Noir Track Intact

The California state legislature is set to adjourn without a budget. UC officials remain guardedly optimistic that last year's "one-time" cut of $305 million will be restored.  Regent Chair Russell Gould informed the Commission on the Future two weeks ago that "the state is listening."  The Conference Committee documents on the state's education sectors still show a split between the Assembly and the Senate on sources and conditions of this backfill,  on a partial buy-out of the Governor's 15% fee hike, and on striking legislative language blocking state funding of employer contributions to the pension (pp 31-37). And these items have not yet gotten close to a full vote.

Judging from our mail,  faculty and staff are less optimistic than are Regent Gould and other senior managers.  The following is a particularly vivid reminder of the gap between the experience of Regents' meetings and the experiences occurring on the campuses.

Hi Chris,

The (fairly obvious) scenario I fear is the following:

1) Schwarzenegger's $300 M for UC in his revised budget will disappear in Sacramento negotiations, presented as it was as directly at the expense of California's poor and dependent populations

2) Moreover, as you have suggested, the legislators will take UC CFO Peter Taylor's proposal seriously concerning UC's ability to save $500 M through efficiency measures and will therefore see even less of a need to restore the 20% cut to the 2009-10 budget.

3) the Gould Commission proposals, replaced in large part by UCOP's supplemental proposals, will go to the Regents in July.  Under the influence of ongoing budgetary confusion, the Regents will proceed to ignore the better proposals and to decide very brutal cuts across the board with no reconsideration of implementing a revised furlough program to soften the cuts.

4) By late summer, each campus will face 15% cuts (or higher) to academic core operating budgets and within each campus, many depts. will face the prospect of a drop in quality in grad and undergrad programs from which it will take many years to recover. One possible outcome: these dire circumstances will force campuses to raid "rainy day funds" and "profit centers" to make in through the year 2010-11, resulting in smaller (5%? 7.5%?) cuts.

5) Meanwhile, civil war will break out between campuses over ICR, UCOP "taxes," etc. radicalizing the push by UCB, UCLA, and UCSD to go it alone and to try to adopt the flawed Michigan model.

Blum Summer Reading

Among the useful material in the Daily Planet story on Regent Richard C. Blum's significant investment stakes in the for-profit higher ed sector, note especially the description of Blum Capital's investment behaviors, particularly its price arbitrage at crucial moments. I'll comment later this week on what this tells us about the relations between two distinct functions known as investing and discovering.

For more on the overall issue of the relation between public duty and private interest, in addition to  Michael's and Catherine's discussions and links below, also see:

A favorable bio-story from 2003, with passing reference to Blum Capital's stake in a UBS-related defense contractor.

A critical five-part series on Blum's investments and social impacts in the Anderson Valley Advertiser.

Google Finance metrics on two of the companies noted to be part of Blum Capital's portfolio: Career Education Corporation and ITT Educational Services, Inc.  You can use the "related companies" function to compare the financials of these firms to others in their sector.

See this chart for CEO compensation in the sub-prime higher ed sector -- produced as part of an ongoing Congressional investigation.

There's also "Subprime Goes to College," an attack offered in Congressional testimony of the dependence of the sector on unsustainable student debt (not to mention federal funding). The attack is authored by a hedge-fund manager named Steven Eisman. He is helping his short position in subprime education companies such as those held by Blum Capital, but he offers useful data and a condensed summary of common complaints about the overall industry.

The Question of the Regents

Catherine Liu’s call to remove Richard Blum from the Board of Regents points to structural questions that confront anyone concerned with reforming the University. As Catherine reminds us, Blum’s companies hold nearly a billion dollars worth of stock in for-profit, online educational companies that, reportedly, have received millions of dollars of UC investments. Of course, as no one needs reminding, President Yudof, Dean Edley, and Regent Gould are all pushing for an expansion of online education—an act that would establish greater legitimacy for the for-profit educational sector at the moment of rising scrutiny of its business practices, educational quality, and reliance on public funds. Indeed, as Catherine Cole has recently pointed out, rising student fees and an accelerated UC commitment to the notion of online education cannot but help legitimate a for-profit education sector that, while dependent on large amounts of public funds in effect diverted from public universities, has been subject to little oversight of its educational commitments or quality.

Given the lack of a clear business model for UCOP’s proposed expansion into online education, and the general opacity of UC’s investment decision-making process, the relationship between Blum’s holding, UCs investments, and the UCOP’s online frenzy call out for some public explanation. At the very least Regent Blum needs to respond to the reports and explain why his dual role does not constitute a conflict of interest.

But the issue goes beyond Richard Blum. As Bob Samuels has argued UC lost 23 Billion dollars in investments over the past several years, (investments largely related to UCRP) and continues to accrue debt far beyond its actual revenues. These losses and debts put the future of UC at risk. Indeed, the restart of employer contributions for UCRP will cause funds to be taken out of divisions and departments and, without resumption of state responsibility for UCRP contributions those withdrawals will become increasingly severe in the future. UCOP (or at least its leadership) have blamed the contribution holiday and the recent collapse of the stock market for these problems. They have refused to examine the role of their own investment decisions and their reliance on money managers for the disastrous transformation of UCRP’s condition. Again, a serious and open examination of these investments and the way that UCOP has relied on out-of-house money managers is the least that is owed to the University community.

These issues point to the continued lack of accountability—on the part of either the President’s office or the Board Regents—to the University and its citizens. The Board and the President treat the rest of the University—faculty, staff, students—as interlopers in their business. They are happy to hear our voices when we speak in praise but push them aside when questions are asked. But the consistent failures on the part of the Board to protect state funding, their apparent commitment to risky financial investment strategies, and their seeming unwillingness to take seriously what at the least appear to be disturbing conflicts of interest, call out for reform.

Regent Blum owes us an accounting: the University rests on open debate of freely disclosed evidence, he needs to adhere to these standards in disclosing and explaining investments that on their face seem to show a lack of confidence in, and support for, the public sector he helps lead but in whose competition he invests. The Committee on Investments owes us an audit. The Board of Regents and President Yudof owe us greater responsiveness, openness, and most importantly a revamped organization that represents the University rather than governs it from afar.

UC Regent profits from For Profit Higher Ed...

