The extraordinary budget disaster facing public higher ed in California - and in many other states -has not been matched by extraordinary improvement in management practice.

We have instead a traditional top-down structure of the kind that is regularly blasted as ineffective by management theorists, but which remains the default in almost all US institutions.

For the public university, this means that choices are - or chaos is - created far from the classroom or laboratory, usually in the state capitol. Cuts and other proposals propagate like a shock wave through the system, from the office of the president in the UC case down to the senior administrators at each campus, and on into the divisions and departments. All the staff and faculty hear at the end is a sonic boom. Their job is to pick up the broken glass.

There should be much more collaboration and dialogue before decisions are made and it is too late. Although this is the first day of the new fiscal year, California and its universities still have no budget. The UC Regents do not meet until the middle of the month.

I would propose town halls and working groups with a specific agenda. Hopefully some of these steps have already been completed in administrative committees and the results can simply be presented:

1. full disclosure of current financial data to all "stakeholders" - faculty, staff, interested students.

This should include explanation of current fund transfers between state and non-state sources, e.g., how state funds help support the medical centers

2. explanation of UC's internal budget choices

-origins of 8% figure, explanation of savings and application
- description of alternatives considered (and apparently rejected)

3. presentation of future planning - Beyond the Crisis.

-balancing of cuts with academic planning; educational goals articulated and prioritized.

4. call for and development of counterproposals for the immediate crisis
5. reworking, synthesis, and transmission of improved budget model for 2009-10 to Regents via formal presentation

We also need an explanation of the origin of the currently proposed State of California solution: how did we get here, so we don't wind up exactly here again?

Some examples (and required reading):
- deliberate cutting of revenue streams, including Vehicle Licensing Fee
- Governor's preference for borrowing
- minority rule preventing reform
- population growth; higher growth in low-income population

All this is a lot of work. But there are a lot of people's work at stake, and many years of damage that we are now going to be expected to overlook and undo.

Private colleges are increasing tuition "only" 4.3% this coming year, according to a NAICU survey - the smallest increase since 1972-73. Congratulations are in order - inflation went negative in December 2008, so this raise is only 5% above what we're likely to see next year!

Endowments went famously negative too - here's a picture.

These consistent tuition increases are a big reason why the public is not sympathetic to cries of poverty coming from public universities, who have been raising their fees like mad as well. Tuition hikes been so much higher than inflation for so long -- up 440% in the past 25 years while the CPI was up about 110% -- that people are talking about a "higher education bubble": "Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking whether it is worth spending $1,000 a week to send their kids to college." Good question.

My only disagreement with this is that a bubble is something that hasn't popped yet. For higher ed, that bubble did pop - though private tuition pricers don't seem to have grasped this fact, while public universities are still forced to use tuition increases to replace state funding cuts.

That doesn't work either. Tuition increases aren't showing up in the classroom. Remember the Delta Project study that concluded, in IHE's summary,

There’s not much evidence to suggest that students at public universities are getting more for paying more. Between 2002 and 2006, average tuition at public research universities increased by nearly 27 percent or $1,419, but the spending on each student only went up by 1 percent, or $149.

It takes special genius for higher ed to have gotten here: its product is more popular than ever - unlike, say, GMs - it constantly charges its customers more, and yet per dollar it is delivering less.

Punishment is supposed to fall on those who have been bad in some way. Bad in terms of illegal behavior: those are given their day in court. Bad in terms of inefficient: their costs balloon and they lose customers (30% if you're autos). Bad in terms of bad theory: their risk goes bad and they cause the Great Recession.

There has been help for all of these people. Criminals have trials and more or less expensive counsel. Bad managers, if they are big and bad enough, get billions of dollars printed just for them. Same for the bad financial theorists, whose $300, 000,000 annual salaries - ok, mostly between $3,000,000 and $30,000,000 a year - got a $12.8 trillion bailout by Bloomberg's count as of March 31.

Then there are the non-criminal, the competent organizations with stable and in fact growing markets, increasing productivity rates, and the activities that create human capital rather than serve as the financial lead ball that drags everything to the bottom of the sea.

