Capitol Alert

State auditor blasts UC over tuition policy

University of California students' standoff with CFO Nathan Brostrom

University of California students protested a proposed tuition hike outside the Board of Regents meeting in San Francisco on Nov. 19, 2014. A state audit last week blasted UC for, among other things, admitting nonresident students to the detriment
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University of California students protested a proposed tuition hike outside the Board of Regents meeting in San Francisco on Nov. 19, 2014. A state audit last week blasted UC for, among other things, admitting nonresident students to the detriment

The University of California has disadvantaged resident students with its recent emphasis on recruiting applicants from out of state and overseas, leading to a drop in the number of Californians enrolled at UC.

That was the highly critical conclusion of a state audit released Tuesday – and a direct rebuke of the university’s long-standing assertion that it has used extra fees paid by nonresident students to make up for recession-era budget cuts and underwrite thousands of slots for Californians that the state no longer supports.

The broad and blistering report also found that academic standards were lowered for thousands of nonresident admissions and that UC has not developed an actual cost of instruction to guide decisions about tuition.

It slammed the university for not seeking further budget savings before pursuing the new enrollment strategy, and questioned some spending choices, including high executive compensation and a low-interest home loan program for faculty and senior administrators.

“It’s a matter of priorities,” State Auditor Elaine Howle said in an interview. “It’s a matter of the university making a commitment to California high schoolers who want to be admitted.”

Over the past several years, the university has undermined its commitment to resident students.

State Auditor Elaine Howle

UC sharply and summarily dismissed the audit’s findings and most of its recommendations, including a suggestion that the Legislature limit the percentage of nonresident students UC can enroll. In an unprecedented move, the university released its own report disputing characterizations of its admissions policies and finances.

UC President Janet Napolitano called the audit “neither accurate nor helpful” in a letter of response to Howle.

“Indeed the draft audit understates and undermines the efforts of thousands of UC faculty and staff who have sustained the University’s reputation, accessibility and affordability during a period when state funding was cut by about one-third,” she wrote.

The audit comes as UC is working to mend its relationship with a Legislature that has confronted its aggressive approach on sensitive issues like tuition, nonresident enrollment and executive compensation.

After Napolitano threatened in November 2014 to raise tuition by up to 5 percent annually for five years unless the state provided more money to UC than already promised, lawmakers countered with a flurry of proposals to rein in the university and handcuff its constitutional autonomy, as well as conducting combative hearings digging into its budget. A detente was reached last May when Napolitano and Gov. Jerry Brown struck a deal for four years of funding increases and a two-year tuition freeze, though some jockeying continues over how much of UC is funded by the state.

Lawmakers responded forcefully to Tuesday’s report. Assemblyman Phil Ting, D-San Francisco, raised doubts about UC’s leadership, and at least one new bill incorporating the auditor’s recommendations is now in the works, from Republican Assemblywomen Kristin Olsen of Riverbank and Catharine Baker of Dublin.

1Percentage drop in the number of Californians enrolled at UC between the 2010-11 and 2013-14 academic years

Assemblyman Kevin McCarty, who is already pursuing a measure to cap nonresident enrollment at the university, said he planned to add an amendment requiring stricter academic standards for out-of-state applicants. The Sacramento Democrat expected that the audit findings would boost his bill’s chances of success.

“This audit will provide more fodder for lawmakers to take a closer look at the UC system,” he said.

 

Among the audit’s major conclusions were:

▪  Recent policy changes that allowed UC campuses to set their own enrollment targets and keep the revenue generated by nonresident supplemental fees created an incentive to recruit more out-of-state and international students. Between the 2010-11 academic year and 2013-14, nonresident enrollment increased by 82 percent, or 18,000 students, coinciding with a 1 percent drop in Californians, about 2,200 students. “Over the past several years, the university has undermined its commitment to resident students,” Howle said in her letter accompanying the audit. Napolitano responded that in-state enrollment “is directly related to state funding,” and that the university plans to add 5,000 more resident students this fall because of additional money from the state. She added that revenue from nonresident fees paid for $60 million in financial aid to Californians last year.

▪  In 2011, a guideline that out-of-state applicants “should demonstrate stronger admissions credentials than California residents” was relaxed. A huge spike followed in the number of nonresident students admitted whose grade-point averages and standardized test scores fell below the median for Californians – about 16,000 over the subsequent three years, more than a fifth of all nonresidents accepted during that time. But 4,300 Californians whose scores exceeded those of most nonresidents were denied a spot at the university. UC said it has transitioned toward a more “holistic” review of all applicants, and only about 55 percent of nonresidents are ultimately accepted to the university.

▪  UC has not sufficiently justified years of tuition hikes, raising fees to close expected gaps in revenue rather than basing increases on an analysis of how much it costs to educate students. UC maintains that it cannot develop a methodology fully separating its academic, research and public service missions, but the audit pointed to institutions like the University of Texas, which conduct cost studies that guide tuition rates and state funding. “If Texas can do it, California can do it,” Howle said.

16,000Nonresidents admitted with test scores below the median of California admits in three years after standards were relaxed

▪  The university’s claim that it has generated $664 million in administrative savings and new revenue over the past five years and shifted most of that to academics and research could not be substantiated. The audit suggested that those projects could have also had a much more significant impact had they been required at every campus rather than optional.

▪  Even during the economic recession, staffing levels and salaries continued to grow. Gross earnings for UC employees, many of whom are not paid with state funds, are $5 billion higher than they were a decade ago, with 14 of the 15 top executives making more than $400,000 per year. Though that is actually less than at some other universities, it does not account for generous benefits. A low-interest home loan program, for example, is available to faculty and senior administrators – tying up more than $250 million that the audit recommended could be used elsewhere. UC responded that the majority of its staff growth has been driven by its expanding medical centers, which are financially self-supporting.

▪  Latino, African American and Native American students are most adversely affected by UC’s policies, undermining the university’s efforts to reflect the diversity of California in its student body. These underrepresented minority groups account for 45 percent of California’s population, but only 30 percent of undergraduates at UC – and just 11 percent of nonresidents from other states. Because they enroll fewer nonresidents, the campuses with the highest proportion of underrepresented minorities also have among the lowest per-student funding in the system. But, Napolitano wrote, “Even in a period when overall enrollment of California undergraduates has remained relatively steady, the proportion of underrepresented minorities has continued to increase.”

University of California students protested a proposed tuition hike outside the Board of Regents meeting in San Francisco on Nov. 19, 2014. A state audit last week blasted UC for, among other things, admitting nonresident students to the detriment

Hoping to prevent a vote on a proposed tuition hike, University of California students attempted to block the Board of Regents meeting in San Francisco on Nov. 19, 2014.

Alexei Koseff: 916-321-5236, @akoseff

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