Frontline has a great segment on for profit education. Today the Senate is holding a hearing on a report drafted by Senator Tom Harkin on the for profit education sector. Steven Eisman, former hedge fund manager and critic of subprime mortgages says that we are on the 'cusp of a new social disaster.'

Bloomberg reports that "The five largest publicly traded for- profit companies received 77 percent of their revenue from federal financial aid programs in 2009, up from 63 percent in 2002, the report said." Richard Blum is a smart investor.

But where is the conflict of interest between Blum's savvy investment in the for profit education bubble and his service as UC Regent?

Today on NPR, the profit education industry defended itself by asserting that it provided education to critically underserved populations. Perhaps thousands of CA students who couldn't get into Cal State or UC's because of budget cuts and enrollment contraction could pick up a degree at one of Blum's for profit universities?

Blum's Capital Partners is the DOMINANT shareholder in two of the largest for profit higher corporations, Career Education Corporation and ITT Educational Services, Inc, both under Senate investigation and cited by Harkin's report.

These companies have learned how to suck taxpayer money into diploma mills that turn handsome profits for their investors while saddling their "students" with crippling debt.

Dump Richard Blum

Berkeley Daily delivers a story about Richard Blum that is a MUST read. Please take the time to do so. I know it's summer and we are all distracted, but we MUST organize to dump Richard Blum as UC Regent. He has made many fortunes investing in diploma mills, private, for profit universities that hard sell their degrees to desperate, working class and veteran students. These private institutions suck up federal grants and treat their students like atm's to the federal student loan serve. Please read this article and let's organize and act. I also heard UC Regent and CA Secretary of Education Bonnie Reiss speak at an event in Providence during which she demonstrated less than zero understanding of education or its function in a democratic society. The Regents serve twelve year terms. Let's subject them to thorough scrutiny and oust the ones, like Blum who are out and out corrupt and the ones like Reiss who are destructively ignorant.

We, the Swinish Multitude

By Michael Meranze

UCOP’s “expanded recommendations” to UCOF envision the University as an increasingly centralized, hierarchical, routinized, and disconnected set of programs. In keeping with the managerial ideology that is their default answer to any set of problems, UCOP has proposed that the problem facing UC is an inefficient, and insufficiently disciplined, faculty and staff; as a result what the university needs is a more powerful center. “I do not know of any organization that achieves budget discipline from the bottom up,” Chris Edley informs us in the expanded recommendations, “We need to be sufficiently top-down to get the job done.” (ex.recs, 94) From the vantage point of UCOP—as with their political analogs Governor Schwarzenegger and Meg Whitman--the key to success is routing out “waste” among, and imposing discipline upon, the little people. Despite their own problematic track record of leadership and direction, they want to impose a new vision on the institution. How does UCOP view the faculty and staff and how do they imagine the University’s future?

The sense that it is the archaic nature and attitudes of the classroom, the faculty, and the staff that lies at the heart of UC’s problems runs throughout the “expanded recommendations.” Recommendations 1 and 2 call for greater centralized oversight of teaching loads, course sizes, and greater power to close programs. Despite acknowledging that programs are not “widgets” that should be added or subtracted lightly, Recommendation 3 proposes streamlining the process to get self-supporting and extension programs approved—thereby increasing the pressure for programs to develop in response to funding not intellectual necessity. The list could go on. These changes are primarily justified in terms of “through-put” and “out-put,” “marketing” and “enrollment management.” The effort is to transform the University so that it can be monitored through computer programs. What matters are those things that can be translated into managerial language and the empty efficiency of streamlining. Research and teaching appear, and perhaps are in the minds of UCOP, an afterthought.

Both UCOP and its allies avoid confronting their vacuity of their models by denigrating the faculty and the staff. Yudof is relatively circumspect in this—although his famous comments about “being manager of a cemetery” did not endear him to those who work for the University. Peter Taylor seems to think that the reason there hasn’t been administrative change has been local resistance. As he told the Chronicle of Higher Education, "The hard part isn't identifying the opportunities . . . It's driving the cultural change that will have to take place." Of course he forgot to mention that these efficiencies had been proposed for years and UCOP had failed to administer them. Edley loves to cast himself as a bold thinker hamstrung by a conservative faculty. As he is reported to have commented recently, “The biggest obstacle [to online education] is our academic senate. They revel in the comfort of denial and the conservatism of greatness. They have never read a newspaper—they’re in denial. The state isn’t going to pay. Faith-based fundraising is not a business plan.” But in reality what is it that UCOP is proposing?

One of UCOP’s major departures, of course, is online education. Both Toby and Catherine have already provided evaluations of the pedagogical and financial implications of UCOP’s online initiatives. I won’t belabor those points.

But I do want to point to another aspect of their program. Expanded Recommendation 7 calls for the immediate establishment of system-wide planning for expanded online courses—even before the pilot program has been established, organized, run, and evaluated. Despite the rhetoric of rigor there is to be none. UCOP wants the program no matter what the faculty decides.

But what exactly is the rush? The only thing that it would accomplish with any certainty would be to displace funds and attention from alternative approaches to online tools. Indeed, it is difficult not to think that the real reason for the rush is that the proponents of accelerated online education at UC worry that the pedagogically based exploration and use of online resources that goes on everyday at UC is in fact more effective and educationally sound than what they are proposing. Like Tim Pawlenty, their ally in the promotion of online education, UCOP seems to view the actual classroom and classroom instruction as an impediment to college education.

Even the “social justice” claims of online access ignore the project's implications for the work of the institution. Edley admits that his model depends on increasing the number of GSI’s at a point when the academic job market is shrinking due to the long-standing administrative preference for lower-paid temporary faculty. The University would thus be in the position of deliberately expanding the pool of graduate students to teach online courses even though it knows that their employment prospects are declining. Put another way, social justice concerns only address consumers not workers. Those who actually work at the University are ignored so long as UCOP can claim that someone is consuming something.

If the online initiative makes it appear as if UCOP is moving in a bold, new, direction, the repetitive claims for centralized supervision suggest that the University is suffering primarily from a lack of “hard-nosed” oversight. But does anyone honestly believe that the political problems of the University stem more from the presence of unnamed “weak programs” than from the remarkable string of administrative scandals that have rocked the University over the last decade? While some steps have been taken to respond to those problems is there evidence that the scandals have been taken to heart? It is hard to see when UCOP continuously justifies increased salaries for administrators because they have assumed new duties while expecting staff and faculty to take on new duties (due to cutbacks) while suffering furlough reductions. Or take the Research Funding Work Group's identification of hundreds of millions of dollars lost each year because of insufficient ICR. Are we really to believe that it is the responsibility of individual faculty, staff, or lab workers to negotiate proper ICR? Or has it been UCOP which has passively allowed the underfunding to go on for years? UCOP would like to manage everyone else even though it has been unable to manage itself.

