UC President Discusses Systemwide Financial Crisis

Photo: UC President Mark Yudof spoke in Oakland on Friday to student leaders and editors about issues the UC system currently faces.
Stephanie M. Lee/Photo
UC President Mark Yudof spoke in Oakland on Friday to student leaders and editors about issues the UC system currently faces.

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Interview with UC President Mark Yudof: Part 1

Leaders from UC student publications, including editors from The Daily Californian, met with UC President Mark Yudof. This is the first part of the conversation. Here, Yudof gives a general introduction about the UC financial situation before taking questions from UCB and UCSC students.

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Interview with UC President Mark Yudof: Part 2

This is the second part of the conversation. Here, Yudof answers questions about the Blue and Gold plan, a financial aid program.

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Interview with UC President Mark Yudof: Part 3

This is the third part of the conversation. Here, Yudof answers questions about advocacy and the UC's relationship with the state legislature.

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Interview with UC President Mark Yudof: Part 4

This is the fourth part of the conversation. Here, Yudof addresses the issue of private funding, education funding stabilization, and mixed federal and state funding.

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Interview with UC President Mark Yudof: Part 5

This is the fifth part of the conversation. Here, Yudof answers questions about fee distribution, budget deficets, and the future of fee increases.

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Interview with UC President Mark Yudof: Part 6

This is the sixth part of the conversation. Here, Yudof talks about the future of the UC as a research institution, what he considers to have been his biggest mistake as president of the UC, and the issue of transparency.

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Interview with UC President Mark Yudof: Part 7

This is the seventh part of the conversation. Here, Yudof addresses the end of furloughs with the simultaneous increase in student fees and the worth of intercollegiate athletics.

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Interview with UC President Mark Yudof: Part 8

This is the eighth part of the conversation. Here, Yudof talks about the fate of the retirement plan and the enactment of emergency powers over the summer. Yudof also responds to backlash from his interview with The New York Times.

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Editors from The Daily Californian as well as reporters with publications from UC Santa Cruz and UC Merced met with UC President Mark Yudof on Oct. 16 to discuss issues facing the university. Below is the full transcript.

Mark Yudof, President of the University of California: Well, thank you all for coming to Oakland. I know that it's a busy time of the year. I mostly want to talk about whatever you want to talk about, so let me say a few things and then we can go from there.

Our situation is this: In May, the state adopted a budget that cut is about $813 million. That's on a base of about $3.25 billion. It was about a 20 percent cut overall. In addition to that, we have energy contracts, union contracts, retiree health benefits--I won't bore you with the expenses that were added on to the previous year. We found ourselves over a billion dollars in the red as of May.

And therefore we had to do some terribly painful things--the furlough program for faculty and staff, you might remember, I think we have a much more progressive program than the state of California. Our furlough program at the bottom was, you lost about 4 percent of your pay, and at the top, like me, you lost 10 percent of your pay, and it was rated by income along the way. We restructured our debt--that's just a fancy way of saying we put off some payments on our debt, or our bonds when we build buildings, so we didn't have to spend as much this year as next and we saved another $75 million. We cut out programs on campuses. Unfortunately we will have laid off about 2,000 people on all 10 campuses. A thousand in 2009-10 and another thousand in 2010-11.

It's a terrible body blow. We could talk about the reasons for it, but it basically has to do with the current economic meltdown, and what I would call the dysfunctional state government of California. Now, you're going to say, "Why don't you go up to Sacramento and rant and rave?" Well, I went up and I ranted and I raved. I was up there over 20 times. We now have a group of advocates. ... We have 200,000 people on that list now. And in the last six weeks, we have sent 25,000 letters. ... So we tried to put on a lot of heat, but in fact, Sacramento had largely shut down.

Once the referenda ... which would have raised taxes some and done some other things--once that was defeated, the word in Sacramento was pretty simple: We have to balance our budget, we can't raise taxes, we don't have the votes, we're going to cut. And we're going to cut the prisons, and we're going to cut K-12 and higher education, and children's health and all the rest of the budget.

The only thing I really felt good about the whole process, and where I really weighed in, is the governor's first budget would have entirely removed Cal Grants from the budget. There would've been no Cal Grants. The current students would've gotten their Cal Grants, but it effectively would've been abolished. And to me that was totally unacceptable. It was unacceptable to Cal State, community colleges, and that's the one point in the budget where we won one. They put the Cal Grants in the budget and we have the Cal Grants today. I'm very optimistic we'll continue to have it.

So we have some tough choices. There are a lot of rumors running around. ... There are a lot of myths that are out there. One myth is that you have a pile of money in your reserves. We don't even really have reserves. We have a checking account. And the truth is we've cut by way of furloughs $184 million and we used $300 million out of our checking account. We used more money out of our checking account than we took out of people's paychecks.

The second point is, it's divided into 76,000 accounts, and most of those accounts are restricted. Some of them might be the English department at Berkeley, or they might be the electrical engineering department at Davis, or whatever. Some of it is we sold bonds years ago, we put the proceeds in these bank accounts and we spend it as the building goes up. We go to jail if we spend the bond proceeds money on our operating expenses: We're not allowed to do that. Some of it's for our hospitals. We get about $2.5 billion from the state now, but our physicians and our hospitals bring in more than twice that.

And there are accounts that pay the physicians to take their reimbursements from insurance companies, to purchase the Band Aids and the IVs and keep the heat on and all the rest of it. There really is not a big pot of gold. I would've spent it, frankly. I don't enjoy furloughs and I don't enjoy fee increases. I absolutely would've spent it.

Other parts are endowment. So it's for an electrical engineering chair or whatever the program is, and you can't spend it for anything else. So the money's simply not there. And frankly if Mark Yudof weren't the president and anyone of you around the table were president--and I think you would aspire to a better career, that's my personal advice--you'd've been faced with the same set of decisions. An avalanche of words is not going to solve the financial problem.

