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ECONOMICS

President Barack Obama recently put forward a plan for free tuition for community college students. Community colleges have become all things to all people. They provide a low-cost step toward a four-year degree, important vocational skills, a second chance for those who have dropped out, remedial work for poorly prepared students, and general community enrichment programs while spearheading economic development efforts. All these are valuable, but they present a number of complex challenges in delivering all the services simultaneously.

Obama presented his plan in Tennessee where the state, under Republican leadership, has moved toward free community college tuition with hopes of increasing the state's low level of educational attainment. Free tuition could be a way of increasing access to higher education while also providing vocational training for students not planning to go forward.

Most economic studies find substantial individual and societal benefits for students who enter and complete higher education programs. This would also be a concrete step to address concerns about poverty and inequality as compared to largely cosmetic ploys such as minimum wage increases.

We are constantly told that "free is good," but economists are quick to point out that few things are truly free. Unfortunately, implementing free tuition for all has a number of potential unexpected costs and unintended consequences. The Obama plan would make the first two years of community college tuition free by providing 75 percent of the tuition from federal sources, with the remainder provided by state and local government. For reference purposes, annual tuition at Parkland is slightly less than $4,000 per year for a full load. This is near the national average. Note also that tuition covers only a fraction of the overall cost of community colleges (about 52 percent at Parkland), with state and local governments providing the remainder. In addition, few people would be surprised if the federal government at some point cut back on funding, such as limiting reimbursements at some level below existing rates.

This means that if Obama's plan were implemented as proposed, local community colleges would lose their tuition funding with only three-fourths of it replaced by the federal government. The community colleges would therefore have to make up the other fourth with property tax revenue or, less likely in Illinois, additional state funding. This is a kind of unfunded mandate from the federal government on local governments. The costs would likely be greater than a 25 percent of the existing tuition revenues since enrollment would increase. This would mean higher levels of non-federal tuition costs as well as increased overall costs to serve more students.

Economists use the term "butterfly effect" to describe a situation where a seemingly small change in one area can have major and unexpected impacts elsewhere. An exaggerated example is a distant butterfly flapping its wings precipitating a hurricane at another location. The butterfly effect of free community college tuition could well have serious implications for many public and private four-year institutions, many of which are experiencing enrollment problems. This could have the perverse impact of encouraging some students to move from existing four-year programs rather than simply increasing overall college attendance.

A major side effect of free tuition would be to dilute further the current efforts of community colleges. Some critics argue that many community colleges attempt to serve too many groups (as noted above) with the result of relatively low completion rates. It is suggested that bringing in more ill-prepared students who need intensive remedial help would further this trend.

While a well-designed and targeted free tuition plan would be beneficial, it cannot be done on the cheap. The Obama plan has been useful to focus attention on community college issues, but the plan itself is seriously flawed.

Economist J. Fred Giertz is on the faculty of the University of Illinois' Institute of Government and Public Affairs. He can be reached at 217-244-4822 or jgiertz@uillinois.edu.

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