Read “Financial Options for Restoring Quality and Access to Public Higher Education in California: 2013-14” below or download a PDF of it. If you’re really a policy wonk, download the spreadsheets behind this report. A number in the executive summary paragraph for question #2 was corrected on December 24, 2013.
FINANCIAL OPTIONS FOR RESTORING QUALITY AND ACCESS TO PUBLIC HIGHER EDUCATION IN CALIFORNIA: 2013-14
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
Executive Director of, Council of UC Faculty Associations
Council of UC Faculty Associations
1270 Farragut Circle
Davis, CA 95618
Phone: (888) 826-3623
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. This report estimates 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 $6.9 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?
Answer: UC fees would have to increase over the current year’s fees by $9,646 (to a total of $22,846 per year) and CSU fees would have to increase by $3,646 (to a total of $9,118 per year); CCC fees would not need to increase.
#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 about $50.
Beginning with Governor Gray Davis’ 2001-2 budget year, accelerating with Governor Arnold Schwarzenegger’s Compact for Higher Education,  and continuing under Governor Jerry Brown, higher education in California has suffered large reductions in state funding. Governor Brown has begun to reinvest in higher education since the passage of proposition 30 last year, but these increases do not yet make up for the $1.8 billion cut Brown made to California’s public higher education his first year as Governor. These reductions have effectively abandoned the California Master Plan for Higher Education  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. Over the past decade California has consistently spent less than most states per higher education student, and public higher education funding – even including massive tuition/fee increases – has fallen quickly in California relative to the United States as a whole in recent years.
Data: State Higher Education Executive Officers, http://www.sheeo.org/finance/shef-home.htm
In response to large cuts in state funding, fees at UC and CSU have increased much faster than at colleges in the US as a whole (Figure 2). While these fee increases have generally been framed as responses to the State’s immediate budgetary problems, they are also congruent with the explicit public policy choice, based on conservative free market principles and embodied in Governor Schwarzenegger’s Compact for Higher Education, 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.
This shift in public policy is stated explicitly 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.
These rapid fee increases in California have been halted in recent years, but fees are still much higher at UC than they would have been if tuition had increased at the rate of the rest of US public 4-year schools.
This working paper seeks to tie together the three elements of change: cuts 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 California higher education was reasonably financially intact before the recent large fee increases. This paper addresses three questions:
- 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?
- 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?
- 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 $6.9 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 $5,379 (from $13,200), for CSU to $2,495 (from $5,472) and CCC to $299 (from $920).
Table 1 shows the calculations that produced this number. 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, 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 2013-14 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 $2.3 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. Providing funding to accommodate students who have been forced out of the higher education system would raise this number to $6.9 billion.
Answer No. 2: Restoring the public higher education system for all students only by increasing student fees would require raising UC fees an additional $9,646 (to a total of $22,846 per year), and CSU fees by $3,646 (to $9,118 per year). CCC fees would not have to increase.
Table 2 outlines the calculations that led to these numbers. 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. 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.
Answer No. 3: Restoring public higher education while returning student fees to 2000-01 levels would cost the median California taxpayer an additional $50.
Table 3 outlines these calculations. We obtained the distribution of taxes paid by adjusted gross income from the Franchise Tax Board for 2011 the most recent year available, then allocated the $6.9 billion it would cost to restore public higher education to 2000-01 proportionately across all taxpayers. Note that the categories are for individual filers (joint filers are counted twice to arrive at a count of individual filers), 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 about $50 next April 15. For the two-thirds of state taxpayers with taxable incomes below $70,000, it would cost $147 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  of all state revenues; part of the $6.9 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 as a uniform surcharge across all tax categories. If the cost were allocated more or less progressively, that would also affect impact on individual taxpayers.
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. 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 enrollment at California’s public higher education institutions has been constrained by their budgets.
Finally, the distribution of taxes is based on 2011, the most recent time for which data are available; this distribution will be slightly different in 2013.
These calculations will be updated and subsequent versions of this Working Paper will be released as better data become available.
 The full text of the Compact has been removed from the budget.ucop.edu site, but we have a copy of it at http://keepcaliforniaspromise.org/wp-content/uploads/2012/09/2005-11compactagreement.pdf
 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
 The spreadsheet used to obtain all the results in this working paper is available at http://keepcaliforniaspromise.org/3553/restore-2013-14
 FTE data comes from the individual higher education systems, state expenditure data comes from the Legislative Analyst’s Office available at http://lao.ca.gov/sections/econ_fiscal/Historical_Expenditures_Pivot.xls
 See page 16 of http://www.assembly.ca.gov/acs/committee/c2/hearing/2005/april%2020%20%202005-uc%20csu-%20public-%20cm.doc
 State income tax revenue by adjusted gross income class and state income tax revenue from corporations: http://www.ftb.ca.gov/aboutFTB/Tax_Statistics/2011.shtml
 Governor’s Budget Revenue Estimates: http://www.ebudget.ca.gov/pdf/BudgetSummary/RevenueEstimates.pdf