Friday, January 9, 2015

The UC-AFT Plan for Enhancing Affordability, Access, and Quality at the University of California

The University of California has been a leader in providing students with a high-quality education that is affordable and accessible, but the funding structure of the university is showing signs of breaking down.  The following plan describes how this great system can be saved by increasing financial aid to many students who are now forced to go into debt in order to afford their education.  We call for a tuition freeze, an additional 6% increase in state funding (2% beyond the governor’s proposed 4% increase), an increase in UC budget transparency, and the use of internal UC funds for financial aid and increased funding for instruction.

Moderate Tuition/High Aid
A central part of this plan is to use the current Moderate Tuition/High Aid model in a more equitable manner.  In 2014-15, the UC will not only receive $2.6 billion in direct funding from the state, but state financial aid will be over $1 billion due to increases in CAL Grants and the new Middle Class Scholarship.[1]  UC students will also receive over $450 million in federal Pell Grants next year, and many families qualify for federal tax breaks related to higher education.  This large amount of aid allows over half of UC students to pay no tuition, and the system enrolls a large number of low-income students: however, many low- and middle-class students still have to pay a large amount to cover the total cost of attendance (rooms, board, books, and living expenses).  While in 2014-15, tuition for undergraduates is just over $12,000, total cost of attendance is over $32,000.[2]  Students then are forced to take out loans and work in order to make up for the growing difference between their grant aid and the total cost of attendance.     
Using the campus financial aid calculators, we can see how the parents of UC students are often asked to pay a quarter of their yearly income to support their children’s education.  For example, here are some specific aid scenarios: 1) if a student comes from a family of two parents with a combined annual income of $50,000, the student will be asked to contribute $8,600 through work study, and the family will be asked to take out a loan for $3,912 each year.  If the student does not take a work study position, the gap between the aid and the total cost of attendance equals close to 25% of the annual family income; 2) in the case of a family with total earnings of $79,000, the student and the family are expected to cover $18,301; and 3) in the case of two parents earning $90,000, the annual cost is $23,198.[3]  These situations show that in a state with a very high cost of living, free tuition often means a financial aid gap of close to 25% of parental income.

Increasing Graduation Rates
The UC financial aid is better than most universities, but it still has major problems.  One related issue is that the more students have to rely on loans and work study to support their own education, the longer it takes them to graduate.[4]  The inverse of this situation is that if students did not have to take out loans or work while in school, UC could increase its current four-year graduation rate of 63% and provide more places for new students without spending more funds or building more dorms and classrooms.[5]  It is clear that this desire to move students through the system in a more efficient and cost-effective manner is a major desire of the governor, but the state often thinks this can be accomplished though the use of online classes, streamlined degrees, and a downsizing of the university’s research mission.[6]  However, all of these strategies outlined in the governor’s new initiative will only serve to lower the quality of education in the UC system.

Investments for Aid
To expand financial aid to students, our plan recommends using investment returns from its endowments and working capital funds – the Short Term Investment Pool (STIP) and the Total Return Investment Pool (TRIP) - for educational purposes.  In 2014, the combined UC endowments contained over $13.2 billion and had a 10-year investment rate of return of 7.7%.   If the university used 3% of the endowments each year for financial aid, $300 million of additional funds could be used so that thousands of students would no longer have to take out loans or work while in school to afford the total cost of attendance.[7]  Meanwhile, the university also invests its working capital (unused grant money, state money, tuition, medical center revenue) in two funds called TRIP and STIP, and these funds now hold over $14 billion.[8]  If the UC used 5% of these funds for educational purposes ($700 million), the quality of education could be enhanced as more students from California could gain admissions and students could graduate at a faster rate leaving room for more transfer students from community colleges. [9]

At the September 2014 Regents meeting, the possibility of using these funds to prevent a tuition increase was discussed, but it was quickly rejected because the university did not want the state to think that it had enough funds.[10]  President Napolitano argued that these investment funds cannot be relied upon, and several regents said that if the word got out that the UC was sitting on so much cash, the state would not increase its funding for the university.  Of course, there is a risk that investment returns will decrease; however, what good is it to have an endowment or investment pool if it cannot be used for educational purposes? Although much of the endowment is restricted by the donors of the gifts, the investment returns are not necessarily restricted, and their average returns are well above 7%.  Moreover, UC could develop a policy that all new gifts set aside a certain percentage for the general fund. The idea here is to use the financialization of the university in a progressive way by directing investment profits towards core educational functions.

