The American Higher Education Mess

The following is a transcript of a talk at the Feb. 22 CSUF President's Symposium, “Appraising the Future, Understanding Costs: Envisioning the New Normal in Higher Education,” given by F. King Alexander, president of Cal State Long Beach.

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Can everybody hear me OK? And first, let me apologize. Some of these graphs for those in the back, I'm glad they're included, but you're going to see why. They're going to be very hard to read, because there's a lot of stuff on them.

When I say stuff, I just want to thank Jane Wellman, because we wouldn't have the stuff and data that we have today if it wasn't for what she has done at Education Trust, as well as the Delta Cost Study. I'd just like to encourage us more and more as institutions to look to this data. We've killed a lot of arguments in Sacramento already and we've made a lot of progress in Washington because this data is indeed made available. She has been one of the ones encouraging more institutions to admit this data, to cough up this data.

I'll point out that in the early 1990s, when the nation’s colleges and universities were first asked to submit this data to the Federal Government and IPEDS, at least half of the nation's institutions objected to the idea of submitting data to the Federal Government. Despite the fact that they're living off Federal Direct Student Aid money, loans, grants and whatever else was in the pool at the time.

The data that I'm going to show you today actually makes our case and makes it very strongly. One reason Jane is so wildly respected throughout the United States and the reason she was in the Roosevelt Room of the White House that day is the very non‑partisan way she presents this data.

Well, I'm here to tell you I'm presenting it in a very partisan way, because the data is indeed on our side. It's on the side of efficient institutions. It's on the side of institutions that have remained committed to the mission of public higher education. It's on the side of institutions that fight hard to keep their tuition and fees low compared to national averages.

It's on the side of institutions who want to make public things that Bob Shireman was talking about this morning which we already do in the CSU. We make our mid‑career earnings available. We make our starting salaries earned available and we actually were the first to put our average undergraduate student loan indebtedness on our website on the college portrait and we've encouraged the rest of the nation's institutions to do the same.

You'd be amazed at how many don't want to do that, by the way. Don't want to talk about their student indebtedness. Don't want to talk about their default rates, and the things that Bob fought so hard to try to make them actually report on an annual basis.

We'll get to a little bit of that. Let me jump in to how we got here. I was very fortunate to begin my studies with Grapevine, the annual compilations of data on state tax support for higher education, including general fund appropriations for universities, colleges, community colleges, and state higher education agencies. Each year since 1960, the Grapevine survey has asked states for tax appropriations data for the new fiscal year and for revisions (if any) to data reported in previous years. If you don't know the grapevine, it's the main source of education, state appropriations. If there's anything you'd take away, there are a couple of charts I want to show you in a second.

But the last real great debate we had in American higher education occurred really between 1965 and 1972. What ultimately ended up is in 1965 we got the Elementary and Secondary Education Act (ESEA), which is in the process of being reauthorized in Washington right now.

One of the most important aspects of ESEA was Title One. Title One said that schools that have a disproportionate amount of poor children need Federal assistance and extra resources to help educate those children. That's been a widely accepted principal in K‑12 schools. Money goes directly to those schools and it can be used as Federal leverage to encourage schools to do certain things and has been used that way.

However, higher education was treated differently for a number of reasons. Number one, the American community college system was flourishing, growing. Private higher education was in jeopardy. They made their case very soundly and said that the states will take care of public higher education, if you develop a Federal voucher system, a Federal Student Aid system where everybody can play. They argued that the Federal Government needed to help private higher education stay afloat and keep their student populations up.

Well, public higher education was against this concept in 1972. We fought for direct institutionally, much like Title One in 1965 did for poor schools in K‑12 districts. Well, when the smoke cleared in 1972, the Federal Government adopted the Federal Voucher System, but it also adopted the Cost of Educational Allowances to appease the public sector institutions.

Cost of Educational Allowances actually authorized that $2,500 would follow every Pell Grant student to that institution so that we could put that into the programs and help those students succeed. Well, guess what? There's never been any money put into the Cost of Educational Allowances.

It was authorized in 1972, but no money ever followed those students. So the institutions that took low‑income students had to figure out the best way to educate them with no extra resources from the state or no extra resources from the Federal Government. Very unlike Title One, very different than the Title One ESEA program.

What has happened since 1972? As far as the public/private battle that happened in '72, the privates won. The market system prevailed in 1972 at the Federal level because the assumption was states were going to take care of the lower cost public institutions.

Demand for student aid changed. In 1978, loan caps were blown off so many institutions ran tuition up as fast as possible simply because they could. In many states, Pell has taken over. The $30 billion‑plus dollars going into Pell annually has made it the largest Federal direct funding system that we have.

The State Student Incentive Grant program (SSIG) was started to encourage states to adopt state student aid programs. This was the first real federal leverage issue to encourage states to adopt good programs or state student aid programs because when SSIG started, there were only six states that had direct student aid state programs. Currently, today, there are 49 that have state student aid programs, so SSIG has become obsolete because it served its purpose.

