Commentary

I feel sorry for college students today. Tuition and other costs keep going up and up. The latest: California State University is proposing a tuition increase from $174 to $462 a year, plus future increases.

Current tuition is $5,742 a year. So in fall 2024 the cost could be as high as $6,204, or 8 percent higher. The increase would have to be approved by the Board of Trustees.

The recommendation followed a March report from the trustees’ Committee on Finance, which found a $1.5 billion funding gap. About 60 percent of students don’t pay tuition, so 40 percent would pay the higher amount.

Unfortunately, the news stories on the funding gap—and the supposed need for a tuition increase—did not note the section in the report on the major causes of the gap. This includes the Los Angeles Times’ story, which said of the report, “In the 2021-2022 school year, there was a 14% disparity between what the system spent and what it actually cost to educate students, pay salaries and keep campuses running, the report said.”

But here are two items from the list starting on p. 51 of the report:

1. Debt service. “Capital facility debt service—Unknown to Significant ... In 2008 Governor Brown faced a $26 billion structural deficit and mounting state indebtedness and essentially froze all further state debt financing including the use of General Obligation bonds and lease-revenue bonds for higher education capital facilities (where the state paid the debt service) ... the last state supported bond occurred in 2006 with a voter approved $690 million in state General Obligation bond funding.”

Actually, in 2008 the governor was Arnold Schwarzenegger. But his action as the Great Recession dug in showed the dangers of bond financing—because you always have to pay back the bonds. And if you delay a payment, the future payments just get worse.

Yet the report even laments, “[T]he Governor [Schwarzenegger in 2006] proposed at that time an additional $2.7 billion in future G.O. [general obligation] bond recommendations to address CSU capital facilities that unfortunately were never placed on the ballot”—but, if passed, would have made today’s crisis worse.

The bonds that were passed should have been paid down entirely with last year’s $100 billion surplus. But that was another wasted opportunity.

2. Pensions and retiree medical. “Retirement cost increases since FY2014/15 – $43.6 million and increasing annually. ... Again, as part of the state’s effort to shift annual cost increases tied to compensation the CSU was required to provide additional funding for retirement obligations out of the CSU operating budget.”

Most Cal State employees, including professors, are part of the California Public Employees Retirement System. Along with most other state and local pensions, benefits were spiked more than 20 years ago. A 2013 City Journal investigation headlined, “The Pension Fund That Ate California. CalPERS’s corruption, insider dealing, and politicized investments have overwhelmed taxpayers with debt.” It detailed:

“CalPERS’s three-decade-long transformation from a prudently managed steward of workers’ pensions into a highly politicized advocate for special interests. Unlike most government pension funds, CalPERS has become an outright lobbyist for higher member benefits, including a huge pension increase that is now consuming California state and local budgets. ...

“CalPERS has also steered billions of dollars into politically connected firms. And it has ventured into ’socially responsible' investment strategies, making bad bets that have lost hundreds of millions of dollars. Such dubious practices have piled up a crushing amount of pension debt, which California residents—and their children—will somehow have to repay.”

CalPERS’s funding level also dropped to 72 percent on June 30, 2022, from 81.2 percent a year earlier. In three weeks we’ll get the latest numbers. As I write on the evening of June 7, 2023, the S&P 500 is at 4,267.52 compared to 4,115.77 on June 7, 2022. That’s an increase of just 3.7 percent. So, although CalPERS’s investments are different from the S&P 500, it’s unlikely to have performed much differently.

Too Many Administrators

Another big factor in Cal State’s rising expenses is top-heavy administration. A 2016 report by then-State Auditor Elaine M. Howled found:

“This report concludes that growth in the number and compensation of management personnel significantly outpaced those of other employee types, including nonfaculty support staff. Specifically, from fiscal years 2007–08 through 2015–16, the growth rate was 15 percent (503 employees) for full‑time equivalent (FTE) management personnel, whereas the growth rate for FTE nonfaculty support staff was only 6 percent (1,514 employees) and for FTE faculty was only 7 percent (1,328 employees). We also found that the six campuses we visited frequently could not justify the growth in the number of new management personnel and one campus granted raises to management personnel that were not supported by current written performance appraisals, as required by CSU policy.”

There’s also something the audit did not cover: Many hundreds of these administrative positions could be cut, saving millions. For example, just at Cal State Fullerton, its divisive Diversity, Inclusion, and Equity administrative section could be eliminated, including all these functionaries:

• Arlene Gutierrez, Executive Assistant to the Vice President for Human Resources, Diversity and Inclusion
• Tara Garcia, Chief of Operations, Human Resources, Diversity and Inclusion
• John Beisner, Executive Director, Risk Management and Compliance
• Phenicia McCullough, Associate Vice President, Human Resources Services
• Bobbie Porter, Assistant Vice President, Diversity, Inclusion and Equity Programs
• Michelle Tapper, Assistant Vice President, Labor and Employee Relations

A similar list could be added from each of Cal State’s 22 other campuses.

Conclusion

Even more than most California government departments, Cal State is loaded with programs that are wasteful, inefficient, and downright counter-productive. What’s needed is a massive program of reform, not tuition increases. Kids shouldn’t be required to go deeply in debt just to support bureaucratic bloat and politically correct indoctrination.

John Seiler’s email: writejohnseiler@gmail.com