LOOKING INTO THE UC BUDGET -- Report #8 (e-mail version)
by Charles Schwartz, Department of Physics, University of California
Berkeley, CA 94720. 510-642-4427 December 20, 1993
SUMMARY
The UC administration is preparing a new policy on STUDENT FEES
(tuition) for approval by the Board of Regents next month. The new
plan, available now only in draft form, will revolutionize the
financial, political and social relationships of the University with
the people of California. The UC leaders speak of a new social
compact between the University, the State, and students and their
families. However, it appears to this writer that many of the most
important questions about this plan have not been answered, and for
the University to proceed without first resolving these issues is to
invite a variety of disasters.
Part I of this report concerns the question of financial aid for
needy students, which is supposed to accompany any high-fee model
of higher education. Who will guarantee that adequate financial aid
will be provided and what are the likely socio-political
consequences? Much of this section is made up of quotations from
members of the Board of Regents and their advisors during the past
two months' open discussions of the student fee policy.
Part II concerns a question of accounting: What is the present cost
per student of undergraduate instruction at UC? Following the idea
that UC must be fair in charging students and their families for no
more than what they get, I calculate a cost which is less than
one-half of the amount cited by the UC administration. This issue
has long term consequences which should also be of great concern to
faculty and the research mission of the university.
While this study looks only at the University of California, the
issues raised are also relevant to other states where large public
universities have started down the path toward privatization. I do
not know what steps, if any, those other universities have taken to
avoid the hazards identified here. In any case, it would be unwise
for UC to proceed without first resolving these issues for itself.
In particular, the question of how to guarantee adequate financial
aid for all needy students is not one that can be answered by mere
statements of good intention; some new structural mechanisms will
have to be designed and built into the plans at the outset.
PART I. STUDENT FEES & FINANCIAL AID
The chief reference is: "Preserving Affordable Quality and
Access at the University of California -- a Discussion Document on
Fees and Financial Aid," a draft document from the UC Office of the
President (UCOP), dated October 12, 1993, and presented at the
Regents meetings of October 12 and November 18. Key excerpts follow.
The University's student fee and financial aid policy heretofore
has been guided by a commitment to ensure access for students to
the University under the Statewide Master Plan for Higher
Education. Financial aid has been and must remain the cornerstone
to affordability for low- and middle-income students. Grants,
subsidized loans, and work help students pay the fees they are
charged as well as cover the costs of books, housing, food,
transportation, and other educational expenses. [page 1]
The primary vehicle for achieving access has been to keep fees as
low as possible by providing a substantial subsidy for all
California resident students. For example, in 1991-92, the full
cost of educating a resident student was $12,168. With the
Educational and Registration Fees paid by resident undergraduate
students at $2,274, the average educational subsidy provided to
the University by the State for each student was $9,894. [page 1]
Though annual budget increases of about 7 to 8 percent are needed
over the next few years to stabilize the University's budget
situation and not lose further ground, it is anticipated that the
state will be able to fund increases of only about 3-4 percent
annually, less than half the amount needed. Although finding
funding for the other half is critical, the University has very
few options for filling the gap. ... For the near term, estimates
indicate that fee increases roughly similar to fee increases in
the recent past, or about $600-$650 per year, would cover the gap.
[page 2]
The substantial educational subsidy provided to the University for
students from high-income families may be a luxury of the past; ...
The median income of the parents of University undergraduate
students was $55,000 in 1991-92 with a third of undergraduates
coming from families with parent incomes over $70,000. [pages 2-3]
SUMMARY ... Underlying this debate are the goals of:
1) ensuring access to the quality educational program California
residents have grown to admire and expect from the University
of California;
2) regaining stability in funding for the University in meeting
its mission, at a time of uncertain funding from the State;
and
3) if called upon, rewriting the social compact in which
students and their families, the University, and the State
all share in the responsibility of keeping the University
affordable for all California residents. [page 28]
The draft document from UCOP presents several alternative
policies for setting future student fees at UC; but all of them
yield the same numbers, which are displayed in Table 1, below, along
with numbers from recent and earlier years.
Table 1. History of Student Fees at UC -
average annual fees for resident undergraduates
Each year's increase is shown in parentheses;
the policy of a 10% cap on increases was dropped.
