Podcast Transcript: Is the University of California Broke?

Host Daniel Barwick interviews authors Laura Hamilton and Kelly Nielsen, who argue on the podcast that California has made decisions about UC that have impoverished campuses in a number of ways, limited access, and created segregation.

Dan: I have two guests with me today. Laura Hamilton is professor and chair of sociology at the University of California Merced, where she researches the organizational production of inequality in higher education. Her books include Parenting to a Degree: How Family Matters for College Women’s Success and Paying for the Party: How College Maintains Inequality, and one more that I’ll mention in a moment. Professor Hamilton received a Ph.D. in sociology from Indiana University. Joining us as well is Kelly Nielson, a senior research analyst at the Center for Research and Evaluation, UC San Diego Extension. Dr. Nielsen’s scholarship focuses on student experiences in higher education and the organizational sources of inequality and equity. He received his Ph.D. in sociology from the University of California, San Diego, and was co-author with Professor Hamilton on the recent book, Broke: The Racial Consequences of Underfunding Public Universities from which a recent article, “Our Broke Public Universities” in the Chronicle of Higher Education, was adapted. Laura and Kelly, welcome to the podcast.

Kelly: Thank you very much.

Laura: Thanks for having us.

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Dan: Laura, first, for our international listeners, can you describe the various systems of public higher education in California and perhaps how your institution fits into that system?

Laura: Absolutely. California is kind of unique. In 1960, a master plan for higher education was developed, which basically set up a coherent and large public post-secondary education system in the state that had effectively three tiers. The top were research four-year universities that were part of the University of California, and I’ll get back to those because our two case cites were UC’s. Then there is a system of more teaching-oriented schools, which are also four-year that is the California State University, sometimes referred to as CSUs, and there are a lot of them. There are also community colleges all around the state; those are the California Community College system. Our two schools were part of the nine undergraduate-serving University of California campuses – there’s a tenth one, but it is basically a medical and graduate school, so we don’t tend to discuss that much in our book. We looked at the University of California Merced, and the University of California Riverside, which are distinct compared to the other seven sister UC campuses, in part because of the student composition. All of these schools are recognized as research universities; the system officially considers them to be equal, but there are definitely different populations. The schools we studied are more heavily Latinx than the rest of the UC system, they have a much higher proportion of low-income first-generation students, and also the two campuses are almost entirely in-state students. In The United States’ public education system, one of the ways that campuses have sought more money is by looking to charge out-of-state or international students more money. These two campuses are unique in the UC system in that they pretty much enroll in-state students. The non-resident populations are very, very small.

Dan: Kelly, why do you say in the article that our public universities are broke?

Kelly: ‘Broke,’ in our book and in the article that we wrote, really has a triple meaning. One is the sense that public universities is a broken system. And what we mean by this is that the system is segregated both by race and social class, and it’s also extremely highly unequal and so you have universities, colleges within public university systems that have just a tremendous amount of resources. And then you have colleges and universities at the other end that are far less-resourced, and a big problem that we try to identify in the book and that we try to deal with in the article is how those resources map on to those inequalities of race and class. So the most resourced institutions tend to be the whitest, they tend to have the wealthiest students and they’re taking the lion’s share of the resources and providing a really – in the case of the University of California system – a really world-class education for those students at the very top. Campuses that are serving the students who are the least resourced, that have been historically underrepresented in American public higher education are getting the fewest resources to try to get a high-quality education. As Laura mentioned, in the UC system the campuses are meant to be in a sense equal. They’re supposed to be equivalent status within the UC system, and yet the resource disparities are really, really tremendous between campuses like UCLA and UC Berkeley and UC San Diego at the top and UC Riverside and UC Merced. You see this sort of segregated system by race and class as well, where the campuses like Berkeley and UCLA and UC San Diego tend to enroll much wealthier students, they tend to be whiter, they enroll many Asian-American students from wealthier subgroups of Asian-Americans than say Merced and Riverside. UC Merced and UC Riverside enroll disproportionately large numbers of Latinx students, black students, as well as students who are recipients of Pell Grants. ‘Pell Grant recipient’ means that they’re lower-income families that are sending students to these campuses. The resource disparity between these campuses is very large. So we mean that the public higher education system is broken in that sense, and that it’s not providing equal opportunity and an equal education to the public that they’re meant to serve.

