Category: PPIC Higher Education Center

UC’s Experiment in Measuring Costs

When it comes to government budgets, the focus is usually on who gets how much. But that’s only part of the story of the California state budget, which usually includes a host of provisions that specify how the money is to be used. This year’s budget is no exception—and one relatively obscure provision could help University of California (UC) campuses optimize their budgetary decision-making.

A lot of attention has been paid to the budget provision that withholds $50 million from UC until the university’s Office of the President (UCOP) implements the recommendations contained in an unflattering state audit. Our focus, however, is on another, little-noticed provision that requires UCOP to complete an experiment in “activity-based costing”—a detailed way of tracking and measuring university expenditures.

As we noted in a recent report, it is challenging to track dollars as they flow through higher education systems. Public universities typically have multiple funding sources and several missions and activities, all of which combine to create an intricate web of dollars. Activity-based costing focuses on an institution’s expenditures to identify where money is going. In a pilot program at UC Riverside, administrators have combined data on students, faculty, courses, and finances to create a detailed picture of the costs associated with instruction. The information enables administrators to estimate costs at various levels—from how much it spends to run a department down to the cost of teaching a single class section. The enacted budget requires UCOP to expand UC Riverside’s activity-based costing to three departments on each of two additional campuses.

Activity-based costing has the potential to inform conversations among campus administrators about the trade-offs involved in using resources to improve student outcomes. For example, the conventional wisdom is that it is expensive to increase enrollment in STEM (science, technology, engineering, and math) programs. By applying activity-based costing, UCR budget and planning officials found that expanding the biology and computer science departments would not necessarily be costly. Because of the size of enrollment and the way courses are taught and faculty are assigned, the revenue generated by those departments exceeds the cost of expansion. The cost of expanding programs in electrical engineering and bioengineering, on the other hand, is currently higher than the revenue generated from enrollment.

The takeaway is that if administrators feel that expanding the electrical engineering program is a priority, they should pursue it knowing that they will need to find additional sources of revenue.

The UCR pilot has also enabled the university to understand the costs of instruction at a high level of detail. Our report calculated the changes in the cost per degree over time for both the UC and California State University systems. UCR was able to break down the cost per degree by type. For example, producing an engineering degree costs, on average, 16% more than a degree in social science. The cost of a humanities degree falls between the two. A significant portion of that cost difference could be attributed to the fact that it takes longer for engineering students to complete their degree requirements.

Activity-based costing isn’t a substitute for goal-setting and planning. It is a tool that can help an institution better align its resources with its goals. Another takeaway from the UCR pilot is that implementing activity-based costing is a complicated endeavor that requires a broad commitment from the institution. The process of expanding this pilot—and what administrators learn from it—bears watching.

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College Graduates Have Higher Net Worth

Compared to less educated adults, college graduates generally see much stronger labor market outcomes, including greater labor force participation, more employment, and higher wages. This holds true across every demographic group—age, gender, ethnicity, and nativity. These differences are well-measured and well-documented.

But what about wealth? Wealth is one of the most important indicators of economic well-being, but it is difficult to measure and therefore information on wealth is much less widely available. Using recently released data from the US Census Bureau’s Survey of Income and Program Participation (SIPP), PPIC has developed new estimates of wealth for Californians. We focus on household net worth, the difference in value between all assets (including retirement accounts, savings accounts, investments, and real estate) and all liabilities (including mortgages, loans, and credit card debt).

The estimates show that Californians are wealthier than adults in the rest of the nation. In 2013, median household net worth among adults age 25 and over was $135,000 in California compared to $105,000 in the rest of the United States. While many have expressed growing concern about income inequality, the distribution of wealth is even more uneven—a fact that is especially apparent when we examine wealth by educational attainment. In California, median household net worth is almost four times higher for adults with at least a bachelor’s degree ($356,000) than for high school graduates ($95,000). (In the rest of the nation, the difference is slightly more than threefold.) One in four college graduates in California is a millionaire, compared to one in fourteen high school graduates.

For most people, wealth accumulates over time. As college graduates consistently earn relatively high incomes year after year, their wealth grows. One in five young college graduates (age 25–34) in California has negative net worth—meaning they have more debt, including student loan debt, than assets. But over time, debt recedes and wealth increases. Among college graduates who recently retired (those age 65–74) in California, half are millionaires.

Higher education has long been key to economic progress for individuals and for the state. In future research, PPIC will explore the role of higher education in promoting social and economic mobility. Ensuring that higher education continues to put people on the path toward economic well-being is a central policy issue.

