Napolitano’s Hidden Reserve Means the U.C. Could Lose State Funding, and Its Independence

BY ISABELLA LORD

UC President Janet Napolitano in April. (Gina Ferazzi / Los Angeles Times)

UC President Janet Napolitano in April. (Gina Ferazzi / Los Angeles Times)

On Nov. 20, 2016, students awoke to crowded streets and empty lecture halls. The previous day, UC students were forced to accept another devastating tuition hike, raising the total cost of UC tuition from $13,500 to $14,382 for the 2017–2018 school year. There had been a six-year freeze following the last tuition hike in 2011. Under this plan, the tuition is subject to change over the next five years. Worst case scenario, UC tuition will increase 5 percent every year, up to a massive 30 percent increase. Whether this happens, however, depends on how much state funding the UC system receives that year. It is not only the increase but the uncertainty of affordability in the future that makes this bill frustrating for students. The dissenters to the decision feared it would cause a drop in federal support and be a tremendous financial burden. Still, it passed 16-4, to the dismay of Governor Jerry Brown and the student population.

UC officials claim that financial aid will serve as damage reduction. A large amount of the UC budget that should be used towards the school is spent on financial aid each year. This is a short-term solution to the UC’s financial problems, and it is not a solution for everyone. Governor Brown plans to close the middle class scholarship within the next few years. Most financial aid from FAFSA only assists people who make $60,000 or less; the middle class scholarship is the rare exception that supports families making up to $150,000. With the loss of the middle class scholarship combined with the tuition increase, more people will drop out of school or refrain from attending a UC altogether. Financial burden is the primary reason students never finish their degree.

So if college is already a financial liability, why raise tuition again? According to the UC regents, the tuition increase was absolutely necessary to ensure the quality of education in the UC system. This excuse may have stalled outrage, but the suspicious behavior of the UC system cannot be ignored. The top ten executives of the UC system make a combined annual salary of $3.7 million, with much higher salaries than higher-ups in other state departments. With each passing year, public U.S. colleges seem to be operating more and more like for-profit schools.

The intent to raise tuition for the 2017–2018 school year was announced in August. The state worried their funds were not being used correctly and agreed to audit the president’s office. Despite their protest, the audit was finally conducted by state auditor Elaine Howle this year, revealing a massive hidden fund of $175 million, $32 million of which came directly from the campuses. This discovery was devastating for students and an embarrassment to UC President Janet Napolitano. She claimed that the funds were never truly hidden, that they were dedicated to a series of projects, and that the reserve actually holds $170 million, not $175 million. None of these excuses help the growing homeless student population, nor do they explain why the tuition increase was necessary. Napolitano called this reserve a “president’s initiative fund.” Not much initiative has been taken, however, and none of this money was spent in 2016. Though Napolitano claims this money is dedicated to a series of school projects, her failure to disclose the money in her budget also warrants serious questioning. Governor Brown has already cut $50 million from his UC budget for next year in response to the audit’s findings, which could be the first of many stringent decisions. The financial situation of the UC system has been tumultuous for a long time. Federal funding for the UC dropped significantly after the recession. In a crisis, education is the easiest to cut and the hardest to reinvest in. The UC system has become fairly independent in its budget and decision making since the recession. The results of the audit, mainly the discovery of an unspent $175 million, could change that.

The governor has already considered abolishing the regent system. California community colleges and state schools are currently led by appointed government officials. The California constitution established the UC system as independent in 1879, meaning they are rarely subject to legislative authority. This independence is one of the reasons the UC system is so successful, and it is unfortunately rare. The reserve may have been a careless use of funds, but does it truly warrant excessive government scrutiny or control?

Still, with the current regents system in place, no one seems to have a permanent solution to the problem. If the state cuts back on funding, tuition goes up. If the state funds the UC more, more students are admitted the following year, and the budget goes up, requiring more funding or another tuition increase. Generally, during a financial crisis, people are expected to spend less. After state funding was cut, however, the UC did not lower their budget. To make up for the state’s austerity, they increased the number of out-of-state students to collect the higher tuition. Meanwhile, the governor is wondering why the UC has failed to find alternatives to lower their budget. The UC could realistically find ways to spend less every year, and now they may be forced to.

In her audit, Elaine Howle gave 33 recommendations to the UC system, including legislative approval of the UC budget. If all her recommendations are implemented, the fund could circulate completely back into the school system by 2020. While the president agrees with the recommendations, regents President Monica Lozano and regent Charlene Zettel worry they strip the UC of its autonomy. In their letter to Howle, they question the implementation of both legislative and third-party oversight on the UC budget. Perhaps this reserve is an indicator that the higher education system simply needs to better organize its finances. $175 million is a significant amount of money that could have been invested into scholarships, renovations or any variety of beneficial ideas. Because of this, enraged students and legislators are calling for a rollback on the tuition increase. While the discovery of the reserve was heartbreaking, it may provide an opportunity for the UC system to make serious changes and finally be held accountable. We have too long let the promise of a diploma sedate us into silence.

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