The Money Problem at U Cal

As a regent of the University of California (UC), I voted against “fee” increases proposed by the administration as often as I voted for them, but with each vote I realized that UC was slowly moving toward the day when basic decisions would have to be made about how the university is financed, who can attend it, and what the public should expect from the institution. Well, that day has come; and the public can either dodge the issues or face them and try to craft a new relationship with UC.
Several days ago, the regents voted to increase fees by a whopping 32% – that’s right, 32% – starting in the fall of 2010. Notwithstanding the predictable assertions about “quality” being threatened and the prospect of a “faculty exodus,” with a loud voice, I would have voted against this increase. Not because the university isn’t justified in raising fees to some extent, but because the economy is in the tank, many students’ parents are unemployed and no business in its right mind raises its prices 32% under such a set of circumstances.
The operative word above is “business.” The University of California IS a business that likes to operate as if it were merely a public service enterprise. It doing so, it gets to have the best of both worlds. As a business, UC chooses to compete with other businesses for talent – and seeks to compensate them accordingly. As a public service enterprise, the university expects to be subsidized heavily by the taxpayers – when we can afford it – and to have all of the protections and perquisites of a public corporation.

This ambiguous identity is, in fact, a benefit to the people of California but it often imposes enormous inequities on the university. I am certain that as a business, the more highly demanded campuses, such as Berkeley, Los Angeles, San Diego and Santa Barbara could raise their fees at a significantly greater level than some of the campuses that are in less demand. Yet, as a public service university “system,” a differential fee structure would be problematic to a large segment of the public.
In addition, maintaining its public service identity seems to oblige UC to create and maintain its own internal subsidy for students who cannot afford the fees that others pay. For example, a third of every dollar paid by student fees is used to provide financial assistance to students whose family incomes are considered low/moderate-income. As my nemesis on the Board, William Bagley, often remarked, this is a tax on families of UC students. As such, I would suggest that it ought to be paid by the state taxpayers rather than solely by the families of UC students. Getting rid of this “Robin Hood” fee structure would enable UC to avoid raising its fees by 32% just so that it can give 33% of that 32% back to lower income students. Instead of a 32% hike, the recent increase would have been 21%.
Over the past fifteen years, the governor and the Legislature have chosen to “buy-out” UC fee increases on almost every occasion when the state budget could afford it. Doing so enabled legislators to thump their chests about their role in keeping fees low, but it postponed the day of reckoning when they would no longer be able to do so, and, then, fees would have to rise to their market level. That day has arrived and can be expected to be with us for a very long time.
At some point, the university is going to be required to become either a market-based institution, along the lines of a select private university or continue to be a quasi-public one that relies on massive public support to survive, either from the State of California or the Federal Government. I opt for the former. When UC becomes a market-based entity, it might be forced to make cuts in certain courses that can no longer be justified. A market-based entity would also do a better job of reducing the time-to-degree.
As the public, we are equally to blame for the untenable situation in which our university finds itself. We have helped to create the mindset that every high school graduate should go to college. Not only should they go to college, we believe, but they should go to a four-year university such as UC, when many of them would be better served at a community college or one of our excellent campuses in the California State University system, at a significantly less cost to the taxpayers and the students families. We need to direct more students to these systems, particularly the community colleges, during their first two years, where the cost is substantially less and the quality is not significantly different.
The circumstances in which UC and the State of California currently find themselves make it clear that the present structure is unsustainable.


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