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Read Higher Education in California: Addressing California’s Skills Gap
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Regional Action to Boost College Success

California needs 1.1 million more workers with bachelor’s degrees by 2030 to keep up with economic demand, PPIC research has found. Three regions will play an especially critical role in addressing this challenge: Los Angeles County, the Inland Empire, and the San Joaquin Valley.

Improving college enrollment and graduation rates in these regions could help close more than half of this projected statewide skills gap, according to a new PPIC report, Meeting California’s Need for College Graduates: A Regional Perspective. It analyzes the challenges ahead and recommends ways to meet them. At a Sacramento event, report coauthor Kevin Cook summarized the findings and a panel of experts described promising initiatives already underway in these regions. Report coauthor Hans Johnson, director of the PPIC Higher Education Center, moderated the panel discussion.

Panelist Benjamin Duran, executive director of the Central Valley Higher Education Consortium, said his group has created a partnership of public and private colleges and universities, as well as community college districts, from Kern through San Joaquin Counties. One of the consortium’s projects involves improving remedial education, which has traditionally consisted of non-transferable classes that delay—and all too often end—students’ college careers. Under the newer approach championed by the consortium, students deemed underprepared for college work are able to enroll in college-level courses right away but also get supplementary support.

The Central Valley consortium is also working to encourage more students—particularly those in the community colleges—to take 15 units per semester or 30 per year so that more of them graduate on time. “When you’re able to go to school full time, the research is showing that you’re far less likely to drop out—you’re going to finish quicker,” Duran said.

Alma Salazar, senior vice president of the Center for Education Excellence and Talent Development at the Los Angeles Area Chamber of Commerce, said, “We do what all great organizations do—we take someone else’s idea and try to make it better.” The result, she said, is the L.A. Compact, modeled after an effort in Boston. It is a collaboration among area organizations, educational institutions, unions, and local government leaders. The focus is on three goals:

  • All students graduate from high school;
  • All students have access to and are prepared for success in college; and
  • All students have access to pathways to sustainable jobs and careers.

Ken O’Donnell, associate vice president of the Student Success Program Integration and Assessment at California State University, Dominguez Hills, talked about his campus’s success in improving its six-year graduation rate from about 30% to 42% in a few years. O’Donnell echoed the PPIC report, which finds that improving success rates for those already in college will have the greatest impact on the statewide skills gap. “You’ve already improved capacity without adding a single additional seat,” he said.


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Read the report Meeting California’s Need for College Graduates: A Regional Perspective
Visit the PPIC Higher Education Center

California is Still Golden for College Graduates

Over the past 15 years, 1.5 million more people have left California than have moved here from other states, according to estimates from the California Department of Finance. Remarkably, even in the face of this outflow, California still experiences net gains of college graduates (those with at least a bachelor’s degree). Over the past five years, California ranks second among all states in net gains of college graduates from other states, even as it ranks first in net losses of less educated adults.

From a demographic perspective, these patterns are unprecedented. In contrast to California, other states that gain large numbers of college graduates, such as Texas and Florida, also gain large numbers of less-educated residents. And states that lose large numbers of less-educated residents, such as New York and Illinois, also lose large numbers of college graduates. California is unique in gaining large numbers of college graduates while losing large numbers of less educated adults.

Why does California have such disparate migration patterns? People move across state lines for many reasons, but primary among them are jobs, housing, and family. California’s strong labor market for highly educated workers attracts college graduates from other states, while the state’s high cost of housing is especially hard on workers with less education and lower incomes.

California will face a large skills gap by 2030—it will be 1.1 million college educated workers short of economic demand if current trends in the demand for skilled workers and the educational attainment of the state’s population continue. Can migration fill this gap? No, but it can help. However, in 2015–16 the University of California awarded more than 50,000 bachelor’s degrees, the California State University awarded more than 90,000, and private non-profit colleges in California awarded almost 40,000—much more than the average annual migration gain of about 20,000 college graduates.

The best way to close the skills gap is to prepare more Californians for the economy of the future. The state can increase the number of home-grown college graduates by focusing on college readiness in K–12 schools, improving completion and transfer rates at all the state’s higher education institutions, and expanding access to four-year colleges. By taking action now, the state can realize big benefits in the future: higher incomes, more tax revenue, less demand for social services, and greater economic mobility.

