At a special meeting on December 13th, the UC regents voted to endorse the Commission on the Future’s final report and the new pension plan. Before the actual vote on the Commission’s report, there was a long discussion of what they were actually being asked to vote on. Some of the regents weren’t sure if they were voting to endorse the whole report, part of the report, or none of the report. Part of the confusion stems from the fact that the final report doesn’t actually make any specific changes; rather, the report discusses general principles with mostly vague goals. Basically, the report argues that the UC system needs to educate more students with less money from the state; the major way the university plans to do more with less is by increasing the number of high-paying out-of-state students and transfer students, while finding ways to speed all students through the system, perhaps with the use of online courses or reduced course requirements.
As I pointed out in my public comments, the proposed solutions make neither fiscal nor educational sense. For instance, we find the following statement in the final report: “admittedly, the education of upper-division students is more expensive because of smaller classes and necessary specialization and facilities . . . From an aggregate perspective, however, transfer students require only two years of UC resources in order to graduate with a UC bachelor’s degree. . . Serving transfer students increases the number of degrees the UC can confer with any given level of instructional resources.” According to this contradictory logic, upper-upper division courses are more expensive, and therefore the way to save money is to increase the number of expensive classes and reduce the number of inexpensive ones.
This failure to grasp basic math and accounting is continued in the discussion of why they should increase the number of graduate students in relation to undergraduate students: “the education of graduate students is more expensive than undergraduate students, both in instructional costs and student financial support. Therefore, under current and baseline fiscal projections, funding for graduate enrollment growth would require that campuses reduce undergraduate enrollment — an unacceptable result in light of our access mission and commitment to the master Plan enrollment goals.” After clearly stating that graduate education is more expensive than undergraduate education, and that the increase in graduate students would result in an unacceptable decrease in undergraduates, we find the following argument: “Recognizing UC’s role in the master Plan as the state’s primary research and doctoral-granting institution, the commission recommends that the University increase the proportion of graduate enrollments from 22 percent of total enrollments to 26 percent by 2020-21, with individual targets set by each campus.” So the master plan tells us to have more undergraduate students, but the matser plan also tells us to have more doctoral students, so the solution is to do both even though the university cannot afford either.
As I have argued, the university simply refuses to admit that undergraduates are now subsidizing everything else in the UC system, and the only solution the university finds to any problem is to increase student tuition and to cheapen the quality of undergraduate education by turning to online classes, reduced requirements, summer courses, and fast degrees. In the Commission’s words, “the master Plan prescribes a ratio of 60:40 in upper division to lower division undergraduate students in order to have ample upper division spaces for community college transfer students (Uc’s ratio in 2009-10 was 66:34 due to freshmen entering with advanced placement and other college credit). Given these expected capital facility costs, UC will either need to find significant new revenues to supplement limited state funding or it will need to pursue alternatives to bricks-and-mortar classrooms and labs.” In the hands of this collection of amateur educationalists, the master plan is simply a rhetorical weapon to whip out to score points when needed. Not only does the final report lack vision, but it starts with all of the wrong premises.
In a moment of frustration, President Yudof declared that if someone else has a different plan, he would love to see it. But a coalition of unions has presented multiple plans to Yudof, and they have been simply ignored. One thing is clear, the regents will not be able to maintain the fiscal health and educational quality of the university if they cannot do simple math, and if they spend the majority of the time blaming the state for all of the UC’s problems, nothing will ever change.
Finally, on the pension front, several unions argued during public comment that retiree healthcare should be based on pay bands like all other current healthcare premiums. While this proposal was rejected by the regents, they did respond to a last minute plea by the highest-paid employees to re-consider waiving the IRS limit on pensions. In an incredible act of hubris, during the meeting, they re-wrote the final pension proposal, and it was unclear if the regents even knew which proposal was under consideration.
Tuesday, December 14, 2010
Wednesday, December 8, 2010
UCLA Embraces Growth, but there is a Catch
In an Inside Higher Ed article, I argued that the way out of the current financial problems facing American universities is to increase undergraduate enrollments. I made this argument because not only do we need more college graduates to fuel our economy, but high university enrollments decrease the ranks of the unemployed and help to train people for the new economy. Moreover, I have shown how undergraduate students generate huge profits for universities, and this revenue can be used to support research, graduate education, and community service. I have also exposed how research grants and endowment gifts often end up costing universities more money than these unstable external sources of funding collect. Finally, I have stresses how the profit-making units usually refuse to share their revenue and often survive through hidden subsidies.
Given this stress on the need to increase undergraduate enrollments, I should applaud UCLA’s decision to bring in an additional 2,500 nonresident undergraduate students in the next few years; however, the campus’ plan poses several problems. The first issue is that while the school expects to rake in $55 million in new tuition revenue, it does not have any stated plans to spend more funds on instruction and student services. In fact, senior administrators have argued that since the undergraduate College already has an $80 million deficit, all of the additional income will be used to help balance the budget. In other words, there will be more students, but no additional resources, and this comes during a time when the size of the teaching faculty has already been reduced.
Another complicating factor is that UCLA intends to concentrate on bringing in new students from China and India because these students pay full tuition and receive no financial aid. Once again, we have to ask how these students will succeed if the campus does not increase the number of ESL classes and other needed student services. Also, there still remains the sticky problem of how will students be able to graduate in a timely fashion if UCLA brings in many more students but has fewer classes and fewer teachers. It appears that these potential international students are seen as a source of needed income, but steps are not being taken to make sure they receive a high quality educational experience. In the next few months, we will be pushing the administration to make sure that added revenue from student tuition finds its way into the classroom.
Given this stress on the need to increase undergraduate enrollments, I should applaud UCLA’s decision to bring in an additional 2,500 nonresident undergraduate students in the next few years; however, the campus’ plan poses several problems. The first issue is that while the school expects to rake in $55 million in new tuition revenue, it does not have any stated plans to spend more funds on instruction and student services. In fact, senior administrators have argued that since the undergraduate College already has an $80 million deficit, all of the additional income will be used to help balance the budget. In other words, there will be more students, but no additional resources, and this comes during a time when the size of the teaching faculty has already been reduced.
Another complicating factor is that UCLA intends to concentrate on bringing in new students from China and India because these students pay full tuition and receive no financial aid. Once again, we have to ask how these students will succeed if the campus does not increase the number of ESL classes and other needed student services. Also, there still remains the sticky problem of how will students be able to graduate in a timely fashion if UCLA brings in many more students but has fewer classes and fewer teachers. It appears that these potential international students are seen as a source of needed income, but steps are not being taken to make sure they receive a high quality educational experience. In the next few months, we will be pushing the administration to make sure that added revenue from student tuition finds its way into the classroom.
Monday, November 29, 2010
UCLA’s Neoliberal Path
Neoliberalism is centered on the belief that free markets can regulate themselves, and so it is unnecessary to have large government programs and the taxes needed to support public education, universal healthcare, and environmental standards. Moreover, neoliberal institutions like the IMF and the World Bank believe that the best way to help a developing country is to impose austerity measures and replace the public sector with private businesses. In the case of universities, the neoliberal formula involves weaning oneself from public finances by increasing tuition, cutting unprofitable programs, and increasing the number of “self-sustaining” units. Of course, this strategy often fails in the end because it turns out that the privatized self-sustaining areas rely on public subsidies in order to remain solvent.