Direct lending: as you know, we just recently adopted direct lending. For some reason the U.S. system thought that it was better to funnel direct student loans or funnel student loans through private banks unlike any other OECD country has done. We thought it would be a great idea to pad the pockets with risk free loans of about $10 billion a year to America's banks—risk free.

Only recently have we turned this around and you've probably read a lot about the fight, but now we're all on direct lending which provides $10 billion extra dollars to our students to go to college. Perhaps that may be ultimately the best policy that was adopted by the Obama Administration when the smoke clears after all is done. This actually was a fight that started in 1990 that was only recently accomplished.

The big issue is that tuition reliance has grown significantly and as Jane pointed out, there is an arms race. There is a spending race and I'll show you what some of those spending numbers are in the private sector. Princeton has to keep up with Yale. Yale has to keep up with Harvard. The spending has gotten so out of control in some institutions that nobody can reel it back in.

At the same time, there is this issue that spending is associated with institutional prestige. Take a look at U.S. News and World Report, which is the most‑read, national ranking, and possibly the worst national ranking for public benefit. 40 percent of the U.S. News and World Report score is based on how much money you are able to spend on the fewest amount of people. Is that good public policy to follow?

 The other is based on selectivity. You encourage as many students as possible to apply, so you can turn away more than competing institutions. That tells you how this ranking system has worked and it's perversely impacted many institutions, but perversely impacted the public sector in terms of how our institutions are responding to public needs. This, perhaps, is the most important issue that we're dealing with.

Remember when I said the Federal Government was going to augment what states did for higher education in 1972? They were supposed to jump in and play a small role in helping students, low income students go to a variety of institutions. Well, the states were going to handle the rest of it.

Well, currently states now put $78 billion into higher education. The Federal Government puts in $170 billion into higher education. The $170 billion is tuition-reliant assistance. The $78 billion is institutional support. If you have been reliant on your state, you're in trouble. You've particularly been in trouble since 1985 and 1990. If there's anything that you take away from this, it's this chart on State Fiscal Support.

We're closely working with the White House Domestic Policy group who's using this data to prove their point and I'll get to that at the end. That state fiscal support for higher education, in terms of tax effort, per $1,000 per capita income is at its lowest point since 1965.

As Jane pointed out, one thing this chart doesn't do with the Grapevine data is it doesn't factor in FTE, student enrollments. In 1965, we had six million students. Today, in 2012, we have 20.5 million students in American higher education. This shows you where the crisis is.

When the loan caps were blown off, the reliance on the state started declining. I've got anecdotal evidence of how legislators have seen this, the State and the Speaker, the State Senate, and the State of Kentucky told me in a parking lot at the University of Louisville, "I'm going to get reelected by cutting your budget at Murray State, letting you raise tuition. You can just rely on the Federal tuition programs to offset what we didn't do for you."

That's what's going on in California. Let me show you California. Here's California. We're at our lowest point in higher education support in tax effort since 1962. This is the crisis for 80 percent of our students. This is the crisis for American public higher education. States are abandoning their commitments as fast as they can. Why? Because they can.

There are no Federal protections on higher education. There are Federal protections on Medicaid through matching funds. There are Federal protections on Title One schools, MOE provisions that stop the states from backing their money out of the Title One schools, which they tried to do for the first 10 years and they lost every court case where they tried to back their money and supplant their money with Federal money.

The reality of all this is that when we talk about higher education, there are good and bad players. There are good and bad players with regard to tuition and fees. I'll give you an example. University of Richmond is a bad player. University of Richmond raised their tuition two years ago $7,000 because they were getting a lot of northeastern applications and their peer institutions were in the northeast. Their president said that, ‘One reason we're raising it is because we don't want the parents in the northeast to think we're cheap.’

That's the Chivas Regal effect in higher education. The bottle looks good but tastes just as good as anything else that's cheaper on the inside. The Chivas Regal effect is indeed alive and well with many institutions, but also not alive and well on many campuses such as ours who are fighting to survive on the lowest funding sources that we've ever had.

There are good and bad institutions in the expenditure rates. Princeton raised their tuition over $2,000 this year, about five percent. They had their best endowment year in recent history this past year, upwards of 25 percent endowment returns. Nobody has asked Princeton, "Why'd you have to raise tuition $2,000?".

There are good and bad institutions on the expenditure rates. Why does Sarah Lawrence in New Jersey charge more than Princeton? Why does Chapman charge more than Princeton? Is that fair to really assume that value is associated with what institutions actually charge?

 There are good and bad institutions with regard to commitment to public goods. What happened in 1972 to win the Federal Government over? It was stated that if federal assistance would be made available to private sector higher education, Stanford would become like UCLA. What's happened is that UCLA has become like Stanford and Illinois has become like the University of Chicago. Virginia has become like Harvard, not the other way around.

In fact, we have seen a decline nationally in service to under-represented populations, Pell students. Private research universities are down to 12.5 percent of Pell students they serve. And let me remind you, these are the richest institutions on Earth in terms of per student spending. Public research universities are down to 19.5 percent Pell-eligible.

There are good and bad states. They asked in a committee hearing, "Is the California master plan alive and well?" I was testifying on this and I said, "Yes it is. It's alive and well, but it's alive and well in North Carolina."