UCOP has also failed to justify public funding in an effective manner. Take President Yudof’s now infamous comparison of our successful businesses and our academic programs. This distinction bungles the reality of the matter. UCOP should insist over and over again that the state receives a huge immediate return on its investment in UC as 3 billion is leveraged into 20 billion of economic activity—and that the dynamism of that investment depends not only on the “businesses” but on the entirely of the University. What Yudof fails to argue—perhaps because he can’t see it—is that the “successful businesses” are dependent on the core programs. They are dependent on the cross-subsidization that occurs, they are dependent on the links between the medical centers and the campuses, and they are dependent on the quality of education and students that are drawn by the faculty and that draw faculty as well. They are dependent, in other words, on the intellectual and educational dynamism of the University.

Budget transparency would help establish this case—but of course budget transparency is anathema to Oakland. UCOP would prefer to disconnect UC even further from the state (as in expanded recommendation 8 calling for more external funding of faculty salaries) than seriously attend to the actual benefits (for the university and the public) of state funding. They would rather claim success with grant money than give an accurate picture of the actual interconnectedness of the intellectual life of the University.

The UCOF work groups failed to provide a systematic and unifying set of recommendations not because the work groups weren’t up to the task but because the UCOF project was flawed. UCOF assumed that the answer to UC's problems was to give more power to the structures that had failed the university in the first place. UCOF assumed that the managerial model promoted by UCOP was sound and the University’s difficulties were rooted in the leftover practices of a bygone age. But none of those assumptions can be sustained.

The Coverage This Week

Coverage of UC this week included a story in the Sacramento Bee on how the University's stated poverty hasn't prevented it from raising salaries at the top. The Los Angeles Times decided that the leading idea from the Monday meeting of the Commission on the Future meeting was changing the term "fee" to the term "tuition."  UCOP has spent much of this crisis year pitching on-line education, but this idea got attention only in its coverage of itself.  It's pretty obvious that on-line ed will have only a marginal, incremental effect on UC's very large educational and financial problems, and it should now be given back to the people who already know something about how it works.

The big financial story was the size of the shortfalls in UC's coverage of its research costs. We've often covered this issue (around UCOF's recs, from a lab perspective, as a pay equity issue, in its administrative details, etc.)  The theme has been that research doesn't make money, but costs money.   A 2003 Senate report demonstrated this, the Council on Governmental Relations has long had non-circulating data on the subject.  Urban legend has convinced generations of scientists that through their grants they were the university's major breadwinners.  For reasons best known to themselves, research administrators let them think this, though they have always known that gross income was accompanied by net loses, and presented that data to each other at professional conferences.  See a particularly good primer, this one from UCSB, that states, "It is less well known that the university provides about 25% of the actual cost of facilities and administrative support for extramurally funded research, over and above what it collects in indirect cost return."

The crisis has for some reason finally caused this news to erupt out of UCOP.   The  size of the loses is remarkable. "UC receives about $3.5 billion a year in research grants and about $780 million to cover indirect expenses such as paying the electricity bill in labs and other facilities. But the actual indirect costs are about $1.5 billion, a $720 million shortfall."  This is a huge number, and it also means that UC provides 48% of the actual costs of facilities and administrative support over and above reimbursements.  Obviously this internal support for research is unsustainable.

Getting the money back is important, but will be easier said than done. Gerald Barnett and I, writing in the Chronicle of Higher Education, suggested a blanket, short-term increase in federal indirect cost recovery rates while real costs get sorted out.  The odds of this happening are rather low. The political question is even more awkward.  Two weeks ago, UCOP said it could cut $500 million in expenses with administrative reforms. Now it turns out it's been losing another $750 million a year in research costs it didn't pursue. This undermines UCOP's right to lecture the campuses about their alleged inefficiencies, weakens public confidence in UCOP's managerial abilities, and gives the legislature no reason to increase state appropriations.  Sure enough, the leg split on the restoration of the one-time $305 million cut, with the relevant Senate committee agreeing only if state revenues are $2 billion greater than the forecast in the May Revise (p 32).

The good news is that the media is starting to realize that UC's businesses aren't doing much for UC education.  In its story, "UC: Millions Lost in Research Costs from Grants,"  (on its way to becoming the title of all UC news titles of the future - "UC: Millions-Billions Lost"), the authors note,

As state funding declines, UC is relying more heavily on private sources of funding such as research grants and hospital fees. Those income sources fuel the university system's medical and research enterprises, and aren't used to pay for basic undergraduate education, which relies on student fees and the state's general fund.

Sorry, that was from the negative Sac Bee story about UC's high end salaries.   But it raises the possibility that the public will increasingly realize the value of direct public funding of the campuses themselves -- if they can be sure education, including research, is what the money will go for.

To inspire such confidence, UCOP will have to be much more straightforward.  On ICR, that would mean saying, "we took losses for two reasons.  First, we did it as a service to our faculty and to the state, because unless we paid indirect costs lots of great research wouldn't get done. Secondly, we took loses because our sponsors forced us to, from federal agencies who short us and require matching payments on some kinds of grants, to industry, which expects the public to subsidize high-risk research. It was great while it lasted, but we can't afford it anymore  We'll have a new proposal for cost recovery in a month."

Pay Some Attention: Return of UCOF 2

The UC Commission on the Future is having its fifth meeting tomorrow, June 14, for its second consideration of formal recommendations.  UCOP has performed a studio cut on the original material, which has the virtue of greater clarity.  Note in particular (page references are internal to the Meeting Materials):

•  "Selected Working Group First Round Recommendations."    (p 20) 

We are told that the other First Round recommendations are not thus rejected, but won't be discussed June 14.  There is some lack of clarity here.

• "Expanded recommendations" (p 68). These have been recently added by UCOP.

These new UCOP recommendations have not been reviewed by the Senate, and there has been some drama about this over the past week.  The upshot seems to be that "nothing will be decided at this meeting."

