Three recent reports have recently come out that show how the California Master Plan for Higher Education has failed. While this plan worked for a few decades, it now has been undermined, In fact, the most telling statistic in the report entitled Beyond the Master Plan: The case for restructuring Baccalaureate education in California is that, “California now ranks last among the states in the proportion of its college students that attend a 4-year institution.” In other words, there are simply not enough spots open at universities for California students, and while many students do go to community colleges, very few of these students end up graduating or transferring to universities.
The new Master Reality is one that is dominated by racial disparities: “Relative to their share of the state’s college-age population, Latino, African American, and American Indian students are more poorly represented in California’s 4-year universities than in any other state except Arizona. Inevitably, the state’s low rate of minority enrollment in 4-year institutions translates into low rates of baccalaureate attainment: California ranks 45th in the proportion of its underrepresented minority population that attains a B.A.” While these underrepresented minority groups now represent the majority in California, their level of college degree attainment is one of the lowest in the country.
A conspiracy theorist would say that the state started to defund higher education when it saw that most of the students were going to be non-whites, but we do not need a conspiracy to explain this situation. The major factor for this problem is that the state has simply not spent enough money building new four-year institutions. Due to this lack of enrollment space, community college students have no way to transfer to universities. Moreover, as the press release “Civil Rights Project Reports Call for Fundamental Changes in California’s Community Colleges” argues, “Almost 75% of all Latino and two-thirds of all Black students who go on to higher education in California go to a community college, yet in 2010 only 20% of all transfers to four-year institutions were Latino or African American. Pathways to the baccalaureate are segregated; students attending low-performing high schools usually go directly into community colleges that transfer few students to 4-year colleges. Conversely, a handful of community colleges serving high percentages of white, Asian and middle class students are responsible for the majority of all transfers in the state.” In other words, if you are not white and you do not go to the right community college in California, you have virtually no chance of ever getting a four-year degree. In fact, I recently discovered that a large group of community college students who do end up transferring to the UCs are in reality out-of-state and international students who come to California in order to eventually transfer to the UC system.
The second report, “Unrealized Promises: Unequal Access, Affordability, and Excellence at Community Colleges in Southern California,” reveals how “segregated high schools with weak records feed students into heavily minority community colleges where few students successfully transfer.” The de facto system in the new Master Reality is that a conveyer belt has been produced that moves students from segregated high schools serving low-income Black and Hispanic students to segregated, low-performing community colleges, which produce very few transfer students. The end result is that everyone ends up paying more, while the state has fewer students earning four-year degrees.
We clearly have a system of institutionalized racism in the state, but no single group is responsible for this sad state of affairs. Instead, we have a conspiracy of unintended consequences. Just as the number of under-represented minority high school students in the state was increasing, Prop 13 was passed, which resulted in the reduction of taxes and the decrease of state support for higher education. In order to make up for this loss of state funds, universities decided to increase the number of non-resident students and slow the growth of enrollment for students from California. In turn, due to white flight, public high schools became self-segregated as the local tax support for these schools was decreased. Since many white parents were no longer sending their kids to public high schools, they saw no reason to pay more taxes to support these schools. Furthermore, due to the real estate bubble, non-white families were priced out of the few neighborhoods that still had high-quality public high schools.
One of the main solutions proposed is that in order to create more enrollments spaces for transfer students, we need to create hybrid four-year universities: “Examples include university centers and 2-year university branch campuses. Under the university center model, 4-year universities offer upper-division coursework at community college campuses, enabling “place bound” students to complete their baccalaureate degree program there. Under the 2-year university branch model, some community colleges are converted, in effect, into lower-division satellites of state universities, thereby expanding capacity at the 4-year level and eliminating the need for the traditional transfer process. What these and other hybrid models have in common is that they help bridge the divide between 2-year and 4-year institutions, enabling more students to enter baccalaureate programs directly from high school and progress seamlessly to their degrees.” While these hybrid institutions may be a good temporary solution, the question still remains of how do we confront the institutional racism of our entire education system in California.
Thursday, February 16, 2012
Wednesday, February 8, 2012
The Effects of Budget Cuts on Teaching and Learning in the UC and CSU Systems
Scott Martindale’s article “UCI faculty: Quality eroding as class sizes swell,” in The Orange County Register does a good job at showing how recent budget cuts are hurting the instructional quality in the UC and CSU systems. The central claim made is that as students pay more, they end up getting less: “Tuition has soared at the University of California and Cal State systems in recent years, but not by enough to offset deep state cuts. The universities have responded with some creative ideas, but the solutions haven’t staved off fundamental changes in how students are educated and in the quality they can expect from their ever-pricier education.’’
In order to explore how educational quality is being affected by budget cuts, this article focused on specific classes and professors. For example, it points out that, “Instead of two teaching assistants for a class of about 50 students, UC Irvine professor Mark LeVine now gets one.” The article continues by pointing out that not only are there now more students per graduate student assistant, but many small, interactive classes have disappeared: “Instead of being able to lead intimate seminar classes of just a dozen or so, LeVine is under pressure to teach more large, lecture-style classes.” In the push to get professors to teach more students for less money, students are paying more to get a reduced educational experience.
In fact, the move to larger classes staffed with fewer graduate assistants means that, “Instead of assigning multiple, full-length research papers throughout the quarter, the history professor has modified class assignments for his students so they're easier and quicker to grade.” These changes have a profound effect on how and what students are taught, and they also work to diminish important critical thinking and communication skills. According to LeVine, "We're forced to really lower our demands so that we can actually get through all the work in terms of grading.” This statement is a profound indictment of how educational quality is being downgraded as undergraduate students pay more and go into greater debt to fund their education.
