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Friday, June 26, 2015

Friday, June 26, 2015
By Joe Kiskis  (UC Davis)

This note makes a few comments on the final UC budget for 2015-2016 and then focuses on points related to the UC Pension Plan (UCRP). To some extent, it updates previous comments here by including changes since then and information that was not available then.

The 2015-16 UC Budget and UCRP

To get good information on the budget, one must read both AB 93 and SB 97. The process this year was a little convoluted. On June 15, the legislature passed AB 93, the Budget Act of 2015. This was the Legislature's version of the budget and was passed on that day so as to meet the constitutional deadline. It was done before the Legislature and Governor had come to agreement. Their agreement was announced the next day. To account for that and other small items in the following days, SB 97 was passed on June 19. It makes many significant amendments to AB 93, including a number relevant to UC. Both AB 93 and SB 97 were signed by the Governor. However the Governor exercised his line item veto authority in a few minor ways that are not relevant to UC. To get complete information, there are, as usual, trailer bills to read. One of those, SB 81, has a few parts relevant to UC---most significantly concerning the Middle Class Scholarship Program.

The main features of the UC budget concerning tuition and the base budget came out as expected and as have been widely reported. However, it's worth noting that the final language on these points is less proscriptive than in the original version and that what is expected to happen in the out years is just that---an expectation that is not mandated in this budget. Briefly, per the Regents decision of May 2015, tuition for California resident students is to remain constant for two more years. Following that, modest increases comparable to the rate of inflation are possible. On the other hand, for non-resident students, tuition will likely increase by 8% in each of the next two years. System-wide Student Services fees (as opposed to tuition) are allowed to go up 5% ($48).  The increase in the 2015-16 UC base budget is the same as the Governor originally proposed, i.e. 4% or $119.5M. The expectation is that 4% increases will continue through 2018-2019.

There was an expectation that the Legislature would augment the Governor's budget with funding for enrollment growth and that the Governor would not line-item veto it. This did not turn out as well as was hoped. The amount is only $25M, and it is contingent on UC adding 5,000 resident undergrads by 2016-17. This is a short timeline, and the amount is far below that needed to educate 5,000 students for one year. On a per student basis, it is also substantially below the average State contribution to the cost of education.

Earlier versions of the budget had limits on nonresident enrollment. Those did not make it into the final budget.

In the trailer bill, the eligibility requirements for the Middle Class Scholarships have been raised and the funding for the program has been decreased.

UC Retirement Plan (UCRP)

As it turned out, there is a large discrepancy between the language related to UCRP in the publicized agreement from the Committee of Two (or equivalently in the Governor's May Revise statement) and that which actually appeared in the final budget product.

The original claim was that there would be a one-time payment of $436M spread over three years ($96M in the first year) to pay off a small fraction of the UCRP unfunded liability. In return the University agreed to make a permanent change to UCRP by adding another tier that would apply to new employees. In this new tier, UCRP eligible salaries were to be capped at the inflation indexed PEPRA/Social Security limit ($117k for the current year) rather than at the IRS limit of $265k currently used by UCRP. Employees in the new tier would have the option of either a defined benefit plan with the new cap in combination with a supplemental defined contribution part or a defined contribution plan with no defined benefit portion. The second option of a straight defined contribution (DC) plan is most troublesome. Fortunately, no language describing such options was incorporated into the budget bills signed by the Governor.

The Governor's May Revise letter to the Legislature suggested budget bill language. This suggested language said only that UC would get a one year addition of $96M in exchange for making UCRP consistent with the PEPRA cap. It said nothing about how that should be done. It made no mention of $436M, no mention of a DC supplement, and certainly no mention of a DC only option. This recommendation was followed, and the language that the Governor suggested is essentially that of the budget bills. However, to drive home the point that there is no larger deal, the amended version of the budget adds:

"This appropriation does not constitute an obligation on behalf of the state to appropriate any additional funds in subsequent years for any costs of the University of California Retirement Plan." (SB 97, p. 96)

Thus neither the Governor nor the Legislature are pressuring the University to introduce a straight DC option. The DC option is something introduced (most likely by UCOP) during discussions in the Committee of Two but done without appropriate consultation within the University. Nevertheless, the Office of the President intends to pursue the possibility of a DC only option. In the discussions that will take place in the coming months, it is worth keeping in mind that a DC option appears to be primarily a priority of UCOP and not of the Legislature or the Governor. Note also that the relative merits of defined contribution verses defined benefit plans were thoroughly, carefully, and widely discussed in the University about six years ago. The conclusion was that the excellence of the University was best served by continuing with UCRP as a defined benefit plan. Thus in 2010, when the President recommended and the Regents endorsed pension reforms, UCRP was preserved as a defined benefit plan.

Posted by Michael Meranze | Comments: 3

Thursday, June 18, 2015

Thursday, June 18, 2015
As you have probably seen, the Governor and the Legislative Leadership have agreed on a final budget bill.  From a funding standpoint, there is little in the new bill regarding UC to change Chris's critical analysis of the Governor's May Revision.  UC is scheduled to receive up to $25M beyond the Governor's original call for a 4 percent general fund increase on condition of a continued tuition freeze.  CSU fared somewhat better.  It will receive approximately $50M over the Governor's May proposal.  It too, though, has a variety of conditions placed on the money.  For UC the key pages of the bill are 105-113 and for CSU 113-117.  I'm going to focus on UC in this post because I am less familiar with the implications for CSU. But I hope that people at CSU will use the comments section to expand the discussion.

