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A blog on higher education and related issues.Chris Newfield
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How to Improve Board of Regents Selection? Use the Existing Process

Mar, 20/06/2017 - 21:25
On June 2, following the negative state audit of budget practices at UC's Office of the President (UCOP) and then regental partygate, the governor's office announced four new appointments to the UC Board of Regents. This rekindled some press interest in the conflict between the sudden announcement of completed appointments and the process described in the state constitution.  Yesterday, the Council of UC Faculty Associations (CUCFA) has written a letter to state Senate President Pro Tempore Kevin de León asking that "the California Constitution be followed when nominating Regents to the University of California." I'll discuss the letter and why we would need it in the first place.

Brown's new appointments are:
  • a Hollywood studio executive (Peter Guber, 75, joining Regents Sherry Lansing and Richard Sherman from that industry); 
  • a former politician who serves on the Governor's Military Council (Ellen Tauscher, 65, joining Regent John Pérez, former Speaker of the Assembly); 
  • one of the governor's political advisors (Lark Park, 47, joining former Brown advisor Gareth Elliott, appointed Regent in 2015); 
  • a financial manager (Maria Anguiano, 38, joining Bonnie Reiss and Richard Blum).

Anguiano would be the only regent in recent memory to have direct UC administrative experience. She'd add to the Board's very rare higher ed expertise, now represented by Regent Eloy Ortiz Oakley, the chancellor of the 113-campus California Community College system. Anguiano served as Vice Chancellor for Planning and Budget at UC Riverside.

The Regents in the State Constitution
In 1974, the California State Constitution was modified to insure that the UC Board of Regents represented the full range of the state population, rather than the full range of each governor's political circle.  Section 9 of Article IX, paragraph 5(d) reads,
Regents shall be able persons broadly reflective of the economic, cultural, and social diversity of the state, including ethnic minorities and women. However, it is not intended that formulas or specific ratios be applied in the selection of regents.In appointment practice, the state's large poor population is unrepresented.   Its embattled middle class is barely there, in the distorted form of political lobbyists and senior managers who may get close to top 1% salaries but not to the 0.1%. The sole public education official on the appointed Board, CCC Chancellor Oakley, is probably the Board's low-income member.

The San Francisco Chronicle's higher ed reporter Nanette Asimov summarized the situation:
Of the 18 appointed regents, including the four just named, half are financiers, corporate executives, investors, real-estate developers or corporate attorneys. Three are former politicians. One is Brown’s senior policy adviser, and another — a former finance expert at UC — is chief financial officer at a company that supplies technology to a private college in San Francisco. The others are an eye doctor, a Sacramento lobbyist, a nonprofit policy director, and the chancellor of the California Community College system.The governor's appointments are out of compliance with this section of the constitution, as have been all of his predecessors.

Second, the 1974 reforms set up an appointment advisory committee that the governor is to consult prior to making appointments (paragraph 6(e)).  The Chronicle reporter Asimov looked into the functioning of this advisory committee and found that it never met or advised.  Her piece was entitled, "Are governors ignoring law when appointing UC regents?"
[S]ix committee members reached by The Chronicle said they are never consulted in the selection of regents — only told shortly before the announcement that choices have been made. “Typically, I get a heads-up with a phone call that appointments will be happening,” said Rishi Kumar, a Saratoga city councilman and public member of the volunteer advisory committee. “We receive an email with the profiles of the folks that are going to be appointed.” Whether the governor is breaking the law would be up to a judge, said Jessica Levinson, a law professor and government ethics expert at Loyola Law School. "But it’s pretty clear that it doesn’t meet our expectation,” she said. “Our general expectation of ‘consult’ is that it’s distinct from ‘informing.’ You wouldn’t say, ‘I’m consulting this person by leaving a note on their door.’"If by "note" you include email, this kind of executive not-consulting is routine. That's why consultation was written into the state constitution in 1974.

Acting like the 1974 process doesn't exist also miseducates the regents themselves.
"I had no recollection of the existence of the committee in my 14 years on the Board of Regents,” said Bill Bagley, who was named a regent by Gov. George Deukmejian in 1988 and served in the state Assembly when voters approved the advisory committee. Bagley, an expert on government ethics for whom California’s Bagley-Keene open records and open meetings law was named, said the committee should have at least a week to opine on the governor’s preferred regent candidates.  That would make sense and be easy to do.  It would also bring the governor and UC into compliance with the state constitution.   If the governor complied with 6(e), consulting the advisory committee, it would make it easier to come into compliance with 5(d), appointing a representative Board.

A recent regent made this point. Fred Ruiz's departure from the Board reduced the presence of the Central Valley on the Board from one to zero; he sent a list of 20 Central Valley candidates to the governor's office, to no avail.  “'This is another example of the governor essentially dismissing Central California as a flyover area,' said Assemblyman Jim Patterson, R-Fresno.'" A functioning advisory committee would have members from the Central Valley to funnel local names to the governor.

Accounting and Conflicts
In addition to geographical diversity, the Board needs demographic and intellectual diversity.  It needs a wider range of experience and perspectives.  If it had this, it could synthesize the expertise of a new member like Maria Anguiano into sophisticated policy deliberations rather that treating her accounting perspective on instruction as an override.  Unfortunately, as I'll explain, the latter is more likely with the current Board.

Anguinao's roots are in finance and accounting (Barclays Capital and Deloitte & Touche). Gov. Brown may have wanted her experience in financial statement analysis, which often seems to be lacking on the current Board. But she is also a well-known advocate of a kind of accounting known as Activity-Based Costing (ABC), which assesses the cost-effectiveness of any activity by breaking it down into its component inputs. ABC is preoccupied with instructional costs, which fellow advocates like William F. Massy, author of Reengineering the University, see as a serious burden that accounting must help reduce.  In his book, Massy names Anguinao as an important ABC champion, one who is bringing the ABC message to the University of California.   She has certainly brought the message to UC Riverside.  

In addition, ABC has been written into the state budget documents as one of the efficiencies the state expects the university to pursue. The Department of Finance (Budget Summary page 39) defines its purpose as providing

rich data for University leaders to better plan enrollment and determine which, and how, courses should be offered by understanding costs coupled with student outcomes. The Administration will continue to monitor the University’s experience in using the information.
The state defines efficiency here as financial managers guiding curricular planning with cost data.  Music department courses are more expensive than Sociology's, and under permanent austerity this is a continuous grinding issue. ABC could consult its component analyses to discover that some of music's costs come from very small group instrument training and the maintenance of practice rooms, not to mention tech costs of connecting students to the incredible world of sonic innovation.  This would be useful information for departments to have during their expert deliberations of instructional needs in the context of wider developments in the field.  But the state's model is that managers do the planning and deciding of "which, and how, courses should be offered."  As institutionalized in budget documents, ABC can be used to compromise faculty's academic freedom to decide curriculum by presenting "there is no alternative" budgetary quantifications.  I'm not saying this need actually happen, but it is more likely if the Board is not made aware of the issue and if the University community does not discuss it.

A bit more on this topic: this blog has always called for more rather than less financial information, so ABC would seem to fit with that.  But our model is that open deliberation on educational goals should drive budgeting, and ABC, like audit practice in general (a classic work can be purchased here), does the reverse; in the language of ABC slide 18, it "allocates direct [and indirect] costs to programs using cost driver based allocation." Suffice to say for the moment that its normal practice is that components of education (course development, advising, etc.) are benchmarked, standardized across disciplines and institutions, put into competition with each other, and, in general, cut: the core goal of ABC is not budgetary transparency but cost reduction.  For example, ABC as an audit technique creates benchmarks from average costs that then implicitly question any cost that is above the benchmark.  The audit question is not, "How can we make Music instruction more effective in pursuing educational goals XYZ, but "Why does Music cost so much?"

One more twist on this of the kind that university Boards should deeply grasp. ABC's claim to fame is to unbundle costs of core activities at traditional universities. It is also possible to unbundle the university itself.  This is a primary goal of market actors in the higher ed space, who must unbundle traditional institutions to profit from the components they vend: competency-based learning, learning management systems, and the like (see e-learning guru George Siemens's short summary, or most of Audrey Watters).  Unbundling reflects a consensus in the tech and finance worlds that the future of higher education is not a system of thousands of independent institutions but
a few large, concentrated players that will provide infrastructure, platforms, and services to support a wide array of fragmented niche providers of content, formats, environments, and experiences.I'm citing a post on Deloitte Consulting's "university press" (that thanks Maria Anguilano).

An example of unbundling in practice is the Minerva Project, which is trying to replace the liberal arts college by dumping research and permanent faculty and offering instruction that is entirely on line (there are some good overviews out there, with much detail in the The Atlantic's 2014 piece). Minerva's founder, Ben Nelson, has some good ideas, particularly about correcting the weakness of the cafeteria curriculum on offer at all standard universities (see the Ed Surge interview)

At the same time, Minerva charges $28,000 a year (including room and board) for online contact with a course delivery platform.  As I discuss at length in The Great Mistake and elsewhere, this defies two centuries of research on the practices of deep learning in the context of the university as a unique institution focused on knowledge creation and full social development.  Minerva's ludicrous selectivity (158 admits from 16,000 applicants) means that learning success should be largely attributed to the ferocious cherry-picking of the admits, again in defiance of the "learning gain" movement. Nelson also seeks to make the for-profit college the normal mode of higher education delivery.   Nelson's current Chief Financial Officer is Maria Anguiano.

