Graham B. Spanier

President, Pennsylvania State University
Keynote Speaker and Honorary Co-Chair, Forum 2005

The Future of the Academy: Coping with Changing Demographics and Privatization

The College Board Forum 2005, New York City
Sunday, October 30, 2005

N.B.: Graham Spanier's presentation showing slides and graphs referenced below is posted on the Penn State website at: http://president.psu.edu/presentations/FutureAcademy_CollegeBoard.pdf

The Future of the Academy

Thank you for this opportunity to discuss issues important to the future of American higher education. I want to begin by commending the College Board for its good work on behalf of education. Projects such as the National Commission on Writing, to name just one, chaired by Bob Kerrey and ably advised by Gaston Caperton and Gene Budig, couldn't be more important today.

As a demographer, I've always felt that understanding the changing demography of our nation can be enlightening in planning for the future of nearly every enterprise in America, and education is no exception.

Along with demography, there are some additional forces reshaping American education: rising costs, increased competition, and declining resources from state governments, to name a few.

Our role as educators is changing on many fronts, and we must continue to adapt.

The Worth of a Degree

First, we might ask, why is higher education so valued in our society? We cherish an educated citizenry and the associated contributions to human development, cultural advancement, and the quality of life. But from a strictly economic viewpoint, lifetime earning power of an individual increases substantially with each academic degree earned — roughly a million dollars more with a baccalaureate degree and more than $2 million additional with a doctorate. Some estimates have put this value even higher.

Education is often seen as the great fault line that determines who can be part of the American dream. In 1950, 80 percent of jobs were classified as "unskilled." Now, an estimated 85 percent of jobs are classified as "skilled," requiring education beyond high school.¹

Percent of High School Students in College

A direct result of this movement is that the percent of high school graduates who choose to go on to college has climbed over the last few decades.

Today, about 67 percent of high school graduates nationally attend college, compared to less than 50 percent in 1980.

Enrollment and budgetary crises would have confronted some colleges and universities had this trend not offset the decline in the number of high school graduates that certain states have experienced. Some states will continue to face this challenge.

Projected Change in H.S. Graduates

As you can see, much of the Northeast is expected to experience a decline in its pool of traditional-age college students.

With a few exceptions, the Midwest and Great Plains will not fare any better. Most of the future increases in high school graduates in the U.S. will be in Western and Southern states.

Only nine states will find themselves in a position of double-digit increases in high school graduates. You see these in green.

Thirty states will experience a decline or no growth in the number of high school graduates. (These are shown in red.)

The expected population stagnation of high school students does not bode well for higher education in the United States. College enrollment in China grew at an average annual rate of 20 percent between 1995 and 2003 and in Malaysia by 17 percent annually. If these and other countries sustain such rates, in only a short time their higher education enrollments will surpass the U.S.²

U.S. Population Profile Is Shifting

A forward look at the United States reveals:

1. All states will gain population, but just three states — California, Texas, and Florida — will account for 45 percent of the net population change in the United States.³
2. The U.S., as a whole, is aging. The size of the elderly population in all states is projected to increase.⁴
3. About 43 million Americans move every year.⁵ Interstate migration will favor the South, with the Northeast continuing to lose people.
4. Diversity will increase, but again, this change will not be evenly distributed across the country.

Fastest Growing States

This past decade was the only decade of the 20th century in which every state gained population.⁶ However, the entire Northeast only saw a 6 percent increase. The West and the South were the fastest growing areas, with 20 percent and 17 percent growth, respectively.⁷ You can see by the states at the top of this graph shown in red — California, New Mexico, Hawaii, Arizona, and Nevada — that this trend is expected to continue to 2025.

You may note that my home state, Pennsylvania, is next to last in growth in our nation, ranked just ahead of West Virginia.

That means competition among universities for 18-year-olds will be more acute than ever, and the pressure to attract non-traditional students will increase dramatically. Given the stagnant demographics of some states, competition for out-of-state students will intensify.

Elderly Population Growing

In 2011, the first Baby Boomers will turn 65, and within 17 years, 70 million will follow suit in the U.S.⁸

By 2025, senior citizens will be a dominant force. This map shows that about two-thirds of the nation will be home to a significant elderly population by then. This gerontological drift could have a great effect on the public support — or more precisely the lack of it — that education receives in the future. Will older individuals, who vote at much higher rates and have strong lobbies, support the education of the state's youth — especially when the competition is health care and other important needs of the elderly?

So, let's talk about the future elderly. The Baby Boomers.