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Read California’s Future: Higher Education
Visit the PPIC Higher Education Center

Federal Data Could Help Students Choose a College

Every year, hundreds of thousands of California high school seniors make significant financial decisions about whether and where to attend college. But students and their families currently have few options when it comes to knowing the financial costs and benefits of attending certain colleges and choosing certain majors.

A new federal bill would allow for a nationwide data system that could provide earnings information by college and major, among other data. The bipartisan bill, called the College Transparency Act, would allow student records from individual colleges to be submitted to the federal government and combined with earnings and financial aid information from the IRS (Internal Revenue Service) and the US Department of Education. Currently, the Higher Education Act prohibits connecting student-level information kept by colleges, such as a student’s enrollment and major, to earnings and aid data kept by federal agencies. This leaves students and parents in the dark as they try to weigh the economic benefits of colleges and majors against the rising costs of attending college.

What could a new federal data system mean for California?

California currently lacks a longitudinal statewide data system that can track students from college to work, and the information that is available to students has limitations. For example, the California Community Colleges Chancellor’s Office provides the Salary Surfer, a helpful tool that presents salary information on community college graduates by program of study, using a combination of student data and data from the California Employment Development Department. But the Salary Surfer only includes those students who attended a community college and subsequently work in California, there’s no indication of whether students transferred to a four-year college to obtain a bachelor’s degree (which would likely affect earnings), and there’s no campus-level information.

A new federal data system could have some advantages over a state-run system. The market for higher education has become more national, and more Californians are choosing colleges outside of the state. In addition, some graduates of colleges in California leave the state to work, and their earnings can’t be recorded by a state-based system. A comprehensive federal database could help students compare schools across state lines and give a more complete picture of graduates’ earnings, even if they work in another state. Currently, the federal College Scorecard offers a helpful but limited look at earnings. The scorecard only has earnings information for those who receive some sort of federal financial aid and does not show earnings by major.

The proposed data system could fill existing blind spots in California’s databases and the current federal scorecard, providing information across state lines and earnings estimates for both colleges and majors within those colleges. Such a system could help students and parents more accurately weigh the costs and benefits associated with the important and sometimes expensive decision of whether and where to attend college.

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Video: Villaraigosa on His Priorities

When Antonio Villaraigosa was asked to name the top issues most important to the state’s future, he started with the economy. His key concerns are poverty and the state’s business climate, its “byzantine and bureaucratic regulatory framework.”

Villaraigosa, candidate for governor and former mayor of Los Angeles, spoke at the Speaker Series on California’s Future sponsored by the Public Policy Institute of California (PPIC). As part of the series, PPIC is inviting all major candidates for governor to participate in a public event. Other highlights of his remarks:

  • Health care: He believes in universal health care but is skeptical about how to pay for the current plan before the legislature: “You’re selling snake oil when you say that single payer is something that’s going to happen any time soon.”
  • Infrastructure: He emphasized his long-term support for high-speed rail. He sees it as an economic development strategy to transform the Central Valley by connecting it to the two big centers of the economy, Los Angeles and the Bay Area.
  • Higher education: He said the state needs to look at how community colleges are funded and marshal its resources to make sure students get through the system and transfer to four-year colleges. But he’s not an advocate for making community college free to all: “It’s already free for poor people, and that’s who it should be free for.

Watch all candidate videos.

Year-Round Pell Grant Revived

As California State University and the University of California work to increase the number of students who graduate within four years, the federal government has reinstituted the year-round Pell Grant—a financial aid program that can help accomplish this goal. Increasing on-time graduation rates has benefits for both students and the state—opening up more spots in the state’s higher education institutions, reducing the total amount of tuition and fees that students pay, and allowing students to enter the workforce sooner.

The year-round Pell Grant is designed to address a specific problem: while students need to take 15 units in the fall and in the spring semester to graduate on time, many take only 12 units, which adds an extra year to their time to degree. Acknowledging this issue, some campuses are adopting the “Finish in Four” model, which encourages students to complete 30 units per year while giving them flexibility in how they meet that goal. For example, a student could take 12 units in the fall, 12 in the spring, and 6 in the summer. The year-round grant program complements this model by allowing recipient students flexibility to use Pell funding for summer coursework.

Many California students already receive Pell Grants―around 46% of students at CSU and UC, and 29% at the community colleges. The new year-round grant allows recipients to receive one-and-a-half Pell awards in one academic year. While this may not cover the full cost—six units during the summer term costs about $120 more than six units in the fall and spring terms—it makes attending more affordable.

