Tuition, Taxes, and Tribulation: Where That Money Goes

By Ravind Kumar

The financial situation in California is not pretty: there simply isn't enough money coming into the state to cover the tremendous amount of spending that goes out. California's financial system is a behemoth creature that is struggling to hold up its own bulk, and the legislature has been forced to shore up the supports by cutting funding for state programs left and right in order to keep the entire monster from crashing down around us. Among those cuts were those for public education—not a large surprise to the larger community of educators in California. The budget for public education has been falling steadily since 1966 when President Ronald Reagan imposed cuts on the UC Berkeley campus in order to “clean up the mess at Berkeley,” referring to the rise in student and faculty protests of the Vietnam war. Since then, the total amount of State funding in the budget has fallen to a mere 14.3% according to the 2007-08 Facts and Figures report.
With State funding steadily dropping, and student fees steadily rising, its not a far stretch for most students and faculty to assume that the student fees are being increased to cover the loss of State funding. And while that is certainly one piece of the larger UC budget pie, student fees are not the centerpiece to the UC budget as some students may think. That line of thinking is heavily flawed. It fails to see the greater picture behind the UCI budget, and indeed most UC's as a whole. It ignores the vast amount of other funding that the UC receives for its research, the private and foundation grants and loans given to the various schools around campus, and those philanthropists who donate small fortunes forward to help keep the UC system running.

State expenditures amount to only about 14.3% of the school income. Tuition counts for 12.8%. The Federal government helps cover an additional 13%, and the rest comes from income generated from campus facilities, like a whopping 31% from Teaching hospitals. Altogether, the UC income from receipts (payments) is approximately $1.6 Billion—not a small number by any accounts. But even put together, over 50% of those receipts are generated by campus resources, whether it be the Teaching hospitals, private grants or contracts, auxiliary enterprises, or educational activities in general. So, while both taxpayers and students might like to think that they are Atlas holding the world up, it would really be more accurate to say that they are like one of his arms.


So then, where does that $1.6 Billion go?

Most of the money from the school income goes towards three major categories. The first is faculty, or salaries, in the number of about 27.6% or 435 million dollars. The second is teaching hospitals – 29.3% or 461 million dollars. The third is a combination of Student Aid, Academic support, institutional support, student services, and research, which altogether take up 35.8% or 572 million dollars. So when UCI found that, thanks to the lack of state funding, that there was at least 70 million dollars in cuts to go around, there were only so many places that the university could turn to in order to cut slack. And while that 70 million might not seem like a lot from the total pie, that entire amount comes from the 14.3% of school funding that is state funding. The teaching hospitals eat up almost all of the income they generate, from 31% output to 29.3% back in. Federal assistance is often heavily restricted, making the funds difficult or impossible to move out of their intended area of expenditure. Which leaves only one other possible source of income, and an unfortunately wide area of academia to slash at. Staff furloughs along with cuts in research and on campus maintenance have accompanied the student fee increases to help deal with the 70 million dollar shortfall—not any one of these alone, but a great deal of sacrifices along the entirety of the UC structure had to be enacted to cope with the sudden and large loss of state support.

No one enjoys paying more or getting paid less during a financial crisis. Both students and faculty have risen up against the cuts, protesting them as unnecessary or too great in nature. Their calls are varied and energetic, but most of them echo a line of thought that is also reflected in the taxpayers who think they, too, hold up the UC system single-handedly. With all the construction on campus, the massive movement of new housing and buildings across campus, those calls have become louder and more unified.

Does the UC system really not have any extra money to use?

The answer is—no. While there certainly is a lot of money in the UC system, those fund are not, as many students, faculty, and other opinionated residents have called them, ‘Unrestricted’ funds. The University of California Office of the President has released multiple reports rebuking those who believe that the UC has a magical reserve of billions of dollars simply sitting around waiting to be used. Peter Taylor, CFO for the University of California, wrote on the University of California website that “all but a fraction of the university's net assets at the end of each fiscal year are committed, and they reside in tens of thousands of funds and accounts, most of which are controlled by UC's campuses. They are akin to money deposited in a personal checking account on the 15th of the month, but committed to paying the next month's mortgage or rent.” Looking at the percentages of expenditure on campus, Taylor’s statement is easily confirmed. The vast majority of the money that comes into the university is used almost wholly on the university itself, in everything from salaries to student aid.

So, as some critics point out, how does UCI afford to have all these new buildings? How is it that research instititutes on campus still have such good facilities? How are they getting their money?

