SAN FRANCISCO -- University of California leaders on Thursday chose to delay a painful solution to chronic funding problems, declining to take steps toward a possible $22,000 annual price tag on a UC education.
But, with only unpalatable options left, the university may soon be left with no other choice but to raise tuition up to 16 percent per year.
UC administrators had proposed a four-year budget plan with annual tuition hikes as a way to deal with chronic funding problems driven primarily by steep state budget cuts, including a $650 million reduction this year. The university said it could face a $2.5 billion shortfall by 2015.
"There is something repugnant about knowing your future," UC President Mark Yudof told regents, noting that the university's portion of the state budget has declined steadily in the past two decades. "But this is the history of this place over the past 20 years."
The university's financial officers want regents to adopt a plan to build tuition increases into annual budgets. The plan would lock in hikes of 8 to 16 percent each year for the next four years. UC tuition is $12,192 per year; annual increases would take it to anywhere from $16,596 to $22,068 by 2015.
Members of the Board of Regents, which could have voted on the long-term plan as early as November, instead told administrators they were unhappy with their options. UC financial staffers now will try to come up with other ideas.
It is time for a radical change in higher-education funding, said Sherry Lansing, the regents' chairwoman.
"This is a movement we are trying to create," she told the board and administrators. "I just don't want to come back here (at the regents' November meeting) and find that in the past eight weeks nothing has changed."
But regents routinely fret over tuition increases -- and then routinely vote to approve them. It appears unlikely the university will be able to avoid tuition increases in the near future.
Several regents repeated what has become a mantra for the university: California needs to overcome its aversion to taxes, or UC's quality will suffer.
"I think we have to start asking better questions because this just isn't going to work," said Lt. Gov. Gavin Newsom, also a UC regent.
Indeed, budget talks routinely consume the regents even though, for more than three decades, colleges and universities across the country have been jacking up tuition at a faster rate than costs have risen on any other major product or service -- four times faster than the overall inflation rate and faster even than increases in the price of gasoline or health care.
If UC's fees had increased at the rate of inflation, students who paid $776 in 1980 would have paid $2,200 this year.
One major reason behind most of the crisis of UC affordability is the decline in public support. State funding has fallen hard, so students and their parents have taken its place.
That's because the universities have contractual commitments to fund health and retirement plans. Relying on a once-bullish market, UC stopped contributing to its retiree health and pension systems 20 years ago. The weak economy, significant market losses and changing demographics led to a deficit, so the university must start making substantial payments.
Second, unlike a private business, UC cannot easily contract. It's faced with an increasing number of students each year.
In addition, much of its budget is tied up in labor costs, protected by union contracts. Colleges are highly labor-intensive -- as much as 70 percent of a budget can be salaries and employee benefits -- so college budgets rise more quickly as health care, pensions and other personnel costs rise beyond inflation.
"The fiscal problems facing UC, along with (California State University) and the community colleges, are the new reality, not simply a detour," said John Aubrey Douglass, senior research fellow at UC Berkeley's Center for Studies in Higher Education.
"Controlling costs and increasing tuition in a progressive fashion -- where more wealthy students help subsidize middle- and lower-income students -- are the two major levers necessary for sustaining quality at UC," he said.
Regents also approved a slate of raises and bonuses for more than a dozen top administrators Thursday. Similar raises are granted at nearly every UC meeting, but the moves have attracted criticism from students and employee unions recently because of simultaneous tuition hikes and cutbacks.
Most of the bumps to officials at UC's hospitals, national laboratories and administrative offices will not be funded directly by students or California taxpayers. Investment proceeds, hospital fees and other funds will cover most of the costs.
Among the bonuses was $744,950 for the 10-campus system's chief investment officer, Marie Berggren, for her performance last year. Combined with Berggren's $470,000 salary, the bonus will bring her 2010-11 pay to more than $1.2 million.