Privatization Hits the Wall

State political leaders are now using board meetings in the Cal State and University of California systems as political theaters.  Every couple of months they administer dramatic tonguelashings and stagey defenses of their constituents' interests.  I can't remember a time when the constitutional autonomy of UC has seemed so nonexistent.  Mark Yudof was hired in part because of his demonstrated success with state legislatures, so it is worth looking further into how things have gone so awry.

I usually focus on Jerry Brown, who has blended advocacy of the disruptive technologies of the 1970s--bullet trains, water tunnels, distance learning--with Hooveresque austerity.  But I got a new perspective from the statement of Assembly Speaker John Pérez that the UCLA FA Blog helpfully posted yesterday.

Here is my partial transcription of his comments, which are worth reading carefully for reasons I discuss in the annotations.

. . . The possibility of increased funding right now: it doesn't exist. . . .There is no significant amount of money to backfill previous cuts. We've made roughly $900 million in cuts and you've increased fees $1.4 billion  dollars. The [fee] increases were disproportionate to the level of disinvestment by the state.  

Pérez is accurately citing Department of Finance data (Figure HED-01). From the state's point of view, UC turned a massive public funding cut into a $500 million net gain for the university.

This doesn't square with UCOP's standing claim that tuition increases make up for only one-third of the state cuts (pp 3-4).  Absent a clear explanation from the Office of the President, the state will assume that UC has done extremely well in the crisis.  Pérez adds a bit later that "higher education and K through 12 education are virtually the only places where there were any restorations to the cuts in this year's budget"--painting UC and CSU as big winners in a still struggling economy.

It is worth recalling that this statement is further evidence for the argument that I and other Senate planning and budget types have been making to UCOP for a decade, which is that tuition increases cause public funding cuts, since they teach legislatures that public cuts have no negative consequences for universities.   Pérez is saying that Sacramento has also noticed this fatal reciprocity--and plans to stop it by freezing the tuition side, with a twist.

We need to really address the problem of the increases that our students have endured over the last several years. And that doesn't just impact our undergraduate students. There is a huge problem with respect to our graduate students, and our professional school students.  Not only are we losing so many to other great universities, but even those that chose to stay within the university system are then hamstrung by the amount of debt that they graduate with. It limits the choices that they make, and the options that they have to make their full imprint on this state. That is a very real problem that we all must address.

Mr. Pérez is quite right about the effects of grad and professional school debt.  Conventional UC wisdom, on the other hand, assumes that the legislature doesn't care about these students because it has no interest in research or graduate programs.  This appears not to have been the case.

A long line of UC administrators convinced themselves that financial aid would offset large fee hikes, and that high fees wouldn't interfere with UC's public mission. The most vocal architect and theorist of this policy was Berkeley Law Dean Christopher Edley, who argued that the era of public funding was over but that high tuition / high aid would allow UC to serve the public interest even better.* These arguments appear not to have persuaded the legislature, or at least the Assembly Speaker.  Now the University as a whole is being punished for the sins of the professional schools.

Mr. Pérez continues:

But we need to be very clear that we have an expectation in the legislature that you do no additional harm to access to the University as you treat all of your students, not just your undergraduates. And the decisions that we make here will impact the way that this budget, and successive budgets, are viewed by the legislature. 

Let me speak to one item in particular. This notion that the additional $125 million that the Governor and the Legislature were able to find in the waning days of last year's budget discussion as a buy-down for a proposed fee increase was essential to do in that moment.  It does not create a new model for you. Do not expect that you can propose a graduate or professional school fee increase and then come to us and find a buy-down.

This says in effect that the Democratic supermajority in the legislature will follow the Governor in neutralizing tuition increases.  They will not be bought out, so UC will take the tuition heat from students. And these increases may trigger either new cuts or non restoration of public funds to balance out any increased revenue from the tuition increases that Sacramento doesn't want.

Finally, the Speaker appeals to the self-interest of UC's decisionmakers. If you do propose fee increases, he says,

What you will find, is that we will come back to you and say, what are you doing about executive compensation? You will find a Speaker that is less receptive to your efforts to stop legislation that is aimed at limiting your ability to compensate your executives at the level that you have. Why? We have stood with you beecause we understand that you need to be competitive in attracting the best administrators, the best researchers, the best clinicians to have a world class institution. But we also need to have the best students. If we make decisions that undermine our ability to have those worldclass students, they will be met with a similar reaction by my colleagues in the legislature.  . . . We have to be very clear in how we move forward . . . nothing can be done in a way that undermines our commitment to a broad-based university community that is actually is continuing its committment to affordability and accessibility.

Everyone agrees with the Speaker's accessibility goals. But here the speaker is saying that access can no longer be pursued through the privatization of education's costs.

Assuming this sticks, then here's what we're looking at. No restored public funding.  No tuition increases.   The end of moderate stability via privatization. Checkmate.

We have to consider the possibility that UC is never going to regain its foundational combination of mass access and top quality.  I don't accept this. I assume I have plenty of company.  But the only way forward is to justify instructional and research costs in a way that (1) allows equitable and effective internal distribution, which we don't have; and (2) explains the need for funding recovery in a way that seems plausible to the public and the legislature.

(1) is a major job for the Senate.  (2) is everybody's job. It would include explaining the value of physical infrastructure, of face to face contact, of student services and administrative support, of course sequencing and intellectual immersion -- of all the things that go into the "student experience."

Senior managers can't or won't do this without faculty help. Our incentive is that if we don't do this, the current best case scenario is this year's budget flatlined into the future, year after year.

***

*Professional school tuition increases became a public issue in the fall of 2009 when a new wave of professional schools added or raised fees at the same time as undergrad fees were going up 32%.  But a change in professional school fee policy had begun four years before.  Previously, these fees were benchmarked to the fees charged for in-state students at comparable public universities (Attachment B, Bullet 4). There were other criteria and much wiggle room, which had allowed "big five" professional schools (law, business, medicine, dentistry, and veterinary medicine) to double fees during the cuts cycle 2002-05 from the $6k to the $13k range (Attachment 1 Display 5). The increases were around 30% for 2004-05. Display 6, which sets up comparisons between UC's 2005-06 fees and those of similar universities (and which includes campus fees in an average total that is higher than the figures in Display 5), shows the Big Five professional school categories in the $21,500 to $24,500 range.  For 2006-07, professional schools raised fees another 10% and clawed back money lost in a lawsuit to previous professional school students by charging that year's students a $1050 surcharge (page 2).  In January 2007, the Regents discussed a change in professional school policy that put competitive needs and market forces first, and allowed professional schools to keep additional fee increments rather than receiving a portion of their fees back from the campus.  They approved this policy in March 2007, over Senate concerns about using fee increases routinely to replace public funding cuts, though they did reject in principle differential fees across the system. In September 2007, the Regents approved three years of increases of 18-19 percent per year at the major professional schools.  Berkeley Law Dean Christopher Edley was the most eloquent, tireless proponent of the increases, arguing in public and private that quality, defined in large part as rankings, had been hammered by public funding cuts, and that very major tuition increases were the only solution. (A 2005 LAT op-ed is here; his discussion with the LAT's Richard Paddock of March 12, 2007 was also important, though no longer on line. My recounting to him of the history and effects of his interventions starts here).