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Wednesday, May 9, 2012

Wednesday, May 9, 2012

Reframing the Doomday Budget Discussion

The agenda for the one-day Regents' meeting May is posted along with most of the agenda materials.  The budget report to the Committee on Finance has a new tone of muffled rage.

We have come a long way from 2009, when Mark G. Yudof said,  "I am compelled to note that the proposed cuts to the university, while serious, do not appear to be disproportionate."  The current discussion item says repeatedly that the campuses have already cut to the bone and are well down the path of amputation.  By page 7 it enters the cuts' absurdist dimension:
Campuses have already implemented all possible cuts and efficiencies and cannot absorb additional budget reductions without doing irreparable harm to UC’s instructional program. There are no obvious solutions to solving the remaining $139 million shortfall, so campuses will have to do what they say they can no longer do, which is cut back programs, delay hiring faculty, consider additional layoffs, and make other programmatic consolidations or eliminations to save money in spite of the detrimental impact on quality that will result.
The document identifies a current year shortfall of $847M, and a $1 billion shortfall next year--even assuming the Governor's small January revenue increases and further efficiency savings. Existing budget parameters build in further cuts in what we cannot cut without irreparable harm.  Cutting the uncuttable is what we do at UC---now on an annual basis. This document shows that we will be doing it again next year, even though we can't.

The Governor's May Revise may buy out the tuition increase that you haven't heard about, defined here as 6% for next year.
In Scenario A, in which good revenue numbers come in, the state provides an additional $125.4 M to avoid this increase.  As the UCLA FA blog has pointed out, receipts are actually behind projections.  This increases the likelihood of Scenario B, which is the 6% increase. Looming in the background is the unidentified Scenario C, in which revenues are behind, the November tax increases fail, UC is subject to a further $200 M cut, and that tuition increase is doubled to at least the low double digits. 12% would bring the base tuition to about $13,700 next year, plus the "Student Services Fee" of $972, plus multiple campus fees that would bring tuition to about $17,000 for in state students.

Since no existing systemwide scenario eases the downdraft on the campuses, they are likely to repeat this year's record explosion in the admission of out-of-state students -- up an incredible 43% from 2011. Denials nonwithstanding, out of state students are displacing California applicants, particularly at the most prestigious campuses where rejection causes the most disappointment. Out of state admissions is also impairing the university's mission of racial inclusion. The endless austerity crisis has distorted administrators' better judgment, which used to see out of state tuition as useful revenue source only at the margins.  A variety of posts on this blog (here, here, and here) have shown that non-resident tuition doesn't come close to filling in cuts until you blow past the old Regents' reference point of 10% of total undergraduate enrollment--towards the 20%+ range for Berkeley, and already 13% for UC as a whole (Table 6).  The UC Berkeley administrative proposal to give each campus its own Board of Regents is a similar kind of Hail Mary pass (see Michael's coverage): Having 10 Boards of Regents plus the Big Regents would be an obvious act of administrative insanity. But it would allow each campus to set its own tuition, which means allowing each campus to raise it more or less at will.

All of the current administrative solutions are perverse and/or unsustainable.  Public universities cannot solve their financial problems by raising tuition even more quickly in the face of the tuition bubble, the student debt bubble, public anger after decades of similar annual increases at 3-4 times inflation, a pro-education president who is campaigning to punish tuition increases with further funding cuts, and mounting damage to an entire academic generation symbolized by the recent tripling of the number of PhDs on food stamps.

A chilly ray of hope appears in the form of a "framework" for multi-year state funding increases that UC officials discussing with the governor (page 4 and Attachment).  The description in the Regents' materials doesn't quite square with the relevant State subcommittee hearing discussion on March 15th, but both versions actually continue to reduce the state's commitment. The state would increase UC general funds over four years by an amount that is cumulatively either somewhat below (4% a year) or somewhat above (6% a year) what Jerry Brown cut in his first year.  This "new normal" would be lower than it seems because UC would now have to fund General Obligation bonds and retirement payments out of their base budget (this reverses what the Regents assumed as recently as January). UC would be subject to performance audits and "curtailed" tuition increases, so there is no sign that the tuition safety value, undesireable though it is, will in fact be under UC's control.  Although UC could not reduce California resident student numbers below their 2011-12 levels, the state would also not again fund enrollment growth.  UC would thus have a financial incentive never to admit a single additional California resident, especially when it could take a non-resident.  The social and political implications go without saying.

