source: Tax filings

While families struggle to help students with tuition — and as student loan debt skyrockets — California universities continue to amass multimillion- and even billion-dollar endowments.

Endowments at the state university system schools have seen massive increases since 2009, even as in-state tuition at University of California has doubled in the last decade to $12,192 and the average student loan balance tops out in California at $20,340 per student as of 2013.

Most universities point to dwindling state support as justification for tuition hikes. But most also ignore, or fail to mention, the increases in their endowments, a considerable pot of money that for some colleges boosts their assets into the billions of dollars.

“We need to be forcing these institutions to spend more of that money in financial aid,” said José Luis Santos, vice president of higher education policy and practice at the Higher Education Trust, a Washington, D.C.-based group that advocates for better higher education opportunities for students.

The University of California at Berkeley’s nonprofit endowment arm reported a fund balance of $1.3 billion at the end of fiscal year 2013, the last year for which numbers are available.

That figure represents a 73 percent increase over the school’s endowment balance of $779.7 million in 2009. The fund supports “academic research for the students, employees and faculty of the University of California Berkeley,” according to the fund’s tax form 990.

The endowment for the University of California at San Diego grew 53 percent from $299.8 million in 2009 to $460 million in 2013.

At UCLA, the endowment balance increased 65 percent over the four-year period. UC San Francisco’s fund topped them all in terms of growth, ballooning 84 percent.

Over the same four-year period, UC in-state tuition increased 71 percent.

Endowments are used as investment resources, but the spending of the yield is dictated by fund policy, which can vary. Donors can, and often do, specify use as well, such as attracting professors with certain specialties or for particular research.

Santos disputes the claims of colleges who say they are hamstrung by contingencies and conditions on many endowment donations. They also contend that they cannot spend more than a specified percentage of their endowment, saving much of it for investment and future growth.

Even a small increase in spending can be significant, though, given the size of the endowment funds. The four schools CalWatchdog examined had a combined fund balance of $4 billion at the end of the 2013 fiscal year. One-tenth of one percent of that balance is enough money to cover full tuition for 329 students.

source: University of California

“Universities will tell you their hands are tied,” Santos said. “The question is, ‘Who sets these percentages?’ No one is governing these endowments other than themselves.”

Meanwhile, the salaries of administrators and top educators and researchers have skyrocketed, a fact that has not gone unnoticed by California lawmakers. Assembly Bill 837 would cap UC system salaries at the half-million-dollar mark.

From a legislative analysis of the bill introduced by Assemblyman Roger Hernández (D, West Covina):

According to the author, “the UC’s stance on increasing student tuition while at the same time continuing to pay its staff over half a million dollars is disturbing.

In 2013 calendar year, 387 employees made over $500,000 in total annual salary, with 29 others earning more than $1,000,000 per year.

In contrast, the remainder of the 268,442 UC employees earns an average annual wage of $43,520. According to AFSCME, the total UC spending increased by 40% during the 2007-2013 timeframe, while spending on UC’s richest employees increased  by 270% during the same timeframe.

When UC trustees voted 14-7 to increase tuition last fall, UC President Janet Napolitano said the rate hike was needed.

According to Napolitano, UC needs that 4% plus up to 5% more tuition each year for five years, or its equivalent from the state, to afford higher payroll and retirement costs, hire more faculty and enroll 5,000 more California undergraduates over five years. A third of the tuition money will go toward financial aid.

According to figures in a March bond issuance filing, the state has increased funding to UC by 31 percent since 2011-12, from more than $2.2 billion to more than $2.9 billion in the 2014-15 budget.

The new budget would increase the UC budget by 4 percent, contingent on no tuition increase.

UC is the state’s junior university system with 10 schools compared to California State University’s 23. But it has for years endured criticism for its generous payroll. Both systems are regulated in terms of payroll by the state assembly, which occasionally enlists measures to prevent outlandish pay.

The measures, though, have not always been successful. In the 2009-10 session, Gov. Arnold Schwarzenegger vetoed a measure that would have prevented executives in the UC system from getting a raise in years when the system’s budget was either kept the same or cut.