Earlier Period Recent Period Planned Future
1984-85 $1324 1989-90 $1634 ( +80) 1994-95 $4411 (+684)
1985-86 $1326 ( +2) 1990-91 $1820 (+186) 1995-96 $5064 (+653)
1986-87 $1345 ( +19) 1991-92 $2486 (+666) 1996-97 $5727 (+663)
1987-88 $1492 (+147) 1992-93 $3044 (+558) 1997-98 $6393 (+666)
1988-89 $1554 ( +62) 1993-94 $3727 (+683) 1998-99 $7064 (+671)
Historically, student fees at UC were meant to cover services
for students beyond their basic education. Given the State's budget
shortage in recent years, UC has raised fees dramatically - as a
matter of necessity. Now, in the new vision being presented, still
higher fees are seen as a social virtue: the many high-income
families sending their children to UC will no longer be subsidized
by the rest of the state's taxpayers.
This new approach, abandoning the Master Plan commitment to
zero tuition, has received major backing by the California
Postsecondary Education Commission (CPEC). At the Regents' October
12 meeting, CPEC Executive Director Warren Fox summarized their
proposal as follows. [Quotations from individuals are taken from the
official tape recordings of the Regents meetings.]
"Here are the principles that our Commission adopted to do its work
on looking at policies to set undergraduate student charges at
California's public universities. ... [T]he first principle is an
important one: that students and their families will contribute
along with the State for financing college education. ... However,
we feel that the State should always make the major investment
and at no time should individuals or their families make the major
investment in covering the cost of education. ... Undergraduate
charges [at UC] could rise to no more than 40% of the average cost
of instruction."
One obvious problem with this formulation of the new "social
compact" is this: How will that 40% limit be maintained? Given the
continuing economic problems of California and given the political
pressures in Sacramento, it seems inevitable that as the University
comes to rely more and more on student fees (tuition), the Governor
and the Legislature will be even more inclined to reduce their
appropriation to UC. Regent Ward Connerly expressed it this way:
"I think that we have to prepare for the day when the cost ... that
we charge to the consumer for the product, may in fact have to be
what it costs us. That sounds heretical to some extent but I think
that we almost have to prepare for that. And to argue the notion
that the taxpayer should forever pay the majority of that cost seems
to me to be one of those Jurassic Park dinosaurs."
The main concern, of course, is about need-based financial aid.
The University says that it is committed to preserving access for
all academically qualified students, regardless of their economic
circumstances; the word "affordability" is now popular. But many
people are skeptical about whether UC will actually fulfill this
promise.
The UC President's Office provides statistics showing how it
has increased student financial aid, returning a significant portion
of new student fee revenue to assist needy students. They report
that, "Despite rising fees, the percentage of UC freshman from low-
income families has increased over the last three years." Student
leaders, however, continue to present painful evidence of the damage
that higher fees are inflicting and they point out significant
shortcomings in the existing financial aid policies and practices.
Several members of the Legislature have also expressing their
concern:
While fees were doubling from 1990 to 1993, Californians'
personal income was declining. As a result, educational
opportunity has become increasingly limited to the wealthy, and
the promise of the Master Plan for Higher Education has been
abrogated. ... We urge you to withdraw your fee proposals and
begin to work cooperatively with students and the Legislature to
develop comprehensive budget solutions which rely on reform, new
efficiencies and priorities, and reinvestment of public support
rather than closing the doors of opportunity.
[Letter to UC President J. W. Peltason from Assemblymembers
M. Archie-Hudson, R. J. Campbell, H. Solis and J. Bornstein,
dated October 12, 1993]
The Regents' own public discussion about student financial aid
has been remarkable:
Regent Meredith Khachigian: "I see some really potential problems
with this kind of a proposal; and I have to put it in there with
social engineering. And I worry about class warfare, all these
kinds of things that I could see happening ... in the social fabric
of our campuses. ... I am so appalled by some of the social
consequences of some of these proposals."
Regent William Bagley: "We [the Board of Regents] are in the
progressive tax business, like it or not. Some of my colleagues
here abhor progressive taxation. ('Hear, hear.') ... [T]hose that
have higher incomes are going to pay more, those students or
parents, and we are going to give that higher income person's
stipend back to those that don't have it. That's progressive
taxation."
