Rebuilding The Public University: The U.C – What/Who’s It For?

In Budget Politics, California, Economic Planning, Economics, Education Reform, Higher Education, Politics, Politics of Policy, Public Policy, Public Sector, Regulation, Social Democracy on December 14, 2010 at 11:21 am

Introduction:

With the U.C Regents’ recent 8% fee hike (on top of the 32% hike from the previous  year) and the more symbolic acceptance that the University of California is not a tuition-free school, we mark a turning point in the history of the once (and future?) greatest public university in the world. U.C Berkeley now joins the “50k club” once occupied solely by private universities.

This is as good a time as any to ask – where is the U.C going? Why is it going in the direction it is? And is there an alternative?

Because there may not be another time to ask.

Background:

Readers of The Realignment Project will know that I have a deep philosophical and practical disagreement with the reigning “high-fees, high-aid” model that has dominated not just in the U.C but throughout American higher education for several years now. This disagreement can be summarized in two competing narratives about what is wrong with public higher education and how to fix it.

The High-Fee, High-Aid Narrative:

The arguments on behalf of the HF/HA model can be seen in many places – the public statements of U.C President Yudof are  my main text here, but you can see it in the Browne Report in the U.K and similar efforts elsewhere. The narrative goes something like this:

Act I: the cost of higher education is rising due to somewhat nebulous reasons (some mention increased student enrollment, others “technology,” some additional student services and expectations for same), but that state contributions have declined or stagnated – and that this trend cannot be fought. Higher education is thus in peril.

Act II: the humanities and social sciences are too expensive, under-enrolled, not self-supporting because they don’t bring in enough research dollars, but in some higher sense are fundamentally unsuited to the modern world because they do not provide marketable skills for future workers. Investment in higher education needs to be redirected to the maths and sciences, which can produce revenue and provide the kinds of skilled workers the market actually wants. The problem is thus revealed.

Act III: because of these factors, universities have no choice but to increase tuition. This is ok, and actually quite progressive – because higher tuition revenue will be redistributed in the form of aid, thus allowing poor students to go to university. This is in fact so moral that attempts to freeze tuition would be bad, because this would limit the amount of student aid that could be given. The tragedy is lamented, but shown to be a necessary and virtuous sacrifice.

Act IV: furthermore, universities can meet the crisis through lowering the cost of education – shorter terms and moving to online education is much in mention, greater reliance on adjunct and other contingent faculty (such as graduate students) is discretely not mentioned. A way towards a shiny new e-future is revealed.

An Alternative Narrative:

If the above description seems a bit unfair and reductive, that’s because I don’t find much merit in their case.

Let’s go through point-by-point.

Act I:

Regarding the financial picture – the U.C did suffer an $600 million drop in funding from the state (about 5/8ths of which has since been restores), but the bigger picture is the stunning mismanagement of the U.C’s endowment and pension funds, which lost $1.5 billion (20% of the total endowment since 2007) and $16 billion in 2008 alone (or 30% of its value)  respectively, for a total of over $23 billion.

Much of these losses can be traced to a cultural shift within the highest levels of the U.C administration that sought to bring the values and the (now-fictitious) returns of the hedge fund world into the U.C endowment and pension funds. As Peter Byrne and a team of investigators uncovered, the U.C’s financial operations changed dramatically in 2003 when three financiers (Gerald Parsky, Richard C. Blum (husband of Sen. Feinstein), and Paul Wachter) on the Regent’s investment committee “steered away from investing in more traditional instruments, such as blue-chip stocks and bonds, toward largely unregulated “alternative” investments, such as private equity and private real estate deals.” This was accomplished in part by “by-passing the university treasurer’s in-house investment specialists, [and hiring] private managers to handle many of these new kinds of less-regulated transaction,” increasing administrative costs while decreasing the ability of outsiders (including the Legislature, students, faculty, and unions) to understand what was going on.

The result? Money that could have been saved for back-filling state cuts was shifted to dodgy deals: $748 million went to seven private equity deals in which Regent Richard Blum and his firm were major investors; $86 million to private equity deals in which Blum had significant interests; $53 million into two for-profit degree mills in which Blum was the majority stockholder, and the list goes on. The return on these investments “as of spring 2009…was running at a negative 20 percent for the fiscal year.” Not only did the U.C itself take a hit, but CalPERS was suckered into investing $500 million, resulting in “an aggregate loss of 18 percent in these Blum funds.”

