State pension underfunding expense socks colleges; professor questions value for taxpayer dollars
State funding for community colleges in Michigan has increased by over $112 million since Gov. Rick Snyder took office in 2011. Despite this fact, tuition has increased 19 percent and the number of students, as expressed on a full-time basis, is down 19 percent.
The state government has increased its appropriations for Michigan’s 28 community colleges by 39 percent during the governor’s tenure, starting at $284 million in fiscal year 2011-12 and going up to $396 million in 2016-17.
Mike Hansen, president of the Michigan Community College Association, attributed the increase to inflation.
“As the governor pointed out, inflation is up about 9.5 percent over that time. Sounds pretty good,” he said in an email.
Hansen pointed out that $80 million of the $112 million increase has gone to the Michigan Public School Employees Retirement System.
“It is laundered through the [community college] budget, but unavailable to us,” he said. “It really never even hits our books, goes directly to MPSERS. That means our operating funding is up $32 million or about 11 percent over that time, so in real terms, up about a 1.5 percent over 5 years.”
The average price of a credit hour went up 19 percent, going from $85.91 in 2011-12 to $102.13 in 2015-16, the last year for which data is available. The College Board estimates Michigan’s in-district tuition and fees is approximately $3,700 in 2016-17, up 18 percent since five years ago.
“Remember that this was during a time when state appropriations were essentially flat in real terms,” Hansen said of tuition costs. “And to provide additional context, during this time, the state, employers, and the local communities were demanding more customized, specialized, advanced-level training in expensive-to-deliver areas.”
In 2011-12, the full-time equivalent of 164,828 students attended Michigan’s community colleges, a number which slumped to 133,895 in 2014-15, a 19 percent drop. (The enrollment number has not been updated since then.)
Hansen attributes this change to the cyclical nature of the economy. Enrollment goes up “when the unemployment rate rises, back down when the unemployment rate wanes. And much of this is out of our hands,” he said.
Richard Vedder, a professor emeritus of economics at Ohio University, said that it looks like the state money appropriated during the Snyder years is “wasted money.”
“Normally you invest more money in things that are highly successful and improving, not in things that are less successfully and declining,” he said. “Snyder seems to be doing the reverse. Why? For what purpose?”
“The fact that tuition and fees have also risen sharply during the same period suggests that the money is probably largely showing up in what economists call ‘economic rent,’’ Vedder said. He described the economic rent in community colleges as “extra payments beyond what are necessary – for employees and other members of the college community rather than for the students themselves.”
Vedder, who directs the Center for College Affordability and Productivity, is a member of the Board of Scholars of the Mackinac Center for Public Policy.
James Hohman, assistant director of fiscal policy at the Mackinac Center, said of the statewide school pension system: “The state retirement system has been underfunded in 41 out of the past 42 years. It would be nice if community colleges got together to help prevent the system from being further underfunded.”