To see this neoliberal agenda in action, we can look at the recently announced plan to restructure UCLA. As Chancellor Gene Block has argued, the only way that the campus can overcome unstable state funding is if it reduces academic costs, increases nonresident enrollment, secures more philanthropic donations, offers more self-supporting degree programs, and expands intellectual property. Looking at each one of these five elements, we will see that not only do they represent the privatization of a public institution, but they are all destined to contribute to a reduction of financial health for the institution.
Restructuring Majors
In the case of reducing academic costs, the strategy relies on lowering the number of requirements in each major. Two of the results of this tactic called “challenge 45” is that the size of upper-division courses has increased and students have been forced to scramble to find courses outside of their majors in order to graduate on time. Moreover, one strategy to help reduce the demand for high enrollment classes is a new expanded summer program that motivates students to pay extra for classes they need. It is important to note that these summer classes are squeezed into a time period that is half the length of a regular quarter session and a third of the time of a semester course. In short, students are being told to pay more for less.
Not only are students having to pay extra to attend during the summer, but the university is also considering allowing students the option of taking an “e-section” of a high-demand course. According to a Daily Bruin article, “The students will receive lecture instruction online via Bruincast and attend a live discussion once a week.” Once again, students will be asked to accept an inferior mode of education in order to move through the system in an efficient manner, and there appears to be little attempt here to monitor the value of the educational experience or the role of faculty in determining how courses are delivered.
While the goal of these instructional changes is clearly to save money, the people putting this together admit that they have no idea how much funds these new programs will save. According to Robert Cox, manager for institutional research in the UCLA Office of Analysis and Information Management: “Everyone can agree that there are ways in which these things can lead to savings, but no one has put a ticket on it to show how much you can save . . . At the policy level, you can see where the policy would tend to take the result, but figuring out how it can fill the hole in the budget, you can’t do it; the issues are too complex.” This analysis does not make one feel very confident about the ability of UCLA to predict and manage its own budget.
Globalizing Enrollments
If we now look at the second part of the UCLA plan, the increase in nonresident students, we do see a source for revenue, but once again, this strategy does not address several academic and financial issues. For instance, someone has to ask how much money is UCLA spending on trying to recruit international students. While the cost is never discussed, we have learned from a Daily Bruin article that one way that the campus plans to double its nonresident student population is by changing the way it markets itself to the outside world, and the goals for this program are quite ambitious: “Boosting the nonresident population to about 5,000 will mean adding about 10,000 more seats to classes. It will mean more students seeking appointments in the Ashe Center at the height of flu season, more students in need of counseling or psychological services and more students in need of on-campus housing.” While I have argued that public universities like UCLA should expand enrollments in order to reduce the need for tuition increases, I have also argued that schools have to hire more faculty members and make sure that the new funds are directed towards undergraduates; however, so far at UCLA, we have seen a reduction of people teaching undergraduate courses, and so it is unclear who will teach the additional students.
In fact, UCLA now only has three lecturers who teach English as a Second Language (ESL), and yet, we are expected to accommodate a growing number of international students who need language help in order to succeed in their courses. Ironically, the ESL lecturers are currently supposed to be self-sustaining because they need to raise money through summer courses in order to support the classes they teach during the year. This unsustainable situation is yet another example of how the myth of self-sustaining units never really holds true.
Hoping on Gifts
While UCLA attempts to reduce instructional costs and increase the number of international students at the same time, it also wants to increase its endowment by having UCLA students call former students and ask for increased giving. It should be pointed out that UCLA is already the most successful public university in the country when it comes to private giving, and it thus unclear how it will be able to increase its revenue during these difficult financial times. Also, 95% of the UCLA gifts can only be used for very specific purposes, like endowed chairs and new buildings, and so they rarely contribute to the general fund of the campus. In fact, many gifts end up losing money because they do not pay for the full cost of the programs they seed and support.
While the people in charge of the endowment campaign stress that they want to convince alumni to give more because of the great value of a UCLA education, many of the current proposals to reshape the university threaten to undermine both its quality and reputation. For example, the move to enhance the number of self-sustaining units includes a major expansion in extension programs, which are often taught by non-UCLA faculty and cater to non-UCLA students. Moreover, these programs are being pitched as ways of training students to fulfill present corporate needs: “Programs would be offered according to what employers want in new hires, among other factors.” Perhaps these extension programs will bring in some more funds, but we have to ask if the university wants to define itself by what some outside company thinks it currently needs.
Privatizing the Public
Of course, UCLA is already leading the way to privatization by catering to the Anderson Business School's desire to leave behind state funding and move to a self-sufficient funding model. Although, the UCLA faculty senate has voted against this move, it is clear that the leaders of the business school are going ahead with their plans, and it appears that Chancellor Block supports this change, which will not only require increasing tuition to over $55,000 but could also result in the general UCLA campus losing needed state funding. It is also unclear what the school will do when pension costs increases dramatically in the near future.
Intellectual Property Values
Perhaps the university is hoping that cashing in on intellectual property rights will help UCLA to resolve the difficult task of increasing revenue while decreasing costs, yet, it should be stressed that it has been very difficult for schools to profit from their inventions and knowledge production. It turns out that it is very costly to do research, and many research projects never go to market. In other words, universities keep on looking outside of the classroom to find a source of income, but the fact of the matter is that education is not only what schools are supposed to do, but it is also what they do best and most cost-efficiently. This is not to say that universities should not continue to pursue ground-breaking research, but they should realize where their money comes from and how much it costs to fund expensive labs with high-tech equipment and an army of bureaucrats, lawyers, office managers, and graduate students. Currently, undergraduate students subsidize virtually everything universities do, and it is time for schools to recognize this by making sure that vital undergraduate programs are supported.
To see this neoliberal agenda in action, we can look at the recently announced plan to restructure UCLA. As Chancellor Gene Block has argued, the only way that the campus can overcome unstable state funding is if it reduces academic costs, increases nonresident enrollment, secures more philanthropic donations, offers more self-supporting degree programs, and expands intellectual property. Looking at each one of these five elements, we will see that not only do they represent the privatization of a public institution, but they are all destined to contribute to a reduction of financial health for the institution.
Restructuring Majors
In the case of reducing academic costs, the strategy relies on lowering the number of requirements in each major. Two of the results of this tactic called “challenge 45” is that the size of upper-division courses has increased and students have been forced to scramble to find courses outside of their majors in order to graduate on time. Moreover, one strategy to help reduce the demand for high enrollment classes is a new expanded summer program that motivates students to pay extra for classes they need. It is important to note that these summer classes are squeezed into a time period that is half the length of a regular quarter session and a third of the time of a semester course. In short, students are being told to pay more for less.
Not only are students having to pay extra to attend during the summer, but the university is also considering allowing students the option of taking an “e-section” of a high-demand course. According to a Daily Bruin article, “The students will receive lecture instruction online via Bruincast and attend a live discussion once a week.” Once again, students will be asked to accept an inferior mode of education in order to move through the system in an efficient manner, and there appears to be little attempt here to monitor the value of the educational experience or the role of faculty in determining how courses are delivered.
While the goal of these instructional changes is clearly to save money, the people putting this together admit that they have no idea how much funds these new programs will save. According to Robert Cox, manager for institutional research in the UCLA Office of Analysis and Information Management: “Everyone can agree that there are ways in which these things can lead to savings, but no one has put a ticket on it to show how much you can save . . . At the policy level, you can see where the policy would tend to take the result, but figuring out how it can fill the hole in the budget, you can’t do it; the issues are too complex.” This analysis does not make one feel very confident about the ability of UCLA to predict and manage its own budget.