This is a quite impressive level of incompetence mixed with corruption, and it amounts to the looting of the U.C for private gain. No wonder AFSCME and the state legislature are pushing for increased oversight and decreased independence for the U.C. However, this also speaks to a shift in priorities within the U.C from a mission of providing a tuition-free public education to one that emphasizes a hedge-fund like model of top-heavy administration rife with bonuses and insider trading. No wonder that the U.C plowed the 2009 32% tuition increase into maintaining its construction bond rating; it’s the same model of behavior we see when CEOs use their pension funds to pump up their stock value.

Act II:

Contrary to conventional wisdom, the humanities and social sciences are not money-pits. As scholars like Christopher Newfield, Robert N. Watson, and Bob Samuels point out, the humanities and social sciences are remarkably cheap to operate. The humanities at UCLA, for example, bring in $5.5 in revenue over their costs; another survey shows that the social sciences at University of Washington routinely run in the black. It makes sense – these departments require only personnel, space to work in, and some money for paper and writing utensils and other standard departmental resources, as opposed to MRI machines, electron microscopes, or super-colliders.

So while the “medical and sciences bring in research money” argument might seem intuitive, the reality is that research grants don’t cover the full cost of equipment, infrastructure, support and maintenance, and so forth – requiring cross-subsidization from other departments. Which is all to the good – doing researching into the structure of the universe and the nature of diseases is important and should be subsidized – but cutting the departments whose profits subsidize them isn’t good for the sciences either.

Act III:

Regarding the critical question of financial aid making up for higher tuition, here we have to deal with the smoke and mirrors that the Blue and Gold program has created since its enactment. Blue and Gold has been used as the progressive shield of the U.C since President Yudof’s arrival, but it’s a Potemkin plan.

Here’s how Blue and Gold – which is billed as the U.C covering all educational fees, remember – actually works.

Fist, Blue and Gold requires you to fill out FAFSA (Free Application for Federal Student Aid), and apply for the maximum in Federal and State aid – which includes loans as well as grants. Then Blue and Gold “combines all sources of scholarship and grant awards you receive (federal, state, UC and private) to count toward covering your fees.” In other words, the U.C is describing outside aid as U.C aid and eliding the very real difference between grants and loans.

Second, Blue and Gold’s aid budgets assume both the family and the student kicking in large amounts to cover the cost of going to the U.C. In the U.C’s model budget, the student is expected to work enough to save $4,000 a year and take out $5000 a year in loans which means at the end of the day, the student is still going to pay $36,000 to attend the U.C. The picture on the family contribution side is even uglier: a family making $20,000 a year is expected to kick in $9,100 a year (or 45.5% of yearly income), a family making $40,000 will have to come up with $11,600 (or 29% of yearly income), a family making $60,000 will have to come up with $16,100 (26.8%), and a family making $80,000 will have to come up with $22,600 (or 28.25%) in order to meet the U.C’s “family contribution” requirements.

Third, as Professor Bob Meister has pointed out, despite the claims that the U.C is expanding the Blue and Gold program to shield working class and middle class families from higher tuition, it’s not actually putting in more revenue from the higher tuitions to do so. Rather, it’s funded by “by increasing the amount that all students are expected to provide as “self-help” (their “loan/work expectation”). This higher amount will then be subtracted from their total “financial need” before aid packages are awarded.”

Far from cushioning the blow of higher tuition or redistributing wealth from richer to poorer students, the Blue and Gold program is largely a political tool. It provides the image of progressiveness and some small share of social peace without the substance thereof.

Act IV:

Even in the best of circumstances, online education is a hard sell to make, like selling UAW workers at River Rouge on the benefits of robots. The empirical case seems to be rather mixed at best; as Wendy Brown has pointed out, “for-profit high quality on-line liberal arts education has been a financial disaster for most institutions engaged with it.” It’s really only affordable if you skimp on the quality – i.e, less researchers to design the courses, fewer staff to interact with students and monitor their engagement, and fewer new courses added. The result is that drop-out rates  are “routinely 20% higher than drop-out rates from on campus courses and runs as high as 70% for some courses and programs.  Moreover, the high rate, much studied, seems impossible to fix.” The U.C still profits, but only at the expense of students who splash out for courses without much hope of a credential.