However, it is unclear if the program will incentivize students to enroll in the summer term to stay on track for timely graduation. The program was previously only in effect for two years (2009–2011), and the limited research studying its impact suggests mixed results. Preliminary findings from a study presented at the Association for Public Policy Analysis and Management conference found a small increase of 3.5 percentage points in Pell students’ summer enrollment. Initial findings from another study presented at the Association for Education Finance and Policy conference found that summer enrollment increased by 28 percentage points. Given the short lifespan of the first year-round Pell, its impact may have been limited by students’ lack of awareness of the program and campuses’ lack of infrastructure to offer the right courses.

To ensure the program’s effectiveness, colleges need to help students use the summer semester to reach a full 30 units per year. The year-round Pell is not the only effort to help students use their summers to finish on time. For example, Sacramento State University is offering $1,000 grants for students who enroll in the summer term. Given the uncertainty of long-term federal funding for a year-round Pell, campuses may need to develop other similar programs to incentivize summer enrollment and encourage on-time graduation.

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UC May Struggle to Meet Transfer Requirement

Governor Brown’s May budget proposal withholds $50 million from the University of California (UC), which must undertake a series of reforms to restore the funds. One requirement—the result of a deal made during the 2015 budget process—is that UC meet its fall 2017 target of enrolling only two new in-state freshmen for every in-state transfer student, both systemwide and at each campus (except Merced). In 2016, the system enrolled 2.3 freshmen for every transfer student. The 2:1 target is intended to increase the number of transfer students served by UC. But reaching this freshmen-to-transfer ratio while responding to growing freshmen demand could prove very difficult this year and in the future.

UC has made progress in enrolling more transfer students but has not come closer to meeting its target ratio. In the last year, UC enrolled almost 2,000 more transfer students, a 13% increase and the biggest jump in more than a decade. However, UC also enrolled more than 5,000 additional freshmen compared with the previous year (a 17% increase)—leaving the freshmen-to-transfer ratio slightly higher.

In recent years, demand to attend UC has increased much faster for freshmen than for transfers. This year, there are more than 3.5 freshmen applicants for every transfer applicant. Since 2011, freshmen applications have increased by 31%, while transfer applications have declined by 1%.

Can UC attain a 2:1 ratio while responding to growing demand for freshmen slots in 2017? To do so, the system would need to draw more transfer students from a smaller applicant pool—especially if officials also plan on increasing freshmen enrollment. Compared to last year, 1,000 fewer in-state transfer students and 6,000 more in-state freshman applied. This problem is particularly acute at Santa Cruz and Riverside, which enrolled more than 3.5 freshmen for every transfer student in 2016 and may not meet the 2:1 goal this year.

UC may also have trouble meeting its target freshmen-to-transfer ratio in the future. If the number of freshmen applicants keeps increasing while the number of transfer applicants stagnates, UC may have to turn away more in-state freshmen applicants to meet its goal. To increase the quantity and quality of future transfer pools, the system is working to expand existing transfer agreements between UC campuses and nearby community colleges. In addition, UC’s new Transfer Pathways program helps prepare community college students in the most popular majors to transfer as juniors to any UC campus. The new program could start showing results in the next couple of years.

Though transfer demand at UC is sluggish, transferring is still a popular path for students elsewhere. California State University (CSU) has seen 14% growth in transfer applications since 2011 and, in 2016, received over 106,000 transfer applications (about three times as many as UC). UC could look to a recent success at CSU, which worked with the California Community Colleges to develop the Associate Degree for Transfer (ADT). Like the Transfer Pathways program, the ADT prepares community college students for junior-level entry at any CSU campus. But the ADT goes further by guaranteeing that students will only need 60 more units at CSU to graduate from their major. It also guarantees students admission to the CSU system and offers priority consideration at a local CSU campus. The ADT is quickly becoming a popular option, with 30,000 ADTs awarded in 2015–16 alone. Of course, students are considering other factors, such as cost, distance, eligibility, and availability when choosing where to apply for transfer. Guaranteed pathways to a degree and priority consideration in admission, however, are likely to entice potential transfers.

It will be difficult for UC to achieve its 2017 transfer requirement, especially at Santa Cruz and Riverside—putting into question whether the system will receive the $50 million withheld in the governor’s budget proposal. With increasing demand for freshmen slots, UC must work to increase the pool of transfer applicants to meet both the 2:1 goal and freshmen demand going forward.

