How much will it cost us to restore public higher education?

 

This post has been superseded by updated versions:

How much will it cost us to restore public higher education in 2011-12?

How much will it cost us to restore public higher education in 2012-13?

How much will it cost us to restore public higher education in 2013-14?

 


 

Raising revenue has become such a taboo subject in California politics, nobody has gone to the trouble of actually answering that question — until now.

For the median California tax return (individual or joint), restoring the entire system while rolling back student fees to what they were a decade ago would cost less than $32 next April 15.

Surprised? So were we. Read “Financial Options for Restoring Quality and Access to Public Higher Education in California” below or download a PDF of it (March 2010, 9 pp.) If you’re really a policy wonk, download the spreadsheets behind this report.

540 Calculator: What restoring the system will cost you.


WORKING PAPER

FINANCIAL OPTIONS FOR RESTORING QUALITY AND ACCESS TO PUBLIC HIGHER EDUCATION IN CALIFORNIA

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Stanton A. Glantz
Professor of Medicine
American Legacy Foundation Distinguished Professor in Tobacco Control
University of California San Francisco
Chair, University of California Systemwide Committee on Planning and Budget (2005-6)
Vice President, Council of UC Faculty Associations
glantz@medicine.ucsf.edu

Eric Hays
Director of Research, Council of UC Faculty Associations
info@cucfa.org

(Version 2 — March 18, 2010)
Council of UC Faculty Associations
15 Shattuck Square, #200
Berkeley, CA 94704
Phone: (800) 431-3348

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EXECUTIVE SUMMARY

It is widely recognized that large reductions in state funding and sizeable increases in student fees have eroded quality and accessibility in California’s three-segment system of public higher education: the University of California, California State University and California Community Colleges. But, until now, no one has  estimated what it would cost – through restored taxpayer funding or tuition increases — to restore the system’s historic quality while accommodating the thousands of qualified students excluded by recent budget cuts. This working paper considers state funding, student fees and accessibility to answer three basic questions about the public higher education system in California:

#1.  How much would it cost taxpayers to push the “reset” button for public higher education, restoring access and quality (measured as per-student state support) while rolling back student fees to 2000-01 levels, adjusted for inflation?

Answer: It would cost taxpayers $4.643 billion.

#2. Absent restoration of taxpayer support for public higher education, how much more would student fees need to be increased to restore the level of per-student resources available in 2000-01 and accommodate all eligible students?

Answer: UC fees would have to increase above currently approved levels by $5,514 (to a total of $17,064), CSU fees by $2,075 (to $6,968) and CCC fees by $484 (to $1,264).

#3.   If the Governor and Legislature were to decide to push the “reset” button, — reinstating the quality and accessibility standards of the Master Plan by returning state support and student fees to 2000-01 levels, adjusted for inflation — what would it cost the typical California taxpayer?

Answer: It would cost the median California taxpayer less than $32.

Introduction

It is widely recognized that beginning with Governor Gray Davis’ 2001-2 budget year and accelerating with Governor Arnold Schwarzenegger’s Compact for Higher Education,[1] higher education in California has suffered large reductions in state funding.  These reductions have effectively abandoned the California Master Plan for Higher Education[2] promise of high quality, low cost public higher education for all, through an articulated system consisting of the University of California, California State University and California Community Colleges. Funding has fallen more quickly in California than in the United States as a whole (Figure 1a).

At the same time, fees in all three sectors have increased much faster in California than in the US as a whole (Figure 1b). While these fee increases have generally been framed as responses to the State’s immediate budgetary problems, they are also congruent with an explicit public policy choice, purportedly based on free market principles, to shift higher education from a public good provided by society as a whole through taxation to being a private good purchased through user fees.

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state-funding-ca-us

fees-ca-us

Figure 1. State funding and fees per student in California compared to the rest of the United States. State support of higher education in California has been below the national average. Support has fallen more rapidly and fees have increased more quickly than in the rest of the United States. California is not simply following national trends. (Sources: State Higher Education Executive Officers http://www.sheeo.org/finance/shef-home.htm, California Legislative Analyst’s Office http://lao.ca.gov/sections/econ_fiscal/Historical_Expenditures_Pivot.xls, College Board http://www.trends-collegeboard.com/college_pricing/, and California Post Secondary Education Commission http://www.cpec.ca.gov/OnLineData/SelectFirstOptions.ASP?ReportType=Enroll.)

