BY HANK REICHMAN

This is the first in a series examining issues in the University of California system, the nation’s premier public research university.

As if the University of California system did not have enough problems with embarrassing sexual harassment scandals at Berkeley and a growing movement to fire Davis Chancellor Linda Katehi for alleged conflict of interest (to be discussed further in future posts in this series) among other problems, the California State Auditor on March 29 issued a scathing report on the system’s enrollment and budget, blasting the university’s increased recruitment of out-of-state and international students, whose tuition rates are much higher than those paid by California residents.  The report had been requested by the Joint Legislative Audit Committee.  Here are some highlights:

• Over the past several years, the university has failed to put the needs of residents first and has made substantial efforts to enroll nonresidents who pay significantly more annual tuition and fees.
• Total nonresident enrollment increased by 82 percent, while resident enrollment decreased by 1 percent.
• The university made it less appealing for the residents it did admit to attend the university by denying an increasingly large percentage of those students admission to the campus of their choice. In contrast, nonresidents, if admitted, are never denied admission to the campus of their choice.
• It modified its admission standard for nonresidents and, during a subsequent three-year period, admitted nearly 16,000 nonresidents with lower academic qualifications than the median for residents it admitted.
• From academic years 2005-06 through 2014-15, the university’s campuses denied admission to nearly 4,300 residents whose academic scores met or exceeded all of the median scores for nonresidents whom the university admitted to the campus of their choice.
• In 2008 the university began encouraging campuses to maximize nonresident enrollment by allowing them to retain their nonresident tuition and establishing separate enrollment targets for residents and nonresidents.
• Admission decisions have hampered efforts for its student body to reflect the diversity of the State—only 11 percent of the increasing number of nonresident undergraduates were from underrepresented minorities in academic year 2014-15.
• The university had other options for generating savings and revenue without increasing tuition or nonresident enrollment.
• Not including nonresident revenue in per-student funding exacerbates inequities, especially for underrepresented students.

The report was blistering in its critique of UC management and not surprisingly generated a great deal of media coverage.  It was followed by a joint legislative hearing April 6, during which UC representatives questioned auditor Elaine Howle’s contention that the university was sacrificing Californians in search of out-of-state dollars. Henry Brady, dean of the Goldman School of Public Policy, said the supplemental tuition that comes from admitting nonresidents is beneficial to resident students. “That money is what we use to help support all of the California students that we admit,” Brady said.

“The priority for UC has been, yes, make UC as accessible as possible, cut where we can, but don’t cut to the point where it harms the quality of the educational experience,” said UC spokesperson Steve Montiel, noting that the university has gone through $660 million in cost cutting.  The state has provided $25 million in funding for enrollment growth, and this year, the university has accepted 8,000 more students — not including transfer students — than last year, Montiel said.

Howle recommended at the hearing that the university set a 5 percent cap on nonresident enrollment, revise the admission standards for nonresidents, and improve internal efficiency by cutting costs.  And State Assembly member Kevin McCarty (D-Sacramento) followed up by introducing AB 1711, which would severely limit enrollment of out-of-state and international students.

But informed observers have pointed out the shortsightedness of this solution and are criticizing the report for missing the real source of the problem, the state itself.  Bay Area business leaders Lenny Mendonca and Jim Wunderman lambasted the report in an April 11 San Francisco Chronicle op-ed:

In what can only be characterized as a selective, misleading and inflammatory report released on March 29, the state auditor calls for putting the brakes on out-of-state investment from nonresident students. Ironically, the auditor also recommends giving the same Legislature that has been responsible for cutting UC funding over the past 30 years more power to control UC admissions and fiscal decisions. But rather than further handcuff UC, California should be looking for ways to stabilize state funding for the university.

The central thrust of the one-sided report, which was the focus of an April 6 hearing of the Joint Legislative Audit Committee, is that nonresident admissions are putting California students at a disadvantage. Not only is this assertion wrong, but it feeds into a polarizing us-versus-them narrative that ignores the realities of globalization.

