Tag Archives: tax

The California College System under Scrutiny

A recent report by the American Council of Trustees and Alumni (ACTA), entitled “Best Laid Plans: The Unfulfilled Promise of Public Higher Education,” explores a fair number of problems the California college system faces. However, I don’t think it covers them all.

The report states openly and rightly the problems that California’s public colleges face are not primarily a function of declining revenues. As it notes, “the real danger is a fundamental failure by today’s trustees and system leaders to apply the same creativity and thoughtfulness that informed the Master Plan to a new world of reduced resources and a shrinking tax base.”

This point is crucial. The behemoth California college system has been fed an enormous amount of money, but there is obviously a limit to how much more the citizens can provide. In just the last five years, tuition at the UC system has gone up nearly 75% and at the CSU system by nearly 85%. And California’s taxpayers already pay steep sales, property and income taxes–among the highest in the nation. It is hard to imagine that much more can be squeezed from either the students or the taxpayers.

The report documents in detail some of the dramatic problems the system faces, including:

  • Low graduation rates at the CSU system: only 17.2% of new full-time freshmen graduate within 4 years, and only 52.4% within 6 years.
  • The leaders of the California public college system have a severe Edifice Complex, looking constantly to increase the amount of buildings and other infrastructure, much of it unnecessary.
  • The leaders are also reluctant to close or consolidate low-enrollment programs, and too easily eager to add new ones.
  • There is considerable administrative bloat, with the compensation of the top administrators increasingly over-generous, even while the taxpayers and students are impoverished.

I would note some other major problems:

The California community colleges have a grotesquely high drop-out rate: only 20% of CCC students either got an AA degree or transfer to a regular college.

  • The CCC system also spends way too much on recreational courses (courses that are meant to provide recreational outlets to adults). While these courses are supposed to pay their own way, they utilize the system’s physical resources.
  • The whole CSU system has suffered endemic “mission creep” regarding remedial education. Under the wise original 1960 master plan, CSU would take only college-ready students, while those needing remedial education (in math and English) were supposed to go to the huge and inexpensive CCC system. Along the way, the CSU system developed a costly remediation system. Now, half of all incoming CSU take remedial math or English or both.
  • Professors and administrators of the CSU system have over the years pushed for more and more focus on research, with tenure-track professors expected to publish, leaving much of the teaching to adjuncts. It is unclear, to say the least, that this has really benefitted the citizens of the state.

The report calls upon the UC Regents and the CSU Trustees to reassert control and enact necessary reforms, including establishing clear measures of productivity; re-prioritizing the academic mission of the college, restoring core curricula; rewarding good teaching; cutting back on administrative bloat; and restoring academic freedom and true intellectual diversity.

I can’t help feeling that the report is an exercise in naiveté. The administrators and faculty are agents in an institution that suffers from the principal/agent problem. Because the real principals — taxpayers, students and parents — have little knowledge of and even less power over the workings of the colleges for which they pay, the agents (faculty and administrators) can run them for self-serving purposes. Until this problem is rectified by radical reform, I see little hope for change any time soon.


Gary Jason is a philosophy instructor and a senior editor of Liberty, and is the author of Dangerous Thoughts.

Does Tuition Go Up Because State Funding Goes Down?

Gary Fethke’s recent op-ed Why Does Tuition Go Up? Because Taxpayer Support Goes Down in The Chronicle of Higher Education is an enjoyable read. Rather than dismiss the opposing side’s argument with straw men, as is so common these days, Fethke presents it faithfully and gives it due consideration, which is a breath of fresh air.

Having said that, I have to disagree with Fethke’s main point. He argues that “rising tuition is the obvious consequence of declining state appropriations…” and that “Students are required to pay more because taxpayers are paying less–it’s that simple.”

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More College Aid for Low-Income Families, Please

college campus.pngWhen individuals seek higher education, why should all of us have to pay? After all, individuals decide whether to seek a college degree based on their own calculations of expected costs and benefits. That taxpayers must bear the burden of financial aid to these individuals seems unfair.

Given the billions of dollars governments pay individuals to help finance their college expenses, taxpayers must be assured that their investment is not wasted.

In short, we would rather not be sucked dry to pay for C students — whose weak academic preparation makes them unsuited for higher education — just so they can party hard for four or five years.

