Fetzer Initiative on Economic Opportunity Policy Brief
By Ananth Seshadri, University of Wisconsin-Madison and NBER
July 20, 2021
Executive Summary: Should we reallocate resources away from UW-Madison to UWMilwaukee (UWM) to equalize per student state appropriations? This report brings the best available evidence to bear and finds no basis for such a reallocation.
1. The Formula: There have been attempts at revising the formula used to allocate resources. A few years ago, the allocation of incremental resources was revisited with a performance-based formula requested by the Joint Finance Committee, voted by Regents, and agreed upon by Chancellors. The result – UW-Madison’s metrics rose while UWM’s metrics fell. This shows that an agreed upon formula indicated that UW-Madison was (grossly) underfunded relative to UWM.
2. Peer Comparisons: Both UW-Madison and UWM receive less in state appropriations and tuition & fees relative to their peers. Peer comparisons show that UW-Madison is (slightly) more underfunded relative to peers than is UWM.
3. Mission: UW-Madison receive more in state appropriations per student primarily due to differences in mission. Take the School of Medicine and Public Health. This college has an important mission consistent with the Wisconsin Idea with no counterpart in any other System school. The same could be said of other Schools. UW-Madison recently absorbed UW-Extension. The analysis estimates what would happen if we were to align the missions of the two universities to be closer to one another. The counterfactuals lead to a striking conclusion – virtually all the differences in state appropriations per student between UW-Madison and UWM can be accounted for by differences in their missions.
4. R&D: UW-Madison generates 8 times as much in Federal R&D dollars for each dollar of state appropriations relative to UWM. And UW-Madison significantly overperforms peers (60%) relative to UWM (10%).
5. Grad Outcomes: UW-Madison graduates earn $6,800-$12,240 more every year than UWM graduates. The value added of UW-Madison (as measured by increased expected earnings of graduates) is significantly more than UWM.
6. Completion Rates: While UWM enrolls more Pell grant recipients, the six-year graduation rate is around 40% compared to 80% at UW-Madison.
7. Access: Finally, for low-income students (less than $30K income), UW-Madison’s net price is 55% below its peers while UWM’s net price is 18% above its peers.
Many want to see resources in higher education institutions allocated more like they are at top performing organizations in the business world where leaders invest capital in the projects that are delivering the most value. Reallocation away from UW-Madison is in direct opposition to that concept especially at a time when it is the one campus with excess demand and is prevented from raising tuition or borrowing to fund projects.