The corporate attack on education

May 20, 2010

Two reports recommend increased funding for Oregon's public universities, but no one should mistake their true purpose--sell corporate restructuring, says Wael Elasady.

TWO RECENT reports make the case for a radical restructuring of Oregon's public universities. Both of these reports call for increased funding of the state's institutions of higher learning, but there should be no illusions about their real aim--namely, advocating a corporate takeover of public universities as the only way to address budgetary shortfalls in an age of financial crisis.

The first report, "The coming crisis in college completion: Oregon's challenge and a proposal for first steps," was released in November 2009 and prepared by Dave Frohnmayer, who is a University of Oregon law professor.

The Frohnmayer report recommends that the Oregon State Board of Higher Education convert the state's three largest universities into autonomous public corporations (similar to Oregon Health & Science University). This model would empower an unelected governing board to oversee all university operations, set tuition rates and admissions standards, and manage all costs and revenues.

The second report, also released last November, was prepared by the office of Portland State University (PSU) President Wim Wiewel and largely endorses the recommendations of the Frohnmayer report.

Portland students protest budget cuts and privatization on March 4
Portland students protest budget cuts and privatization on March 4 (Portland Indymedia)

If implemented, these recommendations would undermine the democratic participation of the state legislature as well as citizens, students and faculty in Oregon's public universities and, if similar measures elsewhere offer any indication, lead to a decline in public access, affordability and course offerings.

The proposal to remove the legislature's ability to cap tuition has led to sky rocketing tuition wherever this policy has been put in place. In Texas, tuition has jumped 23 percent since 2003 when deregulation was instituted, carrying the state well above national and regional tuition averages.

And right here in Portland, since Oregon Health & Science University (OHSU) was transformed into a public corporation in 1995, it has become the most expensive public medical school in the U.S. with 20 percent increases in tuition in just the past two years.

The crisis facing public higher education is clearly national in scale. Across the U.S., tuition rates have run more than 100 percent ahead of inflation since 1981 while family income has only risen 27 percent. Meanwhile, the cost of attending a public four-year university now amount to more than 30 percent of the annual income of most low- and middle-income households.

The simple fact is that the cost of higher education is already too high, with the average American student being indebted before they even begin their careers with over $23,000 in student loans. Students and parents cannot afford to lose the only tool they have to keep tuition costs from skyrocketing further out of control.

If tuition is deregulated and increased to reflect the "market" as suggested by these reports, this trend will be accelerated, and many students from low- and middle-income families will be priced out of the dream of a college education.


BOTH THE Frohnmayer report and the white paper argue that declining state funding for higher education make this restructuring necessary and urgent, pointing to the fact that state funding for higher education has dropped by 40 percent during the past 20 years and in the case of PSU now only compromises 16 percent of its annual budget.

The Frohnmayer report calls for doubling state funding of higher education from $715 million to $1.55 billion per biennium, while the white paper calls for a state funding floor that would guarantee that funds for higher education would not dip below a minimum threshold after each legislative session. Both reports recommended that each university should have access to a local, or regional, tax base for additional funding.

While the Frohnmayer report spends considerable time highlighting the funding shortfalls and challenges facing the Oregon University system, it only devotes 150 words out of the entire 56 pages to actually recommending increases in public funding. And though Frohnmayer states that a "substantial re-investment in the state's universities" is the "principal conclusion" of his inquiry, he does not provide any clear steps to achieving this.

Instead, after painting a dire picture of public funding and casually dismissing all political solutions for funding higher education as impossible, Frohnmayer introduces corporate restructuring as the only solution to saving our higher education system.

The white paper adds nothing original in this regard but simply mimics Frohnmayer's formula of raising the alarm at the decrease in state funding, brushing aside any possible legislative solutions for increased state funding, and then spending the bulk of its space making its case for corporate restructuring.

Unfortunately, the white paper makes two proposals--for a state funding floor and access to local ballots for funding initiatives--worth consideration but fuses them unnecessarily with the proposed corporate restructuring.


WHILE THE two reports lack details about how to address the funding crisis, they do include a proposal for a drastic restructuring of the relationship between the state and our public universities, and they spell out some of the ways they believe university administrators will be able to wield this newfound authority to more "efficiently manage" universities.

