The policies of state government have historically been the foremost device for
"steering" higher education in the U.S. At the most basic level, principles
embodied in the U.S. Constitution make matters of education--both K-12 and postsecondary--an
explicit state assignment. While responsibility for the public schools has been given
to local bodies (with the expectation that local tax money will be a major feature
of school finance), public colleges and universities are largely creatures of the
state. In many states, the assets of the institutions are actually owned by the state.
Even in cases where this is not so, state government wields enormous influence, through
both the power of the purse and its general regulatory authority.
Certainly, the federal government also plays a significant role in shaping the
directions of higher education. But federal influence is exercised indirectly through
the clients of higher education rather than through direct engagement with providers.
For example, the majority of federal funding of higher education flows through a
variety of student financial aid programs that empower students by providing them
with greater choice and access within the academic marketplace. A second major federal
influence is accomplished through its funding of research activities. In this case,
the federal government enters an established marketplace as a "client"
in its own right, acting in the name of the larger society. Although federal research
funds flow through institutions, they get there as a result of client choice, exercised
through proposal processes and awarded on the basis of peer review. Moreover, such
funds are allocated on the explicit condition that the institution will do something
in particular. Herein lies a major distinction between the roles of the states and
the federal government in higher education. State governments pursue public purposes
primarily by assuming responsibility and providing direct operating support for public
institutions as societal assets. The federal government, in contrast, pursues certain
social objectives primarily by funding clients and by buying services of multiple
providers, both public and private.
Postsecondary education systems are the creatures of 50 distinctive state political
cultures. It is not surprising, therefore, to find considerable variety in the public
policies relating to these systems. States also develop and carry out these policies
through a wide variety of entities: the state legislature, the governor, and various
regulatory or coordinating agencies. Yet despite this variation, state policymakers
have always had a relatively limited policy toolkit at their disposal, and they have
tended to use available tools in similar ways. The following subsections characterize
the dominant patterns.
Tool 1 -- Mission and Program Approval: Determining What
Institutions Can and Cannot Do
In most states, state government has the power to determine whether or not particular
institutions will be allowed to operate within the boundaries of the state, and the
conditions under which such permission will be granted. For public institutions,
state action specifically establishes (and, rarely, disestablishes) institutions.
For private institutions, most states have created registration or licensure requirements
that must be met before such institutions are allowed to operate within the state.
But most states are no longer in the position of creating new institutions. Almost
all, however, are continually faced with decisions about what "businesses"
existing institutions should appropriately undertake. These decisions are shaped
by policies that deal with the following three areas.
1. Institutional Mission. States can define the missions of individual
institutions, systems and sectors (e.g., community and technical college systems
as opposed to university systems). While there are many dimensions to institutional
missions, the key ingredients tend to be:
- the extent to which the institution will be engaged in research and public service
in addition to its basic instructional function;
- the levels of degrees that the institution is authorized to grant (baccalaureate,
- the specific array of programs that can be offered; and
- the characteristics of the students that the institution is intended to serve.
Typical distinctions here include the academic ability of students (exercised through
differential admissions requirements) and the geographic region of the state from
which students can or should be drawn.
2. Program Approval. Policies regarding program approval are put in place
in part to constrain an institution's ability to unilaterally change its program
offerings, and, via this avenue, to indirectly alter its mission. In addition, the
authority to approve programs can help to balance the state's range of programs,
often taking into account the offerings of private institutions.
3. Geographic Service Areas. Policies regarding geographic service areas,
in essence, grant an institution exclusive rights to offer programs (within its assigned
mission) in a prescribed geographic region of the state.
