I only skimmed the content of the decree because my eyes were drawn to the mighty list of signatures, at left, that took up half the page.  Had I ever before seen the UC president and all ten campus chancellors joining their signatures to support a cause? I racked my brain for this kind of Senate memory of the 2000s. It came up empty.  All eleven signatures.  UC united! It's the UC United Front.

My mind began to wander. I thought of the audiences at the lectures I've given at universities this year.  They seemed generally to agree that the current public university system is broken, and that the fixes I propose should be developed. But they usually don't think that we--faculty, staff, and students--can do anything to implement them.  One reason is that only senior managers speak for the university to the political, donor, trustee, and executive classes. At UC, it's the president alone.  So what can the rank-and-file educators actually do?

Here was an answer: UC's Eleven! Perhaps they came together to speak out on the Big Four features of the broken paradigm we can't get past.  Still gazing at the signature list, I mused:

1. Perhaps they grew tired of the "cost disease" fixation that obscures quality issues with false expectations for cost reduction. Maybe they read the UCSB memo saying "curb your enthusiasm" about teaching the surge, and realized that without further ado the Committee of Two deal would hinder instructional progress. So they wrote to demand 21st century quality for all UC undergraduates--and in solidarity with CSU and the CCCs.  Their short letter might calculate the increased cost of individualized instruction for all, and quantify state increments that would get us there without increasing tuition and student debt.  The Eleven call for Active Learning for All!
2. Or maybe they were noting that UC had put all its eggs in the STEM basket, although at least half of its degrees are awarded in the arts, humanities and social sciences (SASH), and although all global problems have sociocultural as well as technological dimensions. Perhaps The Eleven were writing to call for new cross-disciplinary hybrids, and for campus funding rebalances to build the first adequate SASH research infrastructure.  UC's Eleven call for funding for Quant-Qual Syntheses for Global Problem Solving!
3. At the same time, universities have oversold the commercialization of STEM research. Perhaps The Eleven had become concerned that federal agencies, state legislatures, and their own campuses were slighting the great basic STEM research that had no future revenue potential. Perhaps they saw a connection leading from the long-term businessing of science to the stagnation of federal funding, to their own ever-growing internal subsidies (10.2.3), and to the regular voter's doubts about whether universities are on her side.  So the Eleven were calling for Multiple Technology Pathways, in conjunction with Full Costing of Research by all extramural sponsors!
4. Possibly UC's Eleven were worried that the state still didn't get that only the full reset of public funding would enable the required educational quality without high student debt.  The state Master Plan had created free public universities when the state was 90 percent white.  Universities started raising tuition around the time that more students of color were arriving.  They then really jacked up tuition during the state cuts when Gov. Pete Wilson was whipping up anti-immigration sentiment and getting the UC Regents to eliminate affirmative action. No doubt this was a coincidence, but The Eleven could be putting all that behind us. They were calling for a Full Funding Reset to serve Post-Anglo California!

Well, I thought, maybe any one of these calls is too much to ask of a three-paragraph diktat.  Perhaps they would be pledging new vigilance in rooting out sexual misconduct on campus, or agreeing to address administrative bloat, or reigning in non-resident enrollments, or capping executive compensation, or expressing commitment to employee and student privacy in electronic communications, or declining ever to serve on boards of companies that directly compete with (while being parasitic on) the University of California. 

Or perhaps they would be supporting Jerry Kang, UCLA's Vice Chancellor for Equity, Diversity and Inclusion, who has defended the right of "members of our Bruin community" to express support for Boycott, Divestment, and Sanctions (BDS) without being individually named "as a murderer or terrorist." The Eleven might have been endorsing VC Kang when he wrote, "the recent Statement of Principles Against Intolerance adopted by the UC Regents encourage quick and forceful response (Principles i and j)" to attempts to harass or intimidate someone or some group on the basis of "religious and cultural identity" or "political commitments."   