Where the tax effort of North Carolina is second in the country and their student fees are 49th. You see the balance? Here the balance was we were supposed to keep our fees low in exchange for the same type of tax effort, yet our tax effort is at it's lowest point since 1962. There is no balance. There is no master plan for when that balance is violated.

So North Carolina is doing well. In fact, there are states that have higher tax effort than California now despite its wealth— Kentucky, Mississippi, Louisiana, New Mexico and West Virginia have higher tax efforts in support of higher education than California. And I can say this, I grew up in Kentucky. I have family in Kentucky. Kentucky is not a wealthy state, but they are supporting their students better. In fact in Kentucky, tobacco is still a vegetable.

There are things that aren’t being done in this state that we should be ashamed of.

Most of our funding formulas are not based on the outcomes that Jane's Delta Cost Study demonstrates. They're based on what used to happen in higher education. Many states have said, "We're going to fund certain institutions to make them a top 20 or a top 30 public institution." What does that mean? I was in Cambria, Australia in 2002 and the first thing out of the Ministry of Education at a question at dinner was, "How can we get the University of Melbourne and the University of Sydney as top 30 public universities in the world? What will we have to do to do it?"

My response was, "Do you have any idea what you are going to do to the students at the University of Brisbane and the University of Perth while you're chasing an arbitrary top 30 that may not matter in any situation?"

Here's what some of the data that Jane makes available shows you. She talks about the spending rates. Private research universities, this averages what they were spending per student, $105,000. Public research university is at 33,000. Private liberal arts are at $25,000. ASCU institutions or Masters institutions like ours, which for the larger CSUs is a real difficult categorization because the average masters comprehensive university in America has 8,000 students. Fullerton has 35,000; we have 35,000, so it doesn't necessarily fit. But our spending levels haven't grown that much over the 15 or 20 years, because of the number of students that we've served and the fact that states have backed out of their responsibility.

Community colleges average about 11,000 per student. Now this is really hard for you in the back to see, but here's where it gets real difficult for us in the CSU. These are the lowest 20 universities in per student spending in America. When Sacramento says that, "You're wasting money, You can get it out of your administration. You're wasting money on your campus. Higher education is inefficient."

I say, "Yes. There are a lot of place that are inefficient." But when you look at this chart, what you'll find is that of the 103 public universities in America with 15,000 or more students, the CSU has half of the lowest spending institutions per student in America.

Now where has that gotten us in Sacramento, when we said, "We're efficient. Why don't you reward us?" Nowhere. Unfortunately that sells well to some legislators and to some Tea Party members, but it doesn't sell well to our faculty, our students, our parents. How would you like to be told as a parent, "Come to our campus. We'll spend less on your child than anywhere else in America."

Cal State Fullerton is 5th, Long Beach is 6^th in spending per student nationwide. That's not what you want to hear.

We spend little, but our outcomes are good in terms of degree production. What you'll find is that most of the universities according to Delta Cost Study data, these are California institutions. Here's Fullerton. To produce one college graduate this factors in the half of the students that we lose, all the costs, it cost Cal State Fullerton $42,600 to produce a baccalaureate degree graduate. It costs Long Beach State $42,000. You go across the state, the numbers vary dramatically. It costs Stanford $305,000 to produce one baccalaureate degree graduate. It costs UC San Diego $103,500 to produce one baccalaureate degree graduate.

My point in all of this is if we are indeed going to support degree production, we need to pay attention to Delta Cost data. We need to fund the places that are doing it efficiently. And if you want to produce three graduates for what we're spending to produce one somewhere else, you need to pay attention to this data.

As you can see on average nationally, it costs private research universities $203,000 to produce one college graduate. Liberal arts—$85,000. Community colleges—$70,000. The reason community colleges are so high is that the AA degree rate is only 21 percent to 22 percent.

This is an issue that community colleges, if they get their graduation rate up substantially, these numbers will come down because they are losing four students for every one that they are graduating and that's factoring into the cost. Public research universities average $70,000. Our type of institution, masters comprehensive, do it for $50,000.

That's one reason why Jane Wellman was in that meeting at the White House. It's because this data is becoming significant to the Department of Education. It's becoming more significant as we're trying to produce more college graduates.

Now dropping this into the equation which Delta Cost doesn't do, where are the poor students? You saw the spending levels. In the CSU, 34 percent of our students are Pell eligible. That's very high compared to the 19 percent at public research institutions. California UC does a better job than the rest of the research institutions, 10 percentage points higher. It has a lot to do with California demographics. This is sort of our peer group of institutions that we have used for years, 24 percent; public research, 19 percent; private research, 12 percent.

What does all that mean? When you break that down per institution, what you'll find is that of those 103 large institutions, 10 CSUS have some of the highest percentages of Pell students among the 100 largest institutions in the country. In fact as you can see, Fresno State has the highest percentage at 50. Northridge, Riverside, SAC State, we're at 36 percent. Fullerton is at 30 percent.

