December 5, 2014

Since its premiere at the Sundance Film Festival earlier this year, Andrew Rossi’s documentary, The Ivory Tower, has fueled a debate about the rising cost and value of higher education.

The film focuses on examples that highlight the increasing costs of higher education and asks how this is compatible with the goal of providing access to as many students as possible - a good question. But the film stops short of tackling the more difficult next step - how do we create a financially sustainable framework that enables us to achieve this aspirational goal?

A constructive, solution-oriented debate must be anchored in reality. One aspect of this reality is the enormous variance amongst institutions of higher education. Some are for profit, others are not. Some only have undergraduates, while others strive for excellence in both teaching and research. Some have medical schools, and others have institutes focused on nanotechnology or pressing social issues. These differences matter, not least because the underlying financial dynamics for both students and the institutions vary enormously. For example, with respect to the affordability question, Suzanne Mettler points out in her book Degrees of Inequality, that students who attended for-profit colleges account for nearly half of all student-loan defaults, even though only one in 10 of all college or university students attend them.

Contrast that with Berkeley. Not only do our students graduate with low levels of debt compared to the national average, but the level of debt has not increased in real terms over the past decade. Furthermore, Berkeley provides a level of excellence at a far lower cost than its peers. In-state tuition at Berkeley is about $12,834 compared to about $40,000 or more at similarly ranked private institutions. With 37 percent of undergraduates coming from families earning less than $45,000 a year and over 30 percent being transfer students, Berkeley is one of the most successful engines of social mobility in America. It educates nearly as many students that receive Pell grants as all of the Ivy League schools combined. This is a very different narrative than the one that dominates the national debate.

However, we confront serious challenges. Despite Berkeley’s performance, state funding has been cut by over 50 percent in real terms over the past decade. As a result, “public” funding now only accounts for about 13 percent of our total operating budget. Consequently, like the majority of US public colleges, we are not on a financially sustainable path. While this year’s state budget reflects a 5 percent increase, this results in an increase of 0.6 percent in Berkeley’s total revenue. At this pace, it will take Berkeley until 2026 to reach the same level of state funding, in nominal dollars, it received in 2003.

To truly address these financial challenges, the debate needs to fundamentally change. Simply saying we want something to be free or accessible does not make it so. Particularly in the context of the current, and understandable, reluctance to increase taxes. But when one considers the far-reaching social and economic impacts of public universities, like Berkeley, it’s clear that finding a new, sustainable financial solution is something we should all be concerned with. It is not an exaggeration to say that the character of our society, not to mention our capacity to compete globally, depends on answering the “how do we pay for what we want” question. It’s time to recognize that we all have skin in the game. Yes, Berkeley delivers world-class teaching and research, but how can we ensure this is sustainable if we step aside from the simple “someone else should pay” solution or, just as bad, hang our hat on the belief that on-line courses will collapse costs.

The case for confronting these difficult issues is not limited to the objective of helping individual’s realize their potential. We are well aware of the argument that those who benefit should bear the costs. But one would have to be a complete isolationist to ignore the social and economic externalities. The system of higher education embodied in the “The Master Plan” that Clark Kerr laid out in 1960 has played a pivotal role in providing the intellectual resources and trained manpower that has made California such a dynamic economic powerhouse. Institutions like Berkley give birth to new firms and create solutions for pressing problems like climate change, human health, and transportation. Given the corporate focus on the next quarter’s financial results, universities are increasingly the only source of the type of fundamental research that has proven to be indispensable to innovation over the longer term.

The University of California system provides the state with unique, critical, and far-reaching benefits by attracting huge amounts of federal and private research dollars. These dollars create jobs, start businesses, and provide an educated workforce for the growth sectors of the state’s economy. A recent Bay Area Council Economic Institute report estimates that firms started by Berkeley founders have created a minimum of 1,247,490 jobs and $238 billion in total economic output. While 55 percent of companies started by Berkeley founders are located in the Bay Area, our economic contributions extend across the nation and globe. Federal, state and local tax revenues from these firms and their broader ripple effect totaled $27.3 billion in 2012.

Critics suggest we simply need to cut costs. We accept part of the criticism and are in the midst of implementing one of the most far-reaching efficiency programs of any university in the nation. In addition, we’ve launched an ambitious revenue generation program. We also have a comprehensive and adaptive program for reaping the benefits of the on-going revolution in digital education. But only those not actually engaged in this field believe it’s a panacea.

It is simply not feasible to achieve financial equilibrium by acting on the cost side alone without a massive decline in quality, time to degree and student services. With respect to the later, I am not referring to building climbing walls, as the film suggests, but basic student needs – career advice, course selection, and mental and physical health. Finally there are the ever-increasing compliance costs embedded in new and more complex legislation or societal demands that are never accompanied by additional revenue.

Public universities, like Berkeley, can’t do it alone. While we believe the case for a significant increase in state support is overwhelming, we recognize it’s unrealistic to expect this to happen to the extent required. We are willing to adapt, but there is a limit to our capacity to adjust, especially when the inadequate level of state funding is combined with constraints on our ability to make decisions. We estimate that more than 70 percent of our revenue opportunities are constrained by decisions makers who do not work on campus. As a consequence, we are asked to respond to California’s new fiscal reality without the decision rights to do so. We are more than ready to be measured against well-defined performance metrics, but we desperately need the capacity to make the decisions required to respond.

Affordable and high quality public higher education impacts all of us. It creates businesses and jobs, and strengthens our workforce. It’s our nation’s most successful engine of social mobility; more important than ever in the current environment of increasing wealth and income disparities. The UC system is a tremendous accomplishment that other states and countries envy and try to emulate. History will judge us poorly if our collective failure to act results in its decline. We are all in this together, but time is not on our side.

An abridged version of this article appeared in The Sacramento Bee. You can read it at: http://web.archive.org/web/20140717181907/http://www.sacbee.com/2014/07/...