I ended my reverie and re-read the actual letter.  In reality, UC's president and all ten campus chancellors had come together to instruct a professional association that voting in favor of BDS is incompatible with academic freedom.  (The American Anthropological Association's Resolution to boycott Israeli academic institutions is here.) The eleven senior managers spoke in the name of the University of California ("The University of California believes that an academic boycott is an inappropriate response to a foreign policy issue . . ."; "An academic boycott goes against the spirit of the University of California.)  As far as I can tell, the authors consulted with no one, may have breached the "Consultation with Faculty" requirement of Regents Policy 1500, and decreed the right answer in an ongoing national debate in which one side sees BDS as defending academic freedom, not abridging it.

On top of the letter's improprieties, what a waste of the UC Eleven.

There’s been much local coverage of two principal investigators switching from UCLA to USC, and taking with them an estimated 85 people from UCLA's Laboratory of Neuro Imaging (LONI).  The Los Angeles Times has run two stories about it, one of which received over 120 reader comments, and the story was Larry Mantle’s lead on his Airtalk show at KPCC, where he had one of the two departing faculty members as his guest. 

But beyond a big win for the Trojans over the Bruins, why should the public care?

The basics are that USC courted and successfully lured LONI’s director, Arthur Toga, and one of its nine listed faculty, Paul Thompson, along with what Larry Gordon and Eryn Brown report in the Los Angeles Times as most of the lab’s academic staff. As is usually the case in this kind of move:

• The academic domain is in one or more superhot areas of research, in this case, the intersection of neuroscience and big data.
• The principals are said to be among the best in the world, and their presence expected to be “transformative,” in the term of the USC president.
• The scientists need a new building.
• No one on either side will explain the business deal or talk financial specifics.
• Everyone praises competition as normal and good for science.  Prof. Thompson told Larry Mantle that UCLA would recruit great new people to replace those who depart. 
• The quoted public university official states that the loss is not related to cuts to public funding.
• Everyone else thinks the departure is related to cuts in public funding.

The Times reporters directly contradicted the UCLA official by citing Ronald Ehrenberg, director of the Cornell Higher Education Research Institute, who told them, "This is a major problem for public higher education.” Similarly, one of the Times readers wrote,

everytime a public institution competes with private, the public one will always lose. The public will always equate anything public with greedy government workers and will resent money going to support what they consider unproductive and unaccountable bureaucrats. The public does not distinguish between productive government ventures and those that are a drain on taxpayers.  (“awunganyi” May 10)

In a follow-up story, the chair of the UC Academic Senate, Robert Powell, said that the exit has “reinforced my fears that Sacramento is not paying enough attention to the research mission of UC.”

True, Sacramento doesn’t pay enough attention to UC research. But no one has spelled out the loss to the public in this move of an excellent neuro-imaging lab.  What is the loss here exactly?

There’s a hit to the UCLA brand.  Brand matters to fundraising, to personnel recruitment, and to grant writing.  It is widely assumed that the best people with the most job offers will chose to go to the richest and scientifically hottest place. UCLA has some repair work to do.

There’s a hit to the status of UC and of public universities in general. This is a loss to the image of public universities as being as good as the best.  More people than ever assume that even UC is reverting to the mean in which public means mediocre and private means the best. 

But both of these losses are fairly easy to dismiss.  Universities are now ranked like sports teams, and UCLA will focus on winning the next game.  UCLA apparently didn’t even take the field for this last one—Profs. Toga and Thompson didn’t ask the UCLA department chair to make a counteroffer.   Prof. Thompson was eloquent on Airtalk about the benefits to the discipline overall to have a concentrated facility with a great infrastructure, and promised ongoing synergy with colleagues doing related work at UCLA. Any damage to research seems temporary at worst.  USC may have made a strategic long-term decision to be great in this area and to do what it takes, thus doing more for neuro-imagery than UCLA wants to do. And UCLA had already done quite a bit.  I don’t know LONI’s equipment and infrastructure issues at UCLA, but the only publicized financial information was of the leaders’ salaries: over $1 million / year for Prof Toga, over $420,000 for Prof. Thompson. A good number of highly qualified people will line up for jobs like these.

Here we get to a deeper loss: public understanding of the costs of science. The public salary numbers are the only thing Californians know about the money behind this deal.  When a UCSD lab moved to Rice University two years ago, one of the departing scientists helpfully explained that UC was facing a “support gap” in future years that would reduce the science they could do there.  But usually, and in this case, all the relevant facts about science funding are kept behind a veil of silence. 