Now I want you to think about that for a second because that is the difference between ESEA K‑12 education and higher education. We don't get any help for that 34-326 percent.. We spend less. We get less from the state. We charge less, yet we have the most expensive students. If this were indeed in the K‑12 sector, this would be ripe for a state lawsuit that would overturn the funding formula immediately. We’ve seen this in Kentucky with the Rose case. We've it in Texas. We've seen it in Ohio. We've seen it in Indiana, in virtually half of the states that have had these cases.

We're spending less on students who need more through our standard funding formulas and we're charging less because we have those low income students. The public policy dilemma is this. The universities with the most expensive students charge the least, receive the least state support and therefore spend the least on these students. Therefore guess what? Our graduation rates are lower.

Now while universities that have the least expensive students have more resources allocated, they have the least amount of costly students. They have the wealthier students.

This is where we get to President Obama's proposals. I'm very supportive of what I'm hearing out of Washington. Now private higher education is throwing a fit because they're screaming, "Cost controls!" First of all, we've dealt with cost controls our whole lives as institutions. It's called a governor. It's called a state legislature.

It's called a board of trustees that doesn't give differentiated tuition and fees.

We can talk about the market all we want to. The market doesn't have anything to do with what we charge. State appropriations do. We've had cost control since day one. They're screaming, "Cost controls!" because the Obama administration is the first administration to recognize what we've been yelling about for 15 years. Federal student aid is unsustainable. If they keep putting more money into Pell Grants, states keep backing their money out. Tuition just goes up to negate the increase in student aid. That's what's happening. States are abandoning their commitments.

We're very pleased that in this budget he's protecting Pell. Indeed, the big battle on Pell will be next year because of the numbers. But the creation of the Maintenance of Effort provision (MOE) for higher education is vital. MOE like Title One can protect what it says. We had a little experiment with it with three economic stimulus packages. Bob Shireman and the Department of Education succeeded in inserting maintenance of effort provisions into the final economic stimulus packages, with support from John Tierney in Boston and George Miller in California, and against the wishes of Lamar Alexander in Tennessee who railed on the house floor. They said that you can receive higher education and education funding only if your state does not cut your budget below your 2006 funding level. 48 governors were against this, Democrats and Republicans. We've got Schwarzenegger. He didn't take a position on it fortunately. But 48 governors, NGA, National Governors Association were completely against this.

What happened after one year of the stimulus money? 20 states cut their higher education budget to the very threshold of where the federal penalties kick in and they wouldn't cross it for two years. Tennessee with a $1.1 billion budget, despite Lamar Alexander, cut their higher education budget within $13 of where the federal penalties kick in. Oregon cut it within a dollar. Colorado cut it within a dollar. California cut it within $3 million and an $8.9 billion higher education budget.

It didn't matter what we did in Sacramento. What mattered was where the federal government said, "You're going to stop if we're giving you money." Now the Obama administration, what the press picked up on is he said, "We're going to hold institutions accountable. Richmond, if you're going to play that game, then we are going to hold you accountable for cost increases and tuition increases."

This is a good thing, because the more information that gets out there on the college scorecard that they're putting together to hold institutions accountable. We already do 80 percent of it on our public goods page. As I mentioned, we already make this information available. Earnings data, student indebtedness, default rates, all of this. We're making it available. The CSU’s 23 institutions have been leading the country in trying to get this legislated and mandated for years.

Net tuition was a CSU idea. We're the first to testify that you can do net tuition and use net tuition to measure what an institution actually charges, not what their sticker price is. This is the hidden student aid that is out there. This is vote buying at its best. The Middle Class Assistance Tuition Assistance Program, $20 billion in federal expenditures go into it now. With CSU we calculated that 41 percent of our parents at CSU over the last few years have received $2000 back in tuition tax credits. That's never been factored into the equation.

We've tried to make this point to assembly member Perez who wants to create a middle class scholarship program. Well, the federal government has already done this. The parents are getting back $2,000 a year to the extent of $20 billion a year. It will probably surpass Pell in the coming years as a middle class benefit.

We're working to keep our student interest loans down. It's going to jump to 6.8. These are the kinds of things they meant that normally happen. It's creating MOE to pressure states and holding institutions accountable which the federal government has never embarked on. They can no longer put money on a stump and leave the room and that's what many institutions are asking to do.

I'll point out that the system has gotten so bad that Bob Shireman, the Department of Education has been asking for help. We can't even reel this back in because it's such a free market voucher system and the authority to give away $170 billion in federal money is not vested in the Department of Education. It's vested in 30 accrediting bodies that have no oversight whatsoever in what has been going on.

There are 178 for profit institutions operating in California right now that live off public money. They live off public money. They're trying to change a 90/10 rule in Washington which says they have to at least get 10 percent of their money from other sources than direct student aid. That's just to tell you how bad it's gotten.

When we made this information available, we have our own state student aid programs that are funding these institutions in a similar voucher way. All you need is accreditation. Everybody knows that accreditation is about as easy to get as anything today. We have dropped the ball on accreditation and accreditation made a key mistake by responding back to the Department of Education when they said, "It's not our job to police these institutions. It's your job." As a result, there's nobody policing these institutions to an extent that in this state, it gets worse.