What we mean in the second sense of the term “broke” is that research universities, public universities, are fiscally broke. And what we mean by this is that since the mid-20th century, public funding for universities has declined. The state has withdrawn from funding public universities with public money and in place of that public money has been private revenues. Private revenues take the form of things like tuition and research grants and philanthropic donations and returns from endowment funds. Not all universities have the same access to private sources of funding, so many universities are increasingly reliant on this dwindling source of public revenue. And so it’s these universities that we consider to be fiscally broke. Many public universities are, in fact, doing tremendously well, and that’s because over time they’ve been able to build up this sort of massive stream of private funding. And so not all public universities could be considered broke. It’s really that group of universities that are dependent on dwindling state funds that are much closer to being broke. But there’s also this sense that universities “feel” as if they are fiscally broke. If you look at the response to the pandemic, there was this real sort of widespread reaction that all of these public institutions were going to become really financially strapped, and in a lot of cases, this didn’t really happen; the finances of many of these schools were fine. But there was still this widespread sense that campuses are broke. A lot of this is a response to the dwindling public funding of public higher education, and also this reliance on private money that they were afraid was going to dry up. And then there’s the third sense: where what we mean is that the universities we looked at, we call it these universities “new universities,” and what we mean by new universities are universities that are trying to really break the mold of the higher education system, especially when we’re talking about research universities. What we mean by the mold is that the traditional hierarchy of American research universities is that status is really bound to selectivity. The less accessible these universities are, the higher status they tend to be. And what new universities have tried to do is, they’ve tried to say, we are going to sort of re-engineer this status model by making access a core piece of what it means to be a high-status research university. Now, this is a great way to sort of try to address the fiscal broke problem, because what they’re saying is that we need to generate more private revenue. And one major source of private revenue is tuition. So we’re going to expand access and really try to increase the amount of revenue we get from students who are paying tuition. But that’s a risky proposition because the more students you have that do not fit in with the selectivity model of prestige, [that] can really harm the status of the institution. So what they’ve tried to do is they’ve tried to say, look, access is actually a high-status organizational way to do things, and by making access high status, we’re going to be able to then attract more revenues from things like philanthropy. We’re going to be able to rise in the rankings as we make accessibility part of the status equation. So that’s the third sense, of really breaking the mold of what it means to be a research university.

Dan: Just as a follow-up, Kelly, aside from the status issue, my understanding is that the designation of a research university makes a real difference, and I know that you do discuss that in the article. Can you take a moment to discuss sort of the fiscal consequences of being designated a research university?

Kelly: Yeah, absolutely. Research is a big component of the status model in American higher education. If you look at the way prestige and status are measured, research is central to it. The Association of American Universities makes research a primary component of being a member of the American Association of Universities. If you look at the ranking systems research and the grant money that research brings in, and the science that gets done on a research university campus, is a big part of what makes a university high-status. We also see things like the expansion of research responsibilities to faculty down the higher education system into places where in the past, teaching was the primary responsibility. And now research is becoming a bigger part of the workload that faculty and other people on campuses have to take on. So we see research becoming increasingly important to what it means to be a sort of high-status organization, and status is increasingly important when you are reliant on private revenues. Research not only brings in research grant money; it also brings in attention to the campus. It can bring in donations to do things like build laboratories and buildings to do academic research and scientific research. And so research becomes part of the status game and the competition for private revenues and student dollars and enrollments, and all these things as private revenue is increasingly necessary for survival, especially for those universities that are closer to the line of being fiscally broke.