The university was not bad, it was good. It did only small things wrong. It spend enormous quantities of time - hours, days, and weeks - checking itself. It had more applications every year, and took many students each year for free (the state didn't pay its share). It had good theories and made scientific progress and social development.

It appears therefore that it must be punished the most of all. It is the university that must get no help at all.

I was happily off-line from California budget news, and returned today to see that understanding of the budget proceeds even more slowly than the budget deal itself. A key question: is Gov. Arnold Schwarzenegger really trying to use the budget crisis to "reform state government," or is he ready to wreck state services during a major recession in order to block any imaginable kind of tax increase?

Today's LAT piece by the regular budget reporters illustrates the intellectual blockage that is central to the budget crisis. It presents Schwarzenegger as a would-be reformer with a deep interest in "reorganizing state bureaucracy, eliminating patronage boards and curbing fraud in social services that Democrats have traditionally protected." It adds, "The governor also would like to move past the budget crisis to reach a deal on California's water problems that has so far eluded him."

This raises the obvious question: why didn't Schwarzenegger do all this things before, since he's been governor for the last 6 years?

It raises a further question: why would a responsible, non-destructive person pursue reform by cutting public services 20% (the University of California), firing some state workers, and letting others take 8% paycuts (UC again), helping to make the state economy even worse?

The simple answer is because there is no downside to this grandstanding that might keep the Gov's essentially Reaganite "no government" vision of prosperity alive (Arnold has proposed no Cal Grants for low-income college students and no CalWORKS program for the unemployed). His dogmatic, extremist, spoiler proposals are setting the agenda not only because he is the Governor, but because there is no actual political discussion in California. The public has no voice in any of this at all.

The Public is voiced by a) journalists, who claim the no vote on Arnold's Mickey Mouse propositions in May meant "no new taxes" - with absolutely no evidence that this is what it meant. (Every no voter I have asked about this has a different explanation - they are tired of Mickey Mouse budget propropositions.) The public is also expressee by b) academic experts, who say that the public hates taxes and also doesn't care.

Bruce Cain, professor of political science at UC Berkeley, said . . . most Californians will see those to be hurt by IOUs as vendors and "overpaid state employees," not themselves.

"The reality of what these cuts he is pushing for will mean hasn't hit home with the public yet," Cain said. "They see him standing up to unions and trying to cut all the waste and fraud. . . . Until the middle class bleeds in a way they care about, Arnold has the upper hand."

How does Professor Cain know this? There's no evidence of research about this on his website, any more than there is evidence of reporting in the newspaper article. I have written him to ask about sources, and in the meantime post the one exit poll I do know of, by David Binder for the Cal State faculty association. This poll contradicts the Arnoldian wisdom that the voters are baying for more tax cuts rather than modern, effective public services - and an end to annual (and now monthy) budget trauma.

See the somewhat better because a little more historical piece in the SF Chronicle. See also a few attempts to describe the impacts on the public of the cuts.

Meanwhile, where's the public?

Just as the faculty are starting to get worked up, messages are coming down of the cuts as a done deal. At UC Santa Barbara, Executive Vice Chancellor Gene Lucas, someone I like quite a bit, passed on a message announcing a hiring freeze that reads in part as follows:

we are estimating that, factoring in current fee increases and the salary savings for 2009-10 from the pay reduction program, we still face at least an additional $25 million reduction of our campus budget this coming year, and possibly a similar sized reduction in 2010-11. Clearly, we are on a multi-year path of becoming a smaller institution in faculty, staff and students. We‚ll reduce program and services as well, but a budget reduction this large over such a short period of time means a reduction in the number of students we service as well as the faculty and staff that serve them.

I admire the candor of noting that this time the cuts are going to redefine the function of the university - even quality is quietly up for grabs.

I dislike the sense that the cuts are all a done deal, which guarantees that they will happen.

Charlie Schwartz has an analysis of UC presidential math that I haven't analyzed in detail, but that should be pondered. A couple of Senate friends of mine have also been unable to get the cuts arithmetic to add up right.

