What if the UC system lost state funding?

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San Jose Mercury News (California)

The University of California-Berkeley’s law and business schools were once largely supported by the state. Now they’re just “state-assisted.” In the future, they may be merely state-located.

Faced with a huge state deficit, state Treasurer Bill Lockyer recently suggested the unthinkable: abandoning the entire UC system, a move that would eventually save California an estimated $7 billion a year.

While Lockyer says the concept is simply intended to “generate discussion,” it haunts a system already suffering from a steady erosion of funding.

Increasingly, UC campuses reach deep into the private sector for support. And they are not alone: Across the nation, major public universities are shifting away from taxpayer financing. University of Michigan President James J. Duderstadt calls his campus a “privately supported public university.”

While UC-Berkeley’s Haas Business School and Boalt Law School are public in name, almost three-quarters of their funds already come from tuition and private contributions. UC’s undergraduate campuses still rely on the state for much of their budgets — but the subsidy has plummeted 35 percent since 1990.

Lockyer’s “Looking Beyond The Horizon” report, issued Oct. 1, is his first to envision a more drastic transformation. “Lockyer does not endorse the idea. He is a UC-Berkeley graduate who recognizes the importance of a publicly funded UC to our economy,” said Tom Dresslar of Lockyer’s office. “But we’ve got to roll up our sleeves and get serious about fixing our budget. There are going to be tough choices.”

The report has sent shock waves through the UC system; not even President Robert Dynes saw it coming.

“Until I stop breathing, I will fight that,” he said. “The central heart and soul of the university is its support from the state of California. That has to remain.”

UC — an unparalleled research university system that has driven one of the world’s great knowledge economies — would be dramatically changed by privatization, says a December 2006 study by faculty members of the UC Committee on Planning and Budget.

Tuition would climb, jumping more than 80 percent by 2010-11, to $15,306 a year for undergraduates. Under this scenario, UC could lose affluent students to smaller private colleges, reducing the academic quality of the student body. Low-income students would flock to less expensive schools, reducing diversity. Graduate assistantships would be in shorter supply and faculty workloads would climb. Lucrative research would gain importance over teaching.

The campuses would go their separate ways, the report predicts. The three strongest campuses — Berkeley, Los Angeles and San Diego — have the market power to attract students from around the world. But the other nine campuses might struggle.

“It would alter the UC system beyond recognition,” the faculty report says. But it adds: “This scenario cannot be ruled out.”

So far, UC’s efforts to privatize have been selectively applied to certain parts of the institution, such as:

Higher fees at professional schools

UC’s business, law and medical schools, moving toward greater financial self-sufficiency, say higher tuition is necessary to stay competitive.

At the Haas School of Business, total fees could hit $40,882 by 2010-11. At Boalt Law School, fees could jump from $26,897 this year to $40,906 in 2010-11.

Former U.S. Rep. Tom Campbell, the Bank of America dean of the Haas School of Business, told UC regents that top business schools around the country now charge much more than the University of California. Of students, “it’s reasonable to ask that they pay the market rate,” he said.

Aggressive private fundraising

In the most ambitious campaign in UC-Berkeley’s history, campus officials are seeking to raise more than $2 billion in private donations by 2012. At UCLA, officials call their recent $3 billion fundraising campaign the most successful in the history of higher education.

But while alumni donations to UC are climbing, officials say the university still lags behind competing institutions such as Stanford and Harvard universities.

Greater reliance on corporate research

In a proposed partnership, BP Amoco will build a $500 million biofuel research center at UC-Berkeley, doubling the amount of corporate funding for research on campus. Chevron is already paying for a $25 million, five-year biofuels project at UC-Davis.

“I see privatization happening right now,” said John M. Simpson, consumer advocate for the Foundation for Taxpayer and Consumer Rights in Santa Monica. “It is wrong to have this fundamental shift in what the people in California have believed all these years without a public debate.”

Several public universities in other states already have taken far more sweeping steps toward privatization, hoping to escape the uncertainty of state budget crises.

At the University of Michigan, state support represents only 18 percent of the academic budget — the comparable figure in California is 46 percent — and 11 percent of its total revenue base.

“The idea isn’t as drastic as it may sound,” wrote Lance J. Weislak and Michael LaFaive of the Mackinac Center, a Michigan-based research and educational institute. “And it is not unfair to ask those who benefit directly from earning the degree to bear a greater burden to pay for it.”

Pat Callan, president of the National Center for Public Policy and Higher Education, said: “I think all public universities are talking about it now.” But Callan does foresee drastic changes: “Once you cut the institutions loose, they start serving a different kind of student.”

The University of Michigan has seen some of those changes already. More than half of its freshman class comes from families with six-figure incomes. Forty percent of its entering freshman class in 2006 were non-residents. And enrollment by minorities has fallen.

In California, a 2004 “higher education compact” between UC, the California State University system and Gov. Arnold Schwarzenegger — a pact that created some fiscal stability through a funding formula until 2011 — offers modest annual increases in state support. But critics say it locks in low funding to a system stressed by rising enrollments.

Educational experts say no amount of private support can fully offset the loss in public funds, even as they dwindle.

For UC’s endowment to pay out enough to cover all of its bills, the fund would need to be worth $54 billion — twice the size of Harvard’s and four times the size of Stanford’s. To fund it, every man, woman and child in California would have to contribute about $1,500.

“It will be literally decades, or even a century, before the endowment could grow to a point where it could provide substantial annual support to replace the state,” said Steven A. Olsen, UCLA‘s chief financial officer.

Christopher Newfield, an English professor at UC-Santa Barbara who leads UC’s Committee on Planning and Budget, said extensive privatization would have catastrophic consequences.

Said Newfield: “The numbers are dismal. They simply don’t add up.”
Contact Lisa M. Krieger at [email protected] or (408) 920-5565.

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