Fixing the Campus Funding Problem
The UC-AFT plan also confronts a growing problem in the UC system, which is the inequitable distribution of funds among the campuses.[11]  As a state audit showed, the university has been for decades secretly redistributing state funds and tuition dollars from the smaller campuses with a high number of under-represented students to the larger, wealthier campuses.[12]  Although the UC has recently stopped this system of redistribution, the problem has been made worse by the fact that the wealthier campuses are bringing in a higher percentage of high paying non-resident students.  Our plan calls for 50% of all nonresident tuition to go into a pool to be redistributed to help rebalance the funding among the campuses.  We also believe that UC should cap the total number of nonresident students at 15%, and proceed with its plan to increase state enrollments by at least 1,000 each year.  Furthermore, the UC should rethink its admissions referral system.  Last year 11,200 qualified Calfornian students who did not apply to UC Merced were admitted only to Merced, but only 2% of these students decided to enroll at the campus.[13] The UC is clearly using the Merced referral system to comply with its obligation to accept all qualified California students, but since UC knows most students will reject the referral, this practice has to be modified. 

The university has claimed that the historical underfunding of particular campuses will be corrected by the new rebenching model, but this model is highly flawed and only redistributes $37 million a year of $2.6 billion state general funds.[14] Moreover, the rebenching model relies on augmenting the funding to campuses that increase their doctoral students, but according to its own logic, these students cost at least three and a half times more than undergraduates to educate.   Of course, the reality of the situation is that UC does not know how much it costs to educate different types of students because it has thus far resisted making this calculation even though AB 94 now requires the system to report on the different costs of educating undergraduate, graduate, and professional students.

Transparency for the Core Mission
The UC-AFT plan calls for the university to comply with the state’s reporting requirements, and this new transparency will be used to make sure that state funds and tuition dollars find their way into the core education mission.  In order to help this process, our plan pushes the university to increase the number of small undergraduate courses and decrease the use of ineffective large lecture classes.  This transformation can be a key to increasing graduation rates and educational quality.  Following UC’s own long-term budget plan, the university should document how it is using $60 million of new funding next year toward “improving the student-faculty ratio; funding for startup packages for new faculty (a major obstacle for many campuses seeking to hire new faculty); augmenting graduate student support to ensure that the level of support offered by UC is sufficient to attract the best graduate students; enhancing undergraduate instructional support (including instructional technology, libraries, instructional equipment replacement, and building maintenance); and reducing faculty and staff salary gaps.”[15]Instead of the state, students, and concerned citizens being told what the UC would like to do with new funds, the UC should prove that it is actually using this money to improve the quality of education.   

The UC budget has also asked for $32 million to continue the academic merit program and $55 million of permanent deferred maintenance funding.  The state should include these costs in its general fund appropriations with the provision that UC documents how these funds will be used to improve the performance of the core mission.  UC would like to see its total funding increase next year by $459 million.  Besides the above mentioned support for the academic merit program, deferred maintenance, and educational enhancements, the UC argues it needs $50 million to fund the state part of the pension plan,  $125 million for additional compensation costs, $22 million for resident enrollment growth, $28 million for non-salary price increase, and $73 million for financial aid.  The UC desires these additional costs to be funded through a combination of a 5% tuition increase ($137 million), a state funding increase of 4% ($120 million), tuition and fees for financial aid ($73 million), non-resident tuition ($50 million), and other alternative revenue ($80 million).[16] Since we believe that tuition should be frozen, we ask for the state to increase its support for UC by 6% (the planned 4% plus an additional 2%). The 6% increase would bring the state increase to $180 million and would buy down close to 40% of the 5% tuition increase. The other $279 million would come from the investment profits from STIP and TRIP, nonresident tuition, and alternative revenue sources.     