In a policy paper released this week, Andrew Gillen, the research director at the Center for College Affordability and Productivity, says he has the solution to creating rationality in our messy and unaccountable financial aid system.
Continue reading More College Aid for Low-Income Families, Please

Jerry Brown Disappoints Backers of Preferences

Say what you will about California’s enigmatic governor, Edmund G. “Jerry” Brown, but on major issues involving votes of the people, Brown is very reluctant to go against the will of the people, no matter what his personal views happen to be.

In 1978, during his first term as governor, Brown opposed the highly popular Proposition 13, which was approved by the voters to place a lid on property taxes imposed by local governments.

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The Next Corporate Tax Target: The University?

Here is a story in The Fiscal Times that may sound a distant warning to wealthy universities.  It raises a question that might sound repeatedly in the coming years: Since some private universities are so wealthy, why don’t they pay taxes?

As the article notes, last year was a good year for endowments.  Harvard’s climbed $4.4 billion (!) last year to reach a total of $35 billion.  Stanford’s went up 22 percent, Yale’s 21.9 percent, Penn’s 19 percent, and MIT’s 17.9 percent.  Because they are non-profit institutions, they aren’t taxed on those increases, leading some to wonder, in these tough times and in light of Federal debt, why?

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How the Feds Plan to Violate Student Privacy

Though civil liberties groups have been slow to react, there’s a disturbing aspect to the Education Department’s new “gainful employment” rules pertaining to for-profit colleges: Starting in 2015, the Social Security Administration (SSA) will start turning over its data on the earnings of individual students at career colleges to the Education Department. This is so it can assess whether the students’ ratio of federal student loan debt to income complies with other gainful employment regulations issued by the department. Under the new rules, one of the metrics for deciding whether students can use federal aid (grants and loans) to attend a post-secondary vocational program is whether the average debt-to-income ratio of the school’s graduates is no higher than 12 percent (or 30 percent of the graduate’s “discretionary income” as defined by federal rules).
The idea behind the debt-to-income rule is to assess whether the graduates of vocational programs–including programs offered by community colleges and other nonprofit institutions as well as career colleges–are actually getting the jobs for which their training at tax-subsidized expense is supposed to be preparing them. But the SSA-Education Department arrangement–the result of an unprecedented agreement between the two federal agencies–raises serious problems related to both the privacy of the students involved and the transparency of the process of determining whether a school has failed to meet the debt-to-income threshold.
Most troubling is the involvement of the Social Security Administration–and also, indirectly, the Internal Revenue Service, which supplies earnings information to the SSA based on tax returns. After all, the SSA is supposed to be in the business of calculating Social Security benefits, not monitoring compliance with laws that have nothing to do with Social Security. The IRS, in turn, is supposed to be in the business of collecting taxes, including Social Security taxes, not helping the Education Department decide whether the University of Phoenix is in compliance with new gainful employment rules. Both agencies, the IRS in particular, are bound by strict laws forbidding the sharing of data except as explicitly permitted by federal statute, such as the one that allows the SSA to use IRS-supplied tax-return information along with filings by employers to determine benefits. Taxpayers have historically relied on the nearly complete confidentiality of their tax-return information as an incentive to honesty in reporting. Controversial provisions in the 2010 “Obamacare” health law that turn the IRS into an enforcement agency for compliance with the law’s individual insurance mandate have raised serious and justifiable objections. Now, thanks to an SSA-Education Department partnership that has no clear statutory authorization, both the SSA and the IRS will be complicit in an arrangement that has nothing to do with either agency’s statutory mandate.

Continue reading How the Feds Plan to Violate Student Privacy

A Coddled Professor Speaks Out

A good deal of outraged reaction greeted “Fat City: Thank You, Illinois Taxpayers, for My Cushy Life,”  an article posted on the Weekly Standard’s website on Friday by David Rubinstein, a recently retired (after 34 years) sociology professor at the publicly funded University of Illinois-Chicago.

 The article was a hoot and a half.  Rubinstein chronicled in detail the charmed lifestyle of a tenured full professor at a prestigious research university: the “2-2” loads (translated into English, that means teaching just two classes per semester, at least one of those classes often a tiny graduate seminar); the no-dress code, so that profs could show up in class unshaven and wearing T-shirts and jeans if they liked; the easy hours (no classes before 11 a.m. if you liked), hugely long vacations, especially over the summer, and academic conferences aplenty, often in exotic European locales, all paid for by his university–that is, by the taxpayers of the state of Illinois. Best of all were the retirement benefits (including, at UI-Chicago, a generous health plan), constitutionally guaranteed because Rubinstein taught at a state school and contractually guaranteed because of the institution of tenure itself, which means lifetime employment. Rubinstein wrote: “Why do I put ‘worked’ in quotation marks? Because my main task as a university professor was self-cultivation: reading and writing about topics that interested me. Maybe that counts as work.”

