Education funding, taxation myths
The Occupy crowd says state college education is underfunded because the wealthy do not pay enough taxes. Opponents say government overspends and taxes are already high enough. We must look beyond the rhetoric for the truth.
Start with education costs: From 1985 to 2011, the average college’s total budget per student has risen a staggering 498 percent while the Consumer Price Index increased by 116 percent. College costs have increased over four times the rate of inflation over the past 26 years!
Next, look at taxation: In 1970, the top federal income tax rate was 50 percent; in 2007 it was 37.9 percent. Regardless, total tax receipts have remained steady at about 19 percent of GDP. As expected, the rising tide of increased wealth from lower taxes lifted all economic boats and filled tax coffers.
The recession first hit the working class as companies had to shrink to remain solvent. Today it has hit the wealthy as the total income of the top 1 percent has fallen by more than 30 percent since the recession began. It is clear that tax rates and wealth gaps are not the root problem.
Instead of getting trapped in irrational class warfare, the UC protesters should direct their anger at university leadership and state government. The growth in the number of UC employees, bloated operations and bureaucratic processes, too many resources directed toward research and away from instruction, overly generous UC employee pay and benefits, the cost of construction for campus ego shrines … all of these things should be challenged to force UC management to go lean and focus on providing the absolute best undergraduate education value.
Increasing taxes on the wealthy will impact capital investment, thereby reducing the number of jobs available to college graduates. It will do nothing to stop runaway college cost inflation.
Jeff Boone
Davis
Short URL: http://www.davisenterprise.com/?p=119384
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Posted by Letters to the Editor
on Dec 27 2011.
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The first statistic quoted is an insulting misrepresentation of a statistic reported elsewhere. David Wise of RealClearSports posted this month that average college tuition per student has risen 498 percent compared with 115 inflation. Not the budget. At least at the University of California, the academic budget per student has fallen after adjusting for inflation. Tuition has increased entirely because of state funding cuts.
http://www.realclearsports.com/articles/2011/12/17/time_for_colleges_to_rein_in_football.html
Wise does make a fair point about the cost of college athletics, and UC Davis is no exception to that. Entirely apart from any spending on academics, UC Davis under Vanderhoef increased campus student fees by more than $1,200, mostly for the athletic department. That truly was a regrettable increase in student costs.
You can make up statistics about anything. 54% of Americans know that.
In the 1998-1999 school year the total UC operating budget was $9.322 billion and total UC enrollment was 178,410; this is $52,252 per student. In the 2009-2010 school year, the total UC operating budget was $18.952 billion and the enrollment was 234,464; this is $80,831 per student. The inflation is 54.70% compared to the CPI of 30.88% for the same twelve year period.
The 2011-2012 budget is $22.5 billion and enrollment is projected at 245,000. This inflated the operating budget per student to a staggering $91,836. This during a time when inflation is at an all time low.
The UC system is blowing up its fiscal house by its own mismanagement of operations. Instead of seeing cost increase much faster than the rate of inflation, we should be experiencing a lowering of the administrative/opearational cost per student as a well-managed organization would realize a lower cost per unit through economies of scale. The way this data charts, a growing UC will continue to inflate student costs much faster than the rate of inflation.
First of all, these numbers are completely different from what you said before. What you had before was a 177% inflation-increase over 25 years (because 5.98/2.16 = 2.77); what you have now is a an 18% increase over 12 years (because 1.55/1.31 = 1.18). So you’re already stepping back from most of your original wild exaggeration.
Second, your numbers are still wrong, for two reasons. National inflation over the period in question was 31%; inflation in California was 40%. Moreover, and more significantly, you’re including operations that have nothing to do with undergraduates, particularly medical schools. Medical schools have grown substantially in inflation-adjusted dollars; public undergraduate education has not.
http://www.dir.ca.gov/dlsr/capriceindex.htm
You ought to learn how UC actually works before you criticize it. Undergraduates don’t study in hospitals. So it makes no sense to include hospital budgets as part of the budget “per student”. It also makes no sense to count research funding as a cost “per student”. The correct ratio is the state allocation plus tuition and fees, per student, per inflation. That ratio has gone down.
“National inflation over the period in question (1998-99 to 2011-12) was 31%; inflation in California was 40%.”
Your California number is close. Your US number is wrong.
For the fiscal year 1998-99, the California CPI index number was 166.008. For the fiscal year 2011-12, the California CPI index number is 234.263. The nominal inflation works out to 41.115%.