A measure last session would have required the California State University system to freeze undergraduate tuition and fees through 2016-17.  But according to the bill, which also inserted language to “request” the UC system do the same, the freeze was contingent on increases in state general fund support.

The bill died in committee.

Napolitano’s success last fall in getting UC regents to approve a five-year, 28 percent tuition hike conditioned on how much state funding UC receives is what triggered the fight.

In his newly released state budget, the governor not only ignored her call for more funding, he indicated a preparedness to micromanage UC over whom it admits. The Los Angeles Times’ George Skelton depicted Brown as having …

… essentially stiffed UC President Janet Napolitano and the regents, who have threatened to raise tuition again unless the state chips in substantially more money.

Brown re-offered only last year’s deal: a 4% increase, or about $120 million, if the university keeps tuition flat. UC previously said that wasn’t enough. “The $120 million is not chump change,” the governor insisted.

And he threw in a new condition: No additional out-of-state students, who pay triple tuition, crowding out California kids. UC was “created by the people of California … for the citizens of the state,” he declared.

The populist quality of his admissions maneuver will serve Brown well politically — even if it goes against his normal posture of budget pragmatism. Out-of-state students pay so much in tuition that they shore up financing for UC and relieve pressure on the state budget.

Brown, Legislature > Napolitano, regents

But the insiders and UC watchers I have spoken with think the governor is playing three-dimensional chess and Napolitano is playing tic-tac-toe.

Brown and the Legislature want to get credit for tuition relief for the middle class. Napolitano wants to have a bigger budget but has yet to convince the public or the media that UC is in dire straits.

The governor just won a landslide re-election by making the case he is a careful fiscal steward of the state. Napolitano has no political base in California after years as governor and attorney general of Arizona and homeland security czar for the Obama administration.

Given these facts and circumstances, it’s difficult to see how Brown can lose this fight. The more interesting question is whether Brown will allow the UC president to save face by making some concessions. To this point, he’s not just content to accept the narrative of her as an adversary, he’s actively encouraging it.

Skelton thinks this may be the end game:

Brown wants to negotiate with Napolitano over university cost-cutting, which could include professors spending more time teaching and less researching.

But that would only be a further humiliation for Napolitano, who has repeatedly declared her intention to keep the UC system as one of the world’s great centers of research.

If Napolitano went along, it would also likely trigger a sharp reaction from the UC Faculty Senate.

The former Arizona gov may already regret challenging the current California gov so directly.

The latest Bee headline suggests Napolitano may have the upper hand in initial skirmishes. But the former Arizona governor is doomed.

Napolitano doesn’t understand how California politics works. She doesn’t remotely get that the UC president’s office isn’t a political power center. Her job is more for people with a courtier streak than a my-way-or-the-highway streak.

Beyond that, Napolitano is a Golden State newcomer who after 14 months doesn’t have remotely enough political capital to take on a California institution just re-elected in a landslide. She also has no idea how toxic tuition hikes are to the state’s dominant Democrats.

But what is perhaps most tone-deaf of all is that Napolitano has launched this fight even as she defies a new state law that requires UC to be way more transparent about its finances so when it imposes tuition hikes, elected leaders understand why they are impossible to avoid.

I wrote about this angle in Tuesday’s U-T San Diego:

It’s hard to believe any government agency in a democracy would think it had no obligation to disclose essential details about its finances. Yet that has long been the norm with the University of California system and its multibillion-dollar annual budget.

This was supposed to change with enactment of a 2013 state law that requires UC to break down how — and for what — it uses state funding, tuition, research grants and other incoming dollars. This was done to force UC to offer a clear financial case when considering tuition hikes and enrollment changes. Presently, UC officials offer a vague “average cost of instruction” per student instead of a detailed analysis.

Beginning Oct. 1, university officials were supposed to provide such data. Not only has UC refused to comply, it has done so even as UC President Janet Napolitano proposed annual tuition hikes for the next five years.

In an interview with the San Francisco Chronicle, Napolitano insisted UC wasn’t being “defiant.” But she also belittled the law as an inconvenient “budget exercise.”

