Notes on the UC Commission's First Meeting

UC planning and budgeting are currently controlled by a logic of cuts, and the Board of Regents Chair Russell Gould said at the start of the meeting that this is a problem.  We need to avoid, he said, reducing resources in ways that reduce quality that further reduce the capacity to attract resources. We need to avoid, he said, a death spiral of cuts.

The kick-off speaker for the UC Commission on the Future, Jane Wellman of the Delta Project, flew the flag on this topic:

I would never argue that a university should compromise on excellence, particularly a public university. if you’re willing to sacrifice quality then the state has no incentive whatsoever to fund you properly. . . Let me be clear. I see no reason for this state or any other state to accept the inevitability of declining investments of public resources in education. This generation deserves to have the same level invested in their future as my generation did. At a time when we under the economic and social importance of increasing attainment there’s no reason for us to accept inevitable declining resources.  We’re never going to get those investments without coming to the table with a lot smarter conversation about cost management and resource management. I do not imagine for a minute that the cost challenge you face can be handled exclusively through productivity increases or cost cuts. It’s got to be tackled on the revenue side. It’s got to be tackled on the tuition side.  But you’ve got to have a piece of that that speaks to cost management.

Unfortunately, this statement did not appear until 1 hour and 22 minutes into the discussion.  By that point it was too late to prevent the establishment of three familiar themes:

A. there will be no increases in public funding
B. there will be revenue enhancements on the margins, i.e. higher and differentiated tuition.
C. everything else will be expenditure cuts

This is pretty much where UC's administrative discussions already were.  The Berkeley campus has long pondered charging higher tuition than other campuses and increasing its share of non-resident undergraduates, perhaps now up to 25%. Other campuses are doing the same, though in my math these will produce fairly small revenue enhancements. President Yudof asked questions that suggested tentative support for surcharges for more costly undergraduate majors as has been imposed in Illinois and elsewhere - $1000 more for electrical engineering than for Political Science, for example.   No one suggested a new focus on turning the legislature around (with new data, new cost containments, new anything).  And the logic in the system, to repeat, is to cut and cut and cut.

Clearly no one on the Commission likes this. But there was a beginner's air to much of the discussion, and new movement was largely up to Wellman.

Did she provide this?  Yes she did, but more in the back of her tapestry than on the front.  Here's my list of her main points, generally paraphrased.

1. the deep problem with higher ed is educational attainment, which everyone agrees has to double (in terms of the number of degrees).  We need 50-60% of the population with some college or BAs.  
2. You can’t solve this problem by increasing UC productivity, since UC is already one of the top performers in the country.
3. Nationally, higher ed costs haven’t gone up more than 1% a year. But prices have gone up. The political system is so focused on price now and on degree value for money - there is so much more political criticism of higher ed out there - that much better accountability and public explanation are needed.
4. UC has a state subsidy per student that is among the highest in the country for a public research institution.  So despite the shocks you enjoy a level of fiscal support and access to resources than has no equal elsewhere.
5. One cost driver for publics is competing with privates. The private/public gap has gone from 2:1 to 3:1 in terms of core spending.  There's some better news now with the decline in their endowments but you do need to ask how many of your campuses can be internationally competitive for top research.
6. All universities function through cross subsidies. It’s normal for less expensive programs to subsidize more expensive ones.  Traditionally, undergraduate education has helped to pay for grad education. When 80% or more of the cost was paid by state, no undergrad wrote a check to a grad student. With falling state support this subsidization will be a problem.  If you look to increase undergraduate tuition by much, these cross subsidies are going to be a challenge.  
7. Softer international demand for graduate programs will continue, and that means we will have to grow our own in a way we have not had to do before.
8. The federal government has not been paying for the costs of its research for some time.  This means that students are increasingly paying for the costs of overhead.  The issue of who pays for the costs of research will come up – it’s not a free lunch, somebody has to pay for that.  
9. Look at attainment and have specific goals.  If you don’t have attainment goals then the financial questions won’t work, you’ll  costs in some measure of need, quality, productivity.  See Washington, Tennessee, Minnesota, especially Ohio, which have robust and thoughtful approaches to attainment goals and to how they're going to pay for it.  In Ohio, there's some reduction in competition and overlap, development of defined centers of excellence, differentiation of tuition with financial aid targets, no-frills options and lower-priced, narrower institutions, shifting enrollment pressures to community colleges.  Maryland is also good on cost effectiveness, more off campus study, education abroad, off campus (distance), faculty workload. They are looking at cost structures and delivery for high-enrollment courses, with an eye for delivering high-quality.
10. You can’t do this alone.  You need policy solutions and state frameworks for addressing underachievement.  You can lower costs simply by letting the state not educate enough people to be eligible for college, and therefore not have as many students to teach. You can solve your cost problem by not trying to serve the population of California as you have in the past. But that's not an acceptable solution. It's a possible scenario if the attainment challenge is not handled. In response to a comment from Senate Chair Harry Powell, Wellman noted that the California cuts will mean the loss of about 300,000 students from higher ed this year, and studies show that once you lose them they don't come back.
    
