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Reducing Tuition Volatility at California’s Universities

Jacob Jackson April 28, 2016

After sharp increases in tuition during the recent recession, the California State University (CSU) and University of California (UC) systems made an agreement with the state to freeze tuition in exchange for increases in state funding starting in 2012. However, state support has not returned to pre-recession levels and the agreement runs out after this school year. It’s clear that the universities will raise tuition, but it’s not clear when or by how much.

The history of tuition increases at UC and CSU shows that periods of low or no tuition growth are often followed by large spikes in growth, most recently in response to declines in state support. California’s universities are not guaranteed a part of the budget (as K–12 and the community colleges are), so declines in state revenue (such as during a recession) often result in declines in state allocations for higher education. Universities raise tuition to make up the lost revenue, leading to volatility in tuition increases from year to year.

Instead of instating abrupt tuition increases, universities could rely on gradual, scripted changes, which would benefit students who are planning their finances around spending the next four (or more) years at a university. What kind of gradual change have we seen historically? Since 1979, tuition and fees have risen considerably at both UC and CSU—on average, about 8.6% annually at UC and about 11.3% at CSU. Some have suggested tying tuition increases to inflation, which over the same period, rose only about 3.1% yearly. In 2014, UC considered a plan to increase tuition at 5% each year for five years in an effort to make tuition increases transparent and steady—rather than unpredictably sudden and large. This plan was highly controversial at the time, but it would have resulted in yearly tuition increases that were lower than the average yearly increase across the last 35 years.

It is impossible to predict when the next recession will hit or what it will do to state revenues and higher education support. Steady increases could provide a cushion for universities if a drop in state funding occurs, and may allow them to keep to their planned tuition increases—but that depends on how the legislature responds to increases in tuition and the next recession.

When tuition does rise, the state and university systems should work together to make sure college is affordable for low-income students, especially considering PPIC projections that show a need for more college educated workers by 2030. The state’s generous financial aid programs mostly kept up with the sharp tuition increases from 2007 to 2011, but some low-income families had to pay more than they did before those increases.

The state could take steps of its own to make funding for the university systems less volatile. For example, some have suggested a dedicated funding stream, such as Proposition 98’s provision for community colleges and K-12, could limit cuts in state support for the university systems during recessions and improve their ability to plan for the future.

Chart source (TOP): University of California, California State University, Bureau of Labor Statistics. Chart source (BOTTOM): University of California, California State University.

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