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Proposed Solutions: Five Broad Themes

The reports, although differing in their details, focus on five broad themes as strategies for dealing with Tidal Wave II in a constrained budgetary environment. These themes are: budgetary stability, student charges, productivity increases, governance reform, and improved linkages to K-12 education. Each of these topics is considered below, with the approach of each report noted.

1. Budgetary Stability
All of the reports agree that the boom and bust cycle of funding higher education in recent years is destructive and ultimately more expensive for society than would be a regime of more predictable funding. One common concern is that the down cycle unleashes sharp increases in student charges, which not only depress enrollment, but also are inequitable to those students and families who bear the brunt of the increases. Uncertainty about funding can also trigger hasty actions that may be unwise in the long run. For instance, UC’s offers of early retirement in the early 1990s caused over 2,000 faculty to depart, many of them among the strongest in their fields. CSU and the community colleges, meanwhile, closed thousands of sections of course offerings, contributing both to diminished enrollment and to increased time to degree. The urgency of events in the early 1990s led to across-the-board budget actions, yet prevented the thoughtful pruning of weak programs. It is in California’s best interests to avoid such a wrenching adjustment again.

The Citizens Commission takes direct aim at this problem in two ways; they recommend that base budgets be stabilized, and that a trust fund be created that would hold extra revenue in good times to be used during economic downfalls. The commission recommends implementing the first idea by guaranteeing UC and CSU no less than the percentage of general funds that was appropriated to each segment in the preceding year, while the community colleges would be guaranteed no less than 10.6% of the Proposition 98 funds, using that ratio to determine their annual level of support. Furthermore, enrollment growth would only be funded (at the agreed upon marginal cost per student in each segment) if annual enrollment increases exceed 1.5%, with the exception of enrollment in teacher education at CSU, which would be fully funded. The trust fund would receive any funds over a 4% annual increase available in a given year; for example, in 1998-99, nearly $600 million is slated as new funds to UC and CSU, well over the 4% mark. Under the commission’s proposal, much of that increase would be salted away for harder times.

The RAND recommendations are couched differently, in that the authors estimate the future fiscal shortfall that the institutions will face if they are to meet projected enrollment demand. They project that by 2015, higher education will need $13.6 billion (in 1995 dollars) to meet annual costs, compared with about $7.5 billion in 1995 ($6.2 billion in state support plus $1.3 billion in student charges), as shown in Figure 9. The authors urge the state (with help from local and federal governments) to fill at least half of the shortfall, with the remainder made up by additional student charges and productivity increases. Indeed, most of their recommendations concentrate on productivity gains and how they might be achieved.

California at the Crossroads, the Education Roundtable report, is highly precise in its request for state funds; indeed, this is the most precise aspect of the report. Modeled on the first compact struck with Governor Wilson, the report requests annual increases of 4% for the next four years, coupled with full funding over and above that amount for enrollment increases, based on the agreed-upon marginal cost per student in each segment. For capital outlay, the report requests $750 million per year—a striking 67% increase over the previous compact—to be divided evenly among UC, CSU, and the community colleges.

This report has the strength of being similar to the earlier compact, which did prove workable. That is, it covers the next four years only, does not have a strategy to reach 2015, and does not call for coordinated activities that are difficult to accomplish. This strength is also its greatest weakness, because it is imprecise on all other matters, including the productivity contributions that should be a quid pro quo for such support. The words are there, but the actions are not clearly laid out, and four years from now it would be impossible to determine whether any of the gains in accountability and restructuring that are promised have actually happened. This document is fundamentally a budget request, pure and simple, and differs from the other three reports in that regard.

Shared Responsibility takes a more complicated but potentially more effective approach, to the problem of funding Tidal Wave II. The report calls for a new social compact among the state, colleges and universities, and students and families, under which "the benefits and burdens of maintaining college opportunity would be fairly shared among all parties."¹⁰ Under this plan, a clear quid pro quo from the institutions and from potential students would be expected in return for state funds:

The Governor and Legislature should preserve the state’s investment in higher education and target additional support to campuses that accept additional undergraduate students. The state should hold colleges and universities accountable for the enrollment of eligible undergraduate students, and for cost-effective operations, including the establishment of priorities and the reallocation of resources. The state should expect students to be better prepared for college, and to share in the cost of increased undergraduate enrollment.¹¹

	Figure 10: Click for larger image

Under this plan, the $5.2 billion increase in expenditures estimated under a business-as-usual approach could be cut by more than $3.3 billion, as shown in Figure 10. This proposal is ambitious, and it is unlikely that all of the pieces could be made to fall together. Nonetheless, each idea implemented produces cost savings, and the proposals are sufficiently independent of each other so that enactment of even some of them would reduce significantly the cost of enrolling the additional students of Tidal Wave II.

