Writing in the Washington Post last week, Nick Anderson described the fiscal crisis at the University of California at Berkeley which is facing a "'substantial and growing' budget deficit and is preparing to take measures that its leader warned will be 'painful' as it repositions itself financially."
Berkeley's chancellor, Nicholas Dirks, ordered the University to review the school's finances, including its academic structure, revenue streams, philanthropy, and capital expenditures. Berkeley's officials believe that expenses are expected to outpace revenues to produce a deficit of $150 million, or six percent of its operating budget. Mr. Anderson reports that Chancellor Dirks blames "the toll of years of tuition freezes in an era of sharp limits in funding" from California's state government.
Berkeley has about 37,000 students. In-state tuition, exclusive of additional fees, will rise roughly at the rate of inflation in 2017. Mr. Anderson reports that California now provides about 13 percent of Berkeley's operating revenue, down from nearly 50 percent in the 1980s.
In a conversation with reporters, Chancellor Dirks stated that any proposed cuts or reallocations would not include faculty layoffs or the elimination of athletic teams. With tuition effectively capped over the past several years, Berkeley has turned to other revenue sources, following a pattern common at public and private flagship universities. Berkeley admitted substantially more out-of-state students -- who pay $38,139 in tuition and fees -- nearly triple what California's in-state students pay for the same education. Anderson noted that federal record data show, moreover, that the percentage of Californians enrolled at Berkeley dropped from 90 percent in 2004 to 69 percent in 2014.
Chancellor Dirks has concluded that the current level of financial support will remain more or less constant forcing the University to seek more "self-reliance." Mr. Anderson notes that Terry Hartle, a senior vice president at the American Council of Education, calls Berkeley's fiscal crisis "a dramatic example of the financial pressures facing even world-class universities as a result of state disinvestment in higher education."
Mr. Hartle is right. Chancellor Dirks is taking the logical first steps without facing a revolt from faculty, students, and alumni, moving sacrosanct "hot button" issues like faculty employment and athletics off the table. His search for new revenue from the expansion of on-line programming, athletic rebranding, administrative and academic reorganization, fundraising, administrative overlap reductions, and repurposing land holdings suggests a different financial model. The question will be if enough changes can be made without running up against resistance from the cultural inertia dominating most college campuses.
And this is where the rubber meets the road. As stewards, what commitments do California's politicians have to higher education?
California prides itself as a knowledge economy state, in many ways leading the global economy through innovation and the integration of education and the workforce. When theory meets practice, however, elected officials have a duty to protect taxpayers through their careful administration of state taxes. But the lessons taken from Berkeley suggest that most state budgets, for which decisions have especially lasting impact during recessionary periods, are compromise-based, politically driven, and incremental.
There are at least four lessons learned from Berkeley's fiscal crisis.
The first is that there is plenty of blame to go around. California's multi-year fiscal morass should have been more of an opportunity to re-imagine and plan for its future. But their politicians punted, forcing the University to serve less California students, for example, and accept more out-of-state full-pays who could bring in new revenue. It's hardly a progressive long-term solution to a growing budget deficit.
Second, California's higher education leadership must lead more aggressively. Hats off to Chancellor Dirks for Berkley's "from the bottom up" review. But the time to open dialogue on California's systemic higher education funding crisis has long since passed. The smart and introspective places like Dartmouth have already been imagining what they can become when they can no longer be what they are. It's a sort of "fix it before we have to" approach.
Third, Chancellor Dirks is making a profound statement indicating that the old financial models don't work. It was easy when the question was how to balance largely fixed expenses off revenues through tuition increases and state funding. But these days are gone. The new questions revolve around the assets and partnerships that can be created to demonstrate efficiencies and prudent re-investment.
And finally, what is the implication for California's students? In the bureaucratic battle over big budgets and growing deficits, will the debating parties remember to put the needs of the students first?
California has led in so much that makes American higher education unique and adaptable, despite the real policy questions that it faces. Let's hope that California's leadership understands that higher education and the economy are inexorably linked.
In the end, what role does a flagship play in a state's economic, cultural, and social life? Is a verbal commitment to create a knowledge economy matched by their politicians' willingness to pay for it? Like Dartmouth, California's colleges and universities need a thought partnership that solves for the moment and prepares for the future.