(In 2007, Harvard president Drew Gilpin Faust told a BusinessWeek reporter that public universities would have a hard time keeping up in research financing. She was publicly rebuked by the Big 10 presidents. Since then, virtually no family financial business has been mentioned outside the family.)

Part I of the missing storyline is this.  Public research universities can no longer fully support all the science grants their excellent faculty can get. I get stories about absurd shortages of photocopier cartridges and arguments about phone charges from labs at every campus in the system.  They seem to me to be frequent and annoying enough to threaten productivity and morale.

Public universities can’t fully support their grants because extramural funding doesn’t cover the full cost of research.  Labs burn money like a jet burns fuel, which is what they are supposed to do.  LONI spent $12 million a year, as a case in point.  This is peanuts for JP Morgan or the military, but a lot for a university.   As I’ve noted in various posts, universities have to add in on average 25 cents of their “internal funds” for every dollar in extramural grants.  Public universities just don’t have the internal funds to do this like they used to.   The economists Robert Archibald and David Feldman calculated that public university expenditures have fallen from 70 cents on the dollar spent by their private peers 30 years ago to about 50 cents today (p 237-38).

In addition, these labs need advanced facilities and in some cases equipment that they can’t charge to grants. USC will build LONI a new building, one that will support other research as well.  In the case two years ago of a UCSD lab that moved to Rice University, Rice was providing space in a building that had cost it (and Texas taxpayers) north of $140 million.  USC is likely to be doing something similar.

On Airtalk, Prof. Thompson said that they must get one-third of their funding from non-governmental sources.  This puts additional strain on a public university fundraising operation that is also trying to find money for graduate fellowships to replace cut state funds. USC undoubtedly told Toga-Thompson that in contrast to UCLA, USC would put LONI at the head of the fundraising line. They may have named likely seven- and eight-figure donors were the lab to move. But labs like LONI depend on what falls from those trees. USC also charges three times the tuition that UCLA does, which is another source of funds. LONI is a big stick with which to beat the fundraising tree. Large public universities can’t fund the same level of background infrastructure or full-court fundraising for each and every one of its special projects.

The next part involves this comment about how USC is entrepreneurial and UCLA is bureaucratic. When Larry Mantle asked about this (about 16:00), Prof Thompson replied that in fact, “he didn’t see any bureaucracy: at UCLA, which is a wonderful place and gave him his career. What USC did have was a team with the “vision and experience” to manage the logistics for a complex move of 100 people.  Here’s my translation:

• USC has a central administration on campus. UCLA has UCOP in Oakland.
• USC had a bigger bureaucracy to throw at one lab, not a smaller one.
• USC was planning a move that was going to happen. UCLA was managing a large research ecosystem. (LONI wouldn’t make UCLA Medicine’s list of 10 biggest problems to solve today until it was approached with an offer, which it wasn’t.)

My four conclusions are these:

1. UCLA’s core problem is a funding shortage, not surplus bureaucracy. (UCLA is the wealthiest UC campus, so things only get worse from there). 

2. Public universities need to tell the truth about research funding.  This will include the facts that science loses money, that some portion of undergraduate tuition funds offset research costs, and that most funding doesn’t “produce” anything in the near-term--except findings for more research along with a great deal of useful failure.

3. Public universities need to explain why research like LONI’s should be to some large extent at public universities.  Why does it matter to the science, to the public impact, to the education of the next generation of scientists? Perhaps there is more openness and accountability at publics, and therefore more innovation. Perhaps scientists at public universities have a better feel for public needs and do more useful research.  Perhaps public universities uniquely have the necessary scale to train the thousands and millions of researchers in all fields to solve our ever-mounting problems.  We now need a new theory of public universities, before things get even worse.

4. Universities both private and public need to open up  discussion of spending priorities to their academic communities.  Given rising costs and shrinking revenues, choices have to be made. They  need to involve the faculty, from all disciplines, and students of all levels.  This is as true of USC as of UCLA, which has a poor record of consultation and can only buy a limited number of LONI-type labs with (in part) student tuition and non-STEM cross-subsidies.  Privates can now raise tuition only so much. Academic choices need to come from a bottom-up debate of a kind that higher ed has never had.

