HIKING TO NOWHERE: UCOP Doubles-Down on Losing Strategy

As you have no doubt seen, UC and Sacramento have already begun the public relations war over UCOP's proposal to hike tuition up to 5% a year over the next 5 years.  President Napolitano and Chair Varner took to the appropriately named "Soapbox" section of the Sacramento Bee to try to justify their plan.  If they hoped to win over the Governor, Sacramento, or students, their efforts clearly failed.  As both the LAT and the Sacramento Bee are reporting, opposition is already intense and the Governor's office is suggesting that the State may lower proposed funding increases if UC increases tuition.  The LAT has more on the long debate ahead.

First off let's admit that there is a problem.  UC's costs are going up and recent small increases in state funding neither make up for previous deep cuts nor keep pace with the costs of supporting undergraduate education or sustaining graduate training and research infrastructure. State General Fund funding in 2014-15 ($2,990,671,000) (in nominal dollars) will still be lower than it was in 2007-08 ($3,273,917,000).  This despite an increase of nearly 20,000 state residents on the general campuses.  For too long time the amount of money the state contributes per student has been in decline.

Not only has state funding per student declined over time but it has done so in unpredictable ways. Consequently, tuition has not only increased tremendously but has done so in a crazy fashion.  Take the following chart that you can find at UCOP:

Now it should be clear that this is not an acceptable situation.  The question is how to get out of it.

Jerry Brown argues that 4% increases combined with some cuts and the magic of online classes is enough. But Brown's support for online is symptomatic of a fundamental mistake: the notion that the rising costs relate primarily to undergraduate instruction.  Between increased class sizes and greater use of contingent faculty UC has been lowering the cost of undergraduate education for years. In fact, upgrades to technology have increased costs, as has expansion of student services that help the full range of students complete their degrees (something dear to the heart of Brown's accountability regime).  But these costs will not be lowered by online education which, if done well, will increase costs at least in the short run. Brown's position seems to be simply a continuation of his life-long mantra of austerity for its own sake.

UCOP wants to take the 4% from the state and then add a 5% tuition hike onto students, while also maintaining the current high level of non-resident students (or even increasing them).  It is important to recognize the assumption that state increases will continue: although most of the discussion and argument has been about the 5% figure UCOP's proposal actually leaves open the possibility of up to a 9% tuition increase if the Governor follows through on his insistence that he will only allow General Fund increases if tuition remains frozen. I am not sure if UCOP simply fumbled the roll-out (so that now the university will look even worse if it tries to increase tuition by more than 5%) or if it was trying to pin down the state.  But whatever the explanation, the possibility of further overburdening students is real.

Neither strategy makes long term sense for the State or the University or especially the University's students. Let me start with the University's because that is simpler.

The University has been committed for many years to a high tuition/somewhat higher aid model. Although the credit agencies prefer to have universities rely on tuition as opposed to state funding, the main argument for the model goes something like this: given the existence of return to aid for in-state resident tuition (but not NRT) it only serves the wealthier students to hold tuition down because financial aid pays the tuition of lower income students. What this argument overlooks is that the rise in tuition means that other funds (like Pell grants) that might have been used to cover non-tuition expenses will be diverted into tuition and that students will end up working longer hours and therefore taking more time to degree.   (Look for instance at "Sonja's" case here.)  I don't know of anyone who has has a way to calculate the number of potential low-income students who were discouraged from applying because of rising tuition and prices, but I doubt it is zero (although UC's figures suggest that the percentage of low income students did not decline in the years leading up to 2012-13 which is the last year that I could find figures for).  And UC acknowledges that the amount of debt taken on by students has risen in recent years. (Figures 1-15 and 1-25)  Chris has laid out the case against this model in this post.

Not only is UC's strategy bad for students but it is bad for the University.  Although the Governor likes to point out that UC's rise in tuition has more than compensated for the gross losses in state funding that overlooks the reality of the way that financial aid works.  As Bob Samuels points out in his own dissection of the UC tuition proposal, the net revenue from tuition is still below that provided by the State because 1/3 of in-state tuition goes to return-to-aid.  In fact, the latest proposal only intensifies the long-standing error on the part of UCOP of insisting that they could keep securing access and quality through the high tuition/somewhat high aid model (one of a series of errors Bob identifies in his post). UC has, in effect, allowed the Governor and the LAO to begin treating student tuition as public funding.  Unless UC is willing to turn its back on access and its public mission and only allow the well-off to attend the University it simply will be unable fund its way out of this situation on the backs of students and their families.  Put bluntly, the present strategy does not offer a way for UC to retain its proclaimed commitments to quality, affordability, and access.

