Ending the Master Plan Won't Even Help the Budget

Photo at left was taken in the UC Regents meeting May 16, 2012. On the audio linked below, you can hear them singing "working on a chain gang."

The larger issue covered by this and related posts is that privatization often, or even generally, costs more money than it brings in.  Privatization is not intrinsically efficient. It builds in administrative and complexity costs, it has new control and audit costs, and above all it has profit costs: the entity providing the funds or services for which the state used to pay directly now takes a piece of the action.  The Master Plan for Higher education (link at bottom) was not a text of democratic educational philosophy, but an attempt to wring complexity and competition out of the state system.  Privatization puts complexity and competition back in, and encourages not only initiative but imitation and duplication, as exhibited by the desperate Berkeley plan for 10 new campus boards of regents oriented around local revenue enhancement. Studies repeatedly show that initiative comes from intrinsic non-monetary motivations, cooperative rivalries, larger goals, none of which require privatization. 

There is a large and growing literature about why the privatization of public goods reduces access (drinking water, electricity, education) and raises costs.  There are also major, constitutive declines in forms of accountability based in public law.  And there are major financial problems.  Much evidence comes from Britain, which two decades ago created a Private Finance Initiative (PFI) program to hire private firms to build and operate public works.  Major public infrastructure was privatized with all the usual blanket statements about the superior efficiency of the private sector and the society-building effects of the untrammeled profit motive.


 A HM Treasury Select Committee report last year  "concluded PFI deals offer “poor value for money” and can typically cost up to 40 per cent more than if they had been funded with normal public borrowing."  Although an aide to the current Conservative Chancellor of the Exchequer George Osborne observed, “We have been saying for a long time that the PFI system we inherited was completely discredited and nothing more than a ploy to keep expensive projects off the balance sheet," they turned around and "reformed" higher education in a way that will pump up a PFI-style student loan system to handle the tripled fees that arose from the 80% public funding cuts.

Now the Intergenerational Foundation has released a report called "False Accounting," which shows that the high-tuition plus loans scheme will be more expensive for students and for the goverment. The BBC headlined it as "£9k fees 'to push debt up £100bn'  and summarized the problem by citing the report, written by Andrew McGettigan, as showing that the loan scheme produces "a [cost] increase of £5 to 6bn a year and "eclipses" the £3bn savings achieved through the cuts announced to the teaching grant."

Cut to California, where the same thing is happening in a different form.  The state, via Jerry Brown, is now backing away from demanding that UC use its admittedly reduced public money to focus on its public educational mission. It is moving towards viewing general fund money as a public subsidy for educational activities that will in practice mostly be led by private partnerships.

I say this for three reasons (inspired in part by the pithy comment on the neo-compact by the Council of UC Faculty Associations.

1. There are no provisions for enough state funding to fund the relatively expensive combination of high-quality teaching and research that are what we mean by good research university. (I discussed this in Tuesday's post).
2. Savings would come from providing no money for additional state residents.  As the state's K-12 population grows, UC would either take the additional students without state funding, as they have often done, or reduce enrollments of state students (as the PPIC report notes).
3. Administration will be one constant scramble for replacement revenues, focusing on self-supported or for-profit auxiliaries, which willy-nilly will become revenue sources for the overall institution.

On the first point, the new compact accepts massively reduced state funds ($2 billion below where growth with state personal income would have put it, and about $850 million below costs for next year). In addition, buildings and pensions, once separately funded by the state, would be part of the 4% annual increases (while those costs would grow much faster).

On the second point, tuition will continue to rise every year, with 6% as a floor, functioning as did the 7%-10% per year  during the Compact with Arnold.  Even more fundamentally, the framework would break the contractral link between residential enrollments and funding, separating, as CUCFA points out, the university from the core mission that the public understands and supports. The university would have financial incentives to replace resident with non-resident students, since they will make a large profit on them. And yet the university will never be willing or able to raise tuition fast enough to make up for the inevitable state cuts that will come from actually putting out-of-state students ahead of the children of California taxpayers. The political folly boggles the mind.


This brings us to the third point.  Without the anchor to the core public mission provided by undergraduate education, the core will be rushed by the auxiliaries who promise large new revenue streams to beleaguered officials.  This reverses the Akos Principle in which the auxiliary enterprises are to serve the education core.Tired of austerity and poverty, the faculty will go along.