Laura: And I think what Kelly was suggesting too, is that these pressures for campuses to compete on the basis of research have extended and trickled sort of throughout the higher education system. I noted that in 1960 there were three tiers in the California post-secondary public system. The CSUs, which are also four-year institutions, a lot of research, very high-quality research is being done at CSU’s, as many of the California State University campuses seek to compete on the basis of research along with the UC system, for the reasons that Kelly has just noted: that if you don’t, then you’re basically shut out of a lot of the possible avenues for private revenue. So campuses that previously might have been more centrally focused on teaching have moved away from that in order to compete for more philanthropic corporate grant dollars, and also just to get their brand and ranking out there in the public more than they would have in the past.

Dan: That shift certainly seems to be a common theme in higher education. You both describe how the University of California, like most other state systems, has experienced dramatic reductions in state appropriations over the last several decades, and that these reductions actually track fiscal crises: during these crises, tuition and fees would spike to partially offset state budget cuts, and then during periods of recovery, state funding never returns to private levels. But you do point out that Governor Gavin Newsom’s revised 2021-22 budget proposes the largest state investment in UC’s history. Laura, would a budget like this, if adopted, correct some of the disparities you’re describing in the article, or would the disproportionate funding simply continue?

Laura: We’re really excited about the Newsom budget. A couple of months ago things looked different fiscally for UC-Merced, where I actually work, and also UC-Riverside; in general the whole UC system. The problem is that it’s sort of a drop in a bucket. It’s been a long turn away from state investment that has had rippling consequences. For example, most of the UC system was built earlier, in the mid-20th century. UC-Merced was built in 2005, even though the 1960 master plan that I’ve mentioned a few times actually called for a campus in the central valley, because it is an area of the state that’s basically forgotten. It’s very underserved. There’s very little research capacity, very little economic growth. Most of the resources in California are concentrated on the coasts. Eventually, the campus finally gets built, and when it does, it’s built largely with a public-private partnership, which means that the campus itself is sort of financing at least half of the building of its campus. This is very different than campuses that were built almost entirely with state funds in years past. But it has ongoing consequences because there was a 39-year deal that the school is paying on every year, sometimes struggling to meet its payments. So that debt, that the campus, the campus that serves predominantly low-income, predominantly Latinx students, that debt the UC Merced has is still there, even with a change in the Newsom budget. This is a positive trend, but we would also need to see a return over time to a change in the state’s overall funding priorities. California is not alone in having heavily funded corrections, for example. The funding for prisons corrections, just very punitive, increased dramatically during the period that funding for higher education from the state decreased. And so it would be great to see a change in trend. One thing that could also help is if we increasingly pay attention to where we’re sending state funds. Campuses that serve more marginalized populations that serve actual students from California should receive a significantly larger chunk of state funds to do that work. It costs more to do that. These are students who will get back to the state, who often return or stay in their home areas and regions, and drive economic growth. So you would need not only increases, but also some targeted movement to where the campuses that are relying on these state funds for their absolute survival should see more of the funding than the campuses that have other more flexible funding streams coming in from private sources of money.

Dan: Let me ask a follow-up …just to clarify, Laura, in the article, you described that between 2003 and 2015, the UC System’s debt more than tripled from around 5 billion to around 15 billion. What has caused that increase? Is it primarily the shift you’ve just described in the way campus construction is financed? Are there other factors at work?

Laura: Yeah, that’s a great question. It’s a combination. Definitely, the increases in UC debt are driven by historic declines in state support over multiple decades. The system has had to educate more students more and more students as this as a state has grown with relatively less support from the state, which as you can imagine, in doing that, that has required in part taking on debt. However, the debt increase also occurred during several periods of reinvestment by the state, and when we look at those periods, you can see that it’s partially overborrowing by the system. The UC system leadership, during this period that you pointed out, came as an exodus from Wall Street. Basically, our leadership became individuals that had worked in Wall Street that moved into leadership roles in the UC system. And they assumed that, you know, “let’s increase debt, we can handle a service that debt, even with state funding cuts.” A very common perspective during that time period was summarized by the credit rating agency Moody’s, and they stated that the UC could leverage its “powerful student market position” to “compensate for state funding cuts by raising tuition dramatically,” and by “growing non-resident tuition, differentiating tuition by campus or degree and increasing online course offerings.” These are all what we would refer to as private market solutions, which may come at the expense of students, and arguably do come at the expense of students, and they were also gambles. The UC borrowed a lot more during that period and accrued substantial debt that it was then unable to pay off. Also in 2013, the UC office of the president made the contentious decision to basically take the system’s debt from the state, and the argument was basically that the UC system, at that, time had a better credit rating than the state. The UC office of the president argued that this slightly higher credit rating would save as much as a hundred million a year, but people were saying, the UCS credit rating is going to be downgraded after you take on that additional debt, which basically negates the advantage. And this occurred six months later. The reason that this was appealing to UC leadership is because it reduced state oversight over UC financial matters. However one of the problems now is that the system has taken on this new obligation and there were sort of no levers or mechanisms for the UC system to request more support from the state once it had sort of taken this debt on. So it’s a combination of both the decreased funding from the state and also a financial strategy that was taken by UC leadership during that period of time.