I don't like the libraries at Berkeley closing early and I think the poison center ought to remain open, that's my opinion. But at the end of the day, if you don't have the reserves, and you're cut an enormous amount of money, you have to balance the budget. I'm very concerned. There are two things that make the University of California what it is in my opinion today, that are unique. It's many things, but there is a conjunction of two things that really makes it unique.

First, we're one of the most powerful research universities in the country. So if you're working on better batteries, so you don't use as much fossil fuel, our great scientists and professors are working on it. If you're worried about climate change, environmental impact, medical research, breast cancer, whatever. Powerful research is going on, and a lot of it.

The other thing is we are the institution of opportunity. Thirty-one percent of UC students are low-income. Berkeley actually may be a little bit higher. ... What's unusual is the conjunction of the great faculty, great student body, that serves so many low-income students. You can find places that are powerful research engines--CalTech, MIT, University of Chicago, places like that. And you can find places that have more low-income students. By low-income I mean Pell-eligible students. Cal State serves a lot of low-income students, community colleges serve a lot of income students, but there's no other institution that does both--a high number of low-income students and a powerful research presence. We have more than twice the amount of low-income students as the average Ivy League institution has.

One big worry is if I continue this furlough program, we will begin losing the faculty, which is the key to maintaining the value of your degree. You are blessed that you have professors who not only disseminate knowledge, not only teach, but create it. They are the movers and shakers. ... I feel that if these furloughs went on for more than a year, we're at real risk that we will have an exodus, and I don't care how bad conditions are, the really outstanding people will always find positions. Our outstanding professors can pick up a telephone and they'll have a choice of where they can land.

The other thing I'm very concerned--so that's one piece of our character--is how are we going to maintain our access when you have a 32 percent proposed increase in fees. Fifteen percent in January, 15 percent in September.

What we'll announce on the 23rd, and I don't want to give it all to you because I want to have something to announce on the 23rd, and we're going do it in Fresno. ... We have the Blue and Gold Program. If your family makes less than $60,000 a year, you don't have to pay any fees. We'll be announcing that we're going to raise that. I won't tell you how much today, but we're gonna raise it, and we'll announce a 10-campus, massive scholarship campaign.

In addition to that, President Obama has blessed us and expanded federal tax credits. We feel that with most families who are eligible for financial aid, that the combination of the Blue and Gold Program, the Pell Grants, the Cal Grants and the federal tax credits, that we can ameliorate much of the hardship for our students. It still will be a hardship for many students, but we think we can take care of a big chunk of it.

Remember that when we increase fees, one-third of that goes to scholarships so there's more money in the bank for scholarships. Actually, we spend only only two out of three of the dollars that we spend out of student fees. Two-thirds goes of it to the instruction program and the like, and the other one-third goes to increasing financial aid. There will always be provisions for families that make in between $60,000 to $100,000. Over $180,000, you're on you're own. We can't help you. We just don't have the financial resources to do that. That's sort of the plan. If the budget is adopted in November, we will put in place the financial aid, we will end the furloughs, and something that's probably not as much on your radar screen. We have the University of California Retirement Plan. It's in some significant trouble in terms of its long-term health, whether we'll actually be able to make all the payments that we owe our employees. It would put money and as an employer contribution for the first time in 19 years. So that is sort of the game plan.

If I were a student, I think I'd be pretty angry about this. Hell, I'm angry. My feeling is the closer fees are to zero, the happier I am because I don't want to worry about access. But it's simply not in the cards. We do not have the finances to make that happen. And the enemy in all of this is mediocrity. We can make your classes bigger, it can take you longer to get your degrees, class access is worse, we can do a lot of things to achieve mediocrity, in fact mediocrity is fairly easy to achieve. But we're not going to do that. This is the great University of California and we're going to preserve it. Maybe on someone else's watch, but not on my watch are we going to see the world's greatest public university sort of sink into oblivion as being just one more university among the public universities across the nation. It's just not going to happen, and I don't think it is in your best interests.

You're in what I like to call a classic lose-lose situation as students. You lose, we raise your fees, although we'll try to ameliorate it, and if we don't raise your fees and we lose the professors and we have larger classes, and it takes you five years instead of four years to get your degree because we don't have the money to do it, you will lose that way as well. It's not a question of making a good choice in the abstract. I frankly think it's more along the lines of the least worst choice under the circumstances. And that's what we're talking about.

Stephanie M. Lee, The Daily Californian: When you mentioned rolling out the new minimum standard for the Blue and Gold Plan, where's that money going to come from?

The way the Blue and Gold Program is structured, you have to apply for your Pell Grant, and you have to apply for your Cal Grant. A large chunk of the money comes from that. But if you come up for your Cal Grant, a large chunk of the money comes from that, but if you come up short, or if for some reason you don't get all you might get out out of one of those programs, then the university will pay for it. What it looks like now it's largely going to come from the set-aside from the fee increase. In other words, if we raise a million dollars in fees, we have $333,000 to spend on scholarships. That's where it'll come from. Now in the future what I'm hoping, and I can't absolutely promise, is that we will raise private money and be able to boost it even more in the future. That's one of the reasons for this massive scholarship campaign that I'm talking about. ... There might be some private money, because we do have some scholarships, endowments.

Angelica Dongallo, DC: If you're covering more students, wouldn't there be less to go around for everybody?

There'll actually be more scholarship money to go around. That's the good news. The bad news is prices have gone up. So there'll be more money for scholarships, that's clear, but obviously, at the end of the day, when we raise our fees, the total amount of money coming into the university is increased. On the whole it is more expensive to students. That's what it means to have a fee increase. So there's not less, there's really more scholarships. Another way of putting it is that relatively low income students will fare very well. This is just true and then gets more attenuated when you get to the middle-class. And when you get above the middle-class you don't really get much back.

