Thursday, November 20, 2014

UCOP’s Failed Funding Model

The first thing to say about the UC’s five-year plan to raise tuition 5% each year is that it is neither predictable nor logical.  President Napolitano has said on several occasions that students need this plan so they can predict and plan for tuition increases, but she has also said that the 5% tuition increase is contingent on the state increasing UC’s funding by 4% each year.  I have asked several UCOP officials, what happens if Governor Brown keeps his promise of only giving 4% if the UC freezes tuition?  The only coherent response I have gotten to this question is that UC will be forced to increase the number of non-resident students and decrease the number of students from California.

Before we get to the question of non-resident tuition, we have to realize that several things may happen that make UCOP’s tuition plan anything but predictable: 1) the state eliminates its 4% increase and UC raises tuition by 5%, and thus gets a 1% gain for all of its efforts; 2) the state eliminates its 4%, and UC raises tuition 9%; 3) the state keeps the 4% increase and UC raises tuition 5%; 4) the states decides to increase its contribution beyond 4% and UC decreases its tuition increase by the same amount.   So tuition may go up in the next five years, anywhere from 0% to 53% or even higher if there is another fiscal crisis. Making matters more complicated is that this negotiation has to happen every year for five years, and no one has asked what happens if there is another budget crisis, and the state cuts UC funding? So the first problem with the sustainable five-year plan is that it is neither logical, nor predictable, nor long-term.

The next problem with the plan is the way it was rolled out.  As Gavin Newsome argued, UCOP gave the plan to the media before it discussed it with key state players.  Moreover, UC never engaged in any real negotiations over the plan ahead of time, and it has presented the plan as a done deal.  It is also strange that UCOP thinks that the way to get more money from the state is to attack the governor, the legislature, and Proposition 30.  Although UC may need more money from the state, Prop 30 did increase revenue and prevent an even worse state budget cut. 

The next major problem with the tuition plan is that UC continues to resist calculating how much it costs to educate students; so it is unclear how they can make any argument about the need for more money.  For example, how do they know if bringing in more students will increase or decrease revenue if they do not know how much it costs to educate each student?  Although, UCOP is required by law now to make these calculations, it has resisted so far, and the governor and the legislature are not very happy about this.

Related to the issue of not knowing the cost of education is the problem of how money is distributed among the campuses.  As I have previously pointed out, the reliance on non-resident tuition means that the rich campuses get richer and the poor campuses serving under-presented California students get poorer.  Present Napolitano knows this because I discussed it with her in great detail, but the UC plan says nothing about evening out the disparities among the campuses.  While the rebenching program is supposed to help make up for disparities, it is only redistributing $37 million each year, which is a little more than 1% of state funds, and is dwarfed by the $246 million of new revenue brought in through non-resident tuition.  

Another huge issue with UCOP’s tuition plan is that it is highly selective in its recounting of the recent past.  Although, UCOP claims that the system has been cut a billion dollars since 2007-8, it fails to mention that state support for Cal Grants and the Middle Class Scholarship has increased by over $1 billion during the same period.  UC loves to hide this fact because it does not want to reveal that as the state has reduced its funding for UC, it has replaced direct support with financial aid.  Following the high tuition/high aid mode, UC knows that it can raise tuition because state and federal aid can make up for most of the new costs to students.  Meanwhile during this period when state support was replaced by financial aid, UC continued to increase the number of high-paying, non-resident students, and so UC core funds have actually gone up by $1.3 billion since 2007-8, and this is after subtracting institutional aid.

As I wrote in Why Public Higher Education Should Be Free, the current way we fund and support higher education institutions is completely incoherent and counter-productive.  If we just took the money we are currently spending on the irrational mix of state aid, federal aid, higher ed tax breaks, institutional aid, and subsidized student loans, we could make higher ed free to the students.   However, free public higher ed will not happen if our leaders continue to march towards the high tuition/high aid model of backdoor privatization.      


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