For the fiscal year 1998-99, the US CPI index number was 164.542. For the fiscal year 2011-12, the US CPI index number is 225.363. The nominal inflation works out to 36.964%.
Source: California Dept. of Finance; see the link to “CPI & Deflators”:
http://www.dof.ca.gov/html/fs_data/latestEconData/fs_price.htm
It doesn’t change the point. For the national inflation rate I just used Jeff’s number; for inflation in California I looked it up separately (and rounded it to 40% even though I kept two digits for the others). Anyway, inflation in California is the correct figure and it’s significantly higher than Jeff’s number.
FINALLY, someone has spoken up on the public education scam, America’s No 1 consumer ripoff. Thanks Jeff.
Sure, except for the fact that his numbers don’t work, he makes a great case.
You guys keep arranging the deck chairs with the dollar figures and numbers, however, the key point to me is Mr. Boone’s 2nd to last paragraph. As I am paying for some children to attend the UC system, and 1/2 dozen of us in the family back to my father are products of this little university here, I think that Boone is generally on-target. A colleague reminds me this farm is a research institution moreso than a teaching institution – i.e., hose the students seeking an education. Our kids are getting less and it is costing more. Meanwhile we have fat cat profs doing things like spending their time editing the Davis wiki or getting involved in “Occupy”. The benefit package, retirement, and pay scales for staff and faculty is bloated (oh yes, my wife is in the UCRS), that cannot be denied. It is more egregious than the regular state employee system.
Look, you can call UC “bloated” if you want, but the fact is that it’s not much more “bloated” now than before. The main exception is that students are getting more side services that they want, such as health care, athletics, and dining halls. You can also call professors “fat cats” if you want to, but the fact is that we’re not any more “fat cats” now than we were before. In one respect, less so than before, because the professional skills of typical research faculty pay extremely well in the private sector.
The huge difference is that about half of the state grant has been replaced by tuition. There aren’t any “deck chairs”; there are still many in-state and out-of-state students who want to attend UC. I think that state support for UC is good for the California economy — but if voters aren’t convinced, then that’s why state support is falling and getting replaced by tuition.
Of course, if you don’t want a UC education for your children (or wouldn’t want it if you had children), it’s your choice. Higher education should be for those who want it, not for those who feel that they are “hosed”. Again, though, there still are many students who want the type of education that comes with access to research faculty. Faculty who are active in research can teach deeper, more interesting classes. Especially these days, there are also many ways for undergraduates to get directly involved in research. Teaching and research aren’t enemies — but students who feel that way really ought to try Cal State or a community college instead.
Either way, it’s pointless and rude to resort to pejoratives. Or to slap together completely the wrong expense figures.
Greg, I don’t understand your “completely wrong expense figures” point. I took them directly from the published UC budget reports. I used a national CPI of 30.88 and you and Rich Rifkin tell me I was wrong since it is 31%… that is not a material difference based on the point I was making. I agree that it would have been more accurate to use the California CPI, but again, it still does not invalidate the point that UC operations cost per enrolled student have exceeded the rate of inflation for this twelve years.
You can quibble about complexities of the use of funds that I do not understand; but “operational costs per customer” is a common “cost-per-unit” metric for all businesses. UC performance related to this is indicative of fiscal mismanagement… especially when considering the expectations of realizing some economies of scale as the UC enrolled population expands. And, given that the UC system has had reductions in state funding for the last decade. And, lastly, the last 4 years of the Great Recession.
Add these things together and it is clear that UC management is failing on performance expectations to run a system that can meet its mission within its means.
From my perspective, you and others working for the system are digging in your heels blaming taxpayers, the state governors and the state legislature while resisting changes toward a leaner and more efficient undergraduate education model. This is the time-tested political strategy for education in general to hold tight while public sentiments turns for “the students” and voters vote to tax themselves more. However, we have reached a point in local and national politics and economics where this strategy will no longer work. Given this, you have to ask yourself what is the correct strategy for the UC system to survive and thrive? I say it needs to go lean.
It’s completely wrong because you’re counting medical operations as part of the cost of educating undergraduates. As I said, undergraduates don’t study at hospitals.
