Where does the money go?

Public Forum on the University’s Financesheld at UC BerkeleyOctober 23, 2009Presentation by Charles SchwartzProfessor Emeritus of Physics& uncertified accountanthttp://socrates.berkeley.edu/~schwrtzFor more details see: Seminar on Financial Futures for UC Where does the money go?

topics • What is UC’s true Cost of Education? 3 • Is the UC administration bloated? 10 • Why do students pay more and get less? 12 • Has Pres. Yudof been fair and honest? 14 • Should we democratize the Regents? 19

An Academic Dispute According to UC Budget officials as of 2007, • Students now pay approximately 30% of the cost of their education. According to my calculations as of 2007, • Undergraduate students are now being charged 100% of the actual cost of their education.

I asked UC officials to investigate this discrepancy • They replied that their methodology, to calculate the per-student cost of education, is promulgated by the National Association of College and University Business Officers, and has been endorsed by the higher education community. • Let’s look into this.

The 2002 Report: “Explaining College Costs: NACUBO’s Methodology for Identifying the Costs of Delivering Undergraduate Education”: • Add the institution’s expenditures for Instruction and Student Services, add some overhead for facilities and administration, then divide by the number of students. That sounds fine for 2- or 4-year colleges. What about Research Universities?

On page 27 of the NACUBO report we read • Several alternative proposals were considered, but NACUBO concluded that all departmental research costs should remain within instruction and student services. • So, what is departmental research?

“Departmental Research” is an Accounting term of art • It is all the research work I do as a professor at a research university that is not explicitly paid for by an external funding source. • In other words, my entire academic year salary – which pays for all my work in teaching and research and service – is recorded as an expenditure for Instruction; and that whole thing is added into the Cost of Undergraduate Education.

Who is Paying for What? • Research at the University is a wonderful Public Good. It should be paid for with public funds. • Teaching at the University used to be considered a Public Good and the state paid for it. But in recent years the cost of Education has been shifted to students, saying that it is for their Private Good. • This study shows that we have reached the limit of what can be charged to undergraduate students -- unless you want to make UC a private university.

Questions? Comments? • How do you do those calculation? --> See details in week #4 of the Seminar. • Is there no connection between Faculty Research and Undergraduate Education? --> There is some; and it is quantifiable. • Are you saying that all research universities are corrupt in their financial accountability? --> Yes. NACUBO maintains that discipline. • … • Next: another problem about how UC uses its money

Apparent Bureaucratic Bloat As Detailed in week #5 of the Seminar: • UC employment statistics over 1996-2006 show outsized growth in the categories of Management and Management-support jobs. • UC officials have not been able to offer any credible justification for this. • I estimate the apparent waste for all UC is $600 million per year. Berkeley is worst at $91 million

Now, a Third example of money mysteries • UC’s Chancellors said they are cutting TA positions due to the state budget shortfall. • Total annual cost of all TA’s is $200 million. • Total UC revenue from students’ Educational Fees is about $1.5 billion. • What are their priorities?

“Accountability & Transparency” • What is UC doing with the money which students are paying them to provide their education? • UC students now have Reg Fee Advisory Committees. How about overseeing use of their Ed Fees - 10 times as much money. • For more on this, see (9/10/09) http://UniversityProbe.org

How has President Yudof handled this year’s budget crisis? • The crisis is real; his handling of it has been “mixed” in terms of fairness and honesty. • Many of the most highly compensated UC employees were given exemptions in his paycut/furlough plan. • See “Persistent Dishonesty from UCOP” (9/19/09) at http://UniversityProbe.org

UCOP Budget Misrepresentations • First they said most non-core funds were “restricted” as to use. • Then they admitted this was not really so. • Then they continued to say “restricted”. • Then they said that most unrestricted funds were “committed.” • But they certainly can re-commit those funds. Haven’t they declared this an Emergency?

Another story - from July 16, 2003 • The UC Regents created a new financial arrangement - an “Indenture” called General Revenue - so they could borrow more money more easily. • Student Fee Revenue would be the largest component of this new pool of money to back construction projects.

From the Regents’ Minutes 7/16/03 • Mr. Charles Schwartz, UCB Professor Emeritus, spoke in opposition, believing that what seemed simply a technical change was a swindle that would direct the revenue stream provided by tuition and student fees toward financing construction projects.

October 2009 • Professor Robert Meister, head of the UC Faculty Association, reports that this prediction has become a reality. He says that The Regents are increasing student fees in order to expand their construction plans. • UC President Mark Yudof responds, “It is untrue because we are not allowed to use student fees to pay bonded indebtedness.” • -- Wrong, again!

Should we Reform the Regents? • They are now accountable to nobody; and they are the main source of the “corporatization” at UC. • Years ago I was involved in an attempt to Democratize the UC Board of Regents. • We added explicit language to keep the political independence of the academic functions of UC. • But for financial oversight and general policy there is more virtue in direct democratic rule.

Regent Richard Blum - July 2009 • “What we need to do with this university, and you heard the story from Chancellor after Chancellor is doing whatever we can to preserve the best people. And in fact the best people are taking the highest cuts. The Chancellors alone, and God bless them, three years ago we knew their compensation was 35 or 40 % below market. For three years in a row I talked to them. I said, Do you want me to walk the plank? I’ll get you an increase. And every time they said, No, we’ll stay where we are; we are team players. So I think that’s all right for a year and maybe you’ll get a lot of your good people to sit still for a year. But you are already hearing about people leaving, starting to look the other way. But I think we have one year to really figure out who, in each part of this institution we need to embrace and keep; and what we need to build on. Because the idea of just cutting from the top is absolutely the way to kill this institution.” • >>> Corporate values for the University

For an Alternative Set of Values • See the 1992 Resolution of the faculty at Berkeley, which recommended that Executive compensation be no more than twice the average compensation of Full Professors. • http://academic-senate.berkeley.edu/archives/documents/ExecCompResolution19921.pdf

F A A T • Fungibility is the • Antithesis of • Accountability and • Transparency

Where does the money go?