Some of these projects will compete with and replace core revenues, as in UC Online Education (UCOE's) idea of putting lower-division courses, which now offer departments bread-and-butter revenues, on line first, without the departments capturing the full revenues themselves.  Others will pull core UC student constituencies into non-UC services, as has been happening with the UC Education Abroad Program, which is required to fund campus study abroad offices that promote non-EAP study programs. A third group will be an expanded version of existing extramural research, which runs large but generally unacknowledged losses.  CUCFA mentions capital project costs being subsidized by tuition, and after all the trouble UCOP went to deny the implication of CUCFA president Robert Meister's analysis that UC might not only pledge tuition money for construction bonds but use them to pay them off, it's as if UCOP said "hmm, maybe we should do that after all," and are now negotiating the possibility.   But the problem is also there for regular research programs, which are central to the research university mission but not now fully funded, forcing the university to subsidize their indirect costs.  As the post-Master Plan UC unfolds, revenue predictions will be overblown, and costs will be higher than expected.  In short, many or most of the non-state revenue gushers promised by educational prospectors will, at post-Master Plan UC, be small or negative.

To put the point bluntly, post-Master Plan UC is even more likely to demand that budgets drive educational policy, but won't rely on these to actually fix the budget.  As is now the case, they will rely on large tuition increases.  As a sign of the high-tuition foundation of the whole privatization drift, Moody's Investors Service, the bond rater, has already given a thumbs-up to the Berkeley plan to let many tuition levels bloom.  Private partnerships will still generally need public subsidy, and student fees, but without traditional public oversight or justification.


So with all this in mind, what happened to the framework at the regents' meeting?  I'll cover the framework discussion when I can get the audio, but it Regent Chair Sherry Lansing opened the Regents meeting (SFC coverage here) with the traditional UC offering of thanks to the political powers that have cut higher education more than any other public sector in California, and over the long run more than any other state legislature in the United States.  She said (audio via UCLA FA blog), "we are grateful for the treatment of the university in the revised budget that Gov Brown released on Monday. The governor has demonstrated the priority that he has placed on public higher education."

But Chair Lansing then issued four demands ("requests") to the legislature and governor:

• Restore the Regents' state allocation request plus $125 million buy out the 6% tuition increase that is coming otherwise.
• Remove the $250 M trigger cut to be applied to UC if the tax hike initiatives 
• Avoid cuts to Cal Grants for low-income students
• Pass the "Middle Class Scholarship Act" (AB 1500).

This would bring the total ask to about $450 M over this year, which gets close to asking for 2/3rds back of last year's cut.  By historic UC standards, this is good.

But it is still inadequate to the situation.  We've had a shortfall in ambition at every point in the crisis (see this post from June 2010).  I called for a Real UC budget scenario last week, and I don't see how anything short of that is going to make any difference.

On a brighter note, at 68:50 in the audio linked above Provost Pitts offers the Regents about the best 4 minute survey of declining public university educational quality that I have ever heard in an official UC meeting.  

When High Tuition Drives Resident Students Away

Plan A for saving the quality of public universities has always been restored public funding.  That plan took another beating yesterday with California Gov. Jerry Brown's latest cuts (see Michael's analysis and the UCLA FA blog's coverage). 

Plan B is a high tuition strategy with various permutations, and it is well under way at UC via the tripling of fees in the past decade and another 6% tuition increase all but assured for next year, and possibly more.  But the functionality of the high-tuition model was questioned by a report last week by the Public Policy Institute of California, whose jist was captured by the Chronicle of Higher Education headline,  "California High-School Graduates Increasingly Reject State's Public Colleges."

Plan B assumes that students will continue to pay more  for a diluted product--diluted because even very high tuition increases have been covering between a quarter and a half of lost public funds.  UC's huge and growing application pool is often cited as evidence. But applicants don't pay tuition unless they enroll.  The PPIC report found that the assumption of ever-growing enrollments has not been true. 

 Over the past five years, the authors write, "the share of California’s top high school graduates enrolling in either UC or CSU has declined from 68 percent in 2008 to 55 percent in 2010, and the share of recent high school graduates enrolling in either UC or CSU has declined from 21.9 percent to 17.8 percent."   "Top" students mean those who have fulfilled the a-g entrance requirements.  In business terms, the two systems have lost a fifth of their share of their home market.


