>> This series is available on the Internet at http://socrates.berkeley.edu/~schwrtz
 

For several months the Governor has been warning that a severe drop in tax revenues will force severe cuts in the budgets for all public agencies in California, estimated at perhaps 15% for the next fiscal year. At the October 17 meeting of the Board of Regents, President Richard Atkinson introduced this issue and set the ideological tone for the discussion,

"As we consider these alternatives [for addressing budgetary shortfalls], our highest priority will be to maintain the quality of the University."

At the regents' November 15 session, UC's Budget Director Larry Hershman listed five "Options for Possible Budget Cuts of up to 15% ($475 Million)" in the 2002-03 Budget, as follows:

• Limit salary increases for faculty and staff.
• Defer State support for summer instruction ...
• Increase student fees ...
• Reduce entering class size for freshmen and transfer students so that enrollment levels are sized to the budget. This will maintain the student-faculty ratio at its current level and protect quality.
• Implement targeted cuts for ... [some new programs].

In this paper I shall discuss the fourth item on this list - enrollment caps. When I first heard the suggestion of cutting off the enrollment of new students to match cuts in the state budget to the University, I thought that was a terrible idea. What some regents viewed as a step necessary to preserve "the quality of the University" would doubtless appear to some other Californians as a discriminatory blow - especially those families whose aspiring students get the UC door shut in their faces. I thought such a move would sit especially badly with the growing hispanic population of this state, whose numbers were rapidly gaining ground amid the elite student body of UC. Aware of the significant presence of Latino members in the state legislature (a fact that some regents have grumbled about on other occasions), it seemed to me that such an enrollment cap would only make the University's budget more difficult to sell in Sacramento.

What emerged, however, at the November regents meeting was a more refined version of limiting enrollments. Here are excerpts from the regents' discussion:

Vice President Larry Hershman: "What are the options for doing what [several regents] suggested about not having our student-faculty ratio deteriorate any more? ... There are a number of options that have been talked about, including options of, you know, not taking all eligible students. Another ... is that we offer an option to students who are qualified ... to go to Community Colleges and we'll take them at transfer."

Regent Peter Preuss (Chair of the Committee on Finance): "That means that the Community Colleges [should be] sufficiently funded to be able to take them."

Hershman: "Yes, it does mean that. ... Although their cost per student is a lot less. But that is a way to keep our enrollments down." .....

President Richard Atkinson: "... The idea would be: these would be fully qualified students, students that we would accept under normal conditions. They would be accepted at a campus and then simply told that they have to spend two years - or one year, I mean, depending on what the circumstances were - at a Community College."

This new plan, admittedly still in an early phase of exploration, would involve shifting a number of new freshmen - students who were already qualified and accepted to UC - to spend their first two years (taking lower division courses) at a Community College before entering a UC campus for the completion of their undergraduate degree. Since UC already accepts many transfer students at the junior year, after they have successfully completed two years of lower division courses at a Community College, this alternative plan implies no loss of quality in the total education such students receive. The UC officials acknowledged that this new plan would not be popular with new students, or with their parents; but they felt that the state's budget crisis required them to consider such steps.

Let's look at some numbers for the costs involved in this plan.

In Table 1, below, I show the numbers for the "marginal cost of instruction", which have been used by state budget officials in funding enrollment growth at California's institutions of higher education.
 

Table 1. State Appropriation per Added Student ("marginal cost of instruction")

at the University of California       ---           $9,158
at the California State University      ---        $6,393
at the California Community Colleges   ---   $3,709

Source: Office of the Legislative Analyst, "Analysis of 2001-02 Budget", February 21, 2001
www.lao.ca.gov/analysis_2001/education/education_toc_anl2001.html

So, as I understand the plan, for each entering student that UC deflects to a Community College, the state will decrease the University's budget by $9,158 and will increase the Community Colleges' appropriation by $3,709. That is a net saving to the state of $5,449 per student. UC expects an overall enrollment growth of 7,100 students for the next fiscal year; so the redirection of that number of students would save the state a total of almost $40,000,000 in that one year. If continued a second year, the savings would be twice as much. It sounds like a good deal.