There are several key points to make about the total budget package.

First, it includes a one-time payment of $96 million for the UC pension.  But this money is dependent on a dramatic reduction in the benefits of UC's defined benefit pension plan (as was clear from the Regents agreement with the Governor).  After a new system is put into place, the maximum salary that can be counted in a pension calculation for new hires will be approximately $117,000.  The Regents have proposed a supplemental Defined Contribution Plan and have also floated the possibility of allowing new hires to go entirely into a DCP.  If the latter should happen it is possible that the DBP will become unsustainable in any form.

Second, the Legislature was able to get the Governor to agree to an additional $25M above his May proposals.  But this money is contingent on the University enrolling an additional 5000 resident students by the 2016-2017 academic year (107).  There are a couple of things to be said about this situation.  First, as Dan Mitchell pointed out, UC is unlikely to increase numbers in a dramatic fashion for the upcoming year.  That means that these increased numbers will hit with great impact in 2016-2017.  Having been at UCLA when it attempted a dramatic increase in numbers I can say that without proper preparation and expanded faculty and student services the effects are quite serious. Secondly, the Legislature is assuming $5000 of the marginal cost of each new resident student.  This figure is even lower than the LAO calculation that, as I pointed out in an earlier post, would lead to the permanent under-funding of the University. In addition, the money will arrive long after the students have both enrolled and had their presence documented by UCOP.

Sacramento is also insisting that this money, itself inadequate for the simple increase without a lot of supplement, also be used to increase and quicken graduation rates.  Now increasing graduation rates is something that we can all support--but Sacramento appears to be concerned with increasing graduation rates no matter the effect on education.  It wants more students to pass through more quickly with inadequate support--a position that ties in nicely with the Governor's vision that costs can be driven down by pushing students into online courses or reducing requirements.  There is, in all of this, a general disregard for academic expertise and an apparent conviction that quantity is the most important variable.

Although less explicit, it seems as if the Legislature and the Governor are willing to make the University more dependent on non-resident students even as they insist on increasing the number of resident students.  Although the Legislature and the Governor have insisted on a continuation of the tuition freeze for resident students through the 2016-2017 academic years (106), President Napolitano has been empowered to increase tuition for non-resident students up to 8% annually.  Both the Governor and the Legislature have apparently agreed to the assumption that non-resident students can be used to underwrite resident students so that the State can continue its long-standing failure to support higher education in the state.

Thirdly, and more positively, the Budget Bill demands greater administrative and spending transparency (108-109).  The bill directs the University to finally clarify the nature and distribution of the Manager and Senior Professional category (long one of the black holes of administrative transparency), to clarify the financial sources it considers applicable to educational activities, and to provide forecasts of costs and resources through 2018-2019. Although this transparency will not accomplish anything in and of itself, it will allow for a more open discussion of priorities than has been possible in the past.  The bill also demands that the University include state employee salaries in any market calculation for the Senior Management Group.  In effect, Sacramento is challenging the University's insistence that its administrators should be paid more than other public executives. Given the University's recent practice of hiring administrators without prior background as educators it is perhaps not surprising that the Governor and Legislature are now wondering why they should be treated differently than other public administrators.


At this point in time, it is difficult to see how President Napolitano and the Regents efforts to provoke public support for the University were successful.  Nor is it clear that the continued willingness of the University to act as if the Governor is the only player in town makes any sense.  In the end, the University received approximately 25-30M extra dollars compared to what the Governor had promised in previous budgets.  But this additional money comes with some very crucial strings, including a drastic reduction of pension eligibility, agreements to look into reducing graduation requirements, increased auditing of faculty and staff, increased dependence on NRT, and the possibility of even greater state intrusion into university affairs. It is also true that President Napolitano was able to get the Governor to promise a longer-term funding commitment to the University.  But as we learned from Schwarzenegger's "compact," those promises are easy to make and easy to break.  So, the bottom line seems to be minimal increased funding, seriously increased auditing of academic life, continued pressure to sacrifice educational quality to cost cutting, and a commitment to substantial cutbacks in retirement benefits for future employees.  Not a good budget round.

Posted by Michael Meranze | Comments: 0

Wednesday, June 3, 2015

Wednesday, June 3, 2015
by Joe Kiskis


As the Legislature and Governor enter the end game for the 2015-2016 budget, here is a review of provisions related to UC in the Governor’s latest budget proposal—the May revise, which is now being considered by the Legislature.

It appears likely that the final UC budget will have provisions that address access and affordability. What is missing are resources to ensure that the university can maintain quality. It is the hardest to quantify, the weakest politically, and is now the most seriously threatened.

