The Public University in the Recession

UC provides case studies of new modes of funding

Since the 1960s, the University of California system has served as a role model for publicly-funded higher education. It has established ten campuses across the Golden State, and educates over 118,000 students annually. However, the UC system, once acclaimed for increasing the accessibility of higher education, may now presage a new and far more worrisome era for the public-university model it inspired.
The UC system has suffered severely from the recession, but its problems run deeper than the economic downturn. In particular, tuition hikes and increases in class size have marked the deterioration of state university systems in California and nationwide. The effects may prove more pernicious than merely crowded classrooms. The most obvious and significant hallmark of the public university was its affordability in comparison to the more expensive private universities. In light of rising tuition prices and admissions cutbacks, the role of the public universities has become increasingly unclear. Private financing and business partnerships may offer the UC system the promise of escape from its budgetary woes, but these must be carefully managed to ensure that state universities remain a truly public entity, affordable to all.
The Cost of the Recession

The current recession has hit public university systems particularly hard. Faced with declining tax revenues, in 2009 the state of California cut appropriations to the UC system by some 20 percent, claiming that the money could be better spent elsewhere. In response, the UC schools hiked tuition by 33 percent, to an average of $10,302 a year. Yet price increases have not forestalled cutbacks that harm the academic experience. “It has become noticeably harder to enroll in classes, especially in introductory-level courses, which every student interested in the major must take. Classes fill up very quickly, and it is extremely difficult to get the classes I want,” Wonwoo Choi, a sophomore at the University of California, Los Angeles, told the HPR. Choi’s experiences are hardly anecdotal. Across the UC system, class sizes have increased and class availability has declined.
The reality of paying higher costs for a worse education worries both students and educators. “Students are definitely concerned. They are looking to teachers, business leaders, and legislators for assistance,” said Dr. Raghu Mathur, former chancellor of the South Orange County Community College District. Mathur told the HPR that “expectations have gone up, and resources have been spread too thin. We need to reevaluate and prioritize the main mission and functions of the institutions.” Acknowledging the realities of state budget-making, Mathur said that we need to get “the biggest bang for the buck” in educating our students. The possibility arises, then, of turning away from the state and towards alternative sources of financing for institutions of higher education.
New Forms of Funding

With the state of California’s budget situation not improving, the UC schools have sought new solutions to relieve their shortfalls. In one particularly innovative proposal, the University of California, Los Angeles, Anderson School of Management recently proposed to forgo the 18 percent of the school’s $90 million budget that it would receive from the state, in favor of private support. The catch was that the relinquishing of government funding would allow the school to increase its tuition rates to the levels of its private competitors.
And Anderson is no isolated case. Budget cuts “have challenged public universities to rethink carefully not only curricular and programmatic issues… but also revenue models and service models to support research, teaching, and student experience,” said Arun Rai, a professor at the Robinson College of Business at Georgia State University. To some degree, Rai told the HPR, budget cuts can have a silver lining. Tightened belts have triggered “initiatives to develop strategic plans related to our research, teaching, and service missions,” while simultaneously encouraging expansion of revenue sources by means of “research funding from various agencies and partnerships with the business community.” Rai also sees the opportunity to “leverage technology creatively to improve the quality of services and reduce costs.”
Similarly, Christopher Baclawski, managing director of CB Capital Partners, a California investment banking firm, pointed to the example of the University of California, Irvine, Paul Merage School of Business as proof that the recession has sparked a period of innovation. “UCI has recently taken advantage of the school’s production of intellectual property by establishing an incubator to develop the college’s technology into operating companies and seek a monetary return should the company result in an IPO or sale,” Baclawski told the HPR. While the budget cuts may not be beneficial on the whole, Baclawski regards the initiatives that they have prompted as “generally positive.” “Operating in a difficult economic environment,” he said, “has the positive effect of streamlining operations and forcing the focus to shift to efficiently servicing the student body,” stimulating improvements that may have not taken place in more advantageous circumstances.
Privatization of the Public

Of course, it would be simplistic to assume that there is no downside to such partnerships and initiatives. After all, these steps are only the beginning. “As state support has decreased, the focus on expanding revenues from other sources has increased at our university and at other public universities,” Rai said. “Of course, universities and their various colleges are at different junctures in this journey.”
The spread of private funding will provide universities with much-needed self-sufficiency, insulating them from the direct effects of financial crises and enabling them to grow their endowments using private donors during more favorable economic times. But one has to wonder whether private funding might risk shifting the public university away from its original purpose of providing a quality education for all who can use one. As Rai reminded us, “In the United States, public universities play a crucial role in research, teaching, and service to various communities. Many top academic programs are housed in public universities.” Government funding, he said, “will be crucial in determining the ability of public universities to provide broad access to students at lower cost than private schools and at high quality.” Should public funding increasingly be replaced, it remains uncertain how long that access will remain a priority.
The public university will survive the present recession, but the question remains in what form. The role of public universities in providing accessible higher education to the American public remains as important as ever. As Mathur pointed out, “In order to function in the global economy, Americans need a minimum of two years of college education, and with over 50 million Americans with absolutely no form of higher education, we just cannot succeed.” The introduction of new management and funding techniques—so long as such tools are carefully monitored—will help complement public funding in ensuring the long-term viability of the public university.
Aditi Ghai ’14 and Ken Liu ’14 are Contributing Writers.