We don't do merit-based scholarships out of any of these funds. It's all income-adjusted. If you're below $60,000, in terms of fees at least, you're in good shape. Our average grant is over $10,000 now. We will give many grants that are higher than just the fees. But we do have a problem on many of our campuses--UCLA, Berkeley, Santa Cruz--compared to other universities around the country, the cost of living is higher, you all know that. That's an issue. If you're in Illinois at [Urbana-Champaign], it's not the same thing as trying to find an apartment in Westwood. On the other hand, some of our inland campuses, Merced and Riverside, I think their livings costs are probably more in line with institutions in the Midwest.

Kelly Fitzpatrick, DC: The Blue and Gold Opportunity Plan: What is the next income level that it's going to reach?

I don't want to tell you, Kelly, because we're going to announce it next Friday. I promised it'd be higher, and we're looking at it. And I do want to make an announcement. We're going to make it at (Sunnyside High School), a predominantly low-income school in Fresno. One of the things that scares me about fee increases is apart from the overall quality of affordability is that I'm afraid that it discounts students from applying to the University of California. I'm going out to a low-income school to essentially tell them that the headline may look scary, but under the Blue and Gold Scholarship Program-and at this particular school, virtually every family in that school will qualify for a scholarship. Now, they have to get admitted to the University of California. But if they get admitted, they'll get a full scholarship covering their registration and education fees. I've got to get that word out there, because I'm afraid Mom and Dad and the kids will sit around the kitchen table and they'll just decide, we just can't afford the University of California. ... The answer is you can do it, they can do it. That's the message I'm trying to get out.

Will Kane, DC: You talked about the dynamic advocacy network. Do you think letter-writing is the way to get out of this?

I don't want to leave any stone unturned in this. So we've got our 25,000 letters in. I've made my 20 visits, I have met with the governor, the speaker, I've met with the committee chairs. I've met with Darrell Steinberg, the president Pro Tem of the senate. We've done all that, but I have to say, this wasn't government-as-usual in any state that I've ever been in. I don't mean that they were not responding to the people, but they have no money, the referendum had been voted down. There was almost nothing you could get out of them because there was so little discretion in the budget. I don't think it's enough. So let me answer that. I think we need to continue doing it. We now have 200,000 advocates on our e-list that we can contact and say, "The university has a financial problem in Sacramento. We have an issue with this or that. Can you help us out by contacting?" Obviously, it's all voluntary and so forth.

I think we need an education campaign, and I'm thinking about how to do that. I think we need to explain to the people of California how important we are. First, it's important to our students. You will go on, the people around this table, to do things that I can't even imagine. You'll be artists, and you'll contribute to culture, and you'll run for public office and you'll start companies. You'll do whatever it is you do. So that's one level of the contribution.

Another level is the research that we do. The University of California helps to solve your problems. My belief is if a better solar panel's going to be invented, it'll come out of a Lawrence Berkeley lab. And if you need, God forbid, you have cancer and you need some sort of surgery, we'll go to our hospital at Davis ... I think we have to get the bigger message out there that it isn't just if you have a family member at the university and it isn't just if you work there, but that we're enormously important to the quality of your life, and we're enormously important to the success of the economy of California. Let's face the facts, we're never going to be a low-tax state-we're not. We're not going to undercut other nations around the world, or indeed Southern states. ... We're not going to have lower wages. Our wages are relatively high in this state compared to many foreign countries. And we've been blessed with natural resources, like agriculture and so forth, but at the end of the day, California will have a successful economy because it has clever people here who are well-educated, who are inventive and creative. That's what universities do.

Think of Liz Blackburn. Do you all now who Liz Blackburn is? Liz Blackburn is a researcher at UCSF. She just won the Nobel Prize in medicine and her discovery--which, I'm a lawyer, I can't describe, probably will profoundly affect our ability to deal with problems of aging and cancer. She studies chromosomes. Liz Blackburn comes from Tasmania. Now you talk about the end of the earth. ... Great research universities are a magnet for talented people. And if they come here and they stay, it benefits our population and it ultimately leads to more jobs and so forth. This is a hard thing to do but we have to do a better job of explaining it. And my problem is I can't buy an ad at the Superbowl game. We don't have money and it's probably not a legitimate public purpose anyhow. So we have to get some donations and we need to get some PSA spots and maybe one of those little balloons that comes down on Google or something like that. But we need to have a more effective way of reaching out to the people of California to explain why we're important. We sort of need to go over the heads of the legislature, that we're not just like anybody else, we're not an employer like Wal-Mart or Sears or something. We're sort of a knowledge factory and an opportunity factory.

Will Kane, DC: You talked about going over the heads of the legislature. How independently should the UC Board of Regents or the UC Office of the President act in relation to the state government?

I think we have to be a tenet for the state government. We have a $19 billion budget. They give us $2.5 billion. That $2.5 billion is very important, because most of the other (money) is restricted. It goes toward research, it goes for medical care, whatever. But the English department, the Spanish department, the economics department, are highly dependent on that money, so we need a good relationship. We can't be in their face. We're a California institution, they built us over 140 years, and I'm not really proposing that. What I'm saying is that we have a right to stir up our supporters and get our message out, particularly if it's done by external groups. That's perfectly legitimate, and that's what I'm talking about.

Kelly Fitzpatrick, DC: You characterize the system as broken, including the legislature.

The financing of higher education is broken.

Kelly Fitzpatrick, DC: You characterize the legislature as dysfunctional. If we're going straight to the voters, are we advocating for more dramatic measures? If it's a systemic problem, it seems like just advocating for more money won't yield much result.

That's a really tough question. That's a good question. I didn't say the legislature in particular, and I'm new to California, 16 months. When you see some people talking about me on campus, remember I haven't been here long enough to do all the harm they accuse me of. I didn't break the economy. What I meant is that it's structurally unsound, to me. Because you have a two-thirds vote requirement in the legislature to pass a tax. They can't agree, two-thirds of them, to do that. We have all these referenda that set aside money for particular purposes or close down particular taxes. And we have term limits. My personal view is that it's not a good idea because someone like Karen Bass [speaker of the California State Assembly], who I think is terrific, I rue the day she's out of office, but she'll be out of office in the next year or so, because she's term-limited down. It's not good. I don't think we need a structural fix, and I guess the right role for the university is to play a facilitating role. Groups come to us and say we're working on fixing these problems of dysfunctionality. I don't really think a public university can be the leader in actually proposing reforms. I don't want to politicize us like that. But we stand ready to cooperate with whoever is seriously thinking about these issues.

