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a q&a with chancellor albert carnesale

Illustration by Nick Wiggins

Options to narrow the funding gap

In an Oct. 7 address to Town Hall Los Angeles, a nonprofit group of prominent business and civic leaders who encourage civic participation and dialogue on significant issues, Chancellor Albert Carnesale raised an issue that campus leaders have been grappling with for some time: how to narrow the funding gap between the University of California and comparable private research universities and remain competitive in attracting and retaining the very best faculty and students. UCLA Today editor Cynthia Lee sat down with the chancellor to talk about the magnitude of the problem and what’s at stake for California.

Q: Why did you decide to bring this problem to a public forum for the first time?
A: It is timely to have this discussion now. I want people to understand that California, more so than most other states, relies upon having a world-class public university system. Without the UC campuses, California — with 38 million residents — would have only three research universities, all private, to produce groundbreaking research, to drive the state’s economy and to grow new industries. Secondly, I want the public to know that all of the UC campuses are committed to the dual goals of excellence and access. And thirdly, looking ahead, we see our ability to compete with leading private universities, most of which are on the East Coast, diminishing because the gap between resources available to public universities and those available to private universities is large and growing. The people of California must face this issue: How do we narrow that gap so that UC can continue to serve them in the way they deserve?

Q: How big is this resource gap?
A: Private universities now charge about $30,000 a year in tuition. An entering freshman, a state resident, at UCLA pays $6,585 a year in fees. That individual student’s education is subsidized by the state by about $13,000. So UCLA receives a total of just under $20,000 per student. Comparing that with the $30,000 charged by the top privates shows a gap of about $10,000 a year per student.

Q: What other factors come into play?
A: This funding gap is exacerbated by the large difference in endowments. UCLA has a relatively large endowment for a public university, almost $1.5 billion. In a typical year, that provides a payout of almost $2,000 a year per student. While most of this endowment money is restricted for specific purposes, much of it enriches the educational experience. Stanford, which has half as many students as UCLA, has an endowment of about $10 billion. So Stanford has a payout on the order of $30,000 per student. Harvard has an endowment of $25 billion, which provides about $60,000 per student. This large gap in endowments and in fees puts UC at a very significant disadvantage.

Q: How much has UCLA done to find a solution on its own?
A: We understand that we have to build up our endowment. So we’re working hard on private fund-raising. And donors have been phenomenally generous — UCLA raises more money than any other public university in the country. I recently launched the Ensuring Academic Excellence initiative, which is part of our overall fund-raising efforts. It’s designed to ensure that we sustain UCLA’s momentum, its persistent excellence, by continuing to have the very best students and faculty. We hope to raise $100 million to fund 100 new endowed chairs, and $150 million to fund fellowships and scholarships for students in the UCLA College and in the professional schools. We’ve already raised nearly $45 million toward our $250-million goal.

We understand also that we must be more efficient, and that our business practices must be among the best. We have to be a leader in attracting external funding for research. UCLA received almost $750 million in peer-reviewed grants and contracts for research last year, probably placing us No. 1 in the country, certainly among the top few.

Finally, to help me identify and think through other actions we might take, I have formed a Competitiveness Council — an advisory group of community and industry leaders.

Q: If UC cannot afford to be great, then why not just be good?
A: Being “good” isn’t good enough. The UC system needs to be of a quality second to none. To compete for new industries, the state needs a strong research base and it needs a highly skilled work force made up of people who have attended the very best research universities. It needs opportunities for interaction between industries and the university so that new products can be produced and new leaders can emerge.
Let’s compare California with Massachusetts as an example. California has 38 million people; Massachusetts has just under 7 million. While we have three private research universities — Stanford, Caltech and USC — there are seven in the Boston area alone — Harvard, MIT, Brandeis, Tufts, Northeastern, Boston College and Boston University. In short, Massachusetts has a private research university for every million people while California has one for every 12-13 million.
Fortunately, what saves the day for us is that California has great public research universities — the UC campuses. That helps to explain why the Silicon Valley is here, and why California is the center of biotechnology in the world. If our state is going to remain the center of the next high-tech revolution, UC must continue to be great. Everyone in California has a large stake in the university’s future.

