LOOKING INTO THE UC BUDGET -- Report #14 (e-mail version) by Charles Schwartz, Department of Physics, University of California Berkeley, CA 94720. 510-642-4427 October 12, 1994 SUMMARY Last month the UC President's staff gave the Regents a progress report on their intensive studies of undergraduate enrollment planning for the coming 15 years. Reports on graduate enrollment planning are due in a few months; and some sort of policy principles will be formulated for the Regents' approval in the spring. The outlook is grim: undergraduate student demand is expected to grow a lot, state funding is expected to be stationary at best, and none of the miriad suggestions for improving the efficiency of the University's operation hold much promise when subjected to detailed quantitative analysis. Either the University receives more revenue or students will have to be turned away. So the Regents were told. In this Report I present a simple Basic Formula for the annual institutional cost of undergraduate instruction. This macro-model lets one bypass the dense thicket of the administration's staff papers and see what the essential variables are. Many of the economies previously suggested by UC's faculty and administrative leaders are readily seen to be trivial or irrelevant. Some of the calculations in the staff papers are found to be wrong or seriously biased in their assumptions. The greatest flaw in all that work is that the most famous (and most controversial) variable - the balance of faculty work time between undergraduate instruction and other activities - IS NOT CONSIDERED AT ALL. It is this writer's view, suggested in earlier work and the subject of continuing study, that it may well be possible to accommodate the additional undergraduate students, at something close to the present level of funding, without seriously damaging the quality of the University's research mission. Even if I am unable to "prove" this hypothesis, the UC leadership has an obligation to explain in detail why these proposals are not viable before they move to limit admissions to the University. INTRODUCTION At their September meeting the Regents had another discussion of long range planning for undergraduate enrollment at the University. This will be the most important issue facing the Board this year, with repercussions for decades to come. Led by a presentation from Provost Walter Massey, who summarized a stack of recent technical reports by his staff that total some 300 pages of detailed data and analyses, the Board stumbled through a discourse that showed how little clear thinking there is about how to organize the University for the years ahead. Massey concluded that undergraduate demand is expected to grow significantly through the year 2010, at most a 50% increase, probably somewhat less than that, but in any case well beyond the capacity of UC to accommodate, given the present and projected environment of state funding. A long list of suggestions for economizing, developed over the past year by the combined efforts of UC's academic and administrative leaders, turn out to provide at most a 5% increase in enrollment capacity. A mantra repeated in the introductory paragraphs of the UCOP Staff Papers is, "The University is facing unprecedented challenges to carrying out its traditional mission of teaching, research and public service. Planning efforts must focus on strategies that will ensure both preservation of the recognized excellence of UC programs in the face of diminished financial resources, and access to these programs by the largest possible number of qualified undergraduate and graduate students. The University must seriously consider ALL options for providing access for eligible students." [Emphasis in original.] And this was echoed by President Peltason at the September regents meeting: "I would say that the comments this morning are in a sense a kind of a preliminary progress report on our evaluation of not only the Governor's but any other suggestion we have had to improve the delivery of education." However, some of the most lucrative ideas for saving money and making UC accessible to more students have not even been considered. This Report will not try to recount, summarize, or criticize in detail all of the documents produced by the President's office on this subject. My main purpose is to attempt to bring some intellectual clarity to this whole issue, letting the reader see which are the main ingredients, which ones are irrelevant, and which ones have been neglected or mis-handled in the official studies. The cost of undergraduate education will be outlined in two parts: Part I considers the annual cost of operating the University; and Part II considers the cost of capital investments to house those operations. [Time and Space. Physics meets accounting.] Part III is an Appendix discussing various further details in brief. PART I. OPERATING COST - THE BASIC FORMULA The formula below gives the total institutional cost of undergraduate instruction as the product of three factors. (Total Cost to Institution) = (Number of New Admissions) x (Graduation Requirement) x (Unit Cost of Instruction) The Total Cost (TC) is $ per year cost to the university for undergraduate instruction. The New Admissions (NA) is the number of Freshmen entering each year. The Graduation Requirement (GR) is now set at 180 quarter-units = 60 year-units. The Unit Cost (UC) is the cost of delivering one year-unit of instruction to one student. (It really doesn't matter whether you measure time in academic years or semesters or quarters; but, for specificity, I