UC needs a state compact
BY WERNER Z. HIRSCH AND
DANIEL J.B. MITCHELL
California over the years has had many fiscal crises that have
forced cuts in funding for various services. One of these programs
is higher education, including the University of California. Since
midyear 2002-03, UC’s cuts during this current budget crisis
have amounted to $484 million. Contingent plans are under way to
prepare for a cut of as much as 20% in state funding. These cuts
come on top of the continuous erosion of the state’s contribution
to the UC budget — from 58% in 1959-60 to 20% today. Although
they support a dwindling proportion of the overall budget, state
funds are particularly important as the major support of UC’s
teaching and degree programs.
In the early 1990s, funding cuts were offset by offering faculty
and staff generous voluntary early-retirement packages. These retirement
incentives were financed by a then-overfunded UC pension system.
Since more than a fifth of faculty and staff availed themselves
of the offer, significant salary savings occurred that helped offset
state funding losses. Today, in the absence of pension overfunding,
another across-the-board early retirement incentive is much less
likely. A new solution must be found. So far, that solution has
been to raise fees to make up for funding losses, pursuant to directives
from the state. This mandate, in conjunction with UC’s constitutional
autonomy, has opened the door to much greater reliance on student
fees — “tuition” under another name — than
in the past.
The challenge now is to develop a policy that will harmonize future
state funding cuts with tuition/fee increases. Clearly, such increases
will come disproportionately from out-of-state students and students
in graduate professional programs. While a permanent compact between
UC and the state would be highly desirable, it is made virtually
impossible by term limits. Thus, the funding cut/fee increase process
has been ad hoc up to this point.
Even with term limits, however, a compact for up to eight years
is possible since the governor and legislators may serve for up
to that duration. To facilitate agreement on such a compact —
and to assure its implementation — decisive help must be sought
from such special-interest groups as business and organized labor.
All of them have a compelling interest in UC educating the largest
possible number of eligible students and in furthering world-class
research, so essential to a prosperous California. Within the Legislature,
important groupings such as the Latino caucus must be assured that
UC will not become an exclusive preserve of students from upper-income
families.
A compact with the state would enumerate broad principles focused
on admissions and student aid. In essence, it would provide that
eligible students within the tradition of the Master Plan for Higher
Education would be able to enter UC regardless of family means.
In exchange for meeting its commitment concerning student admissions,
UC would receive autonomy from the state regarding tuition/fee decisions
and would not be subject to state micro-management. The state would
be obligated to provide advance notice, say of two years, for any
major budget cuts. Such advance notice would allow UC, as well as
students and their families, to prepare for offsetting tuition/fee
increases. If the state were unable to provide such notice, UC would
be free to cut programs or raise tuition/fees outside the compact
to balance its budget.
There is now general consensus that state budgetary policy was
imprudent in the 1990s, contributing to today’s fiscal crisis
and the political turmoil it engendered. It is hoped that lessons
have been learned and that through such devices as the building
of a rainy day fund, the state will avoid future crises of the current
magnitude. However, for UC to remain the preeminent American public
university, it must move toward a compact with the state that will
allow it to pursue its core academic mission.
Hirsch is professor emeritus of economics and Mitchell
is Ho-su Wu Professor in the Anderson School and the School of Public
Policy and Social Research.
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