This budget is another demonstration of the truism that the only way to restore access, affordability, and quality is through adequate State investment in public higher education. In spite of strong revenues to the State, the Governor’s budget falls well short of what is needed to reverse the negative trends in recent years. As it happens, it is well within the means of the citizens of the State to restore all of California public higher education to the levels of access, affordability, and quality enjoyed in 2000-2001.

The May revise budget summary starts the UC overview on page 28.

Many aspects of the May revise as they relate to UC are contained in the agreement of the “Committee of Two”  now endorsed by the Regents.

1) Systemwide tuition and fees for California resident students are to remain constant for two more years. Following that, modest increases comparable to the rate of inflation are allowed. On the other hand for non-resident students, tuition will increase by 8% in each of the next two years.

2) Increases in the UC base budget are to be the same as the Governor originally proposed, i.e. 4% per year ($119.5M for 2015-16) but are now continued through 2018-2019. This is much less than what the State should contribute to replace cuts since 2007 and is also substantially less than the needs identified in the UC proposed budget for 2015-2016. (Further detail is here).

The May revise also proposes one time funds of $25M for deferred maintenance and $25M for energy efficiency projects.

3) The May revise contains a tepid and ambiguous recognition of a State obligation to UC pensions. One-time funds of $436M spread over three years (with $96M for 2015-16) are proposed. However, this is Proposition 2 money, which can be used only to reduce the UCRP unfunded liability (about $7.6B in the last annual report). The one-time payment is only modestly significant in the long run and has negligible impact on the University’s operating budget in the near term. This is because the University has not planned to increase the UCRP contribution rate above 8% for most employees and 14% for the employer. Contributions at this rate cover only the current year additional liability and some of the interest on the unfunded liability. i.e. at this point, the regular employer and employee payments are making no contribution to retiring the unfunded liability. Thus in near term years, the Proposition 2 money does not reduce the large negative impact on the UC operating budget from regular UCRP contributions. The Proposition 2 money could be framed as a replacement for or enhancement to UC’s own occasional ad hoc payments to reduce the unfunded liability, but these have been very controversial, and UC has not revealed any plans to make another such payment.

Unfortunately this modest one time contribution comes with permanent strings. In return UC is required to introduce yet another tier to UCRP that would apply to new employees. The new tier will mirror state law for other state employees. In this tier, UCRP eligible salaries are to be capped at the inflation indexed PEPRA/Social Security limit ($117k for the current year) rather than with the IRS limit of $265k currently used by UC. Employees in the new tier will have the option of either a defined benefit plan with the new cap and an add-on defined contribution plan to supplement the defined benefits or a fully defined contribution plan. It is this second option that is particularly troubling.

The relative merits of defined contribution and defined benefit plans were thoroughly evaluated and debated during the extended review that led to the 2010 reforms of the UCRP. The conclusion was that a defined benefit plan is the more advantageous option for both the University as an employer and for its employees.

The main concern is not so much that UC has cut a deal on this issue but rather that it has made such a poor deal. For very modest one-time money, it has agreed to make permanent changes to UCRP including offering a completely defined contribution option that will put at risk the whole of the defined benefit plan. (Chris Newfield has previously made similar comments.) In addition the closed process by which this agreement between the Governor and the President was reached has undermined shared governance and collective bargaining.

4) UCOP has stated that the Governor has agreed not to veto additional appropriations for UC that come out of the legislative process. The University is asking legislators for additional funds to increase California resident enrollment.

5) There are several areas in which the President has committed UC to the implementation of additional efficiencies. These include transfers, time-to-degree, advising, and use of technology. Some of these Presidential promises relate to topics that are squarely within the authority of the Academic Senate, and all of them would normally be addressed through shared governance.

You can find more information on CUCFA's activities here

Posted by Michael Meranze | Comments: 2

Friday, May 15, 2015

Friday, May 15, 2015
I'm sorry to rain on the parade, but even though the state continues to recover, UC does not.

In November 2014, Gov. Brown offered UC a 4 percent increase in state funding, or $119.5 million.  The UC Regents countered with their famous 5 percent tuition increase, which would have added another $131 million (not counting financial aid revenue from the state).  That might sound like a lot of new revenue, but it isn't. Were both pieces in place, UC would be getting about half of the16 percent annual increase it had estimated it needs for several years running to recover from the Schwarzenegger and the Brown cuts. See my November post on the Regents meeting for context and for UCOP's chart on the subject.

There are various ways to describe the problem: it   is a $1.5 billion structural deficit (2011 values) or it is the $1 billion in cuts since 2008 that CFO Brostrom uses in public statements. A third way is even more ominous: the last Independent Audit Report of UC's finances had UC losing $5.7 billion on operations in FY2013 and $4.5 billion in FY2014 (page 10).  These losses were partially offset by non operating gains (investment returns is the largest piece). Even so, the shortfall was $1.0 billion in 2014.

The Governor has again offered UC the same state increase and no more. He has added a compact-like agreement to do this for four years in a row.  At the appearance of a new headwind he can abandon this commitment as Gov. Schwarzenegger abandoned his, but more to the point is that this is a minimal increase that would likely have emerged from the normal budgeting process.  UC has agreed to freeze tuition for another 2 years, so that increment is lost. In 2017-18, UC can request a tuition increase, but one to be tied to an inflation rate that is likely to remain well under the 5 percent UC proposed. 

