The Privatization of California’s B-Schools

“Berkeley MBA graduate salaries are among the most competitive, while tuition is still below our private counterparts–and, in the case of California residents, significantly below,” says Richard Lyons, dean of the Haas School. He points out, for example, that for California residents the MBA program is still a bargain at $86,396 because it’s roughly $20,000 less than tuition for Northwestern’s Kellogg School of Management and $27,000 below the price tag of a Wharton MBA. Besides, adds Lyons, “our increase in MBA fees has allowed us to make a lot of investments in new faculty, curriculum and student services. The MBA education we are offering is a much stronger product than it was ten years ago.”

A BLESSING IN DISGUISE?

Some deans also take an optimistic view of the cutbacks in state support. “It’s a time of great change and reflection in the UC system,” says Currall. “I’m not thrilled with the cuts, but I am thrilled with the reflection they are causing. People are having to rethink the whole business model and accept the fact that we have to have a new business model. It’s a great change management story. I guarantee we are going to be better off—more efficient, more market oriented. I think this is a blessing in disguise.”

Still, there’s no question that much has been at risk due to the state’s budget crisis. The B-schools at four the ten University of California campuses are among the top 60 MBA programs in the U.S., according to Poets&Quants: No. 9th ranked Berkeley, No. 17th ranked UCLA, No. 56th ranked UC-Irvine, and No. 58th ranked UC-Davis.

To Judy Olian, dean of UCLA’s Anderson School, previous state budget crisis had already put the school on a road toward financial self-sufficiency. “The big hit was in the bust of 2001-2002. That’s when we were cut dramatically in terms of state support,” she says. “For us, the train left the station years ago when we started increasing tuition. We would never raise tuition dramatically now because it’s already quite high.”

Currently, roughly 17% of the Anderson School’s budget comes from state support, but the school also pays to the state a portion of the tuition fees it collects. Olian has proposed a plan to reduce Anderson’s state support to zero. Some $9.5 million would then be redirected to the university to benefit its under-funded programs. In return, Anderson would keep all the tuition it receives from students. Donors, she believes, would then be more likely to give money to Anderson if they knew their tax dollars weren’t supporting the school.

“What we’re suggesting as a model is to walk completely away from state support,” Olian added. “In return, we would have flexibility and predictability. Now we face two risks: the market risk and the state risk (budget uncertainties). Under financial self-sufficiency, we’d only face one risk.” The flexibility Olian seeks would allow Anderson to more easily set faculty compensation and tuition fees without a long, drawn out approval process from the UC system.

“Our objective through this has been that our students would not feel that they are in a budget environment,” adds Olian. “We’ve invested in the places that matter–in student career services, in program innovations, curriculum renewal and admissions. But we certainly had to cut costs in other places, and everybody had to take one-time cuts in pay from 4 percent to 10 percent in the academic year that ended last September.  We’re over that and we recognize that universities are about people. If you can’t get the best people, you’re not going to be the best university. It isn’t labs that make this university great.”