Often boards appoint members who bring relevant expertise and new perspectives, and Anguiano qualifies on both counts.  Good debates could follow--if and only if she were to join a Board of Regents with many experts in education or at least diligent executive learners who engage in deliberative reflection.  She could advocate for her controversial accounting technique that among other things helps accounting override intellectual and educational considerations, explain why she thinks it does more good than harm, and hear informed criticisms.

The same might go for the conflict of interest raised by having a regent also serve in a senior management position at a for-profit college that benefits directly from the declining performance of the public university sector, including UC. Universities generally manage conflicts of interest rather than eliminating them, but the conflict needs to be out in the open so that it can inform Board evaluations of Anguiano's statements.

There should also be a decent balance of intellectual power on the Board itself. This is especially important in the Silicon State where everything public is presumed guilty until proven innocent, especially universities.  We've already had the governor-mandated MOOC fiasco at SJSU, where Valley salesmanship outstripped research, with the product being deemed "crap" by its own creator (Udacity's Sebastian Thrun) once the research was actually done.  California has a history of business titans imposing their models with little public review or consent.  The 1974 reforms were part of yet another attempt to manage business conflicts with the public sphere.

Trying to Enforce Existing Law, 1991-2011
Some observers have previously pointed out this failure of Board of Regents appointments to comply with the state constitution.  UC Berkeley physics emeritus professor Charles Schwartz proposed corrections in the course of a report on the Board's financial interests, back in 1991.

Nothing changed, and twenty years later the Council of UC Faculty Associations (CUCFA) invoked the state constitution in opposing Gov. Arnold Schwarzenegger's lame-duck appointment of pension hawk David Crane. Berkeley Faculty Association member Christine Rosen laid out the problems in a letter to UC Berkeley's Daily Cal (text removed). It summarized three safeguards that multiple governors and Senate Rules committees have ignored:

California's Constitution foresaw that wealth and political connections could contaminate the Board of Regents. That is why Article 9 section 9-e defines a twelve member advisory committee that the Governor must consult when naming a candidate for Regent. This process was not followed in Governor Schwarzenegger's 11th hour appointment of Crane.  California's Constitution also provides that "Regents shall be able persons broadly reflective of the economic, cultural, and social diversity of the State" (Article 9 section 9-d). But there is no one on the board with experience in what the university does: higher education, research and hospitals. Where are the professors, the scientists, the doctors? Where are the humanists and public intellectuals? Governor Brown should rescind Schwarzenegger's improper appointment of David Crane and utilize the Constitutionally mandated procedure to select a better candidate. If he won't do this, the Senate Rules committee - which by law must confirm appointed Regents - should reject Crane and demand that the Governor nominate a better candidate using the legally required method.
As it happened, Crane served a year on the Board as a designate and then had to step down when the Senate Rules committee failed to confirm him.  This does sometimes happen. 

Rosen's call for professionals and humanists on the Board should be taken seriously.  It was in effect a request for representatives of the ancient and continuously-evolving philosophy of higher learning, which sees it as a public good.  A fully constituted Board of Regents would see commercialization and the dominance of UC "businesses" as often in conflict with higher learning, and discuss policies of rebalancing that are not set in advance by our state's tech predestinarians.  

I'm putting words in her mouth.  Rosen did argue that Crane would be yet another addition to the Board's finance bloc that had not shown much support for the educational core. But the arguments for compliance with the state's constitution are independent of a particular appointee's expertise and views. Boards are always a mixed bag, and our current UC Board of Regents is arguably better and more diverse than most of its predecessors.  Eloy Oakley is an experienced, formidable community college administrator with meaningful social justice goals; John Pérez has been a strong advocate for access and affordability; Eddie Island has often spoken on behalf of low-income students and students of color; Hadi Makarechian does his financial homework and asks real questions about budgets and capital project costs.  But this is irrelevant to the legal question: to quote an SF Chroncile editorial, the governor should follow the law.

Trying to Enforce Existing Law, 2017
CUCFA's June 19 letter to the state Senate president says that the slant of the Board towards business elites has biased policy in favor of raising tuition and against state funding.
The fact that [The Board of Regents] is dominated by wealthy interests for whom the steadily increasing costs would not be a practical problem may help explain the lack of urgency in building the confidence of the public and policymakers needed to restore tuition-free education at UC.Sociologically, this is likely.   There is now solid empirical research showing that elected representatives reflect donor and financial network influence rather than the public's policy preferences. This applies to the UC Regents, who are appointed largely from donor circles.

The letter continues:
Therefore, we respectfully request that the Rules Committee enforce the California Constitution by immediately rejecting (without prejudice) the Governor’s nominees.[4] Regent terms begin as soon as the Governor nominates them, so these improperly nominated Regents can vote on issues at the upcoming Regent’s meeting unless the Senate Rules Committee acts quickly to reject them. We also request that the Constitutionally-required advisory committee be more than a pro forma process and that the Senate state that it will only consider Regent nominees that have been vetted through an open public process. Meetings should be conducted in accordance with the Bagley-Keene Act, including proper public notices of meetings with opportunities for public comment. The rejection of the current slate should not preclude these candidates from being considered in the future via the proper advisory committee process.
It would be great to start this month's appointment process all over again: we'd get back in line with the state constitution's procedure, have a more diverse group of nominees, and have the kind of deliberation that would raise our collective IQ about UC's future.   Gov. Brown could propose at least one regent form the Central Valley while increasing the Board's level of educational expertise. Some of the current Four could be renominated--if they helped Board thinking move beyond Hollywood, FIRE (fire, insurance, real estate), and tech.

There's a deep issue at stake here.  The university is now immersed in a pragmatic policy discourse that the philosopher Peter Sloterdijk would describe as "cynical reason." It's a kind of functionalist management of conflicts that focuses on short term fixes rather than long term goals while assuming there's nothing we can do about this.  It is in contradiction with the University's historical destiny--just to use a language pitied by cynical reason.  It is also the modality of political burnout and dynasties in decline.

A good example is all California governors blithely ignoring the constitutional requirements for appointments to the Board of Regents, with the consent of the university's officials.  We don't need to have such low standards for our officials, and we mustn't.
Categorías: Universidade

A Faculty Overview of the UC Budget--Tenth Anniversary Edition

Ven, 19/05/2017 - 18:41
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. It had, over a two year period, been researched and written by UCPB, approved by Academic Council, and submitted to President Bob Dynes for transmission to the board. John and I spent a fair amount of time with Rory boiling the report down to the simplest possible slide deck for our 15 minutes. We also picked the lowest-tech slide design we could find, to symbolize our humble professorial communion with the facts.

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. Here's how it went.

I enthused at the start that there's a reason we want to see a steady upward trend of state funding: that trend had enacted the idea of 8 or 10 research universities linked together in an integrated system, which meant that top-quality education would not just go to the top .1% or 1% but to 10% and more. Strong public funding, I said, explained why UC wasn't SUNY or the UNC or Texas system with a couple of flagships and then a miscellany of varied campuses that conducted little or no research.

Since public funding built the thing, why had funding been cut in two multi-year rounds (1992-1995 and then again 2002-05--we hadn't yet experienced the recent cuts that began the year after the presentation). Did the cuts just reflect a business cycle?

This is a slide that UCOP had presented to regents at least once a year. It said yes, it's up and down with a trend of state investment that is always up. But the slide was misleading.

By erosion, we meant deterioration in core undergraduate instruction and services, deterioration in research climate and infrastructure, and, appealing to the board's perennial concern with status, loss of top applicants to graduate and undergraduate programs and of faculty. Grad program admissions had already become a prominent worry in the 2002-05 cut cycle.

Still working with UCOP materials, we pointed out a

But then we brought in our own research. It showed

This is a measure of the state's overall financial resources available to support higher education: it's what people actually earn, in part because of their access to education. Between 1990 and 2005, this had been cut 35% in real dollars. Sacramento had basically reduced UC's share of state income by half in the 20 years preceding the third round of cuts that would begin in 2009. This is common sense now, but a secular trend of disinvestment seemed to come as news to the regents and to most of UCOP ten years ago.

We had tried for a while to get detailed budgetary data from UCOP, without success. So UCPB had decided to go ahead and do our own research with whatever was publicly available, and then ask UCOP officials to confirm or deny. 

"Core" budget was a kind of breakthrough, because it carved out massive UC revenues that don't much to do with campus education.

So it leaves out:

UCOP adopted this distinction in its budget for current operations during the Yudof period. "Carry offsetting expenses" was a muted way of saying that many of these activities run direct net losses for the university, even if they have indirect gains for the university later (and direct gains for outside sponsors and society as a whole). To keep things simple, we didn't want to open that can of worms. We gave up an important opportunity, but I'd thought my Senate successors wouldcome back to the regents with followup material later on.

Our report was called "The Futures Report" because we projected costs for several different budget pathways. 

These three scenarios, plus a fourth called The Michigan Model (more on that in a minute), were compared to a benchmark that tracked the growth of state personal income. The idea was that UC's benchmark would be "growing with the state," neither more nor less, meaning we wouldn't be playing the "make up for cuts" game as we are still doing now. The established pattern was Lost Decade-- which has happened again.