The conclusion is that traditional incrementalist negotiations with the state are hopeless. It is as bad with Democratic Brown as it was with Republican Schwarzenegger. I enjoy speculating about the precise nature of Jerry Brown's emptiness, but none of that will change this simple fact: UC will go nowhere except down if it cannot come up with a multidimensional educational mission and a full-scale budgetary framework of its own.

My adamant suggestion is that UCOP change the discussion by giving it a completely different starting point. UCOP should write a budget scenario for the Real UC.  This would out where UC should be now financially, including the costs of research and pension contributions and capital costs and upgrades in educational quality in response to on-line learning and everything else. Some of us already did our own version via the Senate research that went into the Futures Report and the Choices Report.  The new starting point should use the Hays-Glantz report that shows the affordable cost of rebuilding the low-tuition, high-quality UC of 2001.  Use this work as a base, or start over and do it better.  Ask and answer the basic questions: if cap tuition at around $12,000, where should the general fund be? If we roll it back, what do we need? If we have a $1 billion deficit next year, what would a non-deficitary budget look like?  Take the report and present a Quality UC budget to the Regents in July, downplaying all the obvious caveats that the state doesn't want to fund it, while it sketches where UC really should be. Do multiple pathways, various scenarios and timelines, different revenue mixtures. We need a new framework of our own, not one dictated by the embedded history of doomed discussions that have been pushing us down our downslide slope.

Give this a try.  It would be fun, it would galvanize the UC community, it would deeply interest the California public that is tired of getting less for more, it would wake up the Califonria media.  And it can't possibly be less successful that what we are doing right now.  We need to get out of this devolutionary spiral, and the only place to start is to tell the educational and budgetary stories that we want to be told about ourselves.


Chris said...

Indeed. I work for a "self-supporting unit," one of the Extension Divisions. The administrators and program Analysts are literally gleeful at the University's move towards "all international students, all the time." The amount of "synergy" and "value-added" programs that our Division will soon be able to provide the University is staggering. Nary a word, though, about what it means for a public institution to be so willingly disenfranchising its own residents.

Anonymous said...

The out-of-state strategy might work well for UCB and UCLA (and perhaps UCSD), but the rest of the campuses can't possibly hope to get any serious money out of non-California students. The incentive for UCB and UCLA to go their own way is just too strong, no matter how much UCOP claims to hate it. Perhaps the end of the UC system is in sight?

Anonymous said...

I disagree, there is much more the other campuses can do to attract good international students, they are just slow to recruit and miles behind Europe and private universities in this regard. Of all the unattractive and undesirable options for getting some increased revenues this is the most benign.

Chris Newfield said...

Ca taxpayers aren't going to pay even half of what they did in 1990 to support a UC focused on educating the wealthiest 2% from Singapore, Italy, China, Brazil etc who didn't get into an Ivy. The acceptance of no enrollment funding for additional CA students is suicidal. See today's PPIC report and Carla Riveras piece in the LAT for another round of deservedly bad publicity on the march to irrelevance to he majority of the state. Facul should oppose this if only out of sheer self interest

Chris Newfield said...
This comment has been removed by the author.
Chris Newfield said...

and thanks for writing abrupt extension. I'd like to hear solutions from people that work in it. Mine would be to max tax it to support the core for enrolled students, as per a post here a while back

TB said...

Chris: I respectfully disagree. Just look where our (relatively) good will strategy towards the state and its students got us in the last five years. I think we should stop pretending and pursuing an unsustainable model and attempt to go de facto private. Neither choice may be pretty, but we should face the facts and act accordingly.
Personally, I think the best solution would be to lobby for the state to tie its HE money to the in-state students, not the schools.
We should be charging *all* qualified students the same fixed total while letting the state politicians worry about subsidizing in-state students.
For one, the blame will finally be directed to where it really belongs instead of us. Meantime the state should be getting exactly what it chooses to pay for.

g_d said...

