Newfield/Meranze on the Audit Scandal at the University of California

BY HANK REICHMAN

A few weeks ago the California state auditor released damning reports on the management of both the California State University Chancellor’s Office and the University of California Office of the President (UCOP), with the latter stirring up a hornet’s nest of controversy in the legislature and the media.  At a Board of Regents meeting yesterday, auditor Elaine Howie acknowledged that the report revealed “nothing nefarious” and the regents agreed (or so they said) to implement her report’s recommendations.  However, on the previous day student protesters disrupted the regents’ meeting, chanting, “Hey regents, step off it! The people over profit!”

I have several times in the past reposted to this blog pieces from the Remaking the University blog, run by University of California at Santa Barbara English professor Christopher Newfield and UCLA History professor Michael Meranze.  Not surprisingly, Newfield and Meranze have been on the case of the UCOP audit and its implications, offering serious and important analysis of the implications of both the audit and UC’s response that will also enlighten faculty members elsewhere.  Here are links to their recent posts on the subject, with a few selected quotes from each:

What the UCOP Audit Means,” posted on May 1 by Christopher Newfield:

The new UCOP scandal is the worst in a long-running series. . . .

The interaction between the State Auditor and UCOP has turned a boring problem of inadequate budgetary records into another political firefight. Together the parties have produced a new round of heightened denunciations from state officials that include calls to rescind the 2.5% tuition increase and to increase direct legislative oversight of UC. . . .

This fight is actually unnecessary, and marks another setback for public understanding of the deeper issues raised by the report: research costs, research benefits to undergraduates, and public-good management standards. . . .

The tragedy of this particular audit is that UCOP is so busy saying it did nothing wrong that it can’t tell the more important story, which is that research is a vital public function that costs enormous amounts of money.  UCOP has to subsidize a lot of it or it won’t actually happen.  It has to use state money to do this, as it always has. We could argue about how much should be funded by UCOP vs the campuses, which is what we were getting set to do in 2006.  We could also argue about whether faculty have been pushed aside in too many of them, and whether the Senate has enough control.  But the real issue here is that the state has to pay for research as well as instruction through enrollment-based general funds. . . .

As we know, universities, in exchange for academic freedom, agree to conduct impartial and independent research whose findings can’t be skewed by politics or money.  And yet the audit claims that senior officials of a leading research university coached the subjects of a survey until they got the answers they wanted.   UCOP thus blunders right into a culture war stereotype: academics cheat, just like everybody else.  You can’t trust them not to waste your tax money.   Fake news, fake science, fake climate change, #fakeuniversity. . . .

Like the proverbial frog that doesn’t notice the water is getting hotter, we UC faculty don’t seem to have noticed our gradually increasing cynicism about our university and state. Increasing cynicism has led to lower expectations.  In my email over the past few days, a number of faculty have said “well what do you expect,” or “that’s politics,” or “that’s UCOP,” or “UCOP’s bad, but not as bad as the legislature.” Obviously I oppose legislative control, but we can’t afford to wallow year after year in this choice between the legislature’s intrusive austerity and UCOP’s executive autocracy.   UC will go nowhere if it can’t make a plausible case for its public good stature.  The prerequisite to both these things is an open culture.   Open administrative cultures depend on active governing involvement of students, faculty, and staff.

The UCOP Audit and University Governance,” posted on May 7 by Michael Meranze:

Amidst all of the heated disagreement, however, there has been one fundamental, and fundamentally wrong, point at which all of the arguing parties appear to agree:  that the answer to the problems the audit revealed can and should be solved from the top down.  Wherever you turn in the discussion (whether in the auditor’s suggestion that the legislature pass a separate budget for UCOP and establish an outside overseer, or President’s Napolitano’s assurance that she had established an internal UCOP working group to improve things, or Regent Lozano’s insistence that the Regents were hard at work in ensuring their “governance” of the institution as well as hiring an outside consultant to help with UCOP reforms), the common element in all of the proposals is that the answer is to be found in a closed loop of decision makers shuttling between Oakland and Sacramento (with the occasional nod to the campus chancellors).