Your Cal Grant program, a $600 million program— the same student that goes to Cal State Fullerton will get $4,000 in a Cal Grant award. If they choose Kaplan of San Diego, they get $12,100. If they choose Expressions College, they get $12,500. If they choose the University of the United States of America which sits in an industrial park outside Long Beach, they'll get $11,500.

There has been no oversight in where this money has gone. The federal issue about its unsustainability is our issue too. Our state funding formulas are unsustainable if we're throwing money around like that and not rewarding the institutions that are doing the best for the public good.

I encourage all of us to use this data to our advantage. If they want efficiency, let's look at efficiency. If they want low costs, let's look at low costs. And let's talk about funding if your priorities are to produce college graduates with good degrees, with low indebtedness, with low default rates. Then let's fund those institutions that are doing the best job possible.

That's what this data clearly shows to me is that there are bad players in this system that need to be reeled in and there are good players that need to be rewarded and there are good and bad states. California is one of the 12 worst states in terms of its abandonment of higher education during that period. California is one of the dirty dozen.

If we're going to be committed as a wealthy state to supporting our students, we need to rethink how we're funding higher education and reward the institutions that are doing a good job and doing what the public wants them to do—keeping expenditures relatively low, keeping costs relatively low, keeping student indebtedness low—all of the things that matter to our tax payers and that matter to our student and our parents.

We're in this. All higher education is not alike. When you hear that privates are like publics and you've heard colleagues say this, "Publics are like privates," some are. Virginia is like a private. The University of Virginia is. According to the legislators the University of Virginia in Richmond is known as the University of New Jersey at Charlottesville, because they are 40 percent out of state. They're simply turning away in-state students. They're not serving in-state students. They're not serving Pell Students. They have privatized along with Michigan and a number of other institutions.

We don't have that luxury. We don't have the finances to do it. We don't have the luxury that many of those institutions have to do that. I would encourage us to be very supportive of federal intervention into this because our own Pell Grants are at stake when we can't control the number of institutions that are getting Pell.

I'll give you this data. For profit institutions in America today have 11 percent of the student population, 30 percent of all the Pell Grants and 47 percent of all student loan defaults. That's a big red flag that we need to work together to show who's good and who's bad in all this.

It's a revenue problem and it's a spending problem and we're not going to fix it by looking at only one half of it. It's a very different manifestation depending on different types of institutions, so we can't expect the diagnosis of a private research university to apply to a community college. The data says we've got to be nuanced in this conversation. The data says that we've got a public policy problem and an institutional spending problem in public institutions. The habits of state funding and the patterns of state appropriations are a big part of the problem. We can say a lot more about that, but that's a piece of it.

There's an institutional piece of it which has to do with the way institutions spend the money that they have in spending habits in institutions that are too frequently on autopilot where fixed costs, employee benefits and other things, are a fixed priority for spending and where we are not doing as much as we need to connect data about spending to putting it in places that make a difference in student effectiveness. That's what the data says.

Alexander: Regarding what we can do. First of all I heard the comment. I appreciate Bob Charmin's comment about K‑12. We're in this with the public schools. California has decimated there schools much worse and faster. We're on the same pattern as what they're doing with higher education. When Kentucky has better tax effort and support of it's children than California, we need to rethink what we're doing. Personally I've never seen so many poor facilities. My kids go to the public schools in Long Beach. They do an outstanding job, but California student to teacher ratio is 39:1. The national average is 23:1. Think about that in a kindergarten classroom.

Number One: We're not in this to blame our public schools. We've got to work with them. These are opportunities that are absolutely essential for our kids and our students and we've got to work our way out of this together.

Number Two: I'm a little pessimistic about what this state is actually committed to. The state put more money into Medicaid. Why? Because there was a federal match, while hammering higher education with a 30 percent budget reduction. That we have to advocate for greater federal intrusion, greater federal involvement and in many ways, put our states in handcuffs to make sure that they're not doing the wrong things over and over and over again and shift that burden to the federal government.

It may be in the form of federal matches. It may be in the form of maintenance of effort provisions that apply to virtually any. I would put all $170 billion in federal moneys. I would use that as the leverage. Federal leverage works.

Number Three: It was the Democrats without federal leverage who threw higher education under the bus last year. You can be a Republican or you can be a Democrat, but we have legislators that are on both sides of the aisles. Every one of them says that they are supportive of education. It's one of their top three priorities. And every one of them were the first to sign onto budgets that have decimated our public schools and are in the process of decimating higher education.

I would hold them to their votes. Not their words -- their votes. We need to advocate for people who are willing to raise revenues for K‑12 schools and children. And to look outside the state of California to realize that it shouldn't be flattering for a state this wealthy to be well behind West Virginia in it's tax effort for children and students.

We need a wake‑up call on this. We need an important wake‑up call because ultimately everybody's at stake in this. The economy, the future economy of the state, our student opportunities, we are in danger of becoming the only generation in the history of America to leave the next generation with less educational opportunity and a lower standard of living. That should be an enough of a wake‑up call to get people to understand the difference between a state investment, which is a school and a child and a student, and a state expenditure, which is a "three strikes and you're out" incarceration.