Here is a suggestion from out in left field. Perhaps UCD could take a five year hiatus from construction. I mean, if the tax dollars to support the university are shrinking, then shouldn’t the enrollment shrink somewhat in proportion? (with a shrinking revenue source, can you afford to educate the same number, or a greater number students? Answer: no.) And if you should be educating a smaller number of students because your revenue sources are shrinking, why do you need to keep building new “shrines”?
Five years, no new construction on campus. Everybody will survive, life will continue on the planet. And maybe the Mondavi center will get fixed.
It would not in any serious way make the world a better place for UC to give up and shrink. First of all, tax dollars to support UC aren’t shrinking; tax dollars to support *undergraduates* are shrinking. UC still has stable public funding, or even expanded funding, for both research of all kinds and medical care. Just a few years ago, the same taxpayers whose support for UC is drying up (albeit that some of them don’t know it) directly voted for a stem cell initiative that provides UC with hundreds of millions of dollars a year. Is UC supposed to turn away that money with, “Sorry, you voters want research from us, but we won’t do it because it would be chasing prestige”? It wouldn’t make any sense.
Besides, if taxpayers are subsidizing undergraduates less than before, out-of-state undergraduates are willing to subsidize in-state undergraduates. Total out-of-state tuition is substantially more than in-state tuition *plus* the per-student tax subsidy. Out-of-state students, who clearly want to attend UC, help keep in-state college education afloat. This is another reason that UC doesn’t have to and shouldn’t give up.
And finally, a lot of the recent construction at UC Davis was for athletics buildings and other upgrades that Davis undergrads voted for themselves. I’m totally against the way that this happened: The administration deliberately made it taxation without representation by phasing in these fees so that voting students wouldn’t have to pay. But it is was NOT a mistake or sin of the *current* UC Davis administration; it all happened under Vanderhoef.
Greg, isn’t it fair to state that the University expanded research and undergraduate programs – in effect expanded UCD prestige – having lived off the previous state funding for the undergraduate programs? I read recently that the Medical Center had record profits this last year. Why aren’t those profits returned to help fund undergraduate instruction and provide tuition relief?
The accounting for all of this that you report as being clearly delineated (i.e. undergraduate studies versus research), are, in fact, largely muddled. For example, the university does not account for the added administrative/operational costs for infrastructure and support services for staff involved in research.
I’m not aware of any legislation that requires all program funds to be restricted. The accounting is done on one set of books. All programs are managed under one set of administrative management. It looks to me like a convenient shell game forcing undergraduate students to be the pawns in a political funding war while the senior UC employees and faculty get their gravy protected by arbitrary fund restrictions.
Your response to my article begs the question: “what would you do?” My suggestion is for the UC system to go lean and run research and undergraduate programs as a profit center to help fund undergraduate programs. It seems you are just protecting the status quo.
First of all it’s just poor form to come out swinging with a lot of slap-dash numbers and sweeping conclusions, and THEN complain that the data is muddled. If you know where to look, the data is there. (Even if it weren’t already online or you can’t find it, you could ask.) For instance there is a lot of good data here:
http://accounting.ucdavis.edu/Reports/
Different medical school and hospital costs are in several different spots of the Schedule B forms here, but it’s not to add them up. The bottom line is that the medical center budget is both huge and growing, and you get a completely different picture after you subtract it off.
As for Medical Center profit, first of all we are not talking about the 30-60% type of profit margin that you sometimes see in Silicon Valley. Profit in 2010 was (according to the Sacramento Business Journal) 6.2% on $1.1 billion in revenue. Of course, hospital expansion and the medical school itself have first dibs on that profit. For all I know some sliver of that $69 million could or does go back to the Davis campus — but it’s just common sense that you can’t really pay for calculus class with heart surgery.
Otherwise, OF COURSE we should “go lean” in various ways. Everyone knows that and it’s exactly what Katehi is trying to do. She shows much more concern for saving money than Vanderhoef did and that’s what many faculty like about her. But a research university does a zillion different things, almost all of them things that someone wants. It’s just not simple to simplify the operation.
I do have one simple piece of advice to the state government and taxpayers — although it’s not really advice because I don’t think it can be fixed easily. Namely, if California voters truly want to spend more state tax dollars on prisons than on public universities, then that’s a disgraceful order of priorities.
As for your first question, it’s only sort-of fair. UC and UC Davis have leveraged past undergraduate education to expand into research and to expand education itself. But “leveraged” is not the same as “lived off of”. If one generation of college students leads to an expanded pool of applicants, there is nothing wrong with expanding to take those applicants. Or, if faculty members are hired to teach at an expert level and they can also get NSF funding for research, then there is nothing wrong with applying for and obtaining that funding. There are ways in which the university robs Peter to pay Paul, but not this way. It doesn’t rob the average undergraduate to pay for campus expansion or for research.
