to grant general income tax relief, there appears to be greater justification and urgency for adding to the resources of our IHL than for reducing the cost of tuition. By using an indirect method of aiding higher education, instead of direct grants, the Federal Government can eliminate the conflict over the participation of private IHL. All transaction would take place between the individual taxpayer and the Internal Revenue Service, and the plan involves no dealings be tween the institutions and the Government. No church-state issue could arise and the "Federal control" argument which has always been present in the Federal-aid controversy would evaporate because existing relationships in higher education would be left undisturbed. So the two major objections which have so far prevented Federal aid for academic construction from being enacted would be laid to rest. IHL could use-or earmark and pledge-income from increased tuitions and fees for the service of bond issues adequate to their facility needs, with any surplus accruing to general purposes, including additional scholarships for the small group of students whose families are in such a low income bracket that they pay no Federal income taxes. Institutional borrowing for capital outlays would not cut into general income, and the securities would be in the nature of revenue bonds which ought to ease some of the legal problems. Most of the pending proposals can be divided into three types: (a) Deductions: The cost of tuitions, fees, and also possibly books, supplies, travel and added living expenses would be deductible from adjusted gross income up to a specified upper limit; (b) Exemptions: A student or his family would be entitled to one or several additional personal exemptions of $600; (c) Credits: The cost of tuitions, fees, and also possibly other expenses attributable to attendance at an IHL can be offset against the tax liability rather than against income, as under a), at a specified percentage or in full and up to a maximum amount. Tax deduction or an additional exemption would administratively be the simplest method and have ample precedent. As long as other outlays which are expected to produce income are deductible, and as long as tangible goods may amortized, there appears to be little justification for denying similar concessions for educational costs. Both methods, however, have been criticized for giving the greatest benefitup to 91 percent-to persons in the high brackets and only 20 percent to those of moderate income. A tuition boost would cost a student or his family of low income 80 percent net, while the net cost to those in high brackets would be only 50 percent, 31 percent, or as little as 9 percent. This, of course, may be explained as the result of our steeply graduated income tax schedule. But it would largely defeat the purpose of granting tax concessions in higher education. Thus, attention seems to be shifting to plans which would permit the student or his family to offset part of the educational expenses against the tax itself rather than against the income base. If such tax credits were permitted at a low percentage, say 20 or 30 percent of the educational expenses, up to a relatively high maximum (e.g., $1,500 or $2,000), they would tend to be of greater aid to private institutions, particularly those with high fees, and to persons in the upper brackets. If credit were allowed for a major part or for 100 percent of expenses up to a low maximum. it would more effectively benefit public institutions and low-income families. It seems to me that a combination of both plans would be fair to all and yield the best results. It might permit 100 percent offset up to a low maximum and percentage offset by a graduated schedule up to a higher maximum. The taxation section of the American Bar Association developed a flat percentage plan in 1954 which was submitted to the House Ways and Means Committee by the American Council on Education in 1958. It would allow the student or his family to deduct from the income tax liability 30 percent of the tuition and fees actually paid up to $1,500. The maximum net tax credit thus would be $450. Such a plan, however, would still let the student foot at least 3 "General Revenue Revision," hearings before the Committee on Ways and Means, House of Representatives, 85th Cong., 2d sess., 1958, pt. I. p. 1064. 