Q: Do the citizens of Los Angeles have a stake in the future of UCLA?
A.: They do. As a major public research university, UCLA is an engine for real-world advances in education, health care, science, commerce, arts, scholarship and community service. It is society’s think tank, essential to progress.

Just consider UCLA’s $6 billion economic impact on greater Los Angeles. We are the 10th largest employer in the region. For every $1 state taxpayers invest in the university, UCLA generates almost $9 in economic activity.

Q: Can’t we make up this resource gap when California comes out of this temporary fiscal slump?
A: We’re talking about a long-term structural problem. If the state wanted to close the gap entirely with state appropriations, it would have to nearly double the amount it provides to UC. That’s not likely to happen — although any increases in state funding would reduce the need for funds from other sources.

To help find a long-term solution to closing the funding gap, I’ve identified five different funding models that are not mutually exclusive. First, as I’ve mentioned, increased state funding for UC would help. Second, we could admit a higher proportion of out-of-state students who would pay nonresident tuition, much higher than state residents pay. This approach has been adopted by the University of Michigan and the University of Virginia, but it’s not very attractive for California, with a much larger population. Our first task must be to educate Californians. Today, more than 90% of UCLA undergraduates are Californians. To have fewer in-state students attend UCLA just so we could admit more out-of-state students who pay a higher tuition would not help meet our state’s needs.

Next, there is privatization. Under this model, business and law schools, for example, would receive no state money; instead, they would charge the same fees as private schools, the market rate. Those fees, by the way, are well over $30,000. This would make it much more difficult to maintain access for low-income families. And such a policy wouldn’t do much to reduce the resource gap because law and business school students constitute less than 5% of our total student population. Moving toward greater self-sufficiency may be required to maintain top-quality business and law schools, so it should be explored, and we are doing that.

Another approach might be for the state to select a few of the UC campuses as “flagships” and fund them at a higher level. But that, too, is far from ideal for California. One of our great sources of strength has been that every UC campus can be a flagship campus. If UC Berkeley had been chosen as a flagship campus from the beginning, then only Berkeley would have been excellent. Consider this year’s Nobel Prizes — two went to faculty at UC Santa Barbara and one to UC Irvine. In our system, every campus can aspire to, and achieve, excellence. Another measure of this overall excellence is membership in the Association of American Universities (AAU) — the top 60 research universities in America. No state has more than two of its public universities as members, except California, which has six.

Finally, there is the higher fee-higher aid model. Under this policy, the university could increase fees, which are now less than a fourth of what a comparable private university charges, and, at the same time, increase financial aid so that access would not be undermined. It would mean that higher income students would pay more than $6,585 a year, but not nearly as much as they would at a private institution. Even if the fee were doubled to $13,000 a year, that’s still less than half of what a family would pay to send their son or daughter to a comparable private university. Access would be maintained because people from low-income families would not have to pay more. And the university would have more money to improve the quality of education.

Q: But would this model place a heavier burden on middle-income families?
A: We would assess the need of each student for financial aid. Currently, financial aid is available to many middle-income families. Upper middle-income families would probably have to pay more, but nobody would pay more than half of what they would pay to private institutions. It would still be an extraordinary bargain, and we would ensure access for lower-income families. If adequate state funding were provided, of course, no fee increases would be required.

Q: Are you then recommending UC charge higher fees?
A: I am not recommending higher fees. What I am saying is that we’ve got to narrow the resource gap to ensure that UC remains among the great universities in the world. We may not yet have substantial problems in competing for the best faculty and students, but the problem is growing. We see trouble on the horizon.

So I hope there will be public discussion and some consensus reached among the people of California, the legislators, the regents and others: Of the options available to us, what’s the best combination to provide both excellence and access?

I believe the people of this state want a great university. Those of us within the university feel the same way. But there is a danger that we will all wake up one morning and find that the UC is no longer great. Then it would take us decades to make things right again. It’s our responsibility to make sure that that doesn’t happen. We must all take the time now to develop a plan of action to ensure that the people of this state continue to enjoy the benefits of their great research university — the University of California.