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This shift in public policy is stated in the 2004 Compact on Higher Education between Governor Schwarzenegger and the UC President and CSU Chancellor: “In order to help maintain quality and enhance academic and research programs, UC will continue to seek additional private resources and maximize other fund sources available to the University to support basic programs. CSU will do the same in order to enhance the quality of its academic programs.” Until this point, the state was viewed as the primary source of support for “basic programs” with private sources being used for additional initiatives.

This working paper seeks to tie together the three elements of change: drops in state funding, fee increases, and declines in quality (measured as per student expenditures). It takes as its base year 2000-01, the last year that higher education was reasonably financially intact before the recent large fee increases. This paper addresses three questions:

  1. How much would it cost taxpayers to push the “reset” button for public higher education, restoring access and quality (measured as per-student state support) while rolling back student fees to 2000-01 levels, adjusted for inflation?
  2. Absent restoration of taxpayer support for public higher education, how much more would student fees need to be increased to restore the level of per-student resources available in 2000-01, and accommodate all eligible students?
  3. If the Governor and Legislature were to decide to push the “reset” button, — reinstating the quality and accessibility standards of the Master Plan by returning state support and student fees to 2000-01 levels, adjusted for inflation — what would it cost the typical California taxpayer?

Answer No. 1: Returning quality and fees to the level of 2000-01 would cost taxpayers $4.643 billion.

By restoring state funding to 2000-01 levels, it would be possible to return student fees to the levels of 2000-01 (adjusted for inflation) while maintaining quality (measured as total per student funding). Specifically, annual fees at UC would be rolled back to $4,924 (from $11,550), for CSU to $2,284 (from $4,893) and CCC to $410 (from $780).

table1

Table 1 shows the calculations that produced this number.[3] We begin with the numbers of full time equivalent (FTE) students in each of the three sectors of California higher education and total state general funds supplied to each sector,[4] then divide one by the other to obtain the state funding per student FTE. Next we adjust the 2000-01 dollar amounts for inflation to their equivalents for 2009-10 and subtract the actual levels of funding per student currently enrolled in each sector to determine the funding shortfall compared to 2000-01.

Restoring full state funding for existing enrollments would cost a total of $3.543 billion.

These calculations do not tell the whole story, however, because all three sectors have responded to resource cuts by admitting fewer students than they would under the Master Plan. UC has reduced enrollment by 2,300 students,[5] CSU has reduced enrollment by 40,000 students;[6] and the CCCs have reduced enrollment by 186,000 FTE students.[7] We assume that providing funding for these students, in addition to current enrollments, would restore full access to each segment of California’s public higher education system. The cost to support full enrollment at 2000-01 levels of state per-student support would be $4.643 billion.

Student fees would return to their 2000-01 levels, adjusted for inflation: $4,924 for UC, $2,284 for CSU and $410 for CCC.

Answer No. 2: Restoring the public higher education system for all students who meet the standards outlined in the Master Plan only by increasing student fees would require raising UC fees an additional $5,514 (to a total of $17,064), CSU fees by $2,075 (to $6,968) and CCC fees by $484 (to $1,264).

Table 2 outlines the calculations that led to these numbers.[8] The overall approach is the same as in Table 1, except that rather than restoring per student total expenditures by increasing state support, it is done by increasing student fees.  Calculations for UC and CSU assume that it continues its “high fee high aid” policy of allocating 33 percent of fees to student aid.[9] The total funding per student used as a measure of quality is the sum of state funding and net tuition and fees after deleting the fee amounts returned to aid.

These calculations assume no further cuts in state support for higher education. For each additional 10 percent cut in state support, tuition and fees at UC would have to be increased by $1,645, CSU by $812 and CCC by $268 in order to maintain quality at current enrollment levels.

table2

Answer No.3: Restoring public higher education while returning student fees to 2000-01 levels would cost the median California taxpayer an additional $32.