States use policies regarding mission, program approval, and geographic service
areas largely to limit institutional competition and to avoid unnecessary duplication
of programs and services. They use this tool to limit regional competition for postsecondary
resources and to curb the inevitable drift of missions away from undergraduate teaching
toward the research university. In their quest for state-level efficiencies, however,
states also tend to create monopolistic environments for individual institutions--a
condition that seldom leads to efficiency or high quality. Given a more or less exclusive
market within a given area, institutions quite naturally presume that students will
have no choice but to come to them rather than the other way around. Indeed, when
rigid institutional missions do begin to break down, their collapse is often prompted
by specific demands for services from place-bound clientele--students who might in
fact be served by another institution that currently does not (or cannot within state
policy) offer certain programs. Such conditions are at the root of the phenomenal
success that proprietary institutions (e.g., the University of Phoenix) have recently
Because more and more of the clients to be served by postsecondary education institutions
will be place-bound and reside at a distance from institutions capable of meeting
their needs, competitive markets for postsecondary education will continue to arise
despite state attempts to "rationally" apportion missions and service areas.
This raises three key policy questions:
1. For which client groups will state subvention be provided?
2. What is the best way to bring existing educational assets (public, private
and proprietary institutions, and services delivered on- and off-site) to bear on
unmet educational needs? Further issues within this broader topic include:
- whether or not to remove existing constraints and let market forces shift institutional
attention to these needs;
- whether or not to create alternative organizational arrangements that better
match supply with demand; and
- how the necessary mix of institutional capacity and desired application of that
capacity can be achieved.
3. How can a state optimize institutional capacity designed for mobile students
while simultaneously optimizing services to less mobile students scattered across
Tool 2 -- Governance: Allocating Decision-Making Authority
State policies regarding governance of higher education have focused almost exclusively
on the allocation of formal decision-making authority to various entities
within an established hierarchical structure. These include:
- statewide policy boards (either coordinating or governing) and their executives,
- multi-campus system boards and their executives, and
- institutional governing boards and campus-level decision makers.
Policies here are chiefly concerned with specifying who gets to make which decisions,
and under what conditions particular kinds of decisions must be approved at levels
higher up in the hierarchy. This pattern is consistent with the larger policy perspective
noted earlier--one that reflects state "ownership" of institutions and
a desire to directly constrain or manipulate institutional actions.
To date, very little such control has been ceded to groups outside the formal
"chain of command." To the extent that others are brought into the
process, it is almost exclusively in an advisory role, as in the use of practitioner
advisory committees in two-year vocational programs. If higher education is to become
more client-centered, a promising approach may be to directly empower clients or
their representatives to make certain decisions outside the "chain of command."
For example, it might be appropriate under some circumstances to establish community
or regional groups to act on behalf of clients in setting priorities for the kinds
of programs to be delivered in a particular geographic area. This would constitute
a significant break with the current tradition, in which educational providers essentially
make this determination. Making this break is important because opposing interests
of providers and clients often lead to quite different conclusions about what should
be done. Clients seek both specific services and enhanced status for themselves and
their communities. Providers seek either the annexation of additional "protected
territory," or the ability to deliver courses or programs with high revenues
that can be directed toward internal institutional objectives like disciplinary research.
In this milieu, key policy questions include:
- What kinds of decisions, if any, should be made by groups outside the current
decision-making hierarchy, e.g., by bodies that act directly on behalf of clients?
- How can states structure the process to ensure the effectiveness of decision
making on behalf of clients?
- How can states facilitate client access to a wider range of providers?
- How can states ensure greater attention to public priority-setting and policy
leadership (see Tool 7) as opposed to system and institutional
A further question then becomes:
- How can the process be structured to allow this kind of shared decision
making to be effective?
Tool 3 -- Regulation: Prescribing "How" Providers
Should Go About Their Business
As state entities, public colleges and universities must usually comply with rules
and regulations that govern other state agencies. At the very least, the institutions
are subject to those applying to other nonprofit entities. Since governments have
tended to rely extensively on regulatory approaches rather than incentive systems
to provide guidance, most public postsecondary institutions must cope with multiple
regulatory requirements on an everyday basis. The extent to which colleges and universities
are exempt from such regulation varies considerably from state to state. In some
states, colleges and universities must conform to the regulations imposed on all
state agencies. In others, educational institutions are treated largely as public-benefit
corporations, and are subject to fewer regulations. In most states, regulations primarily
address contracting, acquisition of fixed assets, and requirements for reporting
information to state government.
