UC resists law requiring disclosure of expenditures

Students Kevin Sabo of UC Berkeley and Allyson Osorio of UC San Diego plan to discuss the failure to detail spending with UC President Janet Napolitano. Students Kevin Sabo of UC Berkeley and Allyson Osorio of UC San Diego plan to discuss the failure to detail spending with UC President Janet Napolitano. Photo: Jessica Christian / The Chronicle Photo: Jessica Christian / The Chronicle Image 1 of / 10 Caption Close UC resists law requiring disclosure of expenditures 1 / 10 Back to Gallery

The University of California has so far failed to comply with a new state law pushed by Gov. Jerry Brown requiring it to disclose, for the first time, key details about how it spends its money — information state officials want especially now that UC is asking the regents to approve five years of tuition increases.

Brown pushed for the law after expressing frustration with UC for giving fat raises to executives, and after urging a moratorium on tuition increases in exchange for more state funding.

The law, AB94, requires UC to tell the public how much it spends to educate undergraduates versus graduates, how much it spends on research, and how much money from each funding source goes to each area. State officials say they want the data to understand how much tuition UC should charge, and what the size of enrollment should be, and for basic transparency to the public.

UC currently lumps those expenditures together in an “average cost of instruction,” which is $17,000, $24,000 or $33,000 per student, depending on what UC counts as instruction. Either way, the “average cost” approach masks much of how UC spends public money. For example, it took an audit to learn in 2011 that the four UC campuses with the most underrepresented minority students were also getting the least amount of money per student. And when a rumor circulated a few years ago that UC was using student fees as collateral on the sale of construction bonds, there was no way to verify UC’s promise that that was not the case.

“What they calculate is the cost of that whole bundle of academic missions — and the students paying for that are overwhelmingly undergraduates,” says Charles Schwartz, a physics professor emeritus at UC Berkeley who for years has urged UC to separate out the funds and written extensively on the topic.

In an article for the Manhattan Institute, Schwartz asked: “What happens to the money that the university takes in from undergraduate tuition and fees? This is the largest pot of discretionary revenue that our administrators collect, but there is no way to find out how they spend most of it. ... We, as a public university, have an obligation to come clean about how we use our money.”

Brown signed the law requiring UC to disclose its separate expenditures in July 2013. It gave UC more than a year to comply, by Oct. 1, 2014. Under the law, UC must update its report every two years and break down expenditures for each of its 10 campuses after 2017.

Extension requested

As the Oct. 1 deadline approached, UC requested a month’s extension. On Oct. 31, UC President Janet Napolitano submitted a seven-page preliminary report explaining that accurately breaking out expenditures would be “extremely challenging” because of overlap between research and instruction, and because “funds are neither budgeted nor spent according to these categories.” It said that a final report would be submitted in six weeks, but its information “should be used cautiously.”

Now, as the UC regents prepare to debate on Wednesday whether to raise tuition by up to 5 percent a year for five years, as Napolitano is recommending, or to reject the plan as Brown is expected to argue, the question of how UC spends its money has taken on new relevance.

“It’s not just the governor. The Legislature also approved this law, and the purpose was to provide parents, policymakers and the public more information about the cost of education — which is important data to have when you’re weighing decisions like what’s the appropriate level of tuition,” said H.D. Palmer, spokesman for Brown’s Department of Finance.

Annual tuition is $12,192, frozen since 2011 at the urging of Brown because tuition was already double what it was in 2006, and triple the price in 2002. The governor told UC and California State University officials that if they held tuition steady, the state would provide additional funding for at least four years: 5 percent more in 2013 ($125 million), another 5 percent more in 2014 ($142 million), 4 percent more in 2015 ($119 million), and 4 percent more in 2016 ($124 million).

UC officials say the university needs even more money to reverse years of budget cuts and maintain the standard of excellence that has made it one of the world’s best research universities.

The tuition dispute — and UC’s resistance to breaking down its expenses — point up what Napolitano calls “different visions” of UC held by the university and the governor. Brown is an ex officio regent who, unlike previous governors, actually shows up at many regents meetings and has influenced UC policy.

He has pushed UC to develop more online courses as a money-saver, though such courses have not lived up to that ideal, and famously scolded the regents in 2012 for paying UC Berkeley’s new chancellor, Nick Dirks, $486,800, which was $50,000 more than Dirks’ predecessor earned. Although the regents made sure the extra money came from private donations, it didn’t save them from Brown’s admonition that the higher pay “does not fit within the spirit of servant leadership” befitting the public university. Brown earns less than $200,000.

But Napolitano insists the university isn’t angling for a fight with Brown.

“Nobody wants a showdown,” she told The Chronicle. “We’re not meeting with six guns outside the Long Branch Saloon.”

And “we’re not being defiant” by skirting the law’s mandate, Napolitano said. UC’s expenditures “don’t break out as neatly as they would like, so we’re making our best judgments. At a certain point, is the university just a budget exercise? It’s not.”

Students want answers

But now that UC is again trying to raise tuition, students are also urging UC to comply with the law and show how it spends its money.

UC’s resistance is “really embarrassing,” said Caitlin Quinn, a vice president with UC Berkeley’s student government. “I think they should separate it out and say what they’re spending. UC should go out of their way to do this because it could help them in the long run to get more money from the state.”

State officials also say that having accurate data from UC would help lawmakers calculate more precisely the number of students the state can afford to enroll at UC campuses.

“We think it’s important,” said Paul Golaszewski, who analyzes higher education policy for California’s independent Legislative Analyst. “We know there’s a big difference in (the cost of) undergraduates and graduate students. So if the state wanted to increase just undergraduate enrollment — or just graduates — there hasn’t been a way to do it because the costs have been lumped together.

“Another benefit is general transparency,” he said. “Taxpayers, students — they’re all interested. So when it’s all bundled together it’s not as transparent.”

Nanette Asimov is a San Francisco Chronicle staff writer. E-mail: asimov@sfchronicle.com Twitter: @NanetteAsimov