If we can’t do (1), show public efficiency (poorer but smarter, more research with less money, more degrees for each faculty member [page 16]), the public has no reason to support rebuilt public funding.

If we can’t do (2), tell the truth about funding, the public will keep thinking that science supports itself and doesn't need state money. Funding will stay flat or fall, and the public university research ecology will get gradually weaker. 

If we can’t do (3), say why public is often better than private, the public will be happy to see high-end science like neuro-imaging as done by the 1% for the 1%, and expect the 0.01% to pay for it with charitable donations.

If we can't do (4), achieve common understanding of resource choices, most public university students and faculty won't miss the LONIs as much as they should.

As you have probably seen (since it has been covered by the Financial Times, Business Week, the LA Times, Inside Higher Education, the Chronicle of Higher Education, and other news outlets) the System-wide Coordinating Committee on Graduate Affairs suspended its review of the proposed transformation of the Anderson MBA from a state-supported program to a self-supported program.  Chris offered an analysis of the proposal's budgetary confusion back in June. CCGA offers a full menu of objections.

For those of you keeping score that means that both Senate Committees (UCLA's Graduate Council and CCGA) that had the time to do a thorough review of the proposal refused to approve it.  The Legislative Assembly at UCLA had supported it by a small majority in a June meeting.  But it should be noted that that meeting had a severely limited time for discussion, crucial financial details were only made available to the Assembly the day before the meeting, and the voting began before the discussion had actually finished (although the administration had been given its own time to speak).  Despite the seriousness with which the Legislative Assembly members approached their task, it is hard to see how they were provided with the opportunity for careful analysis that the Senate Committees had. 

The public response to the UCLA Anderson School of Management privatization has not been warm.  Speaking on an episode of Which Way LA?, Anthony P. Carnevale, a prominent national higher ed analyst and director of the Georgetown University Center on Education and the Workforce, remarked,

"We as a nation, one of our signal achievements is having built a world-class, best-in-the-world higher education system.  And we're basically putting it up for sale."

"What do you lose if you do that?" host Warren Olney asked.

"You don't serve public purposes any longer, quite simply.  And the public purpose in upward mobility, first of all, is dis-served in a very powerful and immediate way. The rich get richer and the poor get poorer.  The other purposes--for diversity's sake and so on--don't get served and the public interest is simply not observed. UCLA is owned by the citizens of the state of California. And it is being sold off. That is, they are losing an asset that they have contributed to, a brand name for a very long time, and it's now being sold off by the legislature."

Olney's other guest, Anderson School dean Judy D. Olian, objected that in fact the public mission will be preserved, but her main stress was on the new presence of private donors and revenue streams. This emphasis also dominated the initial proposal, which didn't claim that educational goals would be improved, and in fact offered no educational goals at all. (Similarly, see the School's Strategic Plan).

Nobody argues with much success that privatization will recover the overall educational attainment and learning quality that has been lost via twenty years of piecemeal privatizing. The only plausible argument for privatization is that it has been forced upon us by repeated and apparently irreversible public funding cuts. The careers of most senior managers in their 50s and 60s have been profoundly shaped by repeated, unpredictable declines in public support. Those running public universities, with long experience of a mixture of cuts and official ingratitude for holding things together as well as they have, have come to believe, in the words of a thoughtful new book on the subject entitled Public No More, that "cuts are not temporary; rather, they portend the extinction of the low-tuition--high-subsidy financing model that has been the backbone of public higher education for over a century."

Once this reality is in place, privatization becomes inevitable--and also preferable to the induced poverty and finger-wagging restrictions that states are increasingly offering instead of funding.  The main goals are then to privatize efficiently, fairly, and transparently, in the guiding belief that the day of strong public university funding is over for good. 

I have long argued that this perception that we have exited the age of higher education as a publicly-fund public good is a self-fulfilling prophecy.  It forms a feedback loop of the kind that George Soros is always trying to get financial analysts to see as creating reality rather than simply perceiving a pre-exisitng reality that they wrongly see as independent of them (example here).  My claim has been that if major players were to define cuts-reality as untenable for higher education, and mobilized their institutions to change this reality, cuts would not be our reality over the medium and long run. But here I leave aside this issue for a narrower question: given privatization's goal of fixing public university finances, does it actually succeed?

