This thinking is absolutely not occurring at public institutions in states with an outcomes-based funding formula. There are many incentives for these institutions to offer an adequate number of sections and offer lots of student support services to enable students to successfully complete their program of study in four years.
However, these institutions also have an increasing number of students who are only able to pursue a college degree through a combination of federal aid, institutional aid, and employment. I have many students taking 12-credit hours per semester because it qualifies as full-time but allows them to work part-time (sometimes full time). A student could complete a 120-hour bachelor’s degree in four years, but only taking 12 hours requires five years. Toss in a medical emergency, family crisis, or other hardship for just one semester and even five years won’t be enough.