Friday, December 31, 2010

UC Execs Reveal True Values

The recent revelation that 36 UC execs have called on President Yudof to “do the right thing” and allow their pensions to go beyond the IRS income limit shows in bright strokes how the university has taken on the logic of a Wall Street firm. Not only does the upper management seek to reduce labor costs by lowering benefits, reducing salaries, busting unions, and eliminating positions, but there is an insatiable hunger to transfer wealth and power to the top. Moreover, many of the people who signed the letter asking for increased pensions are directly responsible for the management of the UC’s investments, which lost over $23 billion in 2008-09. Like Wall Street investors, the people who helped steer the economy into a ditch now want record-breaking compensation deals.

On one level, I actually feel for President Yudof, who allowed these high earners to escape from their furloughs only to have them turn on him. In fact, it is important to stress that one reason why we have not seen the needed faster ramp-up of the employer contributions to the pension plan is that the medical centers, with their billions in net profit, have argued that they cannot afford to contribute the needed amount. The leaders of the “self-sustaining units” feel that the only way they can stay highly ranked is if they offer huge compensation packages to their star administrators and researchers. Like the self-promoting, self-compensating Dean of the UCLA Anderson Business School, these top earners are pushing to further privatize the UC so that they can generate new compensation schemes.

Of course all of this is occurring during a time when the new governor is threatening to reduce the UC budget, and the university is bracing for the results of a state audit that will surely spread gas on the fire. The only responsible thing for the UC administration to do is to show that it will spend state funds and student fees in a fair and effective manner. By freezing student fees, increasing instructional budgets, and reducing the size and costs of administration, the UC system will be in a much better position to protect state funding and its public image.

Tuesday, December 21, 2010

Rating the Raters: The LA Times Tries to Defend the UC System

In its December 17th Editorial on the UC system, the LA Times unintentionally highlighted in one paragraph much of what is wrong with our higher education system: “Colleges and universities across the nation, prompted by ubiquitous rankings based on factors that often have nothing to do with the quality of education, have been engaging in an academic arms race for top managers and star professors, who command big salaries. It's a race that has gone to extremes, and California could indeed choose to drop out of it. But it would do so at a tremendous cost.” In other words, a ranking system, which has little to do with educational quality, is driving the priorities and practices of universities, but since everyone is conforming to this misguided system, the University of California must do the same. Moreover, ranking guides like the U.S. News & World Report Annual College Guide motivate schools to pour money into high-ranking star professors and administrators.

What this editorial does not say is why schools need to compete in the star system in order to achieve the highest rankings. One possible response is that a large part of a school’s rating relies on its perceived reputation by other comparable institutions, and these schools often base their assessment on how a university pays its stars. However, a better explanation is that since universities and colleges are not ranked according to any real assessment of educational quality, there is no incentive for these institutions to put money into instruction, and so they push funds into expensive research and administration.

As I argue in my forthcoming book The Tuition Trap: Why Costs Go Up and Quality Goes Down at American Universities, the lack of any shared assessment criteria in higher ed simply allows schools to spend money on anything they want to pursue, and this usually means that schools use tuition dollars and state funds to support high compensation packages for its stars. After all, since universities are able to get away with substandard education, they can use money intended for educational activities to promote non-educational priorities.

The problem then is that a lack of educational quality control results in increased costs and a further diminishment of quality, and in a system of incremental budgeting, schools will simply spend as much money as they can get. It is also important to stress that since the only thing that controls the spending habits of schools is a lack of funds, universities spend a great sum of money trying to raise dollars from multiple revenue streams. The only solution to this problem is for schools to be ranked in part according to how well they teach their students, but this would require some type of shared assessment, and so far, schools have resisted any standardized testing.

While universities should not be ranked on how well their students do on standardized tests, there does have to be some shared way of judging the quality of instruction. After all, universities and colleges spend a great deal of time assessing students and faculty, and so they need to share and compare this data. However, until some other source replaces the U.S. News & World Report’s ranking system as the central method parents and students use to compare schools, there will be no way of motivating schools to concentrate on educational quality, and without a concentration on quality, there can be no way of bringing down costs. As paradoxical as it sounds, the best way to contain cost creep is to have high standards and a transparent way of judging quality.

Tuesday, December 14, 2010

Regents Rubber Stamp Fake Future

At a special meeting on December 13th, the UC regents voted to endorse the Commission on the Future’s final report and the new pension plan. Before the actual vote on the Commission’s report, there was a long discussion of what they were actually being asked to vote on. Some of the regents weren’t sure if they were voting to endorse the whole report, part of the report, or none of the report. Part of the confusion stems from the fact that the final report doesn’t actually make any specific changes; rather, the report discusses general principles with mostly vague goals. Basically, the report argues that the UC system needs to educate more students with less money from the state; the major way the university plans to do more with less is by increasing the number of high-paying out-of-state students and transfer students, while finding ways to speed all students through the system, perhaps with the use of online courses or reduced course requirements.