Student Regent Darby Morrisroe: "[A] 'high fee high aid' model will
not work because it overlays itself over a current financial aid
structure which is inadequate. ... In any of these models that are
being proposed I don't see a fundamental look at how financial aid
need is assessed, because that is essentially the problem with
financial aid. ... [T]he federal government has had limited
resources to allocate to financial aid. So...they changed the need
assessment. They became more stringent with their criteria for
financial aid allocation. So that even if the current financial aid
system was fully funded, it wouldn't meet the need of students. ...
And we tend to spend an exceptional amount of our time on student
fee policy without ever significantly addressing financial aid -
except to say, well, the increases we get from revenues will go back,
in a 'return to aid' model. Well, that's good...but that isn't
sufficient because it doesn't address how student need is assessed."
President Jack Peltason: "There is ... strong commitment [to
student aid]. There are all kinds of problems: How much money do we
have available for student aid? and then, Which students do you
distribute it to? ... If you give more to the middle-income, then
you have less to give to the poorest. There are debates about how
to allocate it, ... how to assess need, which need has the highest
priority. ... There are more needy students at the moment and the
need is greater than the dollars. So we are always having to make
some tough decisions."
Provost Walter Massey: "[I]t is often difficult to separate policy
discussions from the implementation of policy... What kind of policy
should the University adopt and pursue? Should we have one of
'affordability' as a model, where we say: those parents and students
who can afford to pay more would pay more and [for] those who cannot
... we would make it affordable through other means? Now, as a
policy we might adopt that and we might find that we can't implement
it simply because the finances aren't there, the structure of the
State wont allow us."
Regent Harold Williams: [This was lost on the tape; so I have
reconstructed it from my notes.] The reality is that financial aid
will not cover all of the needs from increased fees. I think the
result is that the middle class will get hit.
I find it incredible that this body, the Regents of the
University of California, composed of very rich and conservative
people, would embark on a program of wealth redistribution that
follows Karl Marx's utopian vision. And even if they do start out
well in that direction, would the promise be sustainable? Looking
down the road, one can predict many grave troubles: an uproar from
lower-income families as they find financial aid lagging and their
children cut off from higher education; a political backlash from
middle class families who find themselves being squeezed out as the
rich and poor are accommodated; the philosophical (and legal)
question whether the University has legitimate authority to levy
taxes, especially such a class-discriminating tax; and the
intensified stress in the social fabric of our campuses, along class
and racial lines, identified by Regent Khachigian.
The Regents meet at UCLA on January 20-21 to decide on this
policy. If they do not have satisfactory answers to these daunting
questions, who then will be placed at risk?
PART II. THE COST OF INSTRUCTION
Putting aside all those questions of social equity, I now ask:
What is a fair price to ask students (and their families) to pay for
their education at UC? The UC President's Office cites the figure
$12,168 as the full cost of instruction in 1991-92, with the
following explanatory footnote found on page 12 of the draft
document from UCOP.
According to the methodology agreed upon with CPEC, cost of
education is based on instruction-related, per-student revenues
for UC's eight general campuses. Those revenues consist of State
general funds, University general funds, student fee revenues, and
lottery funds. Expenditures for health sciences, teaching
hospitals, organized research, and public services are not
included in the calculation.
I wish to dispute that methodology and that conclusion. My
analysis and computation, presented in detail in the Appendix of
this report, lead to a figure of $5,040 for the annual cost per
student of undergraduate instruction. This is less than half the
amount claimed by UC and means that today's student fees already
far exceed the 40% ceiling proposed by CPEC ! The principal
differences are that I work from actual expenditure data, not
revenue data, and I make a separation between undergraduate
instruction and graduate instruction. This last point of
distinction will be controversial; but I believe it is fundamental
to a fair and honest analysis of the issue.
The University has a three-fold mission: teaching, research and
public service. Everything at the University revolves around the
work of the faculty members, who likewise have a three-fold job:
teaching, research and service. (Service, for faculty, means not
only public service, but also university service and professional
activities.) Faculty members receive a salary which covers all of
these tasks together; and the payment of these salaries has, in the
past, constituted the essential core of the State's support for the
University. While one could, and often did, hear arguments about
the proper balance between teaching and research, the basic
commitment of the State was to support all three missions as an
integrated whole that benefits society at large.
