Funding and Governing a Great Public University: the Case of Berkeley

I have been at the University of California, Berkeley for 30 years but I had not really thought about how it is governed and financed until being asked by RIETI. The Berkeley system works well as it protects the professors to allow them to teach and research without worrying about the administrative side.

Berkeley is arguably the greatest public university and academic graduate university in the world, and Berkeley, like all other universities, uses rankings but makes them the core of the politics of how the university works. One can prove anything with numbers, so I could say that Berkeley has the greatest number of top-10 graduate departments. Berkeley also places highly in terms of measures of faculty excellence, along with the University of California, Los Angeles (UCLA) and the University of California, San Diego (UCSD).

For 2003-2004, 35% of Berkeley's revenues came from state funds, 20% from federal research monies, 19% from student fees, and 17% from private support like endowment income. This is much different than the situation in 1978-1979 when state funding accounted for 53%. I think this trend of shrinking state funds will continue. Federal research support has stayed at an almost constant proportion, but private support has jumped from 10% to the current 17%, and student fees have increased by 5% of total revenues. The largest area of expenditure is of course wages.

Private institutions like Princeton and Harvard continue to be the most expensive, and first-rate state universities like Michigan and Virginia tend to have lower proportions of state funding to tuition fees than UCLA or Berkeley. With the lowering of state funds it is difficult to compete with the benchmark universities of Princeton, Harvard, Stanford, MIT, Michigan, UCLA, and Virginia, so fees have had to go up. The purpose of comparing with these universities is political; everything about the governance of Berkeley is about keeping the politicians out.

Berkeley's financial challenges include the recruitment and retention of faculty and staff, and the maintenance and upgrades of facilities. The faculty salaries at Berkeley are about 10% lower than those at MIT, and 28% lower than those at Harvard. Since 2000, Harvard has made 19 formal offers of recruitment to tenured Berkeley faculty, of which six went. The lists showing salaries and offers made by other institutions are always created in comparison to the benchmark universities; other institutions are not considered credible for this purpose.

At Berkeley 85% of undergraduates come from public high schools, 27% are the first members of their families to attend college, and 31% come from families with incomes of less than $40,000. Princeton and Harvard have basically no students from poor families. In terms of capital expenditures, Berkeley has to and does spend $150 million a year on construction and maintenance due to earthquakes. I estimate that currently around half of our undergraduates are of Chinese origin. There are hardly any black or Hispanic students, and an increasing number of students are of Indian origin. The professors at Berkeley come from all over the planet, unlike the professors here who are exclusively Japanese.

The history of California started only very recently. We can put the start date as 1849 and Berkeley was founded a few years later. Nowadays, U.S. universities are very good and are the model for the world, though 50-70 years ago this was not the case. They started to become better at the time of World War II, partly due to the influx of European Jews, amongst whom there were good academicians, for example the nuclear physicists like Einstein. Prior to this there was no such thing as the research university, and the idea of the modern university, which came from Germany, influenced U.S. institutions. One example of the quick evolution of U.S. universities is UCSD, which was only established in 1960 but is now one of the best universities in the world. Therefore I would say that the University of California system is the most successful experiment in public higher education in the world.

When I was 19 and studying at the University of Paris, less than 5% of French students went to university. After that there was an explosion in universities, which allowed many students to attend, but these institutions were of a low class and were simply preparing their graduates for a low-class life, and this was even reflected by the cheap architecture. The sites of the University of California, on the other hand, are beautiful; the buildings themselves may not be attractive, but they are not cheaply built as was the case in Europe.

Q: What do you think about the legacy of student activism, with reference to the opposition to funding from British Petroleum?

A: Berkeley was well known for the riots in the 1960s, but that kind of atmosphere no longer exists. Students now are focused on their own personal careers and futures. This may be due to the change of demographics, as the students who rioted in the past were white and rich and vulnerable to being conscripted into the army and being sent to Vietnam. Now, with the disaster in Iraq, these students are not touched; mercenaries are hired instead, and the students are often from immigrant families.

How do we run such an elite public university that gets so much money from the state and accept only students from the top 10% of their classes? We are not a democratic institution.

Q: You say that your university is educating students who come from relatively poor families. Is this much in the policy of the State of California to establish and continue a knowledge-based economy?

