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UC education: Cadillac product, Chevy price

Henry Brady, dean of the Goldman School of Public Policy | September 1, 2015

In an overheated article (“UC Fails to Hit In-State Goal on Admissions”), the San Francisco Chronicle scolds UC for appearing to decline $25 million offered by the Legislature to admit 5,000 more in-state students this year. That’s $5,000 per student which would supplement the $15,000 in tuition and fees that UC charges each student — although many low- and middle-income students get substantial discounts. State support is needed because tuition does not cover the entire cost of a UC education. That’s not surprising, given that Stanford and the University of Southern California charge over $45,000 per year.

The Chronicle implies that UC foolishly left money on the table. Not so.

If this is such a great deal, why aren’t comparable private institutions like Stanford, across the bay from Berkeley, and USC, across the town from UCLA in Los Angeles, clamoring for something similar? Why aren’t they pleading to take $5,000 from the state and, in exchange, charge $15,000 in tuition and fees for additional students? After all, conventional wisdom is that the private sector is more efficient than the public sector. If this is a good deal for UC, shouldn’t it be a spectacular one for private universities?

Moreover, since USC and Stanford have around 45 percent in-state students, the state of California would benefit from them admitting more California students so they could move towards UC’s current percentage of nearly 90 percent California students. Of course, they would have to reduce their current tuitions so students would not pay more as part of this deal.

Efficiency in action

The simple truth is this: Stanford and USC would never take on students for $5,000 per student if they had to cap tuition at $15,000. They probably wouldn’t take new students for a subsidy of $20,000 per student under these conditions.

Another basic fact is that UC is so much more efficient at providing high-quality, world-class education that neither Stanford nor USC can compete on the basis of costs. UC provides students in California with a Cadillac product at a Chevy price, and the Legislature should be proud of that.

But the current deal it is offering makes no sense. An offer of $10,000 per student might work, but it is embarrassing that the Legislature thinks that the UCs could continue to provide the same product with state support equal to the price of a Vespa motorcycle. The hard-working, high-achieving students who go to the UCs —many more of whom are low-income than those who go to USC or Stanford — deserve the high-quality education offered by Berkeley, UCLA, Santa Barbara, Davis, Santa Cruz and the other UCs. The Legislature should not be in the business of reducing the quality of a UC education by offering ridiculously low incentives for the university to add more students.

Private universities, public subsidies

The problem and inequity go even deeper. Recent research has shown that, surprisingly and paradoxically, many rich, private universities get substantially more public subsidy per student than similar public universities, because of philanthropic deductions and untaxed endowments. These tax expenditures allow rich, private universities to get enormous public subsidies – greater than comparable public universities on a per-student basis – and public universities like UC are then criticized for not doing better when they already provide a premium product cost-effectively and at a price way below the private competition.

Let’s get real. The University of California does a magnificent job with minimal resources. It is a road to opportunity for California students and an engine of economic growth for the state’s economy. Let’s fund it at a level that makes sense, instead of fantasizing that we can get something for almost nothing.

UC President Napolitano has expressed her desire to increase California enrollment and has pledged to try to work with the Legislature. But she should probably walk away from this unsatisfactory deal. After all, how does it help California students to agree to water down the quality of their education? The Legislature should come up with something more sensible.

Comments to “UC education: Cadillac product, Chevy price

  1. Three successful friends were eating at an upscale restaurant: one a Berkeley grad, one a Stanford grad, and one a grad from USC. When the bill came, the Stanford and USC alumni automatically reached for their wallets. The Berkeley grad looked around for someone from the government to pass the bill to whilst verbalizing the victim role by invoking picaresque public university proletarian macroeconomic theories and smoothly brushing off the bothersome fact that Berkeley has a multitude of wealthy alumni peaking at the top with “at least 14 living alumni billionaires: Gordon Moore (Intel founder), Bill Joy (computer programmer and Sun Microsystems founder), Eric Schmidt (Google), Bassam Alghanim (wealthiest Kuwaiti), Charles Simonyi (Microsoft), Cher Wang (HTC, wealthiest Taiwanese), Robert Haas (Levi’s), Donald Fisher (Gap), Carlos Rodriguez-Pastor (Interbank, Peru), Fayez Sarofim, Haakon, Crown Prince of Norway, James Harris Simons, and Michael Milken.”
    https://en.wikipedia.org/wiki/University_of_California,_Berkeley

    • Dave, You totally miss the point of this column. Why are you commenting here if you keep making the same points over and over irrespective of the point at hand?

      More to the point, the author is making the case that UC should not be subsidizing student admits at a deeper level. It is in response to an article that bemoans the percentage of out-of-state admits. Uh, these admits specifically lessen the burden on taxpayers and current students of operating the UC.

      It’s really pointless to comment about higher education financing if you don’t know the details. It’s more complicated than it looks.

      Ultimately, the author makes a great point encapsulated in: Chevy price, Cadillac product.

      Since you are such a fan of Stanford and USC, why don’t you go and blow smoke on their blogs. You can talk about how wonderful their alumni are, so many of them to the manor born….

