Savvy business owners and managers are always looking for efficiencies in order to enhance profitability. Not so in government. The motivations are different there.
Government officials tend to resist change. Once a government benefit, building or department is created, people and jobs become dependent on maintaining the status quo. And those people wield political clout.
This built in resistance to change explains why South Dakota subsidizes an excessive number of school districts, counties, governments and public universities, and seems to lack the political will to do anything about it. A good example of this is the recent response of the South Dakota Board of Regents to our expensive and chronic oversupply of state funded higher education institutions.
Discounts to Fill Empty Seats
The Board of Regents is responsible for running the state’s six public universities. They met in mid-December and decided to expand the availability of already generous price discounts in an effort to sustain enrollment. They expanded the in-state tuition program to a few more states and announced a new program for state employees.
The in-state discount was probably originally intended as a logical benefit for South Dakota residents. But it has evolved into a widespread discount for students from a dozen states. College bound students from Iowa, Nebraska, North Dakota, Minnesota, Wyoming, Montana, Colorado, Illinois, Wisconsin, Kansas, Missouri and South Dakota now get it.
South Dakota has positioned itself as the low-cost provider of higher education in the region. In fact, Forbes reportedly recently ranked it as the most affordable state to get a college degree. But that strategy presumably comes at a cost in a state with limited resources.
The Regents also decided to create another new discount program, giving state employees half price tuition. Some hope this may help worker retention. But it seems like another distraction from the real problem.
Excess Capacity and Decreasing Demand
Unfortunately, discounts fail to confront the core issue which is excessive capacity combined with decreasing demand.
At some point in the past, we overbuilt our higher education system and now have more capacity than we need. Sadly, the problem is only going to get worse.
An historic drop in higher education demand is reportedly on the way. The CEO of the Board of Regents was recently quoted as saying the higher education landscape is changing drastically with big demographic challenges coming up in the next decade.
Most Non-Resident Graduates Leave the State
Supporters of the expanded in-state discount program hope it helps with workforce development. Of course, we need more workers in the state. But the unsettling reality is that 72% of university students from outside South Dakota leave the state after we provide them with an inexpensive education. Meanwhile, many of my business friends report that what they really need is more graduates from the state’s technical schools.
Financial Discipline Welcome
The legislature recognizes there are problems in our higher education system. In 2020, they imposed a bit of financial discipline in higher education with SB 55. It required more regular efforts to identify and eliminate programs with low enrollment, low graduation rates and a lack of financial viability. Good move! But it did little to address the underlying problem.
Reducing Supply Would be Logical
A better strategic move, in the face of an overbuilt higher education system and declining market demand, might be to close a university or two. While that sounds drastic, it warrants serious consideration with changing market dynamics.
In 1970, Richard Gibb, the commissioner of higher education, conducted a study of South Dakota’s system. His report recommended reducing the number of state institutions from seven to four. But that didn’t happen.
Many public officials I have talked to privately over the years acknowledge that we have too many universities in the state. None know what to do about it. Collectively, we lack the political will to do what we know we should. Meanwhile, there is a precedent that few seem interested in following.
In the 1980s, Governor Janklow recognized that the state had too many universities. He turned the one in Springfield into a women’s prison.
Come to think of it, maybe we could reduce our excess supply of universities by turning one into a new state men’s prison. South Dakota needs one, and Lincoln County would likely welcome that idea. This could be a “two birds with one stone” solution.
Okay, perhaps not. But if this were business, we would indeed be exploring creative solutions to our oversupply problem. And if this problem were handled in a businesslike way, perhaps we would have more money available to support our technical schools and pay our K-12 teachers.