Why Not Eliminate Tuition?
In response to our plan, some might ask why don’t we propose simply eliminating tuition and make the UC free again.  The problem with this solution is that tuition is only a part of the reason for a student’s financial burden.  Moreover, if the UC eliminates tuition, it cannot utilize Cal Grants, Pell Grants, and federal higher ed tax breaks.  Furthermore, if done correctly, the Moderate Tuition, High Aid model serves as a progressive tax since wealthier parents pay more to support the education for non-wealthy students.  Unless UC wants to get behind a new tax that would dedicate funding for the UC system, it is unclear how the system can force the government to increase funding for the university.  However, central to this plan is that the state increases its support by 6% each year in return for a tuition freeze. We are also asking that the state agrees that it is responsible for its share of the employer contributions to the pension, once the UC clarifies which employees are supported by state funds.[17]
For far too long, the UC has increased it core mission budget without spending more funds on its core mission. According to the UC 2014-15 budget report, a lack of support for the core mission in recent years has had the following effects: “Another aspect of the fiscal uncertainty is how students and their families in recent years have been hit with large, frequent, and unpredictable tuition and fee increases, while also feeling the effects of budget cuts on the instructional program through reduced course offerings, increased class sizes, and curtailed student services. Instability of the University’s budget promotes uneasiness among students and their families about whether the high-quality education to which students work hard to gain access will be available in future years.”[18] From the university’s perspective, the reduction in funding from the state has resulted in a decrease in the quality of undergraduate education. Our plan will reverse this situation and return the university back to its core mission.

[1] For the increase in Cal Grants and the middle-class scholarship, see:
[2] For the total cost of attendance, see:

[3] The cost calculator can be found at:

[4] The UC four-year graduation rate goes down 10% if a student works more than 20 hours a week, see

[5] UC four-year graduation rates:

[6] The governor’s plan can be found at:

[7] Information on UC endowments and working capital funds can be found at  The ten-year average return rate for the $8.2 billion shared endowment (GEP) is 7.7% (p. 16).  The shared endowment does not include $4 billion in campus endowments.  For the campus endowments, see

[8] The STIP account held $8.3 billion in June 2014 (p. 20) and the TRIP account held $7.5 billion (p. 21).  During the last five year period when STIP was returning 2.2% and TRIP was returning 11%, over $2 billion was transferred from these accounts into the pension, which earned 12.7%.  It therefore would be possible to spend 5% each year of these combined funds to pay for increased financial aid without decreasing the principle in these accounts.  Meanwhile, the pension is now funded at 86%, and if it continues to increase its funding ratio, the state and the system might be tempted to call for another contribution holiday. 

[9] Currently, the UC graduates 63% of students in four years (  If the UC could increase this rate to 80%, the system could educate 5,000 students with no additional cost and the cost for each student would go down significantly since students would be paying for four years instead of five or six.

[10] The discussion of the UC investments can be found at minutes 34-37,  42-47 of:

[11] For a discussion of the funding imbalances, see

[12] The state audit is at:

[14] The rebenching model can be found at:

[17] If the state supports 50% of the core budget, and UC spends $400 million on pension contributions each year for core mission employees, then the state should commit to dedicating $200 million next year as part of the total general fund appropriation.

Thursday, November 20, 2014

UCOP’s Failed Funding Model

The first thing to say about the UC’s five-year plan to raise tuition 5% each year is that it is neither predictable nor logical.  President Napolitano has said on several occasions that students need this plan so they can predict and plan for tuition increases, but she has also said that the 5% tuition increase is contingent on the state increasing UC’s funding by 4% each year.  I have asked several UCOP officials, what happens if Governor Brown keeps his promise of only giving 4% if the UC freezes tuition?  The only coherent response I have gotten to this question is that UC will be forced to increase the number of non-resident students and decrease the number of students from California.

Before we get to the question of non-resident tuition, we have to realize that several things may happen that make UCOP’s tuition plan anything but predictable: 1) the state eliminates its 4% increase and UC raises tuition by 5%, and thus gets a 1% gain for all of its efforts; 2) the state eliminates its 4%, and UC raises tuition 9%; 3) the state keeps the 4% increase and UC raises tuition 5%; 4) the states decides to increase its contribution beyond 4% and UC decreases its tuition increase by the same amount.   So tuition may go up in the next five years, anywhere from 0% to 53% or even higher if there is another fiscal crisis. Making matters more complicated is that this negotiation has to happen every year for five years, and no one has asked what happens if there is another budget crisis, and the state cuts UC funding? So the first problem with the sustainable five-year plan is that it is neither logical, nor predictable, nor long-term.

The next problem with the plan is the way it was rolled out.  As Gavin Newsome argued, UCOP gave the plan to the media before it discussed it with key state players.  Moreover, UC never engaged in any real negotiations over the plan ahead of time, and it has presented the plan as a done deal.  It is also strange that UCOP thinks that the way to get more money from the state is to attack the governor, the legislature, and Proposition 30.  Although UC may need more money from the state, Prop 30 did increase revenue and prevent an even worse state budget cut. 