2. Student Charges
Three of the reports have specific recommendations regarding the growth of student charges, while one (the RAND report) raises issues, but does not advance a firm recommendation. The Citizens Commission is quite precise: "Resident student fees should be changed annually by a fixed amount based on changes in an index which measures income available to Californians."¹² Under that policy, charges would increase by 4.6% per year during the next five years. Furthermore, the commission would put an end to the policy, embodied in the first compact with Governor Wilson, of "recycling" one-third of the fee increases as student financial aid, a policy some view as robbing Peter to pay Paul. Instead, they argue that all financial aid should be provided directly through state appropriations.

The Education Roundtable report argues for a fee policy that "provides for fees to grow at a rate equivalent to the percentage increase in the state’s per capita personal income."¹³ Unlike the Citizens Commission, the Education Roundtable would continue the policy of "recycling" a portion of student fee increases into student aid.

Shared Responsibility argues that "undergraduate student fee increases should be based on two factors: (1) affordability, as measured by the rate of growth of personal income in California, and (2) the student share of the cost of additional undergraduate enrollments."¹⁴ In particular, the report argues that fees should not increase by more than 6% per year in UC, by more than 5% at CSU, and by more than 4% at the community colleges. It also agrees with the Citizens Commission that "recycling" fee increases should cease, with direct appropriations for that purpose to the Student Aid Commission.

The RAND report raises the following questions, without proposing an answer: What are the appropriate shares of educational cost for the student, state and federal governments, and the institutions to bear? Should student support be distributed directly to students, as is true of federal Pell Grants, or should the subsidy be provided indirectly, by supporting the institutions and keeping tuition universally low, regardless of student income? Should aid be based exclusively on need, or should merit play a role? And should the public institutions receive a guaranteed share of the state’s revenue, as Proposition 98 provides for K-12 education and the community colleges? These are all valid questions; the report remains silent on the answers.

From the standpoint of higher educational finance, the noteworthy thing about the recommendations on student charges in the first three reports mentioned above is the shift to some measure of personal income as the basis for proposing increases, as opposed to a share of educational costs, which has been the more common approach. The California Postsecondary Education Commission (CPEC), for example, follows that older pattern in recommending that fees not exceed 15% of cost in the community colleges, 30% in CSU, and 40% in UC.¹⁵ The shift to an income base is obviously an attempt to respond to concerns about affordability, which are high on the list of public concerns.

3. Productivity Increases
With this topic, we enter an arena of intense controversy, for there is a well-established view that holds that higher education is the type of activity that cannot achieve increases in productivity without a loss of quality.¹⁶ The argument goes to the core of the educational production function, which, it is alleged, is a craft activity, similar to the performance of a string quartet. How does one increase the productivity of a live string quartet performance? Does one dispense with one of the players, and perform the music as a trio? Does one speed-up the performance, doing 45 minutes of music in 30 minutes? The point is obvious; it will take four string players 45 minutes to perform a given string quartet, and there is simply no way to increase the output per musician. So, by analogy, goes teaching; it will take one professor so many hours with so many students to produce X units of learning, and if we cut the time, or increase the number of students, we will diminish the quality of the activity (i.e., we will no longer gain the same output). This is a reasonable argument, not easily dismissed; yet three of the reports assume that productivity gains can be achieved in order to meet the enrollment demands of Tidal Wave II. What are the arguments?

Shared Responsibility does the best job on this issue (see Figure 10, shown previously, for specific suggestions). This report does not directly confront the string quartet analogy, but it envisions productivity gains of a different sort, primarily through reduced capital outlays. For example, by reallocating existing resources from activities with lower values to those with higher values, the authors project that $241 million can be saved. By going to year-round operation, an additional $1,678 million is saved. By extending the hours of college operation, savings of $1,231 million are projected. By becoming better prepared, students would save the state another $232 million. None of these examples is rendered inoperative by the earlier argument about educational production functions, and hence each should seriously be considered. We shall see in a later section that the new chancellor of CSU is firmly committed to achieving precisely these types of productivity gains, an encouraging sign.

The RAND report also makes this issue the core of its recommendations:

California institutions of higher education should make major structural changes in their decisionmaking systems so that their leaders can assess the relative value of departments, programs, and systems in order to reallocate scarce resources. . . .

As part of their overall restructuring, California’s colleges and universities should pursue greater mission differentiation to streamline their services and better respond to the changing needs of their constituencies. . . .