I'm still looking for a worse-case cut than UC.

I've been trying to find public universities that are slated to get cut as much as my own, the University of California, whose President as of June 17th is offering a menu consisting of three kinds of 8% pay cuts. I have yet to find anything this bad.

To get started, here's a CHE overview of state cuts, with a table at the bottom, and a CHE overview of the crisis that focused a lot of UC minds on the California issue. Here's my slightly irritated response.

Nevada: 5% fee hikes and 5% pay cuts.

Arizona: ASU - furloughs for all employees 2008-09 equaling 4-6% of total pay
University of Arizona: 8 days/year, or about 3%


Florida: 0% so far

North Carolina: 5% cut in overall budgets translating into unknown pay cuts

Wisconsin: 8 day/year furlough, about 3% cuts

Concordia University (NE): 3%

Worst cut recently announced: 20% at Greensboro College (NC)

Harvard: salary freeze, plus layoffs of 275 after retirement buyouts of 500, on a core staff base of 16,000

So far, UC wins for the biggest faculty cuts (on top of an ongoing 10-15% lag behind competitors in existing salary levels).

There is much anecdotal evidence that faculty are reduced to powerless wailing in the face of cuts: see this good CHE piece for many examples. The Obama election was thought by some - me at least - to mean a reduction of economic determinism. But at universities the opposite is happening: financial factors are overriding everything.

Princeton President Shirley Tighman warns on endowment declines - 30% and not just 25%.

These enrollment cuts are a watershed for the downsizing of public higher ed, as reported in the very good piece by Josh Keller, in the Chronicle of Higher Education

The California State University is the classic social escalator, the gateway for California's racially diverse and international population. It has been slowing down for years, drained financially for years by Republican minority anti-tax blocs in the state leg (Proposition 13 and the need for a 2/3rds majority to pass any budget measure is the recipie for this Country Party lock on the budget). Now is now being monkeywrenched with the excuse of the financial crisis. Faculty and students are striking all over France, and I can't understand what it will take for people to finally say ENOUGH in California.
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Friday, March 27, 2009

Forced to Downsize, Cal State Campuses Reject Thousands of Eligible Students

By JOSH KELLER

San Francisco

Faced with severe budget cuts and an increase in applications for this fall, nearly half of California State University's 23 campuses may have no choice but to turn away students who would normally be promised admission.

Campuses across the state are rejecting or wait-listing students who meet the system's minimum admissions standards. The restrictions are a response to a call in November from the system's chancellor, Charles B. Reed, to cut systemwide enrollment by 10,000 full-time equivalent students in view of the state's budget crisis.

This year's enrollment cuts may not be the last. Given California's continuing budget problems, Mr. Reed said on Wednesday that he would "probably" have to order additional limits in enrollment in the future.

The scope of the restrictions may be unprecedented in California, where the state Constitution dictates that California State University serve the top third of graduating high-school students each year. Eleven of the system's 23 campuses have adopted tougher admissions requirements, in many cases sharply limiting the number of students they admit from outside their local area.

"Never has the demand for the university been higher, but rarely has our ability to meet it been as challenged," said James C. Blackburn, the system's director of enrollment management.

continue reading (password required)

The College and University Professional Association for Human Resources has released a pay study that shows that public university salaries continue to fall behind privates. In other bad news, pay for the humanities disciplines lag enough to cast doubt as to whether they are in the same profession as fields like business. The Inside Higher Ed coverage notes:

the CUPA data suggest that the gaps between those in some professional schools and everyone else remain large, and that some humanities disciplines remain stuck with salaries much lower than counterparts across the quad. The median salary for a full professor of English for example ($79,854, across sectors) is less than the median for an assistant professor of business ($84,025). Instructors in English or in philosophy have median salaries below $40,000 at public institutions, while instructors in law and legal studies earn over $60,000 at public institutions.

These salaries do not come from the market but from custom, status differences, and other unjust lock-ins. Will the crisis help us rethink any of this?

