Wednesday, May 20, 2015

Analysis of Governor Brown’s May 2015 Proposed Budget and Its Impact on the University of California

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public education
[A] tuition-free, publicly funded system that must provide an education to each [person] within a publicly governed school system. The academic standards, the teachers and administration, the values and methods of operation employed are all subject to oversight and direction by public policy-making bodies. Public education means that a wide range of decision making resides at the community level through the operation of locally elected school boards and through other avenues of direct [community] participation. Public education also means a system in which the general public can obtain detailed information about their schools.
from Center for Public Education, “An American Imperative, Public Education”

The transfer of ownership of property or business from a government [or a public entity] to a privately owned entity. One of the main arguments for the privatization of publicly owned operations is the estimated increases in efficiency that can result from private ownership. The increased efficiency is thought to come from the greater importance private owners tend to place on profit maximization as compared to government, which tends to be less concerned about profits.
from Investopedia, “Privatization”

campus real estate and capital projects
We continue to invest in our revenue generation and expense reduction efforts… A primary motivation for utilizing PPPs [Public Private Partnerships] is access to capital. UC, however, has robust financing capability… As we continue to integrate capital needs into our operating budget, we recognize that each dollar the campus devotes to capital is one less dollar we have for student aid, faculty pay, campus maintenance, or a myriad other needs… External funds, student fees, and auxiliary funds comprise the primary sources of capital for new construction… An aggressive and entrepreneurial approach to Real Estate operations and revenue can significantly improve our bottom line.
from UC Berkeley Real Estate Department, “Public Private Partnerships at the University of California”, “2013-14 UC Berkeley Budget Plan”, and “The Evolving Real Estate Portfolio at Cal”

The University of California has signaled an aggressive shift toward privatization, taking many simultaneous forms: increased “revenue generation” in the form of selective tuition hikes and Real Estate investments, decreased compensation for UC workers and/or hiring temporary workers as an “efficiency” measure, and leasing public land to private developers with “Public-Private Partnerships.” The following analysis examines how Governor Brown’s recent budget proposal further enables each of these processes.


On May 14, Governor Brown announced a revised budget proposal, which will be the subject of discussion at the Regents’ meeting on Thursday, May 21. While the budget proposes a two-year tuition freeze for in-state students, put in context, the proposal as a whole presents a concerning advance toward UC privatization.

Tuition Hikes: One Source of New Revenue Generation
2014-15 UC tuition levels:
            in-state tuition and fees:            $13, 878
            out-of state tuition and fees:     $37, 902

2020-21 projected UC tuition levels:
            in-state tuition and fees:            $16,869
                        (assuming 5% annual increase starting in 2017)
            out-of-state tuition and fees:     $60,146
                        (assuming 8% annual increase starting in 2015)

In reality, the tuition “freeze” for in-state students is only a two-year deferral of hikes already built into the plan. Beginning in 2017, the cost of attending UC for California residents will rise by at least the rate of inflation, a very open-ended figure that will enable to Regents to vote on increases above this rate in order to generate maximum profit. This subtle phrasing turns out to be quite significant: as our economy continues to recover from the 2008 real estate crash and subsequent global financial collapse, the U.S. inflation rate this past year was actually negative, averaging -0.1%. If the cost of attending the UC were actually pegged to inflation, there would be a tuition reduction this year—not likely in an era of privatization.

While we don’t yet have a clear picture of the actual rates of increase for in-state students, we do know that beginning this fall, out-of-state and international students would be subject to up to 8% annual increases indefinitely. This hike will bring their cost for a UC education to up to $60,146 per year just five years from now, a 59% increase in the current cost. The relative profit generating potential of non-California students provides a structural incentive for UC to accept more out-of-state and international undergraduate students who can afford to pay this high price. UC President Janet Napolitano confirmed this preference when she proposed an increase of out-of-state enrollment as UC “campuses have been instructed to keep their enrollment of California students flat…If we wanted to, we could make Berkeley and UCLA 50/50 (resident and nonresident), easily, just by snapping our fingers. The demand is that high.”

But with a looming sticker price of $60,000+ before even factoring in the ballooning cost of living in California, can the UC just “snap” non-resident students into ponying up? What will they receive in return for this high sticker price?

Rationing Education
Equally concerning is the Regents’ plans to reduce the time-to-degree to three years. This reduction may seem appealing at first blush for middle and working class students who often take multiple jobs while in school to reduce their education debt. And with the Governor’s proposed $18 million cut to the Middle Class Scholarship Program, poorer students will likely welcome spending less time at the UC.