Table 3 outlines these calculations. We obtained the distribution of taxes paid by adjusted gross income from the Franchise Tax Board for 2006,[10] the most recent year available, then allocated the $4.643 billion it would cost to restore public higher education to 2000-01 proportionately to the amount that each taxpayer now pays across all taxpayers.  Note that the categories are for tax returns, not individuals, so the results are for joint returns (families), individual returns, partnerships and Subchapter S corporations, as well as corporations that pay income taxes.

For the median personal income taxpayer, restoring the entire system while rolling back student fees to what they were a decade ago would cost less than $32 next April 15.[11] For the two-thirds of state taxpayers with taxable incomes below $60,000, it would cost $86 or less. For the 12 million state taxpayers with AGI below $100,000 (81 percent), it would be $242 or less.

Income taxes are presented as one option, simply to illustrate the cost for typical taxpayers.  Personal and corporate income taxes are only 65 percent[12] of all state revenues; part of the $4.643 billion could be allocated to other taxes, which would lower the effect on individual income tax payers. We also assume that the costs would be distributed uniformly across all tax categories. If the cost were allocated more or less progressively, that would also affect impact on individual taxpayers.

Limitations

The calculations outlined in this working paper are all based on publicly available numbers and do not benefit from models of enrollment dynamics that may be maintained by state agencies or the three segments of the California public higher education system. We assume that there would be no change in enrollment between Fall 2009 and Fall 2010 under our base case. The estimates do not account for price elasticity: as tuition and fees increase, some students decide not to attend public higher education in California, which will reduce student demand.

We assume, based on public statements and documents, that increasing UC enrollment by 2,300, CSU by 40,000 and CCCs by 186,000 would allow every interested student to attend an appropriate institution of public higher education in California. As a result, the $4.643 billion estimated total cost (and the corresponding $32 median tax increase) may be an upper bound estimate of the actual cost. At the same time, the $3.543 billion shortfall based on current enrollments (Table 1), which corresponds to a median tax increase of $24, probably underestimates the cost. The true cost — and impact on taxpayers — is likely to be between these two estimates: $24-32.

Finally, the distribution of taxes is based on 2006, the most recent time for which data are available; this distribution will be slightly different in 2010.

These calculations will be updated and subsequent versions of this Working Paper will be released as better data become available.

table3

FOOTNOTES:

[1] The full text of the Compact is at http://budget.ucop.edu/2005-11compactagreement.pdf.

[2] The full text of the Master Plan is at http://www.ucop.edu/acadinit/mastplan/MasterPlan1960.pdf. For a discussion of the history and current status of the Master Plan, see Legislative Analyst Office, “The Master Plan at 50: Assessing California’s Vision for Higher Education,” November, 2009, available at http://www.lao.ca.gov/laoapp/PubDetails.aspx?id=2141.

[3] The spreadsheet used to obtain all the results in this working paper is available.

[4] FTE data comes from the California Postsecondary Education Commission available at http://www.cpec.ca.gov/OnLineData/SelectFirstOptions.ASP?ReportType=Enroll, state expenditure data comes from the Legislative Analyst’s Office available at http://lao.ca.gov/sections/econ_fiscal/Historical_Expenditures_Pivot.xls.

[5] UC cut enrollment 2,300 in 2009-10 and plans to cut enrollment a further 2,300 in 2010-11, see: http://www.universityofcalifornia.edu/regents/regmeet/nov09/f3.pdf)

[6] According to http://www.calstate.edu/PA/News/2009/enrollment-budget.shtml CSU is curtailing enrollments by “more than 40,000 students.”

[7] According to http://www.cpec.ca.gov/Agendas/Agenda0909/Item_07.pdf CCC enrollment has been reduced by 186,000 FTE students. The estimated increases in state funding or fees that are computed based on this estimate are higher than would be necessary to the extent that some of these students are the 2,300 denied admission at UC or the 40,000 denied admission at CSU. Restoring access to UC and CSU would reduce the demands placed on CCC.

[8] Table 2 of the December, 2009, version of this report calculated the fees required to restore higher education quality, but did not include the costs to accommodate eligible students who are currently being denied admission. This version of the report updates Table 2 and the relevant discussion to calculate the fees required to restore quality and enrollment.

[9] See page 16 of http://www.assembly.ca.gov/acs/committee/c2/hearing/2005/april%2020%20%202005-uc%20csu-%20public-%20cm.doc.

