Colleges’ new economics

A TREND TOWARD privatization and a shift in spending priorities is putting California’s public colleges and universities at risk of forsaking their mandate to deliver a quality public education to the state’s growing ranks of would-be college students.

The eye-popping compensation packages paid by the University of California to its top administrators -- even as Sacramento raised fees, cut services and increased class sizes -- are the latest sign that the state’s higher-education system is in trouble. Last year, according to recent reports, UC quietly doled out more than $871 million in bonuses and other benefits to its top employees and administrators. Former Chancellor Robert M. Berdahl of UC Berkeley, for instance, got a 13 1/2 -month paid leave, at $315,600 a year.

These extraordinary expenditures can’t just be explained away as waste, mismanagement or greed; the problem is more fundamental than that. It’s all part of a changing business model, a new economics that is driving public colleges nationwide into uncharted, potentially troublesome, waters.

Over the last two decades, public financing for higher education has waned at the same time that education costs (labor, laboratories, health coverage, etc.) have continued to rise. This has forced public colleges nationwide into a competitive marketplace that is threatening public education.

Many college presidents no longer see their state schools as public; they are “state assisted.” Over the last four years, UC absorbed a 16% reduction in state funding while student enrollments rose by 16%. Nationwide, even flagship state universities are struggling to compete against private colleges that have endowments and can charge whatever tuition the market will bear.

To make up for state budget shortfalls, public colleges have turned to private donors, the federal government and corporations for a larger share of their operating funds -- and boosted tuition and fees.

From 1993 to 2003, industry-sponsored research in the UC system grew from $65 million to $155 million -- meaning that public higher education more and more is driven by what private interests and business will pay for, and less and less by the public interest or the needs of students

“If private donors and corporations are providing much of a university’s budget,” said a former president of the University of Wisconsin, “then they will set the agenda.”

Here’s another, unhealthy change brought on by this heightened competition: Public colleges used to provide an important ladder of opportunity to every student in the state who was academically qualified, regardless of family income. Today, this democratic vision is rapidly being shunted aside in favor of recruiting high-performing students, prestigious research professors and highly paid administrators who can raise an institution’s ranking and, ultimately, its overall wealth.

These national rankings, published by U.S. News & World Report among others, have a huge bearing on a school’s reputation and its ability to attract federal and private money. Because the ranking system places the greatest value on research, income and prestige (and little value on teaching or learning outcomes), it has encouraged many colleges to neglect their primary teaching mission.

IN THE HOPES of luring the best and brightest students (who often also are the most affluent ones), colleges are also splurging on luxury dormitories, lavish new gymnasiums and other country-club-like amenities. (Duke University gave iPods to all its first-year students.)

Similarly, both public and private colleges now use financial aid as a competitive tool to attract the highest-performing students, at the expense of those with the greatest financial needs. According to a recent study, the amount of student financial aid that states awarded not on the basis of need grew from 10% to more than 25% from 1998 to 2002, the latest year for which figures are available.

Administrators of public institutions, who are responsible for private fundraising, are demanding salaries commensurate with those in the private sector. A Chronicle of Higher Education survey found that 23 public university presidents now earn more than $500,000, six more than the previous year.

Meanwhile, the gap between administrative and faculty salaries continues to worsen. (Of course, star professors -- who can bring in research revenue and prestige -- are offered six-figure salaries and promises that they will rarely, if ever, have to see an undergraduate.) The undergraduates are taught largely, if not exclusively, by part-time adjuncts and graduate students. Studies suggest that an increase in the use of low-paid, part-time faculty is associated with a drop in student graduation rates.

What is needed is a new compact between the state of California and all of its public colleges. In exchange for providing a larger, more dependable revenue stream to all of its public colleges and universities, the state should insist on measurable improvements in undergraduate education. This might include expanding low-income access, giving undergraduates more time with full professors and improving graduation rates, which remain unacceptably low, both in California and nationally.

If the state wants to meet the challenges of a post-industrial economy, it will need to reaffirm its commitment to public -- not market-driven -- higher education.