by Charles Schwartz, Professor Emeritus, University of California, Berkeley                           November 28, 2004

>>This series is available on the internet at

Student Fees: Approaching the Limit

What is the actual expenditure by the University for the overall program of undergraduate education; and how much of this cost is currently covered by the fees which those students are required to pay? The calculation is reported below; and the answer is that undergraduate students at UC are now paying for 95% of the actual cost of the educational services provided to them.

The closest comparison figure given by UC officials is found in this quotation from The Regents’ Budget
[“University of California 2005-06 Budget for Current Operations,” November 2004; page 50]: “While in 1985-86 students contributed 11% toward their education, they currently pay 30% of the cost of their education.”

The basic explanation for the discrepancy between these two numerical claims (95% vs. 30%) is simple: UC bundles together the cost of all the core activities conducted by the faculty - undergraduate teaching and graduate teaching and research - while I have singled out one unique component. This distinction has profound implications for a public university, which I will begin to explore.

Basic Components of UC Financing - Outline of the Calculation

     There are budget books and accounting books. I tend to rely on the latter but for these fundamental descriptions there is no great difference. Traditionally, there is the “Instruction and Research” (I&R) component of the budget: this pays for the salaries and benefits of the faculty and also provides for the support staff and supplies they need at the departmental level to carry out their three-part mission: teaching, research and service. (Service means Professional service, Public service and University service; it is not a big issue for our current study.) This bundle of UC expenditures is embedded in the Instruction category in the accounting reports; and in the Appendix I describe how we remove some extraneous parts (e.g., Professional schools, University Extension).

     The Research category covers funds (over and above the faculty and staff salaries mentioned above) which allow expansion of the research programs under faculty supervision. These funds come mostly from external sources, federal contracts and grants being the largest part, and will be excluded from our calculation of cost for the instructional mission. The category called Academic Support covers libraries and also a number of specialized services, most of them directly tied to research programs but some attributable to the instructional mission. Some other categories in budget and expenditures provide overhead (indirect costs) in support of the core academic functions. See the Appendix for the details of my calculation.

     So far, there will be little difference between UC’s analysis and mine. But now we approach the critical distinction.

Can One Disaggregate the Cost of Undergraduate Education?

     I start with two assertions:
A) Graduate Education (the PhD programs above all else) is inextricably tied to faculty research;
B) Undergraduate Education can be separated, both pedagogically and financially.

     Assertion A is, I believe, universally held throughout research universities in this country; so I will not bother to explain or argue for it. Assertion B, however, will provoke plenty of debate. Here is a sample of quotes, copied from a recent spate of Letters to the Editor [Los Angeles Times 11/13/04; responding to an 11/6/04 editorial on the relative values of teaching and research in our universities.]
Teaching, both a craft and an art, should be no less considered — or exalted — than research when considering university tenure.
More of the populace comes into contact with society's teachers than with its researchers; hence, the need for teachers of the highest caliber who in our democratic society will work toward society's enlightenment, more than its indoctrination.
Teaching and research complement each other. We all remember teachers who've ignited our potential, dreams, knowledge. Thanks for your support.
Your editorial makes the fundamental error of separating research and activities associated with it (critical thinking) from teaching. Research and teaching are to each other as bees and honey. Often the connection may not be immediately apparent.
For example, the most distinguished research professor at a university that I attended was a poor lecturer; moreover, his participation in conferences was of very limited value because he mumbled inaudibly.
However, his brilliant research attracted most remarkable and talented students whose teaching was outstanding. Thus, brilliant research fathers outstanding teaching.
This editorial misses the boat on two counts. First, you can't have good teaching without good research.
An instructor who only knows the manipulations of calculus and hasn't learned what it is for, or what it means through active research, can only teach to a stilted standard imposed by a bureaucracy.
College courses need to evolve with changes in a given field, which can be done only by faculty who are engaged in that field. The better the faculty research, the more relevant and better taught the undergraduate courses.
Second, an education isn't a widget made in China, and you can't price it accordingly. Growth in faculty salaries has lagged that of other professions for many years, which is the relevant measure of inflation.
Smart students aren't dumb, and they know where to go for the best education.

     I don’t expect to resolve this enduring debate, which is really about finding the right balance between two worthy types of activity that compete for each professor’s valuable time. But I do have some relevant statistical data to bring forward.

     First, consider the pedagogical issue. About half of all undergraduate courses now offered throughout UC are taught by Lecturers rather than by Professors. These two titles both describe “faculty” at the university; but the one is hired solely for the purpose of teaching (mostly without any tenure) while the other is hired to conduct research and also do teaching (tenured or on the tenure track). The Lecturers are selected by departmental chairmen to be fully qualified to teach at the same level of competence as the other faculty members; but they are not hired to (nor required to) be engaged in research. This “proves”, for me at least, that there is no pedagogical necessity, at the undergraduate teaching level, for faculty to be engaged in research work. (For graduate instruction, it is a very different story because the PhD students are in fact apprentices on the way to becoming researchers in their own right.) This same point can be made by reference to the many excellent Liberal Arts colleges, where faculty are hired only to teach, not to do research. Of course, teachers at every level - primary school, secondary school and college level - are expected to keep up with new developments in the field of their competence; and this does not require that every teacher be engaged in “research” as are the faculty at a research university.