The report traces the decline to several factors, and summarizes its findings like this:

California’s recent high school graduates are less likely to find a place at UC or CSU than they were a few years ago. These declines coincide with actions taken to limit enrollment as well as with the most dramatic increases in tuition and fees in the history of those institutions— increases that were substantially higher than those of similar public universities in other states. Indeed, enrollment rates have risen in other states even as they have fallen in California

Recent stories have noted that other states are activity recruiting California students, and PPIC confirms a small but growing brain drain to other states.

PPIC also asked where the non-enrolling students go.  What they found in UC's records is that of the admits who decline enrollment, a third go to a private college, a third go to a Cal State or community college, a tenth go to an out-of-state public, and a tenth don't go to college at all. The situation is bad for everybody: UC is losing more academically excellent students than it used to, in part because it is reducing its cost advantage, while the state is getting a higher share of students who either "undermatch" by going to a campus below their level of qualification or who don't continue to college.   California is thus building its innovation economy by shrinking its innovation capacity, and growing its knowledge economy by reducing its level of knowledge.  This is a perfectly stupid policy, which will insure more stupid policies in the future.

The discouraging effect of continuous tuition hikes on the student "customer" should be no surprise. The country is now widely perceived to be having a crisis of college affordability, and to be locked in a tuition bubble which has produced a debt bubble. So there is no sustainability to Plan B's vision of raising public university tuition until the day Aragon is crowned King of Gondor.  Does anyone in Sacramento and Oakland read stories called for example "A Generation Hobbled by the Soaring Cost of College"?  If you are looking for a summary of the dire situation to send to Jerry Brown, consider this piece. Jerry will learn:

• The balance of federal student loans has grown by more than 60 percent in the last five years. That's the same five year period where UC and CSU lost 20% of their CA high school share.
• Education Department data shows that payments are being made on just 38 percent of the balance of federal student loans, down from 46 percent five years ago.
• Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years, the latest data available — about double the rate in 2005.  
• A study of recent college graduates conducted by researchers at Rutgers University and released last week found that 40 percent of the participants had delayed making a major purchase, like a home or car, because of college debt, while slightly more than a quarter had put off continuing their education or had moved in with relatives to save money. 
• Roughly half of the surveyed graduates had a full-time job. 

Jerry will also discover the deceptive practices in university financial aid letters that make students think massive debt is normal -- or that in the case of a Drexel letter, that massive debt will lead to a negative payment, as though student debt meant the university owed them money!  And he can read of cases where massive debt leads to no degree at all:

“I’ll be paying this forever,” said Chelsea Grove, 24, who dropped out of Bowling Green State University and owes $70,000 in student loans. She is working three jobs to pay her $510 monthly obligation and has no intention of going back.

“For me to finish it would mean borrowing more money,” she said. “It makes me puke to think about borrowing more money.” 

The wracking university dependence on private money--student tuition in particular--has pushed a huge portion of the higher ed sector into manipulating exactly the young people they are charged to enlighten.   We start instruction by teaching them to betray their own self interest.  We burden students with debt, but more fundamentally we corrupt our relationship with them by not basing it on trust, without which there can be none of the personal development we seek to create.  We who are charged with helping them discover their future first greet them--via our financial aid offices-- by misleading them about their future's financial basis. 

At CSU and UC it hasn't quite come to this, setting aside disinformation about how good poor students have it. And yet the reward for our compromises is the growing understanding that UC will never be the same, as embodied in causal phrasing like "the state’s once-celebrated higher education system."

This brings me to the second premise of Plan B: that faculty can keep their research even if students can't keep high-quality instruction.  A PPIC figure shows this belief to be false as well.

UC has research obligations that CSU does not.  The per-student funding differential reflected no so much differences in teaching expenditures as in research costs.  What we see here is everyone's funding declining but UC's declining faster.  UC is in effect being forced onto a non-research university mean.  UC faculty are expected to compete with their national and international peers in research, and yet the research system is increasingly funded like Cal State.

In the Rays of Hope Department, this NYT piece is very clear that the tuition hikes are tied to a 24% drop in state funding per student over the past ten years. (They don't discuss the feedback loop, where the 72% average state school tuition increase encourages further state funding cuts.)  So there an at least structural interest in  Plan A, as the only alternative to the continuing ramping up of unsustainable debt.

