May 1996

Revisiting California's Master Plan for Undergraduate Education

California's Master Plan for Higher Education has served the state well. In 1960, it defined the distinguishing missions of the university, state university, and community college systems and set an ambitious goal: access to higher education for every California citizen who could benefit from that education. Under the Master Plan, the state's higher education sector grew and throve. That growth, in turn, fueled the state's economic engine and the growth of its high technology and aerospace industries. But the state's recent recession and changes affecting fiscal policy have undercut the aims of the Master Plan and put its existing goals well-nigh out of reach.

In The Future of Public Undergraduate Education in California, Michael Shires looks at the forces affecting public demand for and supply of higher education and projects the state's ability to live up to the Master Plan's aims. He concludes that, given continuing fiscal constraints, those aims cannot be met merely by changing the way the higher education systems do business. The Master Plan itself must be revised.

Demand for Enrollment Will Continue to
Outpace Supply

The recession of the early 1990s began a trend that is likely to continue. In the recession, decreased funding reduced the public sector's capacity to provide higher education, and increased fees and managed enrollment strategies brought down enrollment demand. As a result, enrollments dropped while the state population continued to grow, and the state's ability to meet the Master Plan's access goal was sharply reduced. In 1994-1995, the number of students in higher education classrooms declined by more than 200,000 (11 percent) from the number that would have been there if participation remained at prerecessionary levels.

Will access return to the levels envisioned in the Master Plan--now that California is pulling out of the recession? Not according to Shires' research: "The state's population is expected to grow by about 10 million people over the next 15 years. At the same time, the demands on the state's discretionary resources are expected to grow significantly." The result will be an increasing "access deficit"--that is, a shortfall between the number of higher education seats demanded and the number of seats supplied.

The figure illustrates this point. "Baseline demand" is the number of students that would enroll in California's public colleges and universities if the enrollment rates experienced in the prerecession 1989-1990 academic year continued through the year 2010. "Expected demand" is the number of students that would be enrolled at the 1993-1994 enrollment rates. The difference between these two lines is the number of students that have been "priced out" of higher education by the increases in tuition and fees since 1989-1990.

Even Without Further Resource Cuts, Supply of Undergraduate Seats
Would be Far below Demand in the State's Public Institutions

Two dynamics strongly affect the supply of available seats: (1) capital supply, the physical capacity of the present physical plant, and (2) operating supply, the resources (e.g., faculty, administration, materials) that support day-to-day operations, given available funds. The gap between the baseline demand and the supply lines represents the number of students squeezed out because they can't afford the costs of college and/or because the institutions simply lack the resources to accommodate them.

Today, access is at 89 percent of prerecession levels. By 2005-2006, it will drop to 62 percent and by 2010-2011 to 56 percent. In other words, by 2011, more than 1,000,000 prospective students would be denied access.

More Public Dollars Are Not Forthcoming

This access deficit is not a problem that California can solve by throwing money at it. To close the deficit, higher education would have to almost double its current 10 percent share of state revenues. In fact, higher education's share of state discretionary funds has been shrinking and is likely to shrink even more as population growth increases demands on the state's mandated spending programs such as corrections, K-12 education, health, and welfare.

Even if public higher education could provide the faculty and operating resources, it needs more physical space for additional students. Shires estimates that the sector would need almost $16 billion of bonded capital investment to fund capital upgrades and expansion at an average annual rate of $1.2 billion dollars. This amount of new debt would severely strain the state's capacity to issue debt.

Shires also finds that closing the access deficit through greater productivity (reducing the cost of delivering education) is not a viable alternative. The cost of education would have to be cut by 70 percent to close the deficits. All three systems have recently made such major reductions in operating costs that any further reductions would probably mean serious loss of quality, and as Shires notes, "increased access to inferior education is not a winning scenario for the state."

What Can Be Done?

Grim as the projections seem, Shires makes several suggestions for addressing the access deficit: First, "higher education is a crucial part of the success of the California experience, and declining levels of access will have long-term negative consequences for the state. The public commitment to the sector must be made explicit and institutionalized, especially in light of competition from mandated and constitutionally protected programs."

Second, he calls for the state's three public higher education systems and their institutions to increase the state's return on investment: "The state's higher education sector must restructure, across systems, across campuses, across colleges, and across departments. It must reevaluate the centuries-old models of governance and organization that currently serve the institution and develop new structures and alliances to provide education more efficiently. It must also embrace new technologies and approaches to teaching to maximize the productivity of its human and capital resources."

Third, the state's policymakers must reconsider the Master Plan and develop a new strategy for the public higher education sector. According to Shires, this must be a systematic, carefully considered process, rather than the de facto schemes, such as rationing access to education through increased fees, that are already under way. He calls for the state to convene a new Committee on the Master Plan and to include in the process members from public and private higher education systems, lawmakers, and other leading policy players. The committee will need to consider

Shires concludes by noting that the current Master Plan is arguably a major reason for the state's success story of the past 35 years and that a new Master Plan will be the key to the state's next 35 years. The sooner the reconsideration begins, the better for the state's continued well-being.

RAND policy briefs summarize research that has been more fully documented elsewhere. This policy brief describes work done for RAND's Institute on Education and Training with funds from a grant by the Lilly Endowment Inc.; it is documented in The Future of Public Undergraduate Education in California by Michael A. Shires, MR-561-LE, 1996, available from National Book Network (Telephone: 800-462-6420; FAX: 301-459-2118).

RB-8014

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Published 1996 by RAND

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