     The second bit of statistical data I rely upon comes from a faculty work-time study conducted by UC some twenty years ago. This says that UC faculty, on the average, spend about half of their work time on research, with the other half split about equally between undergraduate teaching and graduate teaching. This allows me to make a most reasonable quantitative cost separation of the I&R budget to get out the portion attributable to undergraduate education. (See the Appendix for details.)

What Does UC Say About My Method of Calculation?

     This methodology for a separate calculation of the cost of undergraduate education at UC was first presented in an earlier paper of mine: ”Looking into the UC Budget - Report #8”, issued in 1993. That produced a letter of response from UC’s Director of the Budget, V.P. Larry Hershman, which is reproduced, and commented upon, in the subsequent Report #8a. [See .] Without repeating that exchange here, I will just say that Hershman had no direct criticism of my calculation; he only wanted to avoid it:

“We spent over a year developing the methodology which established the cost of instruction ... As we have clearly stated, the figure represents an estimate of the average cost of education for undergraduates and graduates combined across all disciplines. ... We have made no claim regarding the separate cost of either undergraduate or graduate education.”
     I updated that study in 2000 (see Part 4 of this series) but that time got no response from any UC official. Earlier this year, I wrote a brief summary of this same issue (reporting that undergraduate students at UC were now paying 83% of the cost of their education) and circulated this to all regents in advance of a special meeting/retreat they had on Long Range Planning. That also got no response; but it did end up being published as an OpEd piece in the Sacramento Bee [November 1, 2004].

Should One Disaggregate the Cost of Undergraduate Education?

     Now we come to the interesting part. Why are UC officials unwilling to discuss this issue? I believe they find it greatly threatening, and I want to explore why that is.

     One reason is that there is a long standing awkwardness (a dishonesty, some would say) in how public research universities, not UC alone, have related to their constituencies - represented by the state legislators. The fact is that we, the faculty, have always been hired, been promoted, been esteemed, primarily on the basis of our research activities and accomplishments. Of course, we are also here to teach undergraduate students; that is part of the bargain we have made with our public funding base. But as seen from the other side - the public and their elected legislators - undergraduate education has always been the primary motivation for supporting the university. Yes, they know about research, and they can appreciate its value, both economic and cultural, but seeing their own sons and daughters enrolled in a high-class university was their primary motivation for generous financial support.

     Is there a mis-match of understandings, or of priorities, here? Of course there is. And wise university officials have never wanted to clarify this foggy situation. They have mostly believed that the public, and their legislators, are not competent enough to fully appreciate the importance of faculty research. If all they can appreciate is a classy undergraduate education, that is ok. So they let the little lie lay.

     I am willing to say that as long as the state was fully funding the whole basic budget of the university - research and teaching - then it was perhaps excusable not to clarify the real priorities that exist within academe. After all, both missions are for the public good; and exactly how the money was divided between these two missions was perhaps not terribly important.

     A decade ago, however, something changed. The state had a budget crisis and one response was a dramatic rise in student fees charged for what had previously been a “free” public education. A new political rationale was constructed along with this shifting of financial burden. The creation of a broadly educated class of citizens was no longer to be seen as primaily a “public good”, but as an operation which was for the “private good” of those students who had the talent and the initiative to get into, and graduate from, this great public university. The university (and not only UC, but many of its colleague institutions across the country), not only accepted this change of public philosophy but accentuated it by advertising the benefits (higher lifetime income levels) for those who would be its students. Thus, students “ought” to pay for their education.

     So where does this leave the leaders of public higher education today? State budget difficulties lead to cuts for their universities; in response, universities take the easiest route and increase student fees to make up for the lost revenue. Where does this process lead? Is there any logical or philosophical limit to this progression?

Two Chancellors Speak Out - The Issue is Privatization

     From the Los Angeles Times, October 8, 2004:

UCLA would have to significantly raise, perhaps more than double, the cost of its undergraduate program to remain a first-rate university, Chancellor Albert Carnesale said Thursday. Although the chancellor said such a fee hike is years away from gaining support, his call for an increase, from the current $6,600, underscored how far the UC system has departed from one of its founding tenets as a tuition-free university.    
In the face of dwindling state funding, Carnesale said UCLA "will not be able to match the elite private universities" in quality under its current fee structure for California residents. He said budget cuts have made it increasingly difficult for UCLA to recruit and keep top faculty and graduate students.

