Wednesday, October 5, 2011

A Heartbreaking Work of Staggering Wrongness

A number of former University of California chancellors met at the end of June to discuss the state of UC, and recently released a statement we linked yesterday, one called Former University of California Chancellors Urge New Funding Models for UC.  The main result is another call for a high-fee UC, this time set at $24,000 for in-state students.

The word "new" has no place in the title of this document. Nearly all of these chancellors were in office during the twenty years of UC public funding decline, and have come together to advocate the acceleration of what they have been doing all along. This consists of advocating business-as-usual non-public revenue growth on a base of doubled tuition.

I've annotated the text below because it is an interesting expression of the intellectual gridlock that is preventing UC's senior managers from thinking their way to a better place. I am also trying to get you to read this kind of thing.  There's a lot more reading just like it coming up this fall, so get in shape!

My comments are in bold

The text of the former Chancellors' letter:

Dear President Yudof:
Thank you for joining us during our assembly of former UC chancellors in San Francisco on June 26-28. As you know, this meeting involved 22 of the 29 living former chancellors. Some of us served as long ago as the 1960s, and one of us was involved in drafting the 1960 California Master Plan for Higher Education; all of us share a deep concern for the University of California. Vice President Patrick Lenz’s comprehensive presentation on the budget was immensely useful to our discussions, and we especially appreciate your taking the time to give us your perspective on UC as well as listening to our thoughts and suggestions. As we promised, we are writing now to share some of the ideas that came out of our two-day meeting.

Our first message is that we support the actions you and the Regents are taking to address the current fiscal crisis and want you to know of our desire to help in any way we can. There can be no doubt that the University faces the most far-reaching restructuring of public higher education in this state since the 1960 Master Plan. Today’s California, however, is very different from the California of 1960. The Master Plan was the product of a disciplined and coordinated effort by the leaders of California’s public and private colleges and universities to create a better and more stable future, grounded in the conviction that higher education is a public good. Today’s restructuring is the sad outcome of decades of ballot-box budgeting, unfunded mandates, and other political restrictions on the rational use of the State’s General Fund.

This is an inaccurate and misleading history of the Master Plan. It's true that the California of the 1950s was overwhelmingly white, and that the refusal of active voters--still majority white-- to support cross-racial pooling of educational resources is a huge factor in our current problems. That is not what the Chancellors say, however.  The point of this conventional narrative of the Fall is that we no longer have the political environment that created the Master Plan's fully public higher education system, so therefore we cannot sustain a fully public higher education system.  

In reality, the Master Plan was a response to continuous political warfare over higher ed plus an attempt to outflank the state's very conservative political class that refused to pay for expanded universities.  Former UC President Clark Kerr, a central figure in the negotiations, told me in an interview in 1996 that it was so hard he wanted to give up any number of times.  In the end, he only got part of what he wanted.  In his recent writing on the subject, he says that while the ex post view sees the Master Plan as a "grand design," ex ante 
the plan looked to those of us who participated in its development more like a desperate attept to prepare for a tidal wave of students, to escape state legislative domination, to contain escalating warfare among its segments. This it also was.  And the preparation, the escape, and the containment in each case was barely in time and barely succeeded.  The master plan was a product of stark necessity of political calculations, and of pragmatic transactions. (172)
The Master Plan was in short the result of an enormous political effort in the 1950s -- in the face of a budget deficit that as Pat Brown took office was 20% of revenues (120).   Sustaining it now will require another enormous political effort. If UC doesn't sustain it, it's because it won't, not because it can't, and the chancellors' potted history is a smokescreen.

The unintended consequence is that the University of California and the California State University have been relegated to struggling for essential support within the 15 percent of the State budget that remains discretionary and within the Legislature’s control. Our two institutions are now the single easiest target for budget reductions. High levels of public approval and low levels of State funding have become a pattern in California. A UC or CSU education is, by default, increasingly treated as an exclusively private good, rather than as the benefit to society it was traditionally held to be. 