On top of this, the PPIC report references its own finding last year that nearly 3/4ths of Californians think public funding for higher education is too low.

Obviously we have to contend with Jerry Brown, that dependent variable in the Great Equation, California's fusion of Herbert Hoover and Angela Merkel.  But the Schwarneggger-Brown Axis of Austerity is an policy choice and not a necessity. It can be unchosen through enough argument and enough public pressure.

Jerry May Revise California Out of Existence

As you all have probably heard, Governor Brown released his May Budget Revision with bad news all around.  Faced with lower than expected revenues and higher than predicted costs, Jerry is proposing significant mid year cuts to a series of important health and human services, support structures for the poor, financial assistance to students.  He temporarily shields K-12 from immediate cuts but makes it clear that they will be cut drastically (to the tune of 5.5 Billion) if his revenue proposals do not pass in the fall. (33-40).  For higher education the prospect is bleak: immediately UC will lose access (at least for a year) to 38M of the 90M that the January Budget had proposed to help in funding the UC Pensions.  But the more dire prospect comes in the increased size of triggered cuts if Brown's revenue proposals fail:  both CSU and UC will lose $250M instead of the original $200M and the CC will lose about $300M.  Even before the triggers we can expect that the Regents, and perhaps the CSU Board, will be proposing tuition increases this summer.



Two things need to be made clear about the May Revise.  First, Governor Brown apparently has decided to hold the state's educational future hostage to the success of his revenue proposals.  It is possible that this strategy is a smart one politically:  Californians have repeatedly indicated that they are willing to pay higher taxes to support education.  Brown has decided to put this claim to a test.  Unfortunately, his proposals are not polling all that well these days.

But we should also recognize that Brown has chosen to frame the budget situation as an either/or: either devastating cuts or the success of his proposals (where we will get less devastating cuts).  Although it is true that he is bound to produce a balanced budget, as Dan Mitchell at the UCLA Faculty Association Blog has repeatedly pointed out (here, here, and here just for a few instances) even the Legislative Analyst has recognized that rather than eliminating inherited debt immediately as Brown insists, the debt could be lowered over time and in a more gradual fashion.  It is his insistence on eliminating what he calls a "wall of debt" and instituting an immediate surplus that drives his depiction of the size of the State's budget deficit.  It also speaks to his failure to explain to Californians that--as the California Budget Project pointed out again today--the remarkable decline in corporate tax contributions due to the rewriting of the tax codes that is a driving force in the decline of the State's revenues.  Brown's strategy is a political and ideological choice; not a fact of nature.

In so doing, Brown is acting out his own version of the European Austerians whose insistence on debt reduction rather than growth has driven down revenues, driven up unemployment, and threatened to send Europe into an even deeper spiral of economic crisis.  Unfortunately, in California there seems to be no organized political institution articulating a counter-austerian position as there is in Europe.

Brown's destructive framing does not, of course, mean that we should not support his proposed revenue increases.  They appear all that may stand to prevent a further hollowing out of the public sector and a meaningful re-engagement with public education and the future of the state.  But his May Revise is another example of the political class's unwillingness to put into practice concrete plans to establish a flourishing society in America.

Reframing the Doomday Budget Discussion

The agenda for the one-day Regents' meeting May is posted along with most of the agenda materials.  The budget report to the Committee on Finance has a new tone of muffled rage.

We have come a long way from 2009, when Mark G. Yudof said,  "I am compelled to note that the proposed cuts to the university, while serious, do not appear to be disproportionate."  The current discussion item says repeatedly that the campuses have already cut to the bone and are well down the path of amputation.  By page 7 it enters the cuts' absurdist dimension:

Campuses have already implemented all possible cuts and efficiencies and cannot absorb additional budget reductions without doing irreparable harm to UC’s instructional program. There are no obvious solutions to solving the remaining $139 million shortfall, so campuses will have to do what they say they can no longer do, which is cut back programs, delay hiring faculty, consider additional layoffs, and make other programmatic consolidations or eliminations to save money in spite of the detrimental impact on quality that will result.

The document identifies a current year shortfall of $847M, and a $1 billion shortfall next year--even assuming the Governor's small January revenue increases and further efficiency savings. Existing budget parameters build in further cuts in what we cannot cut without irreparable harm.  Cutting the uncuttable is what we do at UC---now on an annual basis. This document shows that we will be doing it again next year, even though we can't.