Now I am not naive.  As I suggested at the top of the post, the Governor is not a friendly audience for requests for increased funding.  One of the uncertainties introduced by UCOP's tuition proposal  is whether the Governor will insist on reducing or eliminating proposed state funding increases in response.  If this happens either UC will receive little if any financial benefit from the added tuition unless it places even greater burdens upon students.

But the Governor's position makes no more sense than does the University's.  The problem lies in his indifference to, or ignorance of, the effects of his austerity policies.  To take only the most immediate example, the Governor placed his political capital and fundraising skills to pass his rainy day fund. Unfortunately for too many Californians the storm is still ongoing.  As Dan Mitchell has pointed out the latest figures for tax revenue while higher than the Governor predicted remain highly dependent on capital gains revenues; sales taxes--a better indicator of how the majority of the state's citizens are faring economically--remain low.  His obsessive parsimoniousness is exactly the wrong policy at the present time.

But there is a longer-term problem here.  The Governor insists that the state needs a larger rainy day fund and to hold back on counter-cyclical investments because of the volatility of tax revenue.  But the volatility of tax revenues is deepened by austerity because austerity deepens inequality and inequality exacerbates the volatility of revenues.  Although the overall effective tax structure of California is regressive the volatility problem exists because of the state's dependence on capital gains taxes.  The only long-term sustainable way to move away from that dependence is to create new ways to increase the income and opportunity for the mass of the state's population.  Cutting back state investment does the exact opposite; it insures that the state will become even more unequal and dependent on capital gains income that bears a tenuous relation with the state of the real productive economy.

One of the prime mechanisms for creating mass income, opportunity, and what used to be known as public happiness has been public education.  In the present state of society that needs to include greater--not lesser--access to higher education through the Community Colleges, CSU, and UC.

But just as it is reasonable to argue to Sacramento that it is in California's interest to reinvest in higher education to be able to break with the high tuition/somewhat high aid model it is also reasonable for Sacramento and the California public to insist that this not be done along the business as usual model proposed by UCOP.  Instead, something deeper is needed.

First, if UC wants to make a stronger case for increased state funding UC needs to stop insisting that even if it keeps raising tuition students will be fine. Instead, they should enter into negotiations by taking the position that what is needed is to increase state funding so that student tuition can be rolled back.  UCOP cannot take the "we need more money trust us" position that it has assumed in the past.

Second, UC needs to become more transparent in its budgets.  As Charlie Schwartz has been arguing for decades the budgetary categories UC uses (e.g. instructional costs; student services) are simply too vague.  UC's core activities are instruction and research but the University has never made a good enough case for the importance of State support for research nor have we done a good enough job in explaining why being at a research university is good for students.  UC also needs to genuinely confront managerial over-expansion.  UCOP likes to dismiss criticism by pointing to the relatively small amount of money that goes to senior management salaries.  But that is a red herring: the real issue is that senior managers bring in their wake ever increasing administrative staffs which generate their own tasks and costs.  It is the entire management ideology and structure that needs to be rethought.  

Third, it is time to have a serious discussion of UCOP role and structure in the contemporary moment.  I am not one to call for the elimination of UCOP.  I think that there are still important system-wide functions that it performs.  But we have to recognize that the question of why it performs the functions it does and at such cost is something that needs to be rethought.  Just to give you a sense of scale, the budget for UCOP in 2013-14 was about $587M.  The budget in the same year for the Santa Cruz campus was $633.2M.  Now granted, some of the UCOP budget is due to system-wide programs that happen to be sheltered under UCOP (especially agricultural programs). But do we really think that the Office of the President should have a budget nearly as large as an entire UC Campus?

Finally, as part of a larger public discussion of a new Master Plan for Higher Education UC needs to move beyond the missed opportunity of the UC Commission on the Future.  It is time to recognize that that effort was misconceived and wrongly organized.  Under the leadership of President Yudof, Regent Gould, Senate Chair Croughan, and Dean Edley, UC pursued the wrong effort with the wrong goals: top down, administratively driven, obsessed with online education and far removed from campus life.  As part of any new Master Plan UC needs to engage in a different sort of self-scrutiny: centered on faculty, staff, and the campuses; geared to re-energizing the teaching and research functions of the University, willing to mark out new ways to serve the public in realms far beyond the commodification fetish manifested in UC Ventures or Westwood Tech Transfer.

To regain this sort of public investment and to renew UC's public mission is, to be sure, a long-term endeavor and one without guarantees.  I think that by challenging the logic of continual cuts, President Napolitano has taken a step beyond the Eeyore like passivity of the previous administration. But more needs to be done to decide what the money is for.  If faculty want to regain their role in governing the university we need to take up the challenge in alliance with parents, staff, and students. And to do that we may need to invent new forms of organization and communication.