And it’s not like we’re in the best of circumstances to begin with. It’s hard to trust that U.C administratorswill not use online education to reduce their wage bill at the expense of faculty, adjuncts, and graduate students when U.C regents are up to their eyeballs in conflicts of interest over the endowment and pensions; when the U.C lies to post-docs about whether stimulus money for research can fund researcher pay increases; or when they give themselves massive bonuses while preaching austerity to everyone else.

Alternative Model:

In place of this under-performing, undemocratic, and increasingly corrupt model of higher education, I would propose the alternative model be adopted by the U.C:

  1. Dump the Hedge-Fund Model of Endowment Management: instead, shift the U.C’s endowment towards the previous, conservative model and make that a binding commitment upon the U.C regents. At the same time, work to build a Federal/State Endowment Program: have the Federal and State governments kick in a one-time doubling of the U.C’s (and other public universities) endowment, but mandate that said funds be lodged solely in long-term public bonds, creating a stable source of revenue for the U.C.
    1. Re-Link the Endowment to the Model Plan’s Mission: the revenue from the Endowment Program (supplemented by an dedicated excise tax, see previous link) should be restricted by law to the purpose of gradually zeroing-out U.C tuition. Given that the yearly revenue from student fees amounts to only 1/10th of the U.C’s revenue, it shouldn’t be too hard to reach this goal if the heavy lifting is spread out over 10 or 15 years.
  2. Cut Administration from the Top Down: the U.C’s administration is by far the least sustainable aspect of the university. According to the UCLA Faculty Association, “the numbers of Executives and Senior Managers grew by 114% and Middle Managers by 91%” in the last decade – compared to a 32% increase in all employees over this period; administration pay increases have been on the order of 10.12% per year. Eliminating the excess administration (i.e, administrative employees over the growth rate of the whole U.C) would save $792 million a year, more than the U.C lost from the state during the crash.
    1. Make Administrative Savings Through Increased Democratic Governance: one way that the U.C can save on administrative costs is to replace these positions with a more open, democratic model of governing the U.C that devolves responsibility and power downwards. Some functions could be usefully handled through elected executive officers, others by creating an “administrative track” to make use of experts and professionals who have a yen for empire-building or special knowledge in particular areas.
  3. Re-orientate the U.C to the Public Interest: while this is not directly related to the funding question, one side effect of the HF/HA model is an increasing emphasis on corporate research and business spinoffs. While I have no objection to practical research being done (or U.C professors being paid a fair wage to do so) as long as it’s done in an ethical and transparent way, it shouldn’t be seen as core to the U.C’s mission. If corporations want to do research, they should fund R&D departments. But the mission of a public university should be to serve the public – to do public interest research, both basic and applied, that goes out into the public domain and enriches the whole of society (a service which corporations have profited greatly from, by the way).

Why The Alternative:

At the end of the day, it might be asked why make this change. Why not let the U.C or any other public university be run like a private university? The answer, to my mind, lies in the issue of the publicness of the university. Producing a highly-skilled workforce is a fine endeavor, so is completely non-profitable research for its own sake, but these aren’t necessarily public functions.

What makes a university public is its mission as an instrument of egalitarianism on the one hand, and republican empowerment on the other. The experiment is to be tried, whether the children of the people, the children of the whole people, can be educated,” argued Horace Webster, the first president of CCNY – thus, public universities are both the mechanisms by which inequalities of class and race can be overcome, and also the proof that those inequalities are founded on privilege and not merit. Secondly, Webster argued that public universities would be the test of “whether an institution of the highest grade, can be successfully controlled by the popular will, not by the privileged few.” Just as the individual needs access to public education to avoid being exploited by the wealthy’s monopoly on knowledge, the state needs access to public sources of expertise needed to regulate and oversee private corporate agglomerations of professional knowledge.

So, with all due deference to my peers at other U.C-based blogs, both as a research and a teaching institution, the U.C belongs to the people and their government.

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  1. Great article thank you.

    Where did you get that image from? Its really cool.

    Thanks!

  2. […] more intervention is needed to boost the middle class than just expanding higher education. The first thing we can do is to prevent downward mobility by boosting effective […]

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