06/20/2012 03:47 pm ET Updated Aug 20, 2012

A Solution to the State University Student Exodus

Want a UC Degree? Move to Arizona. At least that is the implication of the current tuition policy of the University of California Board of Regents combined with the funding levels provided by the State Legislature.

The California Legislature currently provides enough funding for a given number of resident students enrolled in the UC system. But resident tuition, plus the state subsidy, pays for only about 75 percent of the cost of education. After the given number of state-funded students has enrolled, the UC system universities are forced to enroll higher paying non-resident students to cover education costs. Major California media have recently reported the recent increased enrollment of California residents at other state university systems.

California is not alone. Today, America's public universities face an explosion of higher education outlets globally, stagnant middle-class incomes, growth of for-profit education providers, and increased efficacy of alternative delivery modes, particularly on the Web. The biggest issue facing public university systems across the country, however, is the permanent decline in state support.

Ultimately, this situation leads to a blame game.

In California, the Legislature and students balk at tuition increases and blame the Regents. The Regents blame the Legislature for the loss in funding but feel compelled to limit tuition increases with the result that the UC cannot cover the loss in state funding.

The irony is apparent: the same legislatures that cut funding then blame the UC for trying to recoup that funding by raising tuition. The Regents, by attempting to keep tuition low for residents, force the UC to accept higher paying non-residents after they have enrolled the State supported level of enrollment.

The current dilemma also presents an interesting paradox. There are UC-eligible residents willing to pay higher tuition to attend the UC -- but the Regents will not let them because they are adamant about keeping tuition low for resident students.

One logical solution would be to allow resident tuition rise to the cost of education, which in the UC System is about $23,000 per year. This level is still lower than the non-resident tuitions at public universities in the other states currently drawing California students.

Yes, riots in the streets would follow based on accessibility and fairness. But these protests will be ill-informed. Because of the Blue and Gold program, any UC-eligible student whose family income is less than $80,000 pays no tuition. Today, these students are being subsidized by a variety of government programs and by the tuition being paid by others. The percent of non-residents necessary to provide this subsidy can be made smaller by raising resident tuition. By doing so, more lower income residents will be able to attend the UC, not less, because higher paying residents, not non-residents, will be subsidizing their tuition.

By raising resident tuition, the UC System will move to a high-tuition, high-financial aid model where UC eligible students from lower income families will have increased access. What about middle income students whose family income is above $80,000? There are many financial aid programs that can help, but here is where our legislators need to make tough choices.

Through the income tax system, the Legislature can decide how much to subsidize UC-eligible students at each income level. The legislature needs to decide on the best use of taxpayer money. Higher education is an investment, but is its return to society greater than K-12 education, health care, roads or in California prisons? These are complicated issues, but their analysis is the job of the Legislature.

Where are we headed? The current situation, unchanged, will lead to a UC System that educates a growing percentage of non-resident students, some from other states and others from other countries, with a decreasing proportion of resident students.

Is this scenario a good one for California or for the U.S.? The answer is complex but actions speak loudly. Current policy by the Legislature and the Regents indicates that they believe this is the best solution.

Gary C. Fethke is professor and former dean of the Henry B. Tippie College of Business at the University of Iowa and Andrew J. Policano is dean of the Paul Merage School of Business at the University of California, Irvine. Their new book, "Public No More: A New Path to Excellence for America's Public Universities," was recently published by Stanford University Press.