Saving US higher education looks a taxing proposition

Universities hope California’s referendum on state funding may set a precedent. Jon Marcus writes

January 3, 2013

Source: Getty

Born free but Californian universities have been forced to increase tuition fees to the point where voters in the state agreed to a tax increase in order to keep tertiary education open to students of all backgrounds


After the momentous Proposition 30 referendum in November last year in which a majority of Californians voted to put more money into public higher education, there have been further signs of a rebound in taxpayer support for America’s long-suffering universities.

In one recent poll, Americans said they’d rather spend money on higher education than on defence. Now other public universities are asking for more money from their state legislatures, with a promise to freeze tuition fees in return.

But experts caution that it is unlikely US universities will ever be in receipt of a free flow of money, and that efficiency and thrift will remain the rule.

Three years ago, voters in California overwhelmingly rejected spending more on higher education and other public services.

Drastic budget cuts since then, of about $900 million (£558 million) for the University of California system alone, have threatened the continued quality of the state’s prestigious public higher-education system, and caused once-cheap tuition to balloon.

But on 6 November 2012, Californians voted for Proposition 30 and thereby an increase in state sales tax of 0.25 per cent, plus a rise of 3 per cent on income tax for the wealthiest residents. Although estimates vary, these measures are projected to raise between $6.8 billion and $9 billion a year for public services.

Despite widespread hostility to taxes in a state hit hard by the economic downturn, the result shows “there was a real acknowledgement of how deep the cuts were, and the repercussions of the cuts”, says Michele Siqueiros, executive director of the Campaign for College Opportunity, which pushed for the referendum to be passed. “Voters understood that fees were rising and that there were fewer [places] available for students.”

Timely backing for the proposal also came from a group of business and civic leaders. California Competes’ report The Road Ahead, published in June, warned of dire economic consequences if funding cuts continued. The public universities contribute an estimated $4.50 to the economy for every $1 invested in them, the report says, and each year graduates from the University of California and California State University systems pay about $12 billion in state taxes.

In polls, Californian voters said they feared that the long-held American belief that young people who work hard enough can go to university, regardless of their income, was becoming less and less true.

Equal opportunity

The same realisation may be compelling people nationwide to renew their support for public higher education, says Christopher Loss, a professor of public policy and higher education at Vanderbilt University and author of the book Between Citizens and the State: The Politics of American Higher Education in the 20th Century.

“Americans are exhausted from the past four years of economic downturn and the kind of austerity measures that have been put into place in fundamental services, including higher education,” Dr Loss says. “People are beginning to realise that these institutions cannot survive in the absence of public support.”

California’s public universities promised to freeze tuition fees this year if the referendum was approved. It’s a lesson that has not been lost on universities in the other 49 states, 41 of which have cut their spending on higher education.

Presidents and trustees of some public universities in Maine, Minnesota, Montana and New Hampshire have promised to freeze tuition at its current level if their states’ governors and legislatures keep funding constant or increase it.

In a poll commissioned by education advocacy groups and released in November, Americans said that, if they had to choose between cutting spending on defence or education, they would prefer to cut the military, by a margin of 57 per cent to 43 per cent.

Fifty-three per cent of respondents said it was important to preserve government financial aid, even if spending on other programmes had to be reduced.

“The one positive thing that has [come] out of Proposition 30 is that the conversation has shifted towards a discussion about higher education as a public good,” Dr Loss says.

Another plus point is a tacit acknowledgement by higher education administrators - reinforced by politicians - that they have to return taxpayers’ generosity by being frugal with their money.

“Voters still expect that our policymakers and leaders are going to be effective with the money they have,” Ms Siqueiros says.

“The people who run [the California system] would be wise to think hard about ways to get the maximum benefit out of the reprieve that they’ve [been given],” Dr Loss adds.

When you’re in a hole…

As if to emphasise this, after the referendum was passed, California governor Jerry Brown took the highly unusual step of personally attending the meetings of the University of California’s board of regents, the California State University’s board of trustees and the California Community Colleges’ board of governors.

“When I go back to Sacramento [the state capital],” the governor reminded them, “there are a whole lot of claimants standing in line [for the money generated by the tax increases]”. “I want to take this generous contribution of the people and make a sustainable budget.”

University of California president Mark G. Yudof seemed to take the hint. “This is an opportunity of great importance, not only to the University of California and other higher education segments but also to the state as a whole, and we cannot afford to let it slip away,” he said.

Before the referendum was approved, the University of California system - which includes Berkeley and UCLA, and has produced 59 Nobel laureates, 2,497 patents and trained graduates who have helped to launch some of the world’s most successful technology companies - was operating on a budget the same size as 15 years ago, when the system enrolled 75,000 fewer students.

The California State University board of trustees has already proposed a budget for 2013-14 that calls for a comparatively modest increase of $372 million, or just under 9 per cent, in state support. Almost a quarter of that would be used to raise employee salaries (union support is credited with helping to get the tax referendum passed). About half would go to increase enrolment by 5 per cent after several years of it being reduced, and $50 million would be used for urgent maintenance.

Officials point out that even with this increase the system’s budget would still be more than $600 million smaller than it was before the economic downturn.

“[It’s] important to remind voters and the general public that this [extra funding isn’t getting] our higher education system out of a hole,” Ms Siqueiros says. “It’s just allowing us to stop digging the hole deeper.”

Nonetheless, says Charles Reed, chancellor of the California State University system, “we are hopeful that the passage of Proposition 30 will be the beginning of the state’s reinvestment in higher education”.

Now people are looking for signs that the same thing will happen in other states.

“The reality is that the vast majority of Americans aspire to some kind of tertiary education,” Dr Loss says. “They believe it offers social mobility and economic mobility, and the evidence shows that that’s exactly the case.”

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