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In 2022, faced with mounting criticism from California parents and students who couldn’t get into the state’s three premier public universities, legislators and UC officials struck a deal.
UC Berkeley, UCLA and UC San Diego would admit a combined 900 more in-state students a year, and the state would up their budgets to cover the loss of revenue from non-resident students, who pay three times what in-state students pay.
That deal has since cost taxpayers $276 million and allowed around 3,000 more students to enroll at the three universities.
While the costs were expected, the number is far higher than the annual $31 million figure Gov. Gavin Newsom and state legislators routinely cite for funding the in-state student expansion, a CalMatters analysis shows. Now, with one year to go in the five-year plan, some are wondering whether the program’s high costs should continue as-is, particularly as California faces several years of multibillion-dollar deficits.
Questioning the non-resident swap
At least one lawmaker and the Legislative Analyst’s Office are questioning the ongoing wisdom of the non-resident funding swap.
“We are now living with those decisions, and we need to decide whether those are decisions we want to stand by still, or perhaps there is another approach,” said Assemblymember David Alvarez, a Democrat from Chula Vista, at a March meeting of the budget subcommittee on education, which he chairs.
The Legislative Analyst’s Office supported enrolling more California students in 2022, but its analysts now are proposing that the state no longer add new resident students in lieu of out-of-state students. The analyst’s office says it’s an unnecessary expense for multiple reasons and going forward can be made cheaper, especially given “the state’s projected budget deficits.”
Instead, it proposes that the Legislature direct the UC to enroll more resident students without limiting the enrollment of non-resident students. That would cost the state $25 million annually, rather than the $61 million predicted for the fiscal year starting July.
One reason for the office's skepticism about keeping the current formula is that the three campuses were able to add thousands more undergraduates from California since the funding program began, aside from those who replaced non-residents.
UC data shows 6,000 more Californians were enrolled at the three campuses, on top of the students added through the funding program, since the swap began. That growth was fueled by hundreds of millions of dollars in annual funding increases to the UC between 2022 and 2024 that lawmakers and the governor also approved in addition to the non-resident funding swap.
The analyst’s office also indicated that the three popular UC campuses have space to continue adding students. “Over the past five years, all three campuses have initiated and/or completed housing projects adding several thousand beds” and still have available classroom and lab space, a February report from the office said.
Time will tell if the Legislature will agree with the analyst’s office. Lawmakers and the governor face an annual late June deadline to finalize the state budget.
The governor’s office so far supports maintaining the non-resident swap program and doesn’t intend to alter the plan in its forthcoming May revision to the governor’s budget proposal, said H.D. Palmer, a spokesperson for the Department of Finance, which in effect serves as the governor’s fiscal policy team.
In a statement, UC spokesperson Omar Rodriguez underscored that the Legislature’s push to drive down out-of-state enrollment has to come with costs.
“Replacing a non-resident student with a resident student is not an even exchange absent sufficient state buyout,” Rodriguez wrote to CalMatters in an April email. With the higher tuition they are charged, every out-of-state student pays for the equivalent of 2.7 California students, he wrote. The three UCs added about 300 more in-state students through the swap program than they were funded for, Rodriguez added.
CalMatters requested interviews with UC officials, but key personnel were not available, Rodriguez said.
UC officials were ambivalent about the non-resident funding swap five years ago. While they welcomed the money, they worried that future lawmakers would back away from the promise to pay the UC for not enrolling out-of-state students.
Emphasis on Californians
Why do any of this? Lawmakers in 2022 wanted to curb the percentage of out-of-state undergraduates at the UC and the three campuses specifically. At the time, more than 20% of the three schools' undergraduate students came from out of state. The funding swap was intended to bring the percentage down to 18% by the fifth year, which is next year. The non-resident enrollment rate currently is around 19% at the three campuses.
But the decision by lawmakers to require the campuses to limit the number of out-of-state students came at a considerable cost. Had the Legislature instructed those same campuses to enroll more Californians and not cut out-of-state enrollment, the combined price tag since 2022 wouldn’t be $276 million, but closer to $105 million, according to CalMatters’ calculations that were validated by officials at the governor’s Department of Finance as well as the UC.
The final price tag to reach the out-of-state enrollment goal will be about $460 million. After that, the program will cost about $153 million a year to sustain — or less, if policymakers side with the Legislative Analyst’s Office.