In other words, UCOP has agreed to several more years of austerity and shortfalls.  This will keep the deficit in place and, as far as I can tell, sustain annual operating losses.  

Students will be happy they will not be paying more. They will not be happy that they will still be getting less.  Educational quality became a clear student issue last fall. But the state's likely political calculation is that cost is still more important than quality, and that students will also take deal.

One possible compensation for bad operating budgets would be a structural fix.   Here we arrive at the pension announcement.  This Democratic administration has taken to describing UC's pension liability as both a gap to be filled and an affront to state budgeting.  It is not just a budgetary problem in this narrative but a moral failing on UC's part. UCOP wanted the state to start paying the employer's share of the pension as it had in the past, and as it does for Cal State. The state's refusal to do this was one reason why the restart of the contributions was delayed. 

The state continues to refuse annual contributions. What it has now offered instead is a one-time payment of $436 million staggered over three years. In exchange, UC is to tier its pension again by adding a Defined Contribution plan for new employees and capping the Defined Benefit pension at the state employee level of $117, 020. (See Dan Mitchell's rundown here.)

In budget negotiations, it is always a bad idea to make a permanent change in exchange for a one-time payment, and this one is no exception.  In addition, the amount received is very small: $145.33 million per year for three years, while UCRP, the pension fund, has a $73 billion net position for pension payments, which is up nearly $10 billion from the previous year, and paid out nearly $4 billion in benefits last year  (page 17).  Why would you restructure your pension, which your employees dearly love, in exchange for 3.6 percent of your annual pension expense, and for just three years?  

UCOP has already handed UC employees an 8 percent pay cut in the form of restarted contributions, and UC operating funds have been squeezed to do the same--with very good results for pension solvency.  So what is the real purpose here?  Perhaps the purpose is to convert UC's pension into a 403(b) over time, and that UCOP wants this as well. I don't know this, but I can't explain why UCOP would take this deal when the pension is actually on the mend.

I can see why the state would do it. It gets a chunk of UC operating expenses off its budget. State politicians can also divide up the UC employee body.  The Academic Senate already cooperated in one tiering of the current pension for ladder faculty; most unionized employees voted to keep younger employees with them in one tier while paying an additional percent of their income to help the fund.  Represented staff generally make less than the $117k pension limit, will thus be less affected by the cap, and have resented high executive salaries.  Thus the state may face little UC employee opposition overall.  

Ladder faculty, senior managers, and Management and Senior Professionals will be seriously affected. The cap would make faculty retention harder: in most disciplines, the cap will kick in at mid-career when the most visible faculty are most liable to be recruited away, and a capped pension will make it that much easier for competitors to beat UC's best offer.   (In some disciplines, assistant professors will start at or above the cap.) UC campuses have long been starved for internal funding for non-sponsored research, academic programming, and new teaching initiatives, but have been able to offer retirement security in the age of academic adjuncting and the "disposable employee."  As retirement benefits are cut and/or destabilized, faculty will lose the one clearly superior thing about working at UC.   

Jerry Brown has long been inserting himself into the middle of UC educational policy, most obviously with his campaign to convert some percentage of UC courses to online. This current deal sets the first actual quota for new students: one third of them must be transfer students from community colleges.  Listen to the clips of the governor and his budget director that Prof. Mitchell has posted.  They offer a good representation of executive branch aggressiveness, and also feature Gov. Brown saying that he wants UC's lower division to shrink.  

This idea is equally bad for students and for the University.  Resident undergraduates who actually want to go to a four-year university will be squeezed between non-resident applications who pay 3 times more and community college students who have seats set aside for them.  In addition, they will lose the lower division courses that form part of the integrated curriculum for the major they will eventually complete.  Putting the first half of college into some other institution's hands will make coherent sequencing and skills accumulation that much harder.  On their side, campuses have a budgetary ecosystem that a shrunken lower division will damage.  Lower division enrollments cross-subsidize graduate education, sponsored research, and student services, among other things, and provide graduates with teaching opportunities.  Shrinking lower division enrollments will shrink funds that support UC's status as a research university.
We'll have more to say about all this during the Regents meet next week and as the plan unfolds. But my main impression today is that this is another step in the state's half-unconscious plan called, "the UC reversion to the mean."  UC was for decades a spectacular, standout place.   It now seems slated to follow California's K-12 system down the national rankings--or would do were other states not busily pushing the rankings collectively down by slashing their university systems too.  

The higher community needs to say, if our senior managers will not, that all of these budget economies are false. Saving money as Sacramento would like simply reduces the quality and the quantity of the intellectual and human capital that UC can produce.  The economist Walter McMahon offers the most comprehensive quantification that includes the non-market and social benefits of higher ed. He shows they are together twice as large as the private, market benefits.  And yet the state, led by Jerry Brown, is trying to fund UC only for the latter, in which it is a three-year skills training service that starves both higher order capabilities and research. If this carries on, massive public benefits will be lost. 

