Monday, November 11, 2013

A Message for the Regents and President Napolitano

As the UC regents meet this week, it is important to look at some of the major issues facing the University of California system.  One of the topics that has received very little attention is the fact that UC has close to $16 billions of debt, and this may be tolerable with historically low interest rates, but once interest rates increase, two large problems will emerge.  First of all, UC will spend even more money servicing its debt, and second, UC may have to reduce the programs that are dependent on cheap borrowing. 

As debt has gone up, UC has continued to increase the size of classes and reduce the number of teachers.  As the graduate student union’s recent report indicates, the quality of education has gone down, but the rankings of the campuses has continued to escalate.  The major proposed solution to this problem of educational quality is to turn to online courses; however this cure could be much worse than the disease.  Not only do online courses threaten to further reduce instructional quality, but the system has not figured out how to fund the sharing of courses and students among campuses.  For instance, I have asked UCOP officials many times about what happens if most of the UCSB students decide to take their Spanish classes online with UC Irvine. In this situation, will UCSB have to fire its faculty who currently teach Spanish? And who will pay UC Irvine to hire more teachers or graduate students to cover the increased enrollments?  Moreover, how much should UCSB pay UC Irvine to teach UCSB students?  None of these questions have been answered, and instead, the system plans to throw a lot of money around the first few years, and then it will decide how to make he sharing of online courses work.

Another major issue is the deterioration of UC benefits.  Although UC in the past has been able to attract and maintain faculty and workers with relatively low pay because it has offered superior benefits, this is no longer the case.  With major reductions in retiree healthcare and a new pension tier, benefits have been reduced.  Furthermore, the new health plans have discriminated against one campus, UCSB, which does not have its own medical facilities or any hospital that is willing to be part of UC Care.  

UC has also moved many of its investments into alternative assets, but recent research shows that this strategy has backfired.  Due to the high fees associated with private equity and hedge funds, the UC might do better by simply investing in low-cost index funds.  Yet, in the pursuit of high returns, the university has continued to increase its investments in high-risk, high-fee investment vehicles. 

Another major problem is that even though tuition has remained flat for the last two years, very few people have looked at the total cost of a UC education. By pursuing an amenities race, UC, like other universities, has continued to increase the student cost for housing, dining, and services, and these increases fuel student debt.  Moreover, while there have been efforts to reduce the administration at the Office of the President, we continue to see administrative bloat on the campuses. 

Let’s hope that the new UC president has the foresight to address these pressing issues. 


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  3. Indeed, UC's debt problems were solved beyond the limits of school already. This really needs a further intervention by the government to the university.
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