The next major problem with the tuition plan is that UC continues to resist calculating how much it costs to educate students; so it is unclear how they can make any argument about the need for more money.  For example, how do they know if bringing in more students will increase or decrease revenue if they do not know how much it costs to educate each student?  Although, UCOP is required by law now to make these calculations, it has resisted so far, and the governor and the legislature are not very happy about this.

Related to the issue of not knowing the cost of education is the problem of how money is distributed among the campuses.  As I have previously pointed out, the reliance on non-resident tuition means that the rich campuses get richer and the poor campuses serving under-presented California students get poorer.  Present Napolitano knows this because I discussed it with her in great detail, but the UC plan says nothing about evening out the disparities among the campuses.  While the rebenching program is supposed to help make up for disparities, it is only redistributing $37 million each year, which is a little more than 1% of state funds, and is dwarfed by the $246 million of new revenue brought in through non-resident tuition.  

Another huge issue with UCOP’s tuition plan is that it is highly selective in its recounting of the recent past.  Although, UCOP claims that the system has been cut a billion dollars since 2007-8, it fails to mention that state support for Cal Grants and the Middle Class Scholarship has increased by over $1 billion during the same period.  UC loves to hide this fact because it does not want to reveal that as the state has reduced its funding for UC, it has replaced direct support with financial aid.  Following the high tuition/high aid mode, UC knows that it can raise tuition because state and federal aid can make up for most of the new costs to students.  Meanwhile during this period when state support was replaced by financial aid, UC continued to increase the number of high-paying, non-resident students, and so UC core funds have actually gone up by $1.3 billion since 2007-8, and this is after subtracting institutional aid.

As I wrote in Why Public Higher Education Should Be Free, the current way we fund and support higher education institutions is completely incoherent and counter-productive.  If we just took the money we are currently spending on the irrational mix of state aid, federal aid, higher ed tax breaks, institutional aid, and subsidized student loans, we could make higher ed free to the students.   However, free public higher ed will not happen if our leaders continue to march towards the high tuition/high aid model of backdoor privatization.      

Tuesday, November 11, 2014

The Problems with UC’s New Tuition Plan

The university has engaged in a major media campaign to promote a new plan to raise tuition a maximum of 5% each year for the next five years.One major problem is that Governor Brown and the legislature have already said that they will only give UC an additional 4% this year and next year if the UC continues to freeze tuition.  It looks like the UC will raise tuition 5%, and the state will eliminate the 4% increase, and so UC will increase its funding by less than 1%; however, in the process, UC has angered the state and has moved further in the direction of privatization. 

UC received $2.8 billion from the state this year and issupposed to get $2.98 billion next year (this includes the 4% increase).  In 2013-14, its net tuition (after subtracting financial aid) was $2.6 billion, and next year they plan to bring in an additional $50 million in tuition (mostly from non-resident students).  This means that UC could lose the state increase of $140 million, in order to increase tuition by $132 million unless they significantly increase the number of non-resident students and decrease the number of in-state students in the following years.   

Although many people want to put all of the blame on the governor, one also has to look at four tragic UC decisions that have shaped the current funding situation: the twenty-year pension contribution holiday, the secret redistributing of state funds and tuition, the 32% tuition increase in 2009-10, and the false accounting of the cost of educating undergrad students. 

Many people blame the UC Regents for these problems, but my experience is that the regents usually rubber-stamp what UCOP puts in front of them.  For example, the twenty-year pension contribution holiday was based on UCOP’s projections and strategy; after all, the regents have to rely on what UCOP tells them, and if UCOP uses bad math and strategy, the regents have to make decisions based on this information. 

The problems with the pension holiday are threefold: the university and its employees must now come up with massive contributions to make up for the under-funded pension; the state and other parts of the university got accustomed to not paying for their share of the pension, and so it is hard to reverse the initial policy; and during the twenty years that the university did not pay into the pension, they used the freed up funds to expand the number and compensation of a growing administrative class.

We cannot reverse the bad pension decision, and so will have to live with the consequences.  In a similar way, when UCOP urged the regents to raise tuition 32% in one year, they created a new system of university funding that will be hard to change.  For example, the LAO now includes tuition as part of its public funding calculation, and this means that there is no incentive for the state to return to a tuition-free model.  While some may say that the 32% increase was inevitable, UCOP pushed it through by not counting $716 million of federal stimulus money that was earmarked to replace the state reductions to the UC system.

