Summary: We need to know the actual educational cost for one undergraduate at the University of Minnesota for one year. Tuition dollars and state appropriations for education should not be used for other purposes such as subsidies of research, athletics, or the building of empires.
I've tried to get an answer to the title question for some time and have been unsuccessful. The University of Minnesota administration in trying to explain our bargain basment prices for out of state tuition (not reciprocity, but regular out of state rates) has made the claim that the difference between in state and out of state tuition, approximately $4000, covers the full cost of education. There is also data from the outside auditor's report of last fall that indicates that tution pays at least 85% of the cost of education.
Since the state also kicks in an amount approximately equal to tuition, then the claimed subsidy that is required should easily be covered?
So why is it necessary to raise tution?
We need to identify the true cost of education so that we can, by subtraction, identify what are not educational costs and cut them if necessary. This is the first step in answering the question: Why has the cost of tuition at the U risen so much faster than inflation.
There is an excellent post by Bob Samuels - who is at UCLA - entitled "Higher Education? Everything You Know is Wrong (about Research Universities)"
As I have argued elsewhere, the problem is not that the universities have taken on many different functions; the issue is that these institutions engage in false and misleading accounting practices that result in escalating costs and decreased educational quality.
For example, most schools argue that they lose money on each student because the true cost of education is much higher than the price of admission; however, when universities make this claim, they are secretly arguing that everything a university does should be paid for by each undergraduate student.
By concentrating on the true instructional cost, I have argued that universities could easily freeze tuition and increase enrollments and still turn a nice profit, but in order to do this, schools have to be honest about how they spend their money.
I have also warned that if universities do not embrace a more transparent form of budgeting, they will suffer a public backlash that is now gaining steam.
For instance, the University of California currently receives $10,000 from each undergrad and $14,000 from the state for each student, but only $5,000 of this amount goes to instructional costs. This means that the majority of undergraduate funds goes to pay for research, administration, and other activities that are not directly related to undergraduate education. In other words, undergraduate students and the state are unknowingly subsidizing the research mission.
The first step toward returning to our true land grant mission at the University of Minnesota is an accurate and transparent account of where tution money and state funding for education actually goes. And the way to do this is to answer the question: What does it cost to educate one undergraduate for one year at the University of Minnesota?
[And please don't say that it is difficult to do. Put some numbers out on the table. Then we will actually have something to discuss. I've heard that only 1% of the building space at the U of M is classrooms. Is this true?]