Kelly Fitzpatrick, DC: Has higher education funding ever considered amending the constitution in the same way that K-12 education has a mandated level of the state budget that it has to receive every year?

The answer is you betcha. We're looking at that bill on the severance tax, it has some features that aren't very compelling. We don't get much money, that's one deficit. ... There are an number of problems, but I've instructed the staff and I'm going to go out there and look at it myself, but I think that it's something we really have to look at very hard. We are working with the legislature to maybe fix up this on another bill to find a funding source, because we're like this with the state government. We had a designated source of funds or revenue, that would be terrific. You realize that every time you get involved in that there are going to be a whole bunch of people, whoever's going to be taxed, that doesn't want it.

UC Santa Cruz: You've talked about the hybrid model: part public, part private. But the increasing trend toward privatization in the UC seems like it's been really fast to me, like ...

What do you mean by privatization?

UCSC: The increased dependence on private funding for education to function.

I'm opposed to privatization, if by privatization you mean we want to turn this into a private university setting its own agenda, charging the students the full freight, I'm opposed. What we have is a mixed model where the state gave us $15,000 per student in 1990 in today's dollars, and gives us $7,800 today. The question is how do you maintain quality, and one of the ways you do it is you raise prices.

UCSC: But what I'm wondering is, there was a fact in the [San Francisco] Chronicle on Sept. 29 that as many as 98 percent of private contributions are limited to the projects that donors want, so they have a specific purpose. I'm wondering if you specifically or the Board of Regents have any sort of protection plan for programs or majors that do not get as much private funding. For example, the engineering department at Santa Cruz versus my major, community studies, which is being phased out because it doesn't get private money. So do you guys have a plan to address that?

When I wrote that article about the hybrid university, I not only had in mind that tuition was rising all over the country as the state subsidy was going down. There's a direct correlation. But if you're dean of engineering or law or medicine, you're more likely to get gifts than if you are in the humanities or the social sciences So there's this sort of unevenness. I think you see some of that happening. That's why the $2.5 billion is so important. One of the things that's happened when the professional schools have charged even higher fees is professional schools are getting less and less of the state money. That's basically what's going on--pulling the state money out of the schools that can be self-supporting ... primarily, business and law schools. The money that's being pulled out can then be deployed in liberal arts and so forth. So that's one part of the plan. Another part of the plan is I am going to Sacramento. I'm going to ask them for $900 million. We really need $2 billion but I'm going to ask them for $900 million. I keep plugging away, because the primary support for majors like you comes from the state appropriations. And the third thing is, you might have seen it referenced, I did a white paper on what I think would be an appropriate federal role, which is somewhat different than it is now. And that's another source. And finally, things like scholarship drives, particularly if we don't have too many limitations on what the scholarships are for, can be a ready source of help for students who are in the humanities, communications, and all the rest of that. But it is very hard. I talked to Jerry Brown, and he said, "When I was governor, 3 percent of the state budget went into prisons and 17 percent went into higher education." That's what Attorney General Brown said. Today it is, 7 percent goes to higher education and 9 or 10 percent goes to prisons. We really have a problem. And I wish I could wave a magic wand. So we have to fight every day to make sure the humanities and the social sciences, where the gifts are not as generous and so forth. It's a battle and it's a tough problem, and I don't have a silver bullet for you. I wish I did.

Will Kane, DC: Can we fix higher education funding without fixing the state government system? Do you see higher education funding stabilizing with the current system we have?

My goal is to have a reset and to stabilize it in 2010-11 with the budget stop the bleeding, the furloughs. Put more money in the scholarships to ameliorate what's happening there. And then as I say, go off to Sacramento with that reset to try to get more money. If over five to 10 years, it doesn't stabilize, we'll be faced with some very difficult choices. That's part of the reason for the [UC Commission on the Future]. And I don't have a view of that today ... that's what we're studying. We could say something like we will allow the student-faculty ratio to rise. So if it's 25 to 1, it goes to 35 to 1. How will that affect our students? The quality of our education? You could say there are there particular programs where we could do three-year degrees, which would be more efficient? Should we accept more community college transfer students, would that be a partial solution? Should we have more online education?

I think there are a whole series of difficult things we need to address. American higher education is has not addressed it yet.

Kelly Fitzpatrick, DC: Mixed federal-state funding: Does this contradict the California Master Plan for Higher Education? [UC Berkeley Chancellor Robert] Birgeneau said there would be an equal number of out-of-state students and in-state students.

Can I separate those two? I don't want an equal number of in-state and out of state students, that's my view. We're a California institution, we're primarily an opportunity for Californians. Eighty-four percent of all CA students who go into higher education go into the public sector in community colleges or Cal State. Now we're at 5 to 6 percent at Berkeley; could we go to 10 [percent] or something? OK. It could add to the intellectual environment, raise some money. But I don't think the way of [University of] Michigan and [University of] Virginia and some other places is the right way.

On the federal funding, the trick is what sort of strings and conditions are there on the federal funding? The other trick is, when the feds add a dollar, it will be subtracted out again from the state budget. We won't have gained anything. You know, the stimulus package that came in and added $600 million to our budget. But that really replaced a lot of state dollars that they didn't have. So one of the reasons we have such a crisis in '10-'11 is that we don't expect another round of [President Barack] Obama's stimulus package so those dollars have to be made up for.

UCSC: To switch it up a little bit ... Could you please discuss the distribution of fee money to the various campuses? And the outdated use of grad student population to give more money to certain schools than other growth campuses generally?