The UCLA-Anderson example suggest that it does not.  To show this, I first have to discuss how the privatization narrative functions as a good cowboy story.  Then I'll look at the financial deal in the Anderson privatization, which suggests that  privatization is subsidized with public money, and doesn't make financial sense without that subsidy.

The story about privatizing a public asset always weaves together four strands.  The first, already mentioned, is that the public sector is now broke and in permanent retreat.  The second is that this is not so terrible because the private sector can and will take over the public sector's public missions and do them as well or better. Thus in launching the privatization campaign of UCLA's Anderson School of Management in 2010, Dean Olian told Scott Jaschik of Inside Higher Ed that "The driver here is the decline in state support." She also insisted to him that "Our mission will still be public -- our mission will still be one that looks to make sure our students are helping East L.A. nonprofits or microfinance projects in Africa."

Jaschik noted a third strand of the privatization story: "In discussing the plan, Olian repeatedly talked about 'self-sufficiency' and never used the word 'privatization.'"  In the privatization narrative, the superior capabilities of the private sector advance the public interest through a newfound financial freedom from public regulation that leads to increased revenues that, in turn, pursue the public good without distorting it. 

Oilan also added the classical fourth strand, which is that the new private operator would, once operating freely, become the financial benefactor of the public side. Based on these assurances, a Los Angeles Times editorial of 2010, in offering its ambivalent blessing, said that "the net $6.6 million a year that Anderson currently receives from UC would stay with the university, money that could go to programs such as literature or philosophy, which don't draw big donors, or scholarships for undergraduates."

To put the four strands together, the privatization story says that public higher ed, drained by inevitable funding cuts, would be revived by the privatized ("self-supporting")  unit, possessed of disciplined public purpose and now freed to make money in part so it can return charitable support to the public operation.  The privatization story is about confronting a new reality and responding entrepreneurially to external conditions rather than to internal traditions-- which is the cowboy theme of the program.

The privatization story triggers a conditioned belief in American culture: the private makes, the public takes. This familiar subplot is the basis of the narrative's political power.  But if we ignore this belief and look at the Anderson proposal, we can see it doesn't actually support the main narrative about how privatization works.

The first strand--that the "state is going away"--extrapolates the future from immediate past experience, and describes that experience rather than reality. The second, public purposes, are as noted above missing from the proposal. They consist mostly of potted statements in public venues of the social causes to which Anderson students could individually apply their management expertise.  Tuition is already in the mid $40,000s and set to rise another $10,000 in the next couple of years, which obviously endangers the ability of highly indebted students to pursue social service.

On the third point, self-sufficiency means less adherence to the university community but, at the same time, more dependence on outside donors and sponsors and perceived market forces.  Since the Anderson School is "disestablishing" a state-built and state-funded academic unit (Appendix J) in order to turn it into an SSP, privatization is an appropriate term.   Carnavale calls it a "sale," but the ownership and control questions remain unclear, and there seems to be envisioned neither a transfer of assets nor payment for them.

This brings us to the crucial claim, which is that the private version of Anderson will generate its own independent revenues and in effect earn a profit that will allow it to give some support to UCLA, the poor public relation.

What we see instead are a series of standing public subsidies for the newly private enterprise:

• The state's sunk costs in capital stock, including its maintenance.  UCLA is giving this away for free, perhaps in order to maintain the impression that Anderson is an ordinary part of UCLA that the public will assume is still public. A precedent for this are two national laboratories, Lawrence Livermore and Los Alamos, that are still claimed by UC on its lab website but that are in fact operated by limited liability corporations (LLCs) involving UC in a partnership with Bechtel and three other for-profit defense contractors (LLNC LLC) (LANS LLC Agreement).   Use of assets would seem here to be automatic, without say a long-term lease and lease payments (see below).
• The state's investment in human capital, including salaries and retirement benefits for past and current retirees. 
• The UCLA brand, which as the Anderson faculty dissenters point out, is primarily a UCLA creation and will have an annual value in faculty recruitment, publication, student placement, tuition revenues for executive education and the other for-profit educational programs, and so on.
• The University's tax-exempt status as a part of state government.  Anderson will not have students who are eligible for state funding, but it will not have to compete with for-profits who pay corporate income taxes.

