Prop. 30 and the Public Funding and Private Profit at the CSU System

Proposition 30 would raise the personal income tax rate on individuals making more than $250,000 per year for the next seven years with the new revenues being used to replenish the cut budgets of K-12 schools and community colleges. Prop. 30 is a double threat. If Prop. 30 does not pass, K-12 and community colleges will take a $5.3 billion hit, while the University of California and California State University systems will equally share a $500 million cut. Very few people are therefore against this proposition. The problem is that whether the proposition passes or not, nothing changes in how we run our educational institutions. We will remain with the same management that we had before and likely have until the next crisis (and there will be a next crisis.) We do not address the problems that we have in education. These problems are primarily related to funding and management.

The California State University is running on a flawed system of public funding and private profits. In August 2010, an article in the Los Angeles Times by Carla Rivera exposed “…evidence that [CSU] officials are improperly depositing public funds into the accounts of nonprofit campus foundations and have failed to correct the problem despite warnings from auditors.” Is this simply a hiccup or a testament of how “state” universities do business?

State-funded universities have multiple layers of funding. It would surprise most Californians to learn that only a small proportion of funding for state universities comes from state appropriations. As an example, San Diego State University has a total 2011-12 budget of $768 million, with only 17 percent coming from state appropriations (while tuition fees comprise 24 percent.)

Proportionally, the funding for the CSU — one of the largest university systems in the country with 23 campuses and 339,873 students — continues to shrink. The three-tier system (composed of the UC, CSU and California community colleges) has experienced reduced state funding. In 1970, funding for the CSU claimed 5.16 percent of the state budget, falling to 4 percent by 1990-91, sliding down to 3 percent in 2005-06, where it has hovered ever since.

Although state appropriations comprise an increasingly diminishing proportion of the total budget, these funds are the heart of higher education — because state funds exclusively pay for faculty.

In all universities that comprise the CSU system, teaching faculty are exclusively paid from state funds. When they bring money in for research or activities, that money is funneled through foundations as private funds — and for which the university takes a proportion, in some case more than 50 percent, as indirect costs (known as facilities and administration costs or F&A). These faculty are given time off to conduct their research or fundraising, using state funds. Similarly, administrators are granted state-funded time off to solicit for private funds. Administrators are more important in garnering money for the university because they devote a large proportion of th¬eir time to raising funds and capital campaigns. They are excused from teaching so that they can work full time to bringing in private profits to the university. With this public funding and private-profit model, it is clear that having more administrators and research faculty improves the university’s chances of getting more private money. So far there is nothing improper in how this system works, except when state appropriations start to dry up and the model of public funding and private profit becomes cancerous.

When state appropriations become tight it behooves administration to offset the loss of funding by attracting private contributions, increasing tuition costs and making classes cheaper. By maintaining a strong administrative core the university ensures a continuing supply of private funds. In order to maintain a large administrative core, SDSU had to cut teaching faculty which resulted in increasing class size, diminished enrollment, limiting offerings and increasing workload for teaching faculty.

Cost savings accrue from a reduction in the costs of funding teaching professors. The numbers of tenured professors within the CSU system have been on the decline since 1987, while part-time faculty (cheaper) are becoming an increasingly larger part of the CSU system. Part-timers rose nationally from 36 percent of the faculty in 1990 to 46 percent in 2003, but by 2008 half of all teaching at the CSU is done by part-timers (49 percent). While the CSU replaced tenured professors with part-time teachers, administration mushrooms.

Ralph D. Westfall, a professor in the Computer Information Systems Department at California Polytechnic University, Pomona has already crunched the numbers. Based on data in the California State University Statistical Abstract, the number of full-time faculty in the whole CSU system rose from 11,614 to 12,019 between 1975 and 2008, an increase of only 3.5 percent in 33 years. In the same time period the total number of administrators rose 221 percent, from 3,800 to 12,183. In 1975, there were three full-time faculty members per administrator, but now there are slightly more administrators than full-time faculty. If this trend continues, Westfall notes, there could be two administrators per full-time faculty in another generation.

In this era of growing and predictable austerity, it seems illogical to decrease teaching faculty, replace professors with part-time teachers, decrease the number of classes offered, eliminate local enrollment quotas and then use that money to increase administration. But within the complex funding balance it makes sense to use public funds to generate private profits. So when Carla Rivera exposed improper transfer of funds this was not just a hiccup but what she exposed is a way of doing business within the CSU system. Diverting public funds to garner private profits. With Prop. 30 passing, as is likely the case, can we enforce better outcomes?

Mario Garrett is a writer, psychologist and professor of gerontology at San Diego State University and teaches classes in Diversity, Aging, Theory, Policy and Methodology. He has worked at the United Nations International Institute on Ageing, The London School of Economic/Surrey University, Bristol and Bath University.

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