Again, one of the exceptions is the student fee hikes associated with Division I athletics. In that case, one generation of undergrads voted for higher fees for future undergrads, so that voting students could later cheer for the alma mater as alumni. That happened three times. That really is exploitation of students in my opinion, but it squeezed by with the stamp of student democracy.
Greg –
My point about the budget being muddled was that expenses are muddled. For examples, the UCD HR department supports all employees regardless of their designation of research or instruction. I could be wrong, but I doubt the UC charges back other cost centers for the percent of department budget. At least I have not found any reports that itemize or apportion separate department expenses to the different programs. So, in this case, the cost inflation of a larger HR department to support research gets muddled with general operations cost for undergraduate instruction… and growing research would in effect increase costs to general campus operations.
“but it’s just common sense that you can’t really pay for calculus class with heart surgery.” I absolutely do not agree with this. Doctors, and all other business, already pay for calculus class through taxation. I think it is perfectly appropriate for fund sharing between programs. I also think it is perfectly appropriate for the Med Center to be a profit center contributing to tuition assistance for undergraduates.
I will go on record stating that I would support decriminalization of some drugs and a release of all non-violent prisoners convicted only of drug possession. Then reduce prison and law enforcement accordingly and use the savings to invest in education and drug treatment.
You will note that in my letter to the editor I included state government as a culprit to this problem. It is a matter of priorities, and the power of the state employee unions extracting more at the expense of almost everything else. I find it interesting that the tough drug enforcement demand is usually a Republican template; but liberal Democrats have owned the state legislature for decades and yet prison spending shoots through the roof, while education funding gets cut. Seems that Democrats have this as their own internal problem… since Republicans lack any influence with the political machinery of this state. That is why I suggest that the Occupy crowd takes their complaints to the state capital.
Also, I did not single out the current chancellor. She may very well be doing the right things. However, I do question a strategy of growing out of state tuition (meaning more foreign students) and growing the size of the university as a strategy to improve affordability for undergraduates… given that the current facts indicate cost inflation related to enrollment growth.
It may be your opinion that you “should” for calculus for with heart surgery. But the fact is that you can’t in any direct sense, whether or not anyone thinks you should. You could, maybe, have some small net transfer of funds.
The reason that HR supports all employees is that it’s a centralized operation. Why is it a centralized operation? For economy of scale, i.e., precisely to save money. Besides, most of the faculty are both teaching and research. It would make no sense for me to talk to two HR units about my benefits because I do both teaching and research. This is just some wild kibitzing.
If it bugs you that UC plans to take more out-of-state students, then here as well, before crafting opinions you should start with the facts. As I said, out-of-state students subsidize in-state students, even beyond the state appropriation for UC. Supplemental out-of-state tuition — solely the extra that out-of-state students pay — is $22K per year, which is about twice the state grant per in-state student. Out-of-state students also aren’t even eligible for UC financial aid. If you’re against this, then it’s like refusing a generous blind date, just because out of sheer pride you don’t believe her that she’s paying for dinner.
There are too few out of “state” students. We already attract as many as we will get with exception of maybe a small uptick resulting from the great marketing campaign provided by Lt. Pike. The strategy is to bring in more out of “country” students… for which, in the emerging economies of Asia, there is a growing and plentiful supply. For this I have a big problem because the strategy basically trades away long-term future American industrial strength and jobs (as these foreign students get trained in American schools and then return home to compete with American business) for short-term gains of cheaper education. What use is an education without jobs? It is another kicking of the can down the road.
I certainly do not think that the US should respond to the rest of the world economy with ostrich methods. I would say that higher education is a valuable service that America can and should sell, and not any real secret that it can hope to guard. That, in any case, is the legislature’s concern, and not our concern here in Davis. If the state legislature cuts its strings to UC, it can hardly hope to still pull them. After all, just like Chancellor Katehi, I’m one of those job-stealing furriners.
“just like Chancellor Katehi, I’m one of those job-stealing furriners”
LOL! As long you stay here in USA paradise and/or benefit our economy, I’m not at all against loading you up with college-provided information bought and paid for by the American taxpayer… even if you do talk funny.