The list of potential regulatory involvement--as experienced by some institutions
in some states--is much longer, however, covering such specifics as:
- the number of personnel to be hired,
- compensation of employees,
- reimbursement for travel expenses,
- reallocation of funds among line items and established budget accounts,
- procedures for purchasing goods and services,
- limitations on the use of consultants, and
- limitations on out-of-state travel.
These kinds of regulations can combine to create an operational straight-jacket
for institutions, making change very difficult. For colleges and universities to
adopt new ways of doing business that respond to client needs and that emphasize
innovative solutions to emerging problems, they must be freed of much of the red
tape that entangles them. But policymakers are loathe to eliminate regulation absent
an alternative that assures them equivalent leverage. Regulation is their most familiar
tool and no proven alternative yet exists to ensure that institutions attend to priorities
set outside the academe.
If institutions are expected to focus more fully on their clients, then additional
policy questions about approaches that offer alternatives to regulation, such as
institutional "steering," will have to be raised and answered. Some of
- What kinds of workable substitutes for regulation can be developed to
ensure that institutions adhere to good managerial practices and pursue priorities
that the government establishes on behalf of its citizens?
- What is the appropriate domain for regulation? In other words, in what
specific areas are regulations necessary?
- What are the characteristics of effective regulations? In other words,
what determines the regulatory approaches that work best to attain certain ends,
within different institutional and political environments?
Tool 4 -- Financing and Resource Allocation: Creating Incentives
and Subsidies for Action
Although regulation is probably the most ubiquitous policy tool employed by state
government to influence institutional behavior, policies governing the allocation
and use of state funds are probably the most powerful. This is true for several reasons.
First, the budget is the only available policy tool that involves both the
use of incentives and explicit prohibitions on particular kinds of institutional
action. Second, budget issues are revisited regularly--in most states annually and
at least biannually. Regulations, in contrast, are placed on the books permanently
and can remain there indefinitely regardless of their continuing appropriateness
or applicability. Third, budget decisions affect all operations of the institution,
not just isolated activities or processes. Finally, the budget is tangible and certain.
It is much less open to interpretation than statutes, which individual state offices
and officials can alter in the rule-making process and can interpret variously in
Currently, states tend to finance or allocate resources for public higher education
in the following ways:
- They are overwhelmingly oriented to funding providers. Funding for state
student financial aid, for instance, is small in comparison to institutional funding.
- They are geared predominantly to the support of basic institutional capacity.
Finance mechanisms address, for example, the acquisition of various productive assets
(faculty and staff, buildings, equipment, library books, etc.), rather than dictating
how such assets should be used. Directions about utilization (or more often, limits
on utilization) are generally provided by means of attendant regulation rather than
being incorporated into the allocation mechanism itself.
- They tend to emphasize equity of funding provisions among institutional recipients.
Perceived "fairness" to providers thus comes before criteria that might
be associated with clients and their needs.
- They tend to be oriented toward traditional, college-ready students. For
example, it is common for institutional funding mechanisms to exclude support for
developmental education and off-campus instruction from state subvention. Similarly,
the majority of student aid funding is provided to full-time, degree-seeking, on-campus
- They are based overwhelmingly on inputs or activity levels (e.g., student
credit hours taught) rather than outcomes (e.g., student credit hours completed or
educational objectives attained).
- They include few examples of funds being provided to empower client
groups other than individual students--for example, communities or key industries.
- Where a given institution uses technology to deliver instruction to students
at another institution, they overwhelmingly fund the "sending" institution
and ignore the student service and administrative costs incurred by the "receiving"
These tendencies perpetuate the status quo and provide institutions with few incentives
to adopt a stronger client orientation. This raises several important questions for
- What is the appropriate structure of a state higher education budget?
What should its fundamental components look like?
- What constitutes an appropriate balance between funding of providers and
funding that empowers clients? How can such a balance best be achieved?
- What mechanisms appear appropriate for addressing the educational needs
of specific, and often quite different, client groups?