Minor quibbles...

You conflate UG and Grad enrollment in the non-res discussion. Grad enrollments are a different thing, subject to professor and programs a student wants to study with/in. State residency shouldn't matter.

The 13% you cite in 2011 includes grad enrollments - your reference point in the clause immediately preceding specifies UG only. UG only for the entire UCs in 2011 is 91.6% CA Resident.

As for displacement, for years the UCs were over enrolling CA residents above what the state would fund. So yes, non-res are displacing CA Res, but only the previously taken for granted over-enrolls. The UCs as a system are enrolling all the UGs (and a bit more) funded by the state.

Then there's the real issue of what the res/non-res split should be at the flagship (Berkeley) and maybe UCLA and UCSD. Other comparable state-flagships (UNC Chapel Hill, UVA, Michigan) have for years had higher non-res enrollment than Berkeley or UCLA, which were as low as 10% just a few years ago. There's a legit question as to what schools like Berkeley, LA and SD should have for non-res enrollments. There are good reasons (knowledge transfer, economic benefit, etc) to spur in-state migration. There is a drain of the best CA resident students who go to the Ivies, MIT and other places for undergrad and grad studies. Those top top students tend to chose on-CA schools (or maybe CalTech or Stanford) at the expense of UCs.

I agree with most of the rest of your points, just worth some reconsidering about the res/non-res mix.

That said, the ability to attract non-res students will be hampered by continual tuition increases. It's borderline immoral to expect students and parents to take on the kinds of debt needed to cover the cost for those who aren't solidly in the top 1% to 3% of income earners.

Chris Newfield said...

TB I agree that the strategy of taking unfunded students (to win goodwill and future budget brownie points) didn't work. I'm afraid your alternative would have the same outcome: UC tuition goes up to $36,000 in $6k annual increments over 4 years, students from somewhere still enroll, so the state progressively defunds both overall GF and the direct payment to students that would have been created at the start. This will continue or accelerate the cost shift to students, eg. Colorado, and the leg won't be on the hook-the tuition raisers will be.

g_d good points. We're out of unfunded student headroom now, however, as I understand it, or will be next year. My main concern in the post was that Jerry Brown wants never to fund an additional in-state student again, which will force UC towards nonresident students regardless of what anyone wants.

My basic feeling is that all our traditional arguments to negative consequences ("if you cut again, it will hurt California students") have shattered on the nihilistic brow of Jerry Brown, who really doesn't care about anything on earth except a smaller budget deficit. In a way this is good, because they were seen as forms of minor extortion by legislators and taxpayers and didn't work anyway. We need to go positive, and concretely so: here's what the Real UC will do for student learning (which includes research), and here's what Semi UC will /won't do. The dependence of concrete Real UC functions (at least some individual attention for example) on public money needs to be made very explicit. More moving of fund sources and cutting Peter to fund vouchers for Paul will just make everyone more cynical and less likely to pay anything for any of it.

TB said...

Well, our ability to enroll students from somewhere else at $36,000/year is determined by the market forces. Notice that once you include room & board, this is more expensive than many private colleges. Also, foreign students cannot not take Pell grants etc. - hence there is a natural cap on what we can charge, and I doubt it's $36,000/year anytime soon. Whether or not the state chooses to chip in for the in-state students is entirely between the state's powers that be, its taxpayers and its students/parents -- I just want to get us out of this equation, otherwise we'll manage to end up on a losing side no matter what.

Anonymous said...

This is a sign of the total incompetence of the Regents and UCOP. They need to be playing political hardball with the state and try to recruit public support.

