By Akos Rona-Tas
The Political Reality
The referenda in the November elections made one thing painfully clear: most Californians still believe that we can have public services without paying for them. What is quite extraordinary is not that people don’t want to pay taxes. These are hard times and many people are either in financial trouble or have well founded fears of being there soon. What is remarkable is that a large portion of the electorate doesn’t seem to want anyone else to pay taxes either. This deep ideological commitment to lower taxes, shared by Republican and Democratic voters, a norm that took three decades to permeate our entire culture, will not dissipate anytime soon. It is, therefore, unrealistic to think that this “something-for-nothing” delusion, ironically fostered by the “no-free-lunch” ideology of market fundamentalism, will go away in time for UC to just muddle through in the next few years. Our challenge is this: we have to find ways of saving public education without the public paying its share.
The Weakness of the Report of UC Commission on the Future
UCOP and the Regents reached this conclusion some time ago, yet there is not much in the Gould Commission’s final report that would match the challenge of this quandary. Many of the incremental changes proposed are reasonable and will be helpful if implemented but, in the end, they will not be able to fill the hole in UC’s budget. The weakness of the report is rooted in two mistaken assumptions. The first that seemingly follows from the realization that we cannot count on the state anymore, is that UC must think about its future in one piece; the rules we put down now must guide the university throughout the 21st century. There is no medium term crisis plan for the next 4 to 7 years and another long range blue print beyond that. We are planning for a 21st century as if the worst economic crisis in the history of modern capitalism since the Great Depression would last for the rest of our lifetime and beyond. Each campus, of course, has its short term plan of survival but that is limited to modest cuts and creative accounting. The importance of chopping up the future into short, medium and long term is that what we need to do now to avoid the worst of this crisis may not be what we want our university to do once the crisis is over. The trick then is to insure that the short and medium term solutions do not impose themselves on our long term objectives.
The second problem is that the report is too heavily tilted in the direction of cost cutting. This is echoed by faculty groups who argue that to keep the quality of the university, we must follow corporations in trouble, and we must downsize. President Yudof voiced this position responding to Governor Brown’s budget proposal. While the Commission’s report does not directly advocate downsizing, it resigns itself to the inevitability of cutting faculty and enrollment. The few suggestions for raising extra revenues take the form of let’s do more of or better what we are already doing: more out-of-state students, more indirect cost recovery, more “self-supporting” programs. Doing more of the same can offer limited help in our crisis for two reasons. The changes are marginal and will produce much less revenue than needed. Moreover, there have been reasons for us not having done more or better already. Getting more qualified out-of-state students with our large classes, without any scholarships for non-Californians, and with high cost of living in our state is not easy for most campuses. Recovering more indirect cost is hard when funding agencies refuse to pay UC’s cost of research. “Self-supporting” programs are expensive to run and compete with programs at other institutions and often end up not supporting themselves. There has to be a more serious approach to generating additional revenue than this tinkering at the margins.
This undifferentiated view of the future and cost cutting bias created a framework that drives all sides of the debate on the future of UC. I think the only way forward is to move beyond this framework and think of a medium range plan and a serious long-term strategy for increasing revenues. I will argue that as a medium term solution to keep quality from falling faster we should not cut but expand UC enrollment because we need the additional tuition revenue. Furthermore, I will propose that we refashion UC in a way that designates a core of its functions that would be protected from excessive commercialization and privatization and a set of profitable auxiliary enterprises that would subsidize the core.
Medium Term Solution: Increase Enrollment
With the new $400 million cut UC faces a stark choice: we can cut faculty and staff or we can increase enrollment. Both will compromise quality but with different long term consequences and I will argue that the second is our better option.
There is a common mistake of thinking about our current crisis as having a bunch of students the State did not pay for. If only we could get rid of those students, so the thinking goes, we would be much better off. This would be true if students paid no tuition or if their fees were symbolic. This is not the case anymore. Currently, tuition is close to what the state pays for each student. It would be also true if students were like candy bars and you had to pay twice as much for two as you pay for one. But students are not candy bars because the marginal cost of the second student is smaller than the cost of the first. From buildings to laboratories, from libraries to tenured faculty, the fixed costs of UC are high. Adding another student will require an additional chair in the classroom but they can use the same buildings, labs, libraries and faculty than the others. There are absolute physical limits to the number of people who can use these resources and adding students will hurt the quality of instruction but as a medium range solution, this maybe our best bet.
