Securing the Public Trust: Practical Steps toward Higher Education Finance Reform in California

Over the past 40 years, shifts in California’s economy and demography have led the state to change its approach to paying for health care, K-12 education, community colleges, and social welfare. Yet the state funds the California State University (CSU) and the University of California (UC) basically the same
way it traditionally has, through a boom-and-bust cycle that features increasing general fund support during robust economic times and declining or limited funding during difficult economic conditions. A consequence of this approach has been that tuitions tend to increase sharply during economic downturns—at precisely the moments when students and their parents can least afford them. Funding for new enrollments has been episodic, and qualified students are being turned away for the first time in the state’s history. This is unacceptable—and preventable, by changing California’s historic approach to higher education finance and budgeting.

College Futures Foundation began examining college finance because of growing concerns that the system of paying for higher education has become a barrier to increasing bachelor’s degree attainment among low-income and first-generation Californians. Our primary focus has been on the California State University and the University of California, which educate nearly three-quarters of the state’s baccalaureate recipients and where the current system of financing is most problematic. As part of this work, we at College Futures convened a series of conversations among individuals with deep experience in public policy and higher education, including finance. We used these forums to study trends, test ideas, review research, and discuss practicable solutions. We also commissioned additional research in key areas. The forum dialogues helped to inform this report, but our findings and suggestions reflect solely our own judgments and are not meant to represent the views of the individuals or their affiliated organizations. We would like, however, to acknowledge their contributions and guidance.

Transforming California’s approach to higher education finance will require that state and institutional leaders have a shared understanding about the fiscal challenges and opportunities that lie ahead. We do not believe such a shared understanding exists now. We hope with this report to contribute to a  productive dialogue about the dimensions of the funding problems and the options available to address them. California’s current fiscal circumstances offer education and policy leaders some flexibility to take actions that they might not be able to take during a recession. That window of opportunity will not remain open for long.