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Conclusion: Public Policy and Public Policy Leadership in Balancing the Forces of Continuity and Change

The new world marketplace, the dizzying pace of electronic technology, and the growth in numbers and diversity of the college-age population are societal factors to which higher education must respond over the coming decades. To respond adequately, individual colleges and universities will require the guidance of state policy. Further, it is in their interest to seek such policy, for, in its absence, state intervention is likely to take the form of ad hoc, fragmented micro-management of institutions.

The Importance of Public Policy
As serious as the challenges facing higher education are likely to be, they can be met. A major strength of American higher education is that college and university operations are not centrally managed by either state or federal governments. Yet public policy--not governmental management--has played, and continues to play, a major role in shaping the responses of the higher education enterprise to public needs. State governments determine the governing structures of public higher education, and many states have established mechanisms for coordinating public and private institutions. Historically, public policy has been critical during the major transitions that have shaped modern American higher education--that is, the creation of land grant universities in the 19th century, the development of the American research university, the establishment of community colleges, and the expansion of access and participation in the post-World War II era.

In the international context, the American system of higher education has been appropriately characterized as "market-driven." This feature has been particularly emphasized by scholars who have contrasted it to the roles that European central governments play in relation to their systems of higher education. They cite the decentralized character of our national system, the existence of a non-governmental private sector, and diversified funding sources. These and the U.S. federal government's emphasis on policies that strengthen market strategies--need-based student financial assistance and competitive research funding--sharply differ from the centralized and bureaucratic models of governance and funding that represent historical patterns elsewhere.²⁰

Although public policy concerning higher education in the United States can be distinguished by its market-like characteristics, states have been much less market-oriented than the federal government in supporting higher education. States have, it is true, delegated extensive authority to lay boards, and most academic and internal resource allocations are institutional prerogatives. Nonetheless, the major leaning of state public policies is towards the institution, not the market. In fact, one effect of decentralization and lay governance at the state level, especially when augmented by constitutional status, has been to insulate colleges and universities from both state regulation and market influences. In this context, most states have selectively asserted public policy priorities through regulatory statutes and varying, centralized structures for governance. Much the same can be said of state higher education finance: state appropriations to public colleges and universities are based largely on workload measures or across-the-board, incremental adjustments to prior year budgets. The bulk of research funding provided by states is not allocated on the basis of competition or peer review, but supports reduced teaching responsibilities for all regular faculty in public research universities. A very small portion of state financial support of higher education is devoted to portable student financial assistance. In these respects, the state emphasis has been mainly on institutional capacity-building and on maintaining institutional assets. One might characterize the state role as a counterweight to the market direction of federal policies. Most states have taken an approach to public policy that has been much more closely aligned with institutional strategies.

This institutional focus notwithstanding, states vary considerably in the ways their system designs and policies have combined to balance institutional and market forces. These variations are important in influencing the performance of higher education. In the 1990s, market forces both within and outside the control of state policy altered the higher education landscape. In the first half of the decade, states reduced subsidies for higher education, shifting costs to students.²¹ Federal and state student financial assistance, primarily in the form of loans, increased significantly. Technological transformations, new providers of higher education, and new federal tax policies increased competition among institutions and offered new choices for many students. Federal tax legislation in 1997 gave states an incentive to further reduce institutional subsidies by shifting costs to the federal government through higher tuition. In addition, although it is too early to identify any pattern of response, statewide governance systems are coming under increased scrutiny and pressure. Legislators in several states, including one of the seven states we studied, have adopted reorganization plans for higher education.²² Legislators in other states have experimented with new approaches to the public finance of higher education.²³

Public policy has been a major force in setting the course of colleges and universities in the past. And it will be an equally important factor impeding or supporting American higher education's adaptation to new public needs in a changing policy environment.

The Importance of State Policy Leadership
It is difficult to convey a sense of urgency without sounding alarmist. But it is urgent--very urgent--that state leaders carefully assess the current and prospective performance of their higher education systems against their state's needs and policy goals. Section I enumerates some of the far-reaching changes in social, demographic, and economic conditions, as well as shifting values and standards, that higher education will face in the coming years. Responding to these challenges while preserving the best of higher education's legacies will require leadership of the highest order. It will also require, we believe, higher education policies and structures that recognize the tension between external forces--characterized here as the market--and the interests and values of higher education institutions and academic professionals. Without such considered assessment, both states and the institutions will act in a policy vacuum, and will be at the mercy of short-term and short-sighted political pressures that so often lead to unforeseen, negative consequences.

Depending on the results of assessment, state policies can tilt the balance between the market and institutional interests one way or the other. There is no magic in the strategies that they can use. The appropriate role of states is to use the policy tools at their disposal at each level--policy environment, system design and work processes--that will most likely result in the desired education performance. And desired performance is more likely to be reached if policies and strategies are adopted with explicit understanding of these three levels of policy, of the tools available at each level, and of the need for coherence or alignment within and among the tools and the policy levels.

Issues of continuity and change underlie the tensions between the market and institutional or professional values. Change is implicit in policies that restructure decision-making and finance with the aim of making institutional behavior more sensitive to external forces, such as student demand, economic development needs, and state policy goals. Change is implicit also in policies that decentralize, deregulate, encourage competition, or provide financial support to students or to institutions based upon specified performance or outcomes. In these instances, market forces "steer" institutional behavior toward change. On the other hand, continuity is represented by policies and structures that insulate institutions from external demands and short-term pressures, promote constitutional protection, use central authority to buffer campuses from societal pressures, and finance colleges and universities based on institutionally defined needs and priorities.

State policies continually, almost always implicitly, balance change and continuity. From time to time, however, it is necessary to revisit the balance or mix deliberately and explicitly. At these times, finding the appropriate balance challenges policy makers. Market-oriented strategies can promote responsiveness to societal change and ward off some of the dangers of "provider driven" institutions that are responsive primarily to their own interests at the expense of service to society. Strategies focused on institutions, on the other hand, can protect the enormous asset that higher education represents in each state, and can sustain areas of scholarship and instruction whether or not they are currently in vogue.

Each historical era may call for a different balance. The institution-building period benefited from structures and policies that insulated colleges and universities from external forces, and asserted public interests through regulation and centralized structures. Our research suggests that this institution-building period is closing. In contrast to it, the conditions of the early 21st century may call for state policies that make greater use of public investment to structure market forces, forces to which institutions, system designs and work processes will be expected to respond.

The search for balance between continuity and change thus will be wide-ranging over the coming decades, as states and colleges and universities seek to balance market forces and academic professional values. They may be assisted in this process by the experience of other states. But the balance must be struck one state at a time, in the context of each state's unique needs and capacities. We are confident that this balance can result in an array of colleges and universities that will be responsive to society's changing needs. These institutions may or may not look like those of today. But however they are governed or structured, they can be responsive to societal change, continuing to support America's place in the new world economy and educating all of its motivated and qualified citizens. At the same time, they can continue to perform their core functions, preserving knowledge of the past, passing it on to the present and creating it for the future. We are optimistic about what state higher education systems can be, but warn that what they will be depends on the present foresight and initiative of state policy leadersöour governors and legislators.

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© 1998 The National Center for Public Policy and Higher Education