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.