The Higher Education Compact with the Schwarzenegger administration was announced in May 2004. It accepted previous state funding cuts, promised state general fund increases of 3-4% per year, which it paired with tuition increases of 7-10% per year. It was a privatization prescription, because it shifted revenues from public to private sources.

But rather than critiquing the Compact as an undermining of the public good status of the university, we asked whether it would actually stabilize and sustain the university's finances. Here's what we found (validated by UCOP budget folks late in the drafting process):

The 3-4% annual increases, coming on the base of much larger previous cuts, would never restore the state share of core funds. This made the regents visibly unhappy.

And it got worse:

We were tragically right about this: any series of manageable tuition increases would not make up for state general fund cuts. I'll return to the point that this is still true, particularly now that no tuition increase is manageable for a large share of today's resident students:

The 2002-05 cuts increased the student share of core funds by 50 percent. (The post-2009 cuts doubled the student share on top of that.)

I dwelt on these next slides, which are the densest in the deck.

The failure of the vaunted Compact was a big deal.

Items 2 and 3 will make more sense with the following chart.

We decided this slide would be too complicated for the presentation so we left it out. The thin purple benchmark line represents UC "growing with the state" (UC's state funding rising at the same rate as state personal income). The black line represents a ramping up of state funding to rejoin the 2001 Pathway in the five years to follow the appearance of the report.

Number 3 (two slides back) refers to a restoration to 1990 levels of high state funding and low tuition (the green line in the preceding slide that ends up at over $6 billion per year in state funding). That is twice what UC gets today. But it is merely the same share that UC had in 1990. We thought it would be easier for the state to get its head around 2001 than around the full "master plan" funding model.On to the next question: what is to be done?

"Research is costly" means research runs net losses, not profits. Private fundraising works on the margins for selected programs, but not to replace lost operating funds for public good activities like high quality instruction and its direct admin support that donors assume the state and students pay for.

The only great private revenue stream for operations is student tuition, at very high levels. This caused more unhappiness in the meeting.

The headline of the next slide makes me sad.

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). In nominal dollars (uncorrected for inflation), UC's general fund in 2017-18 will be the same as it was in 2007-08, somewhat above $3 billion.

The takeaways were obvious to us.

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.

How did the regents respond in the 3 minutes allotted to discussion? They didn't disagree with this last slide, but expressed unhappiness with the the budget conclusions. Regent Marcus said, "we need solutions, not all this negativity." I replied, "we're offering analysis; policymaking is the regents' role." A couple of exchanges later and our time was up. The next topic was the national laboratories, students that were hunger-striking against nuclear weapons came in and chained themselves to tables, Regent Pattiz invited them to go have a nice lunch which further fanned the flames, the police arrived and hauled them out, and that was the end of the faculty view of the UC budget.

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.

What we are living through now is basically one half of the Compact that Arnold abrogated in 2008-09: we got the famous third round of double digit state cuts, followed by the 3-4 percent annual increases that don't really keep up with higher ed cost inflation, but not the annual tuition increases. Like the Senate, we opposed the Compact for increasing tuition at twice the rate of state funding. This was, to repeat, the deliberate privatization of core revenue streams. And yet the size of the combined revenue streams was in the ballpark of UC need, while our current Half-Compact has produced permanent austerity and structural deficits.

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 15 percent employer share of a payroll that is 47% of $31.5 billion in total UC expenditures (p 39), this is $2.2 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), and  the state share is one-third of the total, the campuses need to find over $700 million a year from core funds that are mostly state general fund and student tuition.  Having gone back and forth with one UC budget insider about the share of state funding that covers the annual UC employer contribution, I think it's reasonable to conclude that the General Fund allocation for this expense has gone from $0 in 2007-08 to $200-300 million in 2017-18.

In short, we've just lived through another Lost Decade of funding, and through a large net operating funding reduction.  UC is unfortunately a textbook case of the decline cycle I analyze in The Great Mistake, which is created by divergence from public-good funding philosophies. 
You might be interested in our new report, The $48 Fix, which shows that the 2001 Pathway is still in easy financial reach--but strictly on a public good basis.
Categorías: Universidade

The Budget Revision After the UCOP Audit

Ven, 12/05/2017 - 21:16
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.  As you are aware, both UC and CSU have voted to increase tuition and fees for the upcoming academic year.  Some years ago, this governor started publicly and explicitly to count the state's contribution to the Cal Grant program as part of its contribution to the universities.  The budget revision notes that any increase in tuition forces an increase in the General Fund contribution to the universities as the Cal Grant programs costs rise to meet the new tuition levels. (4)  Although often left out of discussions of state support, nearly $900 million of Cal Grant funding will go to UC and nearly $700 million will go to CSU in the proposed budget. (4) 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. (4)  He shows no indication that he plans to reverse his plans to eliminate the middle-class scholarship fund over time.  (8)

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.

Categorías: Universidade

The UCOP Audit and University Governance

Dom, 07/05/2017 - 18:47
As expected, the State Auditor's report on UCOP has triggered a huge political uproar. The charges of secret reserves, out of control personnel policies, special benefits for executives, and UCOP interference into the audit process have been explosive to say the least.  There have been two legislative committee meetings that addressed it, numerous statements from politicians about its implications for UC, and editorials and op-eds expressing justifiable outrage about UCOP secrecy and management practices. Predictably enough, some legislators have called into question UC's constitutional autonomy.  Despite, or perhaps because of, efforts by UCOP and the Regents to explain away some of the problems, the damage to the University's reputation has been considerable.  This report is going to haunt the University for a good while.

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?

Moving forward, the Regents have decided to hire an outside consultant to review UCOP's plans for reforms.  This suggests that the University has no business or public policy schools with faculty who are experts in these issues.  If only the Senate had a knowledgeable committee on Budget and Planning or perhaps one on Research that could provide meaningful and ongoing oversight of practices that are supposed to enable the university's core functions. But apparently not.  Instead we are to witness UCOP organize an internal reorganization with some review by a paid outside contractor answerable to the Regents who have never demanded from UCOP either the clarity of presentation or the documentation that everyone now seems to agree is essential going forward.

To be fair, this problem is not limited to either UCOP or the Regents.  Although arguably an effect of the Yudof administration and the wrong turn taken by the University Commission on the Future, the proliferation of task forces, the sidelining of formal Senate oversight, the general decay of shared governance, and the centralization of management and authority is deeply embedded on campuses as well.  Task forces not only serve to tilt authority in the direction of management but also eliminate the production of institutional memory and documentation that are, or at least should be, one offshoot of standing Senate committees.  Of course, that institutional faculty memory will only matter if faculty themselves are willing to take the time and effort to press for their viewpoints to be heard and to have influence.  As one Anonymous argued in a comment on Chris' last post, it is up to faculty to begin to take the time to work with staff to clarify and understand university budgeting from the departments on up.  This knowledge will not solve all of our problems.  But given what we know from the audit and its responses, reform cannot depend on top-down initiatives.

I recognize that all of these things may seem to be lost causes; too many of us have accepted the new rules of the game. While we complain, we do not see any possibility of change.  To make matters more difficult, secrecy tends to protect specific rather than general interests.  But more is at stake than simply a desire for faculty voice.  The contemporary managed university does not have the internal democracy nor the free flow of information and institutional knowledge it needs to meet its purposes.

In his comment on Chris' last post, Bob Samuels noted that some of the changes to the audit responses made the online education program look better.  But UC's online venture is a  classic example of managerially imposed and rushed changes made in the nature of a supposed market driven necessity.  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.

The recent experience at UC Riverside is only one example of the crises that can result from a managerial failure to learn from faculty and front line staff.   There the administration sidelined faculty input in the early stages of its planned expansion, rushed to hire despite faculty concerns, didn't think about the necessary lab and classroom space its new hires needed and marginalized departments.  In the end, the Riverside Senate had to step in and salvage the situation.  If there had been genuine consultation the situation would have been avoided in the first place rather than being redone later.  This situation was not the result of evil or self-serving administrators but rather of the collapse of the practices of shared governance and the recognition that institutions require a structured way to absorb the multiple perspectives that exceed the managerial groups.  But that is not an idea one would find in the closed managerial circuit between the State Auditor, UCOP, the Regents, the California Legislature, or, most likely, local campus administrators.

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.  There is, of course, a perspective of system and of the whole that must be part of any decision-making process.  But it is only one such perspective.  And if that perspective is, as has happened, increasingly sundered from the perspectives of the faculty and staff, then we will see more and more examples of universities cut off from their purposes and surrendering to demands to serve other interests than their own.

Categorías: Universidade

What the UCOP Audit Means

Lun, 01/05/2017 - 22:14
The new UCOP scandal is the worst in a long-running series.  This one was prompted by a state audit of the Office of the President's budget, which found issues the auditor claimed cast doubt on UCOP's honesty and competence. State officials reacted angrily to the four biggest of a number of charges from State Auditor Elaine M. Howie (pictured): that UCOP spends a good chunk of money from an "undisclosed budget" that is separate from its public budget; that it affords this undisclosed spending with a tax on the campuses that yields more revenue than it needs; that it spends this excess money on systemwide programs that could go instead to students on campuses; and that it appears to have changed the results of the auditor's campus surveys to make itself look better.  The auditor also rekindled longstanding claims that UCOP hires too many administrators and then overpays them.  It even dragged pension underfunding into the mix.  