In fact, the most striking aspect of the auditor’s report and UCOP’s response was the almost total absence of any acknowledgement of faculty or staff knowledge or perspectives.  Where were the formal responses of Senate Committees in the report?  How exactly is the auditor to know if the programs that UCOP oversees are productive if they don’t get unfiltered responses from the people who are providing the education and front-line services to students, are engaging in research, and are attempting to convey that research to the public? . . .

I’m sure we have all heard managers complain about how faculty do not want to change fast enough; perhaps they might consider that a rush to bad judgment marginalizes the deeper thinking that makes failure less likely.  If the University really wants to think about how to educate and create knowledge more effectively for the twenty-first century,  they would do well to recognize that in universities knowledge flows upward. . . .

Of course, these problems are not limited to UC.  As indicated by the ongoing revolt of the faculty (including a resolution of the university’s faculty senate) over Purdue University’s secretly negotiated agreement with Kaplan’s online education business, the willingness of university administrators to seek deals without proper consultation and without due public debate is widespread.  Nor is this limited to public universities (indeed private universities are probably worse). Yale and Columbia (neither of which have robust traditions of faculty governance) have sought to mobilize a seemingly endless array of technicalities to keep their graduate student workers from collective bargaining. Vanderbilt University has recently sought to prevent the unionization of their NTT faculty by claiming that they are managerial (a position rejected by the NLRB) and suggesting that their unionization would break down traditions of shared governance (although few NTT are included in that).

These may at first glance appear to be distant from the controversies about UCOP.  But they all point to the same issue: the refusal of top managers to recognize that the cost of achieving their expanded flexibility is the increasing inability of universities to take advantage of the practical knowledge held by faculty and staff.

The Budget Revision After the UCOP Audit,” posted on May 12 by Michael Meranze:

The Governor’s May budget revision is the first concrete sign of UC’s weakened condition following the release of the Auditor’s Report on the Office of the President.  Although there is relatively little change in the State’s overall funding to UC, two things stand out.

First, the Governor has made it clear that his trust in the University administration has been further damaged. As part of the May revision he has sequestered $50 million until the University completes demonstrates both that it has begun to implement the Auditor’s proposals and that it has made progress on pilot budget projects at Riverside, Davis, and Merced as well as admitting one transfer student for every two first year students. (3-4)  In linking these disparate initiatives together the Governor has simultaneously moved towards even more interventionist budgeting (he is sequestering general funds based on new benchmarks as opposed to offering targeted new funds for specific initiatives) and joined in the larger skepticism displayed in Sacramento about UC leadership.  Insofar as the Audit provides excuses for tightened budget interventions any formal preservation of UC autonomy will be hollowed out.

The governor’s second, ongoing challenge to UC’s leadership concerns the state’s program of financial aid. . . . .  In order to compensate for parts of the increased financial aid costs accompanying the tuition rise, the Governor is proposing to reduce both system’s budgets by $4 million dollars this year.  He then redirects these funds towards financial aid for private college and university students that he had planned to reduce. . . .

In addition, Governor Brown fires a shot across the bow on future tuition increases:

Rising Cal Grant costs from tuition hikes will also limit the state’s ability to increase General Fund support in the future. The state has increased General Fund spending by at least 4 percent annually since 2012—while tuition has been flat. Going forward, the universities should plan for 3‑percent growth annually beginning in 2018‑19. If the universities raise tuition in the future, additional downward adjustments to state support may be needed to cover the higher Cal Grant costs.

In other words, the financial benefits of a tuition increase will be reduced via a general fund reduction from 4 to 3 per cent per year.

This threat is, to be sure, directly at CSU as well as UC.  But CSU has also recently received an unfavorable audit.  In the case of CSU the auditor was critical of the expanded number of managerial positions (as with the Auditor’s criticism of the growth of the size of UCOP over the past several years).  Each, in other words, are the effects of an expanding managerial culture at both systems.