Globalizing Enrollments
If we now look at the second part of the UCLA plan, the increase in nonresident students, we do see a source for revenue, but once again, this strategy does not address several academic and financial issues. For instance, someone has to ask how much money is UCLA spending on trying to recruit international students. While the cost is never discussed, we have learned from a Daily Bruin article that one way that the campus plans to double its nonresident student population is by changing the way it markets itself to the outside world, and the goals for this program are quite ambitious: “Boosting the nonresident population to about 5,000 will mean adding about 10,000 more seats to classes. It will mean more students seeking appointments in the Ashe Center at the height of flu season, more students in need of counseling or psychological services and more students in need of on-campus housing.” While I have argued that public universities like UCLA should expand enrollments in order to reduce the need for tuition increases, I have also argued that schools have to hire more faculty members and make sure that the new funds are directed towards undergraduates; however, so far at UCLA, we have seen a reduction of people teaching undergraduate courses, and so it is unclear who will teach the additional students.
In fact, UCLA now only has three lecturers who teach English as a Second Language (ESL), and yet, we are expected to accommodate a growing number of international students who need language help in order to succeed in their courses. Ironically, the ESL lecturers are currently supposed to be self-sustaining because they need to raise money through summer courses in order to support the classes they teach during the year. This unsustainable situation is yet another example of how the myth of self-sustaining units never really holds true.
Hoping on Gifts
While UCLA attempts to reduce instructional costs and increase the number of international students at the same time, it also wants to increase its endowment by having UCLA students call former students and ask for increased giving. It should be pointed out that UCLA is already the most successful public university in the country when it comes to private giving, and it thus unclear how it will be able to increase its revenue during these difficult financial times. Also, 95% of the UCLA gifts can only be used for very specific purposes, like endowed chairs and new buildings, and so they rarely contribute to the general fund of the campus. In fact, many gifts end up losing money because they do not pay for the full cost of the programs they seed and support.
While the people in charge of the endowment campaign stress that they want to convince alumni to give more because of the great value of a UCLA education, many of the current proposals to reshape the university threaten to undermine both its quality and reputation. For example, the move to enhance the number of self-sustaining units includes a major expansion in extension programs, which are often taught by non-UCLA faculty and cater to non-UCLA students. Moreover, these programs are being pitched as ways of training students to fulfill present corporate needs: “Programs would be offered according to what employers want in new hires, among other factors.” Perhaps these extension programs will bring in some more funds, but we have to ask if the university wants to define itself by what some outside company thinks it currently needs.
Privatizing the Public
Of course, UCLA is already leading the way to privatization by catering to the Anderson Business School's desire to leave behind state funding and move to a self-sufficient funding model. Although, the UCLA faculty senate has voted against this move, it is clear that the leaders of the business school are going ahead with their plans, and it appears that Chancellor Block supports this change, which will not only require increasing tuition to over $55,000 but could also result in the general UCLA campus losing needed state funding. It is also unclear what the school will do when pension costs increases dramatically in the near future.
Intellectual Property Values
Perhaps the university is hoping that cashing in on intellectual property rights will help UCLA to resolve the difficult task of increasing revenue while decreasing costs, yet, it should be stressed that it has been very difficult for schools to profit from their inventions and knowledge production. It turns out that it is very costly to do research, and many research projects never go to market. In other words, universities keep on looking outside of the classroom to find a source of income, but the fact of the matter is that education is not only what schools are supposed to do, but it is also what they do best and most cost-efficiently. This is not to say that universities should not continue to pursue ground-breaking research, but they should realize where their money comes from and how much it costs to fund expensive labs with high-tech equipment and an army of bureaucrats, lawyers, office managers, and graduate students. Currently, undergraduate students subsidize virtually everything universities do, and it is time for schools to recognize this by making sure that vital undergraduate programs are supported.
Monday, November 22, 2010
The Regents Take a Strong Stance Against Free Speech and Shared Governance
Before the UC Regents voted on another fee increase, several of them voiced their concern for the future. One Regent bemoaned the role of shared governance in blocking some of President Yudof’s efforts to save money. After arguing that the committee structure on the campuses should be “zero funded” and scrapped, Regent Island affirmed that the faculty are holding up cost-saving measures like moving classes online. He stated that due to the faculty’s resistance to change, the online initiative would be so watered-down that it would fail to generate significant revenue.
After this discouraging attack on shared governance, I received word that a police officer pulled a gun on a crowd of protesters. After reviewing the video, I asked during public comment for a full investigation of this incident, which came very close to being a new Kent State tragedy. As I have discussed with campus police in the past, they need to do a better job at preparing for protests and making sure that they only use force as a last resort. Posting a single officer at a sensitive point makes no sense and ends up putting police and the protesters at risk. Moreover, the use of a single row of bicycle racks to hold off hundreds of angry people is a poor defense and opens the door for unneeded police over-reaction.
The general hostile climate against free speech was extended inside and outside of the Regents meeting. Before the start of the meeting on Wednesday, I was told that only people on a special list would be able to enter into the meeting. When I pointed out to a campus police officer that this goes against California’s open meeting law, I was told to back off. In order to make sure that anyone from the public could line up to enter the meeting, I had to contact a staff person from the Board of Regents office who informed the officers to let the public enter the meeting.
While I do feel that the police were often put in harm’s way due to bad planning, there is no excuse for detaining and arresting people for chalking messages, and the police should not be able to simply tear down the signs of protesters. Furthermore, the use of pepper spray at the meeting appeared to be indiscriminate and counter-productive. In general, some police officers displayed a hostile and defensive attitude towards the protesters and the general public.
Since no actions have been taken to discipline the campus police who used tasers on students last year at UCLA, I believe that it necessary for us to investigate filing suit against the university for creating an environment that is hostile to free speech. If we do not counter the aggressive actions of the campus police, we will lose our ability to defend the public nature of our university.
After this discouraging attack on shared governance, I received word that a police officer pulled a gun on a crowd of protesters. After reviewing the video, I asked during public comment for a full investigation of this incident, which came very close to being a new Kent State tragedy. As I have discussed with campus police in the past, they need to do a better job at preparing for protests and making sure that they only use force as a last resort. Posting a single officer at a sensitive point makes no sense and ends up putting police and the protesters at risk. Moreover, the use of a single row of bicycle racks to hold off hundreds of angry people is a poor defense and opens the door for unneeded police over-reaction.
The general hostile climate against free speech was extended inside and outside of the Regents meeting. Before the start of the meeting on Wednesday, I was told that only people on a special list would be able to enter into the meeting. When I pointed out to a campus police officer that this goes against California’s open meeting law, I was told to back off. In order to make sure that anyone from the public could line up to enter the meeting, I had to contact a staff person from the Board of Regents office who informed the officers to let the public enter the meeting.
While I do feel that the police were often put in harm’s way due to bad planning, there is no excuse for detaining and arresting people for chalking messages, and the police should not be able to simply tear down the signs of protesters. Furthermore, the use of pepper spray at the meeting appeared to be indiscriminate and counter-productive. In general, some police officers displayed a hostile and defensive attitude towards the protesters and the general public.