It is now proposed to shift the financial burden for education,
at least partly, onto the individual students who will receive an
education at UC. Thus, that unitary package of financial support
for the University must be taken apart - and this must be done
fairly. As CPEC's Warren Fox stated to the Regents in October:
"Students need to get return on their dollar and they should be able
to see their funds spent directly for instructional purposes; and it
should be called tuition." ...
"The cost of instruction [$12,168] is the actual cost of delivering
the classroom instruction. It doesn't count research and public
service or any of the other things the university does, just
instruction, as opposed to the cost of education, which would
include all of those. We dealt with the percentage cost of
instruction, which is the student paying a fair amount for those
instructional activities directly related to the teaching and
learning process."
My approach follows that of UC and CPEC in separating off
research and public service, and also in separating off the expenses
of the hospitals and medical schools from the general campus
activity. However, they make no distinction between undergraduate
instruction and graduate instruction; and this, I believe, cannot
be sold as fair to those who understand what really goes on in a
"research university" like UC.
According to UC's own statistics, faculty members spend 50% of
their "instructional" time on graduate students and 50% on
undergraduate students; yet graduate students account for only 19%
of all students at UC's eight general campuses. (This does not
count faculty members' "research" time, which is overwhelmingly
devoted to graduate students rather than undergraduates.)
The financial arrangements that UC makes for its graduate
students in PhD programs, preparing them for careers in research,
college teaching, etc., are completely unlike those for the
undergraduates. Teaching Assistantships, Research Assistantships,
tuition waivers, fee remissions, and various fellowships are
provided to recruit the best talent from across the nation and
around the world and to provide, wherever possible, complete
financial support for these budding scientists and scholars.
(Graduate students in the humanities, where there is so little in
the way of outside research money, get substantially less support.)
Graduate students in the professional schools of Medicine, Law and
Business are already targeted for "differential fees."
I am aware that faculty and administrators will deplore my
approach of separating undergraduate instruction from graduate
instruction; and I am aware that many student leaders, who maintain
a commendable solidarity among all students, may also be upset by my
approach. Nevertheless, I think it is essential - in order to be
honest and fair with those in the public who will be asked to pay
the bills - that we calculate the actual cost of undergraduate
instruction alone.
Let me put it this way. If the University should try to charge
undergraduates for more than what they are getting (twice as much,
by my calculations), and perhaps even get away with it for a while -
imagine the consequences when somebody eventually goes to court and
sues the University for fraudulent sales.
The problem that I point out not only affects students and
policymakers; it should concern faculty members as well. Who will
pay for graduate education? is a question almost as dear to the
research-oriented professor as, Who will pay for my research? In
the "good old days" the State paid for the whole package. The new
social compact that the University's leadership speaks about had
better address these questions as well as the question of support
for undergraduate education.
There is a counter-argument to what I have said above: it
points to the elite private universities, where undergraduate
students pay a very large amount of tuition, and this does indeed
subsidize the graduate/research activity of the institution. If
Harvard and Stanford can do that, why not UC? What students
attending the elite private schools get, compared to the top quality
public ones, is largely in the label. Some people will pay a
premium for prestige; I would only question how big the market is
for that inflated product.
If one combines the question of financial aid , raised in
Part I, with the question of the true cost of instruction, raised
here, the potential for disaster in the UC administration's plan
becomes greatly magnified.
There are alternative approaches - see, for example, my earlier
budget reports - but the University's leaders have not yet been
willing to give them significant consideration.
APPENDIX: Calculating the Cost of Undergraduate Instruction
Table 2 presents data on actual expenditures for the various
functions of the university, taken from "The University of
California Financial Report 1992-1993." The ten items are shown
grouped according to the definitions in the Financial Report
[page 3]:
The primary programs are directly related to the three missions of
the University - instruction, research, and public service.
Academic support, teaching hospitals, institutional support, and
operation and maintenance of plant are supporting programs.
Programs providing support for students are student services,
student financial aid, and auxiliary enterprises.
Table 2. Current Funds Expenditures for the year ended June 30,1993
($ in Thousands)
GROUP 1: Instruction (23.7%) $1,668,175
primary Research (18.9%) 1,328,030
programs Public Service (2.2%) 153,677
GROUP 2: Academic Support (9.2%) 645,784
supporting Teaching Hospitals (23.1%) 1,627,666
programs Institutional Support (5.5%) 384,722
Oper.& Maint. of Plant (3.7%) 262,479
GROUP 3: Student Services (3.2%) 225,306
support for Student Financial Aid (4.6%) 322,433
students Auxiliary Enterprises (5.9%) 412,377
TOTAL $7,030,649
Starting with the total Expenditure for Instruction ($1668.2
Million), I subtract the following items: Summer Session = $21.0
Million; University Extension = $142.6 Million; Health Professions
= $598.4 Million; Law Schools = $23.1 Million; and this gives us
the figure for General Campus Expenditure for Instruction = $883.0
Million.
