Reforming California Public Higher Education for the 21st Century

A Bay Area Council Economic Institute White Paper December 2014

Executive Summary

The Master Plan for Higher Education in California, produced in 1960, was a visionary document for its time, but must be updated to reflect the changed economic, demographic and financial environment of the current century. California’s economic future will depend on the outcome.

There have been key changes in California’s economic and educational environments. When the Master Plan was written, only 11 percent of jobs in California were filled by workers who held at least a bachelor’s degree; today about one-third of jobs in California are filled by college graduates. Ten-year projections point to a significant gap between the number of college-educated workers the state is expected to produce and California’s workforce needs. This workforce gap can be resolved in just two ways: by improving Californian’s educational outcomes, or by accepting the loss of quality jobs in the state.

A second key change is demographic. In 1960, 82 percent of the state’s high school graduates were non-Hispanic whites; by 2011 that share had fallen to 28 percent. This poses new challenges for providing educational access that will allow all of California’s citizens to fully contribute to and benefit from its economy.

California’s higher education system is hobbled in its ability to meet these needs. Its ability to generate the workforce of the future has been impacted by deep cuts in public support, particularly in the last decade. Higher education’s share of state budget expenditures has dropped from 18 percent in 1977 to 11.6 percent today. General Fund appropriations per FTE (full-time equivalent) student have also dropped precipitously for the University of California (UC), but also for the California State University (CSU) system.

Schools have responded with increased fees and reduced offerings. But fees can’t rise indefinitely, and further gains from increased efficiencies may also be limited. Although Proposition 30 (2012) stemmed the decline in state support, the additional funding it provides pales in comparison to the size of cuts in previous years and won’t fundamentally resolve the long-term structural challenges that public higher education faces. It is highly unlikely that state support for higher education will return to earlier levels, much less to the full funding that was provided when the Master Plan was drafted. Technology and the market for educational services are changing faster than the system is responding. To ensure that California has the skilled workforce it will need to compete globally, and that all its residents have the opportunity to contribute to its economic future, reforms are needed now. Strengthened state funding will be required but should also be linked to innovative strategies and new performance metrics.


Sean Randolph, President & CEO, Bay Area Council Economic Institute

Hans Johnson, Bren Fellow, Public Policy Institute of California


Higher Education photo courtesy of the University of California: Students in Lecture Hall created by Erik Jepsen, UC San Diego Publications