In addition, the quantitatively larger portion of the benefits of higher education, these indirect and non market benefits, consist of deep, complex capabilities like powers of critical thinking and a capacity for democratic deliberation.  These are often generated by liberal arts and sciences disciplines that form the campus core. They depend almost entirely on state funds and tuition.  UC is now starving the core but sustaining the periphery, particularly the medical centers where so much of the administrative growth, pension liability, and high-end salaries have accrued.  One good feature of UC having lost two of its national laboratories to a private limited-liability corporation during the Bush years was that the federal government reimburses UC for pension costs at Lawrence Livermore and Los Alamos National Laboratories.  It may be time for a similar spin-off of the medical centers.  

I think that would be too bad, personally--medical research and practice are obviously crucial academic and public services.  Unfortunately, this latest poverty deal makes the internal competition for dwindling resources even worse, and the campus core is not protected.

Photo credit: Onbeyond, LLC, 2003.  Sample public campaign ad for UC, declined by UCOP
Posted by Chris Newfield | Comments: 11

Wednesday, May 13, 2015

Wednesday, May 13, 2015
By Stanton A. Glantz, Professor of Medicine, UCSF

Chris here: This piece was written for a daily newspaper. There would be a much better public discussion, or what we used to call in the fifth grade "a fair fight," if it and similar piece would actually appear in one of them. 

Once, California had abundant water and few recognized the challenge of global warming.  . Governor Brown, recognizing that it is impossible to simply roll back the clock on these problems, is leading California to confront this changed reality  with enormous efforts that have uncertain outcomes. But there is one problem in which the governor could roll back the clock to when California worked better: higher education.

Once, California’s three sector system of higher education – its Community Colleges, California State University, and the University of California – formed a high quality integrated system of accessible opportunity in which any California student could find an appropriate seat to advance their dreams.  California had the best higher education system in the world, while it cost the state less, per student, than other states spent on higher education. And the system’s graduates built California.

Now, after years of budget cuts and privatization, students are paying more for less.  The combination of high costs, increasing out-of-state students, and muddled Legislative policy is forcing students out of UC into CSU and the Community Colleges, which are, in turn, forcing the Community Colleges’ traditional students in to for-profit “colleges” that cost taxpayers billions and leave students with nothing but debt. 

Unlike the drought and global warming, we could roll back the clock and solve this problem overnight if Governor Brown provided the leadership to do it. 

Governor Brown appropriately has recognized that high tuition is a problem, but his response is actually making the problem worse.  He has started his Multi-Year Stable Funding Plan at the depths of the Great Recession when the schools were already terribly wounded. Then he has promised state funding increases for UC that are so small that when they are combined with tuition freezes they are actually further cuts, relative to inflation.  Rather than gradually rebuilding California higher education, this plan is a guaranteed slow bleeding to death of California’s public higher education systems.

Rather than exacerbate the problems, Governor Brown should press the “reset” button on all of California higher education and restore what California had in 2000-1, the last time that our higher education system was healthy. 

·       Return fees to 2000 levels (adjusted for inflation), for example cutting from $13,200 to $5,300 at UC
·       Return state funding per student to where it was
·       Fund seats for the thousands of California students who have been pushed out of the system
·       Roll out-of-state UC admissions back to where they were (a 2/3 cut)
·       Roll back spending on administration to where it was before privatization stated (which would be an 8% cut in total cost of UC’s senior leadership)

Doing so would restore quality, affordability and opportunity to California’s students, wipe out almost all new student debt, and stop forcing students out of the community colleges into predatory private schools. 

Pushing the reset button is affordable.   If done as an income tax surcharge, it would cost half of California’s families less than $31 a year and 40% of them under $10 a year.  (And it would only cost millionaires $5000.)   

A coalition of stakeholder organizations representing students and employees across all three systems has come together to press not only for full funding but also for a re-commitment to the California Master Plan for Higher Education. Reclaim California Higher Education
(www.reclaimcahighered.org/) advocates for a return to the vision of higher education affordability, accessibility, and quality for all Californians.

This spring, its members are talking to legislators across the state, urging them to restore adequate state funding to higher education, starting with the pending 2015-16 state budget. Now is the time to implement both increased state investment and institutional reforms.  As the group stated in a letter to Gov. Brown in early March, “Tuition and administrative costs are skyrocketing, while enrollment of in-state students is not keeping pace with the needs of our economy. Our institutions of higher learning should, once again, be engines of economic growth and good jobs in our communities.”

Restoring the promise of California higher education is something that we can and should do.  And, unlike the drought and global warming, it is something we can accomplish right now.

Stanton A. Glantz, PhD, is Professor of Medicine and American Legacy Foundation Distinguished Professor of Tobacco Control at UCSF, vice president of the Council of UC Faculty Associations, and past chair of the UC Systemwide Committee on Planning and Budget
Posted by Chris Newfield | Comments: 1

Friday, May 8, 2015

Friday, May 8, 2015
Labour had a bad night in the UK's parliamentary elections, but it was not a victory for the Conservatives' core policy of permanent public sector austerity.  Scotland gave the Scottish Nationalist Party (SNP) 56 of 59 Scottish seats in Parliament, a gain of 50 overnight, thus declaring independence without leaving the union. The SNP is among other things dead set against London austerity, as you can hear in Mhairi Black's speech celebrating her victory over Scottish Labour lion Douglas Alexander, one of the architects of Labour's failed national campaign. Scotland punished Labour for aligning with the Tories against the independence referendum.  The UK punished Labour for aligning with the Tories for austerity, finding their Austerity Lite brand a muddled non-alternative to Cameron and Osborne.