Graying of Our Faculty

Many Baby Boomers have delayed life stages — from marrying to having children — and there is little reason to expect that they won't do the same with retirement. A 33 percent increase is forecast in the number of people in the national workforce who will be between the ages of 65 and 74 years old.

A 2004 survey reported that 34 percent of the nation's full-time faculty were 55 or older, compared with 24 percent in 1989.

Reasons for this aging trend include massive hiring in the 1960s, low faculty turnover, good health care, poor stock market performance, and, as I mentioned, a decline in the rate of retirement.

Nation's Growing Diversity

Let me turn now to the important topic of diversity.

National demographic projections suggest that about 65 percent of the growth in population through the year 2020 will be in ethnic minority groups, particularly Hispanic and Asian populations.⁹ But as with age, this population change will not be uniformly distributed across the country. In fact, three-fifths of the projected increase in minority populations will take place in just three states: again it's Florida, California, and Texas. A portion of this population growth will be fueled by immigration.

Eighty percent of students attend college in the same state from which they graduated from high school,¹⁰ so it's going to be pretty tough for our institutions to provide our students with an educational experience that mirrors the nation's diversity if we don't have that diverse pool to draw from within our own state.

Minority Faculty across the Nation

Stepping up the recruitment of minority faculty will be an even bigger priority. Despite efforts to increase minority faculty, national numbers still show that faculty of color are severely underrepresented on our campuses. This will continue to require our serious attention as our nation becomes more diverse.

Female Faculty across the Nation

Another significant trend is that more women are attending college.

In the U.S., the proportion of women among all faculty increased from 32 percent to 39 percent between 1987 and 2003. The hiring of female faculty members is a priority as our campuses also experience a gender shift among our student population.

Majority Are Women

Today, the majority of college students are women, who now make up more than 56 percent of the undergraduate population on U.S. campuses.¹¹

Nationally, for every 100 men who earn bachelor's degrees, 133 women do.¹²

By 2020, the gap is expected to widen to 156 women per 100 men earning degrees. This raises a range of questions for educators and policy makers.

Family Structure

In the area of family structure, there are a number of demographic shifts that have an impact on our students, affecting everything from their access to college to the financial aid they need to additional student services that must be provided.

These changes — which run the gamut from continued high divorce rates and the rise of single-parent households to lower fertility rates to the growth of unmarried couple households — have greatly impacted our student population.

As an example, over the last three decades, the proportion of married-couple families with children under age 18 declined from 40 percent of all U.S. households to 24 percent¹³ and fertility rates have dropped substantially.¹⁴ More relevant is that today's students come to school with a broader array of personal and familial challenges. Their demands on our health care facilities and our counseling services, for example, have increased dramatically.

Among all women who had children in 2003, nearly 35 percent were unmarried mothers¹⁵ — who have the highest poverty rate. Poverty is a huge deterrent to obtaining an education, but ironically, education is the key to addressing poverty. So there is quite a disconnect here.

All of the changes I am mentioning are having an effect on the students who will be arriving at our doorstep. Most will require financial assistance and more will have jobs to help them pay for their college education.

I have summarized several major demographic trends that are having and will continue to have a tremendous impact on education. In addition to these demographic trends is another phenomenon that is reshaping our institutions.

There is a shifting landscape in funding of the nation's public research universities. This is leading to the increased privatization of public higher education. The reality is that while public universities are becoming more like their private counterparts, private colleges and universities are also becoming more like the publics.

Allow me to demonstrate this.

Colleges and Universities

There are 634 public four-year institutions of higher education in the nation and 1,546 private, four-year institutions. Combined with other institutions like community and junior colleges, we collectively educate more than 16 million students at a given time. These numbers do not take into account the 850 or so for-profit institutions that are also awarding degrees.¹⁶

Collectively we attract some of the best faculty in the world, who in turn teach and inspire our students.

Postsecondary Enrollments

Public institutions are educating the majority of American college students. This has been true for about the last 40 years.

However, many people — including too many elected officials -- now see postsecondary education as a private benefit rather than a public good. This view has aggravated long-term funding problems for public universities as they have received a shrinking share of state dollars, especially when support has been shifting to other programs like health care. Each new dollar in state health care spending crowds out higher education by about six to seven cents, according to a Brookings Institution report.¹⁷

We have entered an era of major shifts in funding, growing consumerism, budget cuts, increased competition, and rising expectations for higher education. These issues have brought with them other challenges related to quality, costs, rising tuition, accessibility, and the burden we may be placing on families.