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.  The report itself runs 169 pages and includes a 34 page, single-spaced UCOP response that rejects 72 separate passages in the audit.  This is in turn followed by the auditor's blanket rejection of UCOP's rejections.  The report also includes a 6 page letter from UC president Janet Napolitano that, in spite of the confrontation elsewhere, accepts nearly all of the auditor's technical recommendations for accounting improvements.  

The angry stand-off in the full document massively overshoots the stated policy differences, and the mutual hostility becomes a problem in itself.  Politicians and the press reacted as much to tone as content. Legislative hearings have been called for Tuesday. Long-time LA Times columnist George Skelton signaled renewed doubts about UC's ability to serve the state with a piece entitled, "Big Changes Needed at UC--Starting with the Kool-Aid-Drinking Board of Regents."  

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. 

Raptor Budgeting?
First, on the budgetary issue, a bit of background. UCOP does two big things: performs central administrative services and manages systemwide programs. The budget statement that goes to the regents each year is split more or less 50:50 between these two categories.  UCOP used to publish budgets with more big categories (it had 4 in 2014-15, for example [page 144]).  Multiple administrative activities appear in these baskets, divided up by function (governance, budgeting and finance, etc.) along with systemwide initiatives that can be listed with expenditures for each.  

The problem seems to start with incomplete lists of programs, and continues with their being funded from two budgets, one of which the auditor calls "undisclosed." The auditor charges (summary here) that UCOP accumulated $175 million in surpluses that it did not disclose, and then spent them through a process that lacks adequate controls.  The issue is summarized in the report's Figure 6.  

Although UCOP spent some of these reserves, it spent less than it accrued in each year, so the reserve grew--and grew even in years when UCOP increased its tax to the campuses.  The auditor agrees that reserves are legitimate, but doesn't understand why UC has no written policy governing their size.  It repeatedly insists that UCOP could produce a simple unified budget of revenues and expenditures in which all outlays are visible and clearly tied to specific programs. It offers a one-page sample:

I'd add a couple of lines to this myself, but this is better than what the auditor seems to have gotten from UCOP, and UCOP agrees that it will consider adopting this kind of presentation. 

At the same time, UCOP resents the auditor using the term "undisclosed," argues that these are little more than unspent funds carried forward from one year to the next, that its "reserves" are $38 million not $175 million, that all the money was spent on programs that benefit the campuses, its students, and the state, and that administrative growth merely reflects UCOP's enormously complicated set of jobs that are not duplicated in other university systems.  

You'd think that this would be the end of it.  UCOP could say yes, we're moving budget presentations from Figure 6 to Figure 11, thank you for your help, and by the way we regret any confusion, which was entirely innocent, plus you don't understand our inner workings, which is fine because that's our job as a constitutionally independent entity.  

That isn't what happened.  The best of UCOP's response is Janet Napolitano's letter to Elaine Howie. The letter accepts most of the auditor's recommendations, deals with the charges of incompetence by saying UCOP constantly strives for improvement, lists some systemwide programs with budgetary amounts that it says are of value, and rejects the recommendation of tighter legislative control of UCOP.  The letter doesn't explain why these expenditures weren't present in the visible budget in the first place or why the initial list of programs wasn't complete.  

I completely understand the auditor's core beef.  Why can't UCOP automatically produce listings and expenditures for the systemwide programs? Why couldn't they have listed all those that are part of their response to the audit, organize them properly (for example, into the categories, "outside sponsors," "presidential initiatives," and "systemwide faculty research")?  

I'm doubly mystified because, over ten years ago, I was personally involved in a two-year Senate inquiry into UCOP's systemwide research programs, where our planning and budget committee (UCPB) made iterative requests for full expenditure data for all programs. It was pulling teeth with pliers, but we made progress over time. Phase 1, a full list of all programs with UCOP outlays, should have been in place a decade ago with regular updates as programs and funding changed, which they certainly did.  Phase 2, which apparently never happened, was to be tracking expenditures from UCOP to the campuses.  Is the geospatial systems funding--to make up an example-- going directly to fund direct and indirect research costs on several campuses, or have two of the four campuses moved the funding into administrative discretionary funds or, as in one actual case, has a campus converted research money into a pseudo-permanent set of FTE lines in a local department?  UCOP should have a handle both on how much is going out and how it is being spent.  Apparently they don't.  

In addition, why didn't UCOP have a unified budget both for the regents and the state?  I'm also bewildered by the dual budgets, which is to say that I agree with the auditor that in its multiple lengthy retorts UCOP never really explains the "undisclosed" budget.  Why do the books look like that? 169 pages later, I couldn't tell you. 

In any case, the numbers fly. UCOP generates the gratuitous mud wrestling of Attachment 2,  which apparently seeks victory through body count.  That attachment is a masterwork of bureaucratic defensiveness. Naturally, it doesn't work.  

The auditor's short final response begins,
The Office of the President’s 34-page Attachment 2 is demonstrative of the barriers we faced throughout the course of this audit.  Ultimately, Attachment 2 contained no additional information that would cause us to change the conclusions reached in our report. Rather, the Office of the President goes to great lengths to describe its dissatisfaction with the context we included surrounding the conclusions and the underlying philosophy related to transparency and accountability upon which we based those conclusions. As a result, we are choosing not to comment on each of the 72 points
that the Office of the President included in Attachment 2 because doing so would not ultimately change the overarching conclusion that we convey in this report: that the Office of the President needs to better serve its stakeholders by making decisions in a transparent and accountable manner. (165)In the summary, the auditor writes,
the Office of the President missed an opportunity to receive feedback from its key stakeholders, and it demonstrated an unwillingness to receive constructive feedback. Thus an official state review finds UCOP's accounting substandard and also unlikely to improve.

Not Biting the Bullet on Research
The report concludes that 1 (an undisclosed budgetary surplus) + 2 (unjustified staff growth) = 3 ("significant change is necessary to ensure that the Office of the President's actions along with the mission of the University of California").   This is a brutal conclusion: the State Auditor is saying that UCOP isn't running UC for the public benefit.

The immediate rationale for this claim is continuous administrative growth coupled with "poor tracking and monitoring of its systemwide initiatives" that leads to misused funds.  The deeper rationale is what the funds are allegedly misused on--systemwide research.  The audit's own list of UCOP initiatives (Table 11, pp 71-72) shows spending in a number of categories, but research seems to be the big problem.   It concludes,
Although most of these initiatives provide academic or public benefits, we question the Office of the President's decision to prioritize them over other activities such as campus spending on students especially given it has not sufficiently evaluated these initiatives' purpose and intent. (69)On its face, the statement is ridiculous: the auditor lacks the credentials to question UCOP's judgment about academic priorities, and research, the main component of most of the programs, is part of undergraduate education at a research university, not a subtraction from it.

The underlying problem is that UCOP has failed over many decades to explain the centrality of research expenditures to all levels of students.  Longtime VP for the budget Larry Hershman believed the legislature refused to grasp the research mission and always would, so the University had to act as though the state's whole allocation was going into student instruction and related services.  I don't doubt he had empirical reasons to think this, but most legislators also thought the internal combustion engine had made train travel obsolete. At some point you have to roll up your sleeves and do the tireless teaching that reframes the debate.

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.  UCOP's dual budgets may have been trying to downplay this, I don't know.  The strategy stopped working years ago, and now the battle for the state's role in research has to be fought, and not like this.

Public-Good Management
Then there's the other huge issue, which is the auditor's claim that UCOP doctored the auditor's survey results.  The auditor had sent two surveys directly to UC campus officials to find out whether there were redundant administrative services and how the campuses felt about what they were getting for their UCOP tax.  Here's the auditor's statement on the subject:
Contrary to the Office of the President’s assertion that we failed to send our survey to those knowledgeable about specific subject areas, we determined that the campus audit coordinator was best positioned to facilitate the response to one survey and the campus chief financial officer, or an equivalent position, was best suited to respond to the other survey. After we sent the survey, the Office of the President’s systemwide deputy audit officer contacted us and followed-up on some technical questions posed by multiple campuses. This level of coordination was appropriate and we took no issue with it. However, four days before the survey was due, the deputy chief of staff to the president organized a conference call with all of the campuses to discuss the survey. Subsequently, the emails he provided to us show campuses sent him completed surveys which he reviewed to determine, in part, whether the campus responses were within the scope of our audit. However, as we discuss on page 86, the surveys that campuses sent to the deputy chief of staff were much different than the final surveys submitted to us. As is clearly shown in Table 15 on page 87, significant changes and deletions were made to the original surveys sent to the deputy chief of staff for the Office of the President. (166)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.  