UC and CSU are "increasingly treated as an exclusively private good" BY certain conservative advocates for low taxes, their political and business allies, and many defeatist senior managers. This is a political statement, not a statement of fact.  It is not supported even by polling data, where in one recent case two-thirds of respondents oppose increased fees and nearly half were willing to pay higher taxes to keep fees down.  The "private good" claim excuses failure and/or the absence of effort, but it is right-wing ideology rather than a reliable data point.

This can have only one outcome for the University. The Regents and the UC community will ultimately be forced to decide whether the University will continue to be among the best universities—not just one of the better public universities—in the world. We consider it imperative that the choice be the more difficult path of remaining a great university. So it is critical to understand where the budget news leads and what can be done about it.

It goes without saying that the faculty are pivotal. They are the ones who will create new academic models and new and more efficient educational delivery systems. For this reason, we are especially worried about faculty recruitment and retention; a central mechanism for tracking both might be useful to you and the chancellors. We are just as concerned about maintaining the quality of graduate education and opportunities for research. The University must have an evolving intellectual agenda in key areas of research, scholarship, and education, developed by the faculty, articulated by the chancellors and the president, and supported by the Regents. This is what attracts faculty to the University and creates rallying points for the state’s opinion leaders, the general public, and our students.

For decades, UCOP budget officials did not believe that the state legislature had an interest in graduate study or in the production of advanced degrees. In accounts that I began to hear from the horse's mouth in UCOP around 2002, senior UC officials did not advocate for this core function of a research university. Better late than never with the former chancellors, but graduate education now needs to be described as a public mission for the whole population and not as a service focused on a narrow slice of California's private sector, whose high-tech portion seems to most people to be doing much better than they are.

Public multicampus systems like UC have essentially two sets of solutions for survival in a deficit-ridden world. The first is non- controversial: effecting educational and administrative efficiencies; obtaining more research funding and higher indirect cost reimbursement through federal contracts and grants; expanding private fund-raising and additional sources of revenue, such as part-time professional degree programs and patent income from university-sponsored research.

In fact these solutions are controversial.  Extramural research cannot be a new revenue stream because it loses money, as we have had to point out frequently on this blog.  Deficits will remain even if federal agencies increase recovery margins a few percentage points, which, given the current budget climate, they won't.  Simlarly, private fundraising is 98% or so targeted to special activities, and efforts to change this are in their planning stages and, given the tradition, unlikely to succeed.  (UC is struggling even with alumni donations.)  Etc, etc.  The former chancellors should have considered the extent to which alleged profits in these categories are actually loses. The statement is undermined by the fact that they did not.

A second and controversial set of options includes the following:
  • raising out-of-state and international student enrollments as a greater source of revenue;
  • increasing tuition levels uniformly throughout the system;
  • imposing differential tuition—individual campuses set their own student fees so that more selective campuses can generateadditional revenue to offset cuts in state funding;
  • adopting a privatization model—through which all or parts of university operations become, in essence, financially self-sustaining.

The University of California is vigorously pursuing every one of the first set of solutions and beginning to explore the second. Our campuses are now admitting more out-of-state and international students. This is a reasonable if sometimes controversial policy, given the state of public funding for students who are California residents, and it offers potential educational advantages as well. We understand the Regents are also considering differential tuition. Several members of our group expressed concern about departing from the long-held principle that tuition levels should be uniform across the system. Others felt differential tuition is likely to help some campuses but harm others. And we note that there are already differences in what the various campuses charge in so-called campus fees; such fees, for example, are 10 percent higher at UC Davis than at UCLA. Our consensus was that differential tuition raises two broad issues: whether it is a more effective option than simply raising tuition on all campuses and whether it can be done in a way that protects the aspirations and effectiveness of the younger and smaller campuses.

endorsing the status quo while punting on the core issues . . .

