UC Regents discuss redirecting return-to-aid funds

Faced with tuition increase, regents explore alternative funding methods

Javier Panzar/Senior Staff

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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.