Friday, February 20, 2015

Is the UC Spin Spinning Out of Control?

As the state begins to examine the UC budget, two different hearings have been held to determine how the university is using state funds.  It is clear that the legislature wants to increase funding for the university, but it is also clear that the governor and the legislature want to know how the UC is currently spending its money.  There is also a growing concern that the increase in nonresident students is enhancing the funding inequality among the campuses and that eligible students from California are being shut out of the UC system.   In fact, in a hearing reviewing the UC response to a state audit on campus funding imbalances, several legislators made it clear that they are bothered by the fact that the campuses with the highest number of under-represented minority students are the campuses receiving the lowest amount of funding. (For a detailed analysis of the campus funding imbalance, see here)

At the audit hearing, the UC argued that the funding imbalance among the campuses will be resolved by the new rebecnhing funding model, but as I have shown, rebenching is only redistributing $37 million per year, and the revenue generated from nonresident tuition far exceeds the money from rebenching. After calling this enhanced imbalance to the attention of the UC administration, I was told that the smaller campuses should be happy that Berkeley and UCLA receive more funding because these star campuses make the other less stellar campuses look good.  This seems to be a novel trickle-down theory of prestige, or is it just spin?

At the same time that I have been meeting with legislators and staff from the governor’s office to help increase UC funding, while making campus funding more equitable, I have been besieged by questions concerning why the UC budget is so hard to understand.  Many of these political officials have been waiting for UC’s response to AB94, a bill that requires the UC to report on the differences among the costs of educating undergraduates, graduates, and professional school education.  This report was due by October 1, 2014, and the final report was only released the day before the state hearing on UC finances. 

In looking at the final product, one can only be shocked and amused.  Much of the report is a simple narrative discussion of all that UC does and how it is hard to determine the cost of its many activities.  When the UC finally gets to the discussion of the cost differences, the entire new methodology is explained in a single paragraph:  “First, graduate students are considered full-time when taking 12 units a term whereas undergraduates are full-time at 15 units per term. This is a standard practice in other institutions and is the basis for the ratio of 1.25 (15/12) used in the NACUBO report. Second, the University collects data on the proportion of student credit hours (SCH) offered by level and that data includes the type of instructor delivering the student credit hours. There is a substantial differential between undergraduate and graduate students in the proportion of SCH taught by ladder faculty. For graduate students, 79% of SCH are taught by ladder faculty compared to 49% for undergraduates. Since expenditures for ladder faculty are higher than for other types of faculty, expenditures by level of faculty can be used to estimate an overall differential between undergraduate and graduate expenditures. The estimate of the differential for 2012-13 is 1.33. Combining these two factors – 1.25 for the FTE calculation times 1.33 for faculty type – results in an estimate that graduate expenditures per FTE for instruction are on average at least 1.7 times greater than undergraduates." Really?!!  How in the world did they come up with such a reductive methodology and why did it take them over a year to produce it?

Although it is important to stress that graduate students are taught mostly by higher paid senate faculty, the report does not even try to say how much the different faculty groups are paid and how many courses they teach on average and what are the average size of the undergraduate and graduate and professional classes.   The university’s own rebenching formula estimates that doctoral students cost at least two and a half more than undergraduates and medical students cost five times more than undergraduates, but this report says that graduates only cost a third more and medical students cost ten times more. 

Actually, UC gives two different types of calculation for the cost of instruction: one which they call the narrow calculation and the other one is the broader calculation.  According to the narrow calculation, undergraduates cost $21,800 to educate each year, graduates cost $37,100, and health science students cost $216,000, and according to the broader definition, undergraduates cost $29,200, graduates cost $55,800, and health science students cost $342,500.  Yes, they claim it costs them a third of a million dollars to educate each medical student for a year. 