In fact, cutting enrollment, as advocated by many, will cost us money because the marginal cost of a student is less than the tuition we forgo by rejecting her. The real savings from cutting if there is any, will come from cutting faculty. That, however, is hardly a way to keep quality high. In fact, as I have said, we have only two ways to balance our budgets: we can cut faculty or enroll more students. Because we are in an emergency, we must find a temporary solution that creates the least damage in the long run. If we think of the university as composed of the stock of tenured faculty, programs and facilities, and the flow of students streaming through our campuses, it is easy to see which of the two is easier to adjust. Cutting faculty with tenure by attrition will not just be slow, will not just create a program structure where departments with market power will flourish while others will shrink, and will not just be detrimental for the UC pension system, but will raise the costs of rebuilding departments and programs.
On the other hand, increasing enrollment is relatively easy and reversing the bulge is straightforward. The easiest to manage is transfer student numbers because those students are at UC only for two years and how many we must admit is outside the Master Plan. The advantage of out-of-state students, on the other hand, is not just their high tuition but also that we can cut them easily if we can afford to do that. If we let a lot of students in, we can decide later either to slim UC by admitting fewer of them, or to grow the faculty to match the larger student body. The former will be harder politically, the latter will require more resources, but both are doable and are much easier than cutting tenured faculty in a reasonable way and then rebuild the university.
Opening the doors of UC wider, if done properly, may also earn UC political capital with the electorate. If UC presents it as reaching out to California in an emergency situation, at a time when California needs its colleges most, we may even be able to sway the voters to accept the oil tax to pay for higher education. Overenrollment is not a long-term solution. We have to be very clear that overenrollment is a crisis measure and we have to make a strong commitment to returning to our original student to faculty ratio, as soon as it is feasible.
Long Term Solution: Develop Auxiliary Enterprises That Subsidize the Core Mission
Our long-term strategy should be that if the state does not subsidize UC, UC will have to subsidize its own mission. To this end, we should revamp UC in a way that it retains and protects its traditional core functions (i.e., undergraduate education of Californians, graduate education plus non-applied research) while developing auxiliary functions that would subsidize the core. The idea is that rather than marketizing/privatizing our core mission, we expand and marketize auxiliary functions to support it, or to put it differently: UC would generate as much of the needed additional revenue as it can, but not through higher tuition or the corporatization of instruction and research. Of course, the university should not engage in an enterprise just because it is profitable. Auxiliary enterprises must be compatible with UC’s mission and should be in line with such principles as promoting life-time learning, involvement in the local community, and the expansion of the pool of people UC serves in areas where we are best qualified to do so.
This is not a particularly original idea and many of its elements are there in the Commission’s report but it is a very tricky path and we have to make sure it doesn’t take us somewhere we don’t want to go. For this subsidization to work properly,
a) there must be an institutional/organizational firewall that allows the net flow of resources only from the auxiliaries to the core and not in the reverse direction,
b) there must be an environment that allows the auxiliaries to prosper within principled guidelines,
c) we must create a system of faculty monitoring and oversight that patrols the border between core and auxiliaries and, last but not least,
d) we need a level of financial transparency that is currently missing, which involves a system of financial disclosure that facilitates estimating costs and that produces a standardized, periodic report allowing for the necessary calculations.
UC should set up the institutional framework that would include a center for institutional innovation that would evaluate and set into motion business ideas and then would monitor and re-evaluate them. The center should be systemwide to allow for the exchange of ideas across campuses. In fact, the circulation of ideas should be one of the main functions of the center. The center should operate with strong Academic Senate oversight.