Public Funding for Select Institutions

The country's most distinguished public and private universities compete for students, faculty, grants, and contracts. All of these schools receive public money to support their enterprises. Here are four examples of well-known private institutions and the percentage of their budgets that come from public dollars. Compare them against Penn State's federal and state public income, which amounts to 29 percent of our total expenditures.¹⁸

These funds include not only state dollars but government-supported student aid, federal appropriations, and sponsored grants and contracts that come from public funds.

Again, while public universities have become more private, private universities have become more public.

Commitment to H.E.

State support of higher education has been declining for decades. There are, of course, variations among the states, with a few institutions faring better than others. But overall, in the last 10 years, taxpayer support for higher education in the nation has fallen to a low recently of $6.59 for every $1,000 of personal income earned. These numbers also include money appropriated for state scholarships and other financial aid.¹⁹

The savings that states are incurring now will cost them in the long run, when there is a shortage of skilled workers and less innovation to bolster the economy.

As states continue to back away from providing sufficient educational funding to public universities, these institutions continue to turn to other sources of funds — most notably tuition — to absorb the burden. We are shifting costs for higher education from the taxpayer to the students and their families. Public institutions are in fact replicating a pattern of high tuition/high aid, which started in the private sector some years ago.

This trend troubles those of us who believe higher education is a public good, not just a private benefit.

Penn State's Declining Appropriation

At Penn State, we've been struggling with a lack of adequate state investment for decades. In fact, we have the dubious distinction of having had our revenue lines cross in the early 1980s, when tuition replaced state funding as the largest portion of revenue in our general funds budget.

Currently, only 10 percent of Penn State's total budget comes from state appropriations. This gap reflects long-term public policy outcomes that moved funding away from higher education to other sources.

Still a Bargain

According to the College Board, by age 33, the typical college graduate who enrolled at age 18 has earned enough to compensate for both tuition and fees at the average public four-year institution and any earnings foregone during the college years.²⁰

Tuition, however, remains a serious concern for a number of reasons. The most pressing is affordability and the potential for high tuition to limit access for qualified students.

Penn State Tuition Bill by the Numbers

Over a nearly 20-year period, state dollars for public universities have not kept pace in helping to cover the rising costs associated with educating students.

At Penn State, as at other public institutions, the reality is that we spend more per in-state student than we ask for in the form of tuition.

Attracting out-of-state students — historically more common for private institutions — is now a regular practice of most public institutions.

Financial Aid

For the majority of students, financial aid is critical to attending college. More than 63 percent of undergraduate students receive some form of financial aid. In 2004-2005, about $129 billion in financial aid was distributed nationally — a record amount.²¹

Between 2001-02 and 2004-05, the percentage of undergraduate funding in the form of grants decreased from 50 percent to 46 percent, while loans increased from 43 percent to 46 percent. ²² Across the nation undergraduates are graduating with an average debt of $19,300 — a major disincentive for many lower-income students.²³

Recent estimates by Nellie Mae suggest that as many as 25 percent of college students may be relying on credit card debt to help finance their education.

Endowments of Select Universities

Private institutions have been in the fundraising business longer than public institutions and tend to have much larger endowments. These pools of money obviously are a tremendous resource. According to one widely cited annual study of private institutions, only 19 percent of students paid full tuition in 2002, down from 37 percent in 1990.²⁴

And so, like their private counterparts, public universities have made philanthropy an integral part of their culture and have also looked for other sources of income.

Growing Federal Support

Considering federal support for research, instruction, and other services, as well as federal student aid, Penn State, and perhaps a few other public universities, now receives more funds from the federal government than from state government, again bringing into question what it means to be a state's flagship university.

Some institutions may be thinking that if the state is unwilling or unable to help, a move toward privatization would make sense. In exchange for less state funding, the institution would gain more autonomy. However, state appropriations are still the largest single source of funding for current operating expenses at many public universities — making a move to full privatization a risky scenario.²⁵

Crossroads in Higher Education

We are at a crossroads, where financial considerations will force us to refine our missions and to become more entrepreneurial and more judicious in our use of resources. Already, many of us are partnering more with the private sector, pushing for more commercialization of our research, asking faculty to generate more resources, and moving toward more professional programs to meet public demand.

For public universities, the demographic changes we are facing combined with the unmistakable trend of flagging state support and the associated privatization of public higher education is already having an impact. Simultaneously, private universities are seeking more public funding, especially for federal and state earmarks and state-funded building programs like the one recently proposed in Pennsylvania.

I have only scratched the surface regarding the implications of these trends for higher education. These trends tell our future — and it is a future filled with enormous challenge.