The Frohnmayer report recommends that the legislature pass what he calls the "The Independent Public Corporation Enabling Act of 2010" during its special session this February. This proposal would see the State Board of Higher Education create several independent public corporations, each with a governing board authorized to oversee all university operations. The role of the Oregon State Board of Higher Education under this model would be limited to establishing the mission of each independent organization, allocating state funds, and overseeing performance agreements.

The white paper refrains from recommending any specific governance model, instead enumerating key principles. It lists several models that it contends can accommodate its key principles including the model of OHSU (the public corporation model advocated by Frohnmayer), the University of California System, the North Carolina model, and the Virginia model.

Without delving into the details of the individual governance model of each university system, suffice it to say that the underlying feature shared by all four systems is the high degree of independent authority enjoyed by the boards of these universities and their greater freedom from state oversight.

Both the white paper and the Frohnmayer report argue that the increased independence afforded by these structural changes will allow each university to increase its "efficiency" and maximize alternative revenue sources in light of decreased state funding.

Specifically the reports hope this newfound authority will be able to make up for decreased state funding by gaining:

1. Authority to sell bonds, borrow against assets, and assume debt without state budgetary constraints,

2. Full operational control, including the ability to set admissions standards as well as the salary and benefits of faculty and personnel,

3. Authority to set tuition to "reflect market conditions" with no legislative caps on the size of increases.

The first concern about the proposed restructuring is the undemocratic nature of these centralized governing boards. It will strip voters of their power of oversight and regulation of these institutions and will consolidate power in the hands of a few unelected and (generally speaking) politically connected individuals while removing much needed transparency in the way our universities are governed.

In addition, it's not clear that allowing these newly created corporations the ability, for example, to pursue real-estate investments with public money and leverage debt on public buildings will have a positive effect on the resources available to Oregon students.

The power to more easily engage in such business transactions with no oversight could result in riskier investments or higher levels of university debt, creating financial instability for the institution in question.

OHSU provides an example of the possible dangers. In 2009, OHSU reported $39 million in investment losses due to the financial crisis, resulting in a $35 million budget shortfall. OHSU then fired nearly 1,000 employees, enacted a university hiring and salary freeze and reduced university pension plans. To date, OHSU continues to have a high debt burden and struggles with lower hospital revenues, higher rates of uncompensated care and a decline in state appropriations.


BUT IT is not simply democratic participation and oversight that will suffer from this restructuring. Public access, affordability and course offerings will all decline, further eroding the already skewed balance between the university's role of empowering individuals to become critical citizens in a democracy on the one hand and its role in training future workers for employers on the other.

The long-term effects of a corporate restructuring could radically alter the purpose that our universities serve in society. Universities have always been torn by the conflicting mandates of their economic function as training workers for the marketplace and their social function as institutions that provide opportunities for students and faculty to become critical and knowledgeable citizens capable of self-governance in a democracy.

In the past 20 years, this balance has tipped as federal and state funding for higher education has dried up while funding from corporations and businesses has increased. This change in the source of funding for universities has been accompanied by the ever-growing proliferation of corporate priorities in the system of higher education, as revenue generation becomes university administrator's top priority.

Students are increasingly referred to as customers, faculty simply as employees, and course work and research are more and more dictated by the needs of corporations that view universities as factories of human capital and technological research.

The corrosive effects of these changes are clearly visible as the democratic governance and the social function of the university slowly become a thing of the past. Student union buildings look less like centers where students discuss and organize around important political and social issues facing society and more like malls, where food vendors, cell phone providers and banks can advertise their products to a captive student population--for the price of a small fee to the university.

Faculty participation in the governance and social life of the university has suffered similarly. With more than 50 percent of all university faculty in the U.S. now employed on a part-time or temporary basis, shared governance with strong faculty leadership continues to decline. Even the role of university presidents has changed, as the focus has shifted from hiring candidates based on their intellectual and academic accomplishments to candidates capable of doing the necessary handshaking, ribbon cutting and business networking to attract outside revenue sources for the university.

The replacement of state funds with corporate funding has also had more quantifiable effects. In 2000, after students and faculty at the University of Oregon demanded that the university make sure vendors only sell sweatshop-free products, Nike CEO Phil Knight retaliated by pulling $30 million in funding to his alma mater. In fear of losing this large sum, then-university president Dave Frohnmayer (yes, the author of the Frohnmayer report) overturned the student and faculty decision so Nike would continue its funding.