• Senate Chair Harry Powell's summary of the Academic Senate's review of the UCOF First Round recommendations (p 102).
• Proposed Commision Recommendation from the Academic Council  (p 109)
• Council of Vice Chancellors (COVC) Recommendations to UCOF (p 113).

The main idea that has emerged from UCOP for managing UC downsizing is on-line instruction. See Tobias Higbie's analysis.

I offer a brief overview of the financial recommendations.

Catherine Cole explores some of the complications and potential conflicts of interest of the online iniative.

The Ghost of UC Future

by Catherine M. Cole

On June 11, UCOP made public a set of "expanded recommendations" to the UC Commission on the Future which is to meet on Monday, June 14. The cornerstone of these eleventh-hour additions seems to be items number 6 and 7 of the expanded recommendations which propose an "expedited Pilot Project" for lower division online education:

"Eventually, there will be online credit-bearing courses and B.A. degrees in the so-called quality sector. (emphasis added) That much seems certain. The questions are: Who will develop and deploy the first successful model, when will they do it, and can it be at a scale sufficient to make a meaningful difference in access to higher education. The Commission's proposed answers are: UC should be first, as soon as possible,and our ambitions should err on the side of boldness.

"We must plan assuming an indefinite period of serious financial pressures. Moreover, with or without revisions to the Master Plan, there will be growing political, economic and social demands for undergraduate spaces. Access to excellence is already too limited, and the future will be worse absent a combination of transformation and innovation - in both how we deliver on our mission and how we fund it."

You, like me, might be wondering what exactly is the "quality sector"? Sector of what? And what sectors besides "quality" are there? I am going to venture a guess that what is being discussed here is the educational industry which includes the rapidly growing market for online, for-profit higher education, aka "degree mills." I don't know what the sectors other than "quality" are called. For the time being, let's imagine two sectors: "quality" and "dreck."

Here are some disparate facts. Do we dare connect the dots?

--Federal aid to for-profit colleges jumped to from $4.6 billion in 2000 to $26.5 billion last year according to the Education Department.

--For-profit colleges can receive up to 90 percent of their revenue from federal grants and loans.

--According to the Chronicle of Higher Education, the proportion of students who borrowed at public two-year institutions and private, nonprofit four-year institutions stayed about the same between 2003-2008 (between 49.5%-53%), and at public four-year colleges grew slightly. However, "at for-profit institutions, 91.6 percent of students borrowed in 2007-8, up from 79.5 percent in 2003-4."

--Students attending for-profit schools are defaulting on their federal loans at a higher rate than those at traditional schools, according to the Dept. of Education. From the Chronicle of Higher Ed:

"Students at for-profit colleges receive 19 percent of federal student aid, which includes Stafford and Perkins Loans as well as Pell Grants for low-income students. During the 2007-8 academic year, students at more than 2,000 proprietary colleges received more than $16-billion in loans, grants, and campus-based federal aid.

"Four years into repayment, 23.3 percent of students at those colleges were defaulting on their federal loans-a higher rate than students at either public colleges, where 9.5 percent were defaulting, or private ones, where 6.5 percent were in default."

--The Department of Education is seeking to protect taxpayers from loan defaults and to stop students from taking on debt for degrees that don't pay off with higher incomes. New rules from the DOE were supposed to have gone into effect next week, but....

--As of June 11, 2010 (Friday), the Obama administration is delaying the release of a new loan rule. This rule would disqualify the major providers of for-profit education from being able to accept student loans. In response to news of this delay, stock values rallied.

--For-profit colleges say they are key to President Obama meeting his goal of having the world's highest number of college graduates by 2020.

----Blum Capital (of UC Regent Richard Blum) has significant fiscal holdings in the for-profit universities ITT Educational Services Inc. and Career Education Corp who benefit from Obama's delay.

--In 2009 the University of California Board of Regents, of which Blum is a member, voted to increase student registration fees (roughly the Univ. of California equivalent of tuition) by 32%. Shortly thereafter, Blum Capital Partners purchased additional stock in ITT Tech, a for-profit educational institution. Some contend that these events suggest a conflict of interest on Blum's part.

--The UC Commission on the Future meets on June 14 to discuss, among other ideas, several recommendations that were suddenly submitted on Friday outside of the committee review process. Online education is one of the biggest elements targeted for big, bold new initiatives. This would supposedly put those of us in the so called "quality sector" (UC) into a growing market that seems otherwise dominated by the "dreck sector" (University of Phoenix).

--Walmart's recent initiative for online, for-profit education is partnering with a company called "American Public Education." No, American Public Education isn't the federal model of funding for high quality public universities pitched to the Obama administration by the UC Berkeley administration last Fall. American Public Education is rather a fairly dowdy and unknown for-profit university that offers online training to the military. The company has now become the darling of Walmart. Yes, the "American Public University" moniker would seem to be treading on the "brand" identity of the not-for-profit and genuinely public higher education offered by institutions like UC. (Such confusion of identity is, by the way, typical of those 419 email scams from Nigeria that often come from the widow of some vaguely recognizable African leader who needs to deposit several million dollars in your bank account, if only you could send your personal financial details...)

--Of the Walmart/American Public University partnership, Jolene L. Knapp, executive director for the Society for College and University Planning, said this week: "Many in the traditional higher education world will decry this partnership".... "But many, many changes are coming to postsecondary education. This is just one."

--If I were an investor in for-profit, low quality, online universities, my interests would be served by:

a) Having the cost of attending a public university rise so that many who formerly could attend are priced out and need to seek alternate means of accreditation. (check--accomplished with 32% fee increase last year at the UC)

b) Having the lines dividing the "quality sector" from the "dreck sector" become very confused and blurred. (Check. If the new recommendations introduced by UCOP to the Commission of the Future on Monday are accepted, this second objective will be served--not just with online education, but also with expanded, fast-tracked new professional degrees; freezing the growth of the traditional, face-to-face high quality education we have been known for to date; shorter time-to-degree; greater utilization of extension classes, etc.)

c) Having online education be embraced and legitimized by traditional institutions in the "quality sector" of higher education so that the Obama administration keeps the federal loan dollars flowing. (Check. Get the Commission on the Future of the UC to embrace online education, and legitimation will be enhanced.)

