Annoying Results of the State Audit of UC, Pt 1: No Cuts, You're Fine!

UC students, who will pay about 18% more in tuition next year, will be interested to know that the California State Auditor, which has now released its much-anticipated report, defines student fees as public funding (p 9). Their reason is that student fees are "obtained as part of [the University's regular course of business."  This explanation makes no sense at all, since federal research funds are also obtained through the regular course of business, but these taxpayer monies are classed with philanthropy and other things as private and thus excluded from this study.  This founding blunder misstates UC's actual financial condition, for some reason UCOP doesn't object to it, and the Auditor's other very important points, discussed in parts 2 and 3 of this post, are compromised by Sacramento's near-delusional inability to recognize the damage it is doing to public higher education.

This is an important report based on a lot of serious, thoughtful work.  But there are some problems, like defining student fees as public funds.

Last May I saw an email from UC's VP for budget Patrick Lenz, a lead UC negotiator in Sacramento, that included this bizarre sentence: "the only voice to agree with the UC that a $500 million budget cut does have an impact on the state’s funding of marginal cost per student was the LAO [Legislative Analyst's Office.}"  I read that sentence many times, since it seemed to be saying that all but one of our state agencies believe that a state budget cut doesn't mean that state revenues are being cut. I wrote several people for an explanation and didn't get one that made sense to me.  But apparently Lenz was exactly right, because when the state cuts its funds, UC raises tuition, so public funding stays the same - right??  Wrong! This year's tuition increases net 26% of this year's cut (pp 12-13), but even if they netted 100% student fees are not public funds.

Instead of looking into this, the state press has established the lede as the Office of President's differential allocations of state funds and tuition that have created a pattern of rich and poor UC campuses (Table 5, p 33) (see also Samuels and Cloudminder). I'll discuss this in Part 2, and some important technical points the report makes in Part 3. But first, let's look at how good UC has it thanks to our students' generous public funding of their university out of their personal public pockets.



 

As you can see, there are no budget cuts!  The picture says that there was a temporary dip but then the money came back. The state general fund share of the budget is still huge.  Given the widespread suffering in California, UC is clearly doing quite well. Add together the self-described $500 million in administrative savings after which UCOP is in perennial hot pursuit, plus all the new out-of-state students, plus two tuition hikes this year, and thus we can certainly take next year's $650 million cut!  The last huge one clearly had no meaningful effect on UC revenues. What are we crying about?

Let's take a closer look at this figure. It is misleading because

• it starts at the bottom of the decade's cycle, thus setting "normal" funding as low as possible. Our budget comparisons have always used 2001-02, the start of the last big cutting cycle, when GF stood at $3.16 billion.
• it defines as general funds various non-tuition fees paid by students, including non-resident tuition.
• It is corrected neither for inflation, nor for the Higher Education Price Index which is always higher than inflation, nor for 13% enrollment growth (which it does discuss elsewhere). 
• It is based on the report's bizarre definition of public funding, so measures neither the total UC budget nor "UC Core Funds" as defined either by Academic Senate reports or by UCOP in its budgets for current operations.
• It bumps up the top line with one-time federal stimulus money, counted as state funds since they were paid to the states, although these are going away.

Off the left edge of the chart is a higher level of past funding, but the crop means you can't see that the period under review occurs in a funding valley. Off the right edge of the chart is next year's $650 million collapse and the absence of stimulus money, but the crop hides the hillside to come.  The report calculates that state general funds are down only 9% (Table 1)  from the 2005 trough to the 2008-10 trough that was backfilled with federal dollars.  Here's what the big picture looks like, which we've had occasion to point out before.

Remember that red is where we've ended up, yellow is where we could have been if we'd started to return to our 2001 status in 2005, which the Glantz-Hays paper has shown would cost the median taxpayer exactly $32 per year, green tracks 1990's "Master Plan" funding levels, and the flat line was our projected "funding freeze" which would have left us better off than we are under Govs. Jerry Schwarzenegger and Arnold Brown.  This chart does not correct for growth in enrollments.