For LeVine, this sacrifice of educational quality defines the fundamental crisis at our nation’s universities: "The whole idea in the humanities is to take seminars of 12 or 14 students, where we teach them to think critically, where we really create the scholars and doctors and lawyers. We can't do nearly as many seminars because even 20 students isn't cutting it anymore. ... We're talking about a university that is undergoing a profound crisis." As I have previously pointed out, the only reason why universities are able to charge more as they deliver an inferior educational experience is that no one seems to monitor the quality of undergraduate instruction at American research universities.
While most students and parents rely on U.S. News & World Report to determine the quality of our universities, this ranking system does not even attempt to judge the level of student learning or the quality of teaching at these institutions. The result is that universities, like UCI, can continue to claim that they are excellent institutions, while they essentially rob their undergraduate instructional budgets to subsidize professional schools, administration, and non-departmental research. Moreover, accreditors turn a blind eye to questions of educational quality as many administrators refuse to hold university budgets accountable to the undergraduate instructional mission.
My research has shown that while universities know that small classes are often the key to effective education, they have moved to large classes in order to save money. However, large classes can end up being more expensive than small classes once you factor in the full cost of having graduate students teach the small sections attached to the large lecture classes. Of course universities never realize or admit this point, and instead, the OC Register tells us that professors are agreeing to teach large classes now so that they can fund their graduate students: “And tenured professors are increasingly agreeing to teach the classes. It's the only way to financially justify the continued existence of some of the university's smaller but respected academic programs and departments, professors say, and the only way to get desperately needed TAs.” According to this logic, professors accept the expansion of class sizes and the downgrading of educational quality because they want to provide jobs for their graduate students. In turn, the use of graduate students increases the cost of the large classes, and so we must ask, why do professors accept this crazy situation.
Of course, professors need to attract graduate students and give them jobs as section leaders in order to insure that their graduate programs stay alive and there are students for the small graduate seminars that professors prefer to teach. However, these same programs must realize that half of their doctoral students will never earn their degrees, and half of the graduate students who do get doctorates in the humanities and social sciences will never get tenure-track jobs, and half of the one’s who will get tenurable positions will not end up at a research university. In other words, the vast majority of graduate student instructors are actually low-paid, part-time faculty who help to drive up the cost of undergraduate education as they unknowingly participate in their own future unemployment.
As the OC article documents, many of these graduate instructors are now forced to teach more students, and this increase in class size results in cutting corners and delivering an inferior education: “Tetsuro Namba, an UC Irvine undergraduate writing TA for the past three years, has watched student-to-TA ratios go up in many academic departments. In his writing classes, capped at 21 the first quarter and 23 afterward, he's fearful of the same trend. His classes are already too large for him to be as effective as he could be, he says. "I definitely know I have shortchanged giving my students feedback just because I didn't have time," said Namba, 28, a fourth-year Ph.D. student in comparative literature. "I really wish the classes were smaller. As class sizes get bigger, the quality of education goes down because the instructor can't help them as much."” Once again, students are paying more and getting less, as graduate students have to work more to provide decreased instructional quality.
Meanwhile, services related to helping students succeed in their classes have been reduced: “Students also lament that library hours were temporarily shortened in 2009 because of budget cuts, and that a campus peer tutoring program – the Learning and Academic Resource Center, which provides help to students in small group settings – was pared down dramatically, offering help in fewer courses.” This reduction in library hours and peer support has been going on for years, but recently, the speed of service reduction has increased.
It should be clear from the picture of education drawn here that something is radically wrong with the priorities of our research universities.
In order to explore how educational quality is being affected by budget cuts, this article focused on specific classes and professors. For example, it points out that, “Instead of two teaching assistants for a class of about 50 students, UC Irvine professor Mark LeVine now gets one.” The article continues by pointing out that not only are there now more students per graduate student assistant, but many small, interactive classes have disappeared: “Instead of being able to lead intimate seminar classes of just a dozen or so, LeVine is under pressure to teach more large, lecture-style classes.” In the push to get professors to teach more students for less money, students are paying more to get a reduced educational experience.
In fact, the move to larger classes staffed with fewer graduate assistants means that, “Instead of assigning multiple, full-length research papers throughout the quarter, the history professor has modified class assignments for his students so they're easier and quicker to grade.” These changes have a profound effect on how and what students are taught, and they also work to diminish important critical thinking and communication skills. According to LeVine, "We're forced to really lower our demands so that we can actually get through all the work in terms of grading.” This statement is a profound indictment of how educational quality is being downgraded as undergraduate students pay more and go into greater debt to fund their education.
For LeVine, this sacrifice of educational quality defines the fundamental crisis at our nation’s universities: "The whole idea in the humanities is to take seminars of 12 or 14 students, where we teach them to think critically, where we really create the scholars and doctors and lawyers. We can't do nearly as many seminars because even 20 students isn't cutting it anymore. ... We're talking about a university that is undergoing a profound crisis." As I have previously pointed out, the only reason why universities are able to charge more as they deliver an inferior educational experience is that no one seems to monitor the quality of undergraduate instruction at American research universities.
While most students and parents rely on U.S. News & World Report to determine the quality of our universities, this ranking system does not even attempt to judge the level of student learning or the quality of teaching at these institutions. The result is that universities, like UCI, can continue to claim that they are excellent institutions, while they essentially rob their undergraduate instructional budgets to subsidize professional schools, administration, and non-departmental research. Moreover, accreditors turn a blind eye to questions of educational quality as many administrators refuse to hold university budgets accountable to the undergraduate instructional mission.
