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Friday, January 6, 2012

Friday, January 6, 2012

Gov Gives UC Just About Nothing, Continuing the Gradual Termination of UC (Updated 1/7, with revised chart)

I have redone our traditional chart of UC's share of state general funds to reflect Gov Jerry Brown's proposal. The UC Regents agreed to request a $411 million increase on the heels of Brown's $750 million cut for 2011-12, leaving UC's general fund well under water looking only at the time since Brown took office.  Brown proposed a possible $300 million increase, to be reduced to a $100 million increase if tax increases are not approved by voters in a possible ballot resolution in November.  I have context and comments below the fold.

The final number for state general funds to UC is $2.273 billion, erasing any gains made in the past fifteen years (during which time enrollments grew 50%).  The UC Regents requested $411 million more next year, and Brown proposed $90 million in new general fund.

Some history will help explain this chart.  The Benchmark line (purple diamonds)  tracks UC general fund growth starting in 2000-2001 as if it were to grow at the same rate each year as state per capita income, which is what we used in the Futures Report as a measure of the state population's financial capacity.  While California's unemploymen ratet is very high, it's overall personal income has continued to grow. The current forecast is growth of 4.9% in 2011 (p 3).  Commentators are starting to notice that Brown's are cuts of choice, not necessity.  (I discussed Brown's decline from his already-weak "post-Democratic" 1970s semi-vision of social development in his current budget, and in broader terms earlier this week).

Why the diverging lines starting at 2005?  2005 marks the point in time when the Schwarzenegger administration and UC officials agreed to combine low growth in state funding (2-3% per year) with larger growth in tuition (7-10% per year). The 2001 Pathway shows what would have been required to build back the funding base to the 2001 benchmark. The same goes for the 1990 line.  The Funding Freeze was our 2006 worst case scenario, which the state has erratically achieved.

The chart shows that the University of California has been radically restructured in the past ten years: it is not $411 million or $1 billion but over $2 billion below where it would have been if the 2001 trend had not been interrupted by two cycles of massive cuts.  Financially speaking, we simply no longer have the "University of California."  What we still call UC is something else, which admin and faculty are of course reluctant to specify.

Further history: an attempt to avoid ending up exactly where we are right now, the Academic Senate produced three budget reports (via UC Planning and Budget).  Then Senate chair John Oakley and I made a presentation of the Futures Report findings to the Regents on May 17, 2007, showing both the public funding shortfall and the impossibility of using private fundraising and research revenues to fill in the gap.  No action was taken in response.

A year later, the Cuts Report came with explicit budgetary recommendations. On April 8, 2008, Academic Council recommended that the President
make a public commitment that, in the interest of avoiding yet another reduction to the current level of resources devoted to each UC student, the University will establish a minimum cost of instruction no lower than the current, already-reduced, 2007-08 level, and will take the necessary steps to sustain its public investment per student, adjusted annually to reflect actual costs
The 2007-08 general fund level was about $3.2 billion, or one billion dollars above where were are in 2011-12.
No action was taken. There is no evidence that UCOP even mentioned the faculty recommendations to the Regents.

A year after that, Arnold Schwarzenegger abrogated the Compact and inflicted the first 20% cut to UC's general fund budget (see UCOP's chart p S-7).  The following year, federal stimulus funds back-filled the cuts on a one-time basis.

In May 2010 UCOP announced that UC was going to find $500 million in administrative expenses. Six months after that, the new Democratic governor, Jerry Brown, proposed a cut of $500 million.  This is the cut that has now become $750 million,  or a cut of 25%.  This year's Jerry Brown cut has been larger than the catastrophe cut by Arnold Schwarzenegger. We learned this week that we will at best get 12% of that back, and may, if the November tax increases don't make it, lose $200 million more.

That's where we are now.  In response, UCOP has deployed a repetoire of three strategies: "balance sheet initiatives" run by the financial people, more on-line instruction, and a rapid increase in out-of-state students paying levels of tuition that are closing in on the levels at major private universities.  Of course, these are on top of the most fundamental policy of all: the repeated, massive tuition increases on in-state UC sudents -  up over 50% in the past 5 years (using 2007-08 as base).  Even these terrible tuition increases have not repaired UC revenues.  UC is set to receive $2.97 billion in student fees in 2012-13, while having about $2.43 billion in fees in 2007-08.  This means that it has grossed in student tuition revenues a bit more than half of what it has lost in state general funds. When we factor in financial aid (33% of new tuition dollars), increased subsidies of research's indirect costs, and other rising expenses, the shortfall is even worse. This is why UCOP is projection a remarkable $2.5 billion budget shortfall in 2015-16 (Display 7).

