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Public to Private MBA at UCLA

June 30, 2014

A small chunk of the University of California is set to break slightly away tomorrow and become “self-supporting,” as the state system begins a closely watched experiment that could be repeated.

Following years of controversy, most of the University of California at Los Angeles’s Anderson School of Management will be giving up state funding in hopes of living off donations and likely higher tuitions. Critics deride the effort as "privatization," a term to which the UCLA administration strongly objects and never uses.

The business school’s dean last week signed a three-year deal with the university provost allowing UCLA’s full-time master's of business administration program to flip from state-supported to self-supported. That means the M.B.A. program will turn down state subsidies in exchange for less regulation from the top and the ability to set its own tuition rates.

While 59 UC programs, including UCLA’s executive M.B.A. program, are already self-supporting, the change at the Los Angeles full-time M.B.A. program is believed to be first time an existing UC program has been converted to self-supporting. Graduate programs at top publics in other states, including the University of Virginia’s Darden School of Business, have already made a similar move, though.

Other departments at UCLA are watching to see if the model proves to be a better one and could soon follow, said the head of the university’s Academic Senate, Janice Reiff.

“Self-supporting programs are something a lot of different departments are looking at because of a variety of different reasons,” she said.

That could gradually change the structure of one of the nation’s premiere public systems.

Only about 18 percent of the business school’s funding came from the state in recent years. In the future, only 4 percent will, none of it for the M.B.A. program, according to the university. The deal requires the Anderson School to pay UCLA on prorated basis for overhead, including maintenance.

The Anderson School will continue to offer two state-subsidized degree programs: a Ph.D. program and an undergraduate minor in accounting. The rest of its graduate programs, including the part-time M.B.A. programs, were already self-supporting.

The conversion was expected after then-UC system president Mark Yudof approved the controversial move last summer. But a final agreement hashing out the details was signed only last week. When the idea was first introduced, the bottom had fallen out of California’s budget. The original plan, floated first in 2010, was to make the entire business school self-supporting, but it was scaled back amid outcry.

Even though California’s budget picture has improved, UCLA administrators are not optimistic about long-term trends that show a decline in state support as a percent of the campus budget.

“While the state budget picture improved this year, state support for higher education has been in a dramatic decline for more than a decade,” said Jami Jesek, the senior associate dean of finance and operations at the Anderson School, in an email through a spokeswoman. “UCLA Anderson proposed this plan to avoid any additional cuts in state funding while increasing predictability in setting fee levels and flexibility to faculty assignments.”

Critics have worried about a host of issues and have tried to kill the plan for years. Of particular note has been concern about how self-supporting programs fit into the UC system’s historic commitment to an accessible and affordable education.

A recent review program review of the Anderson School gave the change mixed reviews. Three external reviews all said the plan would benefit the school and said some of the controversy was unhelpful, and at least some concerns would soon become non-issues.

Internal reviewers continued to express concern, however, particularly about the prices Anderson School officials plan to charge students in the future.

The deal signed last week by Anderson School Dean Judy Olian pledged, “The full-time M.B.A. program will continue to ensure that financial aid is offered at levels at least commensurate with current levels, and with levels at other UC fulltime State-supported M.B.A. programs.”

A tuition increase may already be in the cards. The current charges are $48,723 for residents and $55,010 for non-residents. Changes to that – presumably an increase, but a business school spokeswoman did not respond to an email seeking more information – are pending review by Janet Napolitano, the UC system president. She now has final approval over tuition charges at self-supporting programs.

A review team of UCLA professors from other departments organized by the Academic Senate last fall expressed some concerns about the M.B.A. program’s future pricing. The team said Anderson administrators’ approach to financial aid was “hampered by two unhelpful tendencies” that could make it harder for students to pay for the M.B.A. program if prices rise.

First, the Senate reviewers said in the report they filed late last year, the Anderson School administration folds together merit-based aid and need-based aid so that the “financially needy” are essentially ignored.

“Sometimes this is accompanied by a remark to the effect that business school is so expensive that everyone has need, which obscures from view the point that our ideal is to make it possible for persons of talent, no matter how modest their financial circumstances, to develop their abilities,” the Senate review team said.

Second, the UCLA Senate review team said, the administration makes a “general argument to the effect that since the school believes that it will have greater resources after the conversion than before, it only stands to reason that it will be doing whatever it was doing before in terms of affordability and access.”

This argument, the Senate reviewers said, is not accompanied by an actual promise to make sure access and affordability remain what they are now.

The administration may not have cleared up its intentions when asked last week how the school was interpreting its commitment to maintain financial aid that is “commensurate with current levels” and whether financial aid could be relatively less generous if the M.B.A. prices rise. “We intend to increase, not decrease, financial aid in the coming years and are, in fact, making it a primary goal of our five-year Centennial [fund-raising] Campaign,” Jesek, the dean of finance and operations, said.

Three outside reviewers, all deans or former deans from other universities, were more enthusiastic.

Nicole Woolsey Biggart, a former dean at UC Davis’s business school, said UCLA’s decision to turn down state funds for more self-control is “an eminently reasonable response to disinvestment by the State of California because the school has the resources both currently and promised to succeed financially.”

She predicted concern over volatile tuition prices would be a “non-issue in years to come” because of donors willing to give to a self-sustaining school.

Sunil Kumar, the dean of University of Chicago Graduate School of Business, predicted donations would allow UCLA to be able to provide merit-based and need-based scholarships to a greater degree than currently. “In my assessment there is very little doubt that on both quality and on access the Anderson School will be significantly better off under self-supporting status than it has been under state funding,” he wrote.

Internally, faculty – if only a minority – continue to have doubts, said Daniel J.B. Mitchell, a professor emeritus from the Anderson School.

He said they worry the business plan won’t work, even if it does bring in more money and more student fees. “It’s not pure gravy because if you’re charging students a lot more, they tend to expect a lot more in terms of services,” Mitchell said.

 

 

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