[10] State income tax revenue by adjusted gross income class: http://www.ftb.ca.gov/aboutftb/Tax_Statistics/AGIC.shtml and state income tax revenue from corporations: http://www.ftb.ca.gov/aboutftb/Tax_Statistics/Corporations.shtml.

[11] For comparison, in 2007 the statewide median income for all personal income tax returns rose to $35,646, while the median income listed on joint returns was $68,797. Source: Franchise Tax Board, available at http://www.ftb.ca.gov/aboutftb/press/2009/release_25.shtml.

[12] Governor’s Budget Revenue Estimates: http://www.ebudget.ca.gov/pdf/BudgetSummary/RevenueEstimates.pdf.

Surprised? So were we. Read “Financial Options for Restoring Quality and Access to Public Higher Education in California” below or download PDF

15 Responses to “How much will it cost us to restore public higher education?”

  1. [...] This post was mentioned on Twitter by Erica Perez, Josh Keller. Josh Keller said: Restoring CA public college funding and tuition to 2000-1 levels would cost the median taxpayer $32, professors say http://bit.ly/4SjCto [...]

  2. Aldo Antonelli says:

    While answer #3 is reassuring, answers #1 and #2 are troubling. What are the chances of the state’s finding an extra 3 or 4 billion dollars to restore funding to higher education? The projected shortfall for Jan 2010 to June 2011 is 21 billion, the political climate has not changed, the minority rule still in place. Answer #2 — raising fees past 18K at UC — would effectively price UC out of the market. On the other hand, the tax impact of restoring full funding is less than the cost of one-month furlough, so it looks like a good deal to me.

  3. [...] annual funding to restore UC and CSU to their good level of state funding as last seen in 2001 (See http://keepcaliforniaspromise.org/?p=553 ). Both of those proposals, as well as the Governor’s will face opposition from that sector of [...]

  4. N. A. Davis says:

    I think it would be a profoundly Good Thing to have a go at giving people the opportunity (and incentive) to be members of the ‘$32 Club.’
    I’m not a PR person, so–apart from doing things like offering to send contributors who pony up $32 or more a bumper sticker, or something of the sort (that also further publicizes the ‘$32 Club’)–don’t have specific suggestions about what should be done. I’m also sure that the ‘$32 Club’ is a pretty lame name. But I’m confident that there are people out there who have the relevant skills. So take this as a plea: follow through.

  5. Milan Moravec says:

    Does the $22 per person include the $3,000,000 of waste to hire consultants to do the work of UCB Chancellor Birgeneau when the work can be done by the UCB Chancellor and or work is done internally and impartially by the UC’s world class Faculty?

    The senior management of UC and UCB are remiss in wasting $3,000,000 during the Great Recession when every $ in higher education counts!

  6. Paul M. Merifield says:

    Please restore the educational budget shortfall, even it means raising taxes.

  7. Anant says:

    Someone should turn the table 3 (on pages 8 and 9) into a plot. It would be more natural that way and people could immediately see the impact for “folks like them.” The horizontal axis should be labelled “household income AFTER subtracting all deductions” so that people don’t accidentally look in the wrong place.

    Further manipulations that might be interesting would be to distort the horizontal axis by so that equal increments represent equal proportion of the population or filed returns.

    The above can largely be done on the basis of the data already in the report. But for future reference, it would be nice to know what the California income distribution looks like for actual graduates of the UC system, as compared with the rest of the population. Presumably, CA-citizens are paying at some coarse level to improve/maintain the tax-base of the state going forward. It’s like taking care of our human crop. We can’t just look at costs. Benefits matter too.

    [This is distinct from the idea of taxpaying parents buying a lottery-ticket to reduce the fees that they might have to pay in the future assuming that their kid is smart enough to get admission. This perspective is a losing one for U.C. politically]

  8. David says:

    In developing this as a public relations campaign, someone should also make the point that $32 a year for the next 18 years is a LOT cheaper than saving up $50k-$100k to finance your kids’ education at a California higher education school paying substantially higher tuition and fees. That money can instead be spent buying a home, getting out of debt, and generally putting that money to work in the state’s economy.

