Jack Peltason's Financial Homework

HEADING the nine-campus University of California has never been easy. But it became a lot harder three years ago when the political leadership in Sacramento reduced the university's share of state general-fund allocations for the first time since the Great Depression.

The funding cutback came with little warning, in response to a sharp fall-off in state tax revenues as California dove into recession. And it didn't end quickly, as some had hoped. The funding squeeze in Sacramento mounted. All university campuses experienced a 6 percent cut in the 1991-'92 school year, another 6 percent in '92-'93, and 4 percent for the current year.

When businesses and institutions all over the country are downsizing, that may not sound too drastic, especially for a multibillion-dollar enterprise. But it has had a jarring impact on a university system geared toward expansion ever since its founding in the late 19th century.

``All last year,'' says university President Jack Peltason, ``the worst-case scenario became the next week's best-case scenario.'' Grabbing at a strand of optimism, he speculates that the 3 percent increase promised by Sacramento for next year represents a turnaround in the funding crisis. He adds, however, that he really needs 9 percent.

Others argue that even if California's economy and revenues spring back, the current emergency has underscored a need to restructure the sprawling higher-education system in the state, which includes the 20-campus California State University complex as well as the University of California.

President Peltason, a plain-spoken political scientist whose speciality is the United States Constitution, took the university's helm in October 1992, at the peak of the funding storm. He was used to demanding jobs in higher education, having just spent eight years as chancellor at the Irvine campus of the University of California and an earlier decade as chancellor of the University of Illinois at Champaign-Urbana.

But from his office overlooking Lake Merritt, the jewel of Oakland's drab urban landscape, Peltason faces the toughest task of his career: how to maintain the high standards of one of the country's leading public universities at a time of severely pinched public resources.

Legislators, the governor, and many average Californians look at the system's spending, budgeted next year at $9.4 billion, and conclude there must be room for economies. Yet a poll recently commissioned by the California Higher Education Policy Center, a nonprofit research group, indicated that 85 percent of the state's residents ``believe that no qualified and motivated student should be barred from attending college because of cost.''

For Californians, the state-supported university system has always been a key to a better future, and they don't want that key to be lost because of budgetary pressures.

Today's problems may only be a prelude for Peltason and his staff. ``The basic problem they face - that all of the systems face - is how to accommodate the 500,000 students who will be eligible to participate in higher education by 2005,'' says Joni Finney, associate director of the Higher-Education Policy Center, located in nearby San Jose. The various university campuses now enroll about 300,000 students.

Until now, Peltason has pursued an admittedly ``ad hoc'' approach to the money crunch. Repeated student-fee hikes and an early-retirement incentive program for faculty have partially offset the drop in state funding. His predecessor David Gardner, set a course at the onset of the funding reversal, committing to do whatever was necessary to preserve highly respected academic programs. Peltason has vowed to continue that course.

At least, says the president, the financial crisis has come at a time when enrollments can be stabilized. ``The students in high school and grade school are on the way, and we have to get ready, but, meantime, we have to keep the university as unhurt as possible.''

Valued faculty members have already left as a result of the early-retirement program. ``We've lost some of our senior and best people,'' he says, ``but the other option is to let go of younger, promising professors.'' According to Ms. Finney, however, faculty losses from the early-retirement push have ``just decimated'' some programs. Many vacated posts have been left unfilled - though, Peltason interjects, retired professors still are available to teach part-time.

If more rounds of cuts come about, the president says, the quality of education offered at such august campuses as Berkeley and UCLA could crumble. ``We're hanging on the edge of a cliff,'' he says, with a touch of melodrama. ``We haven't slipped off yet, but the ground beneath our fingers is falling off.''

Peltason is inclined to put the situation in broad historical perspective. In the US, he says, ``Public universities have been allowed to become as good as private universities only in the last 50-75 years.''

The result of that, he adds, has been ``opportunity for millions of people.'' He sees that historic gain threatened not only in California, but in Oregon, Maryland, and other states.

Studies have shown that the average incomes of families who send their children to the University of California are rising, with those who earn $80,000 and above the fastest growing group. While acknowledging the financial challenges facing moderate- and low-income families with college-age kids, Peltason argues that, in ``real 1990 dollars,'' today's UC students only pay $300 a year more than those of 20 years ago. He anticipates, however, that public universities such as his will have to move increasingly to more generous financial-aid programs, much like those used by private colleges.

Even with its various fiscal strains, the University of California is not in the ``disarray'' portrayed in some recent press reports, Peltason asserts. Asked about the charge that more and more students are having trouble getting the courses they need to graduate, the president responds, ``We're always killed by the anecdotes.'' Some do have trouble, he says, but it's hardly the rule.

And what about the widely held view that undergraduate instruction typically gets sidelined in favor of research? Most professors already teach a lot, says Peltason, though the correct balance between their classroom time and time spent in research still has to be struck. ``It's not that they shouldn't go into their laboratories, but that they should take the undergraduates into their laboratories with them,'' Peltason says.

His refrain, however, is that the university's reputation to a large degree rests on strong research, and ``if you kept them [professors] from research, you'd simply keep them from the University of California.''

Despite the funding turbulence, expansionary thinking hasn't fled systemwide headquarters in Oakland altogether. There's ongoing discussion of a 10th campus, to be located in the ``underserved'' San Joaquin Valley, near Fresno or Modesto. Some, like Finney, say it would make much more sense to enhance the state university system branch already situated in Fresno rather than build another UC campus nearby.

But enrollment projections indicate that by early in the next century ``we would eventually have 16,000 more students than we have room for,'' Peltason says. The new campus has to be kept on the drawing board and some funds spent on environmental impact reports, he says, even though ``we don't now have the resources to keep the present campuses going.''

A lot depends on California's economy, muses the president. ``I'm hoping the worst is behind us, so we can start thinking of something beyond survival.''