A normal acquisition between two private firms would involve the purchase of both physical and intangible assets. I leave it to finance professors to put a price on the UCLA assets that Anderson now has, but the absence of a buyout payment is a large effective public subsidy.

To continue the public subsidy list:

• The state pays for all of Anderson's academic students.  Anderson will under the new scheme keep 100% of the high tuition paid by the students in the professional programs -- the Executive MBA and related programs as well as the full-time MBA students. Were the private side now helping out the public, Anderson would use the market-rate tuition to subsidize some regular business students, particularly the PhDs who are to become faculty in business schools.  In reality, Anderson keeps all of the market-level private-program tuition and gets UCLA to pay for the academic students. The Financial Impact Analysis (FIA) asserts, "The Ph.D. and the Undergraduate Accounting Minor . . . cannot become self-supporting and thus need to be supported by the campus."  This is not true: Anderson could use professional student tuition to cross-subsidize any and all other students at its discretion. The FIA continues, "the Ph.D. program will receive $1.2 million and the Undergraduate minor will receive $3.2 million of General Fund support" - every year, presumably adjusted for enrollment.  Total PhD. enrollments in all years are listed as 75, so Anderson gets around $16,000 per doctoral student per year.  If in practice it spends less than that sum per student, it can not only get the state to pay for its academic students but run at least a small profit on these state students at the same time.    

The undergraduate funding is even more lucrative.  UCLA has a Business Economics major, staffed on its regular campus.   Anderson runs an accounting minor, meaning that Anderson does not pay the lion's share of the educational costs of "its" undergraduates.  Anderson's enrollment of undergraduate majors is zero.  For its zero majors, Anderson will receive $3.2 million.  Anderson has 253 minors this year, and I am told that these are taught primarily by adjunct instructors on a course-by-course basis.  Anderson will be paid around $12,600 per student out of General Funds. To put this in perspective, Anderson will get nearly double the per-student amount that UC currently receives from the state for each additional resident undergraduate, and get this amount for accounting minors that are primarily taught and otherwise supported by other departments.   (Haas at UC Berkeley has, in contrast, 350 majors.) 

Anderson's profit potential on these state students is significant. For example, generously assume again that Anderson spends all of its money on its PhD students, but only $3000 per undergraduate minor. It could then hypothetically spend $760,000 on direct instructional costs and then net $2.4million M in public funds to use for its now-private general operations.  Whatever the actual returns, we can at least say that Anderson will not be "self-supporting" its academic students, for public funds will subsidize them.

• Anderson does not contribute funds to UCLA.  The FIA states, "The  conversion of the MBA program to an SSP will result in a net increase of monies in the campus General Fund for the Chancellor to support campus programs." This is also not correct. The conversion of the unit to an SSP means that Anderson's state-funded students go up in a puff of smoke, to be replaced by their identical private-unit twins.  Their state funding disappears with them.  Anderson's conversion costs UCLA state students and therefore decreases its enrollment-based General Fund allotment--except that Anderson's loss will be backfilled by increases in undergraduate enrollments on the regular campus (as the UCOP endorsement letter plainly says).  Anderson cannot take credit for the fact that more undergraduates will show up to take courses elsewhere on campus.  Attaching numbers to these students, the FIA says, "net revenue recouped by the campus from Anderson’s MBA degree becoming self-supporting is thus $5.2 million." This is revenue recouped by UCLA taking a bunch of new undergraduate students (or by getting paid for the students they have already overenrolled), and is not actual revenue flowing from Anderson to UCLA. 

The same goes for the claim about how Anderson will be giving UCLA $3.6 million for general operations: "after conversion, the School will be levied an overhead charge to compensate the campus for operation and maintenance of physical plant as well as services provided to the School." I don't know how they came up with this number, but assuming it reflects actual overhead costs of operating the MBA program, and that UCLA will still be providing services to Anderson in exchange for Anderson's payment (utilities, student services), (see pp 11-12), this is not money that UCLA can now spend elsewhere on campus. Anderson's check for $3.6 million goes right back to Anderson in the form of services provided.  Under the current system, UCLA uses state general funds and tuition from Anderson students to support Anderson activities; in the future, the tuition will go directly to Anderson, which will then use it to pay for its own overhead, not for UCLA's.