California finally passed its latest terrible budget. Amidst an avalanche of cuts and regressive tax increases, it cut the University of California another $115 million and Cal State another $165 million.

The conventional wisdom is that it could have been worse. This view doesn't express budgetary reality. It expresses long-term budgetary trauma and the successful lowering of expectations into the basement.

UC had already suffered a mid-year cut of $65.5 million on top of the budget freeze of last year, had already enrolled 10,000 undergraduates for which the state paid zero (scroll down to p 4 in this Department of Finance document). The current-year cuts amount to 3.5% (on a presumptive state base of $3.24 billion). There is another $122 million in missing general funds for the 10,000 students that were not budgeted by the state (assuming about $10,000 in GF per student), so UC is about 7.3% below where it expected to be a year ago after the last bad January budget proposal from the governor. Given other necessary increased spending - "$213 million in unfunded mandatory costs" - UC is 14% below where the Regents budget had imagined the university to be way back in November 2007 . And that was just to stay even, not to expand or improve anything.

The budget also assumes a 10% fee hike. This will bring mandatory fees from about $7126 per year to around $7850, pushing overall fees (including variable campus fees) to around $9000. Fees have risen every year in this decade by 7-10% except, coincidentally, for the year when the governor was running for reelection.

An equally important question is where is this all heading? The short answer is down. Two reports (1 and 2) that I co-authored showed that the legislature and governor had already cut 40% of UC's General Fund since 1990 (in inflation-adjusted dollars), so we've rounded that corner and are heading for 50%. Operating units on my campus have been told to plan for 20% reductions in academic operations, just for this year. The reason is that most planners have decided that a) the recovery they were holding out for will never happen, and b) the decline will continue next year and after.

We are heading toward Scenarios 4 and 5 in the UC Senate reports linked above. The first was the "Futures Report," where Scenario 4 - the "Public Funding Freeze" - was first defined. In the second, the "Cuts Report," we mapped the freeze as modified by the "Schwarzenegger Revision." Here's how it looks when graphed.
The new budget deal appears to put UC on the Scenario 5 pathway, in which it loses $1 billion below the Compact and $2 billion below where it would have been had the 2001 budget continued to increase at the rate of growth of state personal income.

Our reports showed that private fundraising and research funding cannot come close to filling in this shortfall. This leaves student fees as a revenue source. You can see in our reports where they wouldhave to go to offset the state cuts - towards about $15,000 per year by 2011-12 or so. The "Cuts Report" showed that were UC to fill in the entire state funding shortfall between 2007-08 and 2008-09 (over $400 million) with fees, however politically untenable and ethically and educationally undesirable this would be, fees would have to increase in one-year over 40%.
What UC has done instead is combine lower fee increases with service cuts, always hoping against hope that they will be temporary. These service cuts have the political advantage of being largely invisible to students and the public. But they are eroding UC educational quality at an ever faster rate.

Making matters worse, UC's Office of the President went on record thanking the legislature and the governor for not cutting more.

“I am compelled to note that the proposed cuts to the university, while serious, do not appear to be disproportionate,” Mark G. Yudof, president of the University of California, wrote in a letter to its regents on Tuesday. “Indeed, I believe the Governor and the Legislature have helped to protect the university’s base budget from potentially even deeper cuts.”

Well yes, but only in the sense that before cutting off 1 of the university's fingers, the governor had threatened to cut off 3 or 4. He helped to protect all right, as in the phrase "protection racket."

I am completely mystified by the tradition in which the UC president always says how good the cuts are. It is simply bizarre this year, in the context of years of cuts, no recovery even to 2001 budget levels, yet another year of tuition hikes for students, and an enrollment freeze.

The presidential thank you signals that cuts don't really make much difference to us. The thank you says that future cuts will be ok too. The thank you says that UC is led by patsies who will take whatever they are given. The thank you this year ushers in further cuts in the next, and that is what's been happening for most of this decade.

While all other state workers lost 2 holidays and 2 working days of pay per month, California's prison system was not cut at all. Our prison system is famously overcrowded, dangerous, mobbed-up, racially segregated, and fatal to its inmates, particulary if they are being treated by the prison health-care system, which was so atrociously run that it was put in federal receivership.