The Governor's May Revise may buy out the tuition increase that you haven't heard about, defined here as 6% for next year.
In Scenario A, in which good revenue numbers come in, the state provides an additional $125.4 M to avoid this increase.  As the UCLA FA blog has pointed out, receipts are actually behind projections.  This increases the likelihood of Scenario B, which is the 6% increase. Looming in the background is the unidentified Scenario C, in which revenues are behind, the November tax increases fail, UC is subject to a further $200 M cut, and that tuition increase is doubled to at least the low double digits. 12% would bring the base tuition to about $13,700 next year, plus the "Student Services Fee" of $972, and campus fees --check out the many fees!--that would bring tuition to about $17,000 for in state students.

Since no existing systemwide scenario eases the downdraft on the campuses, they are likely to repeat this year's record explosion in the admission of out-of-state students -- up an incredible 43% from 2011. Denials nonwithstanding, out of state students are displacing California applicants, particularly at the most prestigious campuses where rejection causes the most disappointment. Out of state admissions is also impairing the university's mission of racial inclusion. The endless austerity crisis has distorted administrators' better judgment, which used to see out of state tuition as useful revenue source only at the margins.  A variety of posts on this blog (here, here, and here) have shown that non-resident tuition doesn't come close to filling in cuts until you blow past the old Regents' reference point of 10% of total undergraduate enrollment--towards the 20%+ range for Berkeley, and already 13% for UC as a whole (Table 6).  The UC Berkeley administrative proposal to give each campus its own Board of Regents is a similar kind of Hail Mary pass (see Michael's coverage): Having 10 Boards of Regents plus the Big Regents would be an obvious act of administrative insanity. But it would allow each campus to set its own tuition, which means allowing each campus to raise it more or less at will. 

All of the current administrative solutions are perverse and/or unsustainable.  Public universities cannot solve their financial problems by raising tuition even more quickly in the face of the tuition bubble, the student debt bubble, public anger after decades of similar annual increases at 3-4 times inflation, a pro-education president who is campaigning to punish tuition increases with further funding cuts, and mounting damage to an entire academic generation symbolized by the recent tripling of the number of PhDs on food stamps.

A chilly ray of hope appears in the form of a "framework" for multi-year state funding increases that UC officials discussing with the governor (page 4 and Attachment).  The description in the Regents' materials doesn't quite square with the relevant State subcommittee hearing discussion on March 15th, but both versions actually continue to reduce the state's commitment. The state would increase UC general funds over four years by an amount that is cumulatively either somewhat below (4% a year) or somewhat above (6% a year) what Jerry Brown cut in his first year.  This "new normal" would be lower than it seems because UC would now have to fund General Obligation bonds and retirement payments out of their base budget (this reverses what the Regents assumed as recently as January). UC would be subject to performance audits and "curtailed" tuition increases, so there is no sign that the tuition safety value, undesireable though it is, will in fact be under UC's control.  Although UC could not reduce California resident student numbers below their 2011-12 levels, the state would also not again fund enrollment growth.  UC would thus have a financial incentive never to admit a single additional California resident, especially when it could take a non-resident.  The social and political implications go without saying.

The conclusion is that traditional incrementalist negotiations with the state are hopeless. It is as bad with Democratic Brown as it was with Republican Schwarzenegger. I enjoy speculating about the precise nature of Jerry Brown's emptiness, but none of that will change this simple fact: UC will go nowhere except down if it cannot come up with a multidimensional educational mission and a full-scale budgetary framework of its own.

My adamant suggestion is that UCOP change the discussion by giving it a completely different starting point. UCOP should write a budget scenario for the Real UC.  This would out where UC should be now financially, including the costs of research and pension contributions and capital costs and upgrades in educational quality in response to on-line learning and everything else. Some of us already did our own version via the Senate research that went into the Futures Report and the Choices Report.  The new starting point should use the Hays-Glantz report that shows the affordable cost of rebuilding the low-tuition, high-quality UC of 2001.  Use this work as a base, or start over and do it better.  Ask and answer the basic questions: if cap tuition at around $12,000, where should the general fund be? If we roll it back, what do we need? If we have a $1 billion deficit next year, what would a non-deficitary budget look like?  Take the report and present a Quality UC budget to the Regents in July, downplaying all the obvious caveats that the state doesn't want to fund it, while it sketches where UC really should be. Do multiple pathways, various scenarios and timelines, different revenue mixtures. We need a new framework of our own, not one dictated by the embedded history of doomed discussions that have been pushing us down our downslide slope.