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Read the report Higher Education in California: Expanding College Access
Visit the PPIC Higher Education Center

Educational Progress Stalls in California

California is known as an engine of economic growth and innovation in the United States and across the world. A highly educated workforce has long gone hand in hand with the state’s robust economy.

California’s historically strong commitment to higher education—providing low-cost access to public colleges and universities at a time of rapid population growth—led to a large increase in college enrollment and completion. Baby boomers who were of prime college age during the 1960s and 1970s benefited from that expansion. Today, those boomers are the best-educated adults of that generation in the developed world. Older working-age adults (age 55–64) in California are more likely to have a bachelor’s degree than in any of the 32 member countries of the Organization for Economic Cooperation and Development (OECD).

Is California’s younger generation keeping up with other countries?

Unfortunately, generational progress in college completion has nearly stalled in California. Although more California high schoolers are completing their diploma today than 30 years ago, the share that subsequently earns a bachelor’s degree has not changed much: 33% of those age 25–34 in California today have at least a bachelor’s degree, compared to 31% of those age 55–64. Other countries have made much stronger progress. Indeed, the share of college attainment among young adults in California ranks 22nd of the 32 OECD countries, and the state’s generational progress is dead last.

The lack of generational progress in California is a cause for concern. College attainment not only benefits individuals’ earnings and employment prospects but also contributes to California’s economy by attracting businesses and keeping the state competitive in an increasingly globalized marketplace. Increasing the share of high school graduates eligible for the state’s public universities could help improve educational attainment among California’s young adults.

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The Growth of Cal Grants

The Cal Grant program is the primary program for providing tuition assistance and financial aid to California’s college students. It has allowed California to maintain access to college for low-income students during a time of rapid tuition increases. The program has grown significantly since its inception in 1955 and now serves more than 300,000 students at an annual cost of around $2 billion.

State law protects Cal Grant recipients from tuition increases at UC or CSU: when tuition rises, so do these students’ Cal Grants. Consequently, as tuition has increased and enrollment of low-income students has expanded, the program has grown rapidly. Next fall, tuition is scheduled to increase by $280 per year at UC and by $270 per year at CSU. In addition, UC, which has enrolled 7,400 new undergraduates in each of the last two years, plans to enroll an additional 2,500 in the fall of 2017‒18, the largest three-year increase in seventy years. CSU has added around 50,000 additional students over the past five years. The expansion of Cal Grants has drawn the attention of the governor. He noted in his May budget revision that “rising Cal Grant costs from tuition hikes will also limit the state’s ability to increase General Fund support in the future.”

Figure: Cal grant funding has increased significantly at public univerisities

Nearly all of the Cal Grant funding increases have gone to students attending public institutions. CSU has seen a 75% increase in Cal Grant funds since 2011‒12, while the community colleges and UC have received a 61% and 27% increase respectively. Private nonprofit colleges, on the other hand, have seen their Cal Grant funding stagnate. The governor’s budget revision acknowledges this by reallocating $8 million that had been targeted to UC and CSU in his January budget proposal to non-profit private Cal Grant funding. These funds will prevent a planned cut to the maximum award for students attending a nonprofit private college.

By contrast, for-profit colleges have seen their Cal Grant funding decrease substantially over the past five years. The 2012‒13 budget introduced restrictions on access to state Cal Grants which affected many for-profit colleges. To some degree, for-profit colleges satisfy an unmet need for access to higher education for non-traditional students. But investigators have found that many of these colleges engage in predatory marketing and lending practices—targeting vulnerable students, making false statements regarding job placement, and overestimating the value of the degrees they provide. To address these issues the state established new institutional eligibility standards for Cal Grants. To be eligible, a higher education institution must now have a minimum graduation rate of 30% and a loan default rate of less than 15.5%. The 2012‒13 budget also cut the maximum award for a student attending a for-profit college from $9,708 to $4,000. These regulations have saved the state nearly $100 million since 2011‒12, reduced by more than half the number of for-profit colleges eligible for Cal Grants, and ensured that low-income and first generation students were not taken advantage of by higher education institutions that did not serve their economic interest.

Cal Grants are an essential tool for improving the economic mobility of the state’s neediest residents. They also allow the state to reduce the burden of federal loans on young Californians. Maintaining Cal Grants for high performing colleges— public and private—will improve access to college for all Californians.

Learn morEVisit the PPIC Higher Education Center