CA millions of degrees short

Business and civic leaders weighed in on the condition of California’s university and college systems with an urgent warning that without a significant increase in graduation rates, the state will lose its prominence as an economic contender.

A new report released Thursday by the California Competes Council found that the state needs 5 ½ million new college degrees and technical certificates by the year 2025. But, without major changes, California will fall 2.3 million short.

(Source:  California Competes and U.S. Census Bureau, 2010 American Community Survey).  Click to enlarge.
(Source: California Competes and U.S. Census Bureau, 2010 American Community Survey). Click to enlarge.

“We need to provide our young people with the tools, not only to live a good life and be good participants in our state, but to also fuel our economic engine,” said Long Beach Mayor Bob Foster, chair of the Council, during a conference call with reporters.

The Council’s report, entitled The Road Ahead: Higher education, California’s promise, and our future economy, is the third in a confluence of reports focusing on improving success at the state’s community colleges this year, this time from the perspective of business and civic leaders. In January, the Community College Board of Governors approved a package of 22 recommendations developed after a year of meetings and public hearings by the Student Success Task Force.

A month later, the Little Hoover Commission, the state watchdog agency, released its recommendations for community colleges in Serving Students, Serving California.

All three reports share some ideas. They would give more independence to the Chancellor’s office, provide more support for new students, and call for greater accountability. The Council states up front that it supports the recommendations of the other two groups, but goes on to say that they “do not go far enough in addressing the lack of accountability in the system caused by dysfunctional governance.”

They call their report a blueprint for the governor and State Legislature and lay out steps the state must take “to restore California to national and international prominence as a producer of high-quality college graduates.”

More and better quality degrees

Producing 5.5 million new graduates by 2025 means increasing the number of degrees and certificates by a little over 4 percent a year. The Council says this could be accomplished by better research into the types of jobs and qualifications needed to fill them in different regions of the state. The report notes that “there are increasing numbers of good jobs across a range of industries that demand skills gained in credential programs of less than four years,” and that “the state should identify majors that are a priority.”

Community colleges are a key strategy in meeting the demand. With about 2.6 million students, they are the largest higher education system in the nation, but rank second to last in completion rates, according to the report. That combination makes community colleges the low-hanging fruit, as it were.

“Improving attainment rates for transfer, degrees, and certificates at community colleges could address a third to half of the 2.3 million graduate gap,” write the Council members.

The authors also caution against losing sight of quality. Doing things on the cheap, such as increasing class sizes, could backfire by producing graduates without the analytical and critical thinking skills they’ll need to be successful.

Create a Higher Education Investment Board

Remember CPEC, the California Postsecondary Education Commission? It didn’t work out so well and Gov. Brown disbanded it last year. The Higher Education Investment Board would be CPEC with teeth.

It wouldn’t be a governance body, said Robert Shireman, director of California Competes. Like CPEC, it would collect information and data from campuses about the number of degrees granted from each campus, how much it costs to educate students for different degrees, and what the workforce needs are for different regions of the state, and use that information to advise the governor and Legislature on policy.

Unlike CPEC, the Board would have authority to compel each campus to respond to its requests for data because it would also have control of student financial aid, like Cal Grants.

“Campuses did not have any incentive to respond to requests of CPEC because there weren’t any consequences,” said Shireman. “The scholarship program is a hook into institutions that they need to be responsive.

Streamline governance

“The statewide Board of Governors should amend its regulations to restore clear accountability to local boards of trustees and to the administrators who report to them.” – California Competes.

In a significant shift from the other two reports, the Council proposed reconfiguring the management structure of community colleges to give local Boards of Trustees more power over policy.

Currently, under AB 1725, passed in 1988, local community college districts must ensure that faculty, staff, and students are allowed to participate in governance. Two years later, the Board of Governors went further with regulations that call for “mutual agreement” between the local trustees and faculty senates on issues pertaining to curriculum and academic standards.

The Council, while acknowledging that faculty input is important, said that by giving academic senates equal authority, it’s nearly impossible to reach any agreements.

“We really debated on the governance question and came away with the feeling that the accountability structure of community colleges really needed to be strengthened in order to move forward and address this gap in degrees and certificates,” said California’s former legislative analyst and council member Elizabeth Hill.