A depressing part of the coverage of this alleged survey tampering was the deference of the campus's top officials to Bernie Jones, Janet Napolitano's Deputy Chief of Staff, who was running the survey massage operation. For example:
Several changes were made to UC Santa Cruz’s initial survey. Jones told UC Santa Cruz to consider “reframing” or deleting a suggestion for greater systemwide coordination to recruit low-income students, asking administrators there to take into account the central office’s efforts in coordinating disbursement of state funds for underserved schools. “As you will see, I addressed 98% of your concerns and I made a number of additional changes as well (all in a direction you would not find problematic),” UC Santa Cruz Chancellor George Blumenthal wrote to Jones in a Nov. 23 email. Jones provided the email to The Times. UC Santa Cruz’s initial survey raised issues about the UCPath system, which is aimed at centralizing personnel, payroll and academic processes. “Some Office of the President initiatives, such as UCPath were at first very poorly and inefficiently run, but they seem to have figured it out and are on the way to bringing a huge and — often — failure prone project to a successful conclusion,” the initial response said. “The key issue is that the Office of the President provides the leadership, vision, and public relations acumen to keep the University on the best course.” That paragraph was removed and the final survey response instead read: “The services and leadership provided by the Office of the President are crucial for the success of the system. Especially for a smaller campus like ours, it would be both expensive and inefficient to provide those services ourselves. In addition, there is a true public policy benefit to the role that the Office of the President plays in providing uniform standards….”UCSC's original statement was already more positive about UCPath than anything that I have heard--it was a very nice comment in fact.  UCOP apparently didn't stop with deleting the hint of UCSC criticism, but went on to exact veneration for its public service. Of course in a proper academic survey, if your subject doesn't spontaneously mention your centralized outreach program, that is the datum: it probably means they don't think this program makes much difference to them.  In the academic world, this alteration would be research fraud.  The auditor was right to toss out the results--except she also published many of them.

This part of the disaster seems to me to flow from UCOP's attempt to defend its executive sovereignty over the overall system.  UCSC's revised comment-- a smaller campus needs central services-- tries to nail shut the whole can of worms about campuses' frequent duplication of of UCOP expertise.  One example was the decentralizing of technology transfer, as over about 15 years one campus after another got their own office of technology licensing and industry alliances, even as UCOP's Office of Technology Transfer continued to preside. (Some of this decentralization is now being reversed.)   My simplified history is that UCOP used to curate, develop, and strategically guide campuses.  But in the twenty years, and especially in the last ten, perhaps from around the time that regent Richard Blum wrote a memo calling on UCOP to be "strategically dynamic," UCOP has become better known on the campuses for enforcing standardization and compliance.  Disconnected from everyday academic life, it offers the public a series of middlebrow tactics.  And as these tactics have failed to produce lasting solutions, it has also devoted itself to spin.

The budgeting and the survey meddling seem to me to have a common source, which is a closed managerial culture dedicated both to its image and its decision rights.   Much if not most of UC has become a culture of silence, of conformity, of handpicked task forces replacing senate committees, of a small list of insiders deciding everything, of non-consultation, of divisional senates that provide no information much less active discussion with their supposed constituents, of shunning or quiet retaliation in response to dissent.  Senior managers are not meaningfully accountable to their subordinates, including to the tenure-track faculty.  Some performance reviews are on a cycle and some are discretionary, but in either case comments are generally by invitation only, and results are never publicized.   If actions are ever taken, they are taken from above, and truthful explanations are not given.  UC's response to in this case is a good example of this closed culture at work: the chair of the Board of Regents posted a video pep talk that closes ranks with UCOP.   She didn't even mention the audit's criticisms, much less promise to deal with them.  It's hard to imagine any regent confronting the cognitive and ethical failures that closed cultures create.  

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.

Categorías: Universidade

Saved by the Public: Central European University as Portent

Mér, 19/04/2017 - 23:10

Central European University may have been saved from closure this month by the crowds that went into the streets to defend it. The threat comes from new licensing requirements that could keep CEU from operating legally in Hungary. The president of this private, English-language university, established by George Soros, Michael Ignatieff, deliberately stirred up public concern by posting analyses of the new regulations along with calls for general support. The effort culminated in a widely covered press conference where he stated that a vindictive government was putting the University’s existence at risk.

It’s rare to see university heads trying to stir up the public rather than head them off. They’re going to have to get much better at it, for the simple reason that right-wing leaders all over the world have positioned knowledge institutions as enemies of regular people, and universities will need to figure out how to get popular support. This is obviously the case in Hungary or in Turkey, where the newly constitutionalized despot Recep Tayyip Erdogan has the educational system by the throat. But we shouldn’t treat these countries as bizarre extremes. The American Right always runs against the university, and Trump owes much of his success to his ability to cast “political correctness” and knowledge-based policy as threats to the real Americans. CEU may be a model for the US and UK as well as other regions where knowledge institutions—universities but also high schools, laboratories and the press—operate under political threat.

First the case of CEU. As you know, Viktor Orbán, the Prime Minister of Hungary, has become Europe's dominant proponent of "illiberal democracy" through his "build a wall" response to refugee migration during the summer of 2015, his internal crackdowns on the autonomy of the Hungarian judiciary and other institutions, and now his threats to CEU. The relevant provisions of the bill are meddlesome, though not alien to the regulatory structures common in liberal democracies:

  • Requires that a a non-EU university operating in Hungary will now need to operate an actual university in the home country (as opposed merely to being accredited there, as CEU is by the U.S. Middle States Commission on Higher Education); 
  • terminates the kind of partnering arrangement that allows CEU to operate its Hungarian degree programs through its legal twin, Közép-európai Egyetem (KEE)
  • allows the Hungarian government to block or abrogate contracts and arrangements between educational institutions located inside and outside of Hungary.

CEU statements have highlighted the illiberal implications. The University has accused the government of violating its own legislative procedures in rushing to pass this law and making a discriminatory assault on CEU by writing rules that will affect it alone. It accuses the government of thereby undermining the conditions of academic freedom. But the university’s advocacy did not stop there.

CEU officials have explicitly tied the fate of their university to the fate of Hungarian society:

All this seems like a co-ordinated attack not just on academic freedom but on freedom of association, and, finally, on democratic freedom,” Liviu Matei, provost of the CEU, told The Telegraph.“There is a pattern to it. Academic freedom and freedom of association might go. After that there is not much left.”
After much international pressure and many large street protests, the government may have retreated on April 12, although the "compromise" it proposes seems to have been explicitly blocked by the new legislation. The European Commission has also announced an investigation into the legality of the legislation. The situation is likely to drag on interminably.

Inside Higher Ed has published CEU faculty member Sejal Parmar’s helpful overview with a large number of links to source documents, and her summary is,

CEU is currently pursuing “all legal remedies” whilst calling on the government to show “mutual good will” by initiating negotiations towards finding a “lawful and long-term solution that would ensure [the university’s] academic freedom and institutional integrity.”
A straightforward compromise is undermined by Orbán’s need to campaign endlessly against his government’s internal enemies. He has positioned CEU as a front for George Soros’s liberal foreign interests and a leader in the NGO assault on Hungarian sovereignty.

“The regulation of higher education is a member-state competency, not the EU’s.” Zoltan Kovacs, a Hungarian government spokesman, told The Telegraph. “We maintain the main reason behind everything that has been coming at us now, and for the past year and a half, is about illegal migration and the fundamental differences in approaches between us and the Commission.”
CEU has provided services for Roma and for refugees, and its faculty and students are the kind of people who opposed the government’s hostile response to the exodus of the summer of 2015. In case Orbán was running short of evidence of liberal opposition to him, he could point to the foreign press opposing his vision of Hungarian sovereignty, in this case the Financial Time, which wrote that Orbán's

government passed a law which, for purely political reasons, aims at closing the Central European University, a Budapest-based bastion of academic independence and free thought founded by the billionaire philanthropist George Soros. (Tens of thousands took to the streets of the Hungarian capital on Sunday to protest against the new law.)

Similarly, former CEU professor Das Mudde's widely-noted Guardian op-ed affirmed that CEU’s existence does oppose Orbán’s conception of the state:

Hungary has become a bellwether for illiberal democracy in Europe and an inspiration for illiberal democrats throughout the region. Hence, the struggle over CEU is not just about that unique university, it is about all universities, and it is about liberal democracy. If we don’t take a stand now, we will be fighting similar measures in Poland and other countries soon.
The time of accommodating Orbán must end now. It has failed. It has not moderated him, as [the European Popular Party] leaders continue to claim. Rather, it is radicalising others and hollowing out the very values the EU, and EPP, claim to stand for. This week, Merkel took a strong stand against Orbán, as he attacked her refugee policies in a by-now familiar Islamophobic, far-right speech at the EPP meeting in Malta. It is time the EPP chooses between Merkel and Orbán, between liberal democracy and illiberal democracy, between a worldview in which universities are encouraged to be critical and independent and one in which critical and independent universities are threatened with closure.
CEU is in fact the kind of cosmopolitan institution that declares its independence of state interests, even as it claims to represent the freedoms valued by ordinary Hungarians.

This is a difficult combination for CEU or any university to sustain—an opposition to state control of freedoms in the name of academics and citizens alike. In his press conference, Ignatieff didn't always manage this: he said many nice things about how much CEU likes Budapest and wants to stay (it has offers to relocate from the city of Vienna and others), and yet he stressed international excellence rather than national service, all while expressing strong moral indignation against the Orbán government in English. I don't know the Hungarian word for "entitlement," but I'm sure it was used in TV commentaries on the CEU response.

