Students Won’t Be Collateral Damage in California Big Spenders’ Showdown

There’s a showdown brewing in California’s not-so-OK Corral—make that the UC Corral—and students are fed up with being the ones caught in the crossfire.

It started back in 2012 when Gov. Jerry Brown threatened to slash state funding for California’s ten University of California campuses unless his Proposition 30  (also known as the “Millionaire’s Tax”) passed. The UC Regents fired back, complaining that slashing funds would compel them to hike tuition some 20 percent mid-year—about $2,400.

The massive tax hike passed by more than 55 percent, and Sacramento’s coffers are brimming at $108 billion, with another $3 billion surplus projected for next year. In return, UC officials froze tuition—until this week, that is.

The UC Regents, led by UC President Janet Napolitano, say their share’s not big enough, and they want more of the spoils. So they voted to hike tuition 5 percent annually over the next five years unless they get more state funding.

This latest political skirmish amounts to two big-government spenders squaring off about which pet projects deserve more funding from hard-working taxpayers—while (disingenuously) claiming that all this contention is about students.

First, let’s look at Proposition 30. Technically dubbed “The Schools and Local Public Safety Protection Act of 2012,” college students statewide staged protests in support of the measure—only to learn after its passage that it would actually do little to keep tuition and other out-of-pocket costs down.

Subsequent analyses have also indicated that Proposition 30’s main goal is helping keep Gov. Brown’s big government, big union regime solvent—not about keeping a college education affordable.

For a variety of reasons, the Proposition 30 personal income tax (PIT) funds exceeded initial projections (p. 21). Yet California’s Legislative Analyst’s Office (LAO) notes that given the growth of high-earners’ incomes, PIT revenues would have increased anyway, making the seven-year tax increase fiscally unnecessary (p. 23).

Proposition 30 also never guaranteed funding to California universities, although the governor’s budget did include $250 million for the UC system for 2013-14. What’s more, Proposition 30 actually isn’t about education at all. According to an analysis of the final 2014-15 budget by the California Senate Republican Caucus:

The Administration says that all Proposition 30 revenue goes into a special account used entirely to fund education, which is true. However, what it fails to say is that these special funds offset state General Fund that would have to be spent to meet the Proposition 98 guarantee even if Proposition 30 revenue did not exist, thereby freeing up that same amount of General Fund for non-education uses. It is a classic shell game. (p. 16)

So where’s the money going? The Caucus report explains that:

...the Governor continues to direct much of it toward other priorities, e.g., to eliminate state employee work furlough days and fund salary and benefit increases ($650 million), increase pension contributions for PERS and CalSTRS ($600 million), to grow health and human services spending (about $800 million), and build a reserve ($1.6 billion). (p. 16)

But California universities aren’t hapless victims here, either.

A host of uncompetitive practices and habits have made them far too dependent on government. When government funding falls short of hoped-for funding levels, officials stick students with the bill. The UC system is a case in point, as the Wall Street Journal’s Allysia Finley explains:

Ms. Napolitano says that the UCs have cut their budgets to the bone, yet her own office includes nearly 2,000 employees—a quarter of whom make six-figure salaries. An associate vice president of federal government relations earns $273,375 a year, plus $55,857 in retirement and health benefits, according to the state controller’s office. Thirty professors at UC Santa Cruz rake in more than $200,000 in pay, and most faculty can retire at 60 and receive a pension equal to 75% of their final salary. More than 2,100 retirees in the university retirement system collected six-figure pensions in 2011.

Neither the UCs nor their employees contributed to their retirement fund for 20 years; the assumption was that they could ride the booming stock market. Now the fund is $10 billion in the hole.

Bureaucratic bloat is nothing new in higher education, but the failure of lavishly paid, taxpayer-subsidized employees to save for their own retirement and expecting students and taxpayers to do it for them is a problem squarely of Gov. Brown’s own making, since he’s the poster person of unionized labor retiring on someone else’s dime. UC Prez Napolitano is not much better since she’s shaking down students for the same reason—just on a smaller scale.

Here we have a perfect storm of perverse incentives that no punitive tax increases, kick-the-can-down-the-road tuition-freeze schemes, or political pandering can weather. The reason is simple: none of these ploys addresses the root cause of out-of-control college costs. And politicians like Brown and Napolitano know it. As Finley continues:

‘We just know for a fact that if you can always get more money, you will look to the money rather than to alternative spending practices,” California Gov. Jerry Brown explained two years ago in an interview with University of California students. This inadvertent moment of candor occurred while the governor was campaigning for a giant tax hike (Prop. 30) that has now put him in a jam.

And that, in a nutshell, is why no amount of money will ever be enough to keep monopolistic, unaccountable bureaucracies solvent—whether we’re talking about the halls of government of the Ivory Tower. Finley speculates that:

Perhaps what most angers Mr. Brown and his fellow Democrats in Sacramento is that the regents have exposed the cynicism of the politicians’ own campaign to raise taxes and made it much harder for them to rally students to do so again.

Based on the reaction of several UC students before the vote, she’s right. One student comment pretty much sums it up, as UCSB’s Noah Brennan-Greenbaum reported in the Daily Nexis:

Sebastian Cano, a student at UC Davis, said he feels the Regents... “have failed in your mission to provide affordable education for many of our students who want to provide a better future for themselves... we are planning on organizing boycotts on all the Regents’ private businesses...We would also like to organize a recall against Mr. Governor over there.”

California college students versus Big Labor’s big leaders. Now that’s a showdown worth watching.