Tallying these factors, I can't accept the FIA's claim that adding these two sums together (minus the subsidy of its academic students) defines a "total benefit to the UCLA General Fund of Anderson’s MBA degree becoming self-supporting" of  "$8.8 Million."  The flow of funds specifically from Anderson to UCLA is at best zero. 

• Net tuition subsidy from UCLA to Anderson. Anderson loses state General Fund money on its MBA students but keeps it for its academic students (it loses $8.5 million and gets back $4.2 million for a net loss of $4.3 million).  Anderson will also keep all of its tuition money, for a $20.6 million gross with 753 students at current rates (over $45,000 / yr), and since it keeps a bit over $9 million under the current model it will under the privatized system gross an additional $11 million (before 15% return to aid). So now Anderson is up $6.7 million, and this is before it raises tuition another 8.3% for residents in 2012-13 (p. 11), grossing an additional $7.5 million or so. Then it will be $14 million up, plus say another $1 million in new endowment payout (improbably unrestricted) on $19 M of announced new donor pledges contingent on privatization.  Assuming Anderson's current expenditures are around $70 million (Schedule B), this additional $15 million increases its budget by over 20% in one fell swoop.

In sum, while the benefit to Anderson is clear, the story for UCLA is not so positive.  It is out $11 million of Anderson tuition that it was using to cross-subsidize  activities on its campus, plus it continues to pay $4.2 million for Anderson's academic students, those which Anderson is unwilling to self-support.  Anderson gains $15 million a year, and UCLA loses  . . .about $15 million a year. And that does not include the unquantified historical accumulation of various kinds of capital that I listed above.

I will deal with the political sources and student impacts of privatization in another post. The outcomes thus far are as follows:

1. UCLA is losing money on this deal. If it allows other units to privatize like this--as pseudo self-supporting-- it will degrade its overall finances.
2. Privatization yields a profit only because it is publicly subsidized. Were UCLA's stealth subsidies to be withdrawn, Anderson would in fact net nothing by privatizing a premier public business school that the taxpayers of California built.

UPDATED BELOW
UPDATE 2 (3/31):  UCLA's faculty Council on Planning and Budget endorse the Luskin Center after the Regents table it.  See Dan Mitchell's explanation and critique.  The CPB document he posts itemizes the funding of the $112M in costs after the Luskin gift, which are mostly bonds (pp 3-5).

Private fundraising is associated with so many of public universities' most exciting projects, and absorbs so much of each institution's creative energy, that it is easy to forget that it comes with costs and negative side effects that need to be weighed into the mix.  This week's meeting of the UC Board of Regents illustrates the issue.  On Thursday, the Regents will review the Annual Report on University Private Support.  This afternoon, the Regents are considering a funding proposal for a new conference center at UCLA that will bear the name of its major donor.

The report on private support offers the kind of aggregate figures that have convinced a lot of people that fundraising is a workable answer to public funding cuts. The takeaway is, This past fiscal year, the University of California received almost $1.6 billion in private support." Since this is about twice the current year cut in state support, and since UC's core funds are about $5.2 billion (Display 1), it looks as though this great intake could make a major dent in UC's budget problems. The report claims that  "every gift is helping UC continue its mission of research, teaching, and public service."

Reality is somewhat different. 

Toby Higbie's account of UCLA's November 9th protest is below.   With additional links 1.

• 
  
• Video on Occupy Cal and the General Assembly.  Good discussion, very large crowds.
• The Occupy Cal General Assembly called for a general strike (education sector) for this Tuesday, November 15th.  The strike is " in opposition to the cuts to public education, university privatization, and the indebting of our generation."
• The UC Davis Faculty Association has endorsed the OccupyCal strike call.
• In an open letter to UC Berkeley Chancellor Robert Birgeneau, Teachers at UC Berkeley condemn police violence.