            Even funnier than Rubinstein’s piece, though, was the reaction of other college professors to his emperor’s-no-clothes take on professorial life at a top-tier university. National Public Radio’s website reposted the piece, and nearly all of the 38 academics who submitted comments completely misunderstood Rubinstein’s point, leading you to wonder how smart people with Ph.D.’s really are. Most of the commenters, reading Rubinstein’s piece as a personal confession rather than a description of prestige-university culture, excoriated him as a “slacker,” a “whiny contrarian,” and a “nobody” who had somehow weaseled the University of Illinois-Chicago out of vast sums of salary. One of Rubinstein’s own colleagues, Peter Hales, an art history professor at UI-Chicago, sniffed, “The UIC I taught at was a place of passion, energy, and hard work.”

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The Book That Shook the Campuses

9780226028569.jpgNeither liberals nor conservatives take the education part of higher education very seriously. Instead, college gets used as an arena for special interest promotion and ideological dispute. The right publishes lists of “The 101 Most Dangerous Academics in America” while fulminating about post-modernism and the hedonist student culture. The left pours endless billions of taxpayer dollars into student financial aid programs without holding anyone accountable (or at least not traditional non-profit colleges) for how that money is spent. Everyone is simultaneously horrified and entertained by college sports.
This happens in large part because everyone assumes that the core business of higher education doesn’t require much scrutiny. Our K-12 schools may be mediocre, but we all know our colleges are the best in the world. Just ask them!
Now Richard Arum and Josipa Roksa’s landmark study, Academically Adrift, has blown a gaping hole in the wall of assumed competence that has long shielded colleges and universities from criticism. The warranty that accompanies the college degree–that students have undergone a rigorous course of study and emerged ready to tackle the challenges of the workplace and further education–turns out to be, in many cases, a fraud.
During their four years of college, 36 percent of students studied made no progress at all on the most widely-used measure of collegiate critical thinking, analytic reasoning, and written communication skills. The average gain was less than half of one standard deviation. Results for minority students and those from academically disadvantaged backgrounds were even worse.
The list of culprits is long: Poor preparation, lax accreditation standards, faculty incentives that privilege scholarship over teaching, a low equilibrium of mutual expectation where professors ask students to do little and provide little in exchange. The modern university has evolved haphazardly over time to accommodate a huge variety of interests, functions, and concerns. Somewhere along the way, the core business of educating undergraduates faded from view.
But this learning-deficient ecosystem only persists because there is little or no outside pressure to become otherwise. Contrast this with the vigorous national conversation about elementary and secondary education. A whole constellation of organizations from across the ideological spectrum exist to analyze, criticize, and improve schooling for children. Many disagree, often stridently, about the necessary means, with perspectives ranging from big government regulation to wholesale privatization and many points in between. But they all begin from the same underlying premise: too many American K-12 students are failing to learn.

Continue reading The Book That Shook the Campuses

Who Pays the Hidden Cost of University Research?

Higher education in America is in financial crisis. In constant dollars, the average cost of tuition and fees at public colleges has risen almost 300 percent since 1980. Our best public research universities, like my own University of California (UC), are wracked with doubt: will they be able to continue their historic role as institutions with a vital public mission, or will they become “privatized,” demanding ever higher tuition and therefore inevitably serving a more elite clientele?
Let me note some pointed comments by citizens outside the campus. A letter to the editor in the San Francisco Chronicle last March 9th said: “What the public college students (and their parents) in this state must understand is that the days of the taxpayers subsidizing their higher education are over, sad as that may be. …The costs at all colleges and universities have risen dramatically over the last few years (much higher than the cost-of-living-index). … Those of us in California who are taxpayers are having a difficult enough time paying our mortgages and for the education of our own children. It simply is not sustainable to expect that there will be free or substantially below-cost education provided on the backs of the state’s increasingly dwindling number of taxpayers. …”
A similar complaint is voiced in an article published by the Howard Jarvis Taxpayers Association, July 5, 2010: “As California faces an unprecedented budget crisis, students at California colleges have been asked to pay a greater share of the total cost of their education, most of which is still borne by taxpayers. …[T]axpayers pay 60-70% of the cost of … UC students’ education, without even counting financial aid.”

