Needed Reforms for Public Higher Education in Texas (and Elsewhere)

Texas faces a massive budget shortfall in the next biennium (somewhere between $15 and $25 billion), and the state's options are limited by court decisions (K-12 education) and federal mandates (health care). The budget axe will fall disproportionately in the area of higher education. This juncture provides both great opportunities and great perils for the Texas Republican Party. If the Republican legislature simply cuts the higher education budget, without further changes, the university bureaucracies will make the cuts as painful to students as possible, counting on a political backlash from students, parents, and alumni. The GOP could lose the support of an entire generation of youth, perhaps forever.

There is an alternative scenario, however. Republicans could use this budget crisis as a triple opportunity: saving both taxpayers and students billions of dollars, while empowering students to improve their own education by greatly expanding their freedom of choice. By creating a true free market for education within existing universities, our state leaders can harness the power and efficiency of the market to dramatically improve education while eliminating waste and abuse. We can thereby improve access and increase the number of students completing a meaningful degree.

The following twenty reforms would revolutionize higher education in Texas, bringing it out from the centralized, bureaucratic mass-production model of the early 20th century and into a new world of entrepreneurial responsiveness to demand. The first six reforms constitute a single, inter-dependent whole: the Entrepreneurial Professor Model. The remaining fourteen further extend the spirit of the free market, transparency, and public accountability. Each can be implemented incrementally.

The Entrepreneurial Professor Model

1. Tie the salaries of professors and lecturers to the number of students they attract to their classes.

(a) We start with a living wage ($30K) plus benefits.

(b) Any additional salary comes in the form of a tuition-based bonus, representing a fixed percentage (say, 50%) of the tuition income generated by students enrolled in the teacher's classes, up to a maximum of 320 students per year (960 student-hours). Each instructor may teach up to eight classes per year. Professors engaged in research may derive additional income from their externally funded grants.

2. Tie the salaries of the administrators of colleges, departments, and centers to a fixed percentage (4%) of the tuition income generated by the unit's total enrollment.

3. Empower both individual professors and colleges and departments to rebate tuition directly to their students, with the costs of the rebates deducted from the salary bonuses of the professors and administrators. In this way, we introduce real price competition between colleges, departments, and professors: all will offer lower tuition rates in order to attract larger numbers of students.

4. Empower professors to hire individual teaching assistants for their courses, with the salaries of the assistants fixed by negotiation and subtracted from the professors' bonuses. Thus, professors will be competing with one another both for students' tuition dollars and for talented assistants, with the market determining the tuition rate for each course and the salary for each assistant.

5. Empower each professor to choose which courses within his or her field to teach each semester, and to set enrollment limits, in order best to meet student demand.

6. Apply a fixed grading curve (no more than 15% As, 50% As and Bs, 85% As, Bs and Cs) to all undergraduate courses. Professors whose grades deviate from the curve will lose a corresponding share of their tuition-based bonuses (i.e., they lose the bonus for each student whose grade exceeds the curve). This provides a powerful incentive to eliminate grade inflation and raise academic standards. The higher standards will in turn transform the campus culture, replacing partying with studying. A limited number of honors sections (with students whose grades and scores are a full standard deviation above the average) could be exempted.

Zeroing Out the Direct Appropriations to State Colleges and Universities.

7. Completely eliminate all direct subsidies from the state to colleges and universities (a savings of $17 billion per biennium). In their place, we increase scholarships and college-loan subsidies that go directly to students, and that can be used at any state-certified institution of higher education. This empowers students to choose the college or university that best meets their needs, whether public or private, secular or religious, non-profit or for-profit.

Restore Guaranteed College Loans from Private Lenders

8. The Pelosi-Reid Congress abolished federally guaranteed college loans from private lenders, replacing them with a federal monopoly. This provides Texas with the opportunity to create a competing system of state-guaranteed loans. We can prevent brain drain by limiting the subsidy to those who remain in the state after graduation.