $613 million in new government debt for 18 state university projects, passing overwhelmingly in the state House and Senate.
Two college professors who have written extensively about the topic of college costs and affordability said this extra spending and debt is probably a bad idea.
An analysis of whether a college education is worth its price is challenging, said Professor Antony Davies of Duquesne University.
"If the answer is 'yes,' then the government doesn’t need to subsidize higher education (and I’m including in 'subsidies,' government grants, below market interest rates, taxpayer-backed debt, and all other special favors to higher education)," Davies said. "If the answer is 'no,' then the government has no business subsidizing higher education."
University of Tennessee Law Professor Glenn Reynolds, who also is author of "The Higher Education Bubble," addresses the matter bluntly: "The single best piece of advice for anyone confronting a bubble is to avoid debt."
For Reynolds and others, placing public dollars in education now is tantamount to buying top dollar real estate in early 2008. Once the bubble deflates, not only are colleges left with buildings that seldom see use, but taxpayers are stuck with obligations that could result in higher taxes and painful cuts.
"Higher education is a bubble, which shows signs of deflating," Reynolds said. "I think it's probably a bad idea for colleges to be borrowing a lot of money now, and several have already gotten in trouble that way."
University of Michigan officials disagree.
"Universities are not in a bubble and respond in market sensitive ways," said Cynthia Wilbanks, vice president for government relations at the University of Michigan.
"Capital outlay funding has been rather episodic, not routine, " she said, adding that university resources benefit the entire state.
Davies said using tax dollars also is a matter of fairness.
"If new construction is such a good idea, why aren’t the colleges and universities taking on the debt themselves rather than asking Michigan to force taxpayers — many of whom will never go to college — to incur the debt instead?" Davies said.