will generally speak in terms of years.) What is at first surprising about this basic formula is the fact that it does not involve the Time-to-Degree (TD), that is, the average number of years it takes a student to complete the graduation requirement. This fact can be understood qualitatively as follows. If students take a longer time to complete their graduation requirements, there will be more students enrolled at any time (for a fixed rate of new admissions), but those students will be taking fewer classes at any time. These two effects cancel each other, leaving the university with the same total instructional cost per year. Another quantity that does not appear in the basic formula is the Enrollment (E), the total number of undergraduate students attending classes throughout the year. The additional relation is E = (NA) x (TD) ; and with this one can easily derive the basic formula itself. (See the Appendix for further details about the basic formula.) We will now use the basic formula to give a first assessment of various ideas about how the University might lower its total cost of undergraduate instruction, or accommodate a larger influx of students at the same total cost. A. Reducing the Time-to-Degree does absolutely nothing at all! This is a very significant statement since so many of the suggestions that have been proposed to the University - from UC faculty and administrative leaders and from the state Legislature - have focused on just this idea. B. Reducing the number of students allowed to enter the University cuts the total cost proportionately. This is obvious to anyone; and it has been the solution that seems most favored by the regents in their earlier discussions. Putting aside the many issues of morality and politics involved here, I would just pose the practical question: If you close the doors, who will then pay for the continued operation of the University? C. Reducing the graduation requirement cuts the total cost proportionately. Thus, if one were to change from a four-year (180-quarter-unit) degree program to a three-year (135 quarter-unit) degree program, this would cut total cost by 25%, or it would allow admissions to increase by 33% at the same total cost. Of course, the UC undergraduate degree would then become quite a different product. Note that the idea of squeezing a four-year curriculum into three years is something different - it is just changing the Time-to-Degree, which, we already noted, has no effect at all. Another common idea is to have students complete some portion of their graduation requirements elsewhere - in high school (with advanced placement tests), at Community Colleges, at UC's Summer Session or Extension courses. This does reduce the University's total cost of instruction proportionately to the number of units displaced. But the cost of that additional instruction is also displaced, and questions of equity and quality arise. The 5% saving estimated in the UCOP staff reports arises from a combination of these measures. D. Finally, one can cut the total cost, or accommodate larger admissions, by reducing the Unit Cost of Undergraduate Instruction at the University. This is the topic that nobody in the leadership of the faculty and administration seems willing to consider. This is certainly controversial, but let's start by laying it out on the table in basic economic terms. There are three primary ways to reduce this unit cost. (See the Appendix for further discussion.) 1) Reduce personnel costs. Of course we can't cut faculty salaries; but we might use more low-paid instructors instead of high-paid research professors to teach undergraduates; and we could, perhaps, use new technologies to replace teachers of any human kind. Questions of the quality of instruction arise most prominently. 2) Increase class size. This lets each faculty member teach more students, lowering the unit cost per student. Again, quality of instruction is the major issue. 3) Increase faculty courseload. Have faculty spend more of their total work time teaching undergraduates and less doing other things. This has a very large potential for decreasing the unit cost, since UC faculty now spend only about 21% of their work time on undergraduate instruction. The concern here is that such a shift will degrade the quality of other things that faculty do at the University - research, graduate instruction, etc. (See my Reports #8, #9, #10 for some prior analysis.) These last ideas are not new at all. What is needed is a detailed and thorough analysis based upon reason and quantified wherever possible. So far, UC's leaders have ignored these ideas or dismissed them with the vague rhetoric of "quality." PART II. CAPITAL COST In the UCOP staff reports, the question of construction costs to accommodate additional undergraduate students comes up in two ways. A. It has been suggested that the University can make fuller use of its existing facilities by holding classes during the summer, on weekends and in the evening hours. This capital idea is put down for two reasons. First, experience shows that in the past students have not responded very well to such non-traditional class offerings; but if there is no alternative, i.e., if it becomes mandatory on some equitable basis, then they may behave differently. Second, the UCOP staff reports point out that providing more available class space is not enough: more teachers must be hired and that costs more money, money which they see the state as unable to provide. This correctly links the problem of capital costs and the problem of operating