April 2005
Taking the Long View: A Talk with UC’s Vice President of Budget, Lawrence Hershman
Lawrence Hershman, Vice President-Budget, began his UC career in 1968 on the San Francisco campus and came to the UCOP Budget Office in 1974. He has worked under six UC presidents and has been on the frontline of budget negotiations with six different state administrations (listed at the end of this article). We recently talked with him about his history at the University and his views on budget directions for the future.
Your 37-year career spans the terms of six UC presidents and six California governors. To what do you attribute your longevity in this job?
So, the question is - how have I survived? There are probably several answers. First, I’ve enjoyed the job. I think you have to like what you’re doing or you can’t do a very good job. When David Saxon first became president, thirty-some years ago, he told me you have to be an optimist to do this job. Well, I truly am an optimist, and I agree that being optimistic is an important element of the job. But more than any other single reason why I’ve continued with it is the people I have worked with – chancellors, EVCs, budget folks, the Senate, the students, the legislators and legislative staff, the DOF. The people have been great. And since the late 70s we have had a good internal consultative process for bringing people in and trying to make sure that the whole university community buys into the budget and helps sell it when we make our case in Sacramento. I think that’s made all the difference. We’ve by and large been together. If it had been all about internal fighting and then having to go carry the message externally, it would have been a lot harder.
Can you say more about the transition you referred to in the 70s?
In the old days, they had a budget process in which campuses submitted budget proposals and there was a constant fight going on between the president’s office and the campuses about what were real priorities. We scrapped that and went to a process where we worked together to build priorities. We build them one year after another, so we don’t have to start all over again with every discussion. Another part of the change was going to longer-term budget proposals, multi-year proposals. And it also made a big difference to have people focus on real priorities – not just wish lists. There can still be enormous conflicts, but we get past those conflicts and work together. All this has made it fun. I enjoy processes in which consensus is built. We did that with the current Compact – we worked really hard to build consensus.
The current Higher Education Compact with Governor Schwarzenegger that you just mentioned is the latest in a series of such agreements that UC has entered into with California governors. The meaningfulness of these agreements has sometimes been questioned, since, in difficult budgetary times the state may not meet its obligations, while the University does keep its side of the bargain. How do you respond to this criticism and what would you say have been the advantages and disadvantages of having these agreements in general?
My view on these kinds of agreements is that they’re handshakes. People tend to be committed to handshakes. I’ve been involved in making several of these multi-year agreements, the first with George Deukmejian at what was a crisis point for the University when faculty salaries were 17 percent behind the market. The next one was with Pete Wilson after we had gone through a couple of years of steep budget cuts and salaries were once again way behind the market … and things looked desperate. At that time there were projections that there wasn’t going to be ANY money for the UC by the year 2000. When Gray Davis became governor, UC wasn’t at a crisis point, but the goal then was to build and respond to big changes in demographics. Since it looked like we were going to have an enormous increase in the number of students, the question was whether we were going to get the resources we needed. Recently, of course, we reached another crisis point after the past bad budget years.
An agreement of this sort does several things. First, it gets the governor to buy in. Second, it sets the stage for developing a budget - you have a basic agreement with the DOF that is a starting point for a budget, and the overall hassle is cut way down, including developing the Regents budget. And last, it allows you to plan. I would be the first to admit that things are never going to work out exactly. But if you look at the history of these agreements, we have, as a matter of fact, usually gotten more, not less. George Deukmejian did way better for UC than the original agreement over period of years. Pete Wilson also did better than the Compact, and Gray Davis at first did a lot better than what we thought was already a good agreement. Now, all of these have been negotiated in very different ways. With the current Compact, there was an enormous amount of discussion that went into it beforehand, involving lots of people. That’s in contrast to the first one [with Governor Deukmejian], which we put together with just three people, David Gardner, myself, and [then-UC Vice President] Bill Baker. The Wilson Compact also involved just a few people and was done fairly quickly. Finalizing the Partnership Agreement with Gray Davis, though, took at least four or five months, because of the particularity of the accountability measures, but also because the agreement was a way to negotiate certain budget proposals. Even in the Gray Davis era, UC would have been much worse off without the Partnership Agreement, in my opinion. On the accountability side, UC also has historically done better than the state’s expectations. It’s important to understand what the state expects of us. We have nothing to lose by being accountable and everything to gain.