Let's go public with the real alternatives that are first poll-tested and panel-tested with voters:

A) Fix a fraction of state GDP that will go to UC. Agree to the level of 1990-91. In exchange, UC agrees to hold tuition to the fraction of per-capita GDP that it was back in 1990-91. Non-resident tuition can rise as needed, but non-residents are capped at 10%. If a campus wants to go over that rate, it has to pay back the state accordingly. UC agrees to do its share of the Master Plan's educational commitment. Forever. No more budget uncertainty except that which comes from state-wide recession. UC is paid for directly by a progressive tax that is tweaked to match against the enrollments of UC. If UC takes people with the same proportion as the income distribution, it is a flat-rate tax. If it takes more people from upper-income families, the tax will also skew progressive towards upper-income. Regular state taxes go on top of the UC tax.

B) An amicable divorce of UC from California. Shared custody of the alumni forever into the future --- UC gets 25% of all state taxes paid by alumni (on the theory that genetics/upbringing/luck is one parent, K-12 is another parent, state infrastructure is another parent, and UC is the fourth parent of success). No other support will go from the state to UC. If the alumni do well, UC gets funded. If they don't, tough cookies. Both the state and UC are happy when the children do well, as it should be. UC still has an incentive to educate people who will stick around in California. But UC is no longer financially linked to the fortunes of non-alumni.

C) Abandonment. Despite UC being a faithful spouse to the state, shining in glory and doing its bit and dedicating itself to educating productive citizens and attracting talent from around the world, the state will steadily abandon it. Instead, the state will lavish money on its mistresses like the prison system and neglect the collection of revenue. The state will even take all the tax revenue from the alumni and divert it to these other purposes, despite UC having a strong positive return-on-investment.

Let's see what the People of California choose. I think that A or B might have some support, but C (the current course of the Brown administration, with tacit support from the UC administration) will lose by a mile.

With polling data like that in hand, UCOP could really play the game. Get the alumni association to run ads. Launch a state-wide "UC Resources awareness campaign" that non-politically just lets people know the facts of what is available to them from UC and all of UC's contributions to the economy.

Chris Newfield said...

Anon- please write this up as an op-ed and send it to the LAT as a counter to today's 2 bad pieces from UC folk. (A) is a great formulation of the "pathway" approach to UC funding. (B) and (C) need development and are a bit too metaphorical fun though the divorce metaphor actually is, esp in (C). (C) is just quality decline and subsidence into normalized state-college status with gated communities of premimum quality, right? (B) is a bit confusing, since it's not exactly privatization (the high tuition model we're slouching towards rather than honestly embracing as the only idea the Rs and UCOP actually have). In any case I think your formulation should get into circulation.

Anonymous said...

The public’s UC Berkeley harvests family savings, Alumni donations, supporter’s money and taxes. Cal. ranked #1 public university total academic cost (resident) as a result of the Provost’s, Chancellor’s ‘charge residents higher tuition’. UCB tuition is rising faster than other universities.

Cal ranked # 2 in faculty earning potential. Spending on salaries increased 29% in last six years. Believe it: Harvard College less costly.

University of California negates the promise of equality of opportunity: access, affordability. Self-absorbed Provost Breslauer Chancellor Birgeneau are outspoken on ‘charging residents much higher’ tuition.

Birgeneau ($450,000) Breslauer ($306,000) like to blame the politicians, since they stopped giving them their entitled funding. The ‘charge instate students higher tuition’ skyrocketed fees by an average 14% per year from 2006 to 2011 academic years. If they had allowed fees to rise at the same rate of inflation over past 10 years they would still be in reach of middle income students. Breslauer Birgeneau increase disparities in higher education and defeat the promise of equality of opportunity.

Additional state tax funding must sunset. The sluggish economy, 10% unemployment devastates family savings. Simply asking for more taxes (Prop 30, 38) to spend on senior leadership, inefficient higher education practices, excessive faculty staff compensation, burdensome bonuses, is not the answer.

UCB is to maximize access to the widest number of residence at a reasonable cost. Birgeneau Breslauer ‘charge Californians higher tuition’ denies middle income families the transformative value of Cal.

The California dream: keep it alive and well. Fire hapless Provost George W Breslauer. Clueless Chancellor Birgeneau resigned. Cal. leadership must accept responsibility for failing Californians.

Opinions? UC Board of Regents marsha.kelman@ucop.edu Calif. State Senators, Assembly members.

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