The Privatization of California’s B-Schools

by John A. Byrne on

“It’s a time of great change and reflection in the UC system,” says UC-Davis Business School Dean Steven Currall

In the past few years, billions of dollars have been slashed from California’s higher education budget. Some have warned that the cutbacks are impacting the quality of a state university system that has long been considered the crown jewel of public higher education.

What has been the impact on the state’s premier public business schools?

Surprisingly, say the B-school deans, there’s been little to no impact. A year ago, faculty and staff endured a “furlough” that led to a one-time average pay cut of eight percent. But the prestige and quality of the full-time MBA programs has been protected as state support of the schools has diminished.

What has occurred is a quiet privatization of business education. The B-schools have pushed through dramatic increases in MBA tuition and fees, stepped up efforts to increase endowments, and added more non-degree executive programs that produce “revenue surpluses” to offset the cuts.

“Basically, all of us have been phasing out our reliance on state funding for many years,” says Steven C. Currall, dean of UC-Davis’ Graduate School of Management. But Currall winces at the notion that he and his fellow deans have “privatized” the business schools.“Some in the UC system see privatization as radioactive,” he concedes. “I prefer the words financial sustainability. We’re reducing our reliance on state funds which makes our business model much more akin to a private university based more heavily on tuition and endowment. That is the model we must pursue.”

COST OF A BERKELEY MBA UP 301% FOR RESIDENTS AND 142% FOR NON-RESIDENTS

The impact of that transition has been felt most by students. Over the past ten years, for example, the largest increases in MBA tuition have occurred in California public programs. Berkeley’s Haas School, the highest ranked of the full-time MBA programs in the state, boosted the price of its two-year MBA to state residents by 301% to $86,396 this year from $19,996 in 2001. Non-resident tuition jumped by 142% to $100,356 from $41,404 in the same timeframe. In comparison, the two-year tuition bill at Stanford rose 72.5%, while the price of a Harvard Business School MBA increased by 79.6%.

Ten years ago, a California resident who went to Berkeley paid only 31% of what a graduate student paid at Stanford for the MBA degree. Today, state residents who go to Berkeley pay 78% of what Stanford students pay. The differences are similar at UCLA’s Anderson School and other University of California business schools.

More shocking, perhaps, is how these increases–along with a sluggish economy–have dramatically altered the payback of the MBA degree. Graduates of Berkeley’s Class of 2000 earned median starting base salaries of $85,000. Last year, Haas MBAs earned median salaries of $110,000 each. So while the non-resident tuition bill has risen by 301%, median starting salaries have increased by just 29%.

WHAT WAS ONCE AN EDUCATIONAL BARGAIN HAS BECOME A HIGHER-PRICED PUBLIC UNIVERSITY MBA

Within ten short years, what was once one of the world’s educational bargains in graduate business has become one of the nation’s higher-priced public university MBA programs. The public universities in California, of course, have plenty of company. The University of Michigan’s Ross School of Business and the University of Virginia’s Darden School effectively “privatized” their full-time programs long ago.

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  • BSchoolHope (Tuck ’13 woot)

    “It’s a social mobility machine”

    I think that this is still true, and to my mind it’s one of the most important roles that business schools play.

    Most of the top B-schools operate a needs blind admissions policy and while the costs have sky rocketed I do think that it’s an avenue that is open to anyone.

    Also, I think that the cost of a business school, public or private, should reflect it’s value proposition. If a public school can place you in jobs equivalent to to a similarly ranked private institution then the value of the degree is equivalent also.

    Take Haas vs Kellog:
    Similar rank on the P&Q top 100
    Similar cost for out of state students (In state students get a bargain at Haas)
    Slightly higher base salary coming out of Haas.

    It seems to me that it is desirable to have educational institutions that do not suffer when government funding is cut. They need to be able to continue to provide the very best tuition and job placement and therefore remain competitive with similar private institutions and give students from all background the ability to advance in life.

  • Maggy (Stern ’89)

    Indeed, CA B-Schools can emulate the successes of Darden and Ross.

    Agree completely with Dean Olian’s “If you can’t get the best people, you’re not going to be the best university.”

    The schools you covered are still a great deal for in-state students.

    Also, I believe UC-Davis dean’s quote was about seceding (vs. succeeding).

  • http://www.clickok.org Jim

    All education is going online. Even business education – sites like http://www.clickok.org are primitive but they are a glimpse of the future.

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