Governor Brown will release his revised budget on Monday the 16th, just after the Ides of May (May is one of those months — including March — when the Ides fall on the 15th as opposed to the 13th). That is when we'll know if the University will bear the full brunt of the "all-cuts" budget, i.e., $1 billion, or whether it will be cut "only" $500 million. It's a sad testimony to the state of UC that we are all sitting here hoping for a $500 million cut.
Some have surmised that the Governor is pursuing a "reverse Norquist." The Norquist doctrine contemplates implementing popular tax cuts in order to shrink the government, to the point where you can "drown it in the bathtub." A reverse Norquist, supposedly, pursues ruthless cuts to build up support for necessary tax collection. Both doctrines are, of course, flawed. The Norquist doctrine ignores that big corporations and the financial oligarchy have way too much to gain from their control of our supposedly democratic government to actually want to drown in the bathtub. It will never happen. Government might well get meaner towards the poor and the middle class, but it's way too useful to the oligarchy to disappear. And Brown's supposed reverse Norquist presupposes that people still value the services they are receiving — including the affordable quality education traditionally provided at UC. But California is no longer willing to pay for it. UC is not necessary for the upbringing of our very own jeunesse dorée (never was), and it no longer affords the middle class the means for upwards mobility, simply because social mobility increasingly works only one way in this country, i.e., down. So there you have it.
10 May 2011
29 March 2011
California Budget Shenanigans
Budget negotiations broke down between Gov. Brown and the Republican minority in the Legislature. So there won't be any tax extensions on the June ballot, which means we should brace for further cuts. If you thought $500M was devastating for the university, this is probably the nail in the coffin of higher education in California.
22 March 2011
Last one out.
If you are not following the discussion over at Remaking the University on the presentation by Patrick Lenz and Nathan Bostrom to the Regents, well — you should. It seems that for once the Regents got the unvarnished truth about the financial state of the University (although see Bob Samuels' letter to the Regents for a different take).
Here is the bottom line: assuming only 1% year-over-year revenue increases from enrollment growth, 2015-16 revenue for UC will be around $5 billion, but costs will be around $7.5 billion in 2015-16, giving a gap of $2.5 billion (and that's optimistic: assumes tax extensions will be on the ballot and approved by the voters, limited increases in utility costs, etc). A number of measures can be implemented to reduce the deficit: the mythical $500 million in administrative efficiencies, better indirect cost recovery from funding agencies, tuition increases at the professional schools, more out-of-state students. Such savings and revenue increases are projected to add to about $1 billion.
So, how does the University go about closing the remaining $1.5 billion gap projected for 2015-16? There are only two sources of revenue left: state funding and student tuition. State funding would have to increase by 12.4% a year over the next four to five years to close the gap, or tuition would have to rise 18.3% each of those years. Or you could mix-and-match, with, say, 5% increases in state funding and 12.6% tuition increases. 18.3% tuition increases over 4 years, as pointed out by Bostrom in response to a question form a student Regent, compound to 95.85% — double the current levels.
It's clear that the University is out of options. Even the most draconian measures would only go a small part of the way towards filling the $1.5 billion gap:
Lenz and Bostrom pointed out that cuts are being "disproportionately" taken at the administrative level on the campuses. That might well be true. But looks like we are well past the point were significant economies can be achieved this way (much less the mythical $500 million). As much as we would like to see extravagant administrative salaries cut to size, the truth is that there is not much money there altogether. And in fact the cuts are pouring all over the place: more than 4,400 people have already been laid off (with more coming) and 3,700 vacant positions have gone unfilled. And my own department's instructional budget, used to support the graduate students with teaching assistantships and readerships, was just cut 25%. We are at the point were the mission of the University is being seriously jeopardized. And did I mention that the budget of Corrections & Rehabilitation is not being cut, and that the oil severance tax has disappeared from the horizon?
So things are definitely not well at UC. The last one out, please turn the lights off.
Here is the bottom line: assuming only 1% year-over-year revenue increases from enrollment growth, 2015-16 revenue for UC will be around $5 billion, but costs will be around $7.5 billion in 2015-16, giving a gap of $2.5 billion (and that's optimistic: assumes tax extensions will be on the ballot and approved by the voters, limited increases in utility costs, etc). A number of measures can be implemented to reduce the deficit: the mythical $500 million in administrative efficiencies, better indirect cost recovery from funding agencies, tuition increases at the professional schools, more out-of-state students. Such savings and revenue increases are projected to add to about $1 billion.