My research has shown that while universities know that small classes are often the key to effective education, they have moved to large classes in order to save money. However, large classes can end up being more expensive than small classes once you factor in the full cost of having graduate students teach the small sections attached to the large lecture classes. Of course universities never realize or admit this point, and instead, the OC Register tells us that professors are agreeing to teach large classes now so that they can fund their graduate students: “And tenured professors are increasingly agreeing to teach the classes. It's the only way to financially justify the continued existence of some of the university's smaller but respected academic programs and departments, professors say, and the only way to get desperately needed TAs.” According to this logic, professors accept the expansion of class sizes and the downgrading of educational quality because they want to provide jobs for their graduate students. In turn, the use of graduate students increases the cost of the large classes, and so we must ask, why do professors accept this crazy situation.
Of course, professors need to attract graduate students and give them jobs as section leaders in order to insure that their graduate programs stay alive and there are students for the small graduate seminars that professors prefer to teach. However, these same programs must realize that half of their doctoral students will never earn their degrees, and half of the graduate students who do get doctorates in the humanities and social sciences will never get tenure-track jobs, and half of the one’s who will get tenurable positions will not end up at a research university. In other words, the vast majority of graduate student instructors are actually low-paid, part-time faculty who help to drive up the cost of undergraduate education as they unknowingly participate in their own future unemployment.
As the OC article documents, many of these graduate instructors are now forced to teach more students, and this increase in class size results in cutting corners and delivering an inferior education: “Tetsuro Namba, an UC Irvine undergraduate writing TA for the past three years, has watched student-to-TA ratios go up in many academic departments. In his writing classes, capped at 21 the first quarter and 23 afterward, he's fearful of the same trend. His classes are already too large for him to be as effective as he could be, he says. "I definitely know I have shortchanged giving my students feedback just because I didn't have time," said Namba, 28, a fourth-year Ph.D. student in comparative literature. "I really wish the classes were smaller. As class sizes get bigger, the quality of education goes down because the instructor can't help them as much."” Once again, students are paying more and getting less, as graduate students have to work more to provide decreased instructional quality.
Meanwhile, services related to helping students succeed in their classes have been reduced: “Students also lament that library hours were temporarily shortened in 2009 because of budget cuts, and that a campus peer tutoring program – the Learning and Academic Resource Center, which provides help to students in small group settings – was pared down dramatically, offering help in fewer courses.” This reduction in library hours and peer support has been going on for years, but recently, the speed of service reduction has increased.
It should be clear from the picture of education drawn here that something is radically wrong with the priorities of our research universities.
Tuesday, January 31, 2012
Obama, Yudof, and the Future of Higher Ed
At the University of Michigan, President Obama made an important speech about his new push to control tuition increases and student debt at American universities. In Ann Arbor, he told college and university leaders that, “You can't assume that you'll just jack up tuition every single year. If you can't stop tuition from going up, then the funding you get from taxpayers each year will go down. We should push colleges to do better. We should hold them accountable if they don't.” The policy behind this statement can be found in his new Race to the Top initiative for higher education. Basically, the president wants to use federal grants and loans as a way of pressuring public universities and colleges to contain tuition increases, and while he does realize that state budge cuts have played a role in tuition increases, it is clear that he thinks that there are other reasons for the escalating costs. Moreover, the president wants to use a billion-dollar grant system to provide funding to states that help to control tuition increases.
In order to discuss this new initiative, PBS had President Yudof on the News Hour. The first question asked was the following: “At basic level, do you agree with the president's observation that the fast-rising cost of getting a college education is harming access?” Yudof’s response was, “You have to remember the president didn't mention that there's been systematic disinvestment in higher education. Our budget was cut $750 million in a year, about 25 percent . . . A third of our tuition goes back into financial aid and is distributed to low-income students -- 55 percent of our students pay no tuition -- 39 percent of the students are Pell-eligible, relatively low-income families. That's the reality.” In other words, Yudof blamed the move to a high fee, high aid model solely on state budget cuts.
While it is obvious that the state budge cuts have a direct effect on tuition increases, we have also seen tuition increases when the state contribution to the UC system has gone up. Furthermore, the other guest on the show, Richard Vedder, pointed out that there has been a massive increase in federal money going to universities and colleges, and that the increase in federally funded grants and loans has allowed universities to continue to spend more as they reduce their reliance on state support.
When President Yudof was asked about the rising costs of higher ed, he responded in the following manner, “Our costs are actually down 15 percent per credit hour over the last 10 years. That's the reality. The states don't want to pay. So it's like you go to your drugstore, the insurance company doesn't want to pay, your co-pay goes from $10 to $20. That doesn't mean the cost of the drug has doubled. It just means your costs have doubled.” This response is very revealing because Yudof is openly admitting that as tuition increases, the university is actually spending less money on educating students.
So not only are students paying more and getting less, but as Richard Vedder argued, universities are increasing their spending on non-educational expenses, like administration: “But it is also clear that universities in the United States over the last generation or so have enormously increased their staffs, for example, administrative personnel, student service personnel. There are climbing walls. They're not in and of themselves all that important, but the cumulative effects of a lot of spending on things outside of the core missions has contributed somewhat to the inflation in college costs.” In support of Vedder’s claims, my own research shows that universities now spend on average about 10% of their total budgets on undergraduate education, but undergraduates and states support 35% of the total university budgets. Meanwhile, the costs for professional education, administration, and research continues to increase, and so as undergraduates pay more, they end up subsidizing other parts of their universities to a greater extent.
When asked what would happen if the federal government decreased its support for the University of California, Yudof replied that, “classes will get bigger, class access may suffer, time to degree may grow. I agree with Professor Vedder. We have to do a better job of cutting our budgets. If we have too many administrators, let's reduce the number.” While we have seen some reduction of administrators at the Office of the President, we are still waiting to see what the campuses will do about administrative bloat. Furthermore, class sizes have already gotten bigger and the access to require classes has already decreased, so it is hard to see how the university is going to maintain educational quality as it increases tuition and aid.