Colleges and universities should develop sharing arrangements to improve productivity.¹⁷

A continuing emphasis in work at RAND involves these issues, and the basic point to be noted is that this organization is committed to working on ways to enable colleges and universities to pursue such objectives, should their leaders choose to do so. Part of the authors’ argument is that corporate leaders will insist on such results before they will throw their support behind increased resources for universities.

The Citizens Commission touches on these issues as well, with their recommendation that:

The state government and the institutions of higher education should make extraordinary efforts to use existing facilities more extensively and wisely by:

A. Providing fiscal incentives to all higher education for sharing facilities.

B. Providing fiscal incentives to all higher education to encourage joint programs in the public interest.

C. Adopting a long-term policy to explore alternatives to new construction in the public segments.¹⁸

Avoiding the creation of new institutions is a theme that will be discussed in greater detail at the end of this section, for it is a prominent feature of the reports by the Citizens Commission and the California Higher Education Policy Center.

Finally, the Education Roundtable report has a few words on productivity, but there is an aura of conservatism on just how far such changes are likely to go. The report argues that the colleges can:

increase the availability of classes to improve time-to-degree for students, expand current efforts to develop joint academic degree programs, develop a collaboration between the institutions that assures the transferability of units and sharing of infrastructure and faculty, and contain the rising costs of higher education by improved management, sharing of resources, and more effective planning.¹⁹

The ideas are sound, but are the commitments sufficiently precise? I was told during my interviews that Governor Wilson had vetoed a second compact because he was uncertain that the institutions were ready to pursue further productivity gains, and the jury is still out on this question.

A Note on New Campus Construction
The ultimate example of business as usual would be the construction of new campuses. Two of the reports address the issue directly: Shared Responsibility and the Citizens Commission report. Of the two, the former is more blunt:

New public campuses should not be built for at least ten years. Maintenance and renovation of public campus facilities should be the highest priority for state capital outlay support. The state should require greater use of classrooms each week, and instruction should be scheduled on a year-round basis.²⁰

The Citizens Commission waffles a bit, in part because by the time their report was finished, the 10th UC campus in Merced was effectively a "done deal" politically, and one presumes they saw no point in railing against the obvious. It is clear, however, that their view is similar to that of the California Higher Education Policy Center, for they state that "new construction for additional enrollment capacity should come only as a last resort."²¹ While the RAND report does not address this question directly, it is clear from their approach that the authors would be critical of new campus construction as well.

Why such opposition to what must surely seem the most logical way to handle Tidal Wave II? The answer is obvious: new construction is the most expensive way to handle enrollment growth. And, in particular, when that new growth is a UC campus, one is buying not just space for undergraduates, which is what is needed, but also the research and graduate education that comes with it, all at great expense. The Citizens Commission did argue that this new UC campus should be different from the others, in that it should have an undergraduate emphasis,²² but the dynamic created within the UC system virtually guarantees that UC Merced will be a cookie-cutter version of the other campuses, complete with the full array of activities that defines a research university. Several people whom I interviewed this summer noted that it would have made sense, at a minimum, to locate the new campus in downtown Fresno, where the people are, and in an area that needs the economic revitalization that the new campus would bring. Instead, the location selected virtually assures the creation of a freestanding residential campus that is similar to others.

A further danger of starting down the road of new campus construction is that one unleashes all the political forces that will prompt other legislators to want one in their area. Already voices are being heard, calling for an 11th UC campus in Chula Vista. Part of the purpose of the original Master Plan was to rein in the political pressure that prompts calls for a campus in every legislative district. Now, alas, that genie is out of the bottle. The next governor would be well advised to squelch any such aspirations promptly and decisively. Whatever else California higher education may need, additional research universities are not among them.

4. Governance Reform
Of the five broad themes in the reports, the area of greatest divergence concerns governance reform. The Citizens Commission devotes considerable emphasis to this subject, more so than any other report. The two most controversial ideas they put forth are a dramatic restructuring of community college governance and CPEC. For the community colleges, the commission’s proposal would eliminate the 71 elected local district boards of trustees, and replace them with appointed governance councils, made up of nine members appointed by locally elected officials, four members appointed by the statewide Board of Trustees, and four members appointed by campus constituencies (administration, faculty, staff, and students). They also urge that all provisions of the state’s Education Code governing community colleges should sunset as part of this rearrangement.²³ For CPEC, they propose reducing its membership from 17 to 9 members, consisting of appointments made by the governor, the Assembly speaker, and the Senate Rules Committee. They would also strengthen the agency by giving it expanded authority to serve as the prime advisor to the Department of Finance, the governor, and the Legislature on budgetary and policy matters for both public and private higher education, and to serve as the agency to distribute special funds to promote cooperation, efficiency, and resource sharing among campuses and K-12 schools.²⁴

The governance change proposed for community colleges is clearly motivated in part by the fiscal and accountability problems experienced by several of the large, urban, multi-campus districts.²⁵ A secondary motivation is the desire to align the community colleges more closely with the governance arrangements of UC and CSU, where a president or chancellor serves as a strong system head, reporting to a single Board of Regents or Trustees. Labor contract negotiations would also be centralized for the system under the chancellor’s office, rather than decentralized to the district level, as currently occurs.

