DATE: Thursday, September 18, 1997          TAG: 9709180001

SECTION: LOCAL                   PAGE: B10  EDITION: FINAL 

TYPE: Opinion 

SOURCE: BY JOSEPH L. DIONNE and THOMAS KEAN 

                                            LENGTH:   90 lines

BREAKING THE SOCIAL CONTRACT: THE FISCAL CRISIS IN HIGHER EDUCATION

For well over a century, the American higher education system has set the world standard for academic excellence and equitable access for all citizens. The Morill Act of 1862, which created the land-grant university, guarantees that all citizens who can profit from higher education will have access to it.

However, with the recent return of millions of students to college campuses nationwide, there are signs that this far-sighted social contract may soon be broken. The higher education sector - by which we mean both public and private institutions of post-secondary education and training - faces challenges unprecedented in its history, and it is floundering in response.

The monetary difficulties of colleges and universities, thought for a time to be temporary, now appear to be part of long-term trends in the demand for enrollment and the supply of funding. Demand has increased sevenfold since World War II and is expected to continue growing over the next two decades. At the same time, operating costs have escalated and public-sector financial support has flattened. As a result, many colleges and universities have had to sharply increase tuition and fees and look for ways to control costs in order to avoid financial disaster.

To examine the dimensions and implications of these trends, the Council for Aid to Education launched the Commission on National Investment in Higher Education in 1994, which we have co-chaired.

What we found was a time bomb ticking under the nation's social and economic foundations: At a time when the level of education needed for productive employment is increasing, the opportunity to go to college will be denied to millions of Americans unless sweeping changes are made to control costs, halt sharp increases in tuition and increase other sources of revenue.

As service-related jobs have come to dominate the workplace in the United States, the college degree - or at least some form of post-secondary education and training - has replaced the high school diplomas as the entry card into rewarding employment. Those who only finish high school - or drop out - start on the lowest rung of the wage ladder and will see their real hourly wages actually decline over their working lives. Unless the nation makes a concerted effort to raise the level of education and skill of these Americans, the wage disparity between the rich and the poor will become so large that it will threaten both America's social stability and its core democratic values. Widespread access to higher education is therefore critical to the economic health and social welfare of the nation.

The higher education sector, however, is facing a catastrophic shortfall in funding. If current trends in funding and costs continue, and if tuition increases are held to the rate of inflation, by 2015 U.S. colleges and universities will be facing a deficit as high as $38 billion - a quarter of what they will need to educate the students expected to enroll in that year. If, on the other hand, tuition increases at current rates - basically doubling by 2015 - the impact on access will be devastating: effectively half of those students will be shut out.

To address a crisis of such proportions, we call for a two-pronged strategy: increased public investment in higher education and comprehensive reform of higher education institutions to lower costs and improve services. The second of these, institutional reform, is in fact a prerequisite for increased public funding. Unless the higher education sector changes the way it operates by undergoing the kind of restructuring and streamlining that successful businesses have implemented, it will be difficult to garner the increases in public funding needed to meet future demands.

Increased public funding should be tied to institutional reform to create incentives to innovate. In addition, colleges and universities should pursue greater mission differentiation to streamline their services and better respond to the changing needs of their constituencies. Community colleges, undergraduate universities and research universities, for example, should embrace different missions, give priority to activities central to those missions, and reduce or eliminate more marginal activities.

Colleges and universities should also develop sharing arrangements to improve productivity. A greater sharing of resourcing could lead to significant savings and even improve services. Finally, and most important, it is time to redefine the appropriate level of education for all Americans in the 21st century. All citizens planning to enter the workforce should be encouraged to pursue - as a minimum - some form of post-secondary education or training.

This reform agenda cannot be implemented by the higher education establishment alone. A sea change of this sort requires the active participation of leaders in government, business and education, as well as the American public. The inclusion of tax incentives focusing on higher education in the balanced budget plan signed by President Clinton earlier this month, they represent only a first step.

In our view, the enormous deficits facing the higher education sector in the near future are more critical than the much publicized crisis in the Social Security system. Indeed, unless America manages to open up the narrowing bottleneck of higher education, there will not be enough economic growth to support any version of the Social Security plans being discussed. In very real and practical terms, post-secondary education is the key to the nation's future. Americans must ensure that it becomes a national priority. KEYWORDS: ANOTHER VIEW

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