Give this a try.  It would be fun, it would galvanize the UC community, it would deeply interest the California public that is tired of getting less for more, it would wake up the Califonria media.  And it can't possibly be less successful that what we are doing right now.  We need to get out of this devolutionary spiral, and the only place to start is to tell the educational and budgetary stories that we want to be told about ourselves.

Faculty Assume some Positions

The Cal State faculty have voted to authorize a two-day strike on all 23 campuses if contract talks fail.  The CSU system has been decimated by the same scale of cuts that have hit UC, and has proposed an unprecedented enrollment freeze on some campuses in the spring of 2013.  Faculty have proposed a 1% raise, which the CSU administration has rejected, and some regulations about class size and a "stable teaching force." The vote for the strike authorization was 95%.

At UC Davis, the Senate's Executive Committee announced that they "hereby censure Chancellor Linda P. B. Katehi for failure to perform adequately the tasks of her office and failure to provide clarity, candor, and trustworthy accounts in relation to the events of November 18, 2011." The Davis Vanguard has coverage.  The Council's Special Committee that wrote the evaluation of the Reynoso and Kroll reports called for Chancellor Katehi's resignation, but the Executive Committee does not.

Apple's Attack on the Knowledge Economy

 

I have a post on my other blog under the above title, which takes off from Charles Duhigg''s recent piece on Apple Computer's global effort at maximum tax avoidance. Mine argues that Apple isn't actually supporting an innovation economy anymore, but something closer to a Bizarro innovation economy that undermines its own basic preconditions, as seen at left.

I found the article on Apple while looking for voting results on the UC Academic Senate memorial calling on the UC regents to support ballot measures increasing higher ed public funding. So far, the recorded votes are:  Berkeley: 370-37 in favor; Irvine476-24; and Santa Barbara 431-19.  Turnout seems to have been good, recorded as 31% at Irvine and 40% at UCSB.

But of course the Regents can only receive state general fund money from a state government that is willing to raise it. Jerry Brown is presiding as an austerity governor, continuing the cuts that Schwarzenegger began.  Austerity is a policy of choice, and is not new.  The California Budget Project's recent chartbook shows that taxes as share of personal income have fallen more in California than in all but four other states (p 13) (they are 2.4% lower than in 1977), and that corporate incomes have been decoupled from corporate tax liability: from 2000-2010, California corporate income rose 204% while tax liability rose 37% (62).  An earlier CBP report showed that the share of corporate income paid in taxes is half of what it was in 1981 (California's Tax System,p 7).


The catch is other states have cut their corporate tax rates even faster, when they had them in the first place, so California's rate remains the 4th highest (p 36), so California businesses can exert constant pressure on Sacramento for further reductions, and receipts are about $13 billion per year below what they would have been without various tax rebates, many for business (p 12).  "There's no money for higher education" means that there is no willingness to raise tax revenues in the current political climate.

Part of the value of the New York Times article on Apple's tax avoidance strategies lies in showing the corporate agency supporting the current situation.  The piece brings this home with a story about the relationship between Apple and its neighboring community college, DeAnza College.

A mile and a half from Apple’s Cupertino headquarters is De Anza College, a community college that Steve Wozniak, one of Apple’s founders, attended from 1969 to 1974. Because of California’s state budget crisis, De Anza has cut more than a thousand courses and 8 percent of its faculty since 2008.

Now, De Anza faces a budget gap so large that it is confronting a “death spiral,” the school’s president, Brian Murphy, wrote to the faculty in January. Apple, of course, is not responsible for the state’s financial shortfall, which has numerous causes. But the company’s tax policies are seen by officials like Mr. Murphy as symptomatic of why the crisis exists.

“I just don’t understand it,” he said in an interview. “I’ll bet every person at Apple has a connection to De Anza. Their kids swim in our pool. Their cousins take classes here. They drive past it every day, for Pete’s sake.

“But then they do everything they can to pay as few taxes as possible.”