You've been doing your homework. That's a good question ... he's so lucid and clear, that's a shame. I think [UCSC Chancellor] George [Blumenthal] is on to something here. What happens is the state money for grad students comes in as a block to the system and then we distribute it out to the campuses. We have some formulas for doing that that have been there for a very long time. And the way it's currently weighted, the institutions with the larger graduate population, I don't know if it's outdated, but it is the ones that have a higher percentage of graduate and professional students get more money out of the central pot.

UCSC: But they stopped at 20 years ago. They stopped looking at the grad student population and just kept those numbers?

It's broken. I promised George, and you have my word and faith of honor, and this predates me, that we're gonna try to fix it and make the formulas more transparent and fairer. I agree with both observations ... it would make some difference for Santa Cruz, the problem right now is that we don't have enough money to distribute, period. But I think those are valid points--the formula is old and it's not transparent, I don't know if it stopped 20 years ago, probably George knows better than I, he's been here longer. We actually have teams of people looking at that, I suspect we're gonna be changing those formulas.

UCSC: Do you think that schools should receive back what they put in? Not including the Blue [and] Gold Program. That two-thirds that goes into the pot.

Yeah, I think that surely it should be the starting point. It seems to me if the students are paying the fees, paying for it for their education, it makes a lot of sense to me that the fees stay on the campus. Then the question is how do you mirror that in the state appropriations, I'll just tell you what the polls of problem are. On the one hand, grad and prof education is more expensive, so that's a reason to claim more. That's what Berkeley says all the time.

UCSC: And you're talking about UCSF also?

Yes. On the other side, we have the growing and emerging campuses and need more money to provide the space and the professors and everything, to tell you the truth, both sides have a very good argument. It would go a lot better if we have more money but we're gonna look at the formulas.

Will Kane, DC: What do you think of the idea of having different fee rates for the different campuses, specifically UCLA and UC Berkeley as the flagship campuses?

Well, the Commission (on the Future) is gonna look at that. It would be very controversial, a lot of faculty don't like it, I haven't really had much opportunity to talk to students about it. The argument against it is that we build the great University of California with all these [Association of American Universities] institutions by having equal treatment of the campuses and you don't want to have tiered campuses ... I'll use Santa Cruz. Santa Cruz is a fabulous campus, I think it'll be an AAU institution in a few years, it has wonderful research. On the other hand, when you're desperately looking for money, the demand for some of our campuses like UCLA, San Diego and Berkeley is very inelastic and if you raise your prices you're not going to lose that many students--particularly if you have money for low-income students. [The] intermediate position is that a portion of all fees that are collected is redistributed to growing campuses. All this would be extremely controversial and write down I didn't endorse any of it. I want the commission to look at it because we're running so short of dollars I think we have to look at it but I'm not prepared to endorse it today.

UCSC: Speaking of running short of dollars, on the budget it looks like there's still a 600 million gap that we haven't accounted for yet. I was just curious how you guys are going to address that?

That's not my recollection, I might have one of the numbers people sit down with you and go over it. The budget I'm submitting to best of my knowledge will be balanced but there are certain contingencies. We're gonna ask for $900 million in new funds, part of that is $305 million which we were told were one time cuts, and if we were not to get that, then we would have a $300 million shortfall. What would I do in the event of $300 million shortfall? Other than pound my head against the wall? We have a number of choices, we could pass cuts along to the campuses and say that you just to administer it. Berkeley would get its share, Santa Cruz would get its share. They'd look at library hours, number of lecturers they hire, they could look at whatever they wanted to look at. They would make the decision about where the cuts would come from. We would not reinstate furloughs and I'm very reluctant to get involved in fee issue again. To me 32 percent over 12 months is an enormous hit. We could restructure our debt some more, our debt is like a mortgage so we could refinance, you know if you have a mortgage and you owe $1,000 a month if you can't afford it, you can refinance and only pay $800. Problem is, you would end up paying more interest and so forth over the long run. We probably would refinance some of our debt--wouldn't be smart financially but it would help get us through the year. So those are the sort of things I'm thinking about.

Stephanie M. Lee, DC: Speaking of fee increases, in 2002, you wrote an op-ed for The Chronicle of Higher Education entitled "Is the Public [Research] University Dead?" when you were president of the University of Minnesota. You began by pointing out that tuition and fees for public universities had gone way above the rate of inflation and you said that step one was to convince the government and regents, etc., that raising tuition is the way to go, is part of the solution. You just said that you'd be reluctant to get into reinstating fee increases and 32 percent is a lot. Do you see there ever being a point where fee increases are no longer viable or necessary?

Boy, I hope so. I hope at some time they're not necessary and not viable. When I wrote that article, I was trying to predict the future and I was being facetious in the title. I was just observing the trends that, you know, every year the state appropriations in real dollar terms seem to be flat or going down in the whole country, and every year the fees seem to be going up. More and more money that seems to be going in the door is for restricted purposes, for research on nanotubes or for a chair in agriculture. It really wasn't meant to give the good housekeeping seal of approval, I was just describing what I saw out there. Unfortunately I was more right than I thought because what's happened in the roughly 10 years since I wrote that article it's only become worse. I think it certainly is possible. One of the things I've been thinking about, we're just not ready yet. If we get some relief from the state, could we lay out a multi-year fee plan that would both be more reasonable for students in magnitude and allow students and their families better ability to plan. You could know the fees two, three or four years in advance and it would be more reasonable. We're still looking at that. It does get complicated because a lot depends on how much money you get from Sacramento and a number of other assumptions. I sure hope it stops. I think this is very unhealthy. I just came back from Saudi Arabia. The king put $10 billion into the King Abdullah University for Science and Technology. I was out there in the desert and we opened it and it was a big deal. All around the world people say, you know, the model is the University of California, we want a great research university, we want wonderful young people to come to this university. South Korea, Singapore, Saudi Arabia, China--they get it. They're taking our idea, evolved in California, implementing it and it's withering here in the state that created it. I can't promise you, but I sure hope that the day has come when fee increases were being sane, not more than inflation, or something reasonable. I called the state of California an unreliable partner, I want a reliable partner and lower increases in fees. That's what I want.