This is not Ignatieff’s failing: universities everywhere have been unable to imagine being both liberal and populist, in which they claim intellectual freedom, tenure, and at least limited workplace self-governance as rights that should be extended to non-university citizens in order to improve their lives. Dependent on selectivity and rejection as key indicators of success, universities have had a hard time bringing academic greatness together with mass inclusion. But that is exactly what is needed now.

Universities are popularly associated with two current failures of liberal democracy: to generate peace and security through the war on terror, and to create general prosperity through the knowledge economy. Orbán’s political theater is designed to remind everyone that today’s liberal enlightenment has helped create—and excuse—high levels of sociocultural and economic polarization, and that under its system many people, sometimes large national majorities, feel the lives they want to be slipping away. Of course the Right has no coherent foreign policy or economic solution either, and their ideas further polarize and make inquality worse. But that doesn’t invalidate its point that liberal economics has left majorities even of wealthy societies behind.

Universities, on the other hand, have done well over the past thirty years—the universities, that is, whose business model focuses largely on creating the private goods that this recent order has favored. These have mostly been the already fairly wealthy private universities that lack responsibility for mass education and can focus on increasing private goods—tech transfer for business, human capital for graduates. In the process, universities lose the interest of the majority of the population that doesn’t benefit from these private-good transactions, which doesn’t matter for private universities with strong brands and very high tuition incomes, and who are willing to shift investment towards direct returns on investment.

The model doesn’t work for public universities, which have affordability obligations and very large numbers of students who must be properly taught. They need support—financially and politically—from the society as a whole. Their teaching and research thus needs visibility and obviously to offer widespread public benefits, as, for example, from longstanding research validating the access of regular people to workplace rights, good wages, political freedom, and cultural self-determination.

Liberal freedoms, academic quality, and egalitarian benefits can be reconciled in a public-goods framework. I argue this at length in The Great Mistake (the mistake is our application of a private-sector business model to a public good), and in brief in my Inside Higher Ed piece last week. Great universities like CEU cannot appeal to the wider population when cut off from a full-scale public good framework that citizens can see will benefit everyone. When universities fail to create a mass base, they are permanently vulnerable. Authoritarian rulers can take advantage of this wherever it happens--Hong Kong, Russia, and Turkey, for starters.

U.S. and U.K. universities obviously have much better civic and legal protections. They aren’t threatened with closure, at least politically, but they are threatened with permanently declining social standing, influence, and funding. This is in part because they haven’t made the public good funding base a popular issue. They stress their exceptionality rather than their embeddedness. They equate quality with selectivity and ranking rather than with inclusion and mass progress.

It is finally dawning on U.K. university leaders that the sector's endless talk of value for money and money from international students has meant neglecting the less mobile sectors of its population, who aren't rushing to their defense.

In the U.S., some leading liberals have done Trump’s work for him by castigating universities for illiberalism rather than praising them as bastions of public-good independence. NYU professor Mark Lilla launched a 1990-vintage attack on university-style liberal diversity politics as costing Hillary Clinton her rightful victory (we responded); former Stanford president John Etchemendy identified a university "threat from within" to liberal democracy; Yale law professor and novelist Stephen L. Carter wrote an agitated piece on the Middlebury protests against Charles Murray that concluded:

The downshouters will go on behaving deplorably, and reminding the rest of us that the true harbinger of an authoritarian future lives not in the White House but in the groves of academe.
Carter reminded me of George F. Will, who 25 years ago used his column in Newsweek to anoint Lynne Cheney as "secretary of domestic defense" in the culture war on exactly what was at stake at Middlebury--anti-racism ("Literary Politics," April 22, 1991). Carter et al. were unable to support a university that grants academic freedom to a full range of views even when they erupted in adversarial expression, meaning they were unable to support a liberal populist university rooted in its immediate society. This failure to define the university, among other things, as a site of intellectualized social conflict shifted the image of the American university within a few weeks of Trump’s inauguration from a bulwark against tyranny to a sponsor of it. To repeat, it was not the downshouters who did this, but the liberal opponents of the popular university that, since regular people are there, will occasionally erupt in downshouting. I personally oppose downshouting, but it needs to be put way down the list of social problems of our time.

CEU must be defended by the academic community elsewhere. But it, like universities in general, will be saved only by the general public.

And that means universities in all our countries giving the general public better reasons to feel we're on their side.

Categorías: Universidade

The Great Mistake on Research Costs

Lun, 27/03/2017 - 11:22
I'm going to use a lull in my travel for The Great Mistake to start clearing my post backlog, starting with a response to the most recent review, by the sociologist Andrew Perrin.  His piece is at the public sociology blog Scatterplot, and, among its other virtues, it offers the most sustained engagement on research costs (Stage 2 of the book's decline cycle) that I've received.  I posted a comment on his post and crosspost it here.  His skeptical analysis of the emphasis I place on research costs is essential reading. It advances the kind of debate whose general absence has helped dumb down university policy.  I'm very grateful to him for the intelligence and energy that went into his analysis.

This blog has covered research costs many times ("How Can Public Universities Pay for Research?" "UCLA Loses LONI: Why Budget Silence is Bad for Science," "UCSD and the Crisis in Public University Research Funding," etc.) In The Great Mistake I go into the problem in detail, and also, in the final chapter, suggest a way of solving the core research cost problem without needing new money.  

After one talk this winter, someone asked me, "are you arguing that the way we fund research is the public research university's Achilles' heel"?  "I wish," I replied.  "That was just one small though important body part that didn't get protected in the River Styx, so you could armor it and be ok.  Our research funding model is more like a tragic flaw.  It is a secret weakness that cannot be separated from a great strength--unless it stops being a secret and is brought to light."  As I was later watching Toneelgroep Amsterdam's great 6 hour sequence of three Shakespeare plays, Roman Tragedies, I wondered, is the public university like Coriolanus, returned a military hero but unwilling to work with the newly empowered plebeians in the Senate, and so destroyed? Or like Marcus Junius Brutus the Younger, picking the wrong political allies, with the same result? Or Mark Anthony, losing the civil war to Octavian by ignoring his own strategists, who assured him he could not win at sea but must fight on land? Overkill, perhaps.  Start by reading Andrew Perrin.


My response:

