Published in the Daily Nexus on November 14, 2012
During the second day of their three-day meeting at UC San Francisco Mission Bay, the UC Board of Regents deliberated on revenue-generating measures such as increasing nonresident undergraduate enrollment and approved their budget for the 2013-14 academic year.
Gov. Jerry Brown spoke during the morning proceedings, assessing the current fiscal climate and seeking clarification regarding a recent UC Berkeley report criticizing the UC for high-risk investments. After discussing the potential benefits of increasing nonresident undergraduate enrollment, the Board passed a motion to approve their 2013-14 budget with Lt. Gov. Gavin Newsom casting the single dissenting vote, citing the inevitable consequences of increased expenditures.
UC Chief Financial Officer Peter Taylor engaged Brown in a debate regarding the university’s investment practices, which Brown alleges have contributed to a 200 percent increase in UC debt within the past five years. Earlier this month, five UC Berkeley graduate students penned a contentious exposé — which can be found at http://publicsociology.berkeley.edu/publications/swapping/swapping.pdf — accusing the UC of engaging in risky interest rate swaps. The document also claimed that funding generated by Proposition 30 will be paid to banks on Wall Street, a prediction Taylor called “scurrilous and factually inaccurate.”
According to Brown, the document raises the relevant question of how such massive debt was accrued so quickly.
“It’s no surprise that people write inflammatory reports, because there are a lot of strong feelings among the different constituencies and everybody’s trying to find somebody else to pay for the costs that are rising, that are significantly higher than inflation,” Brown said. “… But I just have one question: I did notice in this report that the claim is made that the debt of the university increased from $6.9 billion to over $14 billion in four-and-a-half years; could you address that?”
Taylor countered by placing responsibility for the debt on the state’s lack of support.
“We’ve doubled our debt, because as you know, the state hasn’t been financing many of our facilities as of late, as you know, because of the state’s position,” Taylor said. “As a result, we’ve taken on many of the responsibilities that in good and normal times would be financed on state bonds.”
According to Brown, history has proven that such tactics are unreliable.
“In Oakland we had some of these swaps too; they didn’t turn out quite as well,” Brown said.
Taylor defended the swap policy, calling it comparable to other tactics that have been successfully employed at other universities.
“And the market is full of examples of situations where it didn’t turn out as well. This board … in July 2011 adopted the swap policy that’s currently in place that provides guidance to me [and] is as robust and as full of checks and balances as any swap policy you’ll find for any higher education entity in the country,” Taylor said. “I will hold it up as a prime example of the best practices and I encourage the board to review that because the point guarantees that we don’t go crazy with our debt or with our hedging instruments.”
Following a lunch break, the Committee on Educational Policy debated whether further increasing the UC’s 10 percent system-wide cap on out-of-state students could eventually help the UC fulfill its role as a public university.
According to UCLA Dean Aimee Dorr, who was named a UC Provost in July 2012, the university must learn to balance their baiting of out-of-state students with their commitment to California natives.
“One of the UC’s strategies to maintain and improve quality has been to increase the enrollment of nonresident undergraduate students,” Dorr said. “It’s very complex putting together multiple goals which are not necessarily always all compatible with each other … What are the ways that we can get money and what do they do positive for us and perhaps not so positive — or, what do we give up when we do it?”
UC Executive Vice President for Business Operations Nathan Brostrom said higher numbers of nonresident students can provide more than just fiscal benefits, which are estimated to total an additional $23 million in revenue for the 2013-14 year.
“I’d also note that increasing nonresidents is a prudent way that we can maintain capacity when the state withdraws funding for California students,” Brostrom said. “If we downsize our total enrollment, it really only saves money if campuses are able to do a commensurate downsizing of faculty and other benefits like that, and that does not happen very easily in the short-run. This is a way that we can maintain current capacity and then continue to enroll more California resident undergraduates.”
Despite Dorr’s presentation on the non-financial gains of enrolling more nonresident students — such as “enhance[ing] the educational experiences of California students [and] extend[ing] California’s global reach and connections” — Regent Eddie Island said he found the premise dubious at best.
“I’m struggling to find the non-fiscal benefit of out of state students,” Island said.
Student Regent Jonathan Stein said he was skeptical that raising the system-wide cap would solve the disproportionate spread of out-of-state students throughout the system. According to Stein, UCLA enrolled a freshmen class consisting of 30 percent nonresident students this year while other campuses have rates as low as two percent.
“If we’re talking about eventually moving the cap from 10 percent to 15 percent or 20 percent — if we were talking about an even spread of 15 percent at each campus, I think the student regents could potentially get behind such a thing,” Stein said. “But we’re not talking about an even spread. We’re talking about very large percentages of out-of-state students at some campuses and very small percentages of out-of-state students at other campuses. And if we raise the cap, we’re just widening that inequality.”
However, Stein proposed an alternative of campus-specific enrollment standards that would allow the university to increase nonresident populations while maintaining a balance throughout the system.
“We are in support of something that allows a per-campus cap so that the smaller campuses and the newer campuses can continue to grow their out-of-state students by some small number,” Stein said. “That allows us to see new revenue — and that’s very, very important, as Nathan has suggested — and it ensures that no individual campus of the UC system turns into the University of Michigan or the University of Virginia.”
In addition to several other solutions, the board’s full budget presentation — available at http://regents.universityofcalifornia.edu/regmeet/nov12/f1ppt.pdf — includes a provision under “Next Steps” recommending that the UC “secure additional State General Funds or implement a tuition and fee increase to help fund the 2013-14 budget plan.”
In protest of the recommended eventual tuition hikes, several students camped out at UC San Francisco Mission Bay last night in a “sleep-out” organized by UC Berkeley graduate student Charlie Eaton, one of the authors of the UCB report on risky investments. The snoozing protesters plan to rally in favor of students’ rights at today’s meeting.