The Future of Public Undergraduate Education in California

by Michael Shires

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In 1960, the state of California adopted the language of the California Master Plan for Higher Education as its policy and strategy for higher education. That plan had two major components: (1) it specified the roles and missions of each of the four segments of the state's higher education sector, and (2) it stated that each Californian who could benefit from higher education should have access to it.

The Master Plan has successfully served as the model through which the state's higher education sector has grown and thrived. This growth has in turn provided the fuel for the state's economic engine and supplied the seed for the growth of its high technology and aerospace sectors.

The Impact of Current Policies: Reduced Access

California's recent recession has had a major impact on the state's three public university and college systems. It reduced the public sector's capacity to provide undergraduate education through decreased funding, and it decreased the demand for education as a result of increased fees and managed enrollment strategies. Consequently, enrollments in these systems have dropped in a period when the state population has continued to grow. The state's ability to meet the Master Plan's access goal has been sharply reduced in this period. The number of students actually served in 1994–95 declined by more than 200,000 students from the number that would have attended had participation remained at prerecessionary levels. This drop represents an 11 percent decrease in the overall level of service.

Access Deficits Will Grow in the Future

As the state economy begins to recover from the economic problems of the early 1990s, the question arises, "Can the state return to the levels of access envisioned in the Master Plan?" If so, then the state's higher education systems should map out a strategy for accomplishing this goal and should enter a compact with the state legislature to fund that plan. If not, then the Master Plan as the document for shaping the sector should be revised to reflect the realities that will shape the state's future.

This report is an effort to answer the fundamental question posed above. This research shows that there is and will continue to be an access crisis in California. The collision between the state's rising demographic trends and its declining discretionary revenues (from which higher education draws its resources) has resulted in a major shortfall in the number of seats supplied, compared to the number of seats demanded—what is termed in this report an access deficit.

The level of access is expected to decline from today's 89 percent of prerecessionary levels to 62 percent in 2005–06 and to 56 percent in 2010–11. Even in an optimistic fiscal scenario, the service levels would rise to only 65 and 58 percent for 2005–06 and 2010–11, respectively. This would be a marked decrease in the level of higher education access provided in the state and would eventually leave more than one million students unserved in 2010–11.

Access Deficits Are Here to Stay

To close this deficit through increased state revenues, the higher education sector would have to reverse its current trend toward a declining share of state revenues and nearly double its share from about 10 percent today to more than 18 percent in 2010–11. While that share is not unreasonably high in historical terms, the increasing demands of the state's mandated spending programs, such as K–12 education, corrections, and health and welfare programs render it highly unlikely in the future. Given the fiscal context of the state and the competition for discretionary resources, this scenario is extremely unlikely.

Furthermore, California must also consider how to address the sector's capital needs. Even if it could provide the faculty and operating resources, it must have physical space for additional students. This analysis estimates that the sector will require almost $16 billion dollars of bonded capital investment to fund capital upgrades and expansion at an average annual cost (including repairs and renovation) of $1.2 billion dollars.[1] This amount of new debt would severely tax the state's capacity to issue debt. Experts in the state's bond markets estimate that California's total annual new-issue capability is approximately $2 billion per year. Between the demand for new prisons (driven by the "three strikes" law[2]) and the need for new K–12 facilities (which is driven by the same demographic forces as higher education), there is certain to be aggressive competition for the $30 billion that the state is capable of borrowing over the next 15 years.

Closing the access deficit through pure cost reductions is also problematic. Consider that it would require reducing the cost of education by 70 percent to close the deficits. Such a reduction is very unlikely. Because of the recent major reductions in operating costs in all three systems, it is unlikely that major productivity improvements can be made without seriously impacting the quality of the education provided. This is not to say that progress cannot be made in this area, as will be discussed in the recommendations for immediate action below.

Implications for Higher Education

Because of the prospects of continued access deficits in California, two actions are proposed. First, the state must commit to its investment in higher education and the sector must find new ways of maximizing the state's return on that investment. Second, the state must restate or readdress the Master Plan in light of current and future realities. It can no longer provide the level of access it envisioned in 1960, and some new guidance has to be given for allocating the precious and scarce units of education that will be available in the future.

New Investments and Higher Returns

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. In return, the state's three public higher education systems and their constituent institutions must commit to elevating the state's return on that public 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 define 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.

Revisiting Access Under the California Master Plan for Higher Education

One conclusion is inescapable—the access goals of the California Master Plan for Higher Education, in today's and tomorrow's fiscal and demographic environments, are not viable given the state's current fiscal and demographic trends. It is time for the state's policymakers to reconsider the Master Plan and to develop a new strategy for the state's higher education systems.

The fact of the matter is that change is already happening but without a plan. The state is de facto devising schemes for rationing access to education through increased fees and other strategies. But instead of resulting from well-considered, macro-level choices between alternative visions, the access provided by the state's higher education sector is being shaped by a mishmash of local factors and compounded by a highly uncertain budget picture. Students are being explicitly kept out of the system by price increases. Capacity as a share of demand is decreasing, with no explicit vision for higher education.

California appears to be in a state of denial regarding the ongoing viability of the Master Plan. Budgets are no longer considered from the perspective of what is required to support the needs of the state's higher education sector, but rather of how much of the budget is left to be spent on it. And, whereas there is a statewide consensus on the goals of the Master Plan, it is also clear they are not currently being met. This analysis shows that they will likely not be met in the future, either.

The time has come, therefore, for the state to convene a new Committee on the Master Plan to address the state's goals for its public education sector into the future. This Committee will need to consider

  • The capabilities and the strategic role of the state's higher education sector well into the next century
  • The fiscal and demographic context in which the state's higher education institutions must operate
  • The strategic alliances between higher education as an education and training mechanism for the private sector as well as the sector's role in producing a significant portion of the nation's basic research
  • How to strengthen the linkages between the state's public and private education sectors.

But the challenges of today are no more formidable than those of 35 years ago. The current Master Plan was the product of a long process and the last in a series of efforts to consider the structure and character of the state's higher education sector. The new effort should likewise be the result of a carefully considered process. Participation should come from all aspects of the higher education sector and should include members of all four major higher education segments (private institutions constituting the fourth), lawmakers, and other leading policy players.

The current Master Plan is arguably a major reason for the state's tremendous success over the past 35 years. A new Master Plan will be the key to the state's next 35 years. The sooner such an effort can be undertaken, the sooner the sector's goals and objectives can be redirected to springboard the state into the next century.

The failure of the state to provide ongoing support to its higher education systems will be a costly failure indeed. A significant share of the state's burgeoning population will be denied access to higher education, and in an increasingly technological society that demands an increasingly skilled workforce, such short-term policy choices could well leave the state unable to compete. Now is the time to act—to provide a sophisticated and thoughtful plan for those systems—before the unfocused policies of the present result in an unintentioned dismantling of a success that has taken 35 years to build and before the effects of such a process ripple through the state's social fabric.

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Notes

  • [1] This amount is included in the "buy out" costs described in the preceding paragraph.
  • [2] California's three-strikes law mandates 25 years to life in prison for anyone convicted of a felony following two prior convictions for serious crimes.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    California Higher Education Today: Many Fewer Students Served

  • Chapter Three

    California Higher Education Tomorrow: Access Deficits

  • Chapter Four

    Prospects for Closing the Access Deficit

  • Chapter Five

    Conclusions and Implications

  • Appendix

  • Bibliography

This report is part of the RAND Corporation monograph report series. The monograph/report was a product of the RAND Corporation from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

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