On higher ed, Labour's Ed Miliband had promised to roll back one part of the Conservative university revolution (if you're playing catch-up, one primer is my LARB review of Andrew McGettigan's important book) by reducing the fee cap back from 9000 to 6000 pounds per year. But they were not clear about how the gap would be filled or how and above all why universities should be funded in a non-Tory manner.

There has been talk of raising the fee cap to 11,500 pounds, also based on no actual funding model or meaningful principles of the university's private and public benefits.  That may now come to pass, with even higher fees than that discussed for Oxford and Cambridge.  There is no mandate in these results for even higher fees, and the Liberal Democrat coalition MP most responsible for enabling the fee hike, Vince Cable, lost his seat last night.  But voters are returning a Conservative party to power whose budget assumptions will force massive cuts onto unprotected government sectors, including remaining direct university funding, the student loans and grants budget, and also research, which has so far been protected.

We've seen this movie before.  One explanation for this repeated ending is that the Democrats & Labour are also now neoliberals, basically wet Tories, so why not vote for the real thing?  The base stays home unless it has a meaningful anti-austerity, pro-labor alternative, as they did in Scotland's SNP, in which case they turn out to vote passionately for anti-neoliberalism (read Richard Seymour today and predicting Labour defeat last year).

I see Dem/Labour neoliberalism more as an effect than a cause -- as an effect of their intellectual weakness more than of strong conversion to market Thatcherism.    Even though they mostly don't think the corporate and financial world produces good social outcomes, and even though voters always identify them with the public sector, Dems & Labour have for over thirty years been moving towards their opposition and away from their base.  Some of this is cowardice, intimidation, and greed, an obvious desire to stop fighting and join the wealthy and successful upper end of society, but much of it is intellectual confusion about the public sector's nonmarket benefits. After decades of head blows from the Friedman-Hayek-Mt Perelin army of market warriors, the Anglo-American center left can no longer explain, much passionately advocate, the great social processes they used to build in the 20th century.  They consent to self-belittling terms like "safety net" to describe public goods.  They have been the Great Enablers of the Republican marketization of society without appearing to voter as the movement's leaders and winners but as its reluctant gofers.  They also haven't led a new visionary embrace of  public goods that are both essential to progress and in fact popular with most people.  Mr. Miliband managed neither to break with nor continue this New Labour tradition, expanding the vacuum in public good explanations on which labor depends.

The University is a target character in this endless drama of center-left abdication.  In imposing their public funding cuts and tripled fee cap, Cameron's Tories simply negated the nonmarket private benefits and the social benefits of having universities.  The tragedy of that easy victory was how unnecessary it was on neoclassical economic grounds.  Mainstream economists have shown that the private market value of university is only about one-third of the university's total value to society.  I'm referring in particular to the comprehensive work of Walter W. McMahon, who identifies a total of six types of benefits - private market benefits, private nonmarket benefits, and social benefits, with each of these having direct and indirect forms.   Policy discourse in the US and UK  has focused on the university wage premium while treating all indirect, nonmarket, and social value as nebulous secondary effects, thus trivializing everything from better individual health to an increased aggregate capacity for scientific invention, the rule of law, artistic expression, and pretty much everything else about daily life that people like.

Trivializing society has of course been a highly successful core project of the political Right.   That doesn't change the possibility of showing  that most of the total value of education is collective, based on network effects (I'm smarter because my neighbor is smarter and also because an unknown Scottish villager became smarter 30 years ago, with endless ripples outward and everywhere).  All these spillovers, externalities and indirect effects through multiple variables, though they seem beyond the grasp of current political rationality, are the deep sources of real progress.  And yet we don't need to assert this as a quasi-Hegelian or anti-neoliberal abstraction: Prof. McMahon calculated that nonmarket private benefits plus social benefits (of indirect as well as direct types) form 2/3rd of a quantifiable total of educational benefits (244 et passim).  I'm not saying that quantification captures the main value of  higher education, just that Democrat and Labour policy people never use existing mainline research to counter a privatization strategy that reduces total university benefits by grossly exaggerating the private market piece.

The same goes for all the talk of the knowledge economy. Here's a concept that the Left could try harder to redefine for the sake of a just and egalitarian society--the "cognitive capitalism" folks can't do all the work by themselves.  It's also badly done by the center and Right.  The Tory government supposedly cares about human capital, and yet it has let research funding stay flat or fall in real terms, has found no money for moonshots at major challenges where the UK might lead, and had cut the enrollment funding that expands access outside the upper reaches of society that already have it. In the UK, public funding for instruction, the "teaching grant,"  has fallen from 22 percent to "less than 9 % of total university income."  I'm quoting a report recent posted by the Higher Education Funding Council for England (HEFCE), "The sustainability of learning and teaching in higher education in England," which concluded rather bluntly that with the Tories there isn't any.