A: That is an excellent question that opens three important points. One: that our students are increasingly from poor Chinese households is a political problem, not a blessing, for the university. The Chinese families are a small percentage of the voters. The Hispanic population is huge, 20 times the Chinese population, and the Hispanic students are not at the University of California. Two: we have always been very proud of providing an elite education for those who were good enough, and good enough was generous at 12%. Three, the University of California has sold itself to the State as an engine of economic development. We generate $2.5 billion in local economic impact and $4.5 billion in national economic impact. Nowadays it is about the development of the local California economy. The results show that the schools in fact are a major engine of economic development, and it may be that we are into the workings so far that it compromises the university. Working so closely with the economy has benefits, but is also not without risks and potential negative points.

Q: What is the policy at Berkeley or other universities with the balance between the two divisions of 80% of scholarships and spending going to science, medicine, and technology and perhaps 20% going to humanities?

A: While we can balance either dollars or students, let us push the medical school out of the equation. In America they run hospitals, and it is impossible to understand that financing. In terms of money, there is a lot of money available in science and engineering, so they get good funding. There is much less money available for humanities. The university does apply an overhead charge to research grants. I believe that 55% of a research grant is charged as overhead and used for things like maintaining libraries and so forth. There may be an imbalance, but I will have to research and find out approximately what those percentages are when I get back to Berkeley.

Q: Regarding funding for the state university system, what is the current governor's stance toward funding in the system?

A: I will address the point of finance. Since the 1970s, the state payments to the university since 1975 have gone up by five times. The State's share of the operating budget has fallen from one-half to about one-quarter. The State pays about $3 billion a year for the University of California. One thing to understand is that it is part of the bigger system of State public higher education, which includes the University of California and the State University of California which is twice the size of the university system. The State University, which used to be called the State Colleges, has 23 campuses, 400,000 students, with a population of twice the University of California system, a budget about half of the University of California, and targets the top one-third of the students in their high school class.

There is another tier of the system; the community and junior colleges. Some differences include that in the public sector only the University of California is allowed to issue doctoral degrees. There is also a big private sector in California, including the California Institute of Technology (Caltech), Stanford, the University of Southern California (USC) and some others. To understand the finance of the University of California one must understand that it is part of this larger system. It is always aimed at protection and formalization by benchmarks, so in 1960 there was a treaty, called the Master Plan, which says that there are these specific separations. No other state university system has this hard separation between one part of it and another part. California is the only state with these three systems separated into three distinct systems.

This governor has not been particularly bad for the university. The governor's position is not so significant, but what is important is that we are now a smaller portion of the state budget for several reasons. One reason is that the prison system grew. It costs more to keep a 20 year-old in prison in California than to send him to university. The state spent $8 billion on prisons last year. The second is a shift in the politics. What has changed is the new population. Most new immigrants are not planning on going to university. The third is that the population of the legislature itself used to have a much higher proportion of University of California graduates, our alumni, than it does now.

Q: How do you persuade the people of California that those monies should be spent for the top 10% of the students and that the other top one-third can be allocated only one-quarter of the rest of the funds?

A: That is a difficult problem. The French have a similar problem, and their system includes things like the polytechnique system. Frankly, the French have always treated the university badly, and the results are there to be seen. Regarding the French program to become doctors, the admission policy is generous, but at the end of the first year they throw out 90% of the students, because no one has had the courage to create controlled admissions. Of the 90% who are thrown out of the doctor's program, many of them become nurses, and that year counts toward their education. Some become dentists, and that year counts. But most of them simply lose a year because no one has the political strength to change it to a meritocratic admissions system. Since we started out with meritocratic admissions, it is easier for us. The University of California was the first system, and others were added. We added the state colleges, which eventually became the state universities. It is important to note that we maintain movement between the three systems. A student with excellent grades in the community college system can apply as a transfer student into the University of California, and it is a real flow.

In Europe now each country is attempting to create its own MIT. The difference is that it is difficult to make a change to that system, but we already have the system in place where a student can move into the University system. There is still a need for an education system for the lower 60% of students. For them, is a research university the universal model? I would say that it is not. Colleges now want to become research universities. There is simply too much "research." There are endless numbers of dissertations and there is too much to look at. Ultimately the research is always incomplete because there are too many dissertations; all this research finally becomes damaging to the person doing the research and it is wasteful.

