UCLA’s Anderson School of Management to present self-sufficiency proposal that could improve its future

After three-quarters of a century of state support, the UCLA Anderson School of Management has decided it is time to wean from the budget of the state and become financially independent. Many have criticized the administration of the school for wanting to deny state support, but the proposal is wise, timely and necessary for the reputation and future of our elite business school.

Chancellor Gene Block and campus administration will be reviewing the proposal before passing it along to University of California President Mark Yudof for review with the campus administration’s recommendations. During this evaluation period, the administration should really be thinking about what other parts of campus can become self-sufficient as well. Professional schools like the UCLA School of Law or UCLA School of Engineering and Applied Science in particular could benefit from such a plan.

In the proposal, the Anderson School’s full-time MBA program would become self-sufficient, operating almost completely on student fees and private donations. This effectively means that the Anderson School would not receive any state funding because its other programs are already self-sufficient. The plan is very popular among the faculty members, as about 80 percent voted in favor of it.

The money that would have come from the state will be made up for with private donations, cost containment, entrepreneurial programs and a modest tuition rise, according to Judy Olian, dean of the Anderson School. The state’s savings can be passed on to other parts of the university, like the humanities, that cannot attract donations as easily as the business school.

This plan, of course, has not come without criticism.

Some have made the point that the increased tuition that will come with this proposal will limit access to the business school.

The proposal does call for tuition to remain $5,000 cheaper for California residents, but Olian also points out that the increase in tuition would be less than what the increase has been under state support.

California residents will still pay less than the average tuition for a highly ranked business school as the proposal projects tuition levels for out-of-state students to be around the median for leading business schools. Also, student financial aid would increase by nearly a third in this model, according to a briefing fact sheet the administration has prepared.

The Anderson School is not the first business school at a public university to propose this. Business schools at both the University of Virginia and University of Michigan have implemented similar models successfully.

While the administration treads carefully when describing the proposal and has not called it a privatization, it is close to being just that financially. They have probably avoided the word because self-sufficiency sounds much more friendly for a public school than privatization does. But more than that, the school will maintain much of its public mission. California residents will still have cheaper tuition, and the school will maintain its affiliation with UCLA, the UC and the state.

Interestingly, this may help the Anderson School be more public than ever. Only 40 percent of business school’s students are from California, but 75 percent end up staying here. This means the Anderson School is serving the state by bringing in talent and top business leadership.

The plan is sound because while state support for the whole University of California is declining, the Anderson School in particular has been left with very little income from the state and the future of even that amount is unreliable.

According to Olian, the school is currently depending on the state for about 6 percent of its budget of $96 million a year.

That’s a mere $5.6 million. To put that into perspective, that is about a third more than the annual budget of UCLA’s student government, the Undergraduate Students Association Council.

By not accepting state funds, the school can keep its students’ tuition itself and decide pay scales for its faculty without getting approval from the university. This is important because the average salary for a business school professor is 19 percent higher than the average for all professors.

For the Anderson School to remain an elite business school, it needs to be able to offer salaries competitive with other business schools.

Making up the budget gap with donations should not be too difficult because the business executives, chief accountants and investment bankers that are Anderson School graduates probably have incomes large enough to include substantial donations to their alma mater. For this reason, it may be smart for the School of Law and the School of Engineering and Applied Science to consider similar plans. It may not be as reasonable for the School of Public Affairs, as government and nonprofit organizations may not pay as much as law and engineering firms.

Because this proposal promises that the Anderson School will remain part of UCLA and serve a public mission, Chancellor Block and President Yudof should not only endorse and allow this proposal, they should be taking thinking about how to solve budgetary issues at other professional schools through similar models where appropriate.

Replacing state funding with more stable sources seems necessary in allowing them to better compete with elite schools for the best faculty and students.