Op-Ed By Elana Eden and Margaret Hardy in the Daily Californian - the student-run newspaper of U.C. Berkeley | http://bit.ly/S8bYEM
Tuesday, November 20, 2012 :: Lately, my friends have been asking me: “Proposition 30 just passed… so why mobilize?” In the relief following a narrow escape from a 20.3 percent fee hike, it seems like a reasonable question. As the pre-election panic subsides and we return to our schoolwork exhausted but reassured that we’re safe from a fee hike — at least for now — it’s difficult to acknowledge that the fight for public education is far from over.
But the privatization of the university doesn’t stop for elections. We may have averted a fee hike this year, but the UC Board of Regents is already discussing one for next year. At its meeting last week, the Board of Regents passed its new budget proposal, which could lead to an estimated 6 percent increase in 2013-14 undergraduate tuition if the state is unable to provide equivalent funding, as well as fee increases of up to 35 percent for professional degrees.
Six percent may sound small, but all these little increases add up. Average annual UC undergraduate resident tuition has increased about 332 percent from $2,824 in 1992-1993 to $12,192 for the 2012-2013 academic year. Fee hikes have become so much the norm that we expect them as much as we hate them, and the free, public university of California of our parents’ generation has become a kind of myth or even a joke. As you probably know all too well, fee increases translate into a massive loan burden on students and our families. Recent estimates indicated that U.S. student loan debt hit an estimated $1 trillion in late 2011, and in terms of a national average, UC Berkeley students graduated with an estimated $16,000 in student debt in 2010. Prop. 30 temporarily stemmed the growth of tuition and student debt, but it is not a long-term solution. Why? Because tuition increases are driven by more than a lack of state funding; the regents and campus administrators are responsible, too.
While students are asked to pay higher tuition, the treasurer of the board, the CEO of the UCLA Health System and the CEO of the UCSF Medical Center each earned an annual salary of more than $1 million in 2011. Furthermore, the university’s financial woes have been exacerbated by the university’s risky financial dealings. According to a recent report published in November by a group of UC Berkeley graduate student researchers published, the university tried to avoid rising interest rates on their bonds before the 2008 financial crisis by engaging in interest rate swaps with banks. The university agreed to pay a fixed interest rate on the university’s loans, while the banks paid them back at a “floating” rate set by the current market interest rate, according to the report. So, when interest rates plummeted in 2008, banks’ payments to the university shrank rapidly — but the university’s payments to the banks remained the same. Through these risky deals, the report said the university may have lost close to $57 million, and could possibly lose another $200 million in the next 30 years, according to the report.
UC officials have refuted the report, arguing that the university has saved money through the swaps and that graduate students are not familiar enough with finance to understand their complex financial dealings. But Christine Rosen, an associate professor at the Haas School of Business, points out in a Nov. 17 op-ed in the San Jose Mercury News that the savings UC officials claim to have made are actually from the variable rate bonds that the university tried to protect itself against by making interest rate swaps. In her op-ed, she said UC officials are now losing $10 million a year on interest rate swaps, and that its losses from the swaps outweigh its gains from issuing the variable rate bonds. Instead of writing off the investigations of the university’s graduate researchers, UC officials should consider taking action to make its complex decisions less costly to the university community.
According to the graduate student report, many of these loans helped to fund construction of new medical centers, and despite its financial woes, the university continues to pursue extravagant construction projects such as the construction of a hotel and conference center on the UCLA campus. The university doesn’t exactly have money to spare for new construction, so, rather than use revenues from these projects to stave off cuts and layoffs for students and workers, these revenues are used to pay off the loans used to finance such projects.
At the same time that UC officials are spending on new development, resources essential to the campus community are neglected. For example, the UC Berkeley administration is currently restructuring the Multicultural Student Development Offices, leaving students of color with limited community resources even as their enrollment at UC Berkeley decreases. Some campus service workers also lose their jobs, as some AFSCME local 3299 members claim the university pays private subcontractors to hire workers who are not represented by unions and don’t earn a living wage. While we often hear that paying service workers more would cost students more in tuition, this is a false contradiction. The university is not in a financial bind because we’re spending too much on custodians. Money that should be used to lower our tuition and pay the people who clean our classrooms, feed us and keep our libraries running is instead squandered on risky interest rate swaps.
According to Moody’s credit rating agency, the University of California has a strong credit rating because the UC can use its “powerful student market position” in order to “compensate for state funding cuts” by raising tuition dramatically. UC officials have gambled with our money to build medical centers and hotels while students, faced with rising tuition and growing class sizes, haven’t shared in the benefits.
If not for the money spent on high administrative salaries and lost to Wall Street, the university could have funds to help close a gap between state funding and the 2013-14 operating budget. In fact, the salaries of the treasurer of the board and the CEOs of the UCLA Health System and UCSF Medical Center add up to $3.65 million. If this amount was available, it could be used to prevent the possible 6 percent tuition hike next year. Clearly, it’s not just state funding that matters — it’s also what UC officials do with it.
Demanding that the board prioritize the needs of students and workers over banks and administrators will not magically produce free public higher education in California, but it is an important step. A small tax on the wealthiest Californians froze tuition temporarily, and a board that is accountable to students could roll it back.
It is for this reason that students mobilized for the regents’ meeting last week. Prop. 30 was not a final solution to the privatization of the university, and if we want to hold onto the positive momentum, students need to take the next step to save public higher education.
Next stop: UC Board of Regents.
- Elana Eden and Margaret Hardy are members of Students for a Democratic University