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UCSD October 7th Lesson Plan
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The UC “Budget Crisis”



Shifting Priorities in California’s Public Spending


From 2001-2008, the state gradually decreased spending on public education.


Dramatic cuts started in 2009.


Public funds have instead been used for:

1.    Healthcare

a.     Healthcare costs rising

b.    More people don’t have insurance

2.    Prisons

a.     In 1985: prisons=4% state budget; universities=11%

b.    Now: prisons=9.5%; universities=5.7%

c.     Before the war on drugs (1977): 20,000 inmates in CA

d.    In 2009, 173,000 inmates

           i.  Not because of more crimes, but harsher penalties

           ii.  Higher incarceration rates don’t increase public safety, they just cost more

e.    The increase was largely the combined result of the War on Drugs and the Three Strikes Law, which disproportionately effect African Americans and Latina/os

           i.  African Americans make up 13% of the population, comprise 13% of drug users, but make up 2/3 of inmates incarcerated in state prisons on drug-related charges

             ii.  In 2000, Latinos were 12.5% of nat’l population, but 43% of federal drug offenders

              iii.  According to a Justice Policy Institute study, African Americans are given life sentences under 3 Strikes Law 13 times more than white prisoners; Latinos 82% more than white prisoners

f.      Structural racism: Communities of color disproportionately effected by cuts in public services and public education

          i.         Defunding things like after-school programs and public schools increases crime rate

g.    State spends $46,000/year on 1 inmate; 1 UC student $9,560/year

h.     Prisons are a huge industry—multi-million-dollar prison contracts represent huge profits for private corporations




Overview of the UC’s Budget

The UC’s operating budget is $19 billion. Of that, $5.6 billion is spent on research, instruction and public services (and the administrative support to carry out these activities).


Despite calls for transparency from students, faculty and the people of California, the UC administration and Board of Regents has consistently refused to provide a full disclosure of the university’s spending.


Aside from state funding, the UC gets significant income from the federal government, private corporations, student fees, its investment portfolio, patents and UC medical hospitals.


In July 2009, the state legislature cut $813 million in funding, but then gave the UC $716 million from the stimulus package. Adjusting for spending increases, the cut was only $240 million. The UC declared a financial “state of emergency,” laid off hundreds of staff members, imposed pay cuts on remaining staff, and planned to raise student fees by 32%. According to university documents, the UC had $8.3 billion in unrestricted investment funds in reserve at the time.

1.    Much of what the UC says are restricted funds are only arbitrarily designated as restricted by the UC, not because the state or private donors placed restrictions on how the money could be spent.

2.    “Restricted” funds are often funds that the university has earmarked to pay for something the administration or Regents want to spend money on

a.     Last year, UCSD “loaned” itself $40 million to pay for certain expenses

b.    Last year, the UC lent $199 million to the state

3.    Reflects the administration’s priorities—buildings and bonds over jobs and students



Students are Paying More for Less: Where Tuition Really Goes


In July 2009, the UC declared a financial “state of emergency.” In August 2009, the UC decided to take on $1.65 billion in debt to fund 70 new construction projects.

1.    Tuition money is used as collateral so the UC can get a better interest rate on construction loans.

2.    There are more restrictions on how public funds can be spent, but not tuition funds.

3.    The UC doesn’t have to use tuition money to pay for your education.

4.    By essentially promising lenders that it will raise student fees and tuition incrementally over time, the UC can borrow more money for a better interest rate so that it can undertake more unnecessary building projects that financially benefit companies linked to the Regents.


The administration has grown disproportionately, absorbing funding that could be going towards instruction.

1.    From 1996-2006:

a.     the size of the administrative staff increased by 116%

b.    the number of students increased by 33%

c.     the number of faculty increased by 34%

2.    Today we have 500 fewer faculty members, and the administration plans to reduce the number of ladder-rank faculty by 20%.

3.    3,600 UC employees make over $200,000/year (many of them administrators and medical doctors)

4.    The UC hospitals generate $2 billion in annual profit. UC hospitals benefit from the university’s research and academic resources, but the university refuses to redistribute the profits of the hospitals into other areas of the UC. A lot of the people making more than $200,000 are doctors. They shouldn’t be making so much money off of the health care business but if they do, the profit should be used for the general progress of the university not just a few doctors.



Systemic Corruption


The UC Board of Regents controls the university. Current regents (who are appointed by the governor) happen to be extraordinarily wealthy and politically-connected businesspeople who donated at least $50,000 to the governor’s campaign. The Regents use their position to channel the university’s money into their own private holdings. Take the example of UC Regent Richard Blum:

1.    The UC has invested $84 million in real estate and private equity deals in which Blum has a significant financial interest.

2.    At the end of 2009, UC held investments totaling $304 million in all 18 of the public companies in which Blum’s financial firm held a substantial or controlling stake.

3.    Blum’s construction company, URS Corporation, is being awarded contracts for UC building projects, like the Blum Center for Developing Economies at UC Berkeley.

4.    Since 2003, the regents have invested $411 million in Dimensional Fund Advisors, a company partly owned by Gov. Schwarzenegger and Regent Wachter.

5.    After Regent Lansing joined Qualcomm’s board of directors, UC quadrupled its investment in Qualcomm to $397 million



Privatization of the Public University


UC moving towards privatization, which means:

1.    Higher tuition, lower quality education.

2.    Online courses, bigger classes, corporate sponsorship (meaning corporate control over classes offered and how school is run), private donors.

3.    Access depends on ability to pay

a.     Likely to cut off people of color’s access to university because, statistically, they have fewer financial resources, are more effected by unemployment (black unemployment rates have been at least twice as high as white unemployment for all but 5 of the last 37 years), and are more likely to live in communities effected by cuts in public services. In other words, structural racism.


Arguments against privatization:

1.    Universities should not be limited to teaching knowledge that seems practical and in high demand at the moment – we need both Einstein and accounting

a.     The benefit of skills like critical thinking isn’t easily quantifiable

b.    Einstein’s work seemed abstract and theoretical at the time, but it had very real applications later on

2.    The work of scholars like Angela Davis and Judith Butler would never be possible in a privatized UC

       i.         Corporations depend upon gender, sexual, racial and class inequalities to remain profitable

       ii.         Vested interest in limiting certain types of knowledge

3.    More people with college degrees means:

a.     Less unemployment, crime, healthcare expense

b.    More inventions, better technology, cheaper workforce, higher economic growth, higher real estate values

c.     More civic volunteering, political participation, better public schools

4.    Corporations will call the shots on your education

a.     Driven by profits not your best interest



The Alternative: California Master Plan for Education


The California Master Plan for Education was adopted by governing boards in December 1959 and implemented in 1960. It’s a living and evolving document that has been reviewed numerous times since 1960, with each review affirming its core tenets of accessibility, affordability, quality, and equality.

1.    Core principle: It is the state’s responsibility to provide a place in higher education to every high school graduate AND to provide funding to make it accessible to everyone.

2.    CA’s economic strength derived from UC-generated research and its highly-educated workforce; everyone benefits from equal access to higher education.



Suggested Reading:


Bond-Graham, Darwin and Will Parrish. “Who Runs the University of California?” Counterpunch. 1 Mar. 2010.


Byrne, Peter. “The Investors’ Club: How the University of California Regents Spin Public Money into Private Profit.” Spot.Us. 18 Aug. 2010.


Meister, Bob. “They Pledged Your Tuition to Wall Street: An Open Letter to UC Students.”