Of course it is the universities as a whole that will pay for ongoing state discontent with both systems’ management.

A Faculty Overview of the UC Budget — Tenth Anniversary Edition,” posted on May 19 by Christopher Newfield:

This week’s UC Regents meeting is the tenth anniversary of a Senate First and, so far, a Senate last–a direct presentation to the UC Regents of a faculty view of the budget.   In May 2007, Senate chair John Oakley and UC Provost Rory Hume arranged for me as the chair of UCPB to present the budgetary conclusions of what came to be known as the Futures Report. . . .

The whole project emerged from a period when it seemed that UC was capable of choosing its own path.  It also seems that the faculty as a whole would play a meaningful part in that complex choice. I had hoped it would be the first of a series of regular faculty presentations to the regents, because I thought then and now that a real dialogue would ease the governance and budgetary problems that continue to haunt the University. . . .

Ten years later we’re at the same crossroads. 1990 is still completely out of reach.  2001 is more remote than ever. And starting in 2009, Sacramento dumped UC onto the red line in the chart above–a funding freeze, averaged over big cuts followed by partial annual recoveries. We called this the Michigan Model, in which the state disinvests and then the university hikes resident tuition and admits many more non-resident students (reducing racial diversity, class diversity and, in Michigan’s case, national ranking). . . .

The Senate was at the time solidly in favor of rebuilding public funding rather than raising tuition or increasing non-resident student tuition revenues. We were of course deeply worried that the state had gotten used to giving UC and CSU less and would be happy to let us raise tuition instead (and then campaign against us for that).  But it didn’t stop us from stressing the logical budget necessity of public funding. . . .

Fast forward to this week in May 2017.  Many budgets have come and gone, and we’ve written dozens and dozens of budget posts, many comparing actual state funding to the personal income benchmark (with cheery titles like “Gov Gives UC Just About Nothing” and “The Old State Funding Model is Dead”) and calling for faculty and UCOP to put out the strongest possible proposals to support full UC quality– to budget the full costs of a Real UC and endlessly explain its educational necessity.  . . .

Today, UC’s combined tuition and state funding revenues are below their 2007-08 levels.  Net tuition has in my calculations gone from about $1.57 billion to $3 billion (p 224) in ten years, for an increase in tuition income of $1.45 billion when adjusted for ten-year inflation (20 percent). Then there’s state funding.  When we adjust it for inflation and for new capital and bond servicing costs now deducted from the state funds) at around 13 percent of the total general fund allocation, we find that per student state funding wasn’t even flat for ten years: it declined by one third, meaning that about $1 billion less in adjusted dollars was available for operations.  If we correct for the decade’s enrollment growth of nearly 20 percent, per student general funding is one fifth less than that minus 1/3rd, which effectively wipes out all of the net tuition gains. Tuition increases have not made up for any of the real dollar declines in state funding, even after six years of supposed recovery.

Remember too that this is before we throw in the pension wild card.   At the current level of a 14 percent employer share of a payroll that is 55% of $31.9 billion in total UC expenditures, this is a $2.46 billion annual cost for UC overall that it did not pay in 2007-08.  Even if most of the employer cost of the pension is incurred and funded by non-state payroll (medical center and national laboratory staff, etc), it’s pretty clear that we’ve just lived through not just another Lost Decade of funding, but a large net operating funding reduction.

UC is a textbook case of the decline cycle I analyze in The Great Mistake, which is created by divergence from public-good funding philosophies.  But how do you think retreating from the public good funding model has worked out?
Read the full posts!  The University of California system has for decades set the standard for public research universities.  How tragic that it is now leading the way toward their potential ruin.

Your comments are welcome. They must be relevant to the topic at hand and must not contain advertisements, degrade others, or violate laws or considerations of privacy. We encourage the use of your real name, but do not prohibit pseudonyms as long as you don’t impersonate a real person.