Commonwealth Journal

December 27, 2011

Caution on Privatization

CNHI News Service

— New University of Kentucky President Eli Capilouto recently announced that the university would stay out of the fracas surrounding whether to replace or remodel Rupp Arena. I think that was probably the correct move. The entire complex at Lexington Center really has more to do with the development of downtown Lexington as an attraction than it does a place for the Wildcats to play basketball.

I know that may be heresy in some quarters but it should be recognized that UK already has one of the premier forums in the country. Seating capacity is over 23,000 which is quite a lot. To seriously campaign for the NCAA finals one would have to compete with the domes and that is just not going to happen. Besides, the remodel or replacement of Rupp Arena would generally concentrate on more luxury seats to generate more revenue rather than increased seating for students and less wealthy fans.

President Capilouto is right in saying the university has bigger fish to fry with the education of the students in Kentucky and that any participation in fund raising for the Lexington Center project would likely interfere with lobbying for University of Kentucky dollars. Kentucky athletics is doing all right but our educational system is not.

While it is necessary to focus on primary and secondary education it has to be recognized that we have neglected the plan to make the state university a top 20 facility. Mr. Capilouto has engaged a company of efficiency experts at a cost of $1.2 million to examine each facet of university operations and recommend how to better use the taxpayer's and donor's funds. $1.2 million seems like a lot of money to me but I have a somewhat limited experience with numbers with that many zeros.

However, I am not a fan of privatization of public affairs and his proposal to enter into an agreement with private enterprise to remove the existing campus living quarters and build new ones gives me pause. The agreement would also allow the company to collect all rents from the student tenants for an unspecified period and to manage all campus lodging.

Recent years have seen the Kentucky legislature underfund the university on a continuing basis. The governor and our legislature bears much of the onus for this due to the aversion to reforming the Kentucky tax code to bring up to date the revenue generating capacity of the state and to permit more rational budgeting for state needs. The University of Kentucky has accumulated residence needs estimated at $500 million and total campus needs of perhaps $1 billion. This did not happen all at once and can be laid at the feet of a state budget process that has pushed problems down the road rather than deal with potentially unpopular political decisions.

The cost of attending college has skyrocketed in the past decade or so chiefly due to the reluctance of state governments to adequately fund higher education. To be sure, there may be other factors such as administrative bloat to contribute to the shortfall but the point is that college is being priced out of the range of the average middle class family. This will only exacerbate the dramatic increase in the divide between the haves and the have-nots.

Economic mobility has always been accepted as a given in the United States but now we are seeing third world countries with better economic mobility percentages. It has been repeatedly demonstrated that educational achievement is the greatest leveler of economic opportunity and it should be of significant importance for a society to maintain a vibrant and prosperous middle class. Just now the United States is at a pivotal time when we could put to use more scientists, engineers and mathematicians and we are falling behind in making those careers available to all. No doubt, college is not for everyone but the scientific superiority of the United States will be what keeps our economy flourishing.

And herein lies my unease with privatization of the university housing. Private enterprise is in the business of making money and will do whatever it takes to achieve that goal. If it does not do that then it will cease to exist. Given that premise it follows that there may be cost cutting decisions and revenue enhancement decisions that may not be consistent with the purpose of the university which, in my opinion, is to educate as wide a range of the population as possible.

I may be wrong but the history of using private enterprise to accomplish public or quasi-public functions has been less than stellar due to the tendency to cut costs and the reluctance of governments to chip in when the cost to the student becomes onerous, as it already has. We can witness the problems that we have encountered with the private management of prisons, food services and educational facilities. And witness the proliferation of private military contractors who are little more than mercenaries. Time and time again we have seen transgressions that would not be permitted under state management and regulation. To assume that any effective oversight would come from either university or state government after the fact defies the experience of our past.

Personally, I think that legislators need to man up (or woman up) and take seriously the duty to adequately fund the functions of the state and tax revenues are part of that equation.

That's my take. Privatized housing may be the answer but I would enter that future with an excess of caution.