California’s higher education system spared

The University of California and higher education as a whole were spared a harsh reality when Gov. Schwarzenegger signed the long-overdue state budget. The 2010-11 spending plan will not only increase higher education funding but provide an extra chunk of cash to make up for last year’s cuts.

“I think that in relation to the overwhelming challenges the Legislature faced, the university did well in its budget restoration,” said Patrick Lenz, a UC vice president.

But that doesn’t guarantee that students are off the hook for increasing tuition fees, which have inspired a wave of protests at UC campuses state wide. Since just last fall, tuition fees have gone up by 32 percent and hundreds of students have been arrested during protests.

So where will the money go?

Straight to the core educational aspect of the University, according to Lenz. The University’s massive industry in research, medicine, and other auxiliaries and services won’t see a single cent, he noted.

The budget allots a total $2.9 billion to the UC system, nearly half of the University’s core budget for educational expenditures. About $371 million of that amount works as a cushion for funding cuts absorbed by the university in the past three years.

Of that $371 million, about $260 million will come directly from the state while $106 million will come from federal stimulus dollars, said Steve Boillard, a higher education expert with the Legislative Analyst Office. The LAO is the Legislature’s nonpartisan  fiscal adviser.

Among other things, students and teachers both can expect to see an end to furlough days on campus, said Boilard.

Then there is the issue of enrollment, which continues to rise despite the University’s budget gap for education.  

“$51.3 million is going towards unfunded enrollment,” said Boilard. That amount will cover about a third of the University’s student surplus, said Lenz.
“That really is a dedicated resource to reduce class size and hire faculty,” said Lenz.

But schools like UC Davis will be scaling back on staff in the next three years, removing up to 194 positions, Chancellor Katehi announced Monday.

“Those are cuts around administration. They’re taking a look at HR and streamlining operations by eliminating redundancy and bringing in technology,” said Lenz. Those job cuts should not include teachers, he said.

The remainder of the money will allow the University to invest in various academic areas or student services like health care.

But the results of the Nov. 2 gubernatorial race could drastically change things for the University mid-year.  

“It is very clear that at least with Attorney General (Jerry) Brown that he wants to get engaged in order to address structural deficit of the budget,” Lenz said. “That could lead to a special session in January. It could lead to a repeat of what we experienced in the past with mid-year budget reductions. It’s certainly not clear.”   

“Campuses should have a sense of caution in not over-committing these funds in case we have to give it back to the State mid-year,” he added.

Lenz also noted that the money is a one-time offer. “We would hope that they would make it into the general fund but in case it doesn’t they’re just one time monies.”

Lengthy development projects that could rely on continuing funds should hold off, advised Lenz, because the University could take more budget cuts next year.

One of the best investments, said Lenz, is books. They can be purchased now as long term investments that will continue to give back to students.

But while no more fee hikes are planned for the remainder of the 2010-11 school year, Lenz denied that the new funds will mean lowered or even curbed tuition fees for students in the future.  

“Keep in mind that even with the augmentation the state contribution is still $300 million less than what it was in the 2007-08 school year…We have a billion dollar gap between revenue and commitments,” said Lenz.

But the money from this year’s budget should go towards filling that gap in order to prevent more fee increases. Lenz said that was one of the possibilities in consideration, pending on whether or not the financial line of the budget remains stable.

But students can look forward to keeping their Cal Grants. Governor Schwarzenegger’s  July budget included the elimination of Cal Grant’s entire competitive grant award system.
UC lobbyists rescinded that proposal by the time the May revision rolled around.

Students should also see lower interest rates on their loans due to some fiscal restructuring within the Student Aid Commission, said Boilard.

$100 million was cut from the Student Aid Commission by ousting banks as middle-men for student loans. Previously, banks provided and processed student loans through the Cal Grant program. Those banks provided lowered interest rates for students under what was called a guaranteed loan, backed up by a government promise that the loan will be repaid. This year’s budget removes the banks and provides those same loans direct through the government.

“That means even lower interest rates and less work for the Student Aid Commission,” said Boilard.

But even with its given benefits towards higher education, the budget’s overall bare-bones approach to funding social programs makes the University’s win bittersweet.

Imperative social programs like subsidized child care under Cal Works were cut entirely, putting low income working families in a bind for day care. That program’s elimination freed up $256 million, about the equivalent of the University’s funding increase. $820 million was saved by cutting inmate health services within California’s prisons. The budge also pulled in the reigns for new state employee pensions, a heated and drawn-out agreement that delayed budget negotiations until the early morning hours last week.

And the UC as a whole is not only less dependent on an on-time budget than other publicly funded social programs but has the coveted ability to absorb costs when it experiences cuts.

“They are in a better position because they can float themselves loans from other accounts,” said Boilard.

That’s exactly what the University did last year. When the Cal Grant program was gridlocked because of a budget impasse, the University gave itself a loan in order to front $189 million worth of delayed Cal Grant funds for students on a tuition deadline.

The budget’s fairly grim results reflect one ugly reality: we’re broke. And while higher education avoided the axe this time around, “It is hard to see how this is sustainable,” warns Boilard.

“Especially at a time that the foundation is so unstable.”

Some $5 billion of the state’s budget balance relies on federal funding that, in large part, has yet to be approved, and the $106 million in federal funds allotted to the University is not included in that category of pending funds, however.

“That money arrived a month ago,” said Boilard.