The pension mistake and the tuition mistake are dwarfed by the secret funding mistake.  As my work and a state audit showed, for decades, UCOP was secretly taking in all of the tuition money and state funding from the campuses and redistributing it according to some unknown formula. The result was huge disparities between campuses, and while they are trying to correct this situation, it will take a very long time, and it will never make up for the historical imbalances between the campuses.  In short, UCSB and UCSC will never catch up to UCLA, and as I have shown, the campus imbalances areactually increasing.  

Making matter worse, UCOP’s refusal to calculate how much it costs to education undergraduate students has resulted in a situation where the governor and the legislature wrongly believe that the cost of undergrad instruction is driving UC budget increases, and so they have proposed online education as the solution. In reality, UC has driven down the cost of undergraduate instruction through the use of large lecture classes and non-tenure-track faculty, but they cannot make this argument because they need to hide the real cost of research and graduate education.   

In all of these cases, UCOP has dug a hole that will be hard to get out of.  These faulty accounting moves have also increased the distrust that many lawmakers have towards the management of the UC system. Moreover, the failure to have transparent budgets means that the regents are making their decisions on false and misleading information; in turn, many faculty representatives recycle UCOP budgets myths, and the end result is that no one knows the truth about how money circulates within the system.

If we want to argue for more money from the state, we have to know where the money is going.  We also have to identify where new funds can come from.  Since most of the state budget is now mandated, we need to find a way of raising revenue and dedicating it to the UC system, but this process will require the governor, the regents, UCOP, students and faculty all getting on the same page.    

Thursday, October 30, 2014

Vote November 4th: Higher Education, Not Incarceration

One of the main reasons why funding for public higher education has decreased in California and around the country during the last thirty years is that states have been forced to pay for the increasing costs of healthcare and prisons.  While most parts of the state budget are now locked in because of ballot initiatives and legislation, higher education is considered discretionary, and so whenever there is a budget decrease, it ends up being cut. 

This November 4th, you can vote to help support higher education by reining in the costs of healthcare and incarceration.  Proposition 47 reduces sentences for certain nonviolent crimes and invests savings in treatment programs. Overtime, this change could free up money to be used for public higher education.  Meanwhile proposition 45 requires insurance companies to justify premium increases and obtain pre-approval for rate hikes.  This measure will control healthcare costs, which can leave more funds for higher ed.    

Another way to support higher education is to vote for Tom Torlakson for Superintendent of Public Instruction.  Torlakson has been a strong supporter of public education and faculty and has worked closely with the California Federation of Teachers.  For the CFT voter’s guide, click here.   

Thursday, October 9, 2014

Defending Scholarship

In 1971, Robert Nisbet published The Degradation of the Academic Dogma.  Although many parts of the book can be seen as being outdated and ethnocentric, the basic argument still is vital:  Universities are about the production and analysis of knowledge, and everything else a university does should be considered secondary.  Nisbet adds to this “dogma,” the notion that the university has always been about knowledge for knowledge’s sake, even though it can have profound social and personal effects. 

If we look around at the University of California today, and other similar institutions, we can see how this foundation of the modern university has been lost in a sea of competing interests.  Some believe that a university should focus on training students for future jobs, while others argue that the main function of the university is personal development.  At the same time, many recent university initiatives are directed at developing new technologies or raising funds or contributing to the local and state economy.  Many of these goals are worthy, but from Nisbet’s perspective, they should only be indirect results of the central focus on scholarship. 

The problem then is not so much that the university is being taken over by corporate managers or political officials; the problem is that the production and analysis of knowledge has become just one competing interest among others.  Basic research and instruction have thus lost their value because they are no longer the guiding priorities.   From Nisbet’s perspective, university knowledge can only remain central if it is treated with respect and faith.  While this displaced religiosity may be off-putting, the main point is that students and faculty have to believe in the incredible value of knowledge and the disciplinary methodologies that have been established to create and circulate scholarship.

Every time a school celebrates the building of a new stadium or corporate research park, a little part of the university dies.  Our schools have lost their way, and so they don’t mind staffing their classes with inexperienced, part-time people or hiring administrators with no academic background.  Of course, universities need funds to survive, but when every function is sold to the highest bidder and every learning experience is tested and quantified, there is nothing left to protect or cherish. 

In our fight to force our campuses to spend more money on undergraduate instruction, we are trying to return to an emphasis on scholarship and education.  No fancy technology or highly paid manager can substitute for the experience in the classroom or lab or library.