As far as the statewide academic senate is concerned, the Council based that recommendation on a blatantly mistaken understanding of the regulation. “My jaw dropped when I read that section of the report,” said Michelle Pilati, president of the statewide Academic Senate and a professor at Rio Hondo College.   “It’s disappointing to see that the authors of the report did not adequately check their facts.” Except for the changes implemented by the Board of Governors in 1990, Pilati said local trustees can opt to reach a mutual agreement with their faculty senates, but are under no obligation to do so.

Members of the student senate took issue with the portrayal of faculty as the obstacle to change and cautioned against using divisive language. “It’s a mischaracterization and in line with all the other demonization of teachers that we’re seeing in K-12,” said Rich Copenhagen, a student senator from the College of Alameda. “Unfortunately I think this report falls into that, and I don’t think that’s a very healthy way of dealing with our problems.”

The Community College Chancellor’s office said it supports any effort to improve completion rates, but was noncommittal on the report’s recommendations and instead directed attention to the Student Success Task Force. Some key proposals from the task force are already making their way through the State Legislature in SB 1456, the Student Success Act of 2012.

CalSTRS CEO: Avoid drastic change

A response from CalSTRS’ CEO rejecting key recommendations of the Little Hoover Commission serves as a cautionary note to Gov. Jerry Brown and five Republican senators who have been negotiating changes in public pensions as part of an agreement to vote to place tax extensions on the June ballot.

In a letter last week to Daniel Hancock, Little Hoover’s chairman, CalSTRS CEO Jack Ehnes dismissed as “impractical” the watchdog commission’s call for reducing the future benefits of current CalSTRS members and requiring that all public employees join and coordinate their benefits with Social Security.

Both of these ideas have been bandied about in various reform proposals. The five Republican senators are reported to advocate requiring new public employees to switch to a hybrid retirement plan similar to one imposed on federal employees a quarter-century ago. It would include a much smaller pension than what current workers receive, accompanied by a 401(k) match of up to 5 percent of their pay and Social Security benefits. Brown is reported to support much milder measures: capping the maximum amount of pensions and banning some of the pension-boosting tricks that have contributed to higher government costs.

Taking a more radical approach, a citizens group, California Foundation for Fiscal Responsibility, is proposing a constitutional amendment permitting the cutting of future pension benefits of current public workers – another of  Little Hoover’s recommendations.

Ehnes criticized making drastic changes to all pension systems in response to the problems of a few. The Little Hoover report’s “broad generalizations … do not hold up when applied to specific plans,” starting with the opening assertion that underfunding is due primarily to “overly generous benefit promises, wishful thinking and an unwillingness to plan prudently.” Contrary to being overly generous, Ehnes said, CalSTRS provides “a moderate benefit that replaces approximately 60 percent of pre-retirement income for educators.” (The exceptions, which Ehnes doesn’t mention, are the 2 percent of members – administrators and superintendents – who get pensions of more than $100,000. That’s who Brown is targeting.)

CalSTRS, which serves 852,000 current and retired teachers and school administrators, is rarely mentioned directly in the Little Hoover report. Its focus is on CalPERS, the nation’s largest pension plan, which serves most state employees, and independent county and city pension plans, some of which – Los Angeles, San Diego, and San Jose – may consume a third, half, or even more of municipal budgets in coming years. However, the report’s broad recommendations are intended to apply to all public employees, CalSTRS included. (Click here for a Los Angeles Times article today on a report on cronyism and insider trading at CalPERS.)

Although most state public employee unions and some municipal unions over the past year have agreed to higher employee contribution rates and limits on pay for the purpose of determining pensions, governments face legal hurdles to unilaterally reducing the future benefits of current public employees. And in the case of CalSTRS, courts have raised the bar even higher. That’s because, unlike contracts for other state employee unions, only the Legislature can set contribution rates for CalSTRS. A number of court decisions – cited at length by Ehnes – have ruled that current employees have vested rights in guaranteed pensions. They can make changes only in exchange for benefits of equal value, like pay raises. The only exception, Ehnes noted, would be a temporary freeze on accruing pension benefits because of an economic emergency.

The Little Hoover report acknowledges legal obstacles, but says that they may be worth challenging, because changing only the benefits of future employees will not create enough immediate savings. That’s why the California Foundation for Fiscal Responsibility wants to put an initiative to voters. Ehnes calls ignoring clear court rulings on this issue “naïve at best.”