When the report's authors adjusted budget figures to "cover the long-run or full economic costs of activities," it found a deficit of 3.8 percent of the sectors expenditures in 2012-13 (p 17).  Many UK university leaders had supported the Conservative funding changes because of the obvious cash-flow attraction of tripling fees virtually overnight, after decades of what Stefan Collini has called expansion on the cheap, in which per-student funding actually declined.  This report shows just how temporary that victory was.  It rejects the idea that the sector can grow its way out of this annual deficit. This is because its mode of growth is what is causing the deficit in the first place.

I've called this the "price of privatization," and this HEFCE report is a catalog of its various forms. Competing for overseas students and research grants will increase costs of operation "with limited scope to control this"; higher fees will create higher student expectations for both learning and faculty attention and thus raise costs; less prominent universities, rather than focusing on quality educational services for their type of students with stable teaching grants, will compete and fail to increase their revenues; universities will respond to incentives both to overbuild facilities and skim on maintaining them; universities will respond to incentives to underinvest in their workforce.  The report also confirms that UK research loses the typical university about 25 pence on the pound (these are similar to U.S. indirect cost shortfalls, as I've often noted), which means that universities must invest in research for the sake of their market position, which they cant afford unless they cut corners in areas where they already underinvest.

Clearly the university sector was stronger and of more value to society when it stood apart from commercial markets. But Labour lacked the theory (and not just the will) to make the public goods case for continuing this.  This allowed Conservatives to use claims of solvency and customer service to pry open the sector for the sake of business.  And it will allow them, in their victory, to expand the effects of privatization that the Manchester Capitalism group traced to the decades-old Conservative party project--underinvesting in infrastructure, squeezing suppliers, including their own professors (e.g. Warwick's TeachHigher), and "confusion marketing" to the global student body.  The HEFCE report confirms that the Tories have already driven average UK graduate debt to £44,000.  They will be tempted to solve fiscal problems of their own making by raising fees even further.

It's possible that a party that hadn''t sold higher ed to giant vendors while multiplying student debt would attract voters as the SNP did.  I doubt it.  The university hasn't created a public base of support for what it really does, which isn't job training and direct wage maximization.  We do have a huge, diffuse constellation of supporters and fans of higher education, but they exist in one-on-one conversations, in personal experiences on campuses, in moments of insight and in memories of change. The way we go about it, the process of abstracting that into a mass politics, damages the experience and makes it harder to vote for.

I was thinking about this while listening to the first segment of an Ira Glass show called "The Incredible Rarity of Changing Your Mind."  Something much like the Labour rout happened in California in 2008, when a gay marriage ban that everyone thought would lose wound up winning instead.  A consultant was called in, who had the bright idea of doing something they never do, which is going back to the neighborhoods where they "got crushed" and talking to people about why they voted against gay marriage.

They at first thought they'd talk to people about values and principles, and try to flip them by appealing to the golden rule and so on--although research shows people flipped like this almost always flip back in a matter of days.  Gradually they found something that worked much better. That was talking to people about themselves, without a script, letting one thing lead to another, and becoming as personal and as concrete as possible.  The recordings of a couple of the conversations are amazing.  And they quite often actually changed people's minds. Even more amazingly, they didn't change their minds back.  (Some of the research is here.)  The canvasser had to be concrete, and personal, and also had to be the kind of person who was affected by the decision.  If the subject was gay marriage, the canvasser had to be gay, and disclose this.  The moment of change may have happened when the voter could think, "how I vote makes a difference in this person's life."

The canvassers took these results to political consultants.  They had no interest. "These can't scale. We can't afford to do this.  We don't have fifty thousand people to talk personally to five hundred thousand voters."  No kidding--we can't afford it. And yet we have no choice but to do it.  People hate how politicians (don't) talk to them--the familiar slogans but more importantly the generic impersonality. Mr. Miliband went down because he was one of them--he's no different, so why bother?  Political parties will have to organize face to face and door to door--like the SNP--if they want to win.  And the same is true of universities.  We need to do with the public what we do in class, which is the personal effort to change people's minds.

Posted by Chris Newfield | Comments: 6

Thursday, April 30, 2015

Thursday, April 30, 2015
I've been buried in final book manuscript revisions, and have been noticing that I'm increasingly using the term "management" rather than "administration" in my analyses of university governance.  Part of the reason is that my employer, the University of California, uses Senior Management Group as a formal employment classification.  But it's also because the friendlier aspects of the term "administration" seem decreasingly part of everyday academic life.   Friendliness was administration as support structure, as collaborator, as partner, as the entity that did not take orders from obnoxious egocentric faculty prima donnas the way that frontline staff often had to do, but that accepted balanced power relations  and a certain mutual respect that could make decisions move relatively quickly and equitably.  It would avoid command and control of the kind that prevailed in the army and in most corporations, where executive authority consisted of direct rule over subordinates.