I spend a lot of time asking legislators, "Would it make a difference if I were to incarcerate a number of our students? Would we get more money?" But as sad as that is to say, that's where we are right now. Fullerton, Cal State, Fullerton, Cal State, Long Beach, we get about $4,500 from the state and we're incarcerating people at $55,000 per year per person at the state level. That's not the elderly, that's just an average.

Thank you. We'll now go to questions from the audience. We have a roving mike here. We already have a question. Please first say who your question is for.

Audience question: This question is for both of you. I was very discouraged by President Obama's speech on January 27th, where he said that university tuitions were going to be pegged to federal aid. That, if tuition was not kept where they are or brought down federal aid would be cut. I would like to know what your opinion is, both of you.

Alexander: I'm very supportive of what he said and what he said before that. Before, he said two things, "We're going to hold states accountable," which I showed you the charts, that's page three and four, and, "We're going to hold institutions accountable for doing the right things." There are many institutions that aren't doing the right things that are called on a cold war spending growth. That then turn to the federal government to match their spending growth and tell the federal government that it's your fault, you're not keeping up with our spending growth. So, I think it's about time that the federal government, we're all going to lose in this if something isn't done ultimately.

There are 178 "for profits" in California. Many of those "for profits" institutions gauge their tuition based on how much student aid they can get at the state and federal level. If the aid keeps going up, their tuition keeps going up, the system keeps putting more pressure to lose money, we're all going to lose on this.

The federal government has a solid right and a responsibility to use the leverage to make sure institutions are behaving appropriately with public money.

Audience question: I have to say I was very disheartened by the Washington and much of the national reaction to the President's proposals, which was very much a status quo protective response and a response that this is a one‑size‑fits‑all federal regulatory intrusion into higher education. I'm afraid that the assumption is that these proposals that have been put forward, for which the administration asked for help in thinking about it. They asked for ways to do this responsibly, what they got back is a slammed door. So I was very disappointed.

I have problems with the language of, "Any tuition increase results in control since so much of the tuition increase is in public institutions are happening to back fill for budget cuts." I think the math matters, I think the details matter. The symbology King's got exactly right in my opinion.

Audience question: I'm back here. King, we've had this discussion, but how do we control the "for profits?" Having come from states where they are very highly regulated and the states close them, how do we in California do that?

Alexander: California has got like Florida, like Arizona. New York did a better job. New Jersey did a better job. You've been in New York. Most don't go to New Jersey, for example. California was supposed to regulate this and some point completely abdicated these responsibilities to an outside accrediting body. To show you how bad accrediting has become, just in WASC, our accrediting association for Cal State, Fullerton and Long Beach, take a look at who you're accredited along side of, who the board members are from.

WASC, which is one of the most respected accrediting bodies, Cal State, Fullerton's vote counts the same as Patten University in Oakland. Patten University in Oakland is a "not for profit," but the Vice President of Academic Affairs, the Vice President of Student Services and the Provost are all sisters in the same family. They have the same accreditation as Stanford.

Accreditation, first of all, hasn't handled this. When California said, "We're not going to do it either," nobody has been controlling this. In fact, all you need is a simple accreditation from one of six, as it started, and now there are 30 accrediting bodies.

You restrict the funding. I do think the best way possible is for the states to gain control over this. It's a consumer protection issue as much as it is anything else. The council in post‑secondary education in Kentucky had this responsibility to approve of any University in the state. They've forgotten that it's their responsibility.

When you leave the United States, the Ministries of Education, the Landers in Germany, they are the ones that approve whether you can operate in their country, in their region, and it is a government issue. We're the only OECD country that has said that we're going to turn over $170 billion to private accrediting bodies that then can go into states that have no regulation whatsoever.

A good piece of the Governor's proposal, this is sort of the good side of what the Cal Grant discussion is going, is that the Governor and his staff saw how these numbers were progressing. They believed the idea that why are there 178 already operating, getting tons of money. Next year there will be 300.

They said that in the Governor's proposal they said nobody gets more than a CSU student except a UC student. But no private or "for profit" will get more than a $4,000 limit. States have got to get engaged in this. The issue coming out of Washington is that we need to adopt state regulation and state authorities that do this.

The federal government is putting pressure on us to do this right now. Accreditation has taken a stand against state regulation.

Well, we tried this. The federal government tried this in the Clinton administration in the early 1990's. If you remember the Spree discussion, higher education unified and said, "We don't want oversight." Well, we've got a problem that we can't reel in now because we didn't have appropriate oversight.

The state has a responsibility to have one of its agencies, consumer protection or somewhere, some place there is appropriate oversight on who can offer degrees in the state. And who actually is allocated public money, based on a whole different set of transparency agreements, and accountability agreements.

Wellman: "California has effectively dismantled policy capacity for post‑secondary education. The only place there is any capacity now is the Student Aid Commission, which is not well constituted to play an oversight or policy role, it's a funding agency." King's more ready than I am to federalize aspects of higher Ed policy. In a fantasy,

I'd like to see the federal government do some things they're not doing. For a lot of reasons we've got to continue to have the states in the game of setting public policy expectations for higher Ed, of making sure that the funding is appropriate, and you don't have it in California.