For more on for-profit education and its use of online teaching, shady funding schemes, and substandard educational standards, see this Frontline special "College, Inc" which aired in early May 2010. As the website says, "Even in lean times, the $400 billion business of higher education is booming. Nowhere is this more true than in one of the fastest-growing -- and most controversial -- sectors of the industry: for-profit colleges and universities that cater to non-traditional students, often confer degrees over the Internet, and, along the way, successfully capture billions of federal financial aid dollars."

Remember the mantra coming from UCOP on this: "Our ambitions should err on the side of boldness." These are not words we have otherwise heard for a while now at the University of California.

So, friends, this is the Ghost of Christmas...I mean, er...UC Future. You may recall from Dickens, the Ghost of Christmas Yet to Come was the most fearsome ghost of all.

But other ways of viewing this future are possible. Some are arguing that if the UC embraces online education, this will be the "Phoenix"-like resuscitation (if you'll forgive the pun) of the dreams and values expressed in Kerr's Master Plan for Higher Education.

The proselytizers of UC online education certainly do foreground social justice issues. UCB Dean Christopher Edley says that online education and a cybercampus will serve the poor and underprivileged who will have access to UC's excellence without having to leave their homes. Such students would be physically located far from faculty and fellow students. Yet such "social justice" framings of educational access for the poor and underprivileged should give us pause. History has taught us that a separate education is rarely an equal one.

It may be that online education is the way of the future, and we must either get on board of be left behind with no money. But here are two worthy questions: If all members of the Board of Regents and top UC administrators were forced to divest themselves of any financial holdings in for-profit universities, a) would the UC still be exploring online classes?, and b) if so, would we be pursuing this new "delivery model" in the same way?

UCOF Financial Recommendations

Most of the UCOF  recommendations summarize common sense that has been around for years (seek administrative efficiencies . . .)  If they are proposed as solutions, one wants to identify the problem that they seek to solve. 

The Commission was created after the Regents at their July 2009 heard testimony from all of the chancellors that suggested decline on the campuses was fairly far along.  The responses of the Regents made it clear that, at least for those that spoke, this came as a real surprise. In evaluating the new UCOF materials, you may want to look at our list of the problems the Chancellors' identified, and decide the extent to which the current recommendations address them.


The same goes for comparing the recommendations to the analysis offered by the Commission's most knowledgeable guest, Jane Wellman of the Delta Project (my notes on her testimony are here, and a backgrounder on her research is here).  Do the recommendations address UC problems in this national framework?


There is nothing new in the financial or budgetary recommendations.  It is unfortunately still largely captured in my comments on First Round recs, on the continuing embrace of the high-tuition model. High tuition is clearly the path of mental least resistance.  But since 7% annual increases bring in-state tuition to about $21,000 per year by 2020, and 10% will bring it to $28,000, it is irresponsible for UC officials to continue never to discuss in public the declining political support that high tuition has and will continue to create.  In other words, is the first funding recommendation - the multi-year advocacy campaign to raise public support - undermined by the tuition-raising fiscal solution? I can't have confidence in a planning process that doesn't at least take the question seriously. 

Be that as it may, note the norm established by the UCOP budget slides that start the June 14 materials.  Slide 9 shows UC closing the budget gap.  How? The (mislabeled?) slide 8 establishes a 3% annual general fund increase standard, yielding an additional $790 million - about $120 million less than the need to close the gap this year - over a period of ten years. Slide 8 establishes a base of 7% annual fee increases.  Slide 8 also throws in an additional $200 million in annual revenues from an unrestricted endowment. At a 3% payout this would require that UC raise a new endowment of $6.6 billion in the next ten years, and that its fundraising go from about 98% restricted to 100% unrestricted, starting now.  This scenario is completely unrealistic.  The scenario for state GF increases is a self-fulfilling admission of defeat.

These slides frame the supposed UCOF break with conventional UC wisdom with the core of that conventional wisdom --  the existing funding model, in which familiar 7-10% tuition increases coexist with decline in educational resources.

The recommendations that would change how UC works are those from the COVC (p 113), and they should be read very carefully.

Cyber-campus v. 2.0: The Rebranding

by Tobias Higbie
UCLA History Department

What follows is a quick review and analysis of the proposals for expanded online education reflected in the "expanded recommendations" section of the UCOF materials prepared for the June 14 Commission meeting.  Recommendations 6 and 7 are on pages 86-91.  Unlike the previous calls for an 11th "Cyber Campus," these proposals call for conversion of existing UC classes/students to the online platform.

The recommendations show the hand of UCB Law School Dean Christopher Edley, especially in their frequent reach-for-the-stars rhetorical flourishes.  They assert the inevitability of online courses and degrees in "the so-called quality sector," and propose that UC aim to be the first to do so and that "our ambitions should err on the side of boldness."

Beyond this, the proposals are mostly familiar if you've been following the issue.  There will be a pilot program to develop 25-40 online undergraduate courses focusing on high-enrollment courses with high demand from community college students hoping to transfer into the UC system.  There will be a Request for Proposals from UC faculty "with stellar teaching records" who will then get course buy-outs and other support to develop the online material.  Ultimately, the courses will be taught by graduate student instructors.

Recommendation 6 calls for an acceleration of this pilot project.  Recommendation 7 calls for planning coordinated system-wide delivery of online instruction with the frequently stated caveat that this happens only if the pilot project shows that these courses can be equal in quality to regular face-to-face UC courses.  Of course the report has already declared that success in the "quality sector" is inevitable.  So, hey, not to worry, right?

A few highlights:

* They already have a plan: "UCOP Academic Planning has developed a detailed, step-by-step, draft strategy for leveraging online instruction to expand access to UC-quality courses and degrees and generate revenues through online instruction, returning revenue to support core research and teaching."  The Council of Vice Chancellors contribution to the meeting materials asks the Regents to direct the President to have the courses up and running by academic year 2013.  If you have yet to see it, the UCB School of Information is hosting the planning materials.

* One possible strategy is to peel off departments willing to partner with the University Extension (UNEX): "there would be advantages to using UNEX as the organizational base for the online instruction program, and exploring joint branding of degrees with the individual campuses."  This seems to be a way to get around campus Senate opposition.

* The push for semester scheduling across the system is linked in part to online education.  You can only get the economies of scale if all 10 campuses are on the same schedule:  "A coordinated or systemwide approach will be more cost effective in delivering educational programs which, owing to their reliance on rapidly evolving information technologies and on high-touch interaction with potential applicants as well as with enrolled students, requires scale that is not currently available and very difficult to build on a campus-by-campus basis."  The COVC report calls for system-wide semester calendar by 2014. 

