In December, the University of California abandoned its sleek new logo in response to widespread outcry from students and alumni. Some said the logo looked like a fruit label. Others saw a kickboard. But the general consensus among the nearly 55,000 signatories of a petition demanding a restoration of the old logo—which features an open book and the university’s motto, “Let There Be Light”—was that the new one appeared overly corporate, more befitting of an Internet startup than an esteemed center of learning and discovery.
The logo debacle is not an anomaly. It is simply the most visible manifestation of a drastic change in the way public education across the United States is being marketed, financed and administered. It is well known that public universities are facing an identity crisis. States are drastically scaling back support for higher learning, forcing public universities to find new revenue sources. Tuition increases, out-of-state enrollment drives, increased class sizes, online instruction and investment in profitable medical and sports facilities have become the signature strategies of “privatization.” University administrators have maintained that privatization is now the sine qua non of public university survival.
While the fiscal woes of public universities are indeed dire, the quality and extent of institutions’ swift and deep embrace of corporate strategy is not simply a matter of necessity. Public universities are corporatizing because they are increasingly led by administrators with business backgrounds and ongoing ties to Wall Street. These leaders see the problems facing public universities, and the best solutions to them, in business terms. Consequently, as public universities struggle to rebrand and refinance, they often lose sight of their core missions.
A recent report published by researchers at UC Berkeley highlights the corporate origins of this ongoing transformation in public university administration and its dire consequences for students. The report documents how in the last decade, the University of California has engaged in an ambitious effort to debt-finance medical center development. Such borrowing has had two troubling characteristics. First, UC’s borrowing is indirectly collateralized on administrators’ ability to raise student tuition. Despite this, profits from university medical centers have been siphoned and reinvested, instead of being devoted to mitigating skyrocketing undergraduate tuition, which has risen 300 percent in the last decade.
Second, financial managers at UC have used new, more aggressive types of loans to finance development. In attempts to insure against these greater risks, UC has also purchased financial derivative products called interest rate swaps. While these swaps would have protected UC from market interest rate increases, current near-zero interest rates mean that UC is paying drastically inflated borrowing costs to Wall Street banks. University financial managers’ bad bets on interest rates have cost the university $57 million to date in excess interest rate payments. Meanwhile, the university is laying off critical staff, class sizes are increasing, and the student body is becoming more affluent and less diverse.
Just as UC administrators were baffled by student and alumni scorn for the new logo, they have failed to see how their new financial strategy is bad for students and workers. They have defended their aggressive and inequitable borrowing agenda, despite mounting criticism from faculty, students and public officials. UC’s financial leadership has scoffed at the idea of seeking to renegotiate its interest rate swap agreements, as many other public organizations nationwide have done. UC’s inflated interest rate payments are also a direct consequence of criminal interest rate manipulation by Wall Street banks, but administrators have spurned demands that the University litigate to recoup its losses.