The dismantling of CPAC last year I've heard described as a mercy killing, and certainly it was something that took a long time to happen and it needed to happen. California needs to have that conversation.

Historically, people in Cal State have not been eager to have a high functioning CPAC. I understand why you have that history. You've got to get into a different mindset for the future. You've got to come around creating a high functioning, capable post‑secondary body to do the licensure, to do state policy and to do the planning. Otherwise, you're defaulting to the legislative analyst. They're good people, but they've got a different job to do. Their job is to protect the budget. You got a different job.

Audience question: I'm a student at Cal State Fullerton. I appreciate the fact that you talked about, that both of you have talked about that we are paying more money and receiving less services. Our classes are bigger. Our faculty is absolutely way down by their inability to be able to take all of us on. They're trying their best and doing what they can. I have seen faculty members who have gone out of their way to take care of their students. And make sure that their student not only succeed but are able to participate in the global market and to be the best in whatever field that they are. We have the most amazing faculty. Student issues are faculty issues. Faculty issues are student issues. We are linked to each other and we have to have each other. I appreciate that you brought those things up. 

One of the things that is in neither one of your presentations is the third element to all of our universities at this point, which is the administration. Where is the data on them and their participation, also their responsibility in dealing with these issues, because they weren't even brought up.

That's one of the things that we as students find very frustrating. They raised our tuition by nine percent and within five minutes had also raised the salary of a president of a university. We found that very frustrating and something that we didn't understand. The fact that administration didn't even come up in either one of your presentations is confounding and a little bit irritating to us as a student population.

Wellman: Well, I've got another two million charts we can go through. The data on spending for administration versus academics we've got. You do see greater evidence of suppression in spending in the instructional side than elsewhere. I don't think that in most public institutions like Cal State, that there's smoking gun issue on administrative expenses overwhelming academic

expenses. Certainly if you look at where the money goes, more money is going into student services. That's good money. I think it should be going there. More money is going into academic support, which means computing centers.

There's pressure outside of the instructional line. I also would say that the money that's going into presidential salaries, the symbology is bad. You take that money and roll it up it's not going to buy you anything. You do need good leaders and you do need good presidents in any institution.

One of the big problems we have in higher Ed is the quality of leadership and the fact that too many people that we want to have in those jobs won't take them. I'm not going to back away from saying, "You've got to pay people decent salaries." These are impossible jobs. These are very tough jobs, so I'm not going to sign up for making that the problem. The problem is much more nuanced than that. There's just not evidence that this is the thing that's driving costs up. The money is going up all by itself.

Alexander: If you dissect the data even down to what James is talking about, what you'll find is in a collection of the largest institutions, we spend less per student. We spend less on EMG per student. We spend less on administration per student. We don't have the resources that other institutions have. And so we're on the low end and you can argue that we're greatly efficient, but that also means we don't have the resources. We don't get the revenues. The flip side of that, I'll throw this into the equation. Take a look at the high end of spending, the high end of those institutions that I mentioned. The ones that spend the most per student, what you will find are four or five UCs in terms of large institutions. I am very much encouraged for others to use this data to dissect into that information.

One other point, don't let legislatures deflect the intention of what they have done to you and us. These are gimmicks. These are games that have no impact on the budget. They are trying to get your support by putting together a student scholarship bill after they cut the budget by 30 percent and are in the process of cutting the CSU by 35 percent or $950 million. They would love for us to cannibalize ourselves and fight amongst ourselves, because they can get reelected. This is about their decisions, their lack of priority in children, their lack of priority in our students and their lack of priority in the future of California. Hold them accountable and don't let them find scapegoats for this.

Audience question: I would like to follow up on that issue with administration, because starting in 1990 all across higher education, the administration began to grow at about eight percent a year and that continued for many years. It slowed down somewhat recently. Faculty lines got shifted to part timers, administration started to grow very rapidly, more rapidly than I think healthcare costs. Part of the reason for that is a lot of things that used to be done by full time faculty are not done by part time faculty. You think you've saved some money by hiring part timers, but you don't save that much. Because now you have to have much larger student services organizations. Where we used to have a Dean of Students, we have a Vice President for Student Services with a whole retinue of staff.

Clearly administration doesn't account for a big percentage of the university's budget across higher education, but it accounts for more than it needs to. We need to be efficient in that area in my opinion.

Wellman: I absolutely agree we need to be efficient and we need to be looking at where every dime gets spent to put it where it has the most value. There's an argument to be made that there's a higher value for putting student support services in professional student service offices than asking faculty to do the counseling, to do the advising, to do the financial aid packaging that goes along with the student service title. I don't think that's what faculty ought to be doing. That's probably not what they're good at. I would like to see much greater faculty involvement in curriculum development in thinking about student experiences and thinking about teaching and learning. So this is not meant to say all of this can be done by non faculty. We've got to keep faculty in the game.

