Maryland Law Lets Colleges Veto Competitors’ Classes

Certificate of Need (CON) laws, often criticized by libertarian thinkers, require that health care providers ask permission from state regulators before adding new programs and facilities. In practice, that often means running a gauntlet of objections filed by competitors. The result can be state-enforced cartel arrangements that protect inefficient incumbents, slow innovation, and leave consumers with fewer and less attractive choices.

Maryland has hit on a unique way to extend this bad idea. Not only does it have a CON law for health care, but it also applies the format to higher education. In particular, it requires colleges and universities that want to offer new degree programs to ask permission from the Maryland Higher Education Commission (MHEC) and invite objections from rival institutions.

The commission says it currently reviews and approves “on average approximately 250 certificate and degree programs” a year. Notably, its gatekeeping function is not limited to state colleges and universities but extends to private institutions as well.

One listed ground for objection gets straight to the point: “unreasonable program duplication which would cause demonstrable harm to another institution.” A competitor can also argue that there is no need for the contemplated new program because the employment picture for graduates in a specialty is only holding steady, not expanding—as if graduates do not find work across state lines.

There are many other potential trip-ups. As part of its approval process, the agency reviews whether the new program is consistent with Maryland’s quadrennial State Plan for Postsecondary Education, as well as the strategic plans that the state requires private and public institutions to have in place.

A university seeking to defend its new program proposal might have success arguing that it will serve new and different students, perhaps because its campus is geographically remote from that of the jealous incumbent. Quaintly, it is also permitted to argue, though with no guarantee of success, that letting it proceed would help with “the advancement and evolution of knowledge in the domain or field of study.”

Missing from the guidelines, as a reason for allowing competition, is any showing that an established program at some other institution is simply doing a poor job serving students—for example, that it scores badly on metrics such as degree completion or successful job placement. Such comparisons would hardly be sporting, would they?

The latest controversy erupted early this year when Towson University, a state institution in suburban Baltimore, applied to the MHEC to launch a doctoral program in business analytics. The program would emphasize specialties like supply chain management and enterprise software, which might seem a good fit for a region whose economic identity is defined in part by its port and logistics facilities.

The bid drew prompt opposition from nearby Morgan State University, which said its own MBA program would be improperly competed with. Although a majority of the MHEC’s then-commissioners accepted Towson’s argument that the two programs differed substantially, advocates for Morgan State kept up legal and political pressure, seizing on a procedural slip-up. Last month, they successfully derailed the launch, at least for the time being. Students who had enrolled in the program were left holding the bag with classes set to begin in less than two weeks.

Intensifying the hard feelings is a racial angle. Morgan State is among the state’s four historically black colleges and universities (HBCUs), which have long argued for special consideration in the screening process. As far back as 1999, the U.S. Department of Education’s Office for Civil Rights had reached an agreement with the state extracting a pledge to assign distinctive and popular programs to the HBCUs so as to bolster their enrollment since minority students had long been flocking to the state’s conventional institutions of higher education.

Notwithstanding this help, the four historically black institutions have struggled to avoid extreme racial imbalance: Morgan State reports that only 1.8 percent of its student body identifies as white and 0.4 percent as Asian.

In a later lawsuit, advocates for the HBCUs argued that the state had underfunded them and had allowed excessive competition from the conventional colleges. A federal judge in 2013 dismissed the claim of underfunding but found merit in the complaints about undue competition.

Rather than order the remedies demanded by the plaintiffs—which included forcibly relocating 10 successful degree programs from the other colleges to the HBCUs, as well as fencing off many other programs so as not to be competed with—the judge ordered mediation. That served to solidify the MHEC’s policy of deeming competition with Morgan State and the three other HBCUs even more suspect than competition with conventional colleges and universities. (The case was finally settled in 2021, when then–Attorney General Brian E. Frosh agreed to have the state step up its spending by half a billion dollars.)

One great irony is that the institutions targeted for complaint often exemplify successful higher education pathways for minority students. Towson, for example, with a student body that is about 46 percent white, 28 percent black, and 9 percent Hispanic, scores reasonably well on a variety of minority student outcomes such as retention rates. Or take the University of Maryland, Baltimore County (UMBC), which has risen steadily in national rankings while winning acclaim for surpassing any other institution in the country in the number of African-American undergrads who go on to earn doctorates in the hard sciences. Its undergraduate body in 2022 was 31 percent white, 20 percent black, 8 percent Hispanic, 19 percent Asian, 5 percent multiracial, and 16 percent foreign.

Impressive as its track record is, however, UMBC doesn’t count as an institution with historically minority governance. And that is how it came to be that attorneys with the Lawyers’ Committee for Civil Rights Under Law demanded, as part of the now-settled lawsuit, that the court forcibly excise UMBC’s crown-jewel computer engineering department, with about 200 students, and relocate it to Morgan State. Fortunately, the judge didn’t go along.

“The insanity of it,” observed a 2013 Baltimore Sun editorial, is that the conflict “has everything to do with protecting the institutional prerogatives and egos of the schools and little to do with creating a system of colleges and universities that best meets the needs of as many of Maryland’s students as possible.”

Students deserve the benefits of competition and choice. Maryland’s absurd regulatory process stands in the way of that.

Originally published by Reason Foundation. Republished with permission.

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