We have an infuriating situation in which the budget is blocked every year for months at a time by minority Republican rule, and then this year by a lone nut with a fixation on an allocation for the state Comptroller's office furniture. "Success" - an actual budget - means that no bad deed goes unrewarded - incompetence and criminality in the prison system get a budgetary pat on the head, while disabled people, low-to-medium wage state clerks, and very successful professors and their college presidents do "more with less" and receive a fiscal kick in the pants. And then to make it completely absurd, the college president bows and says thank you.

Mark Yudof has lots of competition for the prize of "leader with the lowest expectations." The state of California is behind other big states in most things now, and not the cutting edge of much of anything, except decline. LA Times columnist George Skelton summed it up nicely during the similar budget fiasco one year ago. The question is whether the state's leaders are able to make any kind of a rational list of priorities, set any kind of intelligent goals, and take the population anywhere that it wants to go.

And if they can't, what are we going to do about it?

The best tabulation of the final compromise stimulus for research is AAAS's. A good summary of the overall picture for higher ed can be found at Inside Higher Ed.

I will have to do some studying to find out how much of this is new money and how much already in the works.

Meanwhile, the State Higher Education Executive Officers (SHEEO) have come out with their important annual report on state expenditures on higher ed.

The background for the current downturn is as follows: "The report . . . indicates that per-student state appropriations were on the rise from 2006 to 2008, following four consecutive years of decline. Even with these gains, however, state-supported colleges are receiving less in constant dollars per student than they were in 2001 — a peak year in data that stretch back to 1983."

Since public higher ed is still underwater in relation to 2001, we're going to need a whole new stimulus to avoid another dive towards the bottom.

Here's the best official pitch I've heard in a while to replace competition among stratified universities with something like the general development of the whole system.

I have started an archive of materials on the French university strikes (in French).

The most typical thing about the Sarkozy "reforms" are that they are no-money propositions. This is in spite of the fact that biggest problem with French universities is that on the Western scale they are poor.

The "reforms" are cost-free substitutes for better funding. Among other things, they

• enhance the powers of each university president to reallocate the time and functions of teacher-researchers
• increase the teaching hours of researchers

The theory seems to be that efficiency flows from having someone at the top giving orders. Command-and-control is a widely admitted failure in classrooms and laboratories, and it doesn't really work in the corporate world either. But it does allow conservative politicians to make moralizing statements about the shortcomings of everyone else, publicly flog their traditional enemies among scientists, teachers, and intellectuals, and save public money for more important things, like bank bailouts and tax cuts for the wealthy.

The same cheapness was also the case for Germany's "Elite 10" program for creating a German Ivy League. The idea came in the first place from the methodologically bad world rankings cranked out by Shanghai Jiao Tong University. The literal bait was utterly puny - 13.5 million Euros per year per winning campus through 2011. 37 universities turned themselves upside down to apply for money that would add about 5% to the research funds of an ordinary medium-sized campus in the United States. The real incentive was the status of the "German Ivy League" label. More accurately, the incentive was avoiding defeat and demotion to a lower university caste. The outcomes are always the same:

1. less pressure to spend real money, in this case to improve Germany's overall higher education system.
2. university personnel distracted from common advancement by competition
3. rankings that justify fewer resources for the newly-invented lower orders
4. less development for society overall.
   

I'll write a comparison soon on the French and American "how to," as in how to avoid spending actual money on higher education.

Any illusion that higher ed has entered a new era of as a high government priority has been shattered by the Congressional negotiations over the stimulus package. The Senate has come to a "bipartisan compromise" that comes to about $820 billion before interest. It includes $116 for infrastructural improvements, $250 billion in tax cuts, and this:

Under the terms of the deal, Senate Democrats agreed to cut some $100 billion from their original proposal. Spending for the states and education took the biggest hit, compared with the House bill. State fiscal stabilization funding was cut back $40 billion, school construction dropped $16 billion, and a proposed $3.5 billion line for higher education construction was zeroed out.