[Further detailed data is gathered from, "UC Campus Financial
Schedules 1992-93".]
Now I ask, What fraction of their work time do UC faculty spend,
on the average, at undergraduate instruction? Data to answer this
question comes from the "University of California Faculty Time-Use
Study 1983-84" and is shown in Table 3.
Table 3. Results from survey of 100% I&R FTE faculty,
excluding health sciences and law
Principal Activity Hours/week
All UC-related Activities 61.3
Instructional Activities 26.0
Research/Creative Activities 23.2
University Service 6.6
Professional Activities/Public Service 5.5
Breakdown of Instructional hours/week:
Lower Div. Upper Div. Graduate
Regularly Scheduled Courses 1.1 2.3 1.8
Supervising Indep./Special Study 0 0.5 2.1
Combine these: Undergraduate = 3.9 Graduate = 3.9
A portion of faculty members' University Service is on
committees dealing with instructional matters; I estimate this to be
roughly 1/3 of the 6.6 hours/week reported above. Adding this to the
26.0 hours/week reported for Instruction, gives a total of 28.2
hours/week, which is 46% of the total reported work week of 61.3
hours. Next, we see from Table 3 that one-half of faculty members'
Instructional hours are spent for undergraduate instruction; thus,
about 23% of the average faculty members' total work time is spent
on undergraduate instruction. Combining this 23% with the figure
$883 Million leads to the annual expenditure: Direct Cost of
Undergraduate Instruction (DCUI) = $203 Million. To get the
Complete Cost we must add appropriate indirect costs contained in
the expenditures under Group 2 (supporting programs) shown in
Table 2.
First, consider the administrative overhead. The full amount
of Institutional Support covers administrative services for all
university activity, which comes to $5.4 Billion if we exclude the
hospitals. The DCUI (at $203 Million) amounts to only 3.8% of this
total activity of the University and so I'll charge only 3.8% of
the expenditure for Institutional Support ($385 Million) as overhead
for undergraduate instruction: $15 Million.
Second, consider Operation & Maintenance of Plant. Taking 3.8%
of this would not be fair, since undergraduate students are so
numerous on campus, albeit packed into classrooms while faculty and
staff have their own offices and laboratories. Examining the several
components of this expenditure - building repair and cleaning,
grounds upkeep, utilities, etc. - and estimating a fair portion of
each to charge for undergraduates' usage, I arrive at an overhead
cost of $55 Million.
Finally, consider Academic Support. General libraries
constitute a major portion of this category, at $139 Million, with
another $50 Million for other instructional facilities that
undergraduates use. I will charge 50% of this cost to undergraduate
instruction, based largely upon available data on library usage:
$95 Million.
This gives us a total of $165 Million indirect cost to be added
to the $203 Million direct cost, for a Total Cost of Undergraduate
Instruction = $368 Million. The number of (full time equivalent)
undergraduate students at UC is 114,386; and thus the current actual
cost of undergraduate instruction at UC = $3,220. per student per
year. This would be the appropriate charge for full payment of
tuition.
We need to consider, in addition to this tuition, fees charged
for Student Services (in Group 3 of Table 2.) Before the current
budget crisis, UC charged students for the total cost of enrollment
services and for a variety of other services which are complementary
to, but not a part of, the instructional program. The average of
those fees charged in 1990-91 was $1,820 and I take this as the
current true cost of Student Services.
Thus, I arrive at a fairly calculated total annual cost for
undergraduate students at UC, tuition plus fees, equal to $5,040.
This is less than half of the $12,168 figure given by UC and CPEC.
Present fees (at $3727 for 1993-94) are already 74% of this total
cost, far exceeding the 40% ceiling proposed by CPEC. Furthermore,
the plan laid out by the UC administration for future increases in
student fees (see Table 1) shows them exceeding 100% of this total
cost by the year 1995 !