The state audit was an opportunity to show the state's funding trend in real state per-student, inflation adjusted dollars. This the Auditor failed to do.  Here's what that story actually looks like, carried up though 2010-11, all units in 2000 dollars.

 
UC's definition of very high public university quality derives from an entirely different public funding environment, one in which each student received almost twice the real dollar state investment as is the case today.  The state audit renders this story invisible. This means that the massive reduction in investment is something no public official will feel the need to address, or taxpayers to work to recitfy.

To the contrary, the report's Table 4 (p 24) has Instruction funding -- derived from the "public" accounts they analyzed -- increasing 15% over the five year period, and research up by almost the same amount. This beats inflation on an annual basis in one of the worst downturns in the state's history, Again, the story is that not only is UC doing just fine overall, but that so are its students, measured by a slowly but steadily increasing investment in instruction and research.

And to repeat, UC"s office of the president has no comment on this chapter of the report.  This can only further solidify the No Cuts story.

To see how cuts happen and how they are felt, we would need to turn to some additional issues:

• How Instructional and related public funds are allocated across disciplines on a particular campus (or "cross subsidies"). Cuts may be severe in some areas while others are untouched or augmented.  This is a topic the Auditor did not investigate.
• How Instructional and related public funds are allocated among campuses. Here the state audit makes some explosive comments about racial disparities in campus allocations, and I will take these up in "Annoying" Part 2.
• Whether we can tell the extent to which revenue categories, like Instruction or Research, are actually spent on instruction or research (which themselves need to be explicitly defined).  Here the state audit is disturbing, and I'll take this up in Part 3.

For the moment, we need to realize that the State Auditor has told the state's political apparatus that UC really has no shortage of public funding.  It suggests that the state takes for granted ever-rising student tuition as an accessible form of public funds.

Statement from Three Members of Academic Council on Preserving Quality (7/16)

The statement below was drafted by the following members of the Academic Council, but it has been neither reviewed nor approved by the Council. It is what we intend to keep saying in meetings, and it is what we would like to see the Senate say, at every opportunity.

Jim Chalfant, Chair, University Committee on Planning and Budget
Mary Gauvain, Chair, Academic Senate, UC Riverside Division
Susan Gillman, Chair, Academic Senate, UC Santa Cruz Division


When state budget cuts force UC to choose among access, affordability and quality, we believe that the Academic Senate should fight for quality as the University’s top priority. This means taking all possible measures to prevent further erosion of UC’s excellence, especially for undergraduates, and to prevent jeopardizing the future of the University as a whole. The state’s abandonment of the Master Plan extends well beyond consequences for the public and private shares of the cost of a UC degree.



The faculty of the University of California has the responsibility to ensure that students receive the highest quality education, grounded in research excellence. To do so calls for continued rejection of efficiency measures that emphasize throughput and degree production, while ignoring the quality of those degrees. It calls for protecting the research excellence that supports a UC-quality degree. The faculty cannot stand by and accept further diminutions in quality and will not enable the state or the University to hide the effects of the cuts from public view. Erosion of instructional quality is visible in the form of decreased course availability, fewer specialized elective courses and reduced student involvement in research, increased class sizes that reflect higher student-faculty ratios, decreased feedback to students on written assignments and during office hours, decreased faculty size and layoffs of temporary faculty and staff: in the aggregate, a watered-down education.

Budgets and measures such as student-faculty ratios are clear to all as indicators of the problem, but it is the faculty who also see first-hand the many cutbacks and compromises that are hardest to measure and continue to deprive students of opportunities that earlier generations enjoyed. The withdrawal of state funding thus forces students and their families to shoulder more of the financial burden of a UC education, at a time of decreasing educational quality.
We believe that the University must urgently communicate the alarm of both faculty and administration at the state's retreat from its responsibility to preserve UC as the world’s leading public institution of higher education. Beyond communication, as Senate faculty we advocate continual monitoring of other potential, longer term effects of the cuts on the quality of undergraduate instruction. This requires monitoring not only critical measures such as time-to-degree and campus selectivity, but also developing measures of the quality of UC degrees—a set of lagging indicators that will become evident only after the damage is done.