Since no actions have been taken to discipline the campus police who used tasers on students last year at UCLA, I believe that it necessary for us to investigate filing suit against the university for creating an environment that is hostile to free speech. If we do not counter the aggressive actions of the campus police, we will lose our ability to defend the public nature of our university.
Monday, November 15, 2010
The UC's Path to Financial Suicide
Due to three actions taken by the Regents, the University of California is headed towards a total financial meltdown. These three actions are the nearly twenty-year contribution “holiday” for the pension plan, the outsourcing of the management of the investment funds, and the pending decision to support President Yudof’s pension solution. While many people have been involved in these moves, the Regents are responsible for the fiscal health of the system.
The Problem
The Post-Employment Task Force and President Yudof have both endorsed a funding plan for the pension that will require the university to eventually spend at least $1.7 billion a year on pension costs alone. This level of employer contributions dwarfs any cut the UC system has received from the state. We must remember that when the state cut the UC budget by $670 million in 2008-10, the university turned to layoffs, furloughs, huge fee increases, enrollment reductions, and a whole host of cost cutting measures that shook the university at its foundation. Imagine if the university has to spend close to $2 billion several years in a row.
The fact that no one has questioned this path to financial suicide just means that either no one understands how the university is financed or no one wants to deal with the real problem. Instead, we get Yudof's pension proposal for saving money in thirty years by changing the retirement age for new hires. This impotent gesture may placate the bond raters and some Republican legislators, but it does not address the central problem, which is that we need to move to fully funding the normal cost of the pension program now.
The Union Coalition Criticism of the New Pension Tier
The Union Coalition (UCUC) is protesting Yudof’s plan since: 1) the new tier will hurt many staff and manual workers who will not be able to work until 65; 2) the new tier and current contribution rates have to be accepted by the unions, but the university for the most part has ignored the input of the unions representing close to half of all UC employees; 3) the new tier does not help to deal with the current problems facing UCRP; 4) the ratio of employer-to-employee contributions for the new tier is much higher than any past ratio (the ratio in the 1980s averaged 5:1, and the new ratio is almost 1:1); 5) the large pension contributions combined with the shifting of costs for retiree healthcare puts most employee groups below market value; and 6) there is no stated plan to address the decrease in total compensation.
While the unions are willing to work with the university to help fund the pension in a more effective manner, the university has refused to include the unions in the decision-making process. In fact, when the union coalition asked President Yudof to allow us to make a presentation about our concerns during the official discussion of his pension proposals at the November 18th Regents meeting, we were told that the Regents cannot have every outside group take up the time of the meetings, and so we can have our one minute during public comment time. Our response is that we represent close to half of the employees, and we are not just some outside group. Furthermore, at the start of public comments, we are always told that the Regents will not be responding to any questions posed by the speakers; this is a great example of fake democracy in action.
An Impossible Funding Plan
Instead of acknowledging and correcting all of the mistakes that the Regents have made in relation to UCRP, President Yudof gives this summary of why the pension plan is in trouble: “Costs are increasing, UC and its employees are facing increasing contribution levels, and the state has not resumed its funding to be applied to the University's pension fund.” There is no mention here of losing $16 billion in investments or the Regents’ decision to suspend contributions for 20 years; instead the blame is placed squarely on cost increases and the failure of the state to support the university. When Yudof does get to the plan to fund UCRP, this is what we are told: “Under the current Plan, total contributions to UCRP are on track to increase to above 30 percent of covered compensation in 10 years, by fiscal year (FY) 2020 . . . University contributions are assumed to be 7 percent in Plan Years beginning FY 2011 and 10 percent in FY 2012, with a two percent increase annually thereafter.” In plain English, this means that if employee contributions peek at 8% of their salary in 2013, and the university pays 12% of covered compensation in 2013, the employer contribution will move to 22% by 2018 (after 2012, the employer contribution rate increases 2% each year). However, it is highly unlikely that the university will be able to require all grants, medical services, and core functions to pay 22% of salary in 2018, and so we are left asking, why didn’t the university simply bite the bullet and move immediately by requiring the employees to pay 5% and the employers 12% to fund the full normal cost and therefore reduce the need to pay so much in the future. Moreover, if the university intends to borrow money from itself to pay down the liability, it could do this right away if it fully funded the normal cost with higher contribution rates.
The reason why the university did not want to move to full funding of the normal cost right off the bat is that it knew that it could not get the medical centers and the research grants to pay their full share, and it was afraid of letting the state off the hook for its part. However, by not putting in 12% from all sources now, it will have to put in at least 22% later. Meanwhile, the grants and the medical services are not paying their fair share, and the administration is alienating the unions who represent close to half of all of the employees in the pension plan. Instead of working with the unions to move to full funding, the administration has removed most represented employees from the process and has pushed for a new pension tier that is supposed to save $8.4 billion over a 25-year period, which turns out to be $336 million a year. However, the university has also promised faculty and unrepresented staff that these savings will go to pay for salary increases to cover increased employee contributions and benefit reductions. In other words, the new tier will save nothing and do nothing to solve the immediate problem.
The way that Yudof’s proposal attempts to address the current funding of UCRP is through borrowing and debt restructuring: “Based on the suggestions of the Finance Team, the President recommends that The Regents delegate authority to the President to fully fund the UCRP ARC as quickly as practical by paying UCRP “modified” ARC (Normal Cost plus interest only on the UAAL) from 2011 until 2018 and using other University resources to make up the gap between Normal Cost and modified ARC, including borrowing from the Short Term Investment Pool (STIP) and restructuring of University debt using STIP interest.” This policy is full of loopholes because it calls to fully fund the normal cost “as quickly as practical,” which is legalese for “whenever we want to do it.” Furthermore, the idea of funding UCRP by “using other University resources” means that the President will be given the power to raid any part of the university including student fees and departmental budgets.
Why We All Should be Concerned
If you are not worried about the university having to come up with 22% of covered compensation to fund UCRP, imagine if your department or program would have to take a 22% reduction in its budget every year. Just as departments are assessed a 3% tax to fund retiree healthcare, it is likely that each department will be taxed 20% for UCRP each year. In fact, UCLA has already moved to a decentralized budget system that forces individual departments to pay for all benefit costs.
The only solution is to bring all of the stakeholders to the table, including the unions, and figure out a rational and doable plan to fund the pension and maintain the university without increasing student fees at a high rate or closing down departments or even campuses. By ramping up employee and employer contributions now and eliminating any new tier, the university can put itself on a more stable financial ground, but it will take the agreement of all parties. Furthermore, the Regents have to be held accountable for their failure to protect the financial interests of the university.
The Problem
The Post-Employment Task Force and President Yudof have both endorsed a funding plan for the pension that will require the university to eventually spend at least $1.7 billion a year on pension costs alone. This level of employer contributions dwarfs any cut the UC system has received from the state. We must remember that when the state cut the UC budget by $670 million in 2008-10, the university turned to layoffs, furloughs, huge fee increases, enrollment reductions, and a whole host of cost cutting measures that shook the university at its foundation. Imagine if the university has to spend close to $2 billion several years in a row.
The fact that no one has questioned this path to financial suicide just means that either no one understands how the university is financed or no one wants to deal with the real problem. Instead, we get Yudof's pension proposal for saving money in thirty years by changing the retirement age for new hires. This impotent gesture may placate the bond raters and some Republican legislators, but it does not address the central problem, which is that we need to move to fully funding the normal cost of the pension program now.