UCSC: Is the state of California unreliable or is it the economy that's unreliable?

The state's unreliable, in my opinion. Because if it had just been this economy, and I admit it's tough, terrible, the foreclosures and everything's gone wrong. But we've been losing ground since 1990. You have $1,500 spent on students in 1990 and $7,800 today. That means even in relatively good times, the money is going elsewhere. It might have been going to medical care, might have been going to prisons, went somewhere. It might have gone back to the taxpayers. So this is the most salient thing that's happened. It's the biggest dip. But it's really the exclamation point on a long paragraph of declining support from the state of California.

Will Kane, DC: You said were being facetious in 2002 when you asked "is the public research university dead?"

"Dying," actually, is what I said, I didn't say "dead."

Will Kane, DC: So in 2009, given the circumstances now, do you still think that?

It's in great jeopardy, I wouldn't say it's dying. This is where the role of Washington comes in. We do fabulous research here, I mean it's unbelievable. I would say public universities in general do that. And the Feds, under the present initiatives, another $20 billion for research, I thought that was wonderful. And I think we're doing a better job on access on the federal level. At least the Pell Grants have gone up, the Perkins Loans, and there are some other things out there. But this cannot be sustained because these are brilliant ornaments on a tree that's bending. And in order to run research ... you have to have graduate students, they have to have stipends, you have to hire professors, they have to have buildings to teach in. When you don't have money for those things, eventually you can't do the research for fed government even though they pay the bills for the research. A Pell Grant is a voucher and a voucher is a check--that is all it is. And a check is only worth something if you can cash it. And if you increase Pell Grants and cut $250,000 out of the community colleges, as is happening in this state, that's 250,000 students who can't cash that check. You can raise the Pell Grants 'til the cows come home and it's still a problem for our students so we need to be thinking about how we build the capacity for these young people. It's great that they can get these scholarships and go, but we need to enroll them, we actually have to expand our ability to accommodate them. We need more buildings, more professors, we need to have more advisers and so on. And Will, I also want to talk to you about the football team and [the University of] Oregon.

UCSC: You said that 33 percent of student fees go towards financial aid. How did you guys get that number? Why not 40 percent or lower than 33 percent?

You know, it could be lower, it could be higher. This is long-term, by the way, it's not just this time. If you go back at least 10, 15 years, because it actually started lower. I think when the fee system went into effect in the '80s it started at 10 or 20, maybe 20 percent. ... You can't give it all back because if you give it all back, what's the point? You don't raise any money for the instructional program, and if you give too little back, you don't have access. I would say it's more of a historic figure. When we did our calculations this year--how much we'd need for the Blue and Gold, how much we'd need for families [with salaries] between $60,000 and $100,000--the 33 percent looked approximately right. There's also some other features that weren't true in the '80s. The Pell Grants are higher proportionally than in the '80s and there were no tax credits in the '80s. The tax credit is $2,500 max and it goes up to $180,000 (income). If we have any mavens of taxes, if you don't pay the taxes you can still get up to $1,000--it's a negative tax at the very bottom. So Jenny, it's complicated. It could be higher, it could also be lower. This seems to be the fairest thing that we can get some real resources out of and we take care of a large amount of the low-income students.

Stephanie M. Lee, DC: I've got more of a broad question. You've been in office for 16 months, and I'm wondering what you would consider your biggest mistake.

Biggest mistake so far. Well, I could've thought longer and harder ... you know what happened was this. We did the furloughs with widespread consultations, we had [people] from the Academic Council, the faculty senate that joined us since February and we had numerous meetings. Then I had 30 days when I got thousands of responses. All of that went well and the faculty and staff didn't like my furlough plan so the plan that finally emerged was totally different than what I had proposed. And that was a response to 25,000 to 30,000 letters and e-mails. Then the faculty senate told me they wanted to debate whether or not the faculty could take a few of their furlough days off of teaching. My general attitude at the time was that that's generally a faculty matter, I'm not going to tell them how many podium days they need, they need to figure that out. But what I wasn't thinking was that down the line the fees would go up so much. So the faculty went on its way, I didn't even participate in those discussions--that was a mistake. So what happened was further on down the line once we had hit upon that we needed a fee increase of the magnitude we're talking about, I began hearing from chancellors, began hearing from parents and began hearing from politicians, "How can you charge the students so much more money and teach fewer days?" So I went to the faculty leadership and said, "Can I meet again with the Academic Senate?" And they said, in effect, "Dummy, it's August. You can't find them because many of them were doing their research, some were away on vacation." That set in motion the events that you saw on your campuses, where people were angry at me because I hadn't allowed those as furlough days. But really my sensitivity was, and I think if we had more time to talk about it, it might have worked out differently. I didn't really mind ... People can protest. I'm a constitutional lawyer, I taught the First Amendment, I even wrote a book on it. But I was afraid of the public reaction and the legislative reaction and the media reaction if we officially endorsed days off at the very time when we were asking our students to pay more money. And the way the timing was, since I didn't think of it in advance, it was really too late to pull it back. So I would say that's the biggest mistake I can think of. Maybe you can think of some bigger ones.

Stephanie M. Lee, DC: I have a follow-up question. You mentioned the walkout. I was wondering where you were when the walkout happened on Sept. 24?

I actually think, I may have been out of town. Remember, I don't live on a campus. I live an ethereal life: no students, no faculty, no classrooms, no residence halls. I'm at the corner on 11th and Franklin Street [in Oakland, Calif.]. I may have been out of town, I'm not sure.

UCSC: Just moving on from that, can you address the lack of transparency, you know, that I definitely find--I appreciate the meeting, I really do-but it seems like there is a lack of transparency, especially when we are researching financial stuff.