So, how does the University go about closing the remaining $1.5 billion gap projected for 2015-16? There are only two sources of revenue left: state funding and student tuition. State funding would have to increase by 12.4% a year over the next four to five years to close the gap, or tuition would have to rise 18.3% each of those years. Or you could mix-and-match, with, say, 5% increases in state funding and 12.6% tuition increases. 18.3% tuition increases over 4 years, as pointed out by Bostrom in response to a question form a student Regent, compound to 95.85% — double the current levels.
It's clear that the University is out of options. Even the most draconian measures would only go a small part of the way towards filling the $1.5 billion gap:
- Increasing the student-faculty ration from 21.1 to 1 to 22.9 to 1 (a 9.1% increase) would save about $100 million. Do it 15 times, and you've closed the gap.
- Replacing 1,100 tenure-track faculty position by non-tenure track faculty, would also save about $100 million in salary and benefits. Therefore, replacing 16,500 TT faculty by lecturers would close the gap.
- Eliminating 1,280 staff positions would also save $100 million. You get the picture.
Lenz and Bostrom pointed out that cuts are being "disproportionately" taken at the administrative level on the campuses. That might well be true. But looks like we are well past the point were significant economies can be achieved this way (much less the mythical $500 million). As much as we would like to see extravagant administrative salaries cut to size, the truth is that there is not much money there altogether. And in fact the cuts are pouring all over the place: more than 4,400 people have already been laid off (with more coming) and 3,700 vacant positions have gone unfilled. And my own department's instructional budget, used to support the graduate students with teaching assistantships and readerships, was just cut 25%. We are at the point were the mission of the University is being seriously jeopardized. And did I mention that the budget of Corrections & Rehabilitation is not being cut, and that the oil severance tax has disappeared from the horizon?
So things are definitely not well at UC. The last one out, please turn the lights off.
05 March 2011
Dump Crane
The Council of UC Faculty Associations is asking UC employees to sign a petition asking Governor Brown not to appoint David Crane to the UC Board of Regents, in support of Senator Leland Yee's opposition to Crane's confirmation as Regent. Appointments to the Board of Regents are for 12 years, and Davis Crane would thus serve until the end of 2022. CUCFA argues that David Crane is not the right person for this job. If you hold a similar opinion, this link will allow you to join with the opposition by electronically signing a petition to be sent to Governor Jerry Brown and Senator Yee.
20 February 2011
The New Budgeting Model
A specter is haunting UC campuses – the specter of a New Budgeting Model. References to this new budgeting model, aka the "Funding Streams" proposal are being repeatedly heard in administrative office. The new budgeting model is inspired by the single principle:
Is the principle to be implemented "all the way down"? What if the internal allocation of resources on each campus were also based on a "pay-as-you-go" principle?
Revenue includes student tuition. This means that the high-enrollment classes taught by humanities and social sciences department would finally be recognized as a source of revenue, and those departments would get their fair share (and the accompanying recognition). It's been variously argued that high-enrollment classes subsidize other parts of the university offsetting losses incurred elsewhere – through the ridiculously low indirect cost rates, for instance. This kind of cross-subsidy would now come to an end, or at least come to be closely monitored.
Revenue includes profits from the medical enterprises. Nothing new here. The MCs have long held on to the million in profits they generate. While everybody recognizes that the MCs provide a crucial service to the people of California, it's not clear what the University as a whole gets from them. Berkeley seems to be doing just fine without one. The MCs are quick to call on the central campuses, e.g., to help them build a new hospital (UCIMC comes to mind), but not as quick in sharing resources in time of need. The new budgeting model would just formalize the status quo ante.
Revenue includes contracts and grants. This is a crucial aspect of the proposed model. It seems the University has finally come to recognize that it actually loses money on most grants, as the negotiated IC rates fail to cover the cost of administering those grants (President Yudof's recent statement to the Legislature said as much). This is has of course long been a bone of contention. PIs resent these indirect costs tout-court, in that they detract from the funds they have available for their research. At the same time, indirect costs cover such things as administration, building use, maintenance, etc. This at least in theory, for a in shell game a big chunk of these costs are skimmed off by UCOP and central campus administration (to be used God knows how), in return for general infrastructural support for sponsored research. The new budgeting model would seem to short-circuit the shell game. The units that generate revenue from sponsored research would keep the overhead and use it to cover indirect costs. Supposedly this would include paying "rent" to the central campus for building use etc. The big question is whether they would come up short. I don't think anybody knows. Grants lose money for the university right now. But it is possible that if all infrastructural support is done "in house" these costs might be lower. (Of course, the University also needs to negotiate higher rates with the funding agencies – but that is a long story.) In any case, it would seem that the potential losers, if there are any, in the new budgeting model might be the hard sciences, who live on high-overhead grants.