Tax avoidance is a starkly anti-innovation economic policy--this is the subject of my other post.  Heavyweight companies like Apple have also undermined that political authority of public higher education officials through austerity itself, which reduces these officials to dependents on corporate benevolence.  Dependence appears at the end of the piece, where De Anza College's unusually candid president says,

When it comes time for all these companies — Google and Apple and Facebook and the rest — to pay their fair share, there’s a knee-jerk resistance,” Mr. Murphy said. “They’re philosophically antitax, and it’s decimating the state.”

But then President Murphy realizes that he's reached the end of his leash.

“But I’m not complaining,” he added. “We can’t afford to upset these guys. We need every dollar we can get.” 

Well actually, not upsetting those guys has generated twenty years of massive higher education cuts. So why don't we try upsetting those guys instead - with enough equitable taxation to educate the next generation?

Relatedly, here's one of CBP's final charts:

Up in the Berkeley Hills

As many of you have no doubt already heard, the senior administration at Berkeley (three of the five authors are, left to right, VCA John Wilton, Chancellor Robert Birgeneau, and EVC George Breslauer) has proposed a new vision for the organization of the UC system, a proposal that they seek to present as an act of "modernization."  At its heart is a set of proposals for the devolution of the system focusing particularly on greater campus autonomy over tuition, the make-up of the student body (i.e. the relative number of California residents vs. out-of-state and international students), and capital planning.  The plan proposes that the Regents would set general targets or ranges and that individual campuses would set planning in accordance with local rather than state-wide strategies.  Birgeneau et al. also propose the establishment of campus level boards of regents who would allegedly possess more detailed knowledge of each campuses needs and opportunities as well as the ability to respond to campus projects and proposals more quickly than the statewide board.


In their telling, this proposal is a response to the ongoing budget crisis and a development of the logic of the funding streams model.  UCOP would be reduced to the management of truly systemwide projects and to working with the Regents to negotiate with the state for funding and for setting the general guidelines for enrollment and tuition.

There are, I think, at least two ways to approach this proposal and, although they point in very different directions, I suspect they are both true.  The first is to see this proposal as another attempt by the Berkeley administration and its allies to secede from the system without actually admitting  that that is what they are doing and figuring out all of its implications (starting with state ownership of the campus).  At the heart of their arguments are the importance of being able to set their enrollment targets and tuition and control their own building projects.  The first two are unquestionably efforts to separate themselves from their obligations to other campuses.  And as Yale Braunstein (not to mention Brian Barsky) has pointed out Berkeley's history of managing their own capital projects is hardly a good one.  Birgeneau's effort in his Daily Cal interview to suggest that "Berkeley is more public than it ever has been" because in-state students are supported by the tuition of out of state students doesn't really reassure one that he is committed to Berkeley serving the public interest.  In the context of funding streams and efforts at "rebenching" (although I suspect Berkeley will do fine with both) it is hard not to see this proposal as a way for Berkeley to secure its wealth at the expense of students and other campuses.

But there is a second vantage point.  Berkeley is now declaring publicly what must be going through the minds of campus administrators throughout the system: that UCOP and the Regents have failed in their obligation to protect and preserve the system and to ensure that the campuses can function.  As those who have listened to Regents meetings over the past several years will remember Chancellors have been forthright in laying out the severe damage that has been done to campuses from the Regents failed policies and the decline in state funding.  UCOP, on the other hand,  has insisted that through fundraising and tuition increases the system could weather the storm.  Birgeneau et al. are taking this disagreement further and challenging UCOP more directly.  To be sure, and this proposal only reinforces this point, there is no evidence that the Chancellors have any greater will to demonstrate to the State the importance of State funding.  But at least they are clear about the costs of its decline.  Berkeley's proposal is bring out into the light a simple reality: the Campuses cannot depend on UCOP for effective leadership.

President Yudof is reportedly unhappy with the proposal.  And that is no surprise.  For Berkeley's devolution would severely limit the power and authority of the President's office even if it (as it is obligated to do) continued to officially defer to the Regents.  Like the earlier proposal out of UCSF, Berkeley's gambit would diminish UCOP considerably.  That it might also destroy the system itself does not seem to worry Birgeneau et al. to any great extent.

So how to think about Berkeley and UCSF: As Revolts of the Rich?  Or as Canaries in the Coal Mine?  Probably both.