The Union Coalition Criticism of the New Pension Tier
The Union Coalition (UCUC) is protesting Yudof’s plan since: 1) the new tier will hurt many staff and manual workers who will not be able to work until 65; 2) the new tier and current contribution rates have to be accepted by the unions, but the university for the most part has ignored the input of the unions representing close to half of all UC employees; 3) the new tier does not help to deal with the current problems facing UCRP; 4) the ratio of employer-to-employee contributions for the new tier is much higher than any past ratio (the ratio in the 1980s averaged 5:1, and the new ratio is almost 1:1); 5) the large pension contributions combined with the shifting of costs for retiree healthcare puts most employee groups below market value; and 6) there is no stated plan to address the decrease in total compensation.
While the unions are willing to work with the university to help fund the pension in a more effective manner, the university has refused to include the unions in the decision-making process. In fact, when the union coalition asked President Yudof to allow us to make a presentation about our concerns during the official discussion of his pension proposals at the November 18th Regents meeting, we were told that the Regents cannot have every outside group take up the time of the meetings, and so we can have our one minute during public comment time. Our response is that we represent close to half of the employees, and we are not just some outside group. Furthermore, at the start of public comments, we are always told that the Regents will not be responding to any questions posed by the speakers; this is a great example of fake democracy in action.
An Impossible Funding Plan
Instead of acknowledging and correcting all of the mistakes that the Regents have made in relation to UCRP, President Yudof gives this summary of why the pension plan is in trouble: “Costs are increasing, UC and its employees are facing increasing contribution levels, and the state has not resumed its funding to be applied to the University's pension fund.” There is no mention here of losing $16 billion in investments or the Regents’ decision to suspend contributions for 20 years; instead the blame is placed squarely on cost increases and the failure of the state to support the university. When Yudof does get to the plan to fund UCRP, this is what we are told: “Under the current Plan, total contributions to UCRP are on track to increase to above 30 percent of covered compensation in 10 years, by fiscal year (FY) 2020 . . . University contributions are assumed to be 7 percent in Plan Years beginning FY 2011 and 10 percent in FY 2012, with a two percent increase annually thereafter.” In plain English, this means that if employee contributions peek at 8% of their salary in 2013, and the university pays 12% of covered compensation in 2013, the employer contribution will move to 22% by 2018 (after 2012, the employer contribution rate increases 2% each year). However, it is highly unlikely that the university will be able to require all grants, medical services, and core functions to pay 22% of salary in 2018, and so we are left asking, why didn’t the university simply bite the bullet and move immediately by requiring the employees to pay 5% and the employers 12% to fund the full normal cost and therefore reduce the need to pay so much in the future. Moreover, if the university intends to borrow money from itself to pay down the liability, it could do this right away if it fully funded the normal cost with higher contribution rates.
The reason why the university did not want to move to full funding of the normal cost right off the bat is that it knew that it could not get the medical centers and the research grants to pay their full share, and it was afraid of letting the state off the hook for its part. However, by not putting in 12% from all sources now, it will have to put in at least 22% later. Meanwhile, the grants and the medical services are not paying their fair share, and the administration is alienating the unions who represent close to half of all of the employees in the pension plan. Instead of working with the unions to move to full funding, the administration has removed most represented employees from the process and has pushed for a new pension tier that is supposed to save $8.4 billion over a 25-year period, which turns out to be $336 million a year. However, the university has also promised faculty and unrepresented staff that these savings will go to pay for salary increases to cover increased employee contributions and benefit reductions. In other words, the new tier will save nothing and do nothing to solve the immediate problem.
The way that Yudof’s proposal attempts to address the current funding of UCRP is through borrowing and debt restructuring: “Based on the suggestions of the Finance Team, the President recommends that The Regents delegate authority to the President to fully fund the UCRP ARC as quickly as practical by paying UCRP “modified” ARC (Normal Cost plus interest only on the UAAL) from 2011 until 2018 and using other University resources to make up the gap between Normal Cost and modified ARC, including borrowing from the Short Term Investment Pool (STIP) and restructuring of University debt using STIP interest.” This policy is full of loopholes because it calls to fully fund the normal cost “as quickly as practical,” which is legalese for “whenever we want to do it.” Furthermore, the idea of funding UCRP by “using other University resources” means that the President will be given the power to raid any part of the university including student fees and departmental budgets.
Why We All Should be Concerned
If you are not worried about the university having to come up with 22% of covered compensation to fund UCRP, imagine if your department or program would have to take a 22% reduction in its budget every year. Just as departments are assessed a 3% tax to fund retiree healthcare, it is likely that each department will be taxed 20% for UCRP each year. In fact, UCLA has already moved to a decentralized budget system that forces individual departments to pay for all benefit costs.
The only solution is to bring all of the stakeholders to the table, including the unions, and figure out a rational and doable plan to fund the pension and maintain the university without increasing student fees at a high rate or closing down departments or even campuses. By ramping up employee and employer contributions now and eliminating any new tier, the university can put itself on a more stable financial ground, but it will take the agreement of all parties. Furthermore, the Regents have to be held accountable for their failure to protect the financial interests of the university.
Wednesday, November 3, 2010
UC-AFT Election Analysis
The most positive aspect of the 2010 election is that Meg Whitman did not win and proposition 25 passed, which means that a simple majority of the state legislature can now pass a budget. In the past, we have had a good relationship with Jerry Brown, and he will most likely support higher education in a more robust way.
Another great win was Das Williams for state assembly out of Santa Barbara. Das has been a big supporter of the students and the faculty at UCSB. In fact, UC-AFT was an early promoter of his candidacy, and we hope to work with him closely in shaping his educational policies.
On the national front, things look pretty bad, and we should expect a period of profound infighting and a budgetary stalemate. It looks like the country is following California’s recent past because the minority party will be able to block all legislation and call for tax cuts and the de-funding of public programs. In terms of higher education, we should expect a move to cut student loans and grants. It is also likely that the House will try to reduce the funding of health and science research. President Obama will either compromise and adopt a conservative agenda, or he will promote a more progressive agenda and let the Republicans vote down popular programs. Let’s hope he picks the latter.
Another great win was Das Williams for state assembly out of Santa Barbara. Das has been a big supporter of the students and the faculty at UCSB. In fact, UC-AFT was an early promoter of his candidacy, and we hope to work with him closely in shaping his educational policies.
On the national front, things look pretty bad, and we should expect a period of profound infighting and a budgetary stalemate. It looks like the country is following California’s recent past because the minority party will be able to block all legislation and call for tax cuts and the de-funding of public programs. In terms of higher education, we should expect a move to cut student loans and grants. It is also likely that the House will try to reduce the funding of health and science research. President Obama will either compromise and adopt a conservative agenda, or he will promote a more progressive agenda and let the Republicans vote down popular programs. Let’s hope he picks the latter.
Monday, October 25, 2010
A Response to the Commission on the Future’s Final Recommendations
Since the regents are supposed to be discussing the Commission on the Future’s recommendations at their November 16-18 meeting, it is important to look at their final report. Following the trend of most recent UC documents, the Commission begins by claiming a dire fiscal crisis: “state funding has not kept pace with inflation and enrollment growth, particularly over the last decade. Since 1990-91, average inflation-adjusted state support for educating UC students declined 54 percent. Student fee increases have addressed only about two-fifths (40%) of this decrease. Other actions to reduce costs have resulted in reduction in staff and instructional offerings, faculty and staff salary lags and reductions in funding for instructional equipment, library materials, and facilities maintenance.” As I have argued before, these statistics are misleading because they neglect to add that since 1990, UC has reduced its instructional costs by increasing the size of classes and relying on inexpensive non-tenured faculty to teach the majority of the courses. Moreover, while the report claims that UC now only gets $7,570 per student from the state, the real figure is closer to $10,000, and on some campuses, the amount goes up to $18,000. In fact, according to the Commission’s own numbers, in 2009-10, there were 214,000 resident students, and since the university got over $2.5 billion in funding from the state, the average student subsidy was $11,687.