Dan: It’s funny when you were reading the quote about why the system could comfortably take on debt, I was smiling to myself and I was thinking none of that quote sounds like it was written by educators. (Laughs)

Laura: Absolutely not. (Laughs)

Dan: Kelly you found significant differences in fundraising success among the campuses. Can you describe those differences and the impact of them?

Kelly: In the course of our research, we did see very large disparities in the fundraising success between campuses within the University of California system. We can see that in 2013, for example, UCLA and UC San Diego both started fundraising campaigns. And by 2018, UCLA had raised over $4 billion and UC San Diego had raised about $1.5 billion. UC Riverside actually started a fundraising campaign even earlier than both of these campuses called the “Living the Promise” campaign, and by the same date in 2018, they had only raised $200 million. So we can see that there are just really tremendous gaps between the kind of fundraising that the campuses at the top of the hierarchy within the system are able to bring in versus those at the bottom like Riverside and Merced. We had interviewed the former chancellor of UC Riverside Ray Orbach, who had also been at UCLA earlier in his career where he was instrumental in getting these fundraising campaigns going, and when he came to UC Riverside, he was also a key figure in starting this fundraising process. Fundraising has become more important over time, and so those campuses that started earlier have a kind of leg up in raising money because they’ve got a structure built and they’ve got a pipeline of donations and things like that. Whereas other campuses that are sort of just now starting to really do it out of necessity are further behind in that sort of capacity-building for fundraising. According to former chancellor Orbach, it was a matter of time that UC Riverside would catch up; it would start to sort of build these much bigger streams of private revenue. But that really is contingent on the students that these universities serve, and it’s contingent on the status of these universities. We interviewed administrators at UC Merced who were trying to raise money by offering buildings that donors could attach their names to, and they saw UC-Merced as an opportunity to get a building on the cheap; that UC Merced was going to grow in status, and that right now the buildings were relatively cheap compared to, say, getting your name on a building at UC Berkeley or UCLA. This really sort of assumes that these campuses are going to continue to grow in stature and grow in status to the same degree and in the same level as their peers. But as we argue both in the article and also largely in the book, is that this sort of status game is much more difficult for campuses that are serving a different student body. These students that they serve are also a really important part of building these longer-term fundraising pipelines. When you serve wealthier students, those students go on and they’re able to earn more over their lifetimes, they’re giving more back to their institutions than students who are coming from lower-status backgrounds and are less likely to have the kind of wealth-building, in their communities and in their families, that can then come back to the universities where they graduate from. So this idea of a kind of long-term equalizing of these fundraising pipelines is questionable. Some of the impact of these huge disparities is the number of resources that go to these campuses to support the students to create a higher education environment that really provides a world-class education to all of these students.

