Faced with fiscal cuts dependent on thestate’s budget, which is set to be finalized in mid-June, the UC Board of Regents are seeking solutions to the university’s budget by exploring alternative methods of funding financial aid for UC students.
At the May 16 regents’ meeting, at which regents discussed a potential 6 percent fee increase, UC Executive Vice President of Business Operations Nathan Brostrom presented a method that could be used to fund the university’s return-to-aid program as one solution to a possible tuition and fee increase.
While return-to-aid is not a formal policy, it has been a customary habit within the UC system since 1968 and currently funds financial aid for eligible students by extracting one-third of all revenue generated by student tuition and fees and funneling it back into financial aid.
Faced with the scenario of tuition hikes, Brostrom said the UC has started brainstorming alternative funding methods for return-to-aid, which would use one-time funds — primarily in the form of donations made to the UC — to finance a percentage of return-to-aid, rather than just tuition and student fee dollars.
While the idea is in a preliminary state, it is an example of how money is being reorganized within the UC system because the funds available are far fewer than they have had in the past, said UC Spokesperson Dianne Klein.
“The threat of cutbacks is so severe that we are talking about actions that we never thought we would discuss,” Klein said. “We are getting creative.”
According to Brostrom, the UC currently takes roughly $700 million from tuition and puts it back into return-to-aid. However, if the UC could come up with other resources to replace tuition money, restricted funds and operating funds could be released to each campus for independent use, and tuition would not need to increase in order to ensure the financial aid obligations for each campus are filled.
“This is a way to meet financial aid obligations without raising tuition on the students,” Brostrom said.
Brostrom gave the example that if the regents were able to redirect revenue from return-to-aid towards other projects, it could potentially cut tuition by thousands of dollars.
In order to provide the 5 percent operating fund for each campus, the UC would need to institute a 7.5 percent tuition increase, Brostrom said. However, if return-to-aid money was generated by donations and philanthropy, tuition increases could be limited to 6 percent and would allow the same amount of financial aid while having less impact on middle-class families, who suffer the most from tuition hikes, he said.
Although using one-time funds to help finance return-to-aid would ease the severity of potential tuition hikes, it also presents the concern that these donated funds could run out in the future. If the current percentage that return-to-aid receives from student fees is erased, there is no guarantee for what the UC might receive from donors in the future.
UC Student Regent-designate Jonathan Stein raised this issue at the May regents meeting, at which point he questioned Brostrom about the longevity of the solution and whether one-time funds were a sustainable source of revenue when it comes to financial aid dollars for students.
“It makes me nervous that we would be doing this simply because we feel we are comfortable that we can find one-time funds currently to fill the difference,” Stein said at the meeting. “If we continue to pursue this as a policy, we might put ourselves in a position where in the future we do not rely on one-third return-to-aid and do not have enough money for financial aid.”
Stein also asked that the UC only pursue this option after confirming that sufficient funds had been secured from other sources to ensure that financial aid would not be reduced.
“If alternative funds from philanthropic donations are not available in the future, we would adjust the size of future tuition increases to generate the needed financial aid funds,” Brostrom said in an email.
While Brostrom acknowledges the importance of securing philanthropic funds, he states that the UC is hoping to create a steady flow of private and corporate donations in the UC name so that alternative funds would continue to be available in the future.
“Our goal, of course, would be to generate donations for UC’s endowment so that alternative funds would continue to be available in future years,” he said in the email.
Another aspect of the idea is what type of fundraising donors would be interested in. In some ways it might be easier to fundraise around the basis of scholarship, rather than school maintenance or building upkeep, according to Klein. However, she also said it could also be difficult to fundraise for broader financial aid revenue.
Nothing is settled, but the potential cutbacks are harsh and cut into the core values of the UC public education system, she said.
“We would like to get philanthropic support systemwide, but right now donors have specific scholarships,” Klein said. “It is a tricky dance here.”
Brittany Jahn covers higher education.
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Collusion between Nate Brostrom the Banker and Sherry Lansing the ghost. Great omen for UC’s failure
UCOP spends $1.3 billion per year on ‘miscellaneous services’; that’s about 4.5% of the systemwide annual budget… and Yudof cannot or will not say what his office is spending it on.
When the CA State Auditor said that UCOP’s two word classification for substantial funds was insufficient Yudof basically responded with ‘nothing to see here, folks.
I really hate that we have to play these games in California. We are about to spend nearly $100 billion to build a train that will only affect thousands, but we can’t fully fund education that would positively effect millions of Californians and the economy.
UC is not considering one other option. Santa Clara University in Silicon Valley is setting aside 10% of its admissions to students who don’t need financial aid. UC already does something similar by setting aside 20% of admissions for out of state students who can’t get California financial aid. Why not give in-state students an equal chance to get in? These relatively wealthy students (and future generous alumni) are often excellent students and may otherwise take their money out of state to Ivy League universities.
Interesting idea, but it is possibly the opposite of what is happening with out of state students. I expect that the out of state students that get into Cal are more talented than their California peers, because the university limits how many out of state students it lets in much more than they limit California applicants. If we let in California students based on their ability to pay, it would be like affirmative action for the wealthy. We would let in less talented Californians because they have money, and you know that people would start screaming about the privileged getting privileges. Of course, a decade or two from now it won’t matter as Cal will be a private school. Then the legislature won’t be able to kick us around, and the university will be more stable.