Then there is the sensitive issue of privatization, also referred to as self-sufficiency. As you know, the University of Michigan and the University of Virginia chose this path some time ago; other public universities are considering, or have already adopted, a similar strategy. The University of Oregon, for example, has proposed that the state’s current annual appropriation for its support be used instead to pay interest and amortization on an $800 million bond. The university’s matching contribution, raised through private gifts, would create a $1.6 billion endowment to replace the state of Oregon’s annual allocation.     There may be aspects of the Oregon idea that would work in a California context—perhaps a portion of State general funds, with an equal contribution from UC through private fund-raising, could be set aside as seed money for such an endowment.

The fundamental question for the University of California is how far we can go in the direction of self-sufficiency and retain our public character. It appears that graduate professional schools are the most likely candidates for a move to financial independence, particularly if we are to maintain their current level of excellence. Still, this model has more than financial implications. In the context of UC’s historical role as a public university, what does it mean for us and our faculty, for parents and students and citizens, if UC as a whole becomes less like a traditional public university and more like a private one? This question requires serious discussion within the University, in the legislative arena, and in the court of public opinion.

This group of emeriti might actually use some of its leisure to address the concept of the university as a public good, either philosophically, or as an issue in economic theory (standard econ has a skewed and limited definition of the public good), or as a practical matter - what has happened to UM-Ann Arbor as a university and a public institution, for example? They don't do any of this, and thus there is no learning curve that might produce a few anomalies to challenge the privatization paradigm that they are pretending to consider anew.

This document again raised for me the whole question of administrative learning.  How do administrators learn new things under the daily pressure to decide? Can they learn new things that could change the beaten path?  Is UC admin captured by a conformity culture? These issues are beyond my scope here, but I am always worried about the very high repetition-to-novelty ratio in senior administrative commentary, and this letter is no exception.

The willingness of some states to explore unconventional strategies signals a new era in public higher education.

Let's be clear. Privatization in America is not an unconventional strategy. It is a pervasive tradition and automatic reflex.

This era unmistakably arrived in California when, for the first time, student fee revenue surpassed UC’s share of State General Funds earlier this year. The crossing of these two curves is a disturbing and seminal event.

A few journalists have dutifully reported on the historic moment in which two revenue curves traded places.  Meanwhile, regular people care a lot more about the cost of attendance.  A better candidate for 'seminal event' is  the increase of the Ed Fee past $1000 per quarter (1992-93), or the Compact for Higher Education that mandated annual fee increases of at least 7% a year (2005).  Another would be the 2007 decision by the Regents to let fees at the system's most prestigious professional schools go more or less "to market," which created a precedent for all professional schools and now, for the system as a whole.

At the moment, UC is raising tuition reluctantly and only in response to each new, damaging State budget cut. Two weeks after our meeting, the Regents approved a tuition increase of 9.6 percent and said they will increase tuition again in January if further cuts in State funding materialize (as many believe will happen). Because of chronic budget shortfalls, this approach has the unfortunate effect of asking students to pay more even as they are getting less—crowded classes, fewer courses, eroding student services. Right now, the additional revenue from tuition increases appears to be enough to keep the University afloat but not enough to sustain its excellence or stabilize its future.

Yes and yes on unsustainably paying more to get less. Thank you.

How high should tuition be? High enough to ensure the quality, access, and affordability that have always been the hallmark of a UC education. There are those in our group who argued that—given the State’s current level of support—tuition should not be at the current $12,000 a year but at about $24,000 to preserve UC’s academic excellence.

Here's the punch line -- UC for $24k!  And what did the rest of you argue, with your concern for access and affordability as well as quality?
Contrary to public perception, all the evidence suggests that that higher tuition is not a barrier for students—including low-income and minority students—as long as it is combined with adequate financial aid. 

