What Berkeley’s budget cuts tell us about America’s public universities

Can Berkeley stay Berkeley after budget cuts? Peter Jackson, CC BY-NC-ND

The University of California at Berkeley recently announced a financial restructuring due to mounting structural deficits, including a US$150 million shortfall in the current budget year. All areas of university’s operations – academic, administrative and athletic – will likely face spending cuts.

Higher education experts have begun to ask if Berkeley can stay Berkeley. From my perspective as a higher education researcher, the question is not just about the future of Berkeley, but about the financial constraints being faced by America’s public university sector.

Berkeley is America’s preeminent public research university. And its budget woes reflect the long-term challenges facing leading public institutions. Over the past few decades, most public research universities have struggled to keep up.

Analysis from the Delta Cost Project, which provides policy-relevent higher education research, shows that between 2003 and 2013, state support for public research universities declined by 28 percent on a per-student basis.

This loss of state funding is a major source of strain for public universities. But my research shows how leading private research universities gain an advantage in many other ways as well.

Public-private divide

Let’s first look at the institutional wealth divide between public and private research universities.

The Association of American Universities (AAU) represents the nation’s top 34 public and 26 private research universities. In 2013 the average market value of endowments held by private AAU universities was $7.1 billion, whereas the average endowment value held by public AAU universities was $2.6 billion.

Why do private research universities have much larger endowments?

Private universities have a longer history of cultivating private donors. Some of the earliest examples of philanthropic giving in the United States include gifts to Harvard University in the mid-17th century. A number of private universities, such as Carnegie Mellon University, were later established by philanthropic giving.

However, my research shows that since the 1970s, top private universities have also taken advantage of changes to the rules that govern financial management for nonprofit organizations. These changes have permitted the wealthiest institutions to invest aggressively and use the majority of capital gains to further grow their endowments.

Existing rules have allowed the wealthiest universities to grow their endowments. Don McCullough, CC BY-NC

In addition, there are differences in the way research funds are allocated.

About 60 percent of academic research is supported by grants from the federal government. Data from the National Science Foundation show the AAU’s private universities in 2013 received an average of $423.7 million in federal research support per university. This compared to an average of $363.4 million per institution among AAU public universities.

Public research universities receive fewer grants because of the way scientific research is funded. Grants are typically awarded to individual professors rather than to universities directly.

Professor salaries are significantly higher at private universities. As a result, many professors who are successful at winning coveted research grants choose to work at private universities.

Even when the federal government made funds available for academic research as part of the spending package designed to jump-start the economy during the Great Recession, private universities were funded much more generously than public institutions. My research with Barrett Taylor, assistant professor at the University of North Texas, found that leading private universities were awarded nearly four times as much of these funds than were leading public universities on a per-student basis.

Why does it matter?

The competitiveness of public research universities matters because in an era of growing inequality these are key points of access to a world-class education.

Public institutions face mounting public accountability pressures that may not be as intense for private institutions. In addition, private universities are not obliged to provide access to a large number of students. Federal data from 2013 show that the average AAU public university enrolled over 37,600 students, whereas their private counterparts enrolled on average fewer than 17,500 students.

Private universities restrict enrollments through selective admissions. Federal data show on average 50 percent of applicants to AAU public universities are admitted, compared with just 18 percent at private universities in the AAU. Moreover, while on average 26 percent of students at AAU public universities come from families with modest incomes, only 15 percent of students at AAU private universities come from families with modest means.

Why do we need public universities? Massachusetts Office of Travel & Tourism, CC BY-ND

Differences in student body size translated to vastly different levels of resources. On average private AAU universities held $500,000 of endowment resources for every student enrolled, compared to an average of $65,000 per student at public AAU universities. The greater resources held by private universities allow them to provide students with a richer experience.

Private university enrollments are also much more heavily concentrated at the graduate level – 50 percent compared to 26 percent at public universities. This is important because graduate students spend much of their time conducting research, which can improve the chances professors at private universities will win grants.

My research shows that as a result, in 2013 professors at private universities in the AAU enjoyed over $60,000 more per capita in federal research funding than did professors working at public AAU universities.

We need public universities

During the 19th and 20th centuries, public research universities led the way in expanding and developing what many consider to be the greatest system of higher education in the world.

The University of California was the model for great public universities, and Berkeley remains among America’s premier institutions. But budget cuts take a toll. Over the past 30 years, Berkeley and other public universities have found it difficult to compete with their private peers.

If these trends continue, many students in the United States may be denied an opportunity to experience education at a world-class university.