Many thanks for the thought and intelligence that went into this review.  I agree with the criticism of UC-centrism.  I’d like to assemble a research group to do comparative state studies of university policies, or at least work with other people on this.  We’re getting a better picture through a series of books that focus on the systems the authors know from the inside.  Austerity Blues looks at New York, to take just one other example. Jeff Williams and I would love to publish more work on various state systems in our Critical University Studies series. As you say, North Carolina is a crucial case.
On research funding, let me first take a step back.  The book argues that treating universities as private goods has lowered their social value and hurt their finances. Many defenders of any given instance of privatization either deny social or educational costs or say they are less than the life-saving benefits of the new revenue streams. My examples question these life-saving revenue benefits, which in many cases are actually negative.  Universities always generate value even when they lose money on something like extramural research or small-scale teaching.  But policymakers shouldn’t support a practice—privatization—that doesn’t correctly do the one thing it is supposed to be good at, which is provide net financial benefits (gains that aren’t created by losses elsewhere in the institution).
Research costs come where they do in the book’s decline cycle because they are a core example of the university’s primary reaction to abandoning the public-good model of the university (Stage 1), which is to stopsaying public benefits justify monetary losses on research, and to startsaying the university generates monetary benefits on research (the Bayh-Dole Act in 1980 was one turning point).  The latter statement has the double liability of obscuring research as a public good and of being wrong. Research is a public good and a private (institutional) loss, as it can be in the public good model, and as we disallow in the (inappropriate) private good model.  (A lot of bad things are tied in to this error, like splitting STEM and SASH research on phoney market grounds, hinging some portion of federal funding on science’s (exaggerated) direct economic value, etc.)
Other broad points. Technically, the contrast I draw is between high-research and high-teaching fields, where fields with lots of extramural funding have high gross revenues but lose money when overhead costs are netted out, and fields with essentially no extramural research but lots of enrollments are able to run surpluses—surpluses that administrators must use to cover losses elsewhere.  The fact that these kinds of departments polarize into STEM and non-STEM is contingent on other historical problems that I’m trying to help address.
Also, I am pro-STEM and hate the STEM/SASH divide.  I spent not the happiest years of my professional life as a co-founder of an NSF center trying to overcome it.  I see the divide as an artifact of a two-cultures ideology that has produced fundamentally different—even mutually incomprehensible-- material conditions of research.  The grant scramble in STEM feels to me to be inhumane and even anti-intellectual. I think it’s getting worse all the time, and I have nothing but sympathy and admiration for the colleagues who work 80 hours every week while skipping weekends for months at a time to keep their labs running and students funded.  I take their plight as seriously as I take that of SASH scholars. And yet I also see political inequality between STEM and SASH that is supported by budgetary opacity.  Designated makers always beat takers in America, and my hope is that showing the makers are also takers (we all are both) will create a more open and less biased policy arena and fairer, more effective outcomes.  A side benefit, which I don’t do much with in the book, would be redress for the structural poverty of qualitative and interpretative research, for which I don’t see any ethical or intellectual justification.
Since I advocate a wholesale public good model for universities, I am pro-subsidy.  I am also pro cross-subsidy.  I don’t mind some Sociology enrollment income winding up in Electrical Engineering to pay for accounting staff.  In terms of what you call external funds, my view, which goes beyond that of Walter McMahon and other economists I cite, is that the general public should pay all the costs of public universities, in the full knowledge that some returns will go only to the student they subsidized in the form of private market benefits (a salary increment), while most returns are nonmarket, indirect, and social, and fan out incalculably into the society, as we want them to.  In “internal” terms, we all need to help each other out.  If running one chemistry hood costs as much as running the lights and computers in 35 sociology offices, then sociology coughs up for chemistry.  The reverse should also be true.
The paragraph you call grudging (pp 94-95) reads as follows:
The problem with this situation is not that these subsidies, which are called cross-subsidies, are inherently wrong. To the contrary, these subsidies are commonplace and justified by the public benefits of research results. They are also justified by the private benefit to the student of attending research-intensive universities. At these institutions, students work with faculty who are at the forefront of their part of the knowledge world. They have access to the research process, which helps them to develop creative capabilities sooner rather than later. One can argue that the public and the student receive more benefit from an education in which instructional funding subsidizes research in the same environment. Though the costs can and should be separated so we can see who is paying for what and how much, the cross-subsidy is completely legitimate in principle—as long as it is acknowledged and shared in an equitable way.
The last sentence is the issue for me: not that we havecross-subsidies, but that we hide them. This removes them from the realm of policy and shared governance, and even correct accounting.
 Here are my more specific responses:
You write,
After a few silly anecdotes about scientists prevented from buying printer paper on their grants (do English professors not need printer paper?), Newfield then relies on NSFand university budget data to claim that between 9% and 20% of universities’ outlays for research are uncompensated by federal funders, so must be made up by institutional funds. These funds, he claims, often amount to nearly 100% of institutional research expenditures, which leaves 0% for institutional support of SASH and other research that doesn’t attract extramural funding.I agree the anecdotes are silly. The point is that research accounting rules set up Catch-22s: some are silly, and others which blow holes in universities budgets. I also break down the range of 9-20% into three models all of which are justified by different sections of research funding reports based on the same data.  The differences reflect not only the ambiguity of semi-official interpretations of federal data, but also unequal budgetary situations for different kinds of universities. We need much more—and much more open—research to have a more complete picture of what is going on.
There’s a lot of forensic accounting going on here, and I think Newfield makes untenable assumptions to reach those high numbers (20% unfunded, 100% of institutional outlays). Most important here is the accounting for what universities pay for research that is not extramurally funded. Lots of that is implicit; professors spend their time, paid by university funds, on research and scholarly inquiry all the time. They do it with computers, office supplies, and sometimes dedicated funds that don’t count as research expenditures but are university resources spent on research and scholarly activity.
I’m not sure what you mean by untenable assumptions, but I assume you mean the omission of a portion of tenure-track faculty salaries and benefits as university’s internal funding of research.  I mention this omission in a footnote (middle of p 363, and also see the following note), and my reason is that this applies to all research professors in all disciplines, and is part of what one must do for one’s basic salary. Put differently, it would increase both the total amount of institutional funds spent on research and the total amount of research expenditure, so it wouldn’t change the share.  If anything, counting part of salary and benefits would have helped my inequality case, since disciplines that expect extramural grants for tenure, promotion, etc. generally require about half as much teaching as those that don’t.  In any case, I could better acknowledge that research universities do invest in all faculty in this way, especially since I am personally very grateful for that.
Next you write, “Throughout the section on extramural funding, Newfield implies that universities would not be doing the research if it weren’t for that funding.”  I’m agnostic on this. Your counterfactuals are interesting, but I don’t think they affect my argument.  It’s true that universities paying 20% of research is better than them paying 100%.  But paying 0% is better than paying 20% when general operating money per student has never recovered to the levels that the research enterprise assumed, and when students are progressively taking over from taxpayers in supporting it.  20% or 50% fro institutional funds would be fine with me were research funded at adequately high levels and as a public good, such that subsidies (including those from students as private individuals) are no longer extracted, left acknowledged, and not reimbursed.
Then, “That emphasis is puzzling because, unlike the rest of the book, it’s really not necessary to the overall argument. Each other piece of evidence goes directly to the devolutionary cycle (p. 36), but it’s not at all clear to me why the external-funding claims support that argument at all.’’
I tried to address this point above.
his greater claim that in fact the English department is subsidizing STEM is based on treating institutional funds in two conflicting ways. When they pay for English salaries and overhead, they are treated as external income from tuition and state funds: fees paid for English professors’ work. But when they pay for STEM salaries and overhead, they are treated as internal funds. Newfield is right to call out the PR machine’s implication that STEM pays for itself and English doesn’t, but he’s wrong to interpret this as an internal subsidy.
The terms external and internal may be confusing.  External funds become internal funds, or what the federal accounts call institution (or institutional) funds.  Student tuition and state general funds, plus some other smaller streams, become the university’s unrestricted funds that they distribute as they deem best.  It’s an “internal” subsidy in the sense that the university is itself paying a share of research costs on top of what it gets from the specific extramural research sponsor (DARPA, The Legacy Foundation, etc.)  But the university isn’t creating this money itself, and “profits” from other enterprises (like medical clinics) don’t flow toward core campus operations like instruction and research.  So I stick with calling this an internal (or institutional) subsidy. But again, I don’t think subsidies are bad. I just think hidden subsidies are bad.  (One practical reason that helps propel the decline cycle is that they have convinced legislators that research makes money rather than loses it, so they don’t understand why the state should pay more money for university operations.)
That account masks a much bigger problem with reliance on external funding: its intellectual costs. Funding rates are already very low, and today’s “skinny budget” contains draconian cuts to those low budgets. All that means that scientists will be spending more of their time trying in vain to attain funding instead of doing science. (Grant applications are the beginnings of science, yes — but only when high-quality applications are likely to be funded.) Furthermore, the bottleneck by which such an enormous majority of science is funded by just a few agencies raises the prospect of an intellectual monoculture; heterodox inquiry is unlikely to flourish under such concentration. I think it would be better for science and for SASH disciplines for universities to find ways to fund more research across the disciplines internally. I hope my account doesn’t mask this problem, even if it doesn’t analyze it.  I also hope my account helps the discussion you call for by shining a light on how we spend institutional funds now, precisely so we can imagine spending them differently. 
In general, I agree with you that the agency funding situation poses major intellectual problems.  These are important and longstanding.   Clark Kerr described federal granting agencies as having created a “putting-out system” that made universities dependent subcontractors with borderline sweatshop conditions, and that was during the golden age of federal granting growth in the late 1950s and early 1960s. More internal funding would help with this quite a bit.  Projects could be developed in collaboration between faculty and their offices of research, and consortia could be created bottom-up to share costs across universities.  It would be helpful to draw up some questions and projects that can’t get funded in the current system but that could under this alternative.
The drawback of course is that universities would need to quadruple their research funds to cover what we currently fund today, which still wouldn’t be enough, either for STEM or for SASH disciplines.  I’d like to see a cultural shift that would allow the public to trust universities and their associated professionals enough to do that, but that’s a long road.
In any case, many thanks again for your very helpful and insightful analysis.
Categorías: Universidade

Does Nonresident Tuition Show that Privatization Works?

Mér, 15/03/2017 - 23:36

The most visible item on this week’s University of California Regents agenda has the Board considering a cap on the enrollment of non resident students. It appears towards the end of the second month of a Trump administration that has not dampened enthusiasm for debt-free college or free college but increased it.

Democrats in California, New York, and elsewhere are proposing debt-free plans and are weighing tuition-free as well ("Degrees Not Debt," "The $48 Fix"). In January, the California Legislative Analyst's Office published a report calculating the costs of debt-free college degrees in the state's public systems. When I extended their arithmetic for UC, it showed that UC could be debt-free for less than 10% of its current tuition income.

That would be an amazing thing. It would change what the public thinks universities can do for them. But the UC Regents are talking about a different tuition issue this week.

In California, nonresident (NR) enrollment was a ticking political time bomb that finally went off a year ago, when the State Auditor released a report finding, to quote its title, “The University of California: Its Admissions and Financial Decisions Have Disadvantaged California Resident Students.” The UCOP rebuttal didn’t appease the legislature, which translated the angry denunciations of some members into a proposal that nonresident undergraduates be capped at 10% of overall UC undergraduate enrollment.

UC’s response is to propose an overall UC cap at twice that level, or 20% of undergrad enrollment. The proposal grandfathers the three campuses that are now above that cap at their current levels (Berkeley at 24.4%, UCSD and UCLA nearly tied at just under 23%). It lets other campuses grow their NR student enrollment to the point that the overall university level, now 16.5%, reaches 20%.

The advantage for UC is that it can continue to grow overall nonresident supplemental tuition (NRST) revenues (which bring $26,682 in tuition on top of the $13,500 state-resident tuition and campus fees that NR students also pay). The disadvantage for UC is that this flies in the face of legislative desire, which is that NR enrollments stop growing and start getting cut back. Sometime this week, the Regents' proposal was downgraded to a discussion item, so that even this modest proposal will not be up for a vote.

I’m going to focus on aspects of one issue: does NRST actually work as public income replacement?