Recently, we’ve seen some very large donations to these universities that are further down the status hierarchy. You may have seen just in the news yesterday or your listeners have recently seen in the news that McKenzie Scott made very large donations to many public higher education institutions including UC Merced. She made a $20 million donation, I think that’s right, Laura? She made a $20 million donation to the University of California Merced, which is not anywhere near the kind of donation that they had received in the past. I think the largest donation that they had received before that was 1.5 million. So it’s just a massive donation to the campus. Just recently we saw that Western Michigan University received the largest gift from some anonymous donors to a public higher education institution of $550 million. So what can explain this sort of shift in fundraising by these sort of wealthy donors? It could partly be that the cumulation of the attachment of access in higher education to status, by making serving historically underrepresented students more of a priority, has sort of made these kinds of donations more worthwhile, more culturally rewarding for the people who make them. But we really want to emphasize that a model based on this kind of philanthropy is not really a sustainable model. It’s not a way to address the inequities that we actually see within the system. They will provide a great amount of resources for students in the schools that get them, but this isn’t a sustainable model. So the fundraising problem is not just one of inequity, but rather one of becoming dependent on this kind of fundraising and sort of shifting the priorities of a school towards raising this kind of money to educate the students.

Dan: It seems to me that if you’re correct about the fact that wealthier schools, more prestigious schools, produced higher-earning graduates, it seems to me as if the inequity is perpetuated by that system.

Laura: One of the major issues surrounding racial inequality in our country is that that black families in particular, but also Latinx families, have been historically denied the mechanisms to accumulate wealth over time. The US government, in the latter half of the 20th century, and also mid 20th century, provided education, housing, and other benefits that were disproportionately enjoyed by white families. And that accumulation over time of wealth has basically cut families, racially marginalized families of color, out of wealth building in the US. Any organizations that serve these individuals are also then deprived of wealth and resource accumulation because the people they’re serving have been blocked out of that. So you get this perpetuation over time. A donation from McKinsey Scott, which is amazing, and the other organizations that she donated to, if you look at the list, include a huge number of Hispanic Serving Institutions, just like UC Merced and UC Riverside. It’s amazing, but it’s not enough. I was talking to Kelly earlier about the “GoFundMe” model of higher education, where everybody’s clamoring for a piece of a wealthy donation. And that, as he said, it’s not sustainable. It’s not going to be equitable, even though there are some donors thinking increasingly about access and those differences get compounded over time. I think endowments are really great place to think about that because campuses that started building their endowment wealth early have massive advantages. These are mostly large, mostly private elite schools that have used strategies to increase their endowments before everybody else. There’s no way to catch up for public schools, but even among public schools, there are big differences and because your investments have returns on them, it gets sort of compounded over time. One of the things we pointed out, for example in the book, and more recently in some articles, is that Merced in particular, if you look at their endowment assets at the end of the 2019-2020 fiscal year, it was roughly 1/25th of the amount at UCLA. If you look at the per-undergraduate student endowment amount, 1/25th the amount at UCLA and 1/22nd the amount at UC Berkeley. The school is going to work on trying to close that. The McKenzie Scott donation will help with that, but there’s no way to catch up to wealth building because wealth creates more wealth. So you can’t ever change that gap unless you do some massive kind of equalization of resources across the system.

Dan: I don’t ask this next question for shock value, because it was truly an intriguing part of the article. You describe the possible dismantling of the UC system as a solution. Kelly, what would justify that, and what would be the effects?

Kelly: The arguments for dismantling the UC, as a system, I think really come down to a pragmatic response to the defunding that we describe. A university is funded by the state, but it’s also subject to state demands, and these can be just the sort of expectations that a university serves the public in a particular way. And as that funding declines to very small levels, especially relative to the amount of private revenue that a university like UCLA or UC Berkeley brings in, the constrictions from the state can seem just onerous and not worth the public funding that you’re getting to follow them. When they look at a peer, like say Stanford, you know, we talk about these gaps between the top of the UC system and the bottom of the UC system, but these gaps also exist between private universities like Stanford and Harvard and Princeton and UCLA and UC Berkeley. So it has to be attractive to consider becoming a fully private university and being able to really sort of shake off the expectations of the state, and pursue the kind of wealth that a private elite university can pursue. We absolutely do not think that breaking up the UC system is a solution of any kind. Really, all it’s going to do is increase the inequality. So the effects of privatization of certain campuses like UCLA or UC Berkeley, would really just increase the inequality in higher education in the state of California by just creating two universities that are now going to be even more selective are going to be even wealthier and being able to attract even more of that wealth to serve a much more wealthy and white student body.