Processing Students at a Faster Rate
Since the university claims that it is not getting enough money from the state, and it cannot support increased enrollments, the only thing that can be done is to do more with less. In fact, many of the commission’s recommendations are shaped by this logic, which is itself based on a false understanding of how the university actually spends its money. For example, Recommendation 1, Adopt Strategies for Reducing Time to Degree, argues that the university can save money by pushing undergraduate students through the system at a faster rate: “Implementing formal programs that encourage and facilitate a shorter time to degree, such as “packaged” options for three-year degrees with pathways that make full use of advanced placement credits and summer terms. Such pathways could include joint bachelor’s/master’s degree programs.” While three-year degrees would lower the quality of a UC degree, they would do nothing to improve the fiscal health of the system.
Not only does the Commission want to decrease the time it takes to get a degree, but it also wants to increase the number of transfer students and reduce the number of traditional freshman enrollments. Recommendation 4: Reaffirm the University’s Commitment to Achieving Master Plan Targets for Freshman and Transfer Students looks a good idea on the surface, but it does not take into account the economic realities of accepting more transfer students. By calling for a 60:40 ratio between upper- and lower-division students, the university will cut into its profit margin generated by large enrollment, low-cost, lower-division courses.
Due to the way courses are currently structured in the UC system, lower-division undergraduate courses produce a profit, while upper-division classes break even, and graduate education loses money. This economic analysis is not meant to undermine graduate education, but it is essential for us to recognize that we need to honestly see where money comes in and where it goes. Once we know how we gain and spend money, we can determine how to support the programs we want to protect. In fact, the final report does at one point recognize this funding structure, “Admittedly, the education of upper-division students is more expensive because of smaller classes and necessary specialization and facilities. As implemented, the resource consequences must be monitored. From an aggregate perspective, however, transfer students require only two years of UC resources in order to graduate with a UC bachelor’s degree. Serving transfer students increases the number of degrees the UC can confer with any given level of instructional resources.” While the first part of this argument acknowledges the financial need for more lower-division courses, the final part ignores this financial reality and simply returns to the desire to increase degrees by increasing transfer enrollments.
In fact, by calling for a 60:40 ratio between upper- and lower-division students, the university will commit economic suicide. Not only are upper-division students more expensive, but transfer students limit the ability of the university to accept out-of-state students who pay a high tuition without financial aid.
The Online Solution
Another result of the commission’s failure to grasp that undergraduate students subsidize the rest of the university is their call for online classes. The very title of Recommendation 5, “Continue Timely Exploration of Fully Online Instruction for Undergraduates, as well as for Self-Supporting Programs and in University Extension” makes one think that self-supporting programs actually provide needed dollars to the general fund. Moreover, the commission makes the following dubious claim: “Within the general realm of our current on-campus programs, and in the near-to- mid term, increased online instruction may . . . reduce course impaction, reduce scheduling conflicts, and increase summer session enrollments by enabling students to earn credits without being on campus, thus reducing students’ average time to degree.” What this analysis does not state is that online courses are likely to cost more money, decrease the quality of UC courses, require more faculty work, and draw funding away from the core mission.
While there are some words of caution in the Commission’s discussion of online courses, the final report calls for a major extension of digital education: “The Commission believes that the Pilot Project currently being coordinated by the Office of the President, with the endorsement and participation of the Senate, may clarify the desirability of substantially increasing the use of fully online instruction for degree credit, beginning with lower division and UC Extension courses.” Once again, the problem is that if the UC farms out its lower-division courses, departments might lose one of their central sources for funding.
External Grants and Endowments Lose Money
One positive part of the final report is the acknowledgement that external research grants cost the university several hundred million dollars a year: “Externally funded research in the University of California is supposed to be conducted under the accounting principle of total cost recovery, including indirect costs. The indirect costs are intended to recover the facilities and administrative costs attributable to research. However, Indirect Cost Recovery (ICR) rates on federally funded research at UC campuses do not fully recover the costs of research, falling 5-10 percentage points behind some of our comparator institutions and on average 25 percent short of full recovery. For a variety of historical reasons and local campus practices, UC also does not fully recover the costs of research for non-federally funded research projects – those projects funded by the State of California, foundations, gifts, and corporations.” It turns out that while most people think external grants and endowment gifts bring money to universities, these external funds can actually cost schools large sums because they fail to cover the indirect costs associated with buildings, benefits, labs, staff, administration, and equipment.
The Costly Problem of Graduate Education
If we acknowledge that external funding can actually hurt the financial health of an institution, we realize that the only real source of income for the university is undergraduate tuition and related state funding. Yet, Recommendation 12 calls for, “Increase Graduate Student Enrollment to Meet Long Range Planning Goals and Research Mission Prescribed in the Master Plan.” Although the UC system needs to continue to support graduate education, it is unclear how this can be accomplished. For example, the Commission recommends a shift in the ratio between graduate and undergraduate enrollments: “To be excellent in national and global terms, however, the proportion of graduate enrollments relative to undergraduate enrollment must be adequate to support the research and instructional mission.” It is unclear whether this statement means that the university needs graduate students to teach undergraduates, or the university needs to increase graduate students to retain its prestige and to support the research mission.
What is clear is that a change in the ratio of graduate-to-undergraduate students would require either an abandonment of the Master Plan or a new funding model: “The education of graduate students is more expensive than undergraduate students, both in instructional costs and student financial support. Therefore, under current and the baseline fiscal projections, funding for graduate enrollment growth would require that campuses reduce undergraduate enrollment—an unacceptable result in light of our access mission and commitment to the Master Plan enrollment goals.” Given this awareness of the high cost of graduate education, it becomes hard to rationalize the following recommendation of the Commission: “Recognizing UC’s role in the Master Plan as the state’s primary research and doctoral-granting institution, the Commission recommends that the University increase the proportion of graduate enrollments from 22 percent of total enrollments to 26 percent by 2020-21, with individual targets set by each campus.” From a strictly budgetary perspective, it makes no sense to replace the profit-generating undergraduate students with costly graduate programs. In fact, due to the often low levels of support for graduate students in the UC system, it would be much more cost effective and fair if the university reduced the number of graduate students and increased their funding.
The Failure to Grasp the Budget as a Whole
It should be clear at this point that the Commission’s recommendations do not fit together and suffer from an integrated understanding of how money flows in the UC system. In fact, even the good suggestion of reducing administrative costs is undermined by the methods for achieving the savings. While recommendation 14 calls for the system to, “Expedite Implementation of UC’s Initiative on System-Wide Administrative Reforms, with the Goal of $500 Million in Annual,” the way the reductions are being resented represent a major increase in power for the Office of the President. In fact, after a period of reducing the UCOP budget by farming positions out to the campus, we are now witnessing a major increase in UCOP positions.