    • Dave, Last I checked philanthropy is a marvelous part of our capitalist system. It depends upon the free will of donors.

      But we are talking about a PUBLIC legislature and PUBLIC university. You’re suggesting it should depend upon the whims of billionaires? Why not the same for high schools and elementaries? They surely have august alums with deep pockets. Shall we wait upon them.

      Brady is arguing about the use of public funds for public schools. I think you did indeed miss the point.

      Public Education Friend.

      • The author Dean Henry Brady’s main point:
        “The Chronicle implies that UC foolishly left money on the table.Not so.”
        “The Legislature should come up with something more sensible.”

        Well, there seems to be disagreement on this main point per a letter printed in the Chronicle:

        We take that offer seriously. Adding 5,000 new California students in one year will be difficult, but we are exploring how we can meet the Legislature’s challenge.

        Stephen Handel,
        Associate Vice President
        for Undergraduate Admissions, University of California

        http://www.sfchronicle.com/opinion/letterstoeditor/article/Letters-to-the-Editor-Aug-31-6473906.php

        =====================

        Apparently the previous commenters were thrown off by the Stanford and USC red herrings tossed in.

        Funding a university has multiple moving parts, and it is important to look at individual trees, and to look at the forest. Money to fund programs and students at any university — public or private — must emanate from multiple sources. Alumni giving back is and should be a major money source for any university — public or private. When prosperous alumni do not give back … a university funding problem occurs.

        When prosperous alumni who received a cadillac-cost education give back to their private university … while prosperous alumni who received a chevy-cost education do not proportionately give back (i.e. stingy) to their public university … a tilted playing field (endowment size) results.

        When prosperous alumni who received a chevy-cost education barely give back and are enabled by excuse makers who claim that funding is the government’s job, these enablers are creating irrational excuses for public university alumni shirkers to continue shirking…and for government to continue having problems funding its myriad of programs such as the ever-growing Medi-Cal et al … and for the university to unfairly struggle financially.

        People who want Cal to breathe easier financially should step up and demand that Cal alumni stop being so stingy.

        • Dave, Ah, I am glad you clarified. YES, you are right: alumni of UC Berkeley (and other UCs) have to step up their giving if they want the university to serve its vital purpose and to continue to be the powerhouse it has been. If nothing else, they should think of investing in the value of their degree.

          I think I misunderstood your point based upon a previous comment that you or another Dave wrote saying that the Federal government should not help out public universities at the exclusion of private ones (this was a proposal from Chancellor Birgeneau and the former head of University of Michigan, published here on the Berkeley blog). I heartily disagree with that notion, given all the other ways in which everything is stacked to benefit wealthier schools.

          I do agree entirely that private universities, at least top ones, typically enjoy the beneficence of its alumni more than do many public universities. That said, it shouldn’t be overstated: Berkeley started much later with building philanthropy and it usually appears in annual fundraising lists around the level of MIT — another top school that, like Berkeley, doesn’t have a medical school appended (in fundraising, with and without med schools are apples-to-oranges comparisons). Berkeley does reasonably well in the fundraising race.

          But there are some reasons the top privates do so well that can all be tied in with “a culture of philanthropy:
          1) they let in wealthier people to begin with, people who are much more likely to give to begin with.
          2) Over generations, for many schools, a virtuous cycle of legacy multiplies the factor stated in number 1.
          3) They can publish a massive tuition cost per student, have their wealthy students pay full freight (and cross-subsidize the less wealthy ones who have the talent to get in).
          4) They can constantly hammer on the message that all attendees should pay it forward by giving back.
          5) They provide a highly personalized (or coddling) experience that leaves people very connected.
          6) The unstated proposition underlying all this activity is that all must give back: “join the family, give back.”
          6) The massive gifts (e.g. John Paulson’s recent $400 million gift to Harvard) come with massive tax breaks — so yes, there is a public, fiscal effect that occurs, but we don’t see it the way we see public dollar allocations in state and other budgets. It occurs through loss.
          7) The best privates invest massive amounts of money into making this virtuous cycle continue.
          8) Finally, some of the tip-top privates attract donors specifically because it becomes prestigious to be an important donor to certain institutions — a real rich getting richer scenario, has nothing to do with need or even impact.

          Top publics such as Berkeley, though they often do very well as well, have a much broader mission to perform: the institution (Berkeley) doesn’t (it can’t) base admissions directly or indirectly on philanthropic potential; they must educate higher numbers of people, and then students who become alumni often feel (INCORRECTLY I MIGHT ADD) “well, I just got what I paid for with my taxes” — and this becomes their excuse for being stingy. Their isn’t nearly the clubby “join the family, give back” culture that exists in private schools.

          What the UC does to cross-subsidize to some extent is let in out-of-state tuition payers who may much more. People cry foul, though, even when Berkeley doesn’t or maybe just barely reduces its in-state population. The fact is that if UC Berkeley raised its tuition to private levels and let in people from across the world, it’s quite likely that its undergraduate admissions statistics would get that much more, not less, selective.

          UC BERKELEY ALUMNI: Give, give, give to the best university on the planet. And encourage the legislature to do its part to support the university’s public mission.

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