* The bold vision is at least in part related to the need to convince "donors" (which may mean "investors"):  "On the other hand, a clear vision of a University-wide effort that aggressively pursues opportunities inherent in online education would likely mobilize support from potential donors, the Legislature and the general public."  Then there is the odd statement: "some portion of the Program may be funded as an unsecured loan to be repaid if a follow-on project at scale yields net revenue."  This seems to suggest they've already had discussions about this.  But with whom?

* The recommendations are vague on the form and ownership of intellectual property in the courses.  Courseware will be "'open' in some fashion."  Revenue comes not from selling the material, but "delivering" it with credit and with an instructor.

To summarize then, it seems the pilot project will move forward ASAP and planning for system-wide online courses will run in tandem with the pilot.  But what happens if the pilot shows that online courses are not equal in quality to current courses?  That question misses the point.  The purpose of the pilot is not so much to see *if* online classes are just as good, but to demonstrate that they are.  At the end of the pilot, the advocates of expanded online courses will be able to point to a rigorous vetting process that has certified that their product is in the "quality sector."

Personally, I don't think quality is the stumbling block (although they could screw it up).  With enough money they will be able to develop highly interactive online materials that might even be superior to current classrooms.  At least in my brief experience at UCLA I've noticed spotty wireless connections, insufficient classroom technologies generally, and too many rooms with peeling paint and bolted-down chairs. Compared to those classrooms, online learning might be rather refreshing.

I think financing and long-term business model are going to be a bigger problems. This is likely to be both more expensive and less profitable than they imagine/claim.  If so, it will divert existing resources to a bold new project that will not deliver access or cost savings.  So strategically, I think faculty should demand a more detailed business plan (both for the pilot and the system-wide roll out).  Who are the donors?  More importantly, who are the "investors" or creditors (if there are to be any)?  What kind of deal they're getting for their investment/loans?  How will individual campuses be compensated if courses are on a system-wide platform?  Given the lack of budget transparency within the UC, I don't imagine the advocates of this plan are ready to answer these questions.

UC Budget Reality 3: the Per-Student Disaster

The graphic below follows on those of two previous posts (one on UC's corrosive compromises, another on a better budget strategy.) It correlates declining state revenues with a general campus enrollment growth of 33% over the decade (from about 173,000 to about 230,000 students).

We are used to hearing that state funding has fallen 50% since 1990.  When we correct for enrollment, we see that state funding fell by 44% in constant dollars just in the past decade.  State funds have fallen almost 20% since Arnold Schwarzenegger's first budget in 2004-05, or 25% if the partial restoration in his May Revise does not survive the budget process.  The chart shows that during the boom years of the middle part of the decade, the state budget kept UC's per-student state revenues flat.

Because state funds support sponsored research as well as instruction, state cuts pull money out of research. But the most immediate casualty is instruction, particularly for undergraduate students.  For example, recent data from UC San Diego shows that the revenues supporting Academic Affairs are 85% comprised of student tuition and state funds.  Cuts in state funds are only partially made up by tuition hikes (the 32% hike for 2008-10 netted a 2% restoration of core funds), so the result is reduced educational capacity -- at a moment when California faces an educational attainment emergency.

This situation is truly appalling.  None of UC's announced proposals this year come close to addressing it.  The UC Commission on the Future is meeting on Monday.  Which of its recommendations address the problem in a concrete way?

Pay No Attention To That Man Behind The Curtain

By Michael Meranze

UCOP’s continuing insistence that the state is, and will continue to be, an “unreliable partner” has placed them in lock-step with the very forces that are committed to reducing the importance of public commitments to our common life--indeed to reducing our common life itself. Aligning themselves with the Governor and his perception of the state of the State has meant that the Regents and UCOP can do little but watch the University deteriorate while it is transformed into an unrecognizable and no longer public university.

Of course, UCOP’s belief that California is now an “unreliable partner” has its roots in real difficulties. The state has reduced its investment in higher education dramatically and the political system is profoundly dysfunctional. We are all familiar with the various causes and symptoms: the 2/3 requirement for passing a budget (in place since 1933); the limits on property taxes (with a resultant shift to income and sales taxes) and the 2/3 requirement for any tax increase put into place by Proposition 13, the increased spending on corrections, the capture—by well-financed corporate interests—of the initiative process, the devaluation of experienced political leaders that both triggered and resulted from term limits, the constant shuffling of appointed positions between termed-out politicians, and the increasingly anti-governmental and reactionary nature of the Republican party. As a result, UC’s leadership can no longer operate as if there is a consensus in support of higher education held by the state’s political leadership.

But UCOP has drawn precisely the wrong conclusions from this situation. Instead of working to promote a new commitment to public investment (which they know they need) they have instead embraced political actors and strategies that have failed UC time and again. Let’s take President Yudof’s famous “unreliable partner” statement. Yudof noted that he “was impressed by the honesty of Mike Genest, California's state director of finance, who agreed with me — in public — that the state has become an unreliable partner.” But Genest is not some apolitical technocrat. Instead he is a committed political figure with a committed political agenda—to downsize the state government by convincing the public that state funds do not serve the vast majority. As Genest notably claimed in an interview, “Government doesn’t provide services to rich people .... It doesn’t even really provide services to the middle class.” Genest and the Governor he served (Genest resigned late last year) have been driving the effort to reduce Government support for the poor and lessen the contributions of the wealthy to the common good. They want the government to be an unreliable partner.

Popular mythology aside, California’s Republican Party has not been a friend of the University for a long time—if ever. The numbers are clear. Arnold and his then Finance Director Donna Arduin (brought in to find ways to downsize the government as she had in Florida) pressed UC and CSU to agree to the Higher Education Compact that locked in underfunding of the University. UC leaders then watched as the Governor unilaterally broke the Compact in 2008 and then further reduced spending in 2009 and 2010.

Despite rhetoric to the contrary Arnold has been committed to the proposition that the state and social services need to be as minimal as possible. Republicans in government, not “the state of California,” have starved the public sector (and not simply Higher Education) since the 1990s. Indeed, Gray Davis was the only recent Governor who did not starve the system. By accepting the perspective of a Governor who has done more than any Governor in memory to undermine the public sector and by blaming the state in general, the Regents and UCOP have alienated potential Democratic supporters in the Legislature and made the decline of public education appear all but inevitable.