I don’t think my idea has a prayer of being implemented precisely because it would be seen as affirmative action for the wealthy. However, what UC does now is also unfair. It intentionally overcharges some students (the wealthy) by $700 million so that it can redistribute that money as financial aid without calling it a tax on the wealthy.
It isn’t even limited to the wealthy. It charges out of state students no matter what their economic status. I know plenty of students who would qualify for financial aid if they were California residents but who pay out of state fees, because they are not. I am impressed with the out of state students who are taking the extra burden so they can get the best education they can get. They put up with the condescension of residents and pay higher fees.
It isn’t even limited to the wealthy and out of state students. ALL California residents who aren’t considered poor get taxed in order to give it to the poor. The middle income students end up with tens and hundreds of thousands of loan debt when they graduate from which they may never recover, especially if they go into public service or non-profit work. The middle income students end up poor, and they get no relief whatsoever. Just another form of discrimination in the name of “access”.
“While return-to-aid is not a formal policy, it has been a customary
habit within the UC system since 1968 and currently funds financial aid
for eligible students by extracting one-third of all revenue generated
by student tuition and fees and funneling it back into financial aid.”
“According to Brostrom, the UC currently takes roughly $700 million from tuition and puts it back into return-to-aid. ”
$700 million = 1/3( All revenue generated by student tuition and fees)
All revenue generated by student tuition and fees = $2.1 Billion
$2.1 Billion/175,000 UC Undergrads = $12,000/student , approximate current in state tuition.
[Out of State International pay an additional $20,000 per year tuition.
8% Out of State/International = 175,000 students (.08) = 14,000 students
14,000 students ($20,000) = $280 million]
We’ll keep things simple and ignore Out of state/International fees for the time being since we don’t know how close “roughly” and “1/3″ are to the actual amounts.
1)Since half of California resident students have their tuition fully paid by Cal Grant, half of the $2.1 billion in revenue is actually being paid by the state of California in the form of Cal Grant.
$2.1 Billion(0.5) = $1.05 Billion of revenue generated by Tuition and Fees is being paid by the state and $1.05 Billion is being paid by students not receiving Cal Grant. This means that 1/3 of money given by the state to pay the tuition of students at UC by means of Cal Grant is not going to pay for tuition but is actually being granted to students by the university to pay for room and board.
2) Similarly, 1/3 of the $1.05 billion actually being paid by students who do not receive Cal Grant is not being used to pay for the actual educational mission of the university but is being granted by the University to students receiving Cal grant to pay for room and board. Of the $2.1 Billion generated by student fees from both the state through Cal Grant and Students who do not receive Cal grant, $1.4 Billion(2/3) goes for the educational expenses of half the students receiving Cal Grant and $0.7 Billion(1/3) goes for the educational expenses of half the students not receiving Cal Grant, and the students not receiving Cal Grant are paying their 1/3 while the students receiving Cal grant are paying nothing for the 2/3 they receive.
3) When it is asserted that state funding for UC has decreased X hundreds of millions of dollars, is the increased transfer of funds to the University through Cal Grant with each tuition hike accounted for? If it is not accounted for, there has only been a reduction in funding for students not receiving Cal Grant. Each tuition hike has taken state funding for UC that was formerly allocated to all UC students and reallocated it only to students receiving Cal Grant, and not only for tuition but also for room and board and in the process also increased the charitable donation from students not receiving Cal Grant to students receiving Cal Grant.
4)It is stated that it is not a formal policy but rather a “customary habit”; however, the question arises if it is within the constitutionally granted authority of the University of California to charge a level of fees/tuition at a rate that is not set to meet the costs of the education but so that the university can then acts as a welfare authority to redistribute revenue generated from its over charged fees/tuition.
The legality of the University granting Cal Grant A money to pay for living expenses is also questionable since Cal Grant A is strictly to pay for tuition.
5) Since (1/3) $1.05 Billion = $350 Million paid by students not receiving Cal Grant is in essence a charitable donation by the student or his family, the $350 Million should be allowed as a charitable deduction on his or his parent’s income tax.
I am totally confused. If Cal Grant fully covers UC tuition, what is the rationale for “Return to Aid?” Why has UC increased tuition/fees more than necessary for over a quarter of a century to cover any decrease in state funding, reportedly so that those on financial aid would be able to pay the tuition increase, when the state already covers that increase by increasing Cal Grant? “Return to Aid” seems like Enron style Creative Accounting, contrived to generate revenue to fund the living expenses of students receiving Cal Grant. When the state decreases per student tuition funding for UC that has no effect on student living expenses that the state was not funding to begin with. “Return to Aid” has made UC unaffordable for those in the middle class below upper middle class, in other words, unaffordable for most of the middle class. The implications of a “customary habit” started in 1968 when UC state resident fees were around $200.00 per year and where UC fees represented a very small percentage of per student funding should be thoroughly considered when “Return to Aid” now represents not $200 x 100,000 students(1/3) = $6.7 Million but rather 700 Million. Not $67.00 per student but $4000.00 per student.
“contrived to generate revenue to fund the living expenses of students receiving Cal Grant.”
I’ve heard this for sometime now. Should we be paying for living expenses on top of tuition?