70 percent of every additional tuition dollar. This could be corrected by a 100 percent offset up to, for example, $100. A schedule might be as follows: Tuition and fees up to $100: Credit, 100 percent. A small credit might also be given for other educational expenses, such as books, travel, and added cost of living away from home. Under such a schedule an institution could raise its fees by $100 without added cost to the student or family, by $400 at a net cost of $210. This would open up substantial revenue possibilities for IHL. It has been argued that such a plan would give no benefits to families which pay no income tax and would let them bear the full cost of a fee boost. That argument, on closer analysis, seems to have little validity. Few families, and particularly families of college students, nowadays pay no Federal income tax. Six out of seven fathers of children reaching college age are in their peak earning years, between 38 and 58; most enjoy incomes wilstantially above the average. In a survey at the University of Massachusetts (lass of 1965), 90 percent of all fathers reported their 1960 income above $4,000. No study is available which shows which percentage of the students and their families pays no Federal income tax, but we may safely assume that it is no Lore than 10 percent, and possibly as few as 5 percent. Those students come from very low income families and most of them probably are already on scholarips. In those cases the institutions could forgo the fee increase. Moreover, the granting of income tax credits would free additional scholarship funds, as Vice President John F. Meck, of Dartmouth College, representing the American Council on Education, stated, when he proposed the council's tax rit plan: "Many parents in the $8,000-, $10,000-, and even the $12,000-ayear brackets, who now require partial scholarships in order to keep their children ilege who would be able to forgo these scholarship funds, thus making them available for children coming from homes of less financial ability.' The suggested tax credit schedule would result in an average tax saving (or rene loss to the Treasury) during the 1960's of about $700 million a year, of which possibly as much as $500 million could be recouped by the institutions through higher fees. This would amply take care of the service needs of bond to finance the needed facilities. Suppose the IHL were to issue $5 billion 25-year bonds. About two-thirds of Werest rate of [presently] 3.2 percent. te bonds would be issued by State institutions and be tax exempt, at an average Private institutions may have to pay pervent were to grant them the same tax Temption that public institutions enjoy). The annual service cost would be: Retirement of principal--- Million laterest in the first year would be $190,000,000 if all bonds were immedi ately issued. If issue is staggered over 5 years, it would never reach the total because part of the principal is being paid off. The interest cost over the life of the bond issues may average $100,000,000 per annum; during the 1960's about----- Average annual principal and interest in 1960's____. $200 160 360 the Federal Government-that is, the taxpayers of the whole Nation-would A tax credit program could achieve the same purpose as a grant program: ke a major financial contribution for the construction of facilities (or to #ard the operations) of IHL. The National Government could also materially aid the IHL by permitting tax ferent high marginal tax rates make such donations inexpensive to wealthy Aviation for the Advancement of Science proposed some years ago. The - rather than mere deductibility-of private donations, as the American Stadividuals, while persons in low-income brackets must bear 80 percent of the (9 percent) were claimed as exemptions on income tax returns. Congressional Record, Feb. 5, 1962, p. 1526. In 1960, out of a total U.S. population of 182 million (Dec. 31), 168 million persons werer, were not taxable. General Revenue Revision, op. cit., pp. 1063-1064. Some of those returns, cost of their contribution. So, many of them do not now contribute. By per mitting tax credits-such as I suggested in the schedule for tuitions and feespersons in low- and medium-income brackets could be encouraged to donate more liberally to higher education. Gifts to higher education amounted to more than $1 billion in 1961, according to the Council for Financial Aid to Education, an increase of 28 percent over the total 2 years earlier. By materially widening the range of potential contribu tors, the granting of tax credits could very substantially augment this important source of support for IHL. ENROLLMENT OUTLOOK In trying to design an effective program of Federal aid to IHL, it is, of course, important to know how great the needs are, or are likely to be several years hence. I, therefore, reviewed some of the recent estimates of facility requirements of IHL. Those estimates usually are based on the outlook for enrollments which, as we all know, are growing at a rapid rate. The Under Secretary of HEW, Mr. Ivan A. Nestingen, said in a speech on April 3, 1963: "Two years from now the first large wave of college applicants will hit our institutions across the country. This is the bumper crop of babies born in 1946, just after World War II. They will be succeeded by other large waves of students seeking college entrance." The President was specific in his message on education of January 29, 1963: "*** our