Are “Private” Universities Really Private?

10 April 2015 at 9:01 am 6 comments

| Peter Klein |

Jeffrey Selingo raises an important point about the distinction between “public” and “private” universities, but I disagree with his analysis and recommendation. Selingo points out that the elite private universities have huge endowments and land holdings, the income from which, because of the universities’ nonprofit status, is untaxed. He calls this an implicit subsidy, worth billions of dollars according to this study. “Such benefits account for $41,000 in hidden taxpayer subsidies per student annually, on average, at the top 10 wealthiest private universities. That’s more than three times the direct appropriations public universities in the same states as those schools get.”

I agree that the distinction between public and private universities is blurry, but not for the reasons Selingo gives. First, a tax break is not a “subsidy.” Second, there are many ways to measure the “private-ness” of an organization — not only budget, but also ownership and governance. In terms of governance, most US public universities look like crony capitalists. The University of Missouri’s Board of Curators consists of a handful of powerful local operatives, all political appointees (and all but one lawyers) and friends of the current and previous governors. At some levels, there is faculty governance, as there is at nominally private universities. In terms of budget, we don’t need to invent hidden subsidies, we need only look at the explicit ones. If we include federal research funding, the top private universities get a much larger share of their total operating budgets from government sources than do the mid-tier public research universities. (I recently read that Johns Hopkins gets 90% of its research budget from federal agencies, mostly NIH and NSF.) And of course federal student aid is relevant too.

So, what does it mean to be a “private” university?

Entry filed under: - Klein -, Education, Institutions, Methods/Methodology/Theory of Science, Myths and Realities, Public Policy / Political Economy.

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6 Comments Add your own

  • 1. Bob Robertson  |  10 April 2015 at 9:13 am


    “there is faculty governance, as there as at nominally private universities”

    Maybe should be “as there is at”?

  • 2. Peter Klein  |  10 April 2015 at 9:14 am

    Fixed it, thanks!

  • 3. Wei  |  10 April 2015 at 9:54 am

    Apart from blurry boundary of ownership, regulation also undermines the independence of universities to some extent. For example, faculties in universities, both from public and private, have to follow certain evaluation process and publication criteria to meet qualification of high education institutions from authorities. This shrinks the distinction between the public and the private universities and depressed the diversities of education. This character might be worth of putting into this discussion.

  • 4. Scott Masten  |  10 April 2015 at 10:06 am

    Just time for a short remark for now, but to add a dimension to issue: I attended a talk by Burton Weisbrod here (at the University of Michigan) some years ago at which a professor from the School of Education interrupted Weisbrod to insist that Michigan was not a public/state university. Her argument, as best I could tell, was that, because U-M (along with Michigan State and Wayne State) is constitutionally independent of the state government, it should not be classified as a state university. I doubt she would have stuck to that argument, however, if she’d been terminated without due process. My point being that the classification is likely to differ depending on the issue at hand.

  • 5. epopp  |  10 April 2015 at 12:25 pm

    The other big way “private” universities are not so private is that a substantial chunk of their revenue comes from government-subsidized grants and loans. Yes, they are channeled via individual students, but that federal money props up the whole system. In addition, because private colleges charge higher tuition, as the pool of federally subsidized loans expands (as it has dramatically over the last 20 years), more of that money goes to private than public universities — at the same time that state appropriations are decreasing. So perhaps the privates are becoming more public, even as the publics are becoming more private?

  • 6. Peter Klein  |  10 April 2015 at 1:18 pm

    Great comments. Perhaps we need to place the discussion of nominally private universities within the larger context of “hybrid” organizations such as privately owned regulated monopolies (water, gas, electricity, cable), defense contractors and other private firms that mainly serve government clients, publicly owned organizations that mainly serve private clients (Scott, how about the University of Michigan Business School?), various kinds of public-private partnerships, etc. The problem is not unique to universities. So besides ownership, governance, funding source, clients or customers, and regulation, what else should we include? Perhaps objectives (profit maximization, stakeholder wealth maximization, manager’s utility, some broader social objectives), which differ in their measurability, whether consumption is voluntary or compulsory, whether competition is allowed, how performance is measured. . . . What else?

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