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Unfettering New York’s Public Universities

Fiscally beleaguered presidents of public universities around the country like to wisecrack: “public universities used to be publicly funded, then they were publicly assisted, now they are publicly named.” While easy to dismiss as a self-serving whine, there is something to their complaint, at least as it applies to the two public university systems in New York, CUNY, the City University of New York, and SUNY, the State University of New York. Looking just at SUNY’s budget, for instance, out of a total annual system-wide expenditure of $11 billion, only $3.5 billion – or 32 percent – actually comes from New York State’s taxpayers. The other 68 percent comes from students, research foundations, users of SUNY facilities, and generous donors. The CUNY proportions are roughly comparable. In other words, to quote a top SUNY financial official, New York State today “is only a minority shareholder” in its public universities.
The problem is that New York’s legislators treat all of this non-taxpayer money as if it were actually theirs to collect and to disburse. They not only insist on setting the level of university tuition and then “appropriating” it so that it can be spent, they even want to control the disposition of externally provided research and philanthropy dollars. To add insult to injury, as external funding has gone up, legislators have reduced the state’s tax levy allocation – often by an even greater amount. Understandably, this infuriates the public universities’ primary financial backers – students, research grantors and philanthropists – who see their contributions being used not to enhance the state’s colleges but to indirectly underwrite other state expenditures.
This travesty might finally end (or at least be curtailed) under a proposal now being debated in Albany that is so controversial that its resolution is holding up approval of the 2011 state budget. Called The Public Higher Education Empowerment and Innovation Act (PHEEIA, pronounced “fee-ah”) – supported by Governor David Paterson and the state senate but strenuously resisted by the assembly – this legislation would allow both CUNY and SUNY to set their tuition levels without the legislature’s prior approval and keep all the resulting tuition revenue, accept and retain all funds from research grants and philanthropic gifts, more easily enter into contracts with private vendors and enterprise partners, streamline hospital operations (mainly an issue concerning SUNY’s three hospitals), fast-track campus facility construction, and lease portions of their campuses to other parties for purposes consistent with their academic mission. Naturally, all of these new operational freedoms are hemmed in by myriad restrictions: tuition increases would kept under the higher education price index, all expenditures and contracts would still be subject to state financial accounting rules, land leases and contracts would be tightly overseen by newly established state boards, just to mention a few of the bill’s many constraints.

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Race and Ethnicity in Student Borrowing

The College Board has issued another of its reports on student loan debt, focusing this time on the 17 percent of students who graduate from four-year colleges with “high debt levels”—that is, more than $30,500 worth of education loans. The average debt load for those high -borrowing students, one out every six graduates with bachelor’s degrees, was $45,500 in 2007-2008, the academic year covered by the study. That’s a staggering amount, considering that the average annual starting salary for a new college graduate is about $49,000 (for liberal arts majors, it’s only $36,000). Two-thirds of college students and their parents borrow for higher education, and a fourth of those borrowers are at the highest debt level. About a third of that debt is in non-federally guaranteed loans that typically bear higher interest rates and are more difficult to defer repaying. High levels of student debt typically correlate with high levels of loan default, as college graduates discover that the entry-level jobs for which they qualify right after graduation don’t pay enough to enable them to keep up with their loan repayment schedules.
What is most intriguing—and disconcerting—about the new College Board study, titled “Who Borrows Most?” is the role played by race and ethnicity in student borrowing. “[H]igh debt levels are more prevalent among black bachelor’s degree recipients than among those from other racial/ethnic groups, and these differences are not entirely explained by differences in family income levels.” the study reports. Some 27 percent of black recipients of bachelor’s degrees in 2007-2008 borrowed $30,500 or more to pay for college, compared with 16 percent of whites, 14 percent of Hispanics, and 9 percent of Asians. The racial/ethnic discrepancies in taking on debt existed at all income levels, from the poorest (families earning less than $30,000 a year) to the solidly middle-income. Only among families at the highest income levels–those earning $100,00 or more a year—were the borrowing levels among ethnic groups roughly comparable: Nine percent of well-off white students graduated with more than $30,500 in loans, compared with 11 percent of well-off blacks and 10 percent of well-off Hispanics. Even in this prosperous group that could presumably afford high debt levels, Asians stood out for their low levels of borrowing. Only five percent of Asians from families earning $100,000 or more a year graduated from four-year colleges with more than $30,500 in student debt.
What does this all suggest? To the report’s authors, Sandy Baum and Patricia Steele, it suggests that a sizable percentage of college undergraduates make rash and uninformed decisions about how much to borrow in order to pay for their educations and need an array of government interventions to protect them from the consequences of their poor planning. “[I] is difficult for students to estimate in advance [It] is vital that policies be designed to protect students from unmanageable debt to the extent possible,” they write. The new student-loan provisions tacked onto the healthcare overhaul that President Obama signed into law this year—increases in the size of federal Pell grants for low-income students and easier repayment and forgiveness terms for those who borrow directly from the government—seem to be the kind of “policies” that Baum and Steele have in mind. “Strong income-based repayment is important as a supplement to moderating price increases and increasing the generosity of need-based financial aid,” they write.

