Report says tuition hikes unsustainable, proposes methods to reform funding

For the past several years, the University of California has experienced a dynamic of sharp state budget cuts that have been absorbed primarily by increasing tuition – a funding model that a recent report says is unsustainable.

In the report, the National Association of State Budget Officers, composed of state government officials, proposes numerous ways for states and higher education institutions to collaborate on reforming higher education funding. The association used approximately $180,000 granted to them by the Bill & Melinda Gates Foundation for the report, according to the foundation’s website.

The UC has previously implemented several reforms that the report recommends – including limiting tuition hikes and holding itself accountable for spending – but experts and public officials say these strategies do not solve the structural problems the University faces.

Jonathan Kaplan, a policy analyst at the California Budget Project, said the state needs to take a holistic view of the public services it wants to fund, and figure out how the UC fits into its overall vision.

“I think the toughest choice is for the state of California to think about the public structures and services it wants to provide, including the university system,” Kaplan said. “(The state) has to make a decision as to whether or not they’re willing to provide the revenue that’s necessary to support those public structures.”

Meanwhile, H.D. Palmer, a spokesman for the California Department of Finance, pointed to structural issues within the higher education system. Within the universities and colleges funded by California, many students find it difficult to graduate on time, which requires everyone involved in the education process – the state, the University and the students – to pay more money, Palmer said.

“It isn’t just an issue of more money,” Palmer said. “We need to change the operating structure.”

The report seeks to connect the initiatives of the state officials with those of higher education institutions, said Kathryn White, a fiscal policy analyst for the association who helped assemble the report.

“Unfortunately, states and institutions sometimes talk past one another because they’re not looking at the same sources of data,” White said.

The report pinpoints rapidly rising tuition as one of the main problems in public higher education finance.

Though the UC system has used other methods to counteract the increasing deficit in state funding, such as hiring freezes and budget downsizing, increasing tuition is the largest way the UC has dealt with budget cuts, said Paul Golaszewski, an analyst at the Calif. Legislative Analyst’s Office who specializes in the UC system.

That changed recently, with a tuition freeze now in place until the end of the academic year.

Last year, the UC Board of Regents voted to accept Gov. Jerry Brown’s budget proposal, which included promising to keep tuition stable in 2012-2013 in exchange for $125 million in what was called a “tuition buyout.” The deal hinged on Brown’s Proposition 30, which passed by California voters in November’s election.

The UC has been looking for alternate ways to find revenue for the UC system besides raising tuition – including at the last regents meeting in March, said Dianne Klein, a UC spokeswoman.

In order to raise revenue, the regents discussed increasing fundraising efforts on social media outlets and working with the entertainment industry.

But even if the current state budget proposal passes, they will still have a budget shortfall, Klein said.

In addition to recommending that student tuition play an “appropriate” role in a university’s overall funding, the report also identifies strategies such as instituting accountability measures, or figures collected by a university to measure quality and regulate spending, and collaboration between state and higher education officials to create incentives for enrollment and graduation of low-income students.

Performance funding, another recommendation of the report, is a policy that measures graduation rates and other relevant figures, and awards universities for efficiency or penalizes them for failing to meet satisfactory levels, said Daniel Mitchell, a professor emeritus of the UCLA Anderson School of Management and Luskin School of Public Affairs.

Policies like performance funding are meant to change the incentive structure at higher education institutions to focus on student completion rather than enrollment, White said.

But performance funding may not be feasible in California because the state funds everything from research institutions, such as the UC, to community colleges, so assessing higher education institutions through measures such as graduation rates will give varying results, depending on the goals of the institution, Mitchell said.