None of UCOP's non-tuition measures are going to fix the educational or budgetary holes.  And neither will its tuition measures, in spite of the hardships they cause, and of their gradual elimination of the distinctive nature of public universities.

This is all extremely sad, and could have been avoided --  could still be avoided -- were UC officials to fight tooth and nail for public funding This would require explaining the basic budget math, but also saying exactly why public funding is necessary to offer 21st century versions of high-quality learning at UC and CSU's mass scale to an unevenly educated, multinational, and extremely promising generation now in school.  Private money has never and will never built the infrastructure for this, and there are many many people at this university who could spell out why and how and what public money does.

But the official reflex at UC is for the self-destructive cover-up, and the profuse thanks for nothing.  I have often discussed this habit, (e.g. February 20, 2009), which makes rational sense only on the theory that UCOP is trying to reduce public funding and convert UC to a high-tuition model with enough financial aid to enable a steady stream of press conferences about the university's public mindedness.   But I am still unable to get myself to believe this.

So on the tattered theory that UCOP wants strong public funding for its public university, the  new UCOP statement is yet another example of perversity.   It says that the new money will go to cover pension costs rather than to instruction and research, so that the employees can take the fall for future fee hikes while the university lets the state off the hook for paying pension costs directly.  (Yes I realize UCOP may believe it is setting a precedent for the state paying for the pension, but that's not how the statement will be read.)

The statement again invokes administrative savings in the hundreds of millions, implying for the nth time that more state funding is really not that necessary.  And it says the university is "gratified" when it asks for $411 million and receives $90 million instead, suggesting more cuts, low-balling, and underfunding will, at UCOP, be not only tolerated, but welcomed with praise.  The effect of this kind of statement on both the public and the UC community can only be demobilization. There is no big problem here, no emergency, just the kind of business as usual that has led to an unbroken series of public funding cuts and huge tuition hikes. 

That is the simple logic that binds together UC's executive administration and the governor's office.   And I would like to know why the hundreds of thousands of us at UC are stuck year in year out with this losing strategy.  Why?

A final technical note: the numbers now out there do not add up.  The red line in the chart does not follow the Department of Finance 2011-12 figure for UC, which appears to reflect only the first $500 million cut and not the full $750m.  The DOF's historical tables do not square with this summer's state audit figures, but I haven't had time to figure out why.   UCLA's FA blog notes has a good brief discussion of the deficit issue.


AndrewD said...

Please note that 2/3 of the $300 M increase is a transfer of funds for debt service for capital projects to UC (along with the obligation to make the payments). Thus the $90 M increase is about all we are getting. Of course we are also threatened with a $200 M recision if (when?) the proposed ballot measure for a tax increase fails to pass.

Chris Newfield said...

thanks Andrew. I was trying to be nice(!) but will modify the chart

Unknown said...

UC Berkeley changes include subsidizing foreign student tuition and doubling instate tuition.

Way to go Chancellor Birgeneau!

Anonymous said...

University of California Berkeley Chancellor Birgeneau, Provost Breslauer are leaving an indelible mark on access and affordability to Cal. Both are outspoken on why elite public Cal. should ‘charge Californians much more’ tuition. Number 1 ranked Harvard is now less costly (all in costs). UC Berkeley tuition is rising faster than costs at other universities. The ‘charge more’ tuition policy makes Cal. the most expensive public university!

Birgeneau ($450,000 salary) Breslauer ($306,000 salary) like to blame the politicians, since they stopped giving them every dollar expected. The ‘charge Californians more’ tuition skyrocketed fees by an average 14% per year from 2006 to 2011-12 academic years. If Birgeneau Breslauer had allowed fees to rise at the same rate of inflation over the past 10 years they would still be in reach of most middle income students. Disparities in higher education defeat the promise of equality of opportunity. An unacceptable legacy for students, parents, politicians!

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