NRST is a prime example of privatization, since it partially replaces public funding—state general funds—with high tuition from individual students and their families. Privatization advocates have two main arguments. First, they say they didn’t “replace” public with private funding, since the public funding was already cut and they needed to fill a gap. Second, in the case of NRST, the tuition money comes with low costs, and the benefits are always far greater than these costs.

This year, both UCOP and Senate leaders are also stressing the blessings of diversity as uniquely offered by NR students. UC may have started privatizing reactively, but now seems to say that private funding is as good or better than public funding, at least in the case of NRST, which is per student $26,682 better than public funding. But is NRST in fact an example of privatization bringing both fun and profit?

When I first wrote about it in September 2009, I calculated that its financial benefits were overstated: senior officials announced gross income figures that didn’t deduct expenses or real non-monetary costs like the political goodwill required to maintain state funding. I called NRST one of the “nickel solutions” that can get to a 5% (or some other single-digit share) increase in a vulnerable revenue stream but not beyond that. I was using Robert Birgeneau’s plan to do what in fact has happened—ramp up the nonresident share of UC Berkeley’s undergraduate enrollment to about 25% of the total. Then-chancellor Birgeneau projected an increase of tuition revenues to $70 million at 25% NR enrollment.

In response, I estimated the benefit to the UC Berkeley budget had it already achieved a 25% share of NR students: 8% of full instructional expenditures as I calculated them, and 4% of overall campus expenditures. Hence the nickel.

UCSD professor of marine chemistry Andrew Dickson—and fellow UCPB vet—used a different methodology to come up with a similar estimate. Both of us emphasized hidden or indirect costs of adding NR students. These included new instructional and student support needs. They included the price of political resentment and backlash from the public and the legislature, which would appear in the concrete budget effect of either cuts or reduced public funding increases over the long term as the University proved once again that it didn’t need so much public money because it had so much private money, including tuition from that semi-infinite supply of international students who were joining a billion-strong global middle class allegedly hungering for an American BA.

This blog's NRST analyses suggested three worrisome features of UC advocacy.
  1. UC calculates the financial benefits as a gross income, not as a net. Indirect and nonmonetary costs (like political goodwill or student work hours) aren’t analyzed publicly. 
  2. It denies or deems temporary the anti-public aspects of the move. UC officials were then suggesting that NR enrollment would last only as long as the budget cuts and could be dialed back as soon as possible. 
  3. When someone does put political costs on the agenda, senior officials define them as effectively zero. The same goes for the costs to public funding. I have again recently had a face-to-face experience with a senior UC official who declared the feedback loop from private back to public to be nonexistent. In this view, UC’s continuous and successful efforts to increase private revenues never have and do not now teach politicians that they can cut state funds without hurting the University. 
In contrast, my research for The Great Mistake found statements going back to 1970 that inferred legislative obligations from tuition hikes. For me, the question is not whether tuition hikes dampen state funding increases but how much? How much public money do tuition hikes cost? My answer in 2009 was more than the 8% of your instructional budget or 4% of your campus budget reaped via expanded NRT. With only 4% annual GF increases and a tuition freeze following deep cuts, the UC system has been losing more than 8% a year compared to its structural needs (e.g., Displays 5 and 6; discussion of this “New Normal”).

What’s happened since? The state cut public funding and still hasn’t built it back. The University raised tuition and then the governor forced a freeze. The University ramped up nonresident enrollment, such that UC now has about 5 times the number of NR students that it had ten years ago. As in any social system, these elements of the funding model are interconnected.

Then, about ten years after the growth began, the State Auditor issued its report, and the political blowback began. UCOP responded in three ways. It posted a rebuttal that insisted the University has continued to admit all eligible resident students, rejecting the state’s claim that NR enrollments damaged access. It emphasized the pre-existing plan (page 8) to admit an additional 10,000 resident students, in spite of below-cost per-student funding from the state. And now, the regents will have a discussion of an NR cap that allows further NR growth at the non-flagship campuses up to an overall system total of 20 percent.

You can see the surface appeal of nonresident tuition from this UCLA budget slide, referring to $1.4 billion in core campus revenues in 2015-16.

NRST was 12% of the campus's core revenues, or over half the total tuition the campus gets from resident tuition. Given limits on the growth of state funding and resident tuition, NRST is no longer a temporary alternative revenue stream but a significant part of the overall budget. At least from the administrative perspective, Premise 2 above--NRST's temporary nature--is moot.

But remember that these are gross revenues. Let's look at NRST net income, and switch back to Berkeley to compare the 2009 calculations to the actual situation at nearly 25% nonresident enrollment.

Like all campuses, UC Berkeley grosses $40,182 per NR undergrad. We subtract gross in-state tuition of $13,500, since the campus would get this anyway with a resident student. (The University normally takes one-third of gross in-state tuition as “return to aid” to support financial aid programs, but NR students also pay this on the in-state tuition "base.") UC Berkeley thus receives $26,682 for replacing a resident student with a nonresident student, or for adding a nonresident student rather than adding a resident student.

Next, we subtract a round number of $10,000 for the marginal cost of instruction and related expenses for adding an additional student. These include new additional costs incurred by adding an NR rather than a residential student (a larger international office for visas and other paperwork; language support; academic tutoring; acculturation and integration programs--anyone who things social integration is cheap has never done it!) This reduces the net yield per nonresident student to $16,682. (In the table in regents’ item B4, page 7, the net is instead $15,862.)

Then, we encounter another subtraction. Undergrads who are residents of California also bring state general funding with them. This is the amount that has been cut so much over the decades--it is down from $19,100 in 1990-91 to $7,160 (in 2016-17 dollars, Display 3). But $7160 is far from zero. In the case when a nonresident student replaces a resident student, we subtract $7160. The net after deducting direct costs or losses for this kind of NR student, who replaces a resident, is $9522.

Hmm. If we posit that UC Berkeley decided not to add unfunded resident students and not to overcrowd its facilities, so that all nonresident students replaced a resident they might have taken were the state paying for them, we multiply this figure back by UC Berkeley's 7335 nonresident enrollments. In that case, we get a net NRST for the campus of $69,844,000. This is freakishly close to Robert Birgeneau's 2009 estimate of $70,000,000. More importantly, it is under 10% of the campus's gross tuition revenues. It is just under 4% of the campus's 2015 operating revenues. In short, NRST remains the nickel solution that it seemed to be in 2009.

A rebuttal to this analysis would object that its premise is wrong: UC Berkeley added resident students as well so NR students didn't simply replace them; the state wasn't paying for many of the resident students so there wasn't that $7160 difference to subtract; or it was paying $5000 instead. I agree that we would get different numbers if we changed the proportion of NR added to NR replacing residents and plugged in the state's shortchanging. There is a range of reasonable estimates of the NRST net. But they wouldn't increase the NRST totals enough, net of direct monetary cost, to justify making NRST a central and irreplaceable tuition strategy. That's my first conclusion. There's a price to the privatization of revenue streams, and it needs to be netted out.

Direct financial costs don't exhaust this price. We still haven't touched on the indirect and non-monetary or intangible costs of the NRST strategy. Some of the indirect costs are monetary. There are costs of competition for nonresident students in the form of new capital projects, better overall student services, better housing, and the like. (I'd refer doubters of these indirect costs to Berkeley's former VC for Administration and Finance John Wilton's analysis behind his comment, "Berkeley must now compete for its three most important revenue sources against the best private and public universities.")

Other indirect costs are costs to academic quality. This is a taboo subject in a University that is now engaged in a permanent campaign to fundraise from everybody, but the problem continues eight years after the crisis. This year, to compensate an angry legislature for NRST, UC enrolled the largest one-year number of new residential students in living memory. Campuses are handling the “surge”--on top of the continued growth of non-residents--with strategies like hiring non tenure track rather than tenure track faculty, growing course sizes, and endorsing short-cuts such as having some undergraduate work be graded by other undergrads. How do we quantify this cost of tuition-suppressed public funding--which may follow our graduates into their working lives--so that state government cares about it?

There are still other costs I will merely name. One is the public cost to national higher education as states race each other to swap students so they ca triple charge them. The Department of Education should confront this absurd escalation of overall national tuition charges, which drives some share of student debt, though even under Obama it did not.

Another other is the loss of political goodwill. This is hard to put a number on, but "The $48 Fix" calculated that UC is at least $3 billion in general funding below where it would be had it simply grown with the state from 2000 on (Table 1). Clearly not all of this gap can be traced to tuition hikes. But the annual state funding shortfall is 5 or 6 times larger than even the gross NRST revenue figure for the system-- to say nothing of the net.

We should do a few things going forward. Faculty should support the Senate's call that UCOP not just give the state an NRST cap (page 8), but call on it to buy out the NSRT--and set a wider precedent for restored public support.

We need to recognize that the three premises I mentioned above don't hold. We must see nonresident enrollment through a calculation of its net revenues that includes its indirect, political, and social costs. This means we must face the fact that when we include the cost to public support of the educational core, privatization is a money loser. This leads to the only viable alternative, a public-good model for the university that supports debt-free college,and a $48 Fix.

The same goes for research as well as teaching. Research funding and graduate education have also been destabilized by the private-revenue model. I'd ask faculty skeptics who think "multiple revenue streams" is the only way to keep Berkeley and other UC research on top: Are you better off today than you were 8 years ago, when we started to ramp NRST up?
Categorías: Universidade