  9. Sanford Jacoby says:

    UC has 225,000 students, of whom many, but not all, are from California. There are over 9 million state residents under the age of 18. Only a very small proportion of California households benefits directly — in terms of their children — from the current and future existence of UC. Of course, had UC campuses expanded in number and size at the same rate as the state population, the ratios would be more favorable for UC. But it did not happen. So I don’t see a strong popular groundswell to restore UC funding, especially at a time when massive cuts also are occurring in other state programs with broader constituencies.

  10. Eric says:

    The $32 per year is to restore all of California’s public higher education funding, not just UC. Between UC, CSU, and CCC that was 1.8 million full time students last year — 1.8 million directly benefiting Californians (since some students do not go full time that really means more than 1.8 million people benefit directly from higher ed each year). This does not even begin to count all the Californians doing better now because of a degree earned in the past. Or all the Californians employed now because their employer got a public university degree some time ago. California’s public universities form the heart of California’s economy.

    By the way, UC has grown to keep pace with the state. UC enrolls the same percent of high school graduates today that it did forty or more years ago, as the Master Plan for Higher Education dictates that UC enroll the top 12.5% of all high school graduates. The 2,400 students that UC will not enroll this year is a small cut in the context of UC’s total enrollment. The fear is that this is the first of potentially larger cuts if funding cuts continue.

  11. Fred Lonidier says:

    Certainly restoring state support is essential but, to do that probably will require passing the Lakoff “California Democracy Act” which is a proposition being supported by the California Federation of Teachers and other unions and organizations. At the same time, transparencey is needed in the U.C. budget as the university has enormous holdings of stock, bonds and real estate which it could use, if it chose to, to close current funding gaps. Taking those resoures in to account, there is no U.C. budet crises at all. Here are two sites addressing this issue and, if I could send an attachment, I can send more support.

    http://subvarchive.blogspot.com/2010/01/peter-donohue-on-ucs-hidden-assets.html

    http://kalwnews.org/audio/2010/02/08/teachers-union-president-challenges-uc-regents-financial-emergency_138871.html

    President, UC-AFT San Diego Local 2034

  12. Saul Steier says:

    Hi Fred
    Long time no hear. Good to see we still both share the same values.I’m in CSU system and we , unfortunately don’t have similar hidden fortunes. There is a CSU budget crisis which means poor folk will be unable to get decent higher education- not student learning 0bjectives–

  13. Transparency says:

    UCB Chancellor Birgeneau Loss of Credibility, Trust
    The UCB budget gap has grown to $150 million, and still the Chancellor is spending money that isn’t there on expensive outside consultants. His reasons range from the need for impartiality to requiring the “innovative thinking, expertise, and new knowledge” the consultants would bring.

    Does this mean that the faculty and management of a world-class research and teaching institution lack the knowledge, impartiality, innovation, and professionalism to come up with solutions? Have they been fudging their research for years? The consultants will glean their recommendations from interviewing faculty and the UCB management that hired them; yet solutions could be found internally if the Chancellor were doing the job HE was hired to do. Consultant fees would be far better spent on meeting the needs of students.

    There can be only one conclusion as to why creative solutions have not been forthcoming from the professionals within UCB: Chancellor Birgeneau has lost credibility and the trust of the faculty as well as of the Academic Senate leadership that represents them. Even if the faculty agrees with the consultants’ recommendations – disagreeing might put their jobs in jeopardy – the underlying problem of lost credibility and trust will remain.

  14. [...] #18, 12/09 [PDF] 2. Resident Student Fees Table, California Postsecondary Education Commission 3. How much will it cost us to restore public higher education? Keep California’s Promise 4. Execs Still Get Raises as UC Cuts Staffing, Pay, S.F. Chronicle [...]

  15. Sookie Weyburn says:

    It’s so sad that there are people who think that UC is not their problem. It is even worse that they do not realize the bleeding fact that UC is suffering seriously and they will lose their reputation, prestige, world class facilities if they are not supported as they were in the old days. UC campuses did not become one of the world’s best universities by luck or money they earned. They were supported by the state so we had the luxury of having the best universities in CA, i.e. Berkeley and UCLA. I’d not mind paying just $32 more to bring the old days back and again we could start seeing them on news, giving back to society with new pioneering inventions for our own society. The one which suffers financially is not just a random company, it’s a university and it is the one what makes California now. WAKE UP PEOPLE! THIS IS NOT A GAME…

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