Buying a business school

The Anderson School of Management’s proposal to move toward financial independence from the state is not a giant leap from public to private. For years, the UCLA business school, like many other UC professional schools, has been forced to find increasing sums of private money to maintain its operations. Tuition for California residents already is $41,000, and for nonresidents, $49,000. More than 80% of the school’s budget already comes from private sources, and when other factors are accounted for, it’s closer to 94%. Numbers are similar at several other UC schools, such as in dentistry, law and business.

This new proposal — under which Anderson would take no state money, funding itself solely through private sources such as tuition and donations —seems like the tipping point in the long-running decline of the nation’s premier public university system. In truth, it’s been too easy until now to ignore the more subtle tipping points along the way — the undergraduate fees that, although still a bargain compared with private colleges, have grown beyond the reach of many middle-class families; the shortage of classes that sends frustrated students searching for a course that will fulfill university requirements. And it has been many years since California could brag that its smartest college graduates, regardless of their financial circumstances, could take out a modest loan and afford the education to become a lawyer or MBA.

Given these realities, the proposal outlined by Anderson goes far toward keeping the prestigious school aligned with UC while relieving taxpayers of any responsibility for it. About 40% of the school’s full-time MBA students are from California, and they would continue to pay less than nonresidents, though by a smaller margin — $5,000. The school would continue to offer classes to UCLA undergraduates at no added cost. It would be subject to most of the rules set by UC regents and administrators, including offering courses that meet university standards. It would continue to abide by UC’s ban on affirmative action in admissions. The major difference would be in faculty compensation, which is currently capped according to a range of salaries set by the university. The top professorial names that make for high annual college rankings in U.S. News & World Report and other publications are increasingly expensive to lure and retain.

Meanwhile, the net $6.6 million a year that Anderson currently receives from UC would stay with the university, money that could go to programs such as literature or philosophy, which don’t draw big donors, or scholarships for undergraduates. The school plans to make up the lack of state funding in part by tapping big-pocket donors who have expressed interest in the private-finance venture. And tuition would rise, though Anderson administrators say the increases aren’t expected to be larger than those imposed during the last several years. For state residents, next year’s tuition would be $44,600, about the same as at the University of Virginia, another public university whose business school went financially independent. For nonresidents, it would reach more than $51,000 next year, placing it in the middle range of prestigious private business schools.

Dean Judy Olian told The Times that this represented a “win-win” for Anderson and UC. That might be true — the plan is well drawn. So why does it seem like such a sad turn of events?

Perhaps because no matter how much Anderson’s leaders adhere to UC rules or bristle at the notion that the school is being privatized, that’s what is happening. Other professional schools within the UC system have been floating the idea for years, and if Anderson’s proposal is accepted, it almost certainly will set off a wave of similar plans. The model that funds these schools will be the standard that prevails at private schools across the nation; there will be relatively little incentive to rein in costs. If private donations fall short, it will be students who make up the difference in the form of ever-rising tuition bills.

At the same time, Anderson would still benefit from its association with UCLA, a great university whose international prestige was built up by California taxpayers willing to invest in first-rate education and research. What California receives in return are trained business leaders; 80% of Anderson’s MBAs remain in the state to work. But that doesn’t necessarily make Anderson different from any of the private business schools in the state.

Anderson’s leaders didn’t create the academic arms race — the push to hire the biggest professorial names at salaries that just a decade ago would have sounded astronomical. Nor did they invent the idea of instituting market policies at the University of California. Last year, UC President Mark G. Yudof suggested a surcharge on students who major in engineering and business because faculties in those fields tend to be paid higher salaries, and graduates might be expected to get better-paying jobs. The idea was rightly shelved; it’s troubling enough, though understandable, to charge higher fees for graduate dental and law students, but a state university should not be placing differentiated price tags on undergraduates’ dreams.

American higher education has yet to cope with the bigger issue of hefty compensation packages for academic stars and administrators. Salaries and perks have been pushing college costs higher, outpacing the prices of just about everything else, without necessarily adding to the quality of education students receive. At some point, the years of heavy tuition debt will outweigh the benefits of a big-name school.

As much sense as the Anderson plan makes, Yudof and the Board of Regents — and, for that matter, the Legislature — must consider much more than the reasonable aspirations of a well-regarded business school. The future mission of the University of California is at stake, and their decision must arise not from case-by-case proposals but from a well-articulated vision of what that mission will be. Some very limited privatization might be necessary, but under what limits? And what of a possible return to a public mission in the future? When the state’s economy reawakens, Californians should not find that some of their most valuable gems were given away while they were sleeping.