The data shows administrative expenses going up eight percent per year, I haven't seen it. Certainly not in the institutions you're sitting inside, certainly not in most of them. The people who have some of those numbers have thrown everything and the kitchen sink in that administrative number. Anything other than faculty salaries, they call administration. They're counting hospital expenditures. They're counting athletic expenditures. We haven't gotten into athletics. That's another juicy topic.

There's a lot of funny stuff in those numbers, so I'm not sure I buy it. I do buy, I've said, that when you look at the patterns and where the money is coming from, we're suppressing instructional spending more than other areas. That's a fact on its face.

Alexander: I'll comment that for the institutions that remain engaged in public education, the ones that still take 36 percent, 34 percent, 30 percent in Fullerton’s case of Pell eligible students, student services are absolutely vital.

Let me give a statistic that the Secretary of Education has used on occasion. There are eight universities in the Ivy League. They have $80 billion collectively in endowment. They spend more than anybody else per student in the world. They have 7,200 first generation Pell students amongst all of them. Cal State Fullerton has 10,000. Long Beach has 13,000. Northridge has 16,000, just our individual institutions alone.

They don't need the student services that we need. We have to do things that we wish we wouldn't have to do. We have to offset at 39:1 student to teacher ratio in the high schools. We have to offset the fact that my kids go to the smallest high school in Long Beach -- they have 4,500 kids. That's bigger than a vast majority of universities in America. We have to do things to help our students succeed and a lot of that has to do with student services.

Having said that, I am willing and I've looked at the data. I want the data out there. I want everybody to use this data and stack it up and compare it. What you're going to find is not only are we under-funded, we're under-spending on everything that we do with students. Whether we're helping them in ways that we need to, we don't have the resources.

Before you buy into Jeff's lingo, what some of the other institutions are doing that you may read about in "The Chronicle." Pay close attention and do comparisons. This data makes those comparisons possible and available. I encourage you all to look. Our faculty do as our students said an amazing job. I don't know how our faculty and the CSU are getting done what we're getting done.

That's why we were invited to the White House. That's why we went to Washington and spoke to other institutions about getting stuff done that they can't even fathom we're getting done. I just don't know where the breaking point ultimately is.

Audience question: I've heard a lot about the experimental side. I'd like to know if you have any proposals, since a particularly we may see a ballot measure coming up for tying our higher education needs in specifically with any tax changes be they new changes, or that perennial question of revising Prop 13, or any other ideas for higher education specific tax measures.

Wellman: I don't think that we should only be talking about revenues. I think we need to be talking about budget reform. I think that the conversation in California about the fact the legislature and the Governor don't have the authority to make decisions of the allocation of resources is a serious one. And for them to be accountable for making decisions about how those resources are spent, they need to have authority to do it and that has been incrementally passed away from them. California is still a pretty high tax state and the money is there someplace in California. It's in corrections. It's in Medicaid. It's not in higher education. It's not in the schools. So I think the budget needs to be re‑prioritized.

We need to be looking within higher education about different ways to spend the money we have. I'm not sure I'd go to where King is and say, "Every single dime we've spent is under spending and more efficient." Even the least well financed community college in California is a perfect case in point. They're spending proportionally more on administration in community colleges than they should be. It's because they're fragmented. We aren't taking advantage of efficiencies in systems that we should be.

We need to be looking at ways to leverage the money and not just be talking about revenues. Budget solutions? Absolutely. Should we be allocating more money to higher education? Absolutely. Do we need a tax increase to get there? I'm not sure. I haven't lived in California for many years. Maybe it's different.

Alexander: In some states like Texas, that has helped. In California, it's always not what's face value though. The oil severance tax is a good idea but the question ultimately was, "Who's controlling that? Does that actually take power away from the regions and the trustees to allocate it broadly to all the system institutions?" And there are good ideas that are floating forward. I'm not just saying this. "The Economist" said California is the most dysfunctional democracy. I've been in six states on Earth according to "The Economist." I would second that.

This two‑thirds vote has stymied this state from reacting to people who want to support education. It has shut this state down. It's almost seeking a consensus to get anything done. For the hard decisions, for us to have to wait to make a budget that starts July one for a November election to determine whether we're going to be cut another 10 percent is completely dysfunctional in terms of how you manage a state and how a state progresses.

This has become one of the world's biggest dysfunctional democracies and I think we need complete reform in what's going on. There's only three states that do a two‑thirds vote; Arkansas, Rhode Island. And Rhode Island is as big as Anaheim, so I wouldn't count it.

This state does not work. I will say this. A part time legislature is needed. They're up there year round not passing budgets, not passing them on time. We had to kill 28 bills last year just to keep our ability to react to what they were going to do to us because they're thinking up ways. A part time legislature worked pretty well in Kentucky when they had to get back to work because they had to get back to work after three months. They passed the budget and they made sure we had a budget that we knew would start July one that we had to get ready for. Five of the six years I've been in California, we have not had a budget prior to the fiscal year that we started it.

Structurally, California is broken and needs significant reforms at the governmental level. And tying it together, I think tax reforms would be the next step. Where do we go with that? But I think structurally we've got some major issues and major problems that we all know.

March 8, 2012