The UC-AFT Plan for Enhancing Affordability, Access, and Quality at the University of California

California has been a leader in providing students with a high-quality education that is affordable and accessible, but the funding structure of this system is showing signs of breaking down.  The following plan describes how this great system can be saved by decreasing the cost of attendance for many students who are now forced to go into debt in order to afford their education. We propose both an immediate short-term solution and a long-term fix.  The short-term plan focuses on the UC, while the long-term plan looks at refunding the entire master plan.  For the University of California, our plan calls for a tuition freeze, an additional state funding, an increase in UC budget transparency, and a reduction of administrative costs.

Moderate Tuition/High Aid

A central part of this plan is to use the current Moderate Tuition/High Aid model in a more equitable manner.  In 2014-15, the UC will not only receive $2.6 billion in direct funding from the state, but state financial aid will be over $1 billion due to increases in CAL Grants and the new Middle Class Scholarship.[i]  UC students will also receive over $450 million in federal Pell Grants next year, and many families qualify for federal tax breaks related to higher education.  This large amount of aid allows over half of UC students to pay no tuition, and the system enrolls a large number of low-income students: however, many low- and middle-class students still have to pay a large amount to cover the total cost of attendance (rooms, board, books, and living expenses).  While in 2014-15, tuition for undergraduates is just over $12,000, total cost of attendance is over $32,000.[ii]  Students then are forced to take out loans and work in order to make up for the growing difference between their grant aid and the total cost of attendance.    

Using the campus financial aid calculators, we can see how the parents of UC students are often asked to pay a quarter of their yearly income to support their children’s education.  For example, here are some specific aid scenarios: 1) if a student comes from a family of two parents with a combined annual income of $50,000, the student will be asked to contribute $8,600 through work study, and the family will be asked to take out a loan for $3,912 each year.  If the student does not take a work study position, the gap between the aid and the total cost of attendance equals close to 25% of the annual family income; 2) in the case of a family with total earnings of $79,000, the student and the family are expected to cover $18,301; and 3) in the case of two parents earning $90,000, the annual cost is $23,198.[iii]  These situations show that in a state with a very high cost of living, free tuition often means a financial aid gap of close to 25% of parental income.

Increasing Graduation Rates

The UC financial aid is better than most universities, but it still has major problems.  One related issue is that the more students have to rely on loans and work study to support their own education, the longer it takes them to graduate.[iv]  The inverse of this situation is that if students did not have to take out loans or work while in school, UC could increase its current four-year graduation rate of 63% and provide more places for new students without spending more funds or building more dorms and classrooms.[v]  It is clear that this desire to move students through the system in a more efficient and cost-effective manner is a major desire of the governor, but the state often thinks this can be accomplished though the use of online classes, streamlined degrees, and a downsizing of the university’s research mission.[vi]  However, all of these strategies outlined in the governor’s new initiative will only serve to lower the quality of education in the UC system.

Fixing the Campus Funding Problem

The UC-AFT plan also confronts a growing problem in the UC system, which is the inequitable distribution of funds among the campuses.[vii]  As a state audit showed, the university has been for decades secretly redistributing state funds and tuition dollars from the smaller campuses with a high number of under-represented students to the larger, wealthier campuses.[viii]  Although the UC has recently stopped this system of redistribution, the problem has been made worse by the fact that the wealthier campuses are bringing in a higher percentage of high paying non-resident students.  Our plan calls for 50% of all nonresident tuition to go into a pool to be redistributed to help rebalance the funding among the campuses.  We also believe that UC should cap the total number of nonresident students at 15%, and proceed with its plan to increase state enrollments by at least 1,000 each year.  Furthermore, the UC should rethink its admissions referral system.  Last year 11,200 qualified Calfornian students who did not apply to UC Merced were admitted only to Merced, but only 2% of these students decided to enroll at the campus.[ix] The UC is clearly using the Merced referral system to comply with its obligation to accept all qualified California students, but since UC knows most students will reject the referral, this practice has to be modified. 

The university has claimed that the historical underfunding of particular campuses will be corrected by the new rebenching model, but this model is highly flawed and only redistributes $37 million a year of $2.6 billion state general funds.[x] Moreover, the rebenching model relies on augmenting the funding to campuses that increase their doctoral students, but according to its own logic, these students cost at least three and a half times more than undergraduates to educate.   Of course, the reality of the situation is that UC does not know how much it costs to educate different types of students because it has thus far resisted making this calculation even though AB 94 now requires the system to report on the different costs of educating undergraduate, graduate, and professional students.

Transparency for the Core Mission

The UC-AFT plan calls for the university to comply with the state’s reporting requirements, and this new transparency will be used to make sure that state funds and tuition dollars find their way into the core education mission.  In order to help this process, our plan pushes the university to increase the number of small undergraduate courses and decrease the use of ineffective large lecture classes.  This transformation can be a key to increasing graduation rates and educational quality.  Following UC’s own long-term budget plan, the university should document how it is using $60 million of new funding next year toward “improving the student-faculty ratio; funding for startup packages for new faculty (a major obstacle for many campuses seeking to hire new faculty); augmenting graduate student support to ensure that the level of support offered by UC is sufficient to attract the best graduate students; enhancing undergraduate instructional support (including instructional technology, libraries, instructional equipment replacement, and building maintenance); and reducing faculty and staff salary gaps.”[xi]Instead of the state, students, and concerned citizens being told what the UC would like to do with new funds, the UC should prove that it is actually using this money to improve the quality of education. 

Why Not Eliminate Tuition?

In response to our plan, some might ask why don’t we propose simply eliminating tuition and make the UC free again.  The problem with this solution is that tuition is only a part of the reason for a student’s financial burden.  Moreover, if the UC eliminates tuition, it cannot utilize Cal Grants, Pell Grants, and federal higher ed tax breaks.  Furthermore, if done correctly, the Moderate Tuition, High Aid model serves as a progressive tax since wealthier parents pay more to support the education for non-wealthy students. We are also asking that the state agrees that it responsible for its share of the employer contributions to the pension, once the UC clarifies which employees are supported by state funds.[xii]

For far too long, the UC has increased it core mission budget without spending more funds on its core mission. According to the UC 2014-15 budget report, a lack of support for the core mission in recent years has had the following effects: “Another aspect of the fiscal uncertainty is how students and their families in recent years have been hit with large, frequent, and unpredictable tuition and fee increases, while also feeling the effects of budget cuts on the instructional program through reduced course offerings, increased class sizes, and curtailed student services. Instability of the University’s budget promotes uneasiness among students and their families about whether the high-quality education to which students work hard to gain access will be available in future years.”[xiii] From the university’s perspective, the reduction in funding from the state has resulted in a decrease in the quality of undergraduate education. Our plan will reverse this situation and return the university back to its core mission.

 The Master Plan 2.0

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.

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. 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 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.

The proposed plan ties 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 and 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.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 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.[xiv]

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.[xv] 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 2011,6 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 percent7 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.

A vital part of this plan is that the state would promise to maintain current financial aid and general funds support at the current level, while the colleges and universities would be required to roll back administrative costs to their 2000-20001 levels. California universities and colleges would also be prevented from increasing tuition beyond the rate of inflation.  These schools would also have to freeze their non-resident student enrollments and would have to distribute new funds to eliminate the uneven per student funding among campuses of the same system.   

The end result of this new policy would be to increase graduation rates, reduce student debt, enhance instructional quality, stabilize core funding, and restore the promise of the Master Plan to expand access to all qualified California students.