So you all agreed?  Sadly, you all are wrong.  During the twenty years that states have been shifting university costs from the taxpayer to the student, relative degree attainment has declined, continuation rates are flat or falling, and the US has completely destroyed its international educational advantage.   For the first time in its history, younger people are less educated than their baby-boomer parents (p 10). The proportion of U.S. students starting college who actually finish is now 56 percent, placing the U.S. with its world's highest tuition levels twenty-ninth out of the thirty countries measured by the Organisation for Economic Co-operation and Development (OECD). Tuition increases have degraded affordability and reduced attainment (p 8). California, one of the world’s wealthiest places, has seen one of the most astonishing declines in college achievement. The state’s continuation  fell from 66 percent to 44 percent in just eight years (1996-2004). California’s rank among states in investment in higher education declined during the same period from fifth to forty-seventh, according to Thomas Mortenson, a higher education policy analyst (ibid).  The idea that financial aid protects low-income students is a myth, one that dies a thousand deaths in an exacting study of a unique public university data base, William G. Bowen et al's Crossing the Finish LIne, which shows that low-income students borrow more than higher-income students and increase their borrowing with each ongoing year in college, among other disturbing findings.  

And so on--there is no evidence that non-debt aid keeps up with tuition increases, or that further hikes won't futher damage overall US educational levels, the improvement of which is the main reason why public higher ed was built out in the first place.  All we see here is a group of former chancellors radiating an indecent complacency about access, one that is out of touch with current research about the damage done to educational attainment by the Great Cost Shift to students.

In fact, annual tuition of approximately $24,000 would make UC more competitive with the best universities for outstanding students. The key is sufficient student financial aid to ensure that only students and families at the highest income levels would pay the full price. Under the model we are suggesting, the State’s current contribution of approximately $12,000 per student, traditionally used by UC as general institutional support for its education programs, would henceforth be used solely for financial aid. In effect, these State funds would become a subsidy to students who are California residents.      This would enable the University to reallocate much, if not all, of the tuition income it has perforce returned to financial aid to preserve the quality of the education we provide for residents and non-residents alike.

Gerald Barnett has just skewered this idea once, but once is not enough for a case like this.  The former chancellors propose a return-to-aid of 50%, meaning a net tuition rate -- money actually going back to educational operations -- low enough to guarantee the continuation of "paying more to get less."  On the level of simple revenue flow, this version of privatization insures that revenues will fall continuously further behind costs.

We also see the classic UC problem of refusing to admit the interconnections among various pieces of the revenue puzzle.   Pieces A and B -- student tuition and state funds -- do not exist in parallel universes.  A affects B, and B affects A.   A and B have a historical record in this case, in which the governor and legislature of the country's most famous knowledge economy repeatedly flatline or cut state funding to all of the state's "knowledge factories."  They do this because they know that UC and CSU can and always will raise fees, as they annually have done.  You don't need to be the author of Hamlet to figure out this psychology.  The desperate chancellors propose to make this ten times worse by converting state funding into a form of welfare, as Barnett points out, while simultaneously making tuition for education 100% private funding.  This plan does not respond to a widespread belief that public universities are a private good, but converts them into a private good.  I haven't recently heard a worse UC idea.

Because this new model would transform what has traditionally been general State support into a direct subsidy for low- and middle-income students, if adopted it could and probably should result in a change in the State’s involvement in the operations of the University. However, this would require further study beyond what we were able to do in our brief session.

In academia, we do our research before we publish our findings.  Obviousy this cart is before the horse.  

The strategy we propose means that only those who can afford it would pay full tuition—a fact that needs to be clearly explained to students and families.

This is not how financial aid works.  It is driven by complex formulae whose details (like work expectation) change at the will of the university.  No parent in America equates a decision that their income level means they must pay full fees with a real assessment that they can afford these fees.

It continues to protect low-income students while making UC more affordable to middle-class students, who are most likely to be squeezed out by rising tuition. It is fairer to all students because they would no longer be asked to pay more for less.