11. The Return on Investment measure will be important for this work. You need to be looking at costs with some measure of need, some measure of quality, some measure of productivity.
    
12. Financing needs to pay much more attention than it ever has anywhere to cost management and to productivity.  But by productivity, she said, I am not talking exclusively about faculty workload. I'm talking about unit costs in order to produce degrees.  The big cost drivers are the program mix, the graduate mix.  You need to look at benefits.  It's the non-salary side of compensation is eating up your budget.  Cost reductions can be somewhere in the neighborhood of 3% year is reasonable, and its gettable.
13. You need to be data driven.  The data on expenditures in higher education is terrible, and confused with data on revenues.
14. There are so many myths about higher education spending held by people within the institution. You need data so you don't chase the myths. 

 That's a lot of points.  One simplification is to reduce it all to Point 12: reduce costs by 3% a year through various cuts and reengineering, and also reductions in benefit costs. That fits with Point 4 - we're fat, relatively - Point 3, about better self-justifications to legislatures, and Point 11, about reforming via ROI -  measuring educational returns for each financial investment.  There's also Point 9, which lays out a program of differential tuition (also higher tuition overall), narrower curriculae, more use of community colleges, distance learning, and increased faculty workload.

The presentation had other ideas, but it slid inexorably toward cost containment. This simplification leaves us with A, B, C above, though C is modified to link cuts to educational productivity goals. This means hitching targeted, percentage cut targets, standard UC operating procedure, to Return on Investment, in which "return" is defined as through educational goals.  Since the Delta reports define educational goals - or productivity - as the unit costs of producing a degree (Point 12 again), tWellman can be seen as trying to push UC from one kind of financial driver to another.  Rather than reducing costs, we would be reducing costs per degree.  No one objects to reducing waste and to intelligent cost containment, but this doesn't offer substantive educational goals on which to build a future (as rightly demanded by Point 10). We are still left with A, B, and C.

Two Commissioners pushed back on this. Berkeley Law Dean Chris Edley talked about excellence and multi-campus aspiration.  He said that we are unlikely to find significant cost savings by telling any campus that they should be less than they aspire to be.  This was the remark that prompted the Wellman comment I cited at the start - that declining resources should not be accepted as inevitable, and that this generation should not get less education than the ones that came before.

UCSB Chancellor Henry Yang noted Wellman's expertise with data on cost.  But I'm wondering, he said, if you could include quality in your cost factor analysis.  Wellman replied, "I wish I could do better with that."  She said that wants to go beyond reputation and resources as the measure of quality to look at persistence, i.e, at various forms of productivity in degrees.

This wasn't the most useful direction that Wellman took.  Everyone knows UC needs real reengineering.  Calls for simplification and elimination of excessive procedures have been coming for years from faculty, staff,  administrators and students, and we need the focus, the stability, and the administrative support to actually do the redesign.  The cuts environment blocks all of these, and replacing one financial metric with a better one won't get us the transformational working environment that we need.

The more useful Wellman appeared in Point 2, which contradicts the cost containment theme by saying that UC is already highly productive.  Her more useful arguments also appeared in Point 10, in which the state has to be addressed and transformed in its understanding of the crisis of educational attainment and in its support.  Here she converged with many official recommendations of the Senate and some unions that have not been pursued.  Point 5 was also important: competing with privates has distorted priorities and budgeting and created a ruinous competition when we should be setting our own educational goals.  Point 7 gave an example of such a goal: "growing our own" brilliant PhDs in relation to both national and state-specific goals, as land grant colleges were always supposed to do.  Points 6 and 8 get to the heart of the campus poverty problem (and are compatible with our wealth as claimed in Point 4): high-cost programs are draining more populous low-cost programs, and this practice needs candid accounting, dialogue, and repair.  At the same time, research is draining instructional budgets (see our Indirect Costs Corner for some analysis of this), and this hidden funding problem needs fixing too.

This gets us to Wellman's more creative set of principles. I extrapolate somewhat:

D. as part of a general data upgrade, data on cross subsidies must be amassed, circulated,  analyzed, justified, and repaired as needed 

E.  productivity cannot be separated from quality, which must be defined independently of financial drivers, before they are relinked

F. there should be increases in public funding so that this generation has the same opportunities as its predecessors

G. these increases are contingent on improved cost efficiency and explanations of UC's public contribution

We can certainly do D, E, and G, as long as we can get massive buy-in from the Regents and UCOP on F!