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Wednesday, January 12, 2011

Wednesday, January 12, 2011

Pay Even More to Get Even Less

I have updated the chart of the University of California's funding pathways to reflect the budget proposed by Governor Brown this week, as a companion to Michael's policy analyses (1 & 2).  The first version appeared in the Futures Report, was updated for the Cuts Report, and was updated most recently to reflect Arnold Schwarzenegger's May Revision last year.
The Benchmark (blue diamonds) reflects a universe in which the state's research university finds its revenue going up and down in an exact reflection of per capita personal income. The latter measures a population's ability to pay. Since California per capita income declined 3.4% in 2009 (for the first time in all recent recessions), the benchmark dips to reflect the previous year's conditions. In some socially rational universe, this condition would reflect a normal but not exceptional commitment to maintaining the society's steady and even improving educational levels.

The 1990 Pathway (green line) reflects a hypothetical commitment the state's leaders might have made in 2005, when they formed the Compact for Higher Education instead, to restore "Master Plan" levels of funding. Yellow is a more modest recovery of the 2001 Pathway after the cuts of the decade's first recession.  The Funding Freeze reflects a scenario in which the state consciously decides to cap its commitment of general funds and "privatize" systematically.  Finally, the red line is where we have actually been.

It is worth noting the following features of our situation:
  • Jerry Brown's proposed cut to UC (and to CSU) of $500 million is a 20% one-year cut in the current general fund revenue. This is similar in scale to Arnold Schwarzenegger's drastic 2008-09 cut.  He is proposing a repeat of Schwarzenegger's disastrous cuts.
  • Brown is continuing Schwarzenegger's race to wind up below the worst-case "funding freeze" scenario.  Brown's plan is worse than the worst-case scenario, however, because the latter assumed that tuition would be jacked up rapidly to replace lost public funds.  That will not happen to (or for) UC or CSU).
  • How much would tuition have to rise to recover $500,000,000? If it were recuperated entirely with undergraduates (about 173,000), each full-time student would need to make a net contribution of another $2,900. But this is the amount after 33% of the additional tuition is returned to financial aid.  So the tuition increase for 2011-12 would be $4379 on top of the systemwide average of 12,150 or about $16,900 for 2011-12.  Maintaining existing levels of education with tuition increases poses obvious hardships and will reduce access, further lowering the state's general level of attainment.
  • This year's new low in pay more to get less is contingent on voters passing tax extensions in a special election.  Mark Baldassare, an experienced California pollster, was on the Patt Morrison show expressing reasonable doubt that Brown will succeed where Arnold failed. The cut could be much larger.  
So we have gotten to the point where electing Jerry Brown instead of Meg Whitman has led to a 20% cut as a best case, whereas with Arnold Schwarzenegger it was the worst.  This is what at the MLA I was calling the devolutionary cycle, or death spiral for short. Brown has spun the wheel of darkness again.

Whether last year or this, every potential ingredient of social development has now been reduced to a question of budget cuts or tax increases. This blocked non-debate has completely denatured California's ability to function according to its self-image as a creative and cutting-edge state.  The point of education and the goals of society -- never mind the famous California pursuits of enlightenment and fulfillment -- have been entirely set aside. Jerry Brown helped invent this political language in the 1970s as the state's first austerity Democrat. I like his personal cheapness, but does he have anything to say besides "we need to balance the budget?

This political game is shortchanging society. We will be writing in the next week about the complete reframing that needs to be done, and that apparently Jerry Brown will not be helping with.


Anonymous said...

He lied. After all, his campaign slogan was not "I'll target higher education and the poorest Californians for the most severe cuts." or, "I'll continue to cut the pay of state workers as Arnold did, but this time their working hours will not be reduced." I'm left thinking: there is no help coming from any politicians of either party. which is a pretty grim situation.

AndrewD said...

Chris - It is interesting to see this modified figure. But it would, I feel be useful to include the ARRA funds ($716.5 M + $106 M) to clarify that the 2008-11 period was actually better than your plot shows, and thus $500 M is quite striking!

Chris Newfield said...

Anon: can't disagree. Andrew: I used the Governor's Budget Summary table on p 148 (http://www.ebudget.ca.gov/pdf/BudgetSummary/FullBudgetSummary.pdf), and it shows ARRA of 716 M backfilling 2008-09, and mostly a wash since at a bit over 100M. This means that ARRA was used to offset what otherwise would have been a catastrophic mid-year cut in 2008-09, and that ARRA was not used, for example, to prevent furloughs in 2009-10. This raises the whole question of whether ARRA funds were misused under the original legislative intention of NOT offsetting cuts below an earlier baseline of funding- thus encouraging states to do what CA did and take state money away - but of instead creating an actual stimulus. The absence of a stimulus to the UC budget is striking. I'm resistant to counting federal money as state funds, but you're right that with the ARRA money the red line drops more smoothly from 2007-08 rather than dipping as shown here. thanks for bringing this up.

AndrewD said...

My understanding is that UC spread the expenditure of the ARRA funds over 3 years altogether. This was enabled by the furlough too of course.

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