It is of course painfully clear that an implicit premise of the model is that the University needs to improve its accounting to the point where internal cash flows become apparent and can be adequately tracked. This kind of transparency is long overdue, and occasionally resisted higher up the administrative ladder (I am sure UCOP likes to have enough play money from indirect cost recovery to pay those stellar administrative salaries). This is a tall order, and the University has not been traditionally good at it. So we'll see.
Another foreseeable consequence of the model is that departments in the humanities and the social sciences will go after higher enrollments, and possibly higher enrollments of out-of-state students (with what success, it remains to be seen). New programs will be proposed, in response to real or perceived demand – new majors, minors, concentrations, MA programs (whether "fully employed" or otherwise). It's going to be a race, let's just hope it's not going to be a race to the bottom.
Finally, there is some question as to how fine-grained the individuation of "units" is going to be. This is going to be crucial, of course, if the "units" are those that keep the money. Is the allocation going to be at the level of divisions, schools, departments, research groups – or perhaps individual faculty members?
If anything like this comes to pass, it will change the way the University works. Whether in a good or a bad way, it remains to be seen.
Revenue stays with the units that generate it.This applies primarily at the campus level. The idea is that campus are going to retain the revenue they generate, and UCOP is going to assess a "tax" using the same rate across the board, to pay for centralized operations as well as for programs such as EAP, UCDC, etc. There would be only few exception to this rule – the most notable of which is financial aid. The campuses would be directed to allocate a certain amount of tuition to students' financial aid. Now, for historical reasons, some campuses get more than their fair share of this money (especially tuition), and other less. When these inequalities are addressed, there will be some winners and some losers. It will be interesting to see who is who.
Is the principle to be implemented "all the way down"? What if the internal allocation of resources on each campus were also based on a "pay-as-you-go" principle?
Revenue includes student tuition. This means that the high-enrollment classes taught by humanities and social sciences department would finally be recognized as a source of revenue, and those departments would get their fair share (and the accompanying recognition). It's been variously argued that high-enrollment classes subsidize other parts of the university offsetting losses incurred elsewhere – through the ridiculously low indirect cost rates, for instance. This kind of cross-subsidy would now come to an end, or at least come to be closely monitored.
Revenue includes profits from the medical enterprises. Nothing new here. The MCs have long held on to the million in profits they generate. While everybody recognizes that the MCs provide a crucial service to the people of California, it's not clear what the University as a whole gets from them. Berkeley seems to be doing just fine without one. The MCs are quick to call on the central campuses, e.g., to help them build a new hospital (UCIMC comes to mind), but not as quick in sharing resources in time of need. The new budgeting model would just formalize the status quo ante.
Revenue includes contracts and grants. This is a crucial aspect of the proposed model. It seems the University has finally come to recognize that it actually loses money on most grants, as the negotiated IC rates fail to cover the cost of administering those grants (President Yudof's recent statement to the Legislature said as much). This is has of course long been a bone of contention. PIs resent these indirect costs tout-court, in that they detract from the funds they have available for their research. At the same time, indirect costs cover such things as administration, building use, maintenance, etc. This at least in theory, for a in shell game a big chunk of these costs are skimmed off by UCOP and central campus administration (to be used God knows how), in return for general infrastructural support for sponsored research. The new budgeting model would seem to short-circuit the shell game. The units that generate revenue from sponsored research would keep the overhead and use it to cover indirect costs. Supposedly this would include paying "rent" to the central campus for building use etc. The big question is whether they would come up short. I don't think anybody knows. Grants lose money for the university right now. But it is possible that if all infrastructural support is done "in house" these costs might be lower. (Of course, the University also needs to negotiate higher rates with the funding agencies – but that is a long story.) In any case, it would seem that the potential losers, if there are any, in the new budgeting model might be the hard sciences, who live on high-overhead grants.