As I pointed out in my public comments, the proposed solutions make neither fiscal nor educational sense. For instance, we find the following statement in the final report: “admittedly, the education of upper-division students is more expensive because of smaller classes and necessary specialization and facilities . . . From an aggregate perspective, however, transfer students require only two years of UC resources in order to graduate with a UC bachelor’s degree. . . Serving transfer students increases the number of degrees the UC can confer with any given level of instructional resources.” According to this contradictory logic, upper-upper division courses are more expensive, and therefore the way to save money is to increase the number of expensive classes and reduce the number of inexpensive ones.

This failure to grasp basic math and accounting is continued in the discussion of why they should increase the number of graduate students in relation to undergraduate students: “the education of graduate students is more expensive than undergraduate students, both in instructional costs and student financial support. Therefore, under current and baseline fiscal projections, funding for graduate enrollment growth would require that campuses reduce undergraduate enrollment — an unacceptable result in light of our access mission and commitment to the master Plan enrollment goals.” After clearly stating that graduate education is more expensive than undergraduate education, and that the increase in graduate students would result in an unacceptable decrease in undergraduates, we find the following argument: “Recognizing UC’s role in the master Plan as the state’s primary research and doctoral-granting institution, the commission recommends that the University increase the proportion of graduate enrollments from 22 percent of total enrollments to 26 percent by 2020-21, with individual targets set by each campus.” So the master plan tells us to have more undergraduate students, but the matser plan also tells us to have more doctoral students, so the solution is to do both even though the university cannot afford either.

As I have argued, the university simply refuses to admit that undergraduates are now subsidizing everything else in the UC system, and the only solution the university finds to any problem is to increase student tuition and to cheapen the quality of undergraduate education by turning to online classes, reduced requirements, summer courses, and fast degrees. In the Commission’s words, “the master Plan prescribes a ratio of 60:40 in upper division to lower division undergraduate students in order to have ample upper division spaces for community college transfer students (Uc’s ratio in 2009-10 was 66:34 due to freshmen entering with advanced placement and other college credit). Given these expected capital facility costs, UC will either need to find significant new revenues to supplement limited state funding or it will need to pursue alternatives to bricks-and-mortar classrooms and labs.” In the hands of this collection of amateur educationalists, the master plan is simply a rhetorical weapon to whip out to score points when needed. Not only does the final report lack vision, but it starts with all of the wrong premises.

In a moment of frustration, President Yudof declared that if someone else has a different plan, he would love to see it. But a coalition of unions has presented multiple plans to Yudof, and they have been simply ignored. One thing is clear, the regents will not be able to maintain the fiscal health and educational quality of the university if they cannot do simple math, and if they spend the majority of the time blaming the state for all of the UC’s problems, nothing will ever change.

Finally, on the pension front, several unions argued during public comment that retiree healthcare should be based on pay bands like all other current healthcare premiums. While this proposal was rejected by the regents, they did respond to a last minute plea by the highest-paid employees to re-consider waiving the IRS limit on pensions. In an incredible act of hubris, during the meeting, they re-wrote the final pension proposal, and it was unclear if the regents even knew which proposal was under consideration.

Wednesday, December 8, 2010

UCLA Embraces Growth, but there is a Catch

In an Inside Higher Ed article, I argued that the way out of the current financial problems facing American universities is to increase undergraduate enrollments. I made this argument because not only do we need more college graduates to fuel our economy, but high university enrollments decrease the ranks of the unemployed and help to train people for the new economy. Moreover, I have shown how undergraduate students generate huge profits for universities, and this revenue can be used to support research, graduate education, and community service. I have also exposed how research grants and endowment gifts often end up costing universities more money than these unstable external sources of funding collect. Finally, I have stresses how the profit-making units usually refuse to share their revenue and often survive through hidden subsidies.

Given this stress on the need to increase undergraduate enrollments, I should applaud UCLA’s decision to bring in an additional 2,500 nonresident undergraduate students in the next few years; however, the campus’ plan poses several problems. The first issue is that while the school expects to rake in $55 million in new tuition revenue, it does not have any stated plans to spend more funds on instruction and student services. In fact, senior administrators have argued that since the undergraduate College already has an $80 million deficit, all of the additional income will be used to help balance the budget. In other words, there will be more students, but no additional resources, and this comes during a time when the size of the teaching faculty has already been reduced.

Another complicating factor is that UCLA intends to concentrate on bringing in new students from China and India because these students pay full tuition and receive no financial aid. Once again, we have to ask how these students will succeed if the campus does not increase the number of ESL classes and other needed student services. Also, there still remains the sticky problem of how will students be able to graduate in a timely fashion if UCLA brings in many more students but has fewer classes and fewer teachers. It appears that these potential international students are seen as a source of needed income, but steps are not being taken to make sure they receive a high quality educational experience. In the next few months, we will be pushing the administration to make sure that added revenue from student tuition finds its way into the classroom.