This is inexcusable. Gov. Jerry Brown and the Legislature need to send Napolitano a clear, strong message that UC must comply with a plainly written — and badly needed — state law.

How long until Napolitano gives up on her tuition-hike push and launches a laughable attempt at face-saving? I’d say the over-under is Dec. 24. She’ll announce her new stance on Christmas Eve at 5 p.m. to hope it minimizes her embarrassment at being massively schooled by Gov. Edmund G. Brown Jr.

Central planning of California’s green-energy market has run into a price glitch with the launching of its Energy Imbalance Market, which was meant to balance solar power and natural gas power at dusk each day.

California’s green-energy market mainly is a joint venture of California’s grid operator, Cal-ISO, and Warren Buffett’s PacifiCorp system of hydroelectric dams in the Western United States.

Cal-ISO thought it had it all figured out how to balance green solar power, available only when the sun shines, with cheap but constantly available fossil-fuel power (coal and natural gas).  Importing clean hydropower to replace gas-fired power when solar power fades out at dusk was supposed to lower electricity prices.

But California launched its first-ever regional Energy Imbalance Market on Nov. 1 only to find out there was a big glitch: Out-of-state energy generators did not submit enough bids to provide sufficient hyrdopower to California, mainly from 4:30 to 6:30 p.m. California time each day.

As CalWatchdog.com reported last week, due to this glitch, natural-gas power had to come to the rescue of the state’s energy market.  California’s grid operator explained that what caused insufficient bids were needed power-plant upgrades, metering issues and outages. But then why was PacifiCorp able to submit bids when others could not?

One explanation is that power generators were fearful of holding their power in reserve for California all day, only to find out the price to clear the market when California needed it at dusk might be less than what it cost them to produce it.

The result is right out of an Economics 101 textbook on how reduced supply increases prices: Energy Imbalance Market prices rose. Bloomberg reported the market is “at times creating abnormally high prices … because not enough supply is being bid into the system.”

To lower prices, ISO petitioned FERC to lift price cap

To respond to the problem of “unrepresentative high prices” for hydropower at sunset hours, on Nov. 13 Cal-ISO petitioned the Federal Energy Regulatory Commission for a waiver of energy-trading rules. Paradoxically, the petition requested permission to relax the $1,000-per-megawatt-hour cap on electricity price bids and accept market-clearing prices that might exceed the cap.

Despite lifting the price cap for power of $1,000 per megawatt hour, Cal-ISO touts that its Energy Imbalance Market market would save market participants $21 million to $129 million annually.

However, the American Public Power Association points out the realized cost savings from an Energy Imbalance Market would be from 0.72 to 1.36 percent, or $146 million to $294 million, of total regional power costs.  But glitches like those reported above could wipe out the tiny percentage of projected cost savings of the green Energy Imbalance Market.

Smaller states and market participants oppose Energy Imbalance Markets because the markets shift the benefits of cheap power to large market participants and higher costs to smaller participants.  If PacifiCorp dams sell power to California for two hours per day at dusk, that is power that its previous customers have to go out and buy in the market, sometimes at higher prices. Utah ends up subsidizing Los Angeles.

CA green power market does not improve emissions

Not only has California launched a Western regional green Energy Imbalance Market that is causing the hydropower it buys to be overpriced. It also keeps the air clean in Idaho, Utah, Wyoming and Oregon, but does nothing to clean the air smoggy in Los Angeles, Bakersfield, Fresno or El Centro. And air quality in Idaho, Utah, Wyoming and Oregon, where PacifiCorp operates, is not improved or worsened by selling hydropower to California.

California’s green Energy Imbalance Market is meant to avoid having to buy fossil-fuel-based natural-gas power, but so far has not eliminated the need for natural gas-fired power plants. And the price for backup natural gas power is always much higher because the number of hours it can generate sales is reduced, but its operational costs remain fixed.

So what California’s green Energy Imbalance Market produced is both higher hydroelectric spot power prices and higher backup natural-gas power prices, with negligible emissions improvements.