A major flaw of the report is its failure to address or even substantively acknowledge key context. Since the late 1990s, the state has cut its support for UC and the millions of students the system serves by 30 percent, or more than $1.2 billion. This loss of state funding has forced UC to make a series of dramatic tuition hikes and increase out-of-state student admissions. Non-resident students pay $38,108 in tuition and fees compared to $13,400 for California residents. The nonresident fees generate the equivalent of the annual budget of UC Riverside.

This funding is crucial to keeping the system open and accessible to California students. Without it, UC would either have to reduce in-state student enrollment by thousands, further raise tuition for in-state students by 30 percent, cut student financial aid, furlough 75 percent of all non-academic educational staff or do some unattractive combination of these.

Former legislators Dick Ackerman and Mel Levine argue further that the report and McCarty’s proposed legislation miss the point:

The simple truth is that worthy California residents are not being displaced by out of state students.  The reason that qualified applicants from our state find it so hard to get in is that the State has been starving the UC system for the past quarter century.  In 1990-91, the State provided $18,820 per student to UC compared to $7,780 in 2015-16.  Even with significant tuition increases, the system has not been able to grow its enrollment to accommodate the thousands of worthy California students who want to enroll.

When the Legislature passed this year’s Budget it included a mandate for an increased enrollment of 5,000 California residents at UC and provided $25 million to support that increase.  The catch is that the additional money covers only half of the additional cost to the University.  The real solution is not to put up barriers, but to restore funding levels that will allow the finest public university system in the world to fulfill its core mission of educating young Californians.

In opposing AB 1711, Assemblyman Das Williams of Santa Barbara got it right when he said, “the Legislature and the Governor massively cut UC and CSU funding, and yet, we have sort of expected that there wouldn’t be dramatic, bad consequences”.

In fact, even as these issues were being debated, UC revealed that it had admitted 66,123 high school seniors for the coming fall term — a 15% boost over last year. The increase of 8,488 admission offers to California students is the largest jump since UC started keeping track of this kind of data in 1994.  According to the Los Angeles Times,

Offers to underrepresented minorities grew significantly, with an increase for Latinos to 22,704 from 16,608 last year, representing 32% of the total class admitted.  African Americans grew to 3,083 from 2,337, about 4.7% of all admitted freshmen. The number of offers to Asian Americans and whites also increased over last year. But their share of the total admitted class fell slightly to 25% for whites and 34.3% for Asian Americans. . . .

[A]dmission offers to nonresidents also grew, reaching 32,799 — a nearly 8.9% increase over last year. Their enrollment has been capped at the three most popular campuses — UCLA, UC Berkeley and UC San Diego — and their admission rate fell slightly to 53.7% this year. The rate for California students increased to 62.7% of those who applied. Of those admitted, 43% would be the first in their families to attend college.

Overall, UC expanded the number of freshmen offered admission to 98,922, up from 87,759 last year.

“We’ve intensified our efforts to boost enrollment of Californians at the university, and all indications are that these efforts are working,” UC President Janet Napolitano said in a statement. “Our commitment to California and California students has never wavered, even through the worst financial downturn since the Great Depression. Now, with additional state funding, we are able to bring in even more California students.”

Napolitano and California State Senate President Pro Tem Kevin de Leon (D-Los Angeles) spoke at a public forum on Higher Education and California’s Future in San Francisco April 12, organized by the Public Policy Institute of California, a highly respected think tank, which I attended. There de Leon acknowledged the audit report’s essential unfairness.  “When you make deep cuts and short-change California students, these are the ramifications,” he told the audience.  When asked whether the state is adequately funding higher education de Leon acknowledged that it wasn’t, despite recent improvements.  However, he said, it’s a matter of competing priorities.

