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California’s Public Universities Need Shared Metrics for Better Understanding and Decision-Making

Recent public opinion research shows an alarming trend of growing public mistrust of our nation’s colleges and universities—a mistrust sparked by increases in tuitions and the perception of eroding value of higher education.

California is not immune to this problem; research by the David Binder group for College Futures Foundation in particular has found growing public concern about the rising cost of higher education in California. These concerns are exacerbated when there is controversy about how funds are—or appear to be—used. In April, newspapers across the state blared headlines that an auditor’s report claimed that the University of California had held back money in what some reporters characterized as “secret reserves.” This episode serves as an unfortunate object lesson in what happens under these circumstances. The Auditor General said that the funds could have been used to either increase faculty salaries or reduce tuitions. The UC Office of the President responded that the reserves weren’t secret, could not be used for other purposes—like plugging holes in the budget—and that there wasn’t as much money held in reserve as the audit claimed.

We could learn much from this highly public dispute and the resulting political fallout.

Counting Past Each Other, a new report by Darcie Harvey for College Futures Foundation, calls for a new approach to financial measures for higher education in California. This would address the large and growing problem of miscommunication between state officials, institutional leaders, and the public about where the money comes from, where it goes, and what it buys.

California for many years has been reputed to have the best system of public higher education in the country—a legacy of the shared vision between the state and institutional leaders about the importance of higher education to the public good. That legacy has been put at risk by a growing problem in higher education finance caused by state funds that have not grown at a pace to keep up with increasing enrollment demand and rising costs; meanwhile, tuitions were increased to make up the difference.

Adding to this is another, equally concerning problem. There are no commonly agreed-upon metrics to better understand the current level of funds, how money is spent, how students are doing, and how to gauge many other fundamental measures of success. Moreover, working from a standardized set of facts is essential to good decision making about virtually every aspect of the education system. Instead, our two public university systems and the state of California are essentially comparing apples with fish—when they’re able to compare anything at all.

This is important because in this fiscal environment, every decision has consequences for other areas. Without transparent and consistent measures, decision makers can’t see what those tradeoffs are—such as the consequence of spending on things like retiree health care against the need for new tuition revenue, for example. California needs to be sure that every dollar contributes to goals of quality, access, and degree completion. If we care whether our public education systems can ensure that all qualified California students can achieve their educational goals—and whether the state and the systems are able to plan for and meet student demand—then creating and drawing upon a set of useful metrics should be a high priority.

Metrics aren’t the only cause of the gulf, but they contribute to it. Nevertheless, we must have a common set of consistently defined facts about the building blocks for higher education finance and performance that are shared between state leaders, the University of California, and the California State University.

Our public university systems are “counting past each other” by using different ways to define and measure resource use and progress toward goals.

Darcie Harvey’s report explains in detail how the University of California, the California State University, and state leaders are “counting past each other” by using different ways to define and measure key indicators on how they use resources and how they measure progress toward state and institutional goals.

Highlights from the Report

Counting Past Each Other identifies a host of areas in which the two systems and state officials do not agree on common metrics or where such measures are missing entirely, and provides recommendations for action. They include:

  • Revenue: 

There is no shared definition of what a core revenue item is, where it comes from, how it treats tuition and fees, and how financial aid is accounted for. Imagine running an organization that relied on grants but which didn’t articulate whether it accounted for the cost of fundraising or not.

The report recommends that the systems create common metrics for Core Revenues, State General Fund, and Tuition and Fees, including the treatment of financial aid.

  • Expenditures:

The two systems don’t agree on definitions for fixed costs, of which personnel is one of the biggest spending items. The problem, shockingly, is that it’s impossible to know just how big fixed costs are. There are no common benchmarks that identify benefits as a percentage of compensation, for example, and no separate reporting for expenditures on salary and benefits. Different employees in different parts of the systems are paid from different budgets. Areas like debt servicing for capital improvements and how to count instructional costs are similarly difficult to compare across the systems.

The report recommends common metrics for fixed costs like salaries and benefits, spending by revenue source, and instructional costs by level of instruction.

  • Budgetary Transparency:

We currently cannot properly track whether revenues are ongoing or one-time-only, which makes it impossible to know if they can be counted on in the future, and thus planned for. And the controversy over the UC reserve fund would have been greatly informed by a way of describing just what a reserve fund is and how it could or should be used.

Recommendations for budget transparency include metrics for one-time revenues and how to account for reserves.

  • Other Resource Use:

Finally, the systems don’t only need common metrics for revenues and spending, they are similarly ill-equipped to know whether all students are succeeding. While the systems track admissions, student access, and enrollment rates, they don’t know whether students were admitted to the school of their choice, and they don’t know if students are participating in summer school, extension courses, or off-campus centers. Also, while undergraduate degree completion rates are tracked, graduate completion rates are not. How are California’s graduate students doing? Nobody knows.

The report recommends establishing metrics related to: the number of eligible students admitted; the number of students admitted to schools that are not their first choice; students in so-called “self-supported” programs like extension and summer school; and graduation rates for all levels of graduate instruction.

Research shows that the public continues to understand for the importance of higher education, but that is increasingly questioning decision-making by people in the institutions. Our system of financing higher education needs reforms, state funds have not grown at a pace to meet enrollment demand and rising costs, and there is a growing public belief that the attendant tuition increases are going to pay for amenities and “secret” funds at the same time that students are being turned away. We are not going to solve the higher education finance problem in California unless there is common agreement about the set of facts from which we are working.

The point here is not to cast blame. Outdated systems and processes are often the result of small changes that become more institutionalized but less and less useful over time. But without common ways to measure costs, revenues, and student success, our systems will continue to guess when they need to know.

California’s students deserve better.

Read Counting Past Each Other: How Inconsistent Reporting Creates Confusion about Higher Education Finance