Hey… apparently, I’m a genius…
“Everyone who owns GET plans, they’re starting to look like geniuses,” said Joe Hebert of TrueNorth Financial Services in Seattle.
We prepaid our daughter’s tuition when she was five years old, back in 2002, when the cost was only $42 a credit. After this week’s GET price increase, the cost is now $101 a credit. That’s a pretty damn good annualized return. But I’m no genius.
Washington’s in-state tuition costs were bizarrely low at the time we bought in, and there seemed nowhere to go but up. The GET program was only advertising (but not promising) a projected 6 percent average annual return at the time, but that seemed impossibly low considering rising costs and stagnating state tax collections. Besides, the “G” in GET stands for “guaranteed,” so it wasn’t much of a gamble to plunk down $16,800 in 2002 for four years of college tuition our daughter wouldn’t finish redeeming before 2019. I suppose it might have turned out to be a conservative investment, but it also bought us peace of mind.
But, as is my wont, I digress, for it’s not the virtues of GET I planned to blog about, but rather the first comment on the story in the thread on the Seattle Times, in which rawdibob asks:
Why has the cost of college tuition increased faster than inflation?
Yes, I understand that part of the government-run college tuition increases represents a decrease in the taxpayer subsidy but that is not all of the story.
No, the recent budget cuts aren’t all of the story, but this question gets to the heart of one of the basic misunderstandings many taxpayers have about the cost of providing government services… a misunderstanding I’d argue is intentionally perpetuated by many of those in the smaller government crowd.
Government critics often point toward population plus inflation as a formula for constraining government growth, and while that’s not the best metric (growth in demand for government services most closely tracks growth in personal income), it does appear somewhat reasonable, at least on its face. Problem is, there are multiple measures of inflation, and the familiar Consumer Price Index is perhaps the least applicable when it comes to measuring rising goverment costs.
Why? Because as a broad index of the economy as a whole, the CPI reflects productivity gains resulting from technological and policy efficiencies (such as trade) that simply aren’t available to state and local governments, for whom the bulk of the services provided rely on highly trained professionals. Think about it. You can automate a factory floor, resulting in fewer workers producing more and better product, but you can’t comparably automate a doctor’s office or a fire station or a police precinct.
Or, a classroom.
The only way to dramatically increase the productivity of a university professor is to either increase class size, or require the professor to work longer hours for less money, neither of which is a tenable alternative if your goal is to attract and retain quality students and faculty. And even if one were to head down that route, the productivity gains could not possibly be sustainable compared to those achieved in the broader economy, even compared to many industries that also rely on a highly skilled labor force. For example, Microsoft can exploit the global economy by outsourcing engineering to India and China, but the University of Washington simply can’t outsource its faculty. (It can outsource its students perhaps, but not its faculty.)
Republicans point to year over year spending increases and argue that state government has grown too fast, but the fact is that the cost of providing most government services simply rises faster than consumer prices. Indeed, when adjusted for the Implicit Price Deflator for State and Local Governments (the IPD is widely accepted as the most accurate measure of inflation for various industries), Washington state taxes per capita were already at a 15-year low heading into the Great Recession that sent our budget off a cliff.
Just look at the widening gap between CPI and IPD. What that represents is a decline in government spending power.
And that, rawdibob, is one of the main reasons why the cost of college tuition has increased so much faster than inflation.