What about the current agreement with Governor Schwarzenegger?
In the short run at least, I don’t believe this governor can do any better than the current agreement. The State is in deep trouble, and getting the Governor’s commitment to support UC was absolutely critical. If we hadn’t, we would have been much more vulnerable to large cuts in the basic budget. There was some flack this time because the Legislature wanted to be involved in making the agreement. But they hadn’t been involved in any of the previous negotiations, whether it was with a Republican or Democratic administration, and besides that, all of the things we argued for were also things that the Legislature cared about.
The Compact is meant to assure at least minimum funding through 2011, but at the same time, the state has an unprecedented structural deficit, and – by most analyses – the University has not recovered from the severe cuts of the early nineties. Beyond the terms of the Compact, is there a road map for, over the long run, regaining what has been lost, bringing faculty and staff salaries up to competitive levels, ensuring strong support for research and graduate education?
For the next two years the minimum in the Compact will probably be all we get. Once the state gets out of the hole there will be opportunities for increased funding in our priority areas and for special initiatives. Priorities here mean continued recovery in all areas of basic support, and specifically doing better with respect to graduate students. If there’s extra money, it can be put into salaries for faculty and staff, and then the Regent’s priority of restoring the student-faculty ratio, which is an issue of pure dollars. With the state supporting those areas better, we could then use more of our own fee revenue to help support graduate education. As for research, restoring cuts is always hard in that area. Legislators and governors always react better to new research initiatives that are high priorities for the state. So we need to look at models for how we spend our student fee money, and what percentage is used in return as financial aid. This is one of the more difficult issues, but it can be dealt with. Another model is building more private support. This is something the Regents have been very interested in and we have already begun to look at our priorities there. Saving money will also play a role in the long term. We have every incentive to save money overall, and giving campuses the right incentive to reduce costs is very important, by allowing them to keep what is saved to use towards their priorities.
To what extent can private funding play a role in long-term budget planning?
I think the role is significant. We can’t just depend upon the state; and, although the federal government has been a key source of support over the past 20 years, I don’t think we can depend on continued increases. Also, there’s only so far you can go with student fees. So, we certainly need to develop strategies to get more private support, and we have begun to do that. We’ve done well historically in this area. A lot of that money has gone into buildings, which has been important for growth, but now we need to look harder at our priorities for fund-raising. There are a lot of opportunities out there, and a lot of alumni and other friends of the University.
What do you say to fears about privatization (in connection with increased fees or private support)?
I agree with the people who are afraid of privatization. We’re a public institution. UC gives students the opportunity to meet their goals because of their own abilities, and not because they have money. And that isn’t just a private benefit of the student’s but it’s also a public good. Having students pay a bigger share of the cost of their education makes sense – lots of studies have shown that – but I think it has gone too far now with the professional schools. We don’t have as great a share of the state budget as we have had in the past, so it’s all the more important to keep the argument before state government that public education is society’s investment in itself. We can’t let them forget that higher education is as important an investment – if not more so – as just about any other thing in the budget. Even governors have recognized that cutting higher education is not a sensible long-term strategy. Unfortunately they don’t see that sometimes until things get pretty bad.
Trying to raise more private money is not the same as saying the public shouldn’t be supporting higher education. I’m violently opposed to that and have been my whole career. When Fabian Nunez [Speaker of the California Assembly] was recently honored as Legislator of the Year at UC Day in Sacramento, it was good to hear him talk about how important public education is in terms of students reaching their goals in life. Those of us who grew up poor understand that we should never lose sight of the importance of public higher education. And we should never give up making the basic arguments to the Legislature and the Governor. We shouldn’t let the public policy makers think that they can provide second rate funding for higher education without there being serious consequences. All you have to do is look at other states and other countries and you’ll see what a bad investment strategy that is.
What kind of funding models could generate increased support for graduate education up to levels that would ensure competitiveness in the national and international arenas?