California spent more for a reason
In many ways, the Legislature’s actions were a return to form. The state’s interest in enrolling more California students in its prominent public universities is decades-old. Until the mid-2000s, UC campuses enrolled few students from outside of California. After the Great Recession prompted lawmakers to slash state spending, UC’s public funding cratered. To make up the difference, UC tripled its enrollment of undergraduates from out of state.
But then the state, under the guidance of Gov. Gavin Newsom’s five-year higher education compact, promised to funnel hundreds of millions of dollars annually in 2022 so the UC could enroll more California students at all its campuses. That’s in addition to the $30 million annually to limit the out-of-state student body at Berkeley, UCLA and UCSD, the three most popular campuses.
“They’re making good on the reason that you have a state university, which is not supposed to be a purely revenue-making machine,” said Julie R. Posselt, a professor specializing in higher education issues at the University of Southern California, where she’s an associate dean. “It’s supposed to be an engine for your state's population, economy and workforce.”
The UC is arguably one of the best deals for state taxpayers: a world-class education that for more than half of California undergraduate students is tuition-free because of financial aid.
Demand for the three UCs, by the numbers
More than 100,000 students apply to each of three most popular UC campuses annually, the majority Californians. Lately the freshman admissions rate at UCLA has been less than 10% — not quite as exclusive as Harvard’s 4% but well below the admissions rate to UCLA two decades ago, when more than a quarter were admitted.
UCLA is top of mind for the thousands of low-income students in Southern California that Alison De Lucca’s collective serves. She’s executive editor of the Southern California College Attainment Network, which is made up of dozens of nonprofits working to help students apply for college and financial aid.
Additional slots at UCLA matter to the region’s high schoolers seeking to attend a highly selective institution. “Many of them, particularly post-pandemic, would like to stay a little closer to home,” she said.
She didn’t speculate on whether parents think more slots for Californians is worth the extra state spending, “but I will say that parents are quite emphatic about ensuring that their students also have the chance” to gain entry at a school such as UCLA.
National studies of flagship public universities also indicate that as schools rely more on increased revenue from non-resident students, overall campus diversity can decline. That’s because out-of-state students “tend to be richer and are less likely” to be Black or Latino, one study co-written by Posselt found.
Non-resident value
The UC student association representing all undergraduates opposed the out-of-state funding swap when it first became policy. The association didn’t want to see fewer non-residents, which it considered an attack on the diversity of the student body. Students argued that out-of-state students add to the cultural dynamism of a campus and also contribute to the regional economy.
“We’re living here, we’re voting here, we’re working here, we’re tenants in our campus cities. We’re still treated as second-tier students,” said Riya Master in 2021, when she was an undergraduate at UC Berkeley from Virginia.
Master is now in her fourth year of attending UC San Francisco’s highly ranked medical school. She gained residency as a Californian by working at a UCSF laboratory on drug discovery after graduating from UC Berkeley. As a result, she’s paying the in-state tuition rate. Her goal is to specialize in pediatrics, a field of medicine undergoing a massive shortage nationally.
California enrollment grew
The UC system added 19,000 slots for new California undergraduates across its nine undergraduate campuses since 2022 — equal to a mid-sized UC campus without having built one. That includes about 9,000 more at the three sought-after campuses.
The number of non-resident undergraduates at the UC fell by 3,500 students in that time.
The growth in enrollment availability coincided with higher admissions rates for Californians, as the share of applicants gaining admission jumped from around 65% to 77% in that time.
But it’s a different story at the three most popular campuses: admission rates there haven’t increased, meaning it’s as difficult to get into UC Berkeley, UCLA or UC San Diego now as it was five years ago — and harder compared to nearly a decade ago.
Even with loads of new state spending, UC reports less money per student. Though state support has jumped by more than a billion dollars since 2000, inflation has eroded those gains while enrollment soared. As a result, UC academic spending for every student decreased from $46,000 at the start of the millennium to $28,000 today.
Public universities, such as the three UC campuses, have to manage a tough balancing act, said Posselt, the USC professor. They need to preserve their academic rigor, but “they absolutely have a mandate to not become exclusionary institutions, and they must do all of that while maintaining financial solvency.”
She said the UCs are “probably the best in the country in terms of a state system that is actively trying to maximize” student access.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