What we should push for is clearer budget transparency so we can see how universities are actually spending the money they do have. We also have to insist on a renewed commitment to undergraduate education, and a major emphasis on making sure that federal research grants receive enough overhead funding (indirect costs) to make them at least break even. As a way of pushing this agenda, I have been invited to the White House to make a presentation to the administration.
In order to discuss this new initiative, PBS had President Yudof on the News Hour. The first question asked was the following: “At basic level, do you agree with the president's observation that the fast-rising cost of getting a college education is harming access?” Yudof’s response was, “You have to remember the president didn't mention that there's been systematic disinvestment in higher education. Our budget was cut $750 million in a year, about 25 percent . . . A third of our tuition goes back into financial aid and is distributed to low-income students -- 55 percent of our students pay no tuition -- 39 percent of the students are Pell-eligible, relatively low-income families. That's the reality.” In other words, Yudof blamed the move to a high fee, high aid model solely on state budget cuts.
While it is obvious that the state budge cuts have a direct effect on tuition increases, we have also seen tuition increases when the state contribution to the UC system has gone up. Furthermore, the other guest on the show, Richard Vedder, pointed out that there has been a massive increase in federal money going to universities and colleges, and that the increase in federally funded grants and loans has allowed universities to continue to spend more as they reduce their reliance on state support.
When President Yudof was asked about the rising costs of higher ed, he responded in the following manner, “Our costs are actually down 15 percent per credit hour over the last 10 years. That's the reality. The states don't want to pay. So it's like you go to your drugstore, the insurance company doesn't want to pay, your co-pay goes from $10 to $20. That doesn't mean the cost of the drug has doubled. It just means your costs have doubled.” This response is very revealing because Yudof is openly admitting that as tuition increases, the university is actually spending less money on educating students.
So not only are students paying more and getting less, but as Richard Vedder argued, universities are increasing their spending on non-educational expenses, like administration: “But it is also clear that universities in the United States over the last generation or so have enormously increased their staffs, for example, administrative personnel, student service personnel. There are climbing walls. They're not in and of themselves all that important, but the cumulative effects of a lot of spending on things outside of the core missions has contributed somewhat to the inflation in college costs.” In support of Vedder’s claims, my own research shows that universities now spend on average about 10% of their total budgets on undergraduate education, but undergraduates and states support 35% of the total university budgets. Meanwhile, the costs for professional education, administration, and research continues to increase, and so as undergraduates pay more, they end up subsidizing other parts of their universities to a greater extent.
When asked what would happen if the federal government decreased its support for the University of California, Yudof replied that, “classes will get bigger, class access may suffer, time to degree may grow. I agree with Professor Vedder. We have to do a better job of cutting our budgets. If we have too many administrators, let's reduce the number.” While we have seen some reduction of administrators at the Office of the President, we are still waiting to see what the campuses will do about administrative bloat. Furthermore, class sizes have already gotten bigger and the access to require classes has already decreased, so it is hard to see how the university is going to maintain educational quality as it increases tuition and aid.
What we should push for is clearer budget transparency so we can see how universities are actually spending the money they do have. We also have to insist on a renewed commitment to undergraduate education, and a major emphasis on making sure that federal research grants receive enough overhead funding (indirect costs) to make them at least break even. As a way of pushing this agenda, I have been invited to the White House to make a presentation to the administration.
Friday, January 20, 2012
UCR Students Promote a Bad Tuition Plan as Police Beat Protesters
The UC Regents meeting had a little of everything this week: UCR students came up with a new way to fund the university, a long list of new salary increases was released , UCSF asked to quit the system, a retired professor was fired, protesters disrupted the meeting, Regents met behind closed doors, and police attacked protesters who were using books as shields.
What does it all mean? Perhaps, it all adds up to the demise of the modern Western social contract. Without being too dramatic, we are seeing an attempt to resist the destruction of the central institutions of modernity: the university, the public commons, and the welfare state. Although it was once taken for granted that everyone should sacrifice for the common public good, this social contract has been broken, and now some are fighting to maintain it, while others are pushing us forward to a more premodern mode of social organization.
A case in point is the UCR “Student Investment Proposal,” which argues that students should pay no tuition while they are in school, but once they graduate, they should pay 5% of their income for 20 years. At first, this appears to be an elegant solution, but it really represents the final privatization of the public university. Instead of relying on state and federal funds and a common tax base, the new system would rely on private citizens to fund their own education through the use of a non-progressive flat tax. Just as UCSF wants to break its ties with the state and the rest of the UC system, this new funding model would allow students to “pay for their own education,” and would get rid of messy things like financial aid and family contributions.
Under this neoliberal payment program, the students working at Starbucks would be paying the same percent of their income to the UC as the students working for hedge funds. Of course, the university would have a strong incentive to only accept wealthy students, since these students have the highest chance of earning a big paycheck in the future. Likewise, there would be no reason to support programs in the humanities and social sciences if the big earners will all go to law school, medical school, and business school. In short, the student proposal is a private solution to a public problem, and yet we are told that the Office of the President will take it seriously.
It is indeed telling that a student group has come up with such a regressive funding model. We can read this as a sign of the way the backlash against the public good has been so successful that even good-intentioned people present anti-social ideas as if they were progressive. While the program does insist that the state should spend 2% of its budget on the UC each year, it does not say how the UC should use this money. Instead, we are told that students will pay for their own education out of their own future earnings. Of course, this model assumes that these students will have a future income in a world where we no longer have any sense of the common good.
What does it all mean? Perhaps, it all adds up to the demise of the modern Western social contract. Without being too dramatic, we are seeing an attempt to resist the destruction of the central institutions of modernity: the university, the public commons, and the welfare state. Although it was once taken for granted that everyone should sacrifice for the common public good, this social contract has been broken, and now some are fighting to maintain it, while others are pushing us forward to a more premodern mode of social organization.