educational system faces a major problem of quantity-of coping with the needs of our expanding population and of the rising educational expectations for our children which all of us share as parents. Nearly 50 million people were enrolled in our schools and colleges in 1962-an increase of more than 50 percent since 1950. By 1970, college enrollment will nearly double, and secondary schools will increase enrollment by 50 percent-categories in which the cost of education, including facilities, is several times higher than in elementary schools." This suggests that the rate of enrollment growth is increasing and will pose a greater problem to our educational system in the next 8 years than it did in the past 12. However, enrollment projections by the Bureau of the Census and the Office of Education, the two offices which regularly engage in such studies, indicate a slowdown. Source: Bureau of the Census, Current Population Reports, Series P-20, Nos. 52 and 120; Bureau of the Census, Current Population Reports, Series P-25, No. 232. So, according to the Census Bureau, all educational enrollment grew 66 per cent between 1950 and 1962 and may, in the next 8 years, expand between 14 and 21 percent, for an average of 17 percent. Data in a census report of January 10, 1963, captioned "Decline in Rate of Increase in School Enrollment," suggest that the lower estimates are more likely to materialize. Taking the Census Bureau averages, high school enrollment will rise not 50 percent but about 24 percent, college enrollment will not nearly double but increase 51 percent. Reports by the Office of Education show virtually the same picture. They project an enrollment increase between now and 1970 of 14 percent in elementary schools, of 24 percent in high schools, and in both combined of 17 percent (average of four projections).' At the college level, Office of Education studies Office of Education, "Enrollment in Public and Nonpulbic Elementary and Secondary Schools, 1950-80, Circular 692, 1962. 8 suggest an increase in college enrollment between fall 1962 and 1970 of 55 percent as the average of three projections which range from 25 to 67 percent.) * It is true that colleges will grow faster than other schools. But even according to the highest projections, colleges will account for no more than 12 percent of all enrollment by 1970, and their influence on the total cost of education will be correspondingly small. A comparison of past and future rates of growth should preferably be based on periods of equal length. When we compare enrollment expansion in 195462 with projections for 1962-70, we find that the rate of growth is expected to decline at every level of education. Here are the data computed from reports of the Bureau of the Census: Source: Bureau of the Census, Current Population Reports, series P-20, Nos. 89 and 120; Bureau of the Cesus, Current Population Reports, series P-25, No. 232. Projections by the Office of Education, in the publications which I cited above, closely parallel those by the Census Bureau. They suggest that educational enrollment will, over the next 8 years, grow at about half its rate over the past 8 years, and that, even in the colleges and universities contrary to what is widely believed the rate of growth will decline. Enrollment trends at the elementary-secondary level have an important bearing on higher education. Fall 1963 may see the last of the big attendance jumps in the common schools. As the postwar babies graduate, annual increases will shrink to half the size they maintained in the past dozen years. For some time the States have had to concentrate their funds on the rapidly expanding common schools. In the future they will be able to channel a larger share of their resources into higher education. During the 1950's enrollment grew at a faster rate than GNP or national mome. Between 1962 and 1970 GNP is generally expected to advance between 27 and 37 percent (equals 3 to 4 percent p.a.), for an average of 32 percent. This is almost twice the expected rate of increase in educational enrollment. Thus, the problem of financing education should gradually become easier to solve, its weight less burdensome to bear. COLLEGE AND UNIVERSITY FACILITY NEEDS The President stated in his education message that in the 1960's "23 billion of new facilities will be needed" in colleges and universities and an attached fact sheet explained: "To provide for additional students, replace obsolete structures, and modernize usable buildings, institutions of higher education should invest an average of $2.3 billion annually. Expenditures currently fall short of this by $1 billion." Several projections of facility needs in IHL were prepared in recent years. One study by the American Council on Education estimated 1958-70 requiremen's for academic, auxiliary, and residential facilities "from a high of $15 billion to a low of $19 billion."" That averages between $1 and $1.2 billion per year which, at the time, seemed a steep increase because capital outlays had been running about half that volume up to the mid-1950's. Office of Education, "Economics of Higher Education," Selma T. Mushkin, editor, 1962, P1 and "Opening (Fall) Enrollment in Higher Education, 1962," Circular No. 697, John D. Long and J. B. Black, Jr., "Needed Expansion of Facilities for Higher Educa19-1958-70." American Council on Education, 1958. 