Alternatives to privatizing the UC

The president of the University of California proposed an 8% tuition hike yesterday, which would raise next year’s undergraduate tuition to $11,124 (from $10,302 this year and $7,778 in 2008-2009). The California State University (larger and less elite) is discussing a 15% tuition hike to $4,884 annually.

By comparison, Stanford will charge $38,700 next year for undergraduate tuition, making the two Stanford-level UC campuses look like a bargain. USC charges $20,192 this year, although not all of the nine undergraduate UC programs are at the USC level.

UC tuition will also increase by an unspecified amount for graduate and professional programs. MBA tuition this year at Berkeley costs $39,670 for residents and $47,637 for non-residents. (Stanford charges $53,118).

Both UC and CSU claim the increases are needed to cover reduced state funding. The state has been cutting its support for higher education for 20 years, as it expands the welfare state and becomes increasingly captive to powerful public employee unions like the CTA and AFSCME. (The CSU has a union but it lacks the membership and clout of its larger siblings.)

UC president Mark Yudolf doesn’t have a lot of good options. What are his alternatives?

• Cut administrative overhead, in terms of both numbers and their cost. This has been done in a limited way,but despite an extensive crusade by the SF Chronicle, is unlikely to go further.
• Cut other “waste, fraud and abuse.” Isn’t going to happen, and if it did, the bureaucratic costs would dwarf any savings.
• Cut rank and file salaries or benefits. This is where the money could be saved, but it would also reduce capabilities.
• Improve efficiency with larger class sizes, more automated grading, more classes taught by grad students. The UC lags the big Midwest schools in this category, in part because the legislature previously forbade it (such as grad students teaching upper division classes).
• Reduce enrollment. This would save on variable costs, but do nothing about sunk fixed costs for buildings, plant, equipment, etc.
• Increase prices, the direction the university has been on for decades. This is what Yudolf announced Monday in a program that the UC claimed would “strengthen UC finances”

I have long ties to the UC system. My parents and father-in-law all graduated from Cal (before it was “UC Berkeley”), I attended two UC campuses and my wife graduated from a third. We were hoping to send our child to a UC since we don’t have $200k to pay for a private school. As a prospective UC parent — and an existing CSU faculty member — I am seriously conflicted.

Any price increase has to be rebated to those students on financial aid — 50% at CSU, one-third at UC. So as the state reduces its funding, the salaries of UC employees are increasingly being paid by its customers — much as at a private school. The buzzword for this is “privatization,” and that’s effectively what happened to the UC business, law and medical schools during the last economic downturn.

In fact, Yudolf hinted at privatization last December, and one of his business school deans last summer openly called for an end to state tuition subsidies. But California is different than other states (like Michigan) that have pursued this approach.

As a middle-class taxpayer, I have a strong personal stake in continuing the middle class subsidy, but I think there is an economic rationale as well. For those bright students who don’t qualify for financial aid, forcing them to take $50k in loans to fund their undergraduate education is going to slow household formation and may force many of them to leave for states where the costs and taxes are lower.

Instead, I think the best option is to reduce enrollment, forcing the weakest UC students into the less expensive CSU system (which would presumably use the same approach). This will improve the quality of the experience for those who remain.

I realize this will reduce overall college access: one of the joys of being a public university professor is helping first generation college students get a leg on the economic ladder. Reducing UC and CSU enrollment would force the weakest students to reconsider a four-year degree — some of which would be better served by a two-year community college degree.

The next best option would be to charge the highest prices for the most elite schools, that presumably serve the students with the highest earning potential. Former UC regent Ward Connerly was blunt in recommending this:

"Let elite UC campuses like Berkeley and UCLA charge market rates," he says. "Students who go there would be high achievers who could afford it. Others would go to the other campuses or CSU or community college for two years. We've created the impression that you have to go to the UC system to be successful."

This is the philosophy of the UK government policy shift this month to triple tuition at elite universities (to $14,500) — relatively high for Europe. Perhaps the results of the UK experiment will allow the UC to consider Connerly’s proposal.