Reinvestment results from surplus on current operations. If we generate only the revenue needed to stay open today, we consume the capital investment of a previous generation. As our faculty retire and our equipment ages, we will not have the money to replace them at the top of the market. The more productive the university, the more it can reinvest in quality. This is the principal driver of the dollar-based, productivity model for university budgeting currently operating at the University of Florida.
Costs are important.
Universities find the marketplace resistant to endless price increases. Most private, high-tuition universities already engage in tuition discounting. Public universities with low tuition can enter the marketplace and compete on tuition, for the state cannot subsidize middle-class students forever without tax increases. The consuming public wants inexpensive, high-quality education. As the pricing of public and private, large and small institutions tends to converge, consumers will seek information on quality.