     From the Berkeleyan (published by UC Berkeley), October 28, 2004:
In his debut appearance before the Berkeley Division of the UC Academic Senate, Chancellor Robert Birgeneau offered a cautiously optimistic prognosis on future state funding for UC and an emphatic endorsement of the public nature of the university.
“I’m a deep believer in the public-service aspect that our university offers,” Birgeneau told the Senate’s fall 2004 meeting on Oct. 21. He has already heard, he said, from a number of people, including donors, who believe that the only strategy for the future “is one that takes us in the direction of privatizing the university. I want to state unambiguously and unequivocally that if Berkeley wants a chancellor who will lead in the privatization direction, it should find someone else and I’ll go back to the lab,” he said to much applause. “I came here explicitly because of the public nature of Berkeley and the leadership role it has played as a public institution.”

     The issue of undergraduate student fees connects these two Chancellors’ statements. It would be an interesting exercise to enumerate all those features that distinguish between the best private universities and the best public universities. The level of student fees would certainly be a major item on that list.

     If you were to ask me what signal I can imagine most clearly designates the transition from public to private status, I would say: When undergraduate student fees cross the line of paying for more than 100% of the actual cost of their education at the institution. The calculation reported in this paper says that we at UC are approaching that limit right now. Faculty and administrators had better face up to that fact.

Appendix - Details of the Calculation

     The input data comes from the annual accounting report published by the UC Office of the President: “The University of California Campus Financial Schedules 2003-2004” (CFS). The following table is data from the Consolidated Schedule 12-F: Totals of Current Funds Expenditures by Uniform Classification Category. ($ in Thousands)

Instruction $2,962,447
Research   2,953,116
Public Service      400,134
Academic Support   1,154,087
Medical Centers   3,451,523
Student Services      427,310
Institutional Support      627,995
Operation and Maintenance of Plant      401,493
Student Financial Aid      784,742
Auxiliary Enterprises      654,576
TOTAL 13,817,424

Notes. This excludes the Department of Energy Laboratories ($4,082,089).
These figures also ignore the recent accounting entries “Eliminated Capital Expenditures”,
the inclusion of which would lower these numbers by about 4%.

     First we will extract the portion of expenditures for Instruction that go to undergraduate teaching; then we will add in a portion of Academic Support (Libraries, etc.) and a portion of overhead expenses (Inst. Supp. and OMP). Finally we will add in expenditures for Student Services (not covered by other types of fees) and compare the result, scaled “per student”, to the current level of mandatory student fees paid by California resident undergraduates.

Step 1. Using CFS Schedules B for each campus, remove from the Instruction category the total expenditures for University Extension ($198 million) and also all expenditures by the Health Professions ($1,055 million), Law Schools ($39 million) and Business Schools ($111 million). This leaves us with an adjusted expenditure for Instruction of $1,559 million.

Step 2. Estimate the portion of this $1,559 million paid to Lecturers and Graduate Student Instructors ($180 million.) Then take 23% of the remainder, for the fraction of faculty work-time devoted to undergraduate teaching.* This gives us the Direct Cost of Undergraduate Instruction = 180 + 0.23x(1559-180) = $497 million.

Step 3. Expenditures for the major relevant components of Academic Support are: Libraries ($234 million), Computer Support ($43 million), Academic Administration ($197 million, excluding the Medical Schools). I estimate that half of the Library and Computer Support expenditures may be charged to undergraduate education, along with one-quarter of that for Academic Administration (Dean’s Offices). This gives an amount $188 million, adjusted Academic Support, to be added to the result of Step 2.

Step 4. Combine the expenditures for Institutional Support and Operation and Maintenance of Plant, and distribute this uniformly, as overhead, over all the listed categories, excepting Medical Centers and Student Financial Aid. This gives an overhead rate of 10.7%. Adding this to the sum from Step 2 and Step 3, gives us the Total Cost of Undergraduate Instruction (2003-04) = $758 million. We divide this by the total number of undergraduate students (158,230 budgeted FTE for 2003-04) to get the Unit Cost of Undergraduate Instruction = $4,790 per student.

Step 5. The total expenditure for Student Services needs to be reduced by $109 million, the amount recorded for Student Health Services, because this is paid for by non-mandatory fees for Health Insurance. The net amount should then be increased by the 10.7% for overhead and then divided by the total number of students (graduate and undergraduate) for whom these services are provided: net cost = $1,858 per student.

FINAL RESULT: Add the results of Step 5 and Step 4 to get
The Unit Cost of Undergraduate Education = $6,648 per student (for 2003-04)

     For the academic year 2004-05, average mandatory fees for resident undergraduate students at the University of California = $6,312 per student.
This is 95% of the actual Unit Cost as calculated above.

* According to the “University of California Faculty Time-Use Study 1983-84,” full time faculty (excluding health sciences and law) spend on the average:
     26.0 hours/week on Instructional Activities;
     23.2 hours/week on Original Research/Creative Activities;
       6.6 hours/week on University Service;
       5.5 hours/week on Professional Activities/Public Service.
Adding a portion of University Service to Instructional Activities, we find that 46% of total faculty work time is devoted to Instruction (and not to research or public service). We have the further information that faculty divide their teaching equally, on the average, between undergraduate courses and graduate courses. So we will charge 23% of the cost of faculty (and faculty-support) to undergraduate instruction.