A case in point is the UCR “Student Investment Proposal,” which argues that students should pay no tuition while they are in school, but once they graduate, they should pay 5% of their income for 20 years. At first, this appears to be an elegant solution, but it really represents the final privatization of the public university. Instead of relying on state and federal funds and a common tax base, the new system would rely on private citizens to fund their own education through the use of a non-progressive flat tax. Just as UCSF wants to break its ties with the state and the rest of the UC system, this new funding model would allow students to “pay for their own education,” and would get rid of messy things like financial aid and family contributions.
Under this neoliberal payment program, the students working at Starbucks would be paying the same percent of their income to the UC as the students working for hedge funds. Of course, the university would have a strong incentive to only accept wealthy students, since these students have the highest chance of earning a big paycheck in the future. Likewise, there would be no reason to support programs in the humanities and social sciences if the big earners will all go to law school, medical school, and business school. In short, the student proposal is a private solution to a public problem, and yet we are told that the Office of the President will take it seriously.
It is indeed telling that a student group has come up with such a regressive funding model. We can read this as a sign of the way the backlash against the public good has been so successful that even good-intentioned people present anti-social ideas as if they were progressive. While the program does insist that the state should spend 2% of its budget on the UC each year, it does not say how the UC should use this money. Instead, we are told that students will pay for their own education out of their own future earnings. Of course, this model assumes that these students will have a future income in a world where we no longer have any sense of the common good.
Tuesday, January 17, 2012
Biden and Romney Talk Higher Ed
National politicians continue to speak about higher education from a perspective of almost total ignorance. In fact, Mitt Romney has actually argued that for-profit colleges are the solution for making higher education more affordable and accessible. Of course, Romney does not say that these schools have some of the highest tuitions and lowest graduate rates. As the New York Times points out, Romney may be influenced by the fact that he is receiving large campaign contributions from for-profit institutions. His position also connects with his belief that these schools represent the free market at its purest. Of course, what he ignores or does not know is that most of the funding for these schools comes from federal Pell Grants.
Even more scary is VP Joe Biden’s recent presentation on higher education. Based on his own experience as an adjunct law professor, he argues that the salaries of adjuncts are driving up the costs of higher education. This is wrong on so many levels that one wonders if there is any hope of having our political officials understand anything about the economics of higher ed.
As the President pushes his goal to have the United States regain its position as the country with the highest number of college graduates, all of our state and national policies are moving in the opposite direction. As I have discussed in regard to the reversal of the California Master Plan, what is happening is that as more students are being crowded out of community college and state universities, they are turning to high-cost, low-performing for-profit schools. The end result is that students are paying more and going into greater debt, but we are producing fewer degrees.
One possible solution is to have the federal government to take all of the money it is spending on for-profit schools and spend it on public universities. Another solution is to have the Fed bail out student debt and to move to a system where higher education is made free and universal. For a discussion of these issues, you can listen to a radio show in which I participated.
Even more scary is VP Joe Biden’s recent presentation on higher education. Based on his own experience as an adjunct law professor, he argues that the salaries of adjuncts are driving up the costs of higher education. This is wrong on so many levels that one wonders if there is any hope of having our political officials understand anything about the economics of higher ed.
As the President pushes his goal to have the United States regain its position as the country with the highest number of college graduates, all of our state and national policies are moving in the opposite direction. As I have discussed in regard to the reversal of the California Master Plan, what is happening is that as more students are being crowded out of community college and state universities, they are turning to high-cost, low-performing for-profit schools. The end result is that students are paying more and going into greater debt, but we are producing fewer degrees.
One possible solution is to have the federal government to take all of the money it is spending on for-profit schools and spend it on public universities. Another solution is to have the Fed bail out student debt and to move to a system where higher education is made free and universal. For a discussion of these issues, you can listen to a radio show in which I participated.
Monday, January 9, 2012
The University as Investment Bank and Questions about State Funding
In response to my last blog entry on President Yudof and the current financing of the UC system, and anonymous commenter wrote the following: “This post is highly misleading. You are implying that UC takes contracts and grants, puts the money in STIP, then spends it elsewhere. This is simply not accurate. STIP interest, not the original funds, can be spent elsewhere. What would you have them do with a year of funding---keep it under the mattress until it is spent?” In response to this response, I would like to show how the UC and other universities have become investment banks.
I myself did not understand this system until I met with a high-ranking UC official to try to figure out how the UC was able to transfer $1 billion from the Short-Term Investment Pool (STIP) to the retirement system (UCRS). When I asked if the administration had borrowed the money from the different accounts that hold grant funds, operating cash, state funds, and tuition dollars, I was informed that I am looking at it in the wrong way. I was told that I should think of the university as a bank, and just like once you deposit money in a savings account, it does not just sit there, but it is invested in different things. This explanation reminded me of the famous scene from It’s a Wonderful Life, where Jimmy Stewart’s character tells the people trying to withdraw their money that their funds are not there because they have been lent out to help build their neighbor’s homes and businesses.
I am not implying here that the UC is doing something illegal; rather, my point is that the university has much more flexibility with its funds than it likes to admit. For example, last summer, the university suggested to the Regents the following financial strategies:
“• Transfer an additional $1 billion from the systemwide Short Term Investment Pool (STIP) into the Total Return Investment Pool (TRIP) to increase investment earnings;
• Distribute a two percent extraordinary payout on eligible year-end 2010-11 balances of funds functioning as endowments (FFEs);
• Distribute a two percent extraordinary payout on eligible year-end 2010-11 balances of true endowments; and
• Draw down as needed from the University’s employee/retiree healthcare reserve.”
The first strategy is to move $1 billion of funds from low-risk securities to higher risk investments. Once again, individual accounts are not reached into and taxed; instead, a portion of the pooled assets are transferred. The second two strategies do the same thing with the pooled endowments and other funds that function as endowments. Finally, the fourth strategy is to take money that is being held for retiree healthcare and use it for other purposes. (This final move should raise some concerns since retiree healthcare is not a vested right, and the UC plans to reduce the amount of healthcare it covers for retirees by making former employees pay more for their healthcare.)