Unfortunately, the states are where people actually live and spend their money, so it would make sense to send money there. In states like California, 100% of bond-dependent University of California construction has been put on hold, so some piece of $3.5 billion would have been exactly the stimulus we're supposed to get. They're our damn tax dollars, and we've already spent nearly that amount on bailing out banks that were blown up by genius executives who in many cases earn in one year what a beginning college teacher earns in a thousand.

In California, Pell Grant students were already facing freezes and rollbacks in Gov. Arnold Schwarzenegger's proposed budget. The new round has Pell Grant funds being paid as I.O.U.s, and UC and Cal State having to swallow the cost by not charging Pell Grant students the missing amount until it's made up. And this is in fact a federal program.

Completing the good news from yesterday, the National Science Foundation reported that the federal R&D funding in FY 2008 is nearly 5% below that of FY 2007 (after inflation), and down over 7% from FY 2005. Basic research fell an incredible 25% percent.

This is bad for knowledge and bad for university products. The only good news is that it may be another nail in the coffin of the failed funding policies of public higher education leaders that I analyzed in the Chronicle of Higher Ed last year and have posted here. This defeat might start forcing more public universities finally to admit how dependent they are on public money, and fight to get it back. The events this week show just how badly off the game they are.

The formal count is finally in: university endowments fell an average of 22.5% in the first six months of Fiscal Year 2008-09 (starting July 1, 2008). Returns for 2008 overall, including the first half of the year, were better, but that was the end of an era. The Inside Higher Ed coverage linked above also noted the continuation of an established trend:

The richest colleges performed best. Colleges with endowment assets of greater than $1 billion were the only colleges with positive investment returns — 0.6 percent – in 2008, the study found. Colleges with the smallest endowments, below $50 million, had the largest losses — 4.3 percent on average.

Dependence on endowments has been desperately short-sighted. So are the responses to endowment declines. The two saddest involve university museums. Brandeis is thinking of trying to get a one-time kick in revenues by selling its entire art collection. Penn has announced the firing of all 18 of its museum's academic research staff - unless they can fund-raise for their own salaries.

There are all sorts of problems with the fundraising strategy - it costs a lot of money to raise money, the returns are narrowly targeted to donor projects (98% so at the University of California), they allow donors to short-circuit academic planning. Universities should publish net donor figures so we can account for the costs of raising the money in the first place.

Donations are going to fall even more than they have, so the weakness of fundraising as a main financial pillar is going to get more obvious in the next couple of years. But few people really understand the tension, and often the flat contradiction, between academic research and fundraising. The retro-philistinism of the Penn museum director helps us out here:

Richard Hodges came to the museum as director in 2007, moving from Britain, where he was director of the Institute of World Archaeology at the University of East Anglia. He repeatedly described the changes he is leading as being about moving the museum “into the 21st century.” To do that, he said, the museum needs both money and a change in attitude.

“What we hope is that as a museum we will focus not on the personal research of the range of individuals, but essentially concentrating on the museum’s extraordinary collections and getting those out to a world audience,” he said. By eliminating the salaries of the 18 researchers, the museum will save about $1 million a year, he said.

Told that some of those whose jobs are being eliminated have said he is trying to run the museum like the Wharton School, with the assumption that anyone good can find money, he doesn’t balk at the comparison with Penn’s acclaimed business school. “Why not?” Hodges said. Many scientists of course must win grants to cover salaries if they want to win tenure. Hodges said that in his position in Britain, if he didn’t land grants, his team members would lose their jobs.

Of the prior approach at the Penn museum, he asked, “Why are we sustaining a tradition that believes that all we do is go out and do research for our ends?” He said that the current researchers “through no fault of their own” have been working in an outdated model of following their research interests and not raising money. “They have been in a different kind of institutional structure,” he said.

He added that “the critics are saying we should be frozen in time, speaking a language which is different from the language I speak.”

One idea being discussed — and much criticized by the scholars angry over the job eliminations — is adding an upscale restaurant to the museum.