As I said earlier, the money for graduate education could come either out of fee revenue, increased state support, private funds, or from federal research support. However, there are big concerns about what is happening with federal funding. Federal support grew dramatically over the last 20 years or so, but now I think we’ll be lucky to keep up with inflation. Campuses themselves have to decide that increased graduate student support is a priority and most of them have done that. And we have to convince the state of its importance to the state’s economy. We have a selling job to do. Graduate student numbers have grown dramatically over the last five years after two decades of no growth. If we can keep growing graduate enrollments at a thousand per year at the same time undergraduate enrollment levels off then there will be a fairly major impact over time. And, we’ll have this huge bulge of undergrads going on to get graduate degrees.
Distribution of funds among the campuses is done in what seems to be an uneven and perhaps unfair manner. Can you address the disparity in funding between, say, Merced, and the older campuses (Berkeley, UCLA) that receive enrollment funding on top of an historical base.
In my career, I’ve often thought it was a tougher issue of how to be fair in distributing money to campuses than it has been getting money from the state, or dealing with student fee issues. I can’t prove to anybody that anything is fair or not. In deciding funding for Merced, we set it up so they would have equivalent funding to that of Santa Cruz and we gave them basic money on top of enrollment money. In addition, we got one-time start up money from the state. Merced aside, distribution of funds to the campuses has always been difficult because each campus feels that other campuses are getting more. The way we used to allocate resources recognized that Berkeley and Los Angeles, for example, had a higher proportion of graduate students. When Dick Atkinson became president, he said that base funding for campuses would remain as it was, but would be a new starting point. It was a big growth period, and the new policy was to give every campus the same dollars per student as they grew, and give block allocations to take care of salary increases and other areas of inflation. So, as far as funding for salaries and for enrollment growth goes, everybody was to be treated the same. The view of the President was that cutting back on certain campuses wouldn’t make sense for the University, but that as we grew, everyone would get the same funding based on that growth. That was a policy decision. I, for one, would be reluctant to tamper with it. It wouldn’t do the University any good to cut back the quality at Berkeley; and it wouldn’t help the other campuses in the long run. I think we’d be better off trying to help them at the margin with new resources.
In the years you have been in your post, how have you seen the UC Academic Senate change? What would you say about your interactions with the Senate?
Have I seen changes over time? Not much, but I can say two things. First, the faculty who work in the Senate really care about the University through good times and bad. Their motivations are in the best interest of the University and not foremost in the interest of individual campuses. Second, their views have remained the same over long periods of time. I must say, in spite of all the turnover in committee membership, and all the hundreds of people I have dealt with over the years – the basics don’t change much even though the circumstances change. Which means you don’t have to start from scratch talking about priorities – and the budget is all about priorities. The Academic Senate has had a lot of influence in budget matters. They are great at taking a University position, and that’s always helpful in getting past internal struggles. And we’ve gotten good advice. When Bill Frazer was Chair of the Academic Council – going way back in history [1978-79] – he told us that when they set up the Planning and Budget Committee [UCPB], they wanted it filled with the very best people who could offer the best advice. I can’t think of any year we haven’t gotten that. Especially in the worst of years, when we were really struggling, we sat down with the Senate leadership to try to come up with strategies for the University, and the advice was very helpful and instrumental.
Is there anything you want to add?
I’m going to make one more point that has come up in discussions recently and that I think may be more important than all of these details. We need to look at the University in the bigger picture and over the longer term. We’ve gone through good times and bad, and if you look at UC over 37 years (which is how long I’ve been here) and see the development of the campuses and the improvement of quality everywhere – campus by campus – it’s been phenomenal. Who could have dreamed of what has happened at San Diego or Irvine or Santa Barbara? (I can remember incredibly rough times at Santa Barbara.) I can list every single campus as an example and make the argument that we have developed into the greatest university in the world. We should not lose sight of that. But sometimes we get so caught up in the short-term crisis; we need to step back and look at what has been accomplished. That helps cheer me up anyway. It helps keep me an optimist.
Vice President Hershman’s career spans the terms of these UC Presidents and California Governors:
UC Presidents:
Charles J. Hitch 1968-75
David S. Saxon 1975-83
David P. Gardner 1983-92
Jack W. Peltason 1992-95
Richard C. Atkinson 1995-2003
Robert C. Dynes 2003-present
Governors:
Ronald Reagan 1967-75
Jerry Brown 1975-83
George Deukmejian 1983-91
Pete Wilson 1991-99
Gray Davis 1999-2003
Arnold Schwarzenegger 2003- present
- Brenda Foust