Dear Newly Appointed Berkeley Chancellor:
Congratulations! Even though as of this writing, you have not yet been named, you take over the leadership of UC Berkeley at a critical time. At the end of your tenure, the world’s premier public university will either have found a sustainable path forward or will have entered a period of long-term decline. Do us a favor — do not screw this up. You arrive at a moment when higher education is in wonderful and overdue ferment. Online education is challenging your traditional business model and unsustainable tuition increases. Badges and other alternative credentials threaten your historic right to certify talent. Most of all, Berkeley like other public universities that serve as engines of knowledge-creation and social mobility are under unprecedented financial pressure. Berkeley, in particular, has a lot at stake. It is, as I noted here, an amazing public institution, despite its bottomless capacity for self-parody (as you know, my wife is a dean at Cal). 48 out of 52 Berkeley doctoral programs rank in the top 10 of their fields nationally — the highest share of any university in the world. By any measure: NSF Graduate Research Fellowships (#1), National Academy of Sciences members on the faculty (#2 behind Harvard), members of the National Academy of Engineering (#2 behind MIT), membership in the American Philosophical Society, the American Academy of Arts and Sciences, or winners of National Medal of Science — Berkeley excels. It is by a considerable distance earth’s finest public university. And it serves a public mission. Berkeley’s single proudest claim, ahead even of its 24 national rugby championships, is that it enrolls more students on Pell Grants than all of the Ivy League schools put together. A Pell Grant is a scholarship based on financial need. By serving academically qualified students on Pell Grants, Berkeley ensures that smart, hard-working kids from low income families access to a top-flight education. You may regret the flow of private funds into a public university, but you cannot and should not try to prevent it. Actually, you will devote a great deal of time to encouraging private donations so that Berkeley can remain accessible to middle income students who are not eligible for Pell Grants. This requires building organizational muscles that atrophied when Berkeley, like most public universities, avoided the intellectually distasteful but indispensable work of raising private funds. Berkeley is still building the endowment required to sustain these efforts. The endowment matters because over time, money buys quality — just ask Stanford. It is no accident that although many state universities undertake serious research and offer outstanding educations, only three of the “Public Ivies”, Texas, Michigan, and California, make the list of America’s best-endowed universities. You realize, of course, that the endowment data shown here are misleading in one important respect: the University of California is less a university than a federation of ten highly autonomous campuses ranging from prestigious broad spectrum research institutions like Berkeley, UCLA, and San Francisco to campuses with pockets of excellence like San Diego, Irvine, and Davis, to schools like Riverside and Merced that are not easily distinguished from the State University. These data also illustrate why the Regents hired your boss. Of the great public universities, only the University of Texas took endowment-building seriously, making former UT President Mark Yudoff irresistible as the current president of UC. But Berkeley, along with San Francisco and UCLA, has begun to focus on endowment building. It is no surprise that taken together, these three campuses now hold three-quarters of all UC endowment funds. Faced with the choice of compromising academic excellence, raising tuition to levels that reduce access to higher education for many students, or undertaking a covert privatization to maintain the finances of their institution, all three of these schools have raised tuition and quietly sought private funds. Your job is to continue this course.Soft privatization is not without its management challenges however, especially at Berkeley. First, Cal is a state-owned enterprise. The barely functional California government retains full and largely unwelcome control over your budget and governance, even though it contributes less each year to your operating revenue. Second, your boss happily taxes richer campuses like yours to support poorer ones, so to raise a dollar of endowment, you will often have to attract more than a dollar of donations. Third, strong faculty governance provisions, while occasionally improving decision quality, mostly serve to protect the comfortably and correctly tenured and prevent needed program rationalization. Your biggest risk is not privatization — it is paralysis. To get Berkeley fully upright and sailing, you need to mend both a broken income statement (you lose money every year and must stop the bleeding, even if the state makes good on a new round of cuts) and a broken balance sheet (your endowment may be larger than other UC campuses, but it is still pathetic. Look at the data.) Nothing else you do will matter unless you set audacious goals to fix your core economics. I respectfully suggest two:
- Raise the endowment to $10 billion. This is preposterous, but probably achievable over 7-10 years. It requires that you aggressively take the case for Berkeley to the public, to alumni, and to Silicon Valley. It is an incredibly compelling case, but you need to personify it and champion it consistently, loudly, and effectively. The impressive “Campaign for Berkeley” is a great start that is committed to adding $3 billion to the endowment by 2013. This will be no time to stop. Committing the campus to achieving a $10 billion endowment would ensure access to undergraduate education for all students, the ability to attract and retain outstanding faculty, and a credible case for increased operating autonomy. (And really — if Texas can do it, how hard can it be?)
- Move to a three semester academic year. You waste a beautiful, expensive campus by using it fully for only 30 weeks each year. Adding a third semester to the academic year earns you $150 million annually, relieves a great deal of pressure to raise tuition, and dwarfs all other growth or cost saving opportunities even if you eliminate Summer Session and make no changes to faculty teaching loads. The move would be rapidly copied by other UC campuses and other top flight universities. This represents low risk, no-brainer money because you fully control both the revenue and costs of the initiative. It would enable you to admit more students, significantly increase the size of your faculty (which won’t happen any other way) and offer each professor an option to earn additional income by teaching the third semester or use it for research, as many do now. You are not dumbing down any degree: students would do just as much work, but those who wish to complete an eight semester undergraduate degree in 2.6 years instead of four could do so. Relative to budget cuts or tuition increases, improving the utilization of your largest and most expensive asset is much less painful or politically controversial than any other economic opportunity you face.