Since no one is looking at how the different parts of the university budget interact, many of the proposed ways of saving money will actually cost the university funds in the long run. For example, the call to derive $250 million from self-supporting programs, like extension, fails to recognize how these programs often turn a profit by not paying their fair share for buildings, administration, staff, benefits, and maintenance. In other words, self-sustaining units are not actually self-sustaining, and they rely on using UC facilities and faculty even though they claim to be separate and private. Moreover, as the report posits, most of the profits of these self-sustaining units come from one source: “Current UC self-supporting programs generate about $100 million annually, about $25 million per year above program costs. However, most of that revenue comes from the high- cost, self-supporting executive MBA programs. To date, most other self-supporting programs are relatively small and generate modest amounts above programs costs.” Unless, we want to shut down most of the privatized programs and increase the production of executive MBAs, we will need to find another source for revenue.
Even Private Gifts Lose Money
Another proposed area for future revenue is private fundraising, but as recommendation 16 notes, the way these funds are donated often restricts their use and prevents them from contributing to the common good: “The University’s history of fundraising, however, is marked by a high level of restriction on the funds raised. Approximately 95 percent of UC’s overall endowment payout is restricted, contrasted with 80 percent for most public institutions and 55 percent for private institutions. Only two percent of all gift support in recent years is unrestricted, even less for endowment. To put this in context, of the $1.3 billion in funds raised in FY 2008-09, just over $25 million could be characterized as unrestricted.” Not only are most of these endowment funds dedicated to specific projects, but they often fail to cover the full costs of the programs and positions they support. Furthermore, the university spends huge sums of money trying to raise more endowment funds.
When All Else Fails, Raise Tuition
The final recommendation calls for exploring differential tuition by campus, and it is clear from the Commission’s final report that they see this as a very attractive proposition: “Although tuition cannot singlehandedly solve UC’s budgetary challenges, it is a key component of any funding strategy and one of the only revenue sources that UC can effect to replace other funding shortfalls. There still exists substantial headroom on each campus for across-the-board tuition increases without impacting enrollments.” In other words, campuses can raise tuition and still attract high enrollments, and so each campus should be able to set their own price. Of course, this recommendation completely negates the previous defense of the Master Plan and the very essence of a public university.
The Real Recommendations
At the end of this mixed bag of recommendations, the Commission adds a curious section under the heading of “Contingency Recommendations”: “In addition to the recommendations endorsed, the Commission also deliberated several ideas that are worthy of additional study but need not be advanced at this time. Should the fiscal crisis deepen and state and other funding sources continue to decline to a point where the University can no longer sustain its longstanding commitment to academic quality and increasing access, The Regents, President, Chancellors, and Academic Senate may need to consider some or all of the following contingency measures.” By starting with the rhetoric of crisis, the Commission opens the door to a whole host of problematic suggestions: “Curtail student enrollment, potentially falling short of achieving the Master Plan ratios recommended by the Commission (see Recommendation 4) and restricting access at both the undergraduate (freshmen and transfers) and graduate levels: Re-examine UC’s financial aid strategies, also recommended by the Commission (see Recommendation 6), including reducing the portion of new undergraduate tuition revenue that is set aside (currently 33%) to fund financial aid for needy students; Raise or eliminate the systemwide limit on the proportion of nonresident undergraduate students admitted and enrolled (the Commission recommends a 10 percent systemwide cap in Recommendation 7): Substantially increase tuition and fees, including charging differential tuition by campus (see Recommendation 17), as part of a broad based program to sustain the University; Downsize the University’s faculty and staff workforce, including limiting the replacement of faculty lost due to retirements, terminations, and other separations. This recommendation came to the Commission from the Academic Council: Forego new building and capital projects that are not absolutely essential for safety. “
I believe that these final suggestions actually represent the real recommendations of the Commission. In this neoliberal vision, the few students who are lucky to get into the UC system will pay much more, receive less financial aid, and will be taught be fewer faculty members. This is the ultimate vision of downsized version of public higher education. Let us hope that the Regents have the insight to see that not only do these plans fail to make educational sense, but they also do not make fiscal sense.
Processing Students at a Faster Rate
Since the university claims that it is not getting enough money from the state, and it cannot support increased enrollments, the only thing that can be done is to do more with less. In fact, many of the commission’s recommendations are shaped by this logic, which is itself based on a false understanding of how the university actually spends its money. For example, Recommendation 1, Adopt Strategies for Reducing Time to Degree, argues that the university can save money by pushing undergraduate students through the system at a faster rate: “Implementing formal programs that encourage and facilitate a shorter time to degree, such as “packaged” options for three-year degrees with pathways that make full use of advanced placement credits and summer terms. Such pathways could include joint bachelor’s/master’s degree programs.” While three-year degrees would lower the quality of a UC degree, they would do nothing to improve the fiscal health of the system.
Not only does the Commission want to decrease the time it takes to get a degree, but it also wants to increase the number of transfer students and reduce the number of traditional freshman enrollments. Recommendation 4: Reaffirm the University’s Commitment to Achieving Master Plan Targets for Freshman and Transfer Students looks a good idea on the surface, but it does not take into account the economic realities of accepting more transfer students. By calling for a 60:40 ratio between upper- and lower-division students, the university will cut into its profit margin generated by large enrollment, low-cost, lower-division courses.
Due to the way courses are currently structured in the UC system, lower-division undergraduate courses produce a profit, while upper-division classes break even, and graduate education loses money. This economic analysis is not meant to undermine graduate education, but it is essential for us to recognize that we need to honestly see where money comes in and where it goes. Once we know how we gain and spend money, we can determine how to support the programs we want to protect. In fact, the final report does at one point recognize this funding structure, “Admittedly, the education of upper-division students is more expensive because of smaller classes and necessary specialization and facilities. As implemented, the resource consequences must be monitored. From an aggregate perspective, however, transfer students require only two years of UC resources in order to graduate with a UC bachelor’s degree. Serving transfer students increases the number of degrees the UC can confer with any given level of instructional resources.” While the first part of this argument acknowledges the financial need for more lower-division courses, the final part ignores this financial reality and simply returns to the desire to increase degrees by increasing transfer enrollments.
In fact, by calling for a 60:40 ratio between upper- and lower-division students, the university will commit economic suicide. Not only are upper-division students more expensive, but transfer students limit the ability of the university to accept out-of-state students who pay a high tuition without financial aid.
The Online Solution
Another result of the commission’s failure to grasp that undergraduate students subsidize the rest of the university is their call for online classes. The very title of Recommendation 5, “Continue Timely Exploration of Fully Online Instruction for Undergraduates, as well as for Self-Supporting Programs and in University Extension” makes one think that self-supporting programs actually provide needed dollars to the general fund. Moreover, the commission makes the following dubious claim: “Within the general realm of our current on-campus programs, and in the near-to- mid term, increased online instruction may . . . reduce course impaction, reduce scheduling conflicts, and increase summer session enrollments by enabling students to earn credits without being on campus, thus reducing students’ average time to degree.” What this analysis does not state is that online courses are likely to cost more money, decrease the quality of UC courses, require more faculty work, and draw funding away from the core mission.
While there are some words of caution in the Commission’s discussion of online courses, the final report calls for a major extension of digital education: “The Commission believes that the Pilot Project currently being coordinated by the Office of the President, with the endorsement and participation of the Senate, may clarify the desirability of substantially increasing the use of fully online instruction for degree credit, beginning with lower division and UC Extension courses.” Once again, the problem is that if the UC farms out its lower-division courses, departments might lose one of their central sources for funding.
