Demand for a business degree is booming worldwide.

In many respects, that's good news for me as the dean of the UW-Madison School of Business, but that same popularity also carries a downside.

It causes costs to rise, competition for the best faculty to sharpen and puts demands on us to raise the bar in terms of quality.

The Board of Regents recognized that reality when it approved differential tuition for our nationally recognized undergraduate business degree at UW-Madison.

Our school faces financial pressure in carrying out our mission. We have asked many stakeholders to help us remain competitive. For the business school, resources for essential faculty and staff come from three main sources: taxes, tuition, and unrestricted gifts from alumni.

One concern I've heard expressed about tuition differentials is that they will favor areas that face excess demand for their majors and shift resources toward those schools.

This is not a resource shift, but rather new money from business students. Although it is true that the business school is permitted to retain revenues from the differential, these resources relieve our need to draw more heavily on the campus pool of tax revenue and base tuition.

A major concern that has also been raised with differential tuition by the United Council of UW Students is that it enables the state to avoid "paying its share" of higher education costs.

We all wish the state could do more, but our state economy has struggled to keep up with the nation's economic performance as manufacturing has adjusted to globalization. Non-discretionary public expenditures such as health care, corrections, and other programs are growing faster than personal incomes and tax revenues.

The result is greater difficulty in funding discretionary items such as higher education. This situation seems unlikely to change rapidly enough to prevent damage that would take decades to recover from.

On the other hand, many of our current students and alumni may be in a position to pay a greater share. The state has heavily subsidized this great university for many years, enabling our alumni to attend at very low cost and to enjoy spectacular returns on investment.

The return on a college degree has risen dramatically in recent decades, beyond any reasonable expectation. This pattern seems likely to persist. Asking the beneficiaries of this great education to contribute more seems fair, provided we preserve affordability for those who need support — which we do at the School of Business.

I've been told that when former Chancellor Donna Shalala first proposed adding private money to state funds on building projects, critics worried that the precedent would reduce the state's commitment to future projects. Her position was "Do you want to build buildings, or not?" In her view, waiting for the state to pay meant going without.

I think we are at the same juncture today, but today's debate is about the defining resource of the university — human capital. And it is easier to restore physical plant than it is to restore a depleted faculty — great faculty members have many choices about where to work, and they invariably choose great universities.

We wait for state money at our own peril.

Michael M. Knetter

Dean of the School of Business

University of Wisconsin-Madison

5110 Grainger Hall

975 University Avenue

Madison, WI 53706-1323

Phone 608-262-1758

Fax 608-265-3121

[email protected]