Here are a few examples of potential auxiliaries:
1. UC EAP could be offered to non-UC students. Currently, EAP, an amazing infrastructure started in the 1960s and providing UC education (for UC credit) to over 4000 UC students each year, is in the process of being hacked to death. If UC EAP would be offered to other colleges for the price of out-of-state tuition and to Cal State for UC prices, economies of scale and additional revenue would save EAP (which is already close to being self-supporting). This way new money would support the core (EAP for UC students is core). There could even be money left over to spend on on-campus instruction. Education abroad currently is a lucrative business where we would compete with such formidable institutions as Butler University and Arcadia University that make a lot of money doing what we could do. For this to happen, UC would need to research on the current market and invest in marketing EAP to other schools, a task the proposed center could undertake.
2. Extension can be expanded, a point endorsed by the Commission. Extension currently offers courses in adult education. This should be conceived not just simply as a money making enterprise catering to professionals but also as community involvement that calls for not just narrowly focused post-graduate professional degrees but also courses in the humanities and the social sciences. The point here is that extension should be a coordinated effort of each campus where two contradictory aims should be reconciled: 1.) extension should provide subsidies for the core, but at the same time 2.) the more lucrative programs should also subsidize -- if subsidy is necessary, -- courses that reach out to the community. (One of the many reasons New York is a cultural center is that Columbia, CUNY, the New School, NYU, etc., have all been involved in adult education very broadly conceived.) A broader strategy of expanding extension could raise new revenues.
3. We should encourage, as we do, "self-supporting" programs, but we should tax them. In other words, self-supporting, breaking even would not be enough, they would have to contribute to the core. We should also encourage departments to offer self-supporting professional degrees including Masters of Advanced Studies. (At UCSD, we just approved a few new M.A.S. programs including one in simulation-based engineering and another in medical devices engineering.) But rather than just expecting departments to come up with such programs, UC should offer support developing and advertising them. Like Extension, this too should be a coordinated effort. The Senate should set clear guidelines about faculty workload and compensation, the use of UC facilities and the distribution of the income from these programs.
4. Outside the core is the area where on-line education could play an important role. We should start from the rule that no traditional UC degree (B.A., B. Sc., M.A. etc.) can be earned fully or substantially on-line. But we could still make certain types of knowledge available on-line for a fee, awarding certificates.
5. The traditional academic calendar leaves the campuses underutilized during the summer (and the winter break). From conferences to summer camps, there are many things campuses could do that could raise extra revenue but that could also serve other good purposes. (We should consider year-round education.)
6. With the big wave of boomer retirements, UC campuses could partner with private service providers and offer their campus community to retirees who want to be involved in campus life by taking classes, attending cultural events, going to public lectures, using the library etc. Currently, over 50 campuses, including UCLA and Stanford, have something along these lines (although in typical UC fashion, UCLA is not getting any revenue from this highly profitable Westwood retirement community.) AARP has special publications about "retiring near a college." Each campus could use such facilities to bring back to campus retiring alumni, keep UC pensioners close by, or bring academics retired from other universities into their communities (California will be attractive to many academics retiring from Madison, Ithaca, or Bloomington and campuses could issue an Emeritus Fellow title to some of these academics with certain privileges). UC would get a cut of the monthly fee retirees pay for their independent and assisted living.
7. We should consider offering college level AP courses for high school students (taught by our lecturers) that guarantee a high level of quality often glaringly absent in existing available courses.
8. We should rethink the financial relationship between our medical services and our core functions. UC Medical Centers should pay a tax to UC.
Some of these ideas may not work; others may work but will amount only to small change. Some may have unintended consequences. The point is that currently, we have no institutional mechanism even to evaluate ideas like this. With a few exceptions, UC is not set up to generate additional revenue. We also have no institutional mechanism that would protect the core from the encroachment of these enterprises if they really were to take off or from financial liability if they failed. This is the kind of mechanism that we must build.
In the foreseeable future state support for higher education will not return. We must have a strategy to address the resulting shortfall with a medium term (4-7 year) and a long term strategy. The first should be increased enrollment, the second a university that is more entrepreneurial and market-friendly on its periphery but not in its core.