Despite the damaging effects of years of fee increases, we support the Academic Council statement of June 30, 2011. We must stand for academic quality rather than pretending it is possible to maintain access, affordability, and quality with grossly inadequate state funding.

Feeding the Cuts, Part I

The major news of this UC Regents meeting is yet another student fee increase – 9.8% on top of the 8% already voted for 2011-12 (and another 12% at CSU), with an additional 5.9% mid-year increase possible in January.  On the other hand, a UC fee increase isn’t news, since the Regents raise fees every year (18 of the past 20), sometimes twice a year, and a third of the time by more than 10% (Mark Yudof’s count).  Annual fee increases of 7%-10% were programmed into the Compact for the few years that it ran in the previous decade, and they are logically entailed by the view of a vocal faction of Regents that include board Chair Gould, über-Regent Blum, and shadow-Regent Crane that state funding “is going away.”  Such comments renew the state’s license to do exactly that, even though the pessimism is well-founded in recent experience with the state.

Behind the finger pointing, higher education funding is a discourse and a practice that is created by thousands of interactions among political, business, and educational leaders every year, with contributions from the peanut gallery comprised of students, staff, faculty, and the general public.  It is a collaborative product.  The combination of flat or falling funding and fee hikes have with rare exceptions been annual staples of the budget process for twenty years.  They are a co-creation of states and higher education, and now follow each other as the night the day.  The result was nicely summarized in an epitaph  from Reclaim UC – each defeat becomes the point of departure for the next one.

The repetition of the annual ritual raises an obvious question: why should anyone care this year more than they did last year, or in 2009, or in 2004?  Each year the public hears the same expressions of disppointment and resignation from the universities and the same claims of more or less reluctant necessity from both political parties in Sacramento.  Each year hundreds of thousands of students start college in California and hundreds of thousands graduate, and life goes on. 

One major change is the end of even the appearance of a balance of power between the pro-cuts and the pro-education sides.  The necessity argument now gets daily steroid injections from born-again austerity fundamentalist Jerry Brown, who is Hooverizing the state economy with permanent cuts in every public program designed to preserve or improve the state’s human capital:  from K-12 to Cal State to Cal WORKS, “The Poor Just Got Poorer”, and the phrase would be a good candidate for a new California state anthem.  But there have been no matching steroid injections from the other side.  

No legislator thinks they might be voted out of office for excessive cuts to higher education.  No one in a position to make a credible threat is willing to make one.  Progressives and educators have no full-time political party, and no political whip equivalent of the Club for Growth, which regularly threatens members of its own party around its core issues, these days regarding their temptation to  raise the debt ceiling. 

Higher education exerts no such leverage.  Governor Jerry Brown took higher education hostage in an attempt to force Republicans to support putting tax extensions on the ballot (see clip): the political calculation was that Republicans would be more upset if he shot UC than if he shot, say, CalWORKs, or at least might get more pressure from their conservative constituents.  UC President Yudof ceded Brown’s first $500 million cut in January in an effort to “do all it can to help the state,” but then drew  a line in the sand against the further $150 million cut. The response of Gov. Brown and the Democratic majorities was to cut the $150million and promise another $100 m cut if the state doesn’t make current revenue projections.

In a small-d democratic political world in which political representatives are directly accountable for the effects of their acts, destructive actions bounce back against their perpetrators. In that sort of world, compromise with your opponents might get you something.  In our current political world, compromise gets you nothing: Brown doesn’t need Yudof, or any of us, and Sacramento doesn’t care about the rest of the state, because we never do anything to them.  There is no logical endpoint to this for UC's budget: not $2.5 billion in general funds, not $2.3 billion, not $2.0 billion, not $1.65 bilion, etc.

