About a decade ago, when we prepaid four years of tuition for our daughter through Washington's GET program, a lot of financial advisors disparaged such "529" investment plans as too conservative. Sure, tuition had been rising at about twice the inflation rate for decades, but the roughly six percent annual return we could expect was far below the historical 10 percent average returns one sees from stocks.

Still, we looked at it as a kind of insurance policy; worst comes to worst, our daughter would always have tuition and fees paid for at a state university. One less thing to worry about. But as it turns out, largely thanks to several years of double-digit tuition increases, we beat the market. The $42 per credit we paid in 2002, would have returned $102.23 per credit for the 2011-2012 academic year.

Not a bad return.

That said, it is very important to note that it's not the cost of a college education that's skyrocketing, it's the price.

As you can see from the chart above, and the budget brief it is drawn from, total spending per full time equivalent (FTE) student has remained relatively flat over the past couple decades in inflation adjusted dollars. But as state funding has tanked—dropping from 70 percent of total spending per FTE a decade ago to only 30 percent today—tuition has been hiked to make up the difference.

Historically, the cost of providing a college education tends to inflate faster than the Consumer Price Index for the same reasons that the cost of government services do. These are services that are largely provided by well-educated professionals, and that do not lend themselves to the same sort of productivity gains other economic sectors see from things like outsourcing and automation.

Unlike an iPhone factory or a call center, you can't outsource or automate the college experience any more than you can outsource or automate a police force or a fire department. I suppose you can substitute online and distance learning for the real thing, but there's nothing collegial about it. If we want our children to benefit from roughly the same sort of academic experience that we enjoyed, it's gonna cost us.

So the fact that we're spending about the same in CPI adjusted dollars today as we did twenty years ago is rather amazing. It's certainly a testament to our public universities' ability and willingness to wring out new efficiencies during the current funding crisis. But it also suggests that we might be spending less per FTE than we probably should, at least to provide the same quality of education afforded previous generations.

That's not to say there aren't additional savings that might be achieved by giving university administrators the kind of flexibility asked for at last week's higher education funding forum. But as state Representative Reuven Carlyle (D-Seattle) admits about the legislation he's sponsored to do exactly that, we're talking about savings "in the handful of millions" across our entire public college and university system... a drop in the bucket compared to the hundreds of millions of dollars the legislature has slashed from higher education spending over the past few years alone.

And perhaps just as threatening to our state's economic future as the recent plunge in per student funding, Washington state remains 48th out of 50 nationwide in baccalaureate capacity, turning out less than half the college graduates we need to meet the annual demand of state employers, and only a fraction of the engineering degrees. No state imports more college graduates, a dubious honor we're unlikely to surrender, as over half of Boeing's engineers and machinists become eligible for retirement over the next five years.

The inescapable conclusion is that we are dramatically underspending on higher education, both per student, and in terms of the total number of slots we make available. Our politicians talk about investing in the future, but we don't do it, because the one thing that never seems open for discussion is the kind of dramatic tax restructuring necessary to pay for the human infrastructure investments our state desperately needs to compete in the new economy.