Changing the Budget Climate: What Happens if We Don't

People ask me why I don't think we should just resign ourselves to cuts: look how bad the economy is, they say. People are really hurting.

Of course they are right about this. But UC and CSU were getting quietly squeezed or slammed before the current crisis. Part of the reason: public higher education leaders have generally had mediocre to terrible budget strategies for many many years. They have bought into a bunch of ineffective myths about what the public thinks of higher ed, among other things.

I described 7 of them in a Chronicle of Higher Education piece from last fall (Also see Links). Here I'll focus on two basic problems with public higher ed's strategy:

1. the leadership has NOT been telling the public that cutting public money damages quality and hurts students and the state overall. (This is finally changing this year - a little.)
2. the leadership raises fees year in year out.

Any reasonable member of the public would conclude that state funding cuts do not hurt universities, so they don't need to worry about that. They would also have a simple reason for why they don't have to worry. Tuition goes up every single year. Look at all that tuition money that universities have.

To top it off, UCOP has never made it clear that (a) instruction and related campus operations are far more dependent on state funds than is commonly stated, (b) tuition is the only source of funds large enough to replace lost state money, and (c) 10% annual hikes are still not enough - tuition needs to double to replace that money all by itself, within the next 20 years, and to climb and climb after that. (These are three of the undisputed findings of the Futures Report.)

Whether intended or not, higher ed's leaders have followed a strategy of silence and concealment. The result is that the public does not really much oppose using public funds to help universities stay good, because the public does not know it hasn't been helping universities.

"Who will tell the people"? So far, not our university leaders.

This failed funding strategy, with its crucial silences, set up public universities for their current crisis. Here's what it looks like at UC, in chart form (click on it for a larger version).

Look first at the green line, the Benchmark. That tracks the growth in state personal income. We don't have real figures for the current year, but state personal income has been growing steadily at about 4% a year.

People say that we've been living beyond our means and that the state doesn't have the money for UC. This statement is false. The state has been spending money on things other than higher education. Were the state to have given UC the same proportion of state personal income that it gave in 2001, UC would have had about $1.3 billion more in general funds in 2008-09 than it actually had.

Now look at line 1, the Compact for Higher Education between UC and the Governor (orange squares). This promised a slow recovery from the cuts of 2002-05. The recovery in nominal dollars was to happen in 2010-11. We would be at the end of the decade back to where we were at the start. Even were this to have happened - the Governor "suspended" the Compact last year - these are nominal dollars, and thus both inflation and enrollment growth would in fact still have put us well behind.

Line 2 (olive green triangles): the 2001 Pathway. This line started at the end of the last round of cuts and sought to return in 2010-11 to where we would have been were we to have grown at the rate of state personal income growth after 2001. That is, we would have fully recovered to our 2001 position by the end of the decade. This would mean that there would be a kind of lost decade of growth, but also a restoration of the principle of correct public funding and hope for building on that into the future.

That line looked relatively accessible compared to Line 3, blue with crosses - the 1990 Pathway. This was a measure of state funding before the 1990s cuts, and was a measure of the last time the university was funded at a healthy "master plan" level. It's a dismal picture: we are not much more than half of what we would have been had we not been cut repeatedly.

Here's where it gets worse. Look at Line 4, the Public Funding Freeze. This is a kind of "Michigan Model" in which the university decides that public funding will never recover, locks in a low amount, and then finds other funding sources to make up the difference. The Futures Report shows that these other sources do not include philanthropy and extramural research - a point I won't belabor here. That leaves tuition. The Public Funding Freeze requires that tuition rates double to $15,000 a year, and continue to rise to "market" rates for public universities that could reach $20,000-$25,000 year by 2015 if the lock-in level didn't reflect the complex functions of a major research university system.

Enter Arnold Schwarzenegger. Line 5, the Schwarzenegger Revision (yellow dots), shows cuts proposed in the spring of 2008. The Governor's budget ends Line 1, the Compact, and converts it to the Public Funding Freeze. There's a catch. Because higher tuition is so unpopular, and because there has been zero public teaching about the way state cuts lead directly to higher tuition, there is only partial replacement of lost money on the revenue side. As costs for students continue to rise, quality continues to decline. Michigan in fact it isn't.

This gets us to 2009 - Line 6, Extreme Arnold (plain red). It drops state funds below our previous worst-case scenario, with no obvious limit in sight. As with Line 5, there is no full revenue replacement on the horizon, only higher costs for students and lower revenues overall.

Line 6 is the new normal in 2009. The Regents and UCOP didn't want to fight when normal was Line 1. Will they now? Will they try to rally the public to get temporary tax increases, new bond issues, and other solutions on the revenue side? (These are of course always coupled with restructuring and improvements of the systems themselves.)

If they don't, and we don't get them to by hook or by crook, here's where Line 6 leads: neither to privatization, with high tuition and protected quality, nor to restored public status, with high general funds and protected quality, but to a poor public attached to private gated communities of Potemkin excellence

We will still have Berkeley Law or UCLA med, able to turn out $740,000 / year radiologists, attached to a highly diverse and yet strangely impoverished UC that is no longer producing the highly-educated and creative B.A.s that helped transform Grapes of Wrath California after World War II.