Sunday, July 19, 2009

Compact, Fees Up; No Compact, Fees Up Even More

UCSC Professor Bob Meister and I were on UCPB for most of the 2000s, and have been remembering the battles we had with UCOP trying to persuade them that the Compact was bad financial math for UC. Bob had a darker take, though, and here he summarizes his many arguments with then-Budget Director Larry Hershman:
UC has certainly suffered insofar as the Regents relied on the Compact with Schwarzenegger, but they were NOT innocent victims, as Blum suggests. Schwarzenegger had a budget director who believed that the state should not "subsidize" the large number of UC students who could afford to pay much more [buy using state General Funds to keep fees low]. So Schwarzenegger offered to let UC keep it tuition increases (without imposing offsetting cuts in state funding) if UC promised to become increasingly tuition-dependant in the future. That was the real deal--a green light for Michiganization. Dynes leapt at the opportunity, and the Regents (Blum included?) went along.

This was the moment when the Regents (most?) finally signed on to the "net tuition" concept--i.e., that the real cost of UC is not the total fee, but what the median student pays net of financial aid. The compact was ESSENTIALLY an agreement between UC and the Governor to raise net tuition--otherwise increasing fees would not offset declining state support.

So the real fiscal model was to replace state financing with personal DEBT financing--parental mortgages and student loans. (The full amount of UC's planned reliance on private debt would be increased: net tuition multiplied by total enrollment.) Events have obviously derailed the Regents' plan for an increasingly debt-financed UC (to which several of us objected at the time). It remains true that Schwarzenegger's failure to fund enrollment growth has made things worse.
It was clear to Bob and I - and to other Senate members - that the Compact was a recipe for raising fees 10% every year. But under the Compact, there would also be mediocre and inadequate but nonetheless some kind of General Fund stabilization and minor growth. GF would be kept just a bit above inflation and below real cost increases. Operations were always squeezed and fees always went up, faster during cut cycles, so that cost would be shifted from the public to the private user. This was not a political decision or popular desire, but an effect of budgetary engineering that originated in Arnold Schwarzenegger's Department of Finance and his appointed director, Donna Arduin.

Public cuts could mathematically be offset with high fees, but these were undesirable and politically unpopular. What we got instead were fee increases of 2 to three times the rate of inflation every year, coupled with general fund increases that didn't cover increased costs. There was the appearance of normalcy but no improvement, especially given constant (and often unfunded) enrollment growth. Ambitious leaders of smaller units who could do the math raised fees enormously: Berkeley Law's fees rounded $30,000 a couple of years ago and are heading for $40,000.

Were UC to keep its current financial structure and maintain quality by charging adequate fees, and use fees to make up the whole shortfall (no furloughs, etc.), fees would go next year to $14,500. Charles Reed has already announced a similar program at CSU - meaning that the Governor's 20% one-year cuts mean CSU fees will climb in one year by 30%.

My ideal: UC Regents find their nerve and announce true fees - $14,500. They accompany this with announced upgrades in the undergraduate programs. Students, parents, and the public balk when they finally see a real number of what a Michigan-style semi-privatized but high-quality university actually costs. They get upset and fly into action which causes media coverage and turns the downgrading of UC into a statewide story. This persuades legislators to restore public funds. This in turn stimulates a discussion of how public cuts raise private costs, and that public services are a more efficient way than for-payment contracts for delivering common goods like an educated public.

UCOP says this will never work but it has yet to be tried.

The state

I'll try not to get carried away. In the meantime, think $14,500 - and how to avoid it with something besides crappifying UC.



black magic woman said...

Is there a sentence/paragraph missing toward the end? "The state..."

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