In most universities, teaching come second. Even at the major private schools, one does not get tenure because one teaches. One can forfeit one's chance at tenure if one is considered a terrible, awful teacher, but then if one promises to improve, the schools will probably reconsider their position. But definitely teaching is the second priority, except perhaps in the case of graduate students; that is different. It works at the great universities because the graduate students teach the undergraduates, and both the graduate students and the undergraduates are very good.

Q: Do you mean that even the government of California can keep only nine or 10 research universities going on a public financial basis?

A: Yes, providing that most of the research is funded not by the state. But it has to do with the teaching loads. We do not teach as many courses as the professors at California State University. If you are at Berkeley or Harvard, having to teach two courses a semester is considered onerous. At Harvard they even kind of gave up teaching, with a 90% "A" ratio, but in fact the students at Harvard are really good students. At MIT they grade on a curve.

The research universities are having their great moment, and they are very important, but should all universities be research universities? No. My daughter is really a good student and she may go to Swarthmore. It has perhaps 2,000 students, no graduate programs, the students are unusually bright, and the teachers really teach. It does not have a world reputation, but it is marvelous. Admission is to only the smartest students, and the students have to be very smart to enjoy it.

The question is: is there anything to learn about our experience about how you re-slice things? What if you did it the other way: fund the kid and not the university? Let the university select, fund the kids, set them different rates. There are things to explore. But it is necessary to have the illusion, and the reality to make the illusion credible, of fair and honest admissions. A public university cannot be run with an admissions policy like Princeton's.

Q: In my observation, such a multiple layer system operates not only in California, but also in Michigan, for example at the University of Michigan

A: Michigan is interesting because the University of Michigan is slowly privatizing. The University of Michigan is an excellent university, really world class. We benchmark against it. The situation at the University of Michigan at Ann Arbor is because of Toyota in Michigan. It exists, but all the funds are here. The State of Michigan has no funds for the University. As a result, the proportion of the state payment is going down. What they started to do is to admit a higher proportion of out-of-state students. Out-of-state is defined as anyone not from Michigan. They can be from Japan or Ohio, and the tuition is three times as much. At Berkeley the situation is the same, with out-of-state tuition at $20,000, but we do not admit many of the out-of-state applicants. Virginia, which is a good public university, has a similar situation where the state does not want to pay for the flagship research campus, and they are trying to get out of the state school system as Michigan is trying to do. They are willing to let the state system stay there and drift into second- and third-class schools, and essentially the University of Virginia has proposed to the government of Virginia to leave the school alone and give up control and in exchange put in only 5% of the operating system funds.

The Berkeley Business School thought it should go on its own. We thought they should pay for the building and give us a 26% royalty for the name. Having recruitment problems, they did not like my proposition.

Q: Could you please explain a little about the details of private support for the university, including stock options, patent fees, voluntary alumni support, and so on? How was it able to accumulate such large funds during the dozens of years of the tight financial situation of the State of California?

A: That is exactly what the university is trying to do, but each campus sort of goes on its own. Very little private money gets given to the University of California system. Some gets given to Berkeley, to UCLA, to UCSD, to specific schools from different people, rarely the same people between schools, because people have ties to the particular institution or university, for whatever reason.

Princeton is the best at raising money per student. Harvard has an endowment of something like $30 billion right now. Overwhelmingly it is alumni are who giving the money to Princeton. Even when it is from companies, there is usually a former student involved in that. Nowadays there is an industry of giving to the universities. When I arrived at Berkeley, perhaps 4% of the students gave something to the school. It was not until the mid-1980s that we established an office for fund raising, and now perhaps 25% of former students send in something. For one dollar we bought a beautiful new campus from the state. Then we had to protect it from earthquakes, so we spent money on it that way. On the books we lost a dollar.

Q: What is the mission of the school's Board of Regents, and does the board of regents' system work well?