According to Reclaim UC, “The reduction of time-to-degree is presented as a solution to a problem that would not exist absent university privatization.” In other words, the shortening of time at UC Berkeley is appealing only in a context in which students cannot afford to stay on campus for very long. In addition to loading up on summer courses, some analysts speculate that this reduction in time-to-degree would be accomplished by eliminating core undergraduate curricula, which would starve many departments that depend on significant student enrollments in lower division courses of critical funding. It increasingly seems as if the UC Regents and the Governor imagine a very narrow range of majors within an overall college education that does not include foreign language courses; coursework in ethnic studies, sociology, gender and women’s studies, and anthropology; or education in art, literature, or music, to name only a few of the likely programs that would succumb to such a restructuring plan.

We instead call for increased funding to these departments, whose classes are typically over enrolled and in high demand. Increased financial support would enable them to hire additional full-time professors and offer more and smaller courses, moving the UC away from the mega-class model it has instead forced on many students, faculty, and GSIs. Can the UC continue to offer quality, affordable, and accessible education, where students will be able—and will even want—to pursue their educations at a more reasonable pace?

Why would the University pursue three-year degrees? What is in it for them? One analysis might connect the shorter stay on campus with students’ diminished institutional memory and capacity to form meaningful political associations that might challenge the process of privatization. And students aren’t the only ones who will feel this squeeze.

How the Budget Impacts UC Workers
Perhaps the most egregious part of the budget contains a significant blow to workers’ retirement benefits, which has recently taken the form of forcing new employees into separate and less secure pension plans or “tiers.” That the Governor has recommended the creation of yet another tier with significantly reduced retirement benefits signals very deep structural concerns within the UC system. In addition, we have seen a dramatic undermining of union contracts, where the UC in increasingly hiring underpaid temporary workers and denying them benefits that typically come with UC employment. The UC is now cutting very basic mechanisms of support—this is what they mean when they say “efficiency”—while increasing tuition in perpetuity—we are the “revenue generation”—leaving us to ask if not on education or staffing, then where is the increased profit going?

UC Berkeley’s Real Estate Department: The New Face of Privatization
These changes in tuition, education restructuring, and cuts to workers’ benefits are happening alongside another very aggressive and relatively novel dimension of privatization. This marks a radical shift in the UC’s role as an institution of higher education to a large real estate development and investment firm. Following the expansion of Berkeley’s Real Estate Department and the formation of “The Berkeley Real Estate Management Company,” this unfortunate situation is not hyperbole.

The cost of renting a shared room in one of UC Berkeley’s large multi-story dormitories is currently approximately $15,000 per year, the fifth costliest student housing in the nation. And what do students get for this exorbitant price? This description by an undergraduate resident in Unit 2 is telling:
I am typing this in a boxy, stuffy, fluorescent-lit room in Unit 2…[I]magine living in a hotel room for months—it gets depressing. These walls, this furniture and these windows are all but personalized. You can tell from their very essence that they are meant to last past you and past the person who will pass you…I simply cannot adjust to a living residence monikered “Unit 2.’” The very name makes me feel like I am living in a cookie-cut cubicle. I realize that I am just a trivial life in one of the many windows that fill the walls of Unit 1, Unit 2 and Unit 3…These dormitories make me feel inauthentic, average and every other sad adjective you can imagine…I wonder what feeling indistinguishable will do to my self-image when I step out into the future.

We should be appalled that students are paying such high prices to live in anonymous concrete boxes. Who would build such things? The answer is that UC has been contracting these types of construction projects to private firms owned or managed by friends of a new class of UC administrators, such as Bob Lalanne, founder of the SF architectural firm Lalanne Group and now Vice Chancellor of Real Estate at UC Berkeley. These kinds of private business deals have seriously indebted the University to the extent that it can no longer borrow money to support core functions: we are now running an approximately $15 billion deficit, up from about $1 billion just over a decade ago. At the same time, these construction projects reap immense profits off of students and tenets, profits for which there is no obligation to spend on education. This is the new face of UC privatization.

Why Is This Happening and What Do We Do about It?
This shift towards UC Real Estate speculation has largely taken place under UC Regent Richard Blum, Chairman of the world’s largest Real Estate development firm, CB Richard Ellis. Since his arrival on the UC Board of Regents, the University of California has enabled him cheap access to public land for private development companies. Blum is an expert in preying on indebted public institutions like the US Post office or the University of California, forcing the latter to construct buildings it cannot afford. In the process, Blum helps create real estate bubbles through rapid development and gentrification, and after these bubbles burst, as they did in 2008, Blum and his allies reap profits again buying up cheap land, leaving many in debt and displaced.

The face of UC privatization is multi-faceted in 2015. We need not only to resist tuition hikes across the board, but also address the corruption embedded in real estate development and support campus workers who are fighting to reverse their own impoverishment. As long as administrators continue to call the UC a “public” school, we need to be here to hold these individuals accountable to the public.

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