So how do we make it stop? How do we give Sacramento a reason to make it stop? 

My suggestions involve two corrections and an answer.  The first two steps involve fixing public university tactics, with UC as the case I know best.  The latter is an issue of international importance to the future of public education.  I will devote a post to each of these.

 1. If you don’t like constant cuts to public funding, stop showing public funds can be replaced with annual tuition increases.

Here’s an example.  UC President Mark Yudof officially opposes privatization. He described privatization to a roundtable of UC student newspaper editors as “the point that I get out and march with the students."  He defined the unique mission of public universities as great research and teaching quality for the nation’s highest proportions of low-income students. This is exactly right – Yudof is in effect describing “mass quality,” the original core of the postwar boom’s widely attractive vision of social development for everyone. 

This was the best ever justification for high levels of public funding.   Public higher education is not about the manificent training of a Harvard-style “natural aristocracy” to rule the rest, but about the superb training of each of us.  No other theory of education – universal higher education, not uniform, but universal – scales to the enormity and complexity of the simultaneously cultural and technical problems that our societies all face.

But a bit later in the same conversation, Mark Yudof says, “if you mean [by privatization that] students are paying more and more of the cost of their education that seems to be the road we’re on.”  But of course that is the main form of what the students and everyone else means by privatization.  Yudof accepts this form of privatization, and implements it very frequently. UC’s de facto official position is high-tuition / high aid -- really high tuition logically in only a few years time -- and echoes the standard private university American funding model that the publics slowly started to adopt after 1980.  

 So which is it, UC?  Is it no privatization, or continuous privatization in annual increments? UC is on both sides of the question intellectually, and on the side of continuous privatization in practice. The net impression left by Yudof’s sometimes eloquent remarks is that the public mission can  be satisified by private money --high fees in conjunction with financial aid, for the state’s historically most diverse and underfinanced younger generation.  UC policy gives the public no reason to oppose tuition increases, especially when they hear financial aid is good or when their own children are out of college

Interestingly,  UC leaders are going against public opinion here: a recent PPIC poll suggested that three-quarters of respondents think that public universities are underfunded and that two-thirds of them want to raise taxes rather than raise fees.  But if UC leaders don’t fight for zero fee increases, as a precondition for forcing solid public funding, why should the public do it for them?

The special tragedy of this ambiguity is that we already know what happens when we subject public universities to a mix of cuts and austerity. It’s very simple:  educational attainment goes down. The US had a comparative educational advantage over the rest of the wealthy world for about 150 years – first at the high school level and then in college degrees. Now, for the first time in U.S.  history, younger people are less educated than their baby-boomer parents (Measuring Up p. 5, John A. Douglass, Goldin & Katz, . . .).   This decline coincides exactly with the steady shift in public colleges and universities from high public funding to high private tuition.

If you are wondering whether privatization caused this destruction, the answer is yes it did. Very briefly: private investment – anything from donations to student fees – logically tries to maximize its return, and thus piles in at the top, where attainment is already strong.  Think of Meg Whitman building the most expensive dorm in history at her alma mater Princeton University.  Private funds never adequately support the colleges with the highest percentage of low-income or otherwise disadvantaged students, which also generally have the lowest graduation rates.  This is also true of a unique place like the University of California, where large numbers of low-income students had for decades lept whole quartiles of attainment in a four-year bound.  Private money doesn’t have the scale, the scope, the social ambition, or the interest in those who start at low or medium levels, and thus can’t budget the overall American attainment rate that depends on moving those groups in huge numbers.  The attainment rates of the lower three quartiles haven’t improved in thirty years (Mortenson, June 2010), That’s all the time it took for the country’s pro-private funding model to destroy the country’s global educational leadership.

The first step towards saving public universities is to stop acting as though annual fee increases can replace the public funding that made US higher education great in the first place.  They can’t. (UC leaders know they can't, but it's the annual increase actions that count.) They never will.  Public funding will never come back as long as universities keep offering this phony and painful substitute.