I don't agree with you, I'm just gonna tell you. Go to our Web site. You know when the stuff was out there on our reserves, we put a list of facts about our reserves. We do an annual audit on all our numbers we put that online. When people said, "What did you do in Sacramento?" we put a white paper online. We had 25,000 hits when I addressed the Board of Regents and made the speech last time about what I thought our real issues were. I published a piece in The Chronicle of Higher Education and we put that online. I don't think it's true.

UCSC: I found that when I was looking for the stuff I asked you earlier, it was very difficult to come across ...

Well, that particular piece of information is difficult because, frankly, I don't even have it, Jacob. It's a little malfunctioning part in the Office of the President. But if you want to know, what are the reserves; if you want to know about the scholarship program; if you want to know about what I think about various issues; if you want to know about what the auditors said about our accounts and so forth, then it is all there.

UCSC: Following up on that, one kind of example that I've been thinking about lately of transparency is this--UCSC Professor Bob Meister has, like, written this piece, I don't know if you have heard of it, it's called "They Pledged Your Tuition: An Open Letter to UC [Students]."

It is totally untrue, by the way.

UCSC: OK, well then ...

It just came in the other day and we've written a response. It is untrue because we are not allowed to use student fees to pay bonded indebtedness.

UCSC: So what can you tell us here since you have, you know, this smaller number of students that are able to listen to you in person. Where did he come up with this then?

Damned if I know. He took two numbers that, you know, that we had pledged toward debt and when the fees were going up. [inaudible] It's just untrue. We're not allowed to use fees for that purpose. The fees are used for operating expenses of the university. The reason we made these pledges, cause it will lower-if you pledge the whole campuses as opposed to just the residence hall, or whatever, it lowers the interest rate which means students pay less for their dorm rooms and the like. It's just not true, flat-out not true; misinformation.

UCSC: And are you guys going to come out with a response to that?

Yes. We are.

UCSC: You have one?

It's finished I think. ... You know we just got this this week, you know, and we want to give you accurate information so it takes a couple of days to respond to this-I bet the preparation time is three days to respond to this. I mean this is not a standard story, we have to research our answer and give it to you.

Kelly Fitzpatrick, DC: In dealing with the budget this year, you've talked a lot about the principle of shared sacrifice and I'm just wondering if the decision to end furloughs for next year while raising student fees to such an unprecedented amount ... (seems) like a contradiction to you?

Well, I looked at it as a total package and my number one concern is that we are getting more and more reports of large classes and closed sections. I am afraid of losing the professors and key staff people and I have concerns about the continuing viability of the retirement plan. I would not isolate not just those one factors. This is a quid pro quo there, I'm thinking about a package of things that we needed to do to reset the university and I think if we went on for two of three years with furloughs, Kelly, my honest opinion is that Berkeley would not be the same place, and that is my opinion. But we also set aside a lot of money for scholarships, we're also dealing with the retirement situation, so that's all I can tell you.

Kelly Fitzpatrick, DC: Did you consider maybe continuing furloughs to a lesser extent (so) the fee increases may have been more manageable for students?

I have not, but don't forget that we already laid off 2,000 people and we'll probably be laying off more people in the future. But sure, I considered every alternative. But I ultimately felt the continuation of the furloughs at that magnitude would be highly destructive of the competitive posture and the quality of education at the University of California.

Will Kane, DC: One last question and it is probably pretty simple, you talked about the Cal football team. Do you think intercollegiate athletics is a worthwhile expense for campuses?

Well, my personal view is that you ought not to be putting state money into it, I mean that is my view. To a large extent it should be self-supported. Most sports, as you know, lose money and so I think it a great opportunity for the students and it builds morale. So I guess what I would urge is not putting state money into it and that we try to make these programs as self-sufficient as we possibly can. I mean, you can answer better than I. I mean, I think on the whole, athletics are a positive thing for campuses. It is true last weekend wasn't very positive. Although you probably don't know it, but Davis did prevail in its game in overtime. And that shows one of the complications when you are writing. We're very complicated because we are in so many different businesses. We're in the parking garage business, so where do we get the money to build a parking garage? We charge you. You know, we are in the hot dog business, we supply physician and nurse and dentistry services, veterinary services and all the rest of that. And so people get confused, our budget is very complicated because we are in so many different lines of work. I mean the hospital revenue-the hospital and physician revenues are twice what we get from the state, our research money is twice what we get from the state. But you can't just pull from here and put it there. You can't take the nanotechnology research money and put it in the Portuguese department without going to jail. So it is a very hard story to tell, if you're UCSF, UCSF has a budget of $3.3 billion and it is one of the great medical institutions in the world. Of the $3.3 billion, $200 million comes from the state of California so Californians are paying less than 10 cents on the dollar ... for one of the great medical schools, nursing schools and pharmacy schools. And all these different business make it too complicated and if you take too much money out of the hospital revenues and you run the risk that the hospital will be in jeopardy. And then all of a sudden it will be in the red, which is a distinct possibility because it's dependent on the patient, on the good well of the patients and their insurers.

UCSC: With all the baby boomers beginning to retire, this is sort of becoming the pig in the python moment for the university.

The pig in the python moment?

UCSC: Yeah.

Oh OK, I keep kosher myself lady.

UCSC: Can you tell me more about what you think the fate of the retirement plan will be?

I think it will be all right. It is one of these things like Social Security--we can fix it but it is not a dire situation tomorrow morning. I mean, it was, in my opinion, goofy that for 19 years neither employer or employee contributed any money to the retirement plan. I understand the tactical reasons for the initial decision but I don't know how we let it go on and on and on. So I think what's going to happen as a result of this plan-this is a good example of how complicated we are-if my plan is adopted and the legislature is friendly on this issue, we'll put $100 million of employer contribution out of state money into the retirement plan. But in reality it'll be $300 million because then we can take the employer contribution out of research money and out of patient revenues. So, we've got a $300 million boost plus some employee contributions so we'll have been $300-400 million. The markets are up some. I think long run it'll be OK. We may have to restructure it some, Jen, I just don't know. It may be that someone who was hired in 2012 may not have all the same retirement benefits of someone who was hired in say 1990. I just don't know. We have experts who are looking this to try and figure it out. We have a big balance but if you look at our liabilities going out-and your right, the baby boom generation is the big bulge moving through the system-and, by the way, it is not that different from Social Security or Medicare, except that they have a printing press in Washington and they won't give me one.