To that Napolitano replied by pointing out that forty years ago higher education consumed 25% of the state’s budget, at a time when a smaller percentage of the population sought a post-secondary education.  Today that figure is just 10%.  “That says something about our priorities over time,” she concluded.  [I should note that both de Leon and Napolitano, who were interviewed by PPIC head Mark Baldassare, also spoke at some length about efforts to ensure diversity and equal opportunity in the UC, with de Leon promoting his proposed legislation, SB 1050, which would establish a “K–12 College Readiness Block Grant program for the purposes of preparing California’s high school pupils, particularly pupils who are traditionally underrepresented in the University of California and the California State University, to be eligible for admission into a postsecondary institution, and increasing the 4-year-college-going rates of these pupils.” See also here.]

Indeed, the numbers are sobering, to say the least.  State support for UC fell from $3.2 billion in 2007-08 to $2.2 billion in 2011-12. Since then, the state has slowly restored funding each year to bring UC closer to its pre-recession level. According to the California Department of Finance, the state has pledged about $3.4 billion in annual increments between 2012-13 and 2016-17 and so far has delivered about $2.4 billion.  But that’s only part of the story.  According to the PPIC’s informative report, released in conjunction with the San Francisco event, annual state funding per student in the UC reached a high of $26,157 (in constant 2014 dollars) in the mid-1980s and was as high as $24,644 as recently as 2001-02.  But in 2013-14 the figure stood at just $11,294, compared to $6,552 for the California State University (CSU) system, and $5,821 for the community colleges.  The CSU figure represents a decline from a high of $11,721 in the early 1980s and $9,393 in 2001-02.  The community college figure has been essentially stable for a half century.

The report notes that

Over the long run, state appropriations to UC and CSU have not kept up with enrollment increases. Between 2007–08 and 2012–13, state appropriations to UC and CSU fell from $6.3 billion to $4.3 billion (in constant dollars), or more than 30 percent, even as enrollment increased. On a per student (full-time equivalent) basis, General Fund support at UC and CSU is near record lows. In contrast, per student funding at the community colleges is at historically high levels. Recent state funding increases at UC and CSU have been relatively small in comparison with previous cuts; community college increases have been sizable due to Proposition 98.

Approved by voters in 1988, Proposition 98 requires that 40 percent of the state’s General Fund be spent on K–12 schools and the California Community Colleges. UC and CSU were not included in this funding guarantee. At the time, state higher education funding was split relatively evenly among the three public systems. Now, the community college system receives nearly 60 percent and the other two systems split the remaining 40 percent.

The result, the PPIC report notes, is that

State funding cuts have left UC and CSU with two options: obtaining funds from other sources and cutting expenses. In recent years, some expenses have been reduced through enrollment restrictions and other measures, and salaries and benefits—the bulk of instructional costs—have been relatively flat. But UC and CSU have relied mostly on increasing tuition. Community colleges have also restricted enrollment and increased tuition to help offset past cuts, though community college tuition in California remains the lowest in the nation.

Tuition at UC and CSU for California residents has more than tripled over the past 20 years.

The decline in state support has mostly—but not completely—been offset by increases in revenue from tuition.  UC and CSU used some tuition revenue to increase scholarship aid for lower-income students, but even so the net tuition (full tuition minus scholarship aid) per student more than doubled. Community college tuition for in-state students has increased by nearly 40 percent since 2005—from $1,018 per year to $1,423 in 2014–15. Although this increase has been significant, California’s community college tuition is still about $2,000 below the national average and many students receive fee waivers.

Since 2006, spending on faculty and administrative support at CSU and UC has held steady or Between 2006 and 2012, a period of rapid tuition increases, both faculty compensation and administrative support expenditures by the UC and CSU systems were flat or declining. In fact, UC spent nearly $200 dollars less on administrative costs (per full-time equivalent student) in 2012 than it did in 2006, shortly before the recession. UC and CSU are increasingly relying on untenured, non–tenure track, and part-time faculty.