Tool 5 -- Quality Assurance: Providing Accountability and
Historically, state government has eschewed direct involvement in most academic issues
relating to quality assurance. Exceptions are licensure requirements established
largely to help ensure that "fly-by-night" for-profit institutions are
not operating in the state, and program-review systems applied to public institutions
in many states. For the most part, however, quality assurance has been delegated
to regional accrediting bodies. Since regional accreditation is also the minimum
"quality" standard required for participation in federal programs, delegating
this function is not, on the surface, an unreasonable approach. But it has at least
two significant drawbacks.
First, regional accreditations have focused overwhelmingly (at least until recently)
on the quality of the providers' resources and processes, not on the quality of the
learning achieved. Although the accrediting bodies have lately added more outcome
criteria to their standards, their application remains uneven. Even under the best
of circumstances, the outcome measures applied are group averages. They are not the
kind of measures that certify individual learning and make that certification portable
and meaningful in the marketplace. Nor are they capable of saying much about the
particular segments of student population (and their characteristics) that do not
meet desired standards.
In the mid- to late-eighties, pressed by demands to ensure greater accountability
and "return on investment" for state resources invested in higher education,
these drawbacks induced a majority of states to institute assessment mandates for
public institutions. While often pursued with vigor, these policies were usually
subject to the same drawbacks experienced by regional accreditations: standards were
uncertain and institution-specific, and a predominantly "regulatory" approach
to implementation meant that assessment policies remained generally unconnected to
other state policy tools. More recently, states have attempted to reinforce assessment
with more standardized systems of performance indicators. Although these have ensured
greater consistency in factors used to assess institutional quality, few such indicators
are intentionally constructed to inform particular kinds of public or policy choices,
and even fewer address student learning. Indicator systems of this kind, however,
have significant potential, including helping to direct special-purpose funding (as
well as broader asset-renewal investments) and grounding new approaches to providing
A second problem with approaches to quality assurance that defer to institutional
providers is a corollary of the first. When almost two-thirds of the students who
graduate from college attend multiple institutions, restricting quality-assurance
mechanisms to the individual "nodes" in the chain of instruction--rather
than focusing on the collective experience and its consequences--misses key aspects
of the quality-assurance problem as a whole. These problems are exacerbated by the
growing inability of the degree (and particularly the baccalaureate degree) to certify
a common standard of attainment. Based solely on prescribed accumulations of credit,
current academic degrees are increasingly incapable of guaranteeing to society that
their conferees have achieved given levels of competence--particularly in those cross-cutting
areas like communication skills and critical thinking that lie outside the domain
of the major. The resulting depreciation of meaning puts both degree-holders and
potential employers at a severe disadvantage in the marketplace.
In an increasingly client- and market-centered environment, this provider-centric
view of quality assurance is insufficient. This reality has been recognized by entities
like Regents College and the Western Governors University that certify learning and
award degrees based on demonstrated competence in clearly specified areas. This movement,
if successful, promises to bring major changes to the higher education landscape.
Together with the changing nature of accountability, it raises a number of questions
about higher education policy at the state level. These include:
- How can state entities act more effectively in partnership with other quality-assurance
players like accreditors and third-party information providers to minimize duplication
of effort and ensure consistency of outcome?
- How can current state-level "performance reporting" and assessment
mandates be better integrated with other policy tools to help shape institutional
- What role, if any, does the state play in ensuring the effectiveness of new and
"indirect" quality-assurance mechanisms? Does the state have a role, for
instance, in certifying the certifiers?
- What role should the state assume in articulating credit- and competency-based
approaches to credentialing? For example, how, will the growing presence of credit-
and competency-based approaches affect inter-institutional transfer agreements that
have already been painfully negotiated at the state level?
Tool 6 -- Reporting Requirements: Creating an Information
Base for Decision Making
State governments currently collect massive amounts of data from institutions of
postsecondary education, particularly from public colleges and universities. Almost
uniformly, however, these data:
- are about institutions and their operations. To the extent that data are
gathered about students or other clients, they are compiled from an institutional
rather than a client perspective (e.g., current reporting requirements emphasize
ascertaining how many students are enrolled at each institution, rather than the
total number of students enrolled statewide or the number that are simultaneously
enrolled in multiple institutions).
- are collected primarily to ensure institutional compliance with established
- are not analyzed or disaggregated in ways that are helpful to either stakeholders
or decision makers.