Laura: Can I add to that real quick?

Dan: Sure.

Laura: There was an infamous letter in 2009, authored by a faculty member at UCFD. And that letter suggested basically something like this: that the system should disband and remove the schools that this person argued are becoming effectively a dead weight on the campus, his ability to continue to exist. That argument, while it wasn’t about privatizing necessarily them were elite campuses. It was an argument that reveals the racialized and classed notions and consequences of something like that, because underneath what he was saying was basically let’s get rid of the schools that serve our state’s brown, black, and low-income students. That’s a problem are, you know, UC Merced and UC Riverside need the system to exist right now. I don’t know, maybe they would be okay without it, but I wouldn’t want to take that chance. And it’s important that public systems do serve the populations of their states and the populations, you know, California has an incredibly large Latinx population that is not even sufficiently served by the UC system. So to get rid of or deny resources to schools that serve those students is racist and a problem. So the effects of doing something like that would be to remove the ability of the UC system to offer a research university experience to particular members of the state population. That’s not equitable or okay.

Dan: Your article focuses on the UC system. Laura, what has your research shown about whether the phenomena you’re describing is echoed in other state systems?

Laura: Yes, what we describe in the UC system is happening across the country. In the book, we also provide an example from the state of Michigan, and in recent years, a campaign has been launched, it’s called “The One U” campaign. It was launched by a coalition of faculty and students from across the three campuses in that state. And the goal of that campaign has been to redistribute system resources more evenly. So there are three campuses, like I noted. One is the University of Michigan Ann Arbor, which people tend to refer to as just the University of Michigan. It’s the most elite of the three campuses by far. Then there are two other campuses, the Dearborn and Flint campuses, that like our focal schools in the state of California, they serve a large share of marginalized students from within the state, primarily black and low-income students, but they only receive really a tiny portion of the financial resources that are available to that flagship Ann Arbor campus. Indeed the Dearborn and Flint campus’ students pay 80% of what Ann Arbor students pay for tuition, but the per-student state funding on these campuses is only about a quarter of Ann Arbor’s per-student funding. In addition, roughly half of the Ann Arbor campus is non-resident, which brings just extraordinary amounts of funding that are not available to the largely in-state Dearborn and Flint campuses. What we see happening in the University of California and the University of Michigan systems is not unique. There was actually a really useful Center for American Progress report in 2018 that finds that public education spending at public two-and four-year colleges is, on average, more than a thousand dollars less per year for black and Latinx students compared to their white peers. So this is not just a problem that is happening among research universities, and actually something that we like to emphasize is that the disparities in spending that we see among UC campuses are even more magnified if you compare the community college system in California to the kinds of access to revenue that a school like UCLA has, or a California State University compared to any of the UCs really, and as you move down the tiers of education, you get greater access, you get more marginalized student populations who need resources and who could succeed and do very well if they had those supports in place, but they’re not in place. They’re not there. In the book, we document some of the inequalities that students face at UC Merced, in terms of things like access to an academic advisor, the long waits. They had the lines that were sneaking out into the hallway. I remember a couple years ago, a transfer student from a California State University campus said to me, “Well, on my campus, it wasn’t just a line. People started camping out overnight, so they could actually have an appointment with their advisor.” So I want to emphasize that we show these patterns, but they’re magnified all over the public post-secondary system in various different ways. And the students that are really harmed are those who are racially and economically marginalized, who are often extremely talented, worth investing in, and who don’t see these investments.

Dan: My guests have been Laura Hamilton, Professor and Chair of Sociology at the University of California Merced, and Kelly Neilson, Senior Research Analyst at the Center for Research and Evaluation, UC San Diego extension. We’ve been discussing their recent Chronicle of Higher Education article, “Our Broke Public Universities,” which was adapted from their recent book, Broke: The Racial Consequences of Underfunding Public Universities. Laura and Kelly, thank you so much for joining me.

Kelly: Thank you for having us.

Laura: Thank you, Dan.