Governor Schwarzenegger insists that cuts are the answer to the budget crisis and proclaims that we have spent our way into this mess. But as even the LAO admits, state spending over the last decade has not kept up with inflation and population growth and Arnold’s proposals would lower per capital state spending in real dollars to a level not seen since the mid-1990s. (5,7) Nor do these data address the long-standing shift of California’s tax structure away from corporate taxes onto income taxes and the effectively regressive nature of the income and capital gains taxes.

Genest’s comments made clear that Arnold’s administration believes that only the poor benefit from government services and that their job is to make sure that the wealthy do not have to pay for too many of those services. When UCOP and the Regents act as if fee increases and administrative efficiencies can compensate for the loss of state income they not only reinforce the image that government investment is a luxury that we can do without but they provide institutional cover for the Republican’s wide-ranging efforts to strip away social services from the citizens of the state.

In truth, the Governor’s proposal to increase funding for the University (which received predictable and lavish thanks from UCOP) merely replaced some of the funds that he had cut from higher education over the years. To make matters worse, Governor Schwarzenegger’s May Revision set higher education against the needs of the poor and sick. It is hard to see this gambit as anything but a calculated ploy to force Democrats to support cuts either to higher education or to the needy. The Governor will thereby promote the notion that it is the poor who stand in the way of middle-class opportunity and security--thereby solidifying a notion that the public realm is a danger to the middle-class.

Now I understand perfectly well that no UC administration is going to publicly break with the Governor. He sits on the Board of Regents and has tremendous power over the institution. But that does not mean that the administration needs to parrot his ideological distortions of the state’s budget and economy.

Instead of echoing an ideology designed to impose austerity on the poor as a way to protect the privileges of the wealth, UCOP needs to place the centrality of public support for UC and UC’s importance to the public at the heart of their public campaign for the University. Instead of assuming that the public believes that higher education is a pointless superfluity when it doesn’t directly produce commodities, UC’s leadership must insist over and over again that if we fail to provide a high-quality public education to the young of the state we will be condemning the future.

Of course, given the structure of California politics and the ideological commitments of California’s Republican Party such advocacy will not succeed without resistance nor will it work wonders overnight. Indeed there is no guarantee of its success. But we can be sure of one thing: the Regents and UCOP will be unable to defend higher education so long as they simply repeat the failed policy of echoing Governor Schwarzenegger’s destructive understanding of California’s future. So long as they do so they will simply provide political cover for an effort to entrench deeper hierarchies in California and sacrifice the young and the poor for the sake of wealth and power. And UC will be sacrificed as well.

Same Flat Revenues, Same Flat Pitch: How to Do Better

On occasion, in private conversations, UC officials will admit that their strategy with the state has not been working.  But the next sentence is generally a challenge: "so do you have a better idea?"

Well, actually, yes we do. So do other people.  Better ideas are in constant circulation.  Here's one example of an advertizing campaign that was prepared by a member of UCPB in conjunction with a professional publicist.
Promoting UC Education 1

Sound familiar? "Pay more, get less" emerged in the Fall of 2009 as a protest slogan.  But this advertisement was first presented to UCOP officials in Fall 2003.

There are better ideas for promoting UC funding - just not ones that UCOP, in its higher wisdom, are willing to use.

Instead, we get copy like this.  Responding to budget cuts, the president of the University of California issued the following statement:

California is facing a major budget challenge, and as a result, pain and sacrifice will have to be spread widely across the state. We at the University of California recognize that we need to play a role in the state's solution to its budget gap.

At the same time, it is important for all to recognize that every additional budget cut to the University of California is a painful cut. We already have taken deep cuts in previous budgets . . .  Our ability to preserve this institution's world-class quality and continue making a major contribution to California's economy will be compromised by these growing budget cuts.

Later, on the same subject, the president of the University of California issued the following statement:

While we deeply appreciate the governor's actions, notwithstanding the crisis in the state budget, there is still a significant gap as we seek to repair a budget that has been severely cut. . .  The university requested $913 million to address this critical issue. . . .This money is vital if UC is to avoid declining educational quality, access and research.

 The first statement was released by President Robert Dynes on November 25, 2003. The second was made by President Mark Yudof on January 8, 2010.  Any number of similar statements were issued in response to bad budgets.  The statement, "cuts hurt, but the state can't avoid them," forms the normative baseline for UC reponses to budgetary challenges in the 2000s.

Here now are the graphs with the updated benchmark promised in a budget post last week.    Click on the graph for more detail.

There's a sag in the Benchmark, which is state funding for UC relation to state personal income, whose 3-6% annual increase came to a temporary end in 2008.  But the governor's budget, while deeply appreciated by UC officials, insured that UC state revenues didn't just stagnate but rapidly fell. 

The updated correction for consumer inflation looks like this:

Governor Schwarzenegger's higher educational achievement has been to flatline UC funding from the time of his first budget proposal in early 2004. This has occured while enrollments have increased 20%.  He forced UC and CSU to sign a low-growth Compact in 2004, then abrogated it in 2008, with the result being that UC revenues in real dollars will be 20% below the Compact figure for 2010-11 even if the May Revise survives the 2010-11 budget process.

So one better idea is to stick with this one simple point: a UC education is being gutted, and then shouting it over and over and over again.

Instead, last month, UC officials thanked the governor for another bad budget. Then they launched their administrative savings scheme with a grossly inflated, multi-year savings target of $500 million.

This said said 2 things to Sacramento:
(1) UC will never fight so there is zero political cost for cutting it.
(2) we were right that UC has been wasting money. It doesn't need any more from us.

In fact, far below UCOP level, people are not buying new computer systems. People are quitting or getting fired. For example, UCSD is down nearly 20% in temporary instructors over 2 years, and nearly 10% in staff over the same period. In my division at UCSB, there will no longer be main offices for departments, but multidepartmental staff pools clustered by building, where students will seek an advisor for linguistic courses in an office named "Humanities South."

 UCOP says we are inefficient while in fact much of the university no longer has anything to be inefficient with.  When it does this, it manages to sound ignorant, insult the campuses, and undermine its recovery strategy all at the same time.