In an environment where learners will exercise greater choice among providers
(enhanced by technology-delivered instruction) and where earning a traditional academic
degree is not the learner's only objective, students will increasingly have to be
viewed as active consumers instead of passive recipients of education. As a result,
they will increasingly need information that allows them to act as informed
consumers. The federal government, through such measures as its "Student Right
to Know" legislation, has taken the first halting step in this direction. The
popularity of the rankings presented in U.S. News and World Report and Money
Magazine attest to the public's continuing thirst for such information, even
though it is irrelevant to the vast majority of students.
Perhaps more importantly, states are beginning to use the market to induce institutions
to pay greater attention to improving client service and academic quality. In recent
years, even the most proactive states have become frustrated by their inability to
directly induce institutions to become more client centered. As noted, regulatory
initiatives are generally limited in scope and their influence rarely penetrates
to the institutional levels that directly serve or interact with students. At the
same time, incentive funding pools, though often effective, are generally limited
in size and duration. As a result, many now believe that the only way to effectively
induce institutional attention to client needs is to expose them to higher levels
of market competition.
If clients are to enter the marketplace for education as informed consumers, they
will need information about such issues as:
- the real cost of attendance,
- the likelihood that students "like them" (i.e., those with similar
experiences and competencies) will succeed in the particular educational undertaking
(e.g., completing a degree or earning a credential), and
- the consequences of successful completion (e.g., getting a particular job or
achieving an expected income level).
In addition, such information must be accurate and must allow the potential student
to make direct comparisons among alternative providers. Because of the perceived
credibility of respected consumer guides, students and other clients may increasingly
rely on them rather than on the "sales pitches" of individual provider
organizations to provide such information. Finally, to be useful in informing choice,
consumer information must incorporate data on non-traditional providers--including
proprietary institutions, corporate courseware providers, etc.--that have traditionally
fallen outside the realm of state interest and concern.
This emerging requirement for new kinds of information to inform consumer choice
raises a number of policy questions about the role of the state:
- Should state agencies serve directly as collectors and repositories of consumer
information? Or is it necessary to have a single national or international source
of information of this kind?
- What is the state's role in ensuring institutional compliance with requests for
information of this kind?
- Should states assume the responsibility of ensuring that reported consumer information
is accurate and, if so, how should they do so?
- How should states work with accreditors and other non-governmental entities involved
in quality assurance to develop an appropriate division of labor in providing consumer
Tool 7 -- Setting Public Priorities: Explicit Agendas for
State governments have a long history of stating their expectations for the higher
education systems within their province, and of requiring institutions to plan to
meet these expectations. These state agendas have until now focused almost exclusively
on desired institutional behavior--dealing, for example, with efficiency (e.g., exhortations
to "do more with less") or with the relationship between students and institutions
(e.g., issues of access, tuition prices, and involvement of senior faculty in undergraduate
education). Under the emerging paradigm for postsecondary education, the state will
increasingly need to enter the higher education marketplace directly on behalf of
society and its disenfranchised members. As this occurs, the role of state postsecondary
education agencies must expand to address such tasks as:
- developing a "public agenda" of priority issues to be addressed by
the state system of postsecondary education on behalf of the citizens of the state,
- building consensus around these topics--once identified--with the public and
with political and educational leaders, and
- most importantly, taking steps to ensure the coordinated use of policy tools
in a manner that promotes rather than hinders the pursuit of priority objectives.
This particular role of state higher education agencies is neither widely accepted
nor widely practiced. As a result, there remains much to learn concerning how to
effectively create and implement such a public agenda. Among the most important questions
are the following:
- What processes are most effective in establishing and building consensus around
a public agenda for state postsecondary education?
- What mechanisms are effective in allowing political leaders to embrace an agenda
that is far more specific than those with which they are familiar?
- How can support for meeting the unique needs of sub-state regions be generated
within this statewide agenda, without the process degenerating into traditional political
- How can agendas be advanced that are not so long-term that the political consensus
underlying them evaporates before significant progress is achieved?
