Lombardi, John V.

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Introductory Remarks: Reflections on Privatization in Higher Education

University of Florida Levin College of Law

University of Florida Journal of Law & Public Policy Volume 10 Issue 1 Article 1 1998 Introductory Remarks: Reflections on Privatization in Higher Education John V. Lombardi Follow this and additional works at: https://scholarship.law.ufl.edu/jlpp Recommended Citation Lombardi, John V. (1998) "Introductory Remarks: Reflections on Privatization in Higher Education," University of Florida Journal of Law & Public Policy: Vol. 10: Iss. 1, Article 1. Available at: https://scholarship.law.ufl.edu/jlpp/vol10/iss1/1 This Article is brought to you for free and open access by UF Law Scholarship Repository. It has been accepted for inclusion in University of Florida Journal of Law & Public Policy by an authorized editor of UF Law Scholarship Repository. For more information, please contact kaleita@law.ufl.edu. University of FloridaJournal of Law and Public PolicyVOLUME 10 FALL 1998 NUMBER 1ISSUES IN HIGHER EDUCATIONINTRODUCTORY REMARKS:REFLECTIONS ON PRIVATIZATION INHIGHER EDUCATIONPrivatization is both a rallying cry and a fighting word for universitypeople. Like most symbolic words, privatization has multiple meanings andencompasses many activities. In major public research universities, much ofwhat we do is already privatized, if by privatization we mean not dependentupon state tax dollars. Student tuition is a private market transaction, evenif it is often highly regulated in ways that resemble utility rates. Grants andcontracts, even when they come from state or federal sources, derive from amarketplace that bears all the signs of private competitive transactions. Giftsto endowment or annual funds also participate in the market, for the fundsderive from private individuals, and universities compete along with othercharitable organizations for this largess. Every university with a hospital andmedical school operates daily in the brutal and ferocious market of healthcare, which is highly regulated, endlessly complex, and hotly contested. Anyuniversity running a major athletic program competes for audience, logorevenue, endorsements, television time, and the coaches and players whomake college sports successful.If these were not enough examples, every major university runs a varietyof auxiliary enterprises that range from parking and food services tobookstores and patent and royalty businesses. Almost all of these enterprisesfunction in the marketplace; they must break even or better, while operatingin competition with other private and public enterprises. Universities sellrights to agricultural products, run auxiliaries to support the cost of chemicalsin our laboratories, and charge fees for a range of services provided to ourcustomers. We already live in the marketplace. A conservative estimateUNIVERSITY OF FLORIDA JOURNAL OF LAW AND PUBLIC POLICYwould put over two-thirds of a major public research university's business inthe competitive marketplace.So what is the issue?The issue, of course, is regulation and the power of the state to controlthe economic terms of trade for public higher education. While we may wishto believe that education is a noncommercial public good, in fact, highereducation produces a high demand for and a highly differentiated set ofproducts delivered into marketplaces that suffer from extremely complexforms of regulation. Private and public institutions attempt to distinguishthemselves one from the other on various attributes, but all are publiclysubsidized, albeit in different ways and with different consequences. Privateinstitutions receive state subsidies for tuition. Their federal grants, contracts,and foundation awards derive from tax-free income. Gifts to privateuniversities carry tax benefits for the donors. These and other incomestreams come entirely or partially from direct or indirect subsidies from localand federal tax dollars. Public universities, of course, receive even moresupport from the tax base. Their tuition subsidies reach higher levels, theyreceive significant support for plant and equipment, and their undergraduateand part of their graduate and research programs rely on state tax dollars.The ubiquity of local and federal tax dollars in American highereducation carries with it a host of regulatory functions from tuition controlsto curricular interventions, from research restrictions to personnel rules, frombuilding standards to price controls. No university, public or private, escapesregulation, but the amount of control appears to be closely related to the levelof state subsidy.This, then, leads to the key question of privatization. If we mean byprivatization that the government will get out of the business of regulatinguniversities, then we also need to contemplate the possibility that the statewill get out of the business of subsidizing higher education. It is notpractical to imagine that government at any level will give up its powers ofregulation while maintaining funding levels. The state will regulate what itpays for, and as long as it pays for tuition subsidies, tax breaks for gifts, andresearch grants, federal and state governments will continue to regulate notonly what they fund but also related activities that they do not fund.Universities pursue various strategies to minimize this interference. Theyknow that overregulation often results in inefficient operations and severecompetitive disadvantages relative to less regulated institutions. Onetechnique sees universities offloading activities into the private sector,essentially outsourcing university functions to an unregulated marketplace.A classic example of this is the University of Florida computer requirement.Given the burden of state regulation and highly restrictive price controls, theuniversity met the need to provide computing to its students by requiringstudents to use computers and structuring a set of private market alternatives[Vol. 10PRIVITIZATION IN HIGHER EDUCATIONto support student computer purchases. The university could have created afee, purchased the computers, delivered them to the students, and supportedtheir use. The regulatory environment of Florida made such an optionimpossible, and so the university simply privatized its computer activities.What resists privatization, of course, is the core curriculum. Here theuniversity itself opposes privatization, for it is in the undergraduate andgraduate core curriculum that the university establishes its claim to excellenceand derives its baseline income. The core curriculum is the most highlyregulated by the state and nongovernmental accreditation agencies, alsosupported by government, and it creates the core quality of the universitythat, in turn, establishes the base from which privatization of marginalactivities can occur.Faculty, of course, demand control over this core business of theuniversity, and themselves regulate the content and structure of theuniversity's core academic business. Even here, however, the universityfinds ways of injecting private marketplace notions into the holistic conceptof a university education. Professional schools of law and medicine, forexample, set higher tuition than the core arts and sciences programs.Different disciplines, while in theory charging the same amount for a degree,nonetheless impose additional fees for supplies, services, internships, travelrequirements, and other elements of their programs that effectively createdifferential price structures to reflect the different costs.In short, we have already answered the question of privatization. We areall doing it as fast and as effectively as our regulatory environment permits.Privatization challenges some traditional university beliefs about protectingthe integrity and independence of scholarship from the ravages of themarketplace. Yet current experience demonstrates that the greater threat toacademic integrity comes not from the marketplace, but from the over-regulation of university functions by the state and state-supported ac-creditation agencies, and the decline in financial support from all sources foruniversity work.John V LombardiPresidentProfessor of HistoryUniversity of Florida199814 UNIVERSITY OF FLORIDA JOURNAL OF LAW AND PUBLIC POLICY [Vol. 10

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Introductory Remarks: Reflections on Privatization in Higher Education

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