A: The Board of Regents is the governing structure, like the board of directors of a corporation. They are the legal entity. Money to pay for anything, library forms, tuition, any kind of contribution, all goes as payments to the Board of Regents. The initial design of the university, in the state constitution of the school in the 19th century, says that the Regents shall be politically insulated. The second thing they did is say that there are a number of members, 25, who are each appointed, with a few exceptions, by the governor, but only when a seat is vacant. They occupy the seat for 12 years, and cannot be removed except for in the case of felony criminals. The whole idea was to make them not dependent on any one governor, or even any two. Each governor gets to appoint a few. There are a few others: the lieutenant governor, a student-elected representative, and two elected representatives elected by the alumni association. The Regents appoint the president of the University of California system with the advice of the university academic senate, which is the faculty governing body. They usually agree at the end. The Regents also appoint the chancellor for each campus, with the advice of the president and the academic senate of that campus. It is rare to appoint a chancellor not positively accepted by the faculty senate. I do not know of a case where they appointed one who was rejected by him, where the senate voted 'no.'

Essentially, the Regents are the board of directors.

Q: What is the procedure for selecting a dean in the case of the University of California?

A: There is the president of the university system, which includes the nine campuses. He has very little authority or power over what happens on any of the campuses, and almost no power on how you divide the state money among the campuses. His job essentially is to deal with state government and to take abuse. It is not always a happy job. Then there is the Chancellor of Berkeley, the Chancellor of UCLA, etc. He is the head of Berkeley, like a president. The chancellor, with the cooperation and advisement of a committee of the academic senate, searches for and names a dean, Dean of Engineering, Dean of Architecture, Dean of Law, etc. Some deans have small domains, and some rule empires. This can only be understood in terms of institutional and personal history.

Usually when a new dean is to be appointed, a search committee is called. The committee would typically be one person from the faculty in that department or college, one outsider, perhaps a third, or even four or five. The actual selection can be influenced by the chancellor's office, but not too far because it is usually a committee of the academic senate, so it is influenced by the people who run the key committees of the academic senate. It works by committee, one called the budget committee, for which the real responsibility is not the budget, but promotions and appointments. Its important power is: who gets hired and who gets promoted. That is determined by the committee of the academic senate, for which the names are supposed to be kept secret from everybody; usually one person from the department in question, one from a nearby department, and then a third person. It studies the department's case, because the department has appointed a committee to do a review of that person, perhaps someone who is going up for tenure. It produces a written case. The chairman of the department writes his letter of top of that, usually summarizing it, sometimes including his opinion. That goes to the dean. The dean puts his letter on top of that, usually summarizing the department chair's letter, sometimes putting in his own opinion. That whole file along with the person's publications and with the outside letters without the names of the writers then goes to the committee, which reaches its opinion. That whole pile goes to the chancellor, and he has the option to say "no," but that would be rare. It is very controlled by the faculty and its own committees. For the dean, a similar search committee is formed. It comes up with a list of names, makes its recommendations, and then it goes to the chancellor's office. In this case there is definite interaction and the chancellor has influence. While he does not have decisive influence, he can make the committee start the whole process over.

At Berkeley, and most of the rest of the University of California, it is an unusual system. We call it a "dual governance" system. There is more faculty governance than there is at MIT, Columbia, Princeton or Harvard where the deans are strong. Several years ago I was at a dinner at Columbia, and the dean at Columbia said, "I am offering you a job right now." That would never happen at Berkeley. If a Berkeley dean said that, he would not be punished, he would be sent directly to a psychiatrist and given a year off.

It varies between institutions, and the quality of the institution is not what is in question. Our system of heavy faculty governance has served many functions. It has preserved us from well-willed reforms and from ill-willed reforms. We provide shelter and cover for a smart administrator who has a good idea. That administrator starts talking with faculty and administrators, and they find out that some others already have that same idea. If you are the only person with an idea for Berkeley, it is probably not a good idea. The people start working together and finally get something accomplished. We do not have a faculty union at the university; many states do. Hence, we have benchmarking. Benchmarking protects salaries and maintains our standing as one of the top 10 schools in the world. It all ties together, all on the fundamental principles of benchmark excellence. We are serious about benchmarking for the political and for the objective reasons that I said. There are many things one can compare against that are external for that purpose of political protection, because the first principle is: keep the politics and all the reformers out of the system so that we can focus on excellence in education. The basic principal has been that the larger system sliced up into smaller sections of the systems and talk about them independently.

There are lessons to be learned from what from what we have done. We have been successful. Will we be as successful in the future? I do not know. I am not sure. The future depends on the variables.