- How can consideration of such public agendas be systematically embedded in budget
processes, established accountability processes, and other state-level governing
mechanisms, which often have lives of their own that are unconnected to such agendas?
The Larger Need -- Policy Leadership
Considering individual policy tools identifies a host of questions that must be addressed
by those responsible for one or another of the components of state policy. This treatment
of the policy tools as independent topics reflects the way policymaking most frequently
works: as a set of disconnected initiatives that are usually well-intentioned, but
that frequently work at cross-purposes to one another. The real concern is less the
nature and appropriateness of the individual tools than the question of how they
can be orchestrated to move a single agenda forward.
In many states, it is becoming more difficult to provide the kind of policy leadership
that might conduct such orchestration. Term limits and the associated rapid turnover
of legislators in leadership positions are inevitably leading to situations in which
power is more widely dispersed and policy dealt with episodically and in a piecemeal
fashion. It takes more skill and more persistence to accomplish systemic change in
this environment. While the individual skills of leaders have not diminished, their
ability to sustain an agenda--at least using the old rules of the game--is decreasing.
Their roles in positions of leadership with regard to higher education are short-term,
and the coalitions necessary to move an agenda tend to collapse quickly.
This structural problem is exacerbated by some of the realities mentioned previously,
especially: (1) the delivery of higher education is becoming more global, not respecting
the lines that demark political jurisdictions, and (2) the demand for higher education
finds its voice more and more at the local or regional level. In light of these trends,
the state is by no means the obvious community of solution. Yet the authority, the
responsibility, and the fiscal resources necessary for policy leadership in higher
education now reside at the state level.
In the face of this complexity, the urge to abdicate the leadership role can become
overwhelming. One manifestation of this urge is the growing popularity of using market
forces as an alternative to an unworkable policy framework. But there are serious
flaws using the "market" as a substitute for intentional policy, as outlined
1. Reliance on the market emphasizes higher education as a private good and diminishes
it as a public good. Achieving public purposes in a market environment requires a
public entity (the state) to enter the market on behalf of the collective citizenry--a
form of policy activism for which most states are ill-equipped.
2. The market has serious imperfections. First, almost all participants in the
market are subsidized to a greater or lesser extent. As a consequence, questions
about allocating subsidies arise--who gets them, who doesn't, and through what mechanisms.
Resource allocation decisions can be thrown into even sharper relief than historically
has been the case. Second, the market is poorly informed. Reliance on the market
requires a much more proactive stance on the part of the state to provide information
to that market.
3. For large numbers of individuals who need education (particularly basic skills)
but who historically have not taken the initiative to enter the market, market mechanisms
do not work.
4. For the market to work effectively and efficiently, there must be competition
at all levels. But many years of policy have deliberately and effectively placed
institutions in a monopolistic position. A move toward the market, if sincere, means
removing many layers of institutional protection.
At the core, the "state" faces a significant conflict between the two
roles it assumes vis-a-vis higher education: as the entity responsible for the creation
and maintenance of the major intellectual assets of the state (its public institutions),
and as an entity seeking to acquire certain services from those institutions on behalf
of the citizenry. Some have noted this as an inevitable conflict between "owner-operators"
and "purchasers of services."
In the end, therefore, embracing the "market" does not allow abdication
of policymaking responsibilities. But it does significantly change the nature of
policymaking--from a focus on regulating institutions to a focus on affecting the
This perspective on policy leadership raises several extraordinarily important
- What are the conceptual frameworks that can organize thinking about policymaking
in a client-centered, market-driven environment?
- Can effective state policy regarding higher education be developed in the absence
of a broader reform of state government?
- How can policy be given some continuity in an environment where power is dispersed
and leadership changes frequently? More importantly, what steps can be taken to help
ensure that policies act in concert in such an environment?
- Can some basic principles be articulated to guide policy leaders in this emerging
environment? Or must leaders deal with issues on a state-by-state basis?
- Can the entities established to provide policy leadership for state government
simultaneously play the "owner-operator" role and the "purchaser of
services" role? If not, what are possible alternative arrangements?
Finding answers to these questions is key to the future health of higher education--and
potentially the nation.