NOT ALL cases of corporations exerting pressure through their financial influence over the university are so overt or politically charged. Since 2006, more than 65 percent of all university research is being funded by private interests--compared to 60 percent that came from federal funding in 1965.

This enormous increase in private funding has led to a significant deterioration in the independence of academic research institutions. Corporate research funding often places limits on scientists and forbids them to share the results of their research with their colleagues because of the investing company's fear of losing commercial patent dollars.

Furthermore, an alarming number of academics and administrators are reporting conflicts of interest related to their research due to outside financial relationships with private corporations and firms. For example, an investigative report by the San Jose Mercury News found that of Stanford University's 700-plus faculty, more than 299 disclosed potential conflicts of interests related to their research, and 26 out of 67 department heads and administrators reported outside financial interests related to their research within the last four years.

Pressure on scientists and academics to steer their research towards the desired goals of the corporation providing the funding has been widely documented and in many instances has undermined the objectivity of the research in question. Stanford's Center for Biomedical Ethics reported in a study that industry-sponsored research on drugs reported positively on drugs 98 percent of the time compared with just 79 percent of papers based on research not funded by the industry.

Finally, the type of research and the programs offered at universities will reflect the needs of the corporations funding the universities as they demand a return on their investment. This trend is already underway as liberal arts colleges, minority studies programs and the humanities struggle to compete for resources with departments that are seen by administrators as revenue generators for the university.

Likewise, funding for basic sciences that drive innovations 10 to 15 years down the road has lost out as private industry interested in applied research for immediately viable commercial products has provided a growing share of university budgets.

The effect of such perverse commercial influence in academia can be seen most clearly in bioscience, in which the overwhelming majority of research funds will go to developing highly profitable drugs to treat maladies like impotence, baldness and wrinkles while life-threatening diseases such as malaria and tuberculosis that kill millions every year in poorer parts of the world receive just a fraction of the research funds.

In many important ways, the privatization and corporatization of our universities has already occurred here in Oregon and across much of the country. The recommendations of the Frohnmayer report and the white paper, if followed, would serve to accelerate this process and destroy what little remains that allows us to call these institutions public. And ultimately, we will pay the price in our inability to address the educational needs of coming generations.

The Frohnmayer report and the white paper correctly point out the dire need for increased public funding to our public universities. So we demand an explanation for the failure of both of these reports to make an effective case for increased public funding for higher education. As both students and taxpayers, we demand leaders who can make that case, and an administration who does not offer students, faculty and staff token participation in a process in which the defining elements have already been set.


DESPITE THE best efforts of Dave Frohnmayer and the PSU administration to sell corporate restructuring as the only option for saving higher education, students and faculty have come out strongly against the proposed restructuring.

Within a couple months of the release of the Frohnmayer report and the white paper, students at PSU had created informational packets, hosted several forums and organized a protest in response to the restructuring plans. And during the March 4 national day of action to defend public education, more than 400 PSU students and faculty rallied on campus. Speaker after speaker addressed the need to oppose the privatization and corporatization of Oregon's public universities.

The success in Oregon last November of ballot measures 66 and 67, which raised taxes just enough on the richest 2 percent of Oregonians and on corporations to avoid major cuts in education, health services and other basic state services, shows that many in Oregon have begun to reject the notion that our students, teachers and workers should be expected to bear the brunt of an economic crisis they did not create.

Not only have Oregon residents proven that they are willing to lead the way in increasing taxes on the wealthy and corporations to safeguard public education and state services, but with state spending on prisons outstripping education and federal spending on foreign wars and bank bailouts in the trillions, many are beginning to understand that budget cuts have more to do with twisted priorities rather than a lack of funds.

With major budget cuts averted for 2010 and a strong show of protest from students, the discussion of corporate restructuring seems to have temporarily died down. But students and workers in Oregon must continue to organize in anticipation of the $1.5 billion in budget cuts already being threatened by state politicians in 2011. Supporters of corporate restructuring will surely attempt to use this as a new impetus to again peddle a plan that will dismantle what's left of Oregon's public higher education.

E-mail alerts

Further Reading

Today's Stories

From the archives