I wasn't any happier about this last month than I am now. So on May 19th I wrote an email to UCOP CFO Peter Taylor, architect of the $500 Million in savings plan.

Dear Mr. Taylor,

As a former chair of UCPB, I have received a number of distressed emails today from colleagues who read the SF Chronicle coverage of your efficiencies initiative.  The $500 M figure is close enough to last year's GF cut to imply to most people that strategic sourcing and software coordination can make up for state cuts.  Your slide 2 states that the budgetary shortfall after your initiative is implemented is $237 M.  Unfortunately, this is an order of magnitude off the $2 billion UC is actually short by comparison to 2001, a number established in a UCPB report several years ago and indeed mentioned by President Yudof  about an hour before you spoke.

Your presentation has doubtless confused the public and probably many Regents about the size of UC's public funding need, and given the legislature yet another excuse to do no more than they are already doing.  The real shortfalls on the campuses are impairing our educational services to the state, and I do hope that in the next few days you and other UCOP officials will clarify this matter.

Sincerely yours,

Chris Newfield
Professor of English

A few days later, I received a long reply, which I thought was to me and the 6 officials cced, but which wound up getting facebooked on the Mark Yudof page.  It's nice to know I wasn't the only one who wrote in.  Peter Taylor's main point is that "administrative efficiency in no way negates UC's severe need for state support" and that they never said it did.  He adds later,  "I'll note that over the course of our ongoing budget negotiations, Sacramento has asked for evidence that UC is also "helping itself" as it were, and operational efficiency serves to exhibit our good faith stewardship of this great University."  So having been screwed UC again, Sacto is asking UC for proof that it shouldn't be screwed again.  Add twitter, repeat as often as necessary.

My reply is as follows, of May 25th.

Dear Mr. Taylor,

I very much appreciate your detailed reply.  I certainly support the substance of the program you outline.

It's clear that if we allow the state to maintain its current perspective on higher ed funding, UC is dead in the water.  The May Revise puts us at $200 M below our GF for 2001-02 in nominal dollars. In real dollars, it puts us below the trough year of 2004-05, and these figures are not corrected for enrollment growth or for cost increases above California's CPI.

The coverage of UC last week said (1) UC was a big winner in the May Revise, and (2) UC has discovered it is sitting on $500 M in waste.  It's hard to see how these stories do anything but kill the chance for near-term increases in GF.  You are right: now UC will be expected to "help itself" by finding its next $500 M in state funding from its own internal system savings.

We need to present the state with a new framework or we will never recover.   I see only one possible starting point: There is no substitute for correct levels of public funding.   Either the state's leaders restore it or they will be shown to be wrecking California's future.

I know you all are perfectly well aware of the public funding crisis. But I think you all get the messages reversed, and lead with the minor story (administrative savings continue to be found, and UCOP has a new initiative to accelerate them with better coordination).  This then relegates  the major story to parenthetical status (continuing budget damage to high-quality UC education).

For an example, I'd refer you to Nathan Brostrom's very well-spoken appearance on the Patt Morrison show.  He said all the right things about how the campuses have long been seeking savings, etc., but the lead vision of an impaired UC which can only be fixed with restored GF came from a caller named Kyle, with whom Mr. Brostrom then agreed.  Somebody should make a transcript of Kyle of Costa Mesa and put it up on the UCOP web site!

We can easily lay out companion educational initiatives -- all in fact accurate -- once the lead message about public funding is in place:  explaining the full costs of running a research university; proclaiming our extraordinary productivity and efficiency given the poverty of the campuses relative to our research university peers;  describing efficiency savings as widespread, continuous, determined, and restricted (Jane Wellman's estimate to the Gould Commission was 2-3% / year); describing the damage done by budget cuts ("they're wrecking the future") coupled with clearly identified concrete public benefits when the cuts are undone (countercyclical economic stimulus achieved, educational attainment restored, specific grand challenges addressed).

The common theme is  UC needs and UC contributions, not UC's unfixed flaws.  I know you have collected many many examples of these from the campuses and other UC units.

With all best wishes for your work,

Chris

I think just about any of this would work better than what UC is doing now.

UC and Extramural Funding

by Anonymous

One valuable point made by the recent UCOF report is that extramurally-funded research is not a net source of revenue to UC, unlike what many people seem to believe. The report also made several good recommendations for reducing the cost of extramurally-funded research to UC, such as working to increase ICR rates. While these are certainly very helpful activities, they are not a complete solution because extramurally funded research can never reach, on average, a cost-neutral basis. The reason for this is that the demand by research universities for extramural funding will always exceed the supply, thus driving down success rates. The UCOF report did not consider the cost to UC of efforts spent on preparing proposals that were never funded.

Success rates for proposals to federal science agencies are rarely above 35% and in many fields are trending down to 10%. A large amount of time of UC faculty and supporting financial staff is thus wasted in the preparation of worthy proposals that will never be funded. Moreover, as success rates diminish, more and more effort is required to produce a competitive proposal, and more and more proposals are submitted in hope that one will be funded.

An additional cost is the waste of effort by university faculty who review proposals as a service to federal agencies. For example, a recent editorial complained about how fourteen reviewers spent several days plus air travel and a hotel stay to review proposals for a program that made only one $150K/yr award (3.6% success rate). Note that federal agencies never reimburse indirect or direct costs spent preparing unsuccessful proposals. Aside from the occasional nominal honorarium, they also never reimburse time spent on reviewing proposals.

This dismal situation drives continual advocacy to increase the federal science budget. While increased funding temporarily alleviates the crisis, it is not a long term solution. The reason is that research universities respond to larger science budgets by developing even larger research programs. This does not even require growth of ladder-rank faculty -- universities simply erect buildings in hope that the infrastructure cost  will be paid off by the ICR generated by the newly-hired soft-money researchers housed within them. This strategy might work if only one university pursued it, but it certainly doesn't work if a hundred universities pursue it. The end result is a Malthusian situation where proposal success rates are too low to sustain researcher salaries and building costs.

Just as student fee increases can never make up for reductions in state funding, neither can growth in externally funded research.  Extramural funding leverages but does not replace internal funding. Research is an essential component of the UC enterprise, and UC ought to spend core funds on it, but we should become more strategic about how that is done. In particular, we need to drop the apparent goal of UC to indiscriminately maximize gross extramural revenue. Let's work on developing a better system for allocating UC research funds.