By Ron Leuty
San Francisco Business Times Reporter
Once upon a time, California’s higher education system was the envy of the nation, with students paying little to nothing to be taught and trained by world-renowned faculty.
But the fairy tale is turning into a nightmare as the University of California and California State University systems, as well as many private institutions, seek to cover and control rising costs as state tax support dwindles. The 10-campus UC system, for example, threatens to raise tuition as much as 20 percent if voters in November don’t pass Gov. Jerry Brown’s tax plan.
Beyond an argument between proponents of higher taxes versus those who support higher tuition, the complicated economics lesson could have dire consequences for California students, teachers and businesses.
“What’s going to happen in the long run in California is we’re going to educate fewer and fewer people when we need more people with bachelor’s degrees,” said Leroy Morishita, president of Cal State East Bay.
Schools are cutting, consolidating and reworking contracts, trying to buy cheaper pens and eliminating bottled water. But costs continue to rise.
At Cal State East Bay, salaries and benefits account for 71 percent of the Hayward school’s $157 million operating budget, but if Brown’s tax plan doesn’t pass, it would have to cut $8.5 million in the 2012-13 budget.
“That would be a dramatic shift,” Morishita said.
Indeed, the bill is coming due for students and their families as well. State support last year of the 331,000-student CSU system, for example, fell to $2.14 billion. In 1998-99, the state earmarked $2.16 billion for CSU, when the system had 274,000 full time-equivalent students.
As a result, the 23-campus CSU system, including Cal State East Bay and San Francisco State University, has seen full-year, full-time, in-state undergraduate tuition increase 192 percent over the past 10 years, to $5,970 for the coming school year.
During that same period, tuition in the UC system soared 163 percent, to $11,220 in the 2012-13 academic year. UC regents last month agreed to freeze tuition for the coming year, if voters approve Brown’s tax package.
UC, however, will increase fees for professional degree programs by as much as 35 percent.
“There’s been a shift from state support to the view of public education not as training for the future and the public good, but to one that is basically Milton Friedman’s view of education: If you want to get educated, go borrow the money as an investment,” said Stanton Glantz, a professor of medicine at UC San Francisco and secretary of the UCSF Faculty Association.
Still, the cost of a California public higher education remains affordable when compared with other states — at least for now. Yet some leaders say the rate of tuition increases and their frequency are the source of student ire and faculty angst. What’s more, they say, the increases could put higher education out of reach for students from poor families.
At the same time, too, schools have undertaken cost-cutting and cost-shifting measures. As of July 1, 5 percent of the pay of faculty and staff in the Oakland-based UC system will go toward their pension plan. Employees previously surrendered 3.5 percent of their pay, but most employees previously paid nothing toward their pensions.
But the institutions likely will have to cut deeper still. If the governor’s tax plan fails, for example, Morishita said Cal State East Bay could use more part-time employees, not fill tenure-track positions as faculty retire and defer maintenance.
Cal State East Bay has reduced enrollment, limited travel and cut equipment purchases. In fact, it has worked with OfficeMax to substitute name-brand supplies, like with ballpoint pens, for generics.
The OfficeMax supplies contract alone could save Cal State East Bay $500,000 a year, said Brad Wells, the school’s chief financial officer.
Supplies, services, equipment and travel make up 7 percent of the school’s budget.
“It’s very simple to do, and that money is savings forever,” Wells said. “It takes several of these to move the needle, but we picked five of our largest contracts and we’re addressing all of those five this year, just as a starting point.”
Cuts at state schools have translated into reduced admissions or cuts in the number of class sections, which means students sometimes are not able to get the classes they need to graduate in the traditional four years — or even five years. That has benefited other institutions, like the nonprofit Golden Gate University.
“UC is turning more and more into a private institution,” said Golden Gate President Dan Angel.
Some students from state schools have arrived in tears as they seek a school that will have the right classes that will allow them to get their bachelor’s degrees, said Cherron Hoppes, dean of Golden Gate’s undergraduate programs.
Golden Gate, which has 600 undergrads, in the fall will cost $17,700 for a student with 15 units, or $590 per unit. The same student in 2008-09 paid $540 per unit, or $16,200.
Golden Gate University has held its tuition increases to less than 2 percent each of the past three years.
“You don’t want to charge so little that you can’t give students what they need,” Angel said.
Private schools, however, also face their own cost demons.
Golden Gate University, for example, in recent years has closed three campuses as online courses enrolled more students.
Personnel costs make up 54 percent of the $355.8 million fiscal 2013 budget at the University of San Francisco, said Gerardo Marin, senior vice provost for academic affairs. That includes a 135 percent increase in the cost of health care benefits over the past five years.
“We have to compete with Stanford and Berkeley and pay them a salary where they can afford to live in the city,” Marin said. Financial aid, at about $65 million, is the second-largest item in the Jesuit university’s budget.
USF will charge $38,490 for undergraduate full-time tuition in the 2012-13 school year, nearly 4 percent more than last year.
“Nobody’s happy to pay more,” Marin said. “It’s the same at the supermarket when things go up in price.”
USF has been expanding its network of satellite campuses, including one that opened this summer in Pleasanton and another in downtown San Francisco, to attract more students who also work. It also is beefing up its online programs.
USF has about 9,800 students.
At the same time, USF is trying to control costs, Marin said. It weighs building improvements carefully as it considers the effect those delays might have on student or faculty recruiting. It has closed some programs, such as an institute for nonprofit organizations, that don’t attract enough students. It also has tried to cut down on its use of paper and bottled water.
“It’s a continuous process,” Marin said.
Ron Leuty covers biotech, higher education and China for the San Francisco Business Times.