Growing Pains: The Future of UC’s Funding Model Without major new funding streams, the system cannot grow with California’s population and economic needs

August 20, 2018

Approaching a Tipping Point Report Cover

Despite massive cuts in state funding over the past thirty years, the University of California has managed to keep enrollment on pace with growth in population.  With California’s population projected to grow 22.5 percent (from 40 to 49 million by 2040), that will no longer be the case, unless UC is able to find new funding models.

In a new report, “Approaching a Tipping Point”, CSHE authors John Aubrey Douglass and Zachary Bleemer tell the story of substantial state disinvestment from the University of California over the last 30 years in the midst of dramatic enrollment growth.

“In its first four decades, UC depended largely on income generated by federal land grants and private philanthropy, and marginally on funding from the state,” explain the authors. “The year 1911 marked a major turning point: henceforth, state funding was linked to student enrollment workload. As a result, the University grew with California’s population in enrollment, academic programs, and new campuses. This historic commitment to systematically fund UC, the state’s sole land-grant university, helped create what is now considered the world’s premier public university system.”

“State disinvestment over the last several decades,” they assert, “essentially severed the historic link between state funding and enrollment workload, ending the incentive and hindering the ability for UC to expand academic programs and enrollment in pace with the labor and social needs of California’s growing population.”

The report goes on to outline how the University community has sought alternative revenue resources to grow in enrollment and maintain the quality of its academic programs and research productivity. Additional income has been generated by successfully competing for federal research dollars, increasing tuition income largely from non-resident undergraduate enrollment and masters-level professional degrees, and through increases in private philanthropy.

Yet even with a more diversified funding portfolio, the authors show, UC has not made up for the dramatic decline in direct state funding relative to student enrollment. Unlike in the past, it now also bears the burden of most capital construction and maintenance costs, as well as growing pension costs, without significant assistance from the state.

With or without reinvestment by the state, Douglass and Bleemer state that “UC needs to seek new funding streams and operational efficiencies.” Informed by their historical analysis, they explore options, some of which are politically challenging, including: increasing research funding to help subsidize teaching and public service programs; revising the indirect-cost agreement with the State of California; raising undergraduate tuition and fees for upper income students and establishing tuition pricing model tiered by student family income; explore differential fees by major; and reducing the percentage of UC undergraduate tuition income that is “returned-to-aid” in favor of increased fundraising for financial aid.

The authors also propose additional administrative and academic efficiencies, including improving graduation rates, expanding summer sessions, and considering a model of larger classes and greater dependence on instructional technologies that could complement current undergraduate enrollment, or create a new class of off-campus UC undergraduates.

But without a major renewed investment by state lawmakers, Douglass and Bleemer state, “It is not clear that UC can continue to grow in enrollment and academic programs and sustain its teaching and research mission at the quality and productivity levels the state has enjoyed in the past. Individual campuses, such as Berkeley and UCLA, may be able to generate other income sources to maintain their quality and reputation. But there is no clear funding model or pathway for the system to grow.”

The authors state that “UC may be approaching a tipping point at which the University community will need to decide whether it has the resources to continue to grow in enrollment, academic programs, and services, or not to grow and focus on maintaining quality and productivity.”

What would it take to re-position UC to maintain its world-class quality and grow in enrollment and programs that meet help meet California’s socioeconomic mobility and economic development needs?

The authors state that any revised funding model requires expanding UC’s non-state revenue streams and California lawmakers reinvesting in both capital projects and the university “Core” operating budget.

Douglass and Bleemer end on a positive note: “There is a tremendous opportunity for a renewed collaboration among California’s lawmakers, local communities, the business sector, and public higher education to update and enhance the state’s network of colleges and universities for the 21st century.” Yet any significant state reinvestment will depend on the next California governor. “Governors in the past have been key players in creating and building California’s pioneering higher education system. A new governor should have ambitions for higher education that match those of Californians.”

Info on Authors:

John Aubrey Douglass is Senior Research Fellow – Public Policy and Higher Education at the Center for Studies in Higher Education at UC Berkeley and the UC Berkeley PI of the Student Experience in the Research (SERU) Consortium. His latest books include, The New Flagship University: Changing the Paradigm from Global Ranking to National Relevance (Palgrave Macmillan 2016), and Envisioning the Asian New Flagship University: Its Past and Vital Future (Berkeley Public Policy Press 2017).

Zachary Bleemer is a doctoral candidate in Economics at UC Berkeley and Director of the University of California Cliometric History Project at CSHE.