UCLA’s Anderson School of Management wants to end its reliance on state funds under a controversial proposal that would be the first such shift to self-sufficiency in the cash-strapped UC system and could provide a model for other programs seeking freedom to raise tuition and faculty salaries.

Anderson, which offers master’s degrees and doctorates, hopes to wean itself off state funds by 2015 and to replace that $5.6 million a year with additional private donations and tuition levels closer to that of private business schools. Under the plan’s projections, annual tuition for California residents in a full-time master’s program at Anderson would rise gradually from $41,000 now to about $53,000, including a $5,000 discount for in-state students.

Years of declining state support for higher education and continuing uncertainty about such funding are driving the proposal, which must still receive approval from UCLA faculty and UC leaders. The plan’s supporters say the status quo is hurting Anderson’s ability to compete with private schools for top business professors, who are among the most highly paid faculty at universities across the country.

“We’ve got to change the way we operate if we are to continue being what we are,” Judy D. Olian, Anderson’s dean, said in an interview. “State support has declined so significantly that we’ve asked ourselves what is the best model to sustain the excellence of the school and the excellence of what we can do in this region.”

Some critics say that Olian’s plan, coming after several rounds of UC-wide fee increases, is another step toward privatizing the prestigious public university system. Olian and her supporters deny that, saying that Anderson would remain under UCLA’s academic governance and policies, including its tenure and pension rules.

They also say that other areas of the campus could benefit; state funds originally intended for Anderson could help support such departments as English and math, which have large undergraduate enrollments and fewer opportunities for private fundraising.

“There is a kind of win-win,” Olian said.

Business schools at two other public universities, the University of Michigan and the University of Virginia, have successfully implemented similar plans, and others are considering it, experts say.

Those schools “want to control their own destiny,” according to Jerry E. Trapnell, executive vice president of the Assn. to Advance Collegiate Schools of Business, the schools’ main accrediting agency. In addition to seeking more stable funding, they hope to respond more nimbly to market demands for new programs, Trapnell said. A major challenge would be to ensure enough financial aid to maintain the income and ethnic diversity of public institutions, he said.

Anderson is not the only UC graduate school to consider doing without most public funding.

UC Berkeley’s Boalt Hall School of Law explored a similar plan several years ago and could be a candidate for such changes in the future, along with other UC business and law schools. But officials said relatively few departments or schools in the UC system could forgo state support because of limits on what students in many programs are willing to pay and the difficulties of tapping alumni donations in many less-lucrative fields.

UCLA Chancellor Gene Block said he fully supports Olian’s proposal but noted that he expects it to generate debate on the campus. Block, who served as provost at the University of Virginia before arriving at UCLA in 2007, said the plan maintains the mission of a public university while redirecting state money “to chronically underfunded undergraduate programs elsewhere on campus.”

But approval is not certain. UC President Mark G. Yudof said in a statement that he had not seen Anderson’s detailed proposal and could not comment on it. Because of its significance, he said he also plans to ask UC’s Board of Regents to review the plan, even though board approval may not be formally required.

Ann Karagozian, who chairs UCLA’s Academic Senate, said she has not yet reviewed the proposal but expects some faculty to express concerns that Anderson could pursue programs intended to generate higher tuition at the expense of scholarly research and public service. “There are a host of issues that we need to deal with and evaluate carefully before I think we can put our stamp on it,” she said.

Anderson enrolls about 720 students in its full-time master’s programs, which receive state support, and about 1,100 others in several part-time and executive MBA programs, which do not. There is also a small doctoral program in management. The school recently placed 15th in U.S. News & World Report’s national rankings of graduate business schools, which put Harvard, Stanford and MIT in the top three spots. UC Berkeley’s business school tied with Dartmouth’s for seventh place, and USC’s Marshall School placed 20th.

At Anderson, about a third of the tenure-track faculty are paid salaries higher than $200,000 a year, campus officials said. If the new plan is approved, the business school would be free to raise salaries even higher, without seeking approval from the university’s central administration.

Officials say the plan is feasible because the school, which now has an annual budget of about $96 million, would keep all fees and tuition revenue it generates while forgoing other state funds that have been shrinking. The business school would continue to pay UCLA for facilities and other shared costs, and UC would still compensate Anderson for teaching undergraduate courses in accounting.

The plan assumes that donors would be more willing to support a self-sufficient school and that private gifts and endowment income would grow from about $10 million to $14.5 million annually. Olian also hopes to eventually triple the school’s current $102-million endowment, which is much smaller than most of its public and private competitors.

Professor Bill McKelvey is among a minority of Anderson faculty who oppose the proposal. He said he worries that the plan is based on risky assumptions about private donations and that higher tuition could drive potential students away.

In recent votes, about 80% of the school’s faculty have supported the proposal. Without the change, “it will become more and more difficult for us to maintain our excellence in teaching and research, which will gradually make the school a less compelling place to be,” said professor Charles Corbett, who is Anderson’s faculty chairman.

larry.gordon@latimes.com