The answer is simple. Grants. The Office of Research here at UCI is on a constant quest for grants, state, federal, and private, in order to help keep down the costs of research and projects around campus. Assistant Vice Chancellor of Research Development Dr. Jacob Levin gave a detailed description of how grants function to help support the research and facilities on campus.
He writes, “My Office has worked on something like 140 grant submissions since I began. [The] smallest awarded was $1,000. [The] largest was $27,156,000. Most grants probably range between $100,000 - $300,000 per year in the sciences, less in the Humanities (student grants of $5,000 are common there), but they can vary tremendously.” Based on documentation provided by Dr. Levin, the biggest contributor for grant funding is at the federal level, with the Health and Human Services Agency, which contributed $132 million in grant funding during the 2006-07 fiscal year. Those grants get split up and allocated throughout the campuses many and varied research projects, whose discoveries contribute to the Intellectual Property coffers of UCI, which in turn also help to bring additional income into the University. And there is far more than just funding for research within grants.

According to Dr. Levin, the University (and indeed any organization that receives grant money) negotiates what is called Facility and Administrative costs, an indirect-rate that helps to cover the administrative costs of doing research at the various facilities around campus. For on campus operations, this can be as high as 53%, which is funding in addition to that already given. That means that, for on campus resources, every 100$ nets the university an additional 53$ to cover administrative costs. Put simply, every grant the campus receives helps to alleviate the stress of administrative operations around campus. Unfortunately, private and foundation gifts often have very low or no indirect-rate costs, meaning that the campus has to foot the bill for those administrative costs. Grants are generally hard to get, with only about 10-20% of grants requests submitted receiving funding. Despite this, Dr. Levin’s office boasts a 45% success rate with securing grants—well above the average, according to him, which not only makes his department worth sustaining, but drives researchers to apply for the more complex grants that provide some of the largest funding opportunities. And each grant, in turn, helps to support the administrative costs of the University, at both the facility level and at the administrative level, with small portions of the F&D cost going to the UCOP offices and EVC offices.

Of course, the same critics who argue that funds are liquid within the UC budget system have also attacked the usage of grants at UCI and at UC’s at a whole. Can’t those funds be moved around?

Once again, the answer is no—and the answer is somewhat responsible for the complexity of the budget crisis. Grant money, or money loaned by a corporation or foundation, is always tasked towards a single purpose. Jeanette Storey, CAO at the Sue and Bill Gross Stem Cell Institute at UCI, knows the limitations of grant money first hand. “We received $52 million in research grants, of which 27 million was for the facility. But because that money is for research OR the building, we have a very small operating budget.” Grants, she say, have very strict guidelines attached to them. Moving them can be nearly impossible, and what’s more, if a project is completed for less than the total amount of the grant, more often than not the excess money has to be returned to the grant organization. Dr. Levin expanded on this with more detail, writing that “All funding must be reported on to the funding agency on how it was spent, and they have strict rules on that. We can certainly try to negotiate a better rate, but as I mentioned, that is quite an undertaking even with the Federal government, and Private Foundations are likely just to walk away and deal with someone who won't make trouble.”

While grants may not be the life-ring for the UC financial crisis, they are still important to the UC campus as a whole. “If a researcher requests funding for researching spinal cord injuries, they need equipment, facilities, graduate students or post docs.” The university, she says, only provides enough funding for 3-5 years of research—and at that, often not enough to afford all the costs associated with that research. Grants are the lifeblood for researchers, providing them with the funding they need to continue their research after the university funding has ended. “If a researcher doesn’t get their project done in the time allocated for them, their career might be finished. Those years are extremely important, and those grants are what give them the ability to do that.” Grants, she says, are also extremely important for new researchers, those who often bring new and exciting ideas forward. Their acheivements within the university help give the university a stronger name within their field--and conversely, if their research is underfunded or under-valued, they might leave for a better institution. "If they're not happy, its bad news...literally." Whether it be through new discoveries through new researchers, or gaining prestigious new faculty and the work they bring with them, the research aspect of UCI and its continued success is an integral part of keeping the campus strong as a whole, both now and in the future.

While students, faculty, and taxpayers will continue to raise questions about the existence of additional funds within the UC Budget, the fact of the matter is that, while the money certainly is there, it is not as available and easily accessible as some would like to believe. And while such critics will continue to delude themselves into believing that they are single-handedly holding up the UC financial system, it would be wise to acknowledge the importance and presence of other very significant forms of funding within the UC system as a whole.