Kelly Fitzpatrick, DC: I was just wondering why you thought it was necessary to ask the Board of Regents for the emergency powers in July?

Yeah, let me explain that, Kelly. This is another thing that has been completely distorted. So I am sitting there in my office and I am thinking, we may have to do furloughs or salary reductions, so I call in the general counsel and say, how do you do furloughs or salary reductions around here? What do the regents rules say? He gets back to me and says, "We have no rules." I said, "You have no rules? That's very funny" - strange, not funny, strange. I got the leaders of the academic council of the faculty senate and said, "What happened in the '90s when they reduced salaries?" and they said, "The regents just did it." I said, "The regents just did it?" They said, "Yes." "They didn't consult anyone?" They said, "No, they just reduced salaries in response to a financial crisis in the early '90s." So I said, "That's no good." I said what we need is a set of rules that says you have to consult with various groups and you have to declare that there really is a financial emergency and you have to go before the board of regents and it expires on its own in a year, even if nothing happens. We have some rules to guarantee that the staff and employees in particular, and also the students, have some opportunity to look at this and that whatever we do we have to do in public, we can't do it behind closed doors. That was my position. We sat down and the general counsel drafted the first set of rules. The faculty senate said the didn't like it and I said, "OK, then redraft them" and they redrafted them. So the emergency powers were designed to curb my powers and to curb the powers of the board of regents because - are any of you law students? Well, that's fortunate, (to Will) maybe one in the making-the regents have the inherent fiduciary power to reduce salaries under California law. They just do. So the emergency powers was designed to trim my powers and the board's to make sure we can solve it and to make sure we did it in a public meeting where the media would be present and all the rest and that's what we did. And if you want to do the history--and you can search--go back and see what they did in the 1990s and you'll see that they didn't do it that way at all. So this notion that when someone stands up at a meeting and says, "Oh my god Yudof, it's the Bay of Tonkin all over again. It's like Vietnam. Emergency powers! He's gone to war by himself" - it was really my effort to give everyone on the campuses more of a roll in the debate of all this and make it public.

UCSC: I wanted to ask about the New York Times interview that there was a lot of reaction to.

I sure had fun with that.

UCSC: Well, I wanted to ask you about the cemetery joke.

I think these people should get a sense of humor, is what I think.

UCSC: OK, I didn't finish.

Yeah, no. I'm sorry.

UCSC: People seemed upset about that because a lot of people do feel like their program are dying because of budget cuts and I heard a lot of people saying that they didn't understand what you meant by saying, like, "I listen." So I was wondering if you could, like, explain what you meant by that compared to like saying, "They don't listen, I listen." What did you mean by that?

It's not that complicated and I wish they would get a sense of humor. There is actually a 28-page transcript and she just took snippets of it and printed it.


We'd be happy to provide you with the transcript. But I said a lot of things, but she just picked out all my bad jokes and put them in and that was the end of the day. It's really clear what I was saying, Jenna, I was making a self-deprecating joke, that people think the president of the University of California is all-powerful but it's like being the manager of a cemetery. I get to talk a lot but people aren't listening to me-that's all it meant, that's it. It didn't mean they were dead, it didn't mean there were cadavers. It just meant that people-I'm not the Marine Corps. I don't have a command and control, I need the cooperation of students and faculty, that's all it meant.

UCSC: So you meant that they don't listen to you and you don't say something and everyone does it?

No, no. Let me state it again. I say lots of things I'd like people to do and often times they pay no attention to me. And the last line, "I listen" was just - which I think I demonstrated - that when, with the furloughs and other things, that I really do pay attention to what the faculty and the staff think.

Will Kane, DC: Do you regret making the comment? The cemetery comment?

No, no. I think--you don't go on the Jay Leno show and give the Gettysburg Address, that's my view.

Kelly Fitzpatrick, DC: I was just wondering. It seems like most of the people who are eligible for the Blue and Gold Opportunity Plan, as it stands, would already be entirely covered with Pell Grants and Cal Grants, for the most part. So, it seems like middle-income students are the ones being priced out at this moment and the scholarship campaign that you mentioned or the percentage of fee increases that goes to - is that going to be more concentrated on those students who don't receive any aid? Not in the form of grants, not in the form of loans, I mean.

It's going to be concentrated in the $0-$100,000 range. The point I was trying to make, Kelly, is part of it is putting more money into low-income families, but part of it is creating certainty. That what I'm saying is, we will make up difference if you come up short on your scholarship because there are holes in the Pell Grants and in the Blue and Gold program. But everything doesn't go into Blue and Gold, it's going to be going into that $60,000-$100,000 range. We had no choice--I mean, the only fair thing to do is to make it income-adjusted, so that's what we're doing.

Kelly Fitzpatrick, DC: And do you know if that would be in the form of loans?

We're planning on using the one-third set aside for scholarships, so it's primarily scholarships, I would think.

UCSC: When do you think things will get better?

That's a good question. I think we will not be much better in '10-'11. I think by '11-'12 things will get better. We're out of stimulus money in '10-'11, the state still has a probably $10-12 billion, or even more, deficit. The economy probably will have bottomed out and started to recover by then, and maybe the tax collections will be up, maybe we can make some progress in Sacramento. I'd like to say something different, boy I hope I'm wrong, but I would say '11-'12 is our most hopeful year when things will be remarkably better. And you all will be in graduate schools or wherever you're going, that's all I can tell you. I really feel bad, because I think not only is this a lose-lose situation, but you're going to be entering economy in the most difficult time for young people in 75 years, and that's not good. But it'll get better, it always does. This is California--we'll come back and America will come back and I think we're making many of the right decisions in Washington with the stimulus package and so forth.


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