It is of course painfully clear that an implicit premise of the model is that the University needs to improve its accounting to the point where internal cash flows become apparent and can be adequately tracked. This kind of transparency is long overdue, and occasionally resisted higher up the administrative ladder (I am sure UCOP likes to have enough play money from indirect cost recovery to pay those stellar administrative salaries). This is a tall order, and the University has not been traditionally good at it. So we'll see.
Another foreseeable consequence of the model is that departments in the humanities and the social sciences will go after higher enrollments, and possibly higher enrollments of out-of-state students (with what success, it remains to be seen). New programs will be proposed, in response to real or perceived demand – new majors, minors, concentrations, MA programs (whether "fully employed" or otherwise). It's going to be a race, let's just hope it's not going to be a race to the bottom.
Finally, there is some question as to how fine-grained the individuation of "units" is going to be. This is going to be crucial, of course, if the "units" are those that keep the money. Is the allocation going to be at the level of divisions, schools, departments, research groups – or perhaps individual faculty members?
If anything like this comes to pass, it will change the way the University works. Whether in a good or a bad way, it remains to be seen.
10 February 2011
Charlie Schwartz and the Mystery of the Disappearing Billions
Prof. Charlie Schwartz, who should receive a medal for his tireless digging into UC's financial statements, has uncovered a discrepancy between the Regents' Budget (which includes general fund moneys etc.) and UC's actual expenditures. The discrepancies amount to several hundred million dollars a year, or 4-to-5 billions over the last decade.
Schwartz's repeated inquiries at UCOP (sent to Patrick Lenz, UC’s Vice President for Budget, Peter Taylor, Executive Vice President for Finance ,as well as President Yudof) have so far gone unanswered.
While the discrepancy might well, in the end, be the result of mismatched accounting definitions, it's remarkable that UC finanaces are so byzantine that not even UCOP's top brass can make sense of them.
Unless, of course, something untoward is going on. Having been raised Catholic, the California Professor knows that to think ill of someone is a sin, but more likely than not to be right on the mark.
Schwartz's repeated inquiries at UCOP (sent to Patrick Lenz, UC’s Vice President for Budget, Peter Taylor, Executive Vice President for Finance ,as well as President Yudof) have so far gone unanswered.
While the discrepancy might well, in the end, be the result of mismatched accounting definitions, it's remarkable that UC finanaces are so byzantine that not even UCOP's top brass can make sense of them.
Unless, of course, something untoward is going on. Having been raised Catholic, the California Professor knows that to think ill of someone is a sin, but more likely than not to be right on the mark.
07 February 2011
UCB Dropping ballast
We have predicted since the very early days of this blog that the de-funding of UC by the state would bring to the surface tensions and potential conflicts among the ten campuses, potentially undermining the system as a whole. The two flagships, UCB and UCLA, and aspiring falgship UCSD would look to insulate themselves from the effects of the cuts by staking a claim to academic excellence in the system.
Sure enough, it looks like Berkeley is looking to drop ballast in the face of a proposed $80M budget cut. As reported by both the California Watch and the UCLA FA blog: in the words of UCB Provost Breslauer,
UCB's attitude is nothing new or unexpected. It is also nothing inherently reproachable: UCB has to do whatever they think it is necessary for self-preservation (and so do the other campuses). One just wishes they would go about it in a slightly more diplomatic manner, paying at least lip service to the idea of one university and the "power of ten" rhetoric. You know, just so that the other nine campuses do not feel like they are being dropped as so much ballast.
Sure enough, it looks like Berkeley is looking to drop ballast in the face of a proposed $80M budget cut. As reported by both the California Watch and the UCLA FA blog: in the words of UCB Provost Breslauer,
My greatest fear is that Berkeley will be driven into lesser and lesser stature and excellence to shore up the existence of other campuses [...] We are constantly fighting to make sure that redistribution (of funds generated by the campus) does not threaten our stature, the standard by which public higher education is judged in the world.The $80M cut represents about 22.5% of UCB's $1.8 billion budget (UCB's share of state funds also declined from $500M in 2005 to a projected $225M with the new cuts), and 16% of Jerry Brown's $500M cut to UC — but notice also that 16% of undergraduates in the system are at Berkeley (35,300 out of 218,000).
UCB's attitude is nothing new or unexpected. It is also nothing inherently reproachable: UCB has to do whatever they think it is necessary for self-preservation (and so do the other campuses). One just wishes they would go about it in a slightly more diplomatic manner, paying at least lip service to the idea of one university and the "power of ten" rhetoric. You know, just so that the other nine campuses do not feel like they are being dropped as so much ballast.
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