These blandishments sound good but are not true (see above for starters)
It is a flexible solution: whenever the State subsidy goes up, student tuition can go down.

State funding increases, foolishly called a "subsidy" here, will never again happen if fees are set at anything like $24,000.

And even with significantly higher fees, UC would remain a bargain compared to the most distinguished private institutions, some of which charge undergraduate fees well over $40,000 a year, and to the best public ones as well.

This is the real logic of all these UC discussions of high fees.  Senior folks constantly point out that UC fees are relatively speaking not as high as those at privates or some other research publics.  Then they make the illogical leap to the claim that this means UC is a "bargain" compared to the publics, when the real case is that thanks to the national drift toward forcing this generation to take on debt for what their parents got for close to free, none of these universities are a bargain, including UC. 

The comparison to tuition at elite private universities makes no sense even in business terms.  Students at Stanford, Swarthmore, Reed, Pomona, Millsaps, and Occidental are paying 40k for classes that are rarely if ever larger than 25 students, where every paper and problem set is hand-graded by a faculty member, where face-to-face guidance is frequent, where personalized active learning is the norm rather than the exception.  As several UC parents have pointed out on listserves, they will not send their kid to a UC factory U for $24k (large lectures, TAs when you're lucky, 90 student "discussion" classes, etc) when they can find a good private college for $40k, and a net tuition of much less. 

If the University of California expects to continue as one of America’s great universities—competing with such institutions as Harvard, Yale, MIT—it must have combined revenues from State, tuition, and other funds at least roughly comparable to theirs. This model will bring us closer to that goal.

UC has never had per-student resources like those of Harvard, Yale, or MIT. Nor has it ever spent remotely as much on each student (start with Figure 1 here).  I have no idea what the Chancellors are literally thinking here, though I read loud and clear the status anxiety, unfortunately demarcated in dollars.

Whatever the University does, it is difficult to envision a long-term survival strategy for public higher education that does not address the massively dysfunctional web of political decisions that has crippled the governance of this state. California’s entrenched use of the initiative process has changed the state’s tax structure in ways that have had profoundly negative effects on public higher education. This trend began with 1978’s Proposition 13, whose permanent lowering of the property tax has forced the State to depend on the notoriously unstable personal income tax as a major source of revenue. It is because of the unfunded mandate in 1994’s Three Strikes initiative that the State now spends more on prisons than on all of public higher education. Ours is the only state in which ballot initiatives are frozen into the constitution and cannot be amended by the Legislature, however outdated or counterproductive they become as circumstances change.

It is past time to look at the discretionary parts of the State budget and remove some of the constraints that prevent the Legislature from making real choices about the expenditure of public funds. The University can and should contribute to an informed public discussion, through academic examination of the issues by its faculty, of the risks these political realities pose to the future of California’s unparalleled system of public higher education.

Why doesn't the university establish educational goals, figure out sustainable research subsidies, and then tell the state the general fund total it needs, calculate it helpfully as a share of the overall state budget, and then say look to get us this the prison budget has to be cut back to X%?  The prison budget has been a known problem since before Three Strikes -- UCSB's then budget director Bob Kuntz did a good presentation on it during the first big cut cycle in the spring of 1993. The time for discussion is over; the time for proposals is now, with dollar amounts attached. (UCOP's framework for tuition increases was on that score a real advance.)

We understand that some will regard higher tuition, a public/private endowment, or indeed any step away from State support as a step toward compromising the University’s public character.     That is not the intent of our recommendations.  Our hope is that better economic times will bring adequate State funding for all public higher education, including the University, once again. But as California struggles through today’s fiscal impasse, we cannot wait for better days. It is essential to protect the University’s academic excellence now. This may be the only way to ensure UC can continue to be what it has always been, a strong and vital institution committed to meeting its public obligations for teaching, research, and public service of the highest order.

This is wishful thinking undermined by the actual proposals.  The UC community deserves better, more fact-based analysis from its senior managers.

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