Wednesday, December 3, 2008

Shock to the System

Even the massively funded endowments of universities like Harvard have been slammed hard by the falling economy. TheDeal.com (December 3) reported that: “[Harvard]'s endowment, the largest in the nation, lost 22% of its value since July 1. That tallies up to about $8 billion... and is expecting a 30% loss for the year, but it could be even greater than that as valuations for the fund's real estate and private equity holdings have yet to be updated.” The university is "reconsidering the scale and pace of planned capital projects… and are taking a hard look at hiring, staffing levels and compensation to consider how we can reduce overall spending."

If this meltdown hits the well-funded colleges and universities, the impact on public educational institutions has to be beyond devastating. States are reeling from the need to create jobs while their tax base slips – whether income tax, property tax, sales and transaction tax or extraction royalties (for harvesting and mining rights) – all of which is forcing cuts in college aid, support and putting pressure on increasing the effective tuition costs for students at the worst time to cut our ties to the future.

A recently-issued biennial report from the National Center for Public Policy and Higher Education, (a non-partisan group that supports higher education) reported in the December 3, 2008 New York Times, presents the scope of the problem for most Americans. The Times summary: “Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families… ‘If we go on this way for another 25 years, we won’t have an affordable system of higher education,’ said Patrick M. Callan, president of the center… ‘When we come out of the recession… we’re really going to be in jeopardy, because the educational gap between our work force and the rest of the world will make it very hard to be competitive. Already, we’re one of the few countries where 25- to 34-year-olds are less educated than older workers.’” Currently, the United States ranks a mediocre 10th in the world in per capita college graduates. Can we really afford to slip much farther?

And it’s not just university and college education that is needed; people with discernible skills, specialized training, are also required. Sheila Maguire, writing for CNN (December 3) wrote: “It may come as a surprise… that [even today] some employers are desperately searching for workers with the right skills… Hospitals looking for X-ray technicians, manufacturers looking for machinists, and energy suppliers looking for people to service rigs and keep them safe are all facing real worker shortages… These jobs require specific technical skills that can only be gained through focused training that is closely linked to the needs of local businesses. In fact, the largest portion of jobs in our labor market (nearly half) require some kind of technical training beyond a high school diploma, and these ‘middle-skill’ jobs are experiencing the greatest shortages of skilled workers.”


While blue collar trade schools aren’t plagued with the same capital requirements, everyone on the higher education side is clamoring for money public money or donations from institutions and alumni. After, we are incurring massive deficits to get out of this recession, but it is the economic value produced by the generations still in school that will be saddled with paying off this debt… they need the education and training to get this job done. Yet increased spending for higher education is competing with other recovery funds, and donations and tax revenues are plummeting. Perhaps we need to rethink how we pay for higher education.

With the exception of many public services jobs (particularly primary and secondary teachers, whom I think should simply be exempt from state and federal income taxes for the first $30K of their income to incentivize the recruitment of new teachers), a college degree generates a higher quality of life and a better income. The same is true for many trade schools.

While we already have progressive income tax (higher rates for higher earning individuals), perhaps it is time for us to examine another alternative, an optional education tax – a permanent percentage of adjusted gross income based on the number of years of college attended (or training programs in which a certification is generated) – that would eliminate the need for loans and tuition payments for students willing to accept this “slow payback” structure. Computer programs can address the issue through social security numbers; while the government would be funding the program at inception, eventually, it should be self-sustaining.

Whatever the solution, we will be struggling in an America we might not want to live in if we cannot train and education the people we expect to live here. It is about survival. I welcome other notions and ideas… this is just a “thought stimulus package” from me.

I’m Peter Dekom, and I approve this message.



1 comment:

thom taylor said...

"No Child Left Behind" ironically aided the educational and social polarization by removing manual arts training. Another government program gone wrong...