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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.

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Be Careful What You Wish For

President Obama’s call for an increase in college graduation rates and the establishment of a $2.5 billion college completion fund begins to address a vexing issue for those of us employed in higher education, namely, how do we make the United States more economically competitive in a world that demands a well-trained, college-educated workforce? The president’s call is welcome. Graduation rates need to increase, especially among under-represented groups and first-generation college students. If we want more Americans to become more competitive in a smaller and smaller “world village,” we must pay attention not only to those who traditionally pursue higher education, but also to those who do not have such a tradition. No doubt, “a high tide lifts all boats.”
However, this insistence on increasing the numbers of college graduates appears to overshadow a more overarching but simpler objective of higher education—to educate rather than graduate students. Consider two statements common in higher education, both of which I have heard in conversation, one with a student, the other with a faculty member (thankfully, not at my current institution, which clearly does focus on educating rather than graduating students).
The first conversation was with a paralegal student I advised when I was an academic dean at a two-year for-profit institution in the western U.S. The conversation went something like:

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J-School Propaganda

Nestled away in the heart of one of the most conservative Midwestern states is a publicly funded university radically at odds with its surroundings.

Universities are in theory, marketplaces for ideas and ideologies; centers for free expression as well as vigorous and informed debate; refuges for free and independent thought. But if the taxpayers who help fund this institution heard what certain professors in its school of journalism are teaching students, they might ask for their money back. To some extent, this is no surprise. Most universities and their journalism schools are notoriously left leaning in nature. However, the sheer ferocity of the indoctrination is astonishing. I know first hand. I spent much of the past year at this institution.

It was not a surprise that as a conservative, I was ideologically alone in journalism school. However, it did not seem like a gigantic leap to think that no matter their leanings, professors would keep their politics out of the curriculum and fellow students would be open to and accepting of dissenting voices.


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The Tuition Spiral

The New York Times reports that “College Costs Outpace Inflation Rate.” Of course they have. The Chronicle offers a more telling headline: “Student Aid Has Gained, but College Costs Have Risen Faster.”

The Times reports “in recent years, consumer prices have risen less than 3 percent a year, while net tuition at public colleges has risen by 8.8 percent and at private ones, 6.7 percent.” This was the largest increase in six years.

What is to be done? Senator Clinton has proposed a $3,500 tax credit for students, and an increased Pell grant. Bill Richardson proposes two years of free schooling at public universities in return for a year’s pledge of public service. Mitt Romney has offered a similar plan, tying student aid to the type of jobs students intend to take after college. All of these plans would necessarily involve a significant increase in direct government spending on higher education. Most frankly acknowledge that government aid will never catch up to tuition increases. Few are willing to consider whether government aid might underpin the rise of tuition. Whatever the case, it’s impossible to trace any consistent benefit from mere aid increases.

Richard Vedder has, as to be expected, proposed a plan of far greater substance:

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College Sports Bonanza

Senator Grassley, the Chronicle of Higher Education reports, has turned his attention to the tax status of collegiate athletic programs – wondering “what gives the IRS comfort that they have met the requirements of being a charity.”

The Chronicle furnishes Grassely abundant cause to wonder, reporting that athletics donations now amount to more than a quater of funds received by some universities:

The fresh concerns came in response to a Chronicle article, published online last week, suggesting that contributions to sports programs are eating up an ever-larger share of donations to colleges, and that some athletics programs entice donors with perquisites like free seats on teams’ charter flights.
“When I hear stories about top donors to college athletic programs getting a free seat on the team plane,” Mr. Grassley said in a written statement, “I wonder what the public gets out of that. We need to make sure that taxpayer subsidies for college athletics-program donations benefit the public at large.”

Grassley’s very right to wonder about this. The second Chronicle article is sure cause for alarm, detailing sophisticated athletics fundraising operations operating independently of University development departments. Its unclear what if any benefit these increasingly self-contained operations are providing schools, and good cause to examine their tax status accordingly.

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