Of course I idealize the university as a bastion of mutual consent.  The AAUP and other organizations on the ground had to struggle to maintain some balance of power between academic and non-academic personnel.  Financial control and "decision rights' were formally top down: check the many powers of the UC president as one example. But for decades if not centuries the university stayed relatively close to a kind of collegium, to use Jim Sleeper's preferred term, in which it was the embodiment of educational practices that rested on the accumulated knowledge of its faculty, that were expressed in teaching, research, and public service with students, staff, and the larger public, and that required meaningful self-governance to be effective.  For these practices to be really good, to be meaningful, they had to be governed by the knowledgeable ones, the people who were inside and enacting the day-to-day practices.  This was not a mystical quasi-religious doctrine but the foundation of professional expertise as it allowed almost any kind of complex skill, white-collar and blue-collar alike.  Even if the senior administrators came from the faculty, they were expected to take seriously and not lightly overturn the judgements of active faculty whose human capital was of a newer vintage, to use the term of an education economist like Walter McMahon.   The model tried to make unilateral authority very rare.

But like many of us, I am now often using the term academic management because that unilateral authority has become so common. It is the rule in the UK university now, and to an extent that would surprise many Americans. It is increasingly common in the US.  The most famous recent case was the rescinding of the hire of Steven Salaita at the University of Illinois at Urbana-Champaign. The AAUP has released its report on that case, which sweepingly rejects the manner in which administrative authority was used.  It argues that that sort of managerial power is not compatible with academic freedom and established professional practices.

We've just heard about another kind of case at another University of Illinois campus--UI Chicago.  Here senior administrators rescinded hires in innovative cluster programs without faculty consultation, and in areas of special interest to that campus's special student population.  A number of faculty have detailed their grievances with the process and decision, and we've posted their letter with signatures.  It's an interesting local issue with national resonance.
Posted by Chris Newfield | Comments: 1

Monday, April 27, 2015

Monday, April 27, 2015
The big story in Higher Education this year has been the threat of massive budget cuts.  From Wisconsin to Louisiana, from Kansas to Arizona, and from Maine to North Carolina, state governors and legislators have proposed or enacted cuts to public colleges and universities. Although the outcome of this year's budget struggles remain uncertain, it does seem clear that California is not going to impose new cuts. Instead we seem to be battling over the size of small state funding increases.

That contrast between California and other states might appear to be grounds for confidence in the future.  But that would be premature.  Although the state has increased funding over the last several years and is proposing a small increment this year--it is important to recognize not only that these increases do not compensate for the years of cutbacks but that they help to solidify a strategy of permanent austerity budgeting.

One way to see this point is to look at the recent Legislative Analyst's report on "enrollment funding" for UC.  The main point of the report is to call for the Governor and Legislature to reinstate "enrollment funding" (i.e. to tie state funding to specific enrollment targets for the University).  Now I should say that I have no problem with the idea of enrollment funding.  Both the Governor and UC have done away with it (the Governor I suspect because he doesn't want to be obligated to increase funding with enrollment and UCOP because it allows them greater flexibility should they want to restrict enrollment without losing state funds).

If made correctly, there are good arguments for a greater linkage to tie funding to enrollment and to ensure that funding goes to support that enrollment (for instance ensuring that a new permanent faculty FTE is hired for every 19 additional students as is assumed in the financial calculations). (4) But the way that the LAO seeks to organize enrollment funding is less defensible and also revealing.

The logic of enrollment funding ties increase state support to the marginal costs of additional students.  The LAO calculates the marginal cost at $9244 for general campus students (UC's is slightly higher but I am going to use the LAO's). (8)  The LAO recommends setting the present year as the baseline for enrollment--which would also lock in the per student funding as it now exists as a baseline.

They propose that present enrollment be considered the baseline because it would avoid a conflict over whether funding should go for increased enrollment or to answer UC's claim that there are significant numbers of unfunded students.  But here is where the problem lies. Instead of providing a way to address the conflict over whether or not the state is fully funding students, the LAO simply eliminates the question by refusing to engage with it.  And that has serious implications.

The easiest way to do see these implications is to accept the LAO cost logic and then look backwards over the last decade and one half.  To be sure this means that all of what follows are estimates--but I think that the general picture is clear.

In 2001-2002 UC received $3,279,000,000 from the General Fund.  In the fall of 2001 there were 167,914 resident students enrolled on the general campuses.  In the fall of 2013 (the last year that I have good numbers for) there were 196,917 resident students enrolled on the general campuses.  That increase of 29,742  should have led--given the LAO's calculations of marginal costs to a funding increase of approximately $275M from the state (and this is without additional costs for health system students).  Put another way, the 2013-2014 UC General Fund support would have been $3,560,000,000. Instead it was $2,884,456,000.   The Governor's proposed General Fund contribution for 2015-2016 is $3,106,138.

The numbers, although approximate, are clear.  The LAO's proposal on enrollment funding would lock UC into a permanent structure of state austerity.  Although the state does pick up some of these losses through Cal Grants they do not recover all--nor do they even begin to backfill the long-standing under-funding of the University.  Students, staff, and faculty have been forced to assume the costs of this austerity--whether in terms of higher tuition, larger classes, or increased workloads.  By all means have the state engage in enrollment funding. But also have the state fund that enrollment at an adequate level, and allow it to rise as costs and educational needs change.

Posted by Michael Meranze | Comments: 5