Before we try to understand how the UC generated these numbers, we should look at a few of UC’s disclaimers.  The first important claim is that they are unable to calculate the cost of educating professional school students:  “The University is unable to break out expenditures for graduate professional programs as requested in AB 94. These are programs that are authorized to charge Professional Degree Supplemental Tuition in addition to mandatory systemwide tuition and fees. Most of these programs are housed within larger departments where expenditures are not differentiated by program. There is no reliable method for delineating these expenditures on a systemwide basis, nor is there a suitable proxy to use to estimate them. Therefore, the University is unable to respond to this portion of the request.”  First of all, AB 94 does not focus on how much money the UC is bringing in per student, but how much UC is spending per student.  In fact, UC and the state Legislative Analyst keep on confusing the two issues.  For example, in the LAO’s report for the budget hearing, they have a chart called “UC Education Expenditures Per Student,” but as I have told them on several occasions, this should be called revenue per student and not spending per student, since this is just a calculation of how much tuition, state funds, and UC general funds are brought in per student: it does not actually look at how much the UC is spending on each student, and that is why AB 94 was needed.  However, UC once again repeats on page 4 of its response to AB 94 a chart entitled “Per-Student Average Core Funds Expenditures for Education (2012-13 dollars),” and they make the following standard claim, “In 2012-13, the average expenditure figures for students based on the actual expenditures for the general campus instructional program and its support activities totaled $16,890, composed of $8,360, or 49%, student fees; $2,340, or 14%, UC General Funds; and $6,190, or 37%, State General Funds.”  So how can the UC be spending $16,890 on each student, if they claim the average narrow rate is $24,157 and the average broader rate is $33,299? Is this going to help the state understand the UC budget and spending?

Confusing matters even more is the next disclaimer, which is the standard argument that all activities in the system are mixed, and so it is impossible to say how much anything really costs:  “the University’s accounting and information systems do not readily allow for the disaggregation of educational expenditures requested in the AB 94 language and funding is neither appropriated to the University of California by level of student nor by discipline, nor spent that way on the campuses. Faculty are paid to teach both undergraduate and graduate students as well as perform other functions related to the research and public service missions of the University and their salaries are not apportioned across these activities. Similarly, staff perform support functions affecting students of all levels and disciplines. These expenses are not categorized on the basis of what level of student may benefit or their field of study.”  The argument here appears to be that the university has never been asked to make this type of calculation, and they really do not know how to do it, so the whole response is just an impossible fiction.  When I have asked people at UCOP how they can make any decisions if they do not know how much anything costs, they tell me that they use historical estimates and incremental increases.

In the response to AB 94, the basic methodology for this impossible report is defined in the following manner:  “The University’s method for calculating instructional expenditures by all the categories requested is based on reasonable assumptions and proxies for actual data, which are delineated below.”  In other words, this report is based on “proxies” and “assumptions” and not on any real research, but isn’t this a research university?  After all, I and others have suggested to UCOP several different methodologies that the UC could have used to make these calculations, but they refused to listen to my advice and the advice of others.  

Driving much of this problem is the fact that the UC does not believe that the state or students want to pay for the cost of departmental research, and so they have to hide this cost by including it in the cost of instruction.   This hiding is evident by comparing three statements from the same document. The first statement clearly says that research is not part of the cost of instruction:  “These calculations leverage functional expense categories reported in published financial statements and identify expenditures that can be considered direct expenditures on education (e.g., instruction, academic support) as well as indirect expenses (e.g., institutional support, maintenance, depreciation).” Nowhere is research mentioned in this part of the report, and in fact, research is later explicitly excluded “the figure represents the estimated total funding from core funds on a per-student basis that is available to support instruction (faculty salaries and benefits, instructional support, instructional equipment and technology) and other activities such as libraries, student services, administration, and operation and maintenance of facilities. It excludes financial aid, which is treated in the standard CPEC methodology as an expenditure to support access, not as an expenditure to provide the instructional program. Health sciences instruction, research, and public service expenditures, as well as related expenses for support activities, are excluded."  But later on they say you cannot separate the cost of instruction from the cost of research: "Historically, the instruction category in the budget includes most of the direct instructional resources associated with the schools and colleges located on the general campuses, encompassing classroom and laboratory instruction, instructional technology, and joint scholarly research activities of students and faculty."  In other words, according to the same document, you have to separate research from instruction, and it is impossible to separate research from instruction.  


All of this confusion came to a head at the recent hearing on UC finances that you can watch here.  A good summary of the hearing was presented by a KQED report that looked at the following questions:  1. Why Has UC Spending Gone Up So Much?; 2. Are out-of-state students crowding out California kids? 3. What should be considered a “competitive salary” for a UC employee? 4. Are students paying for teaching … or research? 5. Why shouldn’t state lawmakers impose more rules on UC’s use of taxpayer dollars? Of course, this story was buried underneath several reports that UC has decided to freeze summer tuition. Was it just a coincidence that UC made this announcement on the same day as the hearing on UC finances was held? And was it a coincidence that UC waited until the day before the hearing to release its response to AB 94?    

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