costs. However, it is a seriously flawed analysis because it does not allow for the possibility of increasing instructional efficiency, as discussed above. B. This same blind spot infects the other discussion of capital costs in the UCOP staff papers: If more students are to be admitted, then more faculty must be hired and more space for their offices, support staff, research labs, etc., must be constructed. This formulation is based upon the old assumptions about the balance between teaching and research for faculty members; but all of that must be open for discussion, not frozen. (See more details in the Appendix.) PART III. APPENDIX A. The basic formula assumes that every entering student completes the degree program and graduates at some time. The entering class will consist of students who will complete their degree over various time scales; thus the Time-to-Degree is to be understood as an average over all students but this doesn't affect the basic formula itself. Also, students enter with different degree requirements (e.g., transfer students come in needing to complete only half their total units at UC) and so the product (NA) x (GR) in the basic formula should be understood as the sum over different student populations. B. The basic formula should be easily comprehensible to students at California's Community Colleges, where they are charged for the number of units they take, regardless of when they complete their degree requirements. It is us sophisticates at UC who may have some trouble in learning this formula. C. UCOP's Staff Paper #3 presents a calculation to answer the hypothetical question, "How much additional enrollment capacity would be generated if all regularly-admitted new domestic freshman were to graduate in three years?" When I first read that portion I was confused about the validity of their calculation. Now, by referring to the basic formula, I can see that their calculation is not just wrong, it is nonsensical: it does not distinguish between an accelerated four-year program and a restructured three-year program. (See my earlier discussion Part I, paragraph C.) D. The concept of Full-Time-Equivalent (FTE) student enrollment is regularly used in UC's budget negotiations with the State, and this makes sense in the year-to-year process of incremental budgeting. However, for long range planning FTE is not a good concept because it creates unnecessary confusion. For example, the basic formula could be re-written this way: (Total Cost) = (FTE Enrollment) x (Standard courseload = 15 units) x (Unit Cost) But if you ask the questions, What is the effect of shortening Time-to-Degree, or of reducing the number of units taken at UC?, the answers are not at all obvious from this reformulation because the FTE obscures those basic elements. Furthermore, the original form of the basic formula uses NA, the actual number of new students admitted each year, and this is the real quantity to be dealt with, both humanly and politically. E. The unit cost of instruction involves more than just faculty salaries/time. There is the cost of instructional support (TAs, etc) and of libraries that must be added in. Also, if one needs more classrooms to accommodate more students, that will be a new cost; but I note from the Staff Reports that classrooms and teaching laboratories account for only 9.5% of the assignable square feet in non-residential facilities at UC's eight general campuses. The cost of student services at the University and the cost of housing and dining, etc., for increased numbers of students is important but it is not part of instructional cost; this is usually paid for by direct levies upon the students themselves and thus need not enter our present calculations. The question of University "overhead", e.g. administrative expenses, must also be addressed. I have previously opined that this is now inflated and should be cut down; more study on this point is needed. F. One topic that took a lot of time at the regents' discussion was "technology and distance learning." My impression is that there is a fundamental split on this topic. Some people imagine this as a way for the University to save money (decreasing the unit cost of instruction) but the faculty establishment apparently views it only as a possible way to enhance the quality of instruction. Dare I mention that this disparity looks like a classical labor union dispute? G. All my analysis so far has treated the whole University of California as a single uniform entity; but, of course, its individual campuses present different circumstances. Physical space to accommodate more students is one topic that will need deeper study. Another, more controversial, idea is that different campuses might evolve along different academic tracks. The President has taken a formal position opposed to this proposition but no reasoning or analysis has been presented either for or against it. H. I would be reluctant to apply the basic formula to graduate instruction in the PhD programs of the University. The process of writing a dissertation is so individual, for both student and teacher, and so varied from one case to another that I would not think the "production line" model underlying the basic formula is appropriate. ------------------------------------------------------------------- CORRECTION. In Report #12 I gave data for UC's expenditure for Public Information activities totaling $11,863,000 in 1992-93. That calculation left out the transfers (recharges), which are needed to give a complete picture of the actual expenditures. The corrected total is $26,275,000.