What is so interesting about these financial transactions is that they do support my contention that the university could use grant money or medical revenue to support things like instruction if it saw this as a priority. However, from the university’s perspective, spending money on instruction means that the funds just disappear, but if money is used for other purposes, they could bring in more money in the future.
This financialized model has been hastened by the recent state reductions of UC funding. In fact, I believe that the governor’s latest budget plan is the worst one ever for the UC because not only does it lock in a long-term reduction of state funding, but it also gives the UC administration more leeway to use state funds in any way that they want. While some at UCOP have actually applauded this new budget as a positive gesture, the possible $300 million increase, which would be reduced by $200 million if the governor’s tax initiative does not pass, does nothing to return funding to the 2007-8 level of $3.2 billion. Instead, the UC would get $2.5 billion, in the best-case scenario, but would have to take on millions of dollars of debt financing.
While the UC claims that the new budget increases state funding by 4%, it really should be considered to be a 20% reduction from the past high. So why has UCOP reversed course and applauded something that they always in the past have attacked? Moreover, if the state increase is considered to be 4%, does that mean that tuition will have to go up 12% under the plan discussed last September? Also, since the state does suggest using $90 million to fund the retirement of state-supported employees, does this mean that the UC will have to follow any new state pension restrictions? Stay tuned.
I myself did not understand this system until I met with a high-ranking UC official to try to figure out how the UC was able to transfer $1 billion from the Short-Term Investment Pool (STIP) to the retirement system (UCRS). When I asked if the administration had borrowed the money from the different accounts that hold grant funds, operating cash, state funds, and tuition dollars, I was informed that I am looking at it in the wrong way. I was told that I should think of the university as a bank, and just like once you deposit money in a savings account, it does not just sit there, but it is invested in different things. This explanation reminded me of the famous scene from It’s a Wonderful Life, where Jimmy Stewart’s character tells the people trying to withdraw their money that their funds are not there because they have been lent out to help build their neighbor’s homes and businesses.
I am not implying here that the UC is doing something illegal; rather, my point is that the university has much more flexibility with its funds than it likes to admit. For example, last summer, the university suggested to the Regents the following financial strategies:
“• Transfer an additional $1 billion from the systemwide Short Term Investment Pool (STIP) into the Total Return Investment Pool (TRIP) to increase investment earnings;
• Distribute a two percent extraordinary payout on eligible year-end 2010-11 balances of funds functioning as endowments (FFEs);
• Distribute a two percent extraordinary payout on eligible year-end 2010-11 balances of true endowments; and
• Draw down as needed from the University’s employee/retiree healthcare reserve.”
The first strategy is to move $1 billion of funds from low-risk securities to higher risk investments. Once again, individual accounts are not reached into and taxed; instead, a portion of the pooled assets are transferred. The second two strategies do the same thing with the pooled endowments and other funds that function as endowments. Finally, the fourth strategy is to take money that is being held for retiree healthcare and use it for other purposes. (This final move should raise some concerns since retiree healthcare is not a vested right, and the UC plans to reduce the amount of healthcare it covers for retirees by making former employees pay more for their healthcare.)
What is so interesting about these financial transactions is that they do support my contention that the university could use grant money or medical revenue to support things like instruction if it saw this as a priority. However, from the university’s perspective, spending money on instruction means that the funds just disappear, but if money is used for other purposes, they could bring in more money in the future.
This financialized model has been hastened by the recent state reductions of UC funding. In fact, I believe that the governor’s latest budget plan is the worst one ever for the UC because not only does it lock in a long-term reduction of state funding, but it also gives the UC administration more leeway to use state funds in any way that they want. While some at UCOP have actually applauded this new budget as a positive gesture, the possible $300 million increase, which would be reduced by $200 million if the governor’s tax initiative does not pass, does nothing to return funding to the 2007-8 level of $3.2 billion. Instead, the UC would get $2.5 billion, in the best-case scenario, but would have to take on millions of dollars of debt financing.
While the UC claims that the new budget increases state funding by 4%, it really should be considered to be a 20% reduction from the past high. So why has UCOP reversed course and applauded something that they always in the past have attacked? Moreover, if the state increase is considered to be 4%, does that mean that tuition will have to go up 12% under the plan discussed last September? Also, since the state does suggest using $90 million to fund the retirement of state-supported employees, does this mean that the UC will have to follow any new state pension restrictions? Stay tuned.
Wednesday, January 4, 2012
My Dialogue with President Yudof
On Dec. 2, 2011, UC President Mark Yudof gave a speech to the California Chamber of Commerce entitled, “A Baker’s Dozen Myths about Higher Education.” This presentation is classic Yudof, and it reveals the great disconnect between the UC administration and the facts on the ground. To analyze several of Yudof’s claims, I will quote his myths and explanations, and then respond to him in the form of a dialogue.
Yudof: The cost of producing UC degrees and credit hours has gone up over the last decade. I hear this myth all the time. And it’s frustrating, because this cost has actually dropped by more than 15%, in constant dollars, since the 1990s. This cost has dropped in part due to a broad range of system-wide efficiencies: common IT systems; reduced employee travel; thousands of unfilled faculty and staff positions; 1/3 fewer employees at the UC Office of the President; a higher student-faculty ratio, and so on.
Samuels: This claim is actually partially true: the money UC spends on undergraduate students has gone down, but that is mostly due to expanding class size, the use of inexpensive lecturers and graduate student instructors, and the elimination of many courses and class sections. What you do not say is that at the same time, the cost for graduate and professional education has gone up, and while there are fewer administrators at the Office of the President, there are more on the campuses. In fact, there are now more administrators than faculty members.