The proposal to strengthen CPEC is clearly modeled on the common pattern in other states in which a coordinating board has real authority, and is the conduit through which budget requests from the campuses make their way to the governor and Legislature, often with a critical view of the requests, coupled with the agency’s own recommendation. Among statewide boards, CPEC is currently among the weakest nationally, and it is certainly worth considering this proposal. It is also worth considering, however, why the other reports did not advance similar recommendations.

My assumption is that the other reports ducked such issues because they have the potential to be highly controversial, and can become virtually the only thing that gets considered and debated, distracting from the more fundamental need to move quickly to accommodate Tidal Wave II. A number of observers of the California scene would question, for example, the continued value of the three, distinct systems, arguing instead that the system offices be disbanded and that more market-like conditions be allowed to prevail. To raise such issues at this time, however, would be counter-productive to the real needs of the state, and would shift attention away from the enrollment concerns that drive these reports.

Shared Responsibility does endorse the recommendation that the Education Code, which in its annotated version runs to three full volumes and over four hundred pages of statutes, be thoroughly reviewed with an eye to eliminating laws and regulations that are no longer of value.²⁶ The chancellor of the community college system is pursuing this objective, and it seems a worthy one.

One common theme in my interviews was the problem created by the increasingly politicized nature of the UC Board of Regents, a problem not limited to California, but one that troubles many public institutions.²⁷ Governors increasingly use the board to make political appointments rather than to ensure the strongest possible appointments of knowledgeable, influential and independent citizens. None of the reports, however, discuss this issue, which may be the most important governance concern of all.

5. Linkage to K-12 Schools
A relatively new issue that might not have appeared in similar reports in earlier years, but that is at the forefront of public attention today, is the sorry state of K-12 education and the need to connect the colleges and universities in ways that help to improve student performance. Factors that contribute to this change include: growing concern about the amount of remedial education being taught in college;²⁸ the need to improve performance of Latino and black students so that they can gain places in the more selective campuses, now that Proposition 209 has blocked preferential admissions; and the general awareness that K-12 and higher education are one system, with the requirements for college admission setting the standard that K-12 must achieve. Sadly, the history of higher education in this country, at least since the 1960s, has been to isolate K-12 from higher education, with different actors and policymakers operating in each sector. It is as if education were divided into geological slabs, with few people paying attention to the vertical linkages between them. One salutary feature of recent times is the breakdown of this artificial division, a topic that is addressed by all the reports.

Enhanced student performance is one of the key strategies advanced by Shared Responsibility, as it should be possible for more students to accelerate progress by taking Advanced Placement courses in high school, as well as enrolling in college-level courses in high school and at community colleges. In this sense, the report shifts the focus on productivity from the professor to the student, adopting the concept of "learner productivity." Similarly, while in college, students should be encouraged to accelerate their programs, enrolling in summer as well as during the regular academic year. The report also stresses the need to improve teacher preparation, a responsibility primarily of the CSU system.

The Citizens Commission places even greater emphasis on improved linkages, arguing that "the state should make the institutions of higher education explicitly accountable for improving the quality and effectiveness of K-12 and of teacher education."²⁹ Included among their proposals would be a teacher improvement and development fund established from Proposition 98 funds and matching amounts from higher education budgets. The CSU system is encouraged to place highest priority on and to redirect resources to its schools of education in order to improve teacher preparation. Colleges and universities are urged to clarify the standards and competencies required to succeed in college, and to support efforts at competency-based reform in the schools.³⁰

The Education Roundtable report devotes a section to the need to strengthen collaborations with K-12 education, with proposals to set and enforce high goals for academic achievement, increased priority for new teacher preparation, commit to participate in community-school partnerships to serve the needs of low income, at-risk students, and to bring the results of research on best practice to the schools, through active collaborations.³¹

The RAND report focuses on the need for the CSU system to take the lead in improved teacher preparation, and, along with all segments of higher education, to encourage efforts at K-12 school reform.³²

In short, there exists unanimity on this subject in all reports, and as mentioned earlier, it is noteworthy that the topic is addressed at all. Indeed, this is one of the most heartening developments of recent years.

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