The PPIC report also asked whether UC and CSU are using their resources efficiently:

Increases in tuition have bridged the gap created by falling state funding for both the UC and CSU systems. But these increases have led some policymakers, parents, and students to believe that institutional spending is out of control.   At the very least, they have raised concerns about the overall efficiency of all three systems.

Recent tuition increases are not caused by out-of-control expenditures at public universities . . .

Over the past 30 years, California’s public higher education systems have increased enrollment and awarded a steadily rising number of degrees and certificates despite the decline in funding from the state. From 2006 to 2012, when UC and CSU tuition grew the most, the overall distribution of expenditures did not change dramatically.  Faculty salaries did not increase over that time frame, and the dollars per student spent on administration were relatively constant.

The conclusion of all this is clear, and was recognized by both de Leon and Napolitano:  If California is to maintain what was once the most admired and successful system of public higher education in the world it will need to reinvest in that system.  Makeshift solutions, private donors, and never-ending tuition hikes won’t cut it.  That will take political will.  As Napolitano acknowledged, higher education competes with K-12 and pre-K education, with health care, transportation, and services to the disabled.  The UC, she said, will need to make the case not only for higher education’s contribution to an educated work force but also for “knowledge production itself.”  UC must walk a careful path between being an elite research institution and becoming a simply elitist one, she said.

In the meantime, the clock is ticking.  Even as Napolitano was speaking, the San Francisco Chronicle reported that UC Berkeley, one of the system’s two flagship campuses (along with UCLA), will eliminate 500 staff jobs over two years to help balance its budget by 2019-20.  Chancellor Nicholas Dirks sent a memo to employees informing them of the job reductions and said they will amount to “a modest reduction of 6 percent of our staff workforce.”

Berkeley employs about 8,500 staffers, from custodians to administrators. Faculty members will not be affected. Dirks said the reductions will be done in part through attrition and did not mention layoffs.  But the campus is in the process of laying off about 60 employees, spokesman Dan Mogulof said without identifying the departments they’re from. Some staff members in at least one area, residential student services, were told by managers two weeks ago that they should prepare to be laid off, the Chronicle reported. Other departments are bracing for similar news.

The job elimination message came as the campus projects a deficit of $150 million this fiscal year — 6 percent of its operating budget of $2.5 billion.  Berkeley’s deficit was $109 million last year and $12 million in the 2013-14 fiscal year, campus officials said in February.  The campus will receive at least $200 million in loans and debt restructuring from the UC system and is identifying other areas to cut and raise more cash, as previously reported on this blog. An estimated $50 million will be saved by eliminating the jobs, Dirks said in the memo, which offered few details.

“My concern and the public’s concern is that UC Berkeley is going to start cutting the people it can ill afford to lose — the people who clean buildings, who work in food services or health clinics,” said Todd Stenhouse, spokesman for the American Federation of State, County and Municipal Employees, which represents such workers at Berkeley.  “There’s a very clear need for those front-line services. But the question is whether there really is a need to hemorrhage resources on executives.”

Meanwhile, campus sources informed the Chronicle that departments have been told to reduce their budgets by 10 percent and can choose how to do so. Employees say they are hopeful that large numbers of layoffs can be avoided by leaving vacant positions unfilled or by shrinking programs. Dirks said he expects other savings to come from reducing travel expenses and spending less on students’ health insurance premiums, among other efforts.

Speaking at the PPIC event, de Leon was optimistic that the political will and savvy to reinvest in the UC and CSU are there, at least in the current Democratic-controlled legislature, which he called the “most progressive and productive legislative body” in the country.  But so far budget proposals from California governor Jerry Brown, who I have called “the only true fiscal conservative in American politics,” remain sadly inadequate.

Janet Napolitano’s administration of the UC is far from lacking in aspects of concern to the institution’s faculty, but her conclusion yesterday is irrefutable: “Our great system of higher education is often taken for granted, but we will lose it if we don’t act now.”

Future installments in this series will cover Title IX and tenure at Berkeley; campus chancellors gone wild; faculty pensions and compensation; and academic freedom conflicts.