November’s unemployment rate in Minnesota fell to 3.5 percent, a 14-year low. That’s a welcome sign of a strong economy, but it’s also a harbinger of what may be this state’s biggest economic challenge in the next decade — a shortage of skilled labor.
Now and for the foreseeable future, Minnesota needs all of the talent-drawing power the University of Minnesota can muster. That’s why the Board of Regents should be hesitant about going down the tuition path President Eric Kaler recommended this month.
Kaler asked the board to boost nonresident tuition for out-of-state students from places other than Wisconsin, the Dakotas and Manitoba (where tuition reciprocity agreements prevail) by 60 percent over the next four years, starting with a 15 percent jump for new students in 2016-17. That move would erode a competitive advantage in student recruitment that has served both the university and this state well.
During the financial storm of 2008, the Board of Regents gambled that by cutting nonresident tuition a dramatic 36 percent — from $19,580 to $12,500 — the university could boost nonresident student enrollment enough to derive more revenue from that student cohort. The gamble paid off handsomely. Not only did enrollment more than double, but revenue generated by nonresident students swelled from $26.5 million in 2007-08 to more than $100 million in 2014-15.
Less quantifiable benefits have also ensued. The academic quality of nonresident students has been high, boosting the reputation of the university’s entire undergraduate program. Minnesota is increasingly seen as a school with national drawing power. That has happened without diminishing the share of undergrads from Minnesota. Instead, the cohort that has dwindled since 2008 is from the reciprocity states, and that change has been a net financial plus for the university.
Nonresident tuition has climbed gradually but steadily since 2008 and is now $20,660 per year. That’s still at the bottom of the Big Ten. Kaler’s proposal would step up the pace of that climb, bringing it to the middle of the Big Ten pack by 2020. Being “more in line with our peers” would send the market a signal about the value of a University of Minnesota undergraduate education, he said. He also believes a tuition boost now will generate more revenue — if it does not shrink nonresident enrollment.
That’s a big “if.” The students who Minnesota is attracting from other states have plenty of options — including all of the other Big Ten schools that Minnesota will resemble in tuition rankings if Kaler’s plan wins Board of Regents approval. Standing out in the crowd won’t be as easy. To be sure, many nonresident students will qualify for assistance and thus pay less than the $35,000 anticipated for 2019-20. But the marketing distinction of a low sticker price will be lost.
Kaler cites one more impetus for his proposal: Several Republicans in the state House majority don’t like low nonresident tuition. “There’s a perception in the Legislature that Minnesotans are subsidizing out-of-state students, and that’s unwise for us to ignore,” he said.
We agree that such pressure ought not be ignored: It ought to be refuted with facts. Even at its low point in 2008-09, nonresident tuition fully covered the cost of instruction. No cross subsidy has occurred. Any claim that low nonresident tuition has shifted more of the institution’s cost burden onto residents’ shoulders is misinformed.
Legislative critics maintain that if nonresident tuition were higher, resident students could pay less. Kaler’s proposal makes no such promise. That reticence is appropriate, given the possibility that higher nonresident tuition will produce the opposite result. It could lead to fewer nonresident students, a diminished national presence, less revenue and a bigger cost burden for students from Minnesota.
Worse, it could lessen the potency of one of the state’s best talent magnets just as a long-forecast labor shortage takes hold in the Upper Midwest, and other states in the region make their moves to attract students from around the country and the globe.
If legislators can’t see the potential consequences of Kaler’s proposal, the business community surely can. We hope employers join us in urging regents to scale back Kaler’s proposal, keep next year’s nonresident tuition increase in the single-digit range and factor Minnesota’s need to import young talent into future tuition policies.