10 The Office of Education published a study in 1960 which placed the cost of new facilities and replacement, rehabilitation, and depreciation between 1958 and 1970 at $1.2 billion annually. As the volume of higher educational construction expanded and outlays reached, and then exceeded, $1 billion annually, need estimates also climbed and kept well ahead of simultaneous expenditures. In 1961 the Office of Education placed needs during the 1960's at an average of $1.9 billion per year." The authors computed requirements over the 10-year period 1961-70 at $18.9 billion, of which $16.4 billion (equals 87 percent) appeared likely to come from current sources (if apparent trends continued); this left a deficiency of $2.5 billion. How did the President arrive at an estimate of $23 billion with a deficiency of about $10 billion (equals 43 percent)? The author of the earlier Office of Education study prepared a more elaborate report in which he showed three projections of cumulative facility needs 1961-70: high, medium, and low, at $22.9, $18.8, and $16.3 billion, respectively." The medium projection was unchanged from his earlier report, but the newly added high project equalled the amount used by the President. It may be helpful at this point to recall our experience with the classroom shortage in the public schools. The Office of Education placed the deficiency in 1950 at 250,000 classrooms. In October 1954 the Commissioner of Education testified that it had risen to 370,000, and the chairman of the Senate Committee on Labor and Public Welfare stated on January 27, 1955, that "each day the shortage of classrooms grows more severe *" and predicted that “within 3 years our shortage of classrooms throughout the Nation will have climbed to 600,000." Two months later the Secretary of HEW testified that the estimates had been reviewed and that "we find that the estimated classroom deficit by the year 1959-60 would be 176,000 classrooms rather than 407,000."" When the school year 1959-60 came around, the Office of Education reported the shortage at 135,264 and has since lowered its estimate to 121,235 in the fall of 1962. It also proved that the fears in 1955 that the school construction would be unable to keep up with the enrollment increase had been groundless: The number of pupils per classroom dropped from 29.4 in the fall of 1955 to 27 in the fall of 1962." Of the 600,000 new classrooms which the President indicated in his education messages of February 20, 1961, and February 6, 1962, to be needed during the 1960's, at least 210,000 were completed in the first 3 years, which corresponds to a decennial construction rate of 700,000. Similar wide variations exist in the need estimates of facilities in IHL. The deficiency in higher educational facilities-that is, the gap between estimated needs and prospective revenues from presently available sources-will, by 1970, equal $2.5 billion according to a study of the Office of Education, which Secretary of Health, Education, and Welfare Abraham Ribicoff presented to your committee on August 17, 1961, or to nearly four times that amount, as suggested by a fact sheet of the Department of Health, Education, and Welfare in January 1963. Part of the trouble is that there are no uniform and unchangeable standards of facility needs in either school or higher education, nor is there agreement on the degree of effective space utilization that can be expected. We may profitably review some of the studies that have been made on space utilization in IHL and on proposals to use available facilities more fully. 10 "College and University Facilities Survey," pt. 2, by Robert W. Bokelman; pt. 3, by Louis A. D'Amico and E. Eugene Higgins, Office of Education, 1960. 11 "Physical Facility Needs of American Higher Education, 1961-70," in: "Aid for Higher Education," hearings before the Subcommittee on Education, Committee on Labor and Public Welfare, U.S. Senate, 87th Cong., 1st sess., 1961, pp. 42 ff. 12 "Economics of Higher Education," op. cit., p. 193. 13 "Emergency Federal Aid for School Construction," hearings before the Committee on Labor and Public Welfare, U.S. Senate, 84th Cong., 1st sess., 1955, p. 1. 14 "Federal Aid to States for School Construction," hearings before the Committee on Education and Labor, House of Representatives, 84th Cong., 1st sess.. p. 282. 15 "Enrollment, Teachers, and School Housing," fall 1960, Office of Education, 1960. Office of Education, release, Jan. ? 1963. |