Yudof: Tuition goes up because the university is providing resort amenities to students. Perpetuators of this conspiracy theory are fiercely devoted to it. Rock climbing walls, manicured landscaping, gourmet dining halls—these and other examples are constantly cited as the real cause of higher tuition bills.
Samuels: This claim is also partially true, but it neglects to add that the cost of room, board, and other essentials, like books and computer use have also gone up. Moreover, UC can only construct its new buildings and amenities by promising to raise tuition on its bond submissions.
Yudof: Tuition goes up because state funding goes down. Plain and simple.
Samuels: However, if you look here at the history of UC tuition increases, you see that in the last twenty years, UC has increased tuition every year except twice. This means that tuition has gone up even when state funding has gone up.
Yudof: UC raises tuition as federal student loan caps are lifted. This purported practice isn’t just false. It’s flat-out illegal for UC and other non-profit universities.
Samuels: UC may not be simply raising tuition because the caps on federal loans are going up, but the system is able to increase tuition because students are willing to go into debt to pay for the increases.
Yudof: Tenure track faculty at UC do not teach undergraduates. Tenure track faculty members teach about 61% of all student credit hours at UC. And in fact, this percentage is up slightly in recent years as budget cuts forced campuses to reduce the ranks of lecturers, visitors, and other non-tenure track faculty.
Samuels: First of all the number of lecturers has gone up recently, and the UC is planning to increase its reliance on non-tenured faculty to reduce costs. Second, if tenured faculty teach 61%, then 39% of the courses are being taught by faculty who are not eligible for tenure. Third, UC refuses to track the number of courses and sections taught by graduate students, so they are not included in these statistics.
Yudof: The number of high-level administrators at UC is expanding. UC, we call our high-level administrators “senior management group” members, or SMGs. Rather than expand or remain constant, the number of SMGs has actually declined slightly. Last year, the number dropped from 315 to 293—which means they account for less than 1% of all full-time-equivalent personnel across the entire UC system.
Samuels: “The Senior Management Group (SMG) is only a small sector of the administration that now outnumbers the faculty. While you always concentrate on the senior managers, you ignore the cost of non-senior administrators on the campuses.
Yudof: Non-residents only make up 6.6% of UC undergraduate students system-wide. This is well below the percentage at most of the university’s public comparator campuses. At the University of Michigan, for example, non-residents comprise 35% of undergraduate students. At the University of Virginia, it’s about 30%.
Samuels: You are bending the truth to prove your argument. At all of the elite campuses, non-resident students have replaced students from California, and this trend is only growing. Currently, Berkeley has a target of 30% nonresident students and UCLA is shooting for 25%. UCSD and Davis also have ambitious plans to increase nonresident enrollments.
Yudof: Only the wealthy can afford to attend UC. Nothing belies this myth more than the incredible socioeconomic diversity of UC students. About 40% of all UC undergraduates receive Pell grants. Pell grant recipients come from families with an annual household income of $50,000 or less.
Samuels: The UC system does deserve high marks for making the university affordable to low-income students, but this has resulted in increased costs and decreased enrollments for middle-class students. As you yourself admit, “High tuition actually hurts the middle class much more than it does the poor. This is because high tuition enables institutions to employ a high fee/high financial aid model.” This just proves my previous point.
Yudof: myth #10: UC student debt is skyrocketing. At graduation, the average student loan debt of UC students is $16,795. This figure is almost $10,000 lower than the national average, which currently stands at $25,250. In fact, when adjusted for inflation, UC students’ debt load has remained virtually flat since 2006.
Samuels: Once again, the average debt is remaining flat, but the debt for middle-class students is going up.
Yudof: Corporate and alumni giving can replace all the core funding the legislature cuts from UC’s budget. Corporate and alumni giving is phenomenally important to UC. It played a critical role in the foundation, and the development, of this university. And throughout UC’s history, it has helped sustain the university during times of fiscal crisis—like the crisis we’re experiencing today. At the same time, most corporate and alumni giving is restricted—which means that if the state cuts our core funding, private giving can’t necessarily cover the gap.
Samuels: If the UC cannot use its donations to fund instructional programs, why is it spending so much money trying to raise these funds, and why in the past didn’t the university go on a campaign to raise money for educational purposes?
Yudof: $1 billion can be cut from UC’s budget with zero effect. This isn’t a myth. It’s a canard. I hear this fiction all the time. And I find it very troubling—extremely troubling. UC’s annual budget is roughly $20 billion. A $1 billion hole is hard to ignore on its own. But it’s more complicated than that. Much of our funding is restricted. Hospital revenue is restricted. Government grants and contracts are restricted. You can’t just take money from laser research and give it to a professor of Portuguese. So when that $1 billion is cut from our core funds, it can’t necessarily be covered by our other sources.
Samuels: This is one of your favorite arguments, which I have refuted on many occasions. In fact, the recent state audit found that most of UCs restricted funds are only restricted by the administration. Currently, UC places all types of funds, including federal grants, in its short-term investment pool. It then uses this pool as a central bank and takes out money to support any purpose it chooses. For instance, the UC recently transferred $1 billion into the retirement system and lent the state $1.7 billion.
Yudof: The University of California only serves its students. This is California’s university. It is defined by its public service mission. And it serves all the people of this state. So when UC’s core funding is cut, it ends up affecting all of us, too.
Samuels: Finally, we agree!
Yudof: The cost of producing UC degrees and credit hours has gone up over the last decade. I hear this myth all the time. And it’s frustrating, because this cost has actually dropped by more than 15%, in constant dollars, since the 1990s. This cost has dropped in part due to a broad range of system-wide efficiencies: common IT systems; reduced employee travel; thousands of unfilled faculty and staff positions; 1/3 fewer employees at the UC Office of the President; a higher student-faculty ratio, and so on.
