Rising costs, insufficient funds raise possibility of UC tuition bump

Up to $390 million in cost increases are expected for the University of California in the next fiscal year, potentially raising the possibility of a tuition increase.

Under a multi-year funding agreement with Gov. Jerry Brown that began in 2013, the state will support annual funding increases of 4 to 5 percent to the University in exchange for freezing tuition from 2013 to 2017 at the 2011-2012 level.

The funding growth, however, has not kept pace with rising operating costs, challenging the UC’s ability to hold up its end of the bargain, said Nathan Brostrom, chief financial officer of the UC at the UC Board of Regents’ meeting September.

Because of this, UC leaders will have to decide in the next month how to cope with budget constraints and may have to address the possibility of raising tuition. Though UC President Janet Napolitano has expressed her commitment to keeping tuition flat, the University is looking into tuition reform.

The University has not seen any systemwide tuition increases since the 2011-2012 academic year, when regents, amid student protest, raised tuition by 9.6 percent in reaction to years of state budget cuts.

These cost increases, which were discussed in the regents’ meeting, are categorized in order of priority: mandatory costs, high-priority costs and the University’s “Reinvestment in Quality” program, a $50 million program that would make faculty pay more competitive and lower the student-to-faculty ratio.

Patrick Murphy, director of research and senior fellow at the Public Policy Institute of California, a nonpartisan think tank, said he thinks the UC may be approaching a critical juncture in terms of its budget.

“There may reach a point at which the University system has to draw the line and decide that it can no longer (accept) another student without reducing the resources available to other students,” Murphy said. “Then, you’ll need more money.”

Mandatory costs, deemed necessary to maintain the school’s quality of education, include rising employer pensions, inflation of infrastructure and utilities costs, rising health benefits costs and higher compensation for staff after the UC signed 10 new collective bargaining agreements last year.

Totaling about $120 million to $135 million, these costs drive the spending increases funded by the University’s core education budget, said Patrick Lenz, vice president of budget and capital resources at the UC, during the September’s regents meeting.

However, Paul Golaszewski, a UC analyst at the nonpartisan Legislative Analyst’s Office, said he thinks not all cost increases are necessarily mandatory, especially because the UC had a choice when it negotiated collective bargaining agreements with the unions to avoid the compensation raise.

Last year, the 5 percent increase in state support represented just a 2 percent increase in the University’s total core budget of about $6.6 billion, insufficient to cover even the increased spending coming from inflation.

State funding to the UC has fallen by more than $1 billion over the past 10 years, hitting 9 percent of the University’s total operating budget in 2012-2013, compared to 23 percent in 2001-2002, according to the 2014 Accountability Report.

Avi Oved, UC student regent-designate, said he thinks the state’s funding has not reached the minimum needed to sustain the University.

“The state continues to shortchange the UC because we always manage to be resourceful and deal with the budget constraints,” Oved said.

To cover financial needs, the UC has raised money by tapping into alternative sources, including private donations. The University has also restructured its assets and cut operating costs by streamlining administrative processes, said Brooke Converse, UC spokeswoman. The school’s Working Smarter Initiative, for example, aims to cut $500 million in administrative costs over the course of five years from 2010 to 2015.

About $119 million more state funding, a 4 percent increase, is expected for the UC next year.

“It will probably be enough to cover most of the unavoidable mandatory costs, but what the UC is going to argue is that it won’t be enough to fund the high-priority items it would like to do,” Golaszewski said.

Beyond the mandatory costs, other important “high-priority” expenditures worth from $190 million to $205 million also need to be funded, including the backlog of deferred maintenance and seismic upgrading projects, enrollment growth and compensation increase for non-represented employees.

Conrad Contreras, external vice president of the Undergraduate Students Association Council, said he thinks a tuition raise will reduce the accessibility of the UC for students from low-income backgrounds.

“Although raising tuition may increase the quality of education, it will only benefit the privileged who are able to afford it,” Contreras said. “We have to balance quality and affordability in our education.”

In the immediate budget cycle, it is unlikely that state funding of the University will go beyond the agreed 4 percent increase, Murphy said.

“Even if the state were to decide not to fund higher education, there really isn’t much the systems can do about it,” Murphy said. “All the Universities can do is take what the state gives them and make the best out of it.”

Details of the revenue sources for the 2015-2016 budget are expected to be discussed in November’s regents meeting, along with the possible tuition increase.