Governor Brown predicts that if the state does not pass tax extensions in June, tuition for in-state University of California students could go from $12,000 to $20,000 or even $25,000 next year. This claim shows that Brown has bought into President Yudof’s rhetoric, and now both are using the same misguided strategy. As I have argued in the past, Yudof believes that his only way of working with the state is to threaten Sacramento with cutting enrollments or raising tuition. The end result of this strategy is that students always suffer, and the UC does not have to look at its own internal issues.
In contrast to popular belief, the UC brings in extra revenue for each student it enrolls, and therefore, it makes no financial or educational sense to reduce enrollments. In fact, I have recently presented to the Office of the President a new calculation of how much the UC profits from each additional student. While I have not heard back from UCOP yet, my calculations show that the administration has been misrepresenting UC’s financial status to not only the public and the state, but also to the Regents. As you will read below, virtually all of the statistics that UCOP presented at the last Regents meeting regarding student enrollment and finances are way off the mark, and this information has led some Regents to believe that the UC can simply give up on state funding. Moreover, the same faulty information is being used by the Governor to threaten a doubling of student tuition.
How Much Does the State Really Give the UC Per Student
The University of California administration often argues that the state support for UC students has gone down by over 50% in the last twenty years, but looking at the actual enrollment and funding numbers (the sources are listed at the end of this entry), we find that the per student state funding in 1990 was $13,690 (there were 156,000 students and the state gave the UC $2.1 billion). In 2010-11, the per student state funding is $15,000 (200,00 resident students and the state funding is $3 billion). In terms of student fees and tuition, the UC will receive this year $1.9 billion in tuition and fees (after paying out financial aid), and there are 215,000 students (resident and non resident, graduate, undergraduate, and professional); thus the current per student tuition revenue is $8,267. If the state reduces its support to $2.1 billion, which is what the Governor is threatening will happen if tax extensions are not passed, the per student state support will be just over $10,000, and the total revenue per student will be about $19,000. Furthermore, if the UC gets $2.6 billion from the state, the per student support for resident undergraduate and graduate students will be $13,000. In any case, it is incorrect to say that students will be paying more than the state. In fact, currently, the UC is scheduled to receive $21,260 per student in combined state funds and student tuition (this is based on state support of $2.6 billion). If we add in an average of $2,080 per student out of the general fund, this gives a total of $23,340 of revenue per student (the UCOP 2011-12 budget presentation graph puts this number at $17,220). As I told members of the UCOP budget staff, by downplaying these numbers, the administration motivates Regents to claim that we can simply walk away from state funding.
How Much Profit Does UC Make on Each Additional Student?
I have also showed UCOP how the worst thing the UC could do is to decrease its undergraduate enrollments because my analysis shows that UC makes a profit off of undergraduate student it enrolls. According to UC’s own numbers in its accountability report, in 2007-08, there were 3,008 Lecturers (average appointment was 51%) representing 1,550 full-time equivalent positions (fte), and they generated 1,554 student credit hours per lecturer fte at a cost of $34 per student credit hour (the average lecturer FTE salary was $54,000 in 2009-10). (I am using the most recent salary data from 2009-2010 and the most recent student credit hour data, which is from 2007-08. If anything, faculty are teaching more student credit hours now, so my calculations are highly conservative).
If we now look at senate faculty, in 2007-08, there were 10,150 senate faculty FTE averaging 445 student credit hours per fte. Senate fauclty had an average salary of $110,000 and cost $247 per student credit (student credit hours are a superior way of calculating cost because they takes into account class size and course units). Last year, undergraduate students averaged 45 credit hours per year, and since two thirds of the student credit hours are taught by senate faculty, we can calculate that the total direct instructional cost is $7,920; it cost $7,410 for senate faculty to generate 30 student credit hours and $510 for lecturers to produce 15 student credit hours. If we add 20% of salary for benefits, we get $9,504. (This number is high because half of the lecturers do not get benefits, and the senate faculty who teach most of the undergraduate courses do not make as much as the senate faculty teaching mostly graduate courses. Also, UC does not count courses taught by graduate students and instead often credits graduate student taught courses to senate faculty who are the teachers of record, and this inflates the cost since graduate students get so much less money than senate faculty).
Using the conservative instructional cost of $9,504 and the current revenue per student of $23,340 (calculated above), the UC generates $13,836 per student to pay for related and unrelated costs. It is clear that due to the economies of scale, each time you add more students, you do not hire another administrator or pay more for utilities, the library, or maintenance, and so it makes no financial sense to reduce enrollments, especially for lower-division undergraduates who are by far the least costly students. Also, if you reduce enrollments, you do not take down libraries or stop paying your electric bills.
Now, if we want to figure the indirect cost per student, one way to do this would be to determine how much each campus spends on its core mission. For instance, the UCLA College spends 70% of its general funds budget on faculty salaries and benefits (this includes senate faculty, lecturers, and grad students) and 16% on staff and 11% on operational expenditures, so the indirect cost is 27-30%. If we take the conservative indirect cost of 30%, and we add it to my direct instructional cost per student of $9,504, then the total cost is now $12,355. Once again, it makes no financial sense for the UC to reduce enrollment since it brings in an extra $10,985 per undergraduate student. In the case of nonresident students, the UC brings in an extra $23,450 per student. Even if the state decides to reduce UC funding by a billion dollars next year, the UC will still bring in a profit of $8,000 per student.
While I am still working hard to get the state not to cut the UC budget, I also recognize that most of the UC’s financial problems are internal. The quandary is that even though it is irrational for the UC to double tuition if the state doubles its budget cut, I believe this is exactly what will happen because no one is dealing with actual numbers. We all need to confront the truth and push for budget transparency. Moreover, the regents should know this information.
You can determine the total state funding for UC by combining these:
2000 to 2008 here: http://www.universityofcalifornia.edu/accountability/index.php?in=6.2&source=uw
1964 to 2006 here: http://budget.ucop.edu/enroll/actfte.pdf
2009 projections are here: http://repository.ucop.edu/cgi/viewcontent.cgi?article=1000&context=enrllmt_lrp_reports
The average student credit hours can be found at: https://sisds.ucdavis.edu/aboutinstruction.htm
Average salaries for professors 2011: http://www.universityofcalifornia.edu/regents/regmeet/jan11/joint.pdf
For the average cost of benefits for faculty serving the core missions, see:
“The University of California 2008-09 Budget For Current Operations Summary of he Budget Request.”