Samuels: This claim is actually partially true: the money UC spends on undergraduate students has gone down, but that is mostly due to expanding class size, the use of inexpensive lecturers and graduate student instructors, and the elimination of many courses and class sections. What you do not say is that at the same time, the cost for graduate and professional education has gone up, and while there are fewer administrators at the Office of the President, there are more on the campuses. In fact, there are now more administrators than faculty members.
Yudof: Tuition goes up because the university is providing resort amenities to students. Perpetuators of this conspiracy theory are fiercely devoted to it. Rock climbing walls, manicured landscaping, gourmet dining halls—these and other examples are constantly cited as the real cause of higher tuition bills.
Samuels: This claim is also partially true, but it neglects to add that the cost of room, board, and other essentials, like books and computer use have also gone up. Moreover, UC can only construct its new buildings and amenities by promising to raise tuition on its bond submissions.
Yudof: Tuition goes up because state funding goes down. Plain and simple.
Samuels: However, if you look here at the history of UC tuition increases, you see that in the last twenty years, UC has increased tuition every year except twice. This means that tuition has gone up even when state funding has gone up.
Yudof: UC raises tuition as federal student loan caps are lifted. This purported practice isn’t just false. It’s flat-out illegal for UC and other non-profit universities.
Samuels: UC may not be simply raising tuition because the caps on federal loans are going up, but the system is able to increase tuition because students are willing to go into debt to pay for the increases.
Yudof: Tenure track faculty at UC do not teach undergraduates. Tenure track faculty members teach about 61% of all student credit hours at UC. And in fact, this percentage is up slightly in recent years as budget cuts forced campuses to reduce the ranks of lecturers, visitors, and other non-tenure track faculty.
Samuels: First of all the number of lecturers has gone up recently, and the UC is planning to increase its reliance on non-tenured faculty to reduce costs. Second, if tenured faculty teach 61%, then 39% of the courses are being taught by faculty who are not eligible for tenure. Third, UC refuses to track the number of courses and sections taught by graduate students, so they are not included in these statistics.
Yudof: The number of high-level administrators at UC is expanding. UC, we call our high-level administrators “senior management group” members, or SMGs. Rather than expand or remain constant, the number of SMGs has actually declined slightly. Last year, the number dropped from 315 to 293—which means they account for less than 1% of all full-time-equivalent personnel across the entire UC system.
Samuels: “The Senior Management Group (SMG) is only a small sector of the administration that now outnumbers the faculty. While you always concentrate on the senior managers, you ignore the cost of non-senior administrators on the campuses.
Yudof: Non-residents only make up 6.6% of UC undergraduate students system-wide. This is well below the percentage at most of the university’s public comparator campuses. At the University of Michigan, for example, non-residents comprise 35% of undergraduate students. At the University of Virginia, it’s about 30%.
Samuels: You are bending the truth to prove your argument. At all of the elite campuses, non-resident students have replaced students from California, and this trend is only growing. Currently, Berkeley has a target of 30% nonresident students and UCLA is shooting for 25%. UCSD and Davis also have ambitious plans to increase nonresident enrollments.
Yudof: Only the wealthy can afford to attend UC. Nothing belies this myth more than the incredible socioeconomic diversity of UC students. About 40% of all UC undergraduates receive Pell grants. Pell grant recipients come from families with an annual household income of $50,000 or less.
Samuels: The UC system does deserve high marks for making the university affordable to low-income students, but this has resulted in increased costs and decreased enrollments for middle-class students. As you yourself admit, “High tuition actually hurts the middle class much more than it does the poor. This is because high tuition enables institutions to employ a high fee/high financial aid model.” This just proves my previous point.
Yudof: myth #10: UC student debt is skyrocketing. At graduation, the average student loan debt of UC students is $16,795. This figure is almost $10,000 lower than the national average, which currently stands at $25,250. In fact, when adjusted for inflation, UC students’ debt load has remained virtually flat since 2006.
Samuels: Once again, the average debt is remaining flat, but the debt for middle-class students is going up.
Yudof: Corporate and alumni giving can replace all the core funding the legislature cuts from UC’s budget. Corporate and alumni giving is phenomenally important to UC. It played a critical role in the foundation, and the development, of this university. And throughout UC’s history, it has helped sustain the university during times of fiscal crisis—like the crisis we’re experiencing today. At the same time, most corporate and alumni giving is restricted—which means that if the state cuts our core funding, private giving can’t necessarily cover the gap.
Samuels: If the UC cannot use its donations to fund instructional programs, why is it spending so much money trying to raise these funds, and why in the past didn’t the university go on a campaign to raise money for educational purposes?
Yudof: $1 billion can be cut from UC’s budget with zero effect. This isn’t a myth. It’s a canard. I hear this fiction all the time. And I find it very troubling—extremely troubling. UC’s annual budget is roughly $20 billion. A $1 billion hole is hard to ignore on its own. But it’s more complicated than that. Much of our funding is restricted. Hospital revenue is restricted. Government grants and contracts are restricted. You can’t just take money from laser research and give it to a professor of Portuguese. So when that $1 billion is cut from our core funds, it can’t necessarily be covered by our other sources.
Samuels: This is one of your favorite arguments, which I have refuted on many occasions. In fact, the recent state audit found that most of UCs restricted funds are only restricted by the administration. Currently, UC places all types of funds, including federal grants, in its short-term investment pool. It then uses this pool as a central bank and takes out money to support any purpose it chooses. For instance, the UC recently transferred $1 billion into the retirement system and lent the state $1.7 billion.
Yudof: The University of California only serves its students. This is California’s university. It is defined by its public service mission. And it serves all the people of this state. So when UC’s core funding is cut, it ends up affecting all of us, too.
Samuels: Finally, we agree!
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