I don't know exactly how those numbers in Table 1 are calculated (I believe they are arrived at by some formula which has been negotiated between the educators and the Governor's finance staff). But there is one aspect that I do know for sure: that number $9,158 for the University covers a whole lot more than the actual cost of instruction for UC freshmen. The "marginal cost of instruction" covers the whole range of missions for which the University exists: undergraduate instruction plus graduate instruction plus research activity by the faculty plus all the associated support staff and overhead costs. We all know that, for example, graduate instruction is much more expensive, per student, than undergraduate instruction. So that $9,158 figure is certainly inflated well above the actual cost of instruction for UC's entering undergraduates.

A calculation which disaggregates some of those cost factors is something which I have never seen coming from UC officials; but I have been able to carry out such an analysis myself, using available data from the UC accounting offices. In an earlier report (Part 4 of this series, issued 8/27/00) I calculated that the actual unit cost of undergraduate education at UC was about $7,100 per student in 2000-01. A portion of this cost is paid by the students themselves in the form of student fees. Subtracting $3,300 for student fee income (this number is derived from Display 13 of Hershman's November 15 Budget Presentation) from the $7,100 leads us to the following result: The actual annual expenditure of State funds by UC for undergraduate education is about $3,800 per student.

With this new intelligence we get quite a different fiscal picture of the plan to redirect freshmen from UC toward the Community Colleges. For each student turned away, UC will actually save an expenditure of $3,800 but it will lose $9,158 in state funding. What a lousy deal!!

The situation is probably even worse than that. The actual cost per freshman and sophomore student at UC is undoubtedly less than the average cost for all undergraduate students, which is the $7,100 number I gave above. I don't have complete data to calculate this; but I note the greater occurrence of large lecture classes in lower division courses: at Berkeley, the average class enrollment is 51 for lower division courses, 35 for upper division courses, and 14 for graduate courses. In addition, I expect that lower division courses are more frequently taught by Lecturers, who are much cheaper, per course taught, than the regular rank faculty. (It is conceivable that the state's cost of lower division instruction is actually lower at UC than it is at the Community Colleges.)

It has long been the practice of UC's leaders to make one big bundle of the many costs associated with the University's many missions and present this as a unitary budget request to the state government. This is not just laziness, it has been a deliberate and successful strategy in gaining generous state funds over many years. If this strategy inflated the cost of undergraduate instruction, nobody complained.

In Part 1 of this series (issued 3/2/00) I analyzed the task of disaggregating the costs associated with different aspects of the faculty's multipart mission - undergraduate instruction, graduate instruction, research - relating to the anticipated costs of Tidal Wave II. I can readily understand why my analysis was dismissed by UC officials at that time. Their approach would bring in more money to the University - and indeed it has done so in times of plenty. But in times of hardship, things work out differently. The scams that worked to UC's budgetary advantage in earlier years now turn around and bite hard in this time of fiscal retrenchment. It is dismaying that President Atkinson and Vice President Hershman have become so used to their own fictions that they could not notice the fiscal trap they were walking into.

UC officials should develop reliable figures for the separate costs of the University's separate missions. Yes, the several missions (undergraduate teaching, graduate teaching, faculty research, public service) are interrelated, but they are still distinguishable and these distinctions become important to recognize in times of tight budgets and painful choices. To provide such disaggregated data is not only more honest, it also makes good business sense; and that is something most of the regents ought to understand.

A related bad habit of UC's budgetmakers is the use of an overall student-faculty ratio as the primary measure of "quality" at the University. In Part 1 of this series I gave a detailed discussion of the many different measures of and meanings of a student-faculty ratio. I suggest that UC officials wise up on this nonsense as well.

What is the best way to meet the looming budget crisis? I don't have all the answers. Some of the other options listed by Hershman seem reasonable. I would only add the opinion that the rhetorical emphasis, "we must protect quality above all else," is being overdone. Quality is not free; it costs money. A cutback in funding may well impair the production of top quality faculty research. Accept that, if it is modest in degree and temporary in span, and don't sacrifice other vital missions of the University. In Part 1 of this series I talked about how to save a lot of money, in planning to accommodate Tidal Wave II, by a slight shift in the teaching/research balance of faculty members' work. That is a suggestion most faculty don't want to hear; but enlightened administrators ought to understand its logic - logic which was perhaps abstract at the time I wrote it but which is becoming more relevant in the context of the current budget squeeze.