External Grants and Endowments Lose Money
One positive part of the final report is the acknowledgement that external research grants cost the university several hundred million dollars a year: “Externally funded research in the University of California is supposed to be conducted under the accounting principle of total cost recovery, including indirect costs. The indirect costs are intended to recover the facilities and administrative costs attributable to research. However, Indirect Cost Recovery (ICR) rates on federally funded research at UC campuses do not fully recover the costs of research, falling 5-10 percentage points behind some of our comparator institutions and on average 25 percent short of full recovery. For a variety of historical reasons and local campus practices, UC also does not fully recover the costs of research for non-federally funded research projects – those projects funded by the State of California, foundations, gifts, and corporations.” It turns out that while most people think external grants and endowment gifts bring money to universities, these external funds can actually cost schools large sums because they fail to cover the indirect costs associated with buildings, benefits, labs, staff, administration, and equipment.
The Costly Problem of Graduate Education
If we acknowledge that external funding can actually hurt the financial health of an institution, we realize that the only real source of income for the university is undergraduate tuition and related state funding. Yet, Recommendation 12 calls for, “Increase Graduate Student Enrollment to Meet Long Range Planning Goals and Research Mission Prescribed in the Master Plan.” Although the UC system needs to continue to support graduate education, it is unclear how this can be accomplished. For example, the Commission recommends a shift in the ratio between graduate and undergraduate enrollments: “To be excellent in national and global terms, however, the proportion of graduate enrollments relative to undergraduate enrollment must be adequate to support the research and instructional mission.” It is unclear whether this statement means that the university needs graduate students to teach undergraduates, or the university needs to increase graduate students to retain its prestige and to support the research mission.
What is clear is that a change in the ratio of graduate-to-undergraduate students would require either an abandonment of the Master Plan or a new funding model: “The education of graduate students is more expensive than undergraduate students, both in instructional costs and student financial support. Therefore, under current and the baseline fiscal projections, funding for graduate enrollment growth would require that campuses reduce undergraduate enrollment—an unacceptable result in light of our access mission and commitment to the Master Plan enrollment goals.” Given this awareness of the high cost of graduate education, it becomes hard to rationalize the following recommendation of the Commission: “Recognizing UC’s role in the Master Plan as the state’s primary research and doctoral-granting institution, the Commission recommends that the University increase the proportion of graduate enrollments from 22 percent of total enrollments to 26 percent by 2020-21, with individual targets set by each campus.” From a strictly budgetary perspective, it makes no sense to replace the profit-generating undergraduate students with costly graduate programs. In fact, due to the often low levels of support for graduate students in the UC system, it would be much more cost effective and fair if the university reduced the number of graduate students and increased their funding.
The Failure to Grasp the Budget as a Whole
It should be clear at this point that the Commission’s recommendations do not fit together and suffer from an integrated understanding of how money flows in the UC system. In fact, even the good suggestion of reducing administrative costs is undermined by the methods for achieving the savings. While recommendation 14 calls for the system to, “Expedite Implementation of UC’s Initiative on System-Wide Administrative Reforms, with the Goal of $500 Million in Annual,” the way the reductions are being resented represent a major increase in power for the Office of the President. In fact, after a period of reducing the UCOP budget by farming positions out to the campus, we are now witnessing a major increase in UCOP positions.
Since no one is looking at how the different parts of the university budget interact, many of the proposed ways of saving money will actually cost the university funds in the long run. For example, the call to derive $250 million from self-supporting programs, like extension, fails to recognize how these programs often turn a profit by not paying their fair share for buildings, administration, staff, benefits, and maintenance. In other words, self-sustaining units are not actually self-sustaining, and they rely on using UC facilities and faculty even though they claim to be separate and private. Moreover, as the report posits, most of the profits of these self-sustaining units come from one source: “Current UC self-supporting programs generate about $100 million annually, about $25 million per year above program costs. However, most of that revenue comes from the high- cost, self-supporting executive MBA programs. To date, most other self-supporting programs are relatively small and generate modest amounts above programs costs.” Unless, we want to shut down most of the privatized programs and increase the production of executive MBAs, we will need to find another source for revenue.
Even Private Gifts Lose Money
Another proposed area for future revenue is private fundraising, but as recommendation 16 notes, the way these funds are donated often restricts their use and prevents them from contributing to the common good: “The University’s history of fundraising, however, is marked by a high level of restriction on the funds raised. Approximately 95 percent of UC’s overall endowment payout is restricted, contrasted with 80 percent for most public institutions and 55 percent for private institutions. Only two percent of all gift support in recent years is unrestricted, even less for endowment. To put this in context, of the $1.3 billion in funds raised in FY 2008-09, just over $25 million could be characterized as unrestricted.” Not only are most of these endowment funds dedicated to specific projects, but they often fail to cover the full costs of the programs and positions they support. Furthermore, the university spends huge sums of money trying to raise more endowment funds.
When All Else Fails, Raise Tuition
The final recommendation calls for exploring differential tuition by campus, and it is clear from the Commission’s final report that they see this as a very attractive proposition: “Although tuition cannot singlehandedly solve UC’s budgetary challenges, it is a key component of any funding strategy and one of the only revenue sources that UC can effect to replace other funding shortfalls. There still exists substantial headroom on each campus for across-the-board tuition increases without impacting enrollments.” In other words, campuses can raise tuition and still attract high enrollments, and so each campus should be able to set their own price. Of course, this recommendation completely negates the previous defense of the Master Plan and the very essence of a public university.
The Real Recommendations
At the end of this mixed bag of recommendations, the Commission adds a curious section under the heading of “Contingency Recommendations”: “In addition to the recommendations endorsed, the Commission also deliberated several ideas that are worthy of additional study but need not be advanced at this time. Should the fiscal crisis deepen and state and other funding sources continue to decline to a point where the University can no longer sustain its longstanding commitment to academic quality and increasing access, The Regents, President, Chancellors, and Academic Senate may need to consider some or all of the following contingency measures.” By starting with the rhetoric of crisis, the Commission opens the door to a whole host of problematic suggestions: “Curtail student enrollment, potentially falling short of achieving the Master Plan ratios recommended by the Commission (see Recommendation 4) and restricting access at both the undergraduate (freshmen and transfers) and graduate levels: Re-examine UC’s financial aid strategies, also recommended by the Commission (see Recommendation 6), including reducing the portion of new undergraduate tuition revenue that is set aside (currently 33%) to fund financial aid for needy students; Raise or eliminate the systemwide limit on the proportion of nonresident undergraduate students admitted and enrolled (the Commission recommends a 10 percent systemwide cap in Recommendation 7): Substantially increase tuition and fees, including charging differential tuition by campus (see Recommendation 17), as part of a broad based program to sustain the University; Downsize the University’s faculty and staff workforce, including limiting the replacement of faculty lost due to retirements, terminations, and other separations. This recommendation came to the Commission from the Academic Council: Forego new building and capital projects that are not absolutely essential for safety. “
I believe that these final suggestions actually represent the real recommendations of the Commission. In this neoliberal vision, the few students who are lucky to get into the UC system will pay much more, receive less financial aid, and will be taught be fewer faculty members. This is the ultimate vision of downsized version of public higher education. Let us hope that the Regents have the insight to see that not only do these plans fail to make educational sense, but they also do not make fiscal sense.
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