Social Security

California is one of 14 states in which teachers and administrators have elected not to participate in Social Security – a decision that dates back 60 years. Teachers decided that CalSTRS offered a better return for their money. (There are nonetheless adverse effects for some teachers: Those who have contributed separately to Social Security, through summer jobs or jobs before becoming a teacher, face a stiff penalty when they retire. They can lose up to $381 per month in their Social Security entitlement when it’s combined with their CalSTRS pension. So far, Congress has declined to fix the inequity.)

Other public workers (including classified school employees like bus drivers, who are part of CalPERS) do contribute to Social Security. The Little Hoover report recommends having all public employees be part of the federal system and that the two systems be better integrated. Teachers currently pay 8 percent of their pay toward their pension, and districts pay 8.25 percent, with the state kicking in 4.5 percent. Under Social Security, workers and employers each pay 6¼ percent of pay.

Paying into Social Security and paring back the share to CalSTRS would reduce the liability for state and local governments, whose contribution levels to pension systems must rise when the pension systems’ investment income falls below projections. That’s precisely the problem now, because CalPERS and CalSTRS lost 25 percent of their market value in 2008.

However, there would be a tradeoff: Because CalSTRS offers a better retirement benefit than Social Security for every dollar contributed by workers, teachers would lose retirement income under the arrangement.

Forcing current teachers to join Social Security doesn’t pencil out, Ehnes wrote.  “We found that, if CalSTRS benefits were reduced to offset the benefit a member would earn from Social Security, the total cost of this coordinated benefit structure would be $1.8 billion more each year to the member and employer.”

The state and school districts do face substantially higher costs to keep CalSTRS solvent – potentially $3.8 billion more per year, phased in over the next decade. Ehnes is arguing that there are ways to deal with this problem without dragging CalSTRS into the mix of drastic changes to other systems.

At this point, it’s unclear whether Brown and the Republican five have made that distinction – or found any common ground at all.

New overseer for charters urged

Charter schools have become a time sink for the State Board of Education, with a third of its time spent dealing with schools serving 5 percent of California’s students. Relieving that burden is one reason that the Little Hoover Commission, a state oversight body, is recommending that California establish an independent body to directly authorize and oversee charter schools.

A California Board of Charter Schools would not replace local districts and county offices of education, which are still the primary authorizers of charters, but it would offer an alternative path for charter applicants, and, under the Little Hoover Commission’s plan, it would have the ability to revoke the authorizing power of local districts that are either too lax in monitoring charters or discriminatory in keeping them out. The Little Hoover Commission heard evidence that both situations exist.

Creating the charter school board is not a new idea. The Little Hoover Commission and the Legislative Analyst have recommended this before. And Caprice Young, the former CEO of the California Charter Schools Association, reports she urged it as well as a member of Gov. Schwarzenegger’s Committee on Education Excellence. With the continued rapid growth of charter schools – there are now 912, the most in any state by far – and the number of appeals before the State Board growing, the idea has again surfaced.

The Board of Charter Schools would operate within the state Department of Education, with its members appointed by the governor and the Legislature. The state Board of Education would continue to hear the appeals from charters denied by local districts and county education offices, and would keep its power to revoke poorly performing or dishonest charters. The Little Hoover Commission expects, however, that over time, the State Board of Education would see a diminishing caseload, opening up more time for it to focus on broader policy questions.

Colorado and Arizona also have  independent charter authorizing boards. In several states, colleges and universities are charter authorizers as well, but the Little Hoover Commission said that California institutions of higher education have lobbied against the idea.

The report, Smarter Choices, Better Education: Improving California’s Charter Schools, recommends several other reforms.

  • It endorses the idea of a performance contract between charters and authorizers to nail down commitments for academic progress and rights of charters to facilities. The charter petition doesn’t cover some of the negotiated specifics. The report recommends that the new board create model contracts.
  • The Little Hoover Commission concluded that the criteria for renewing charters are too vague and “the bar is set too low, making it difficult for authorizers to close down poor-performing schools.” Therefore, the Legislature should rewrite renewal criteria while keeping them flexible enough not to punish charters that serve at-risk students.
  • Because it takes at least several years for a new charter to establish itself and collect data on student performance, the report recommends that charters initially be granted for a minimum of five years. (The State Board of Education would still have revocation authority.) Accomplished charter schools should be granted charter extensions for up to 10 years.