The picture is even grimmer at the community colleges. As enrollment increases have outstripped funding, many campuses have been forced to cut courses and put a cap on enrollment. To balance the books, community colleges raised their fees more than a third, from $11 to $18 a unit. That's only about $150 a term, but community-college students are especially sensitive to tuition hikes. The higher the cost, the less they're willing to risk a job now for uncertain future prospects. At a recent hearing in Sacramento, community-college officials estimated that enrollment was 90,000 below what they had been expecting.

The Master Plan's promise of mobility to community-college graduates--do well and you can transfer to a public university--has also fallen victim to the state's fiscal woes. In recent years the number of transfers has been steadily increasing, and to keep pace with demand, the state agreed to underwrite 4 percent annual growth for UC and CSU. This past summer, the legislature broke the agreement. The result is as dispiriting as it is predictable: The University of California has closed off enrollment for the winter semester, and 1,500 transfer applications from community-college graduates were returned unread. The CSU system, facing the same pressures, will turn away an estimated 20,000 students next spring. Come next fall, the situation will be even worse.

California's self-inflicted political wounds have made perfect fodder for the late-night TV talk-show hosts. But when it comes to higher education, California's dismal story typifies what's happening across the country. Nationwide, college enrollments are steadily growing. But because state support and tuition don't fully cover the cost of providing an education, each new student means more red ink for the university. That's why many universities are turning away eligible students or ratcheting up their admission standards. While costs keep going up for everything from buying new technology to patching aging campuses, the share of higher-education operating expenses paid for by state tax dollars has been cut by more than a quarter since 1980. Some states now contribute less than 15 percent to university operating costs, and tuition has shot up mainly to cover the shortfall. State budget cuts have also forced many campuses to shrink curriculums. This fall the University of Illinois system canceled about 1,000 classes when the state lopped nearly $200 million from the budget, Virginia Tech shut down an education major and the University of Colorado dropped some academic programs in business and journalism.

For the better part of a century, says Mark Yudof, president of the University of Texas System, state legislatures and public universities have had a compact: "In return for financial support from taxpayers, universities agreed to keep tuition low and provide access for students from a broad range of economic backgrounds, train graduate and professional students, promote arts and culture, help solve problems in the community, and perform groundbreaking research."

No longer--now it's the market, not the commonweal, that calls the shots. The value of a college education has skyrocketed. Today's male college graduates make $32,000 a year more than those with only a high school diploma, up from a $15,000 differential in 1975, after adjusting for inflation. This leaves public officials more inclined to perceive the BA not as a social investment but as a ticket to personal financial security. "Legislators and governors everywhere have become accustomed to letting higher education pay its own way," says Robert Zemsky, who runs the Learning Alliance for Higher Education at the University of Pennsylvania, "reminding those who balk at ever-higher tuition that, from the perspective of a return on investment, nothing beats a college education." Last spring Yudof confirmed the demise of the historic compact when he brokered a deal with Texas legislators; essentially, it blurs the line between public and private institutions by allowing each campus to determine its own tuition.

The market mindset also shapes how lawmakers are viewing financial aid--not as a response to students' need but as an investment in the state's productivity. Georgia's well-publicized "HOPE" scholarships paved the way, and now a dozen states award hundreds of millions a year in merit scholarships to keep top-ranked high school graduates from going out of state. Almost all that money goes to well-off students who would have attended college anyway, instead of to low-income students who otherwise can't afford a college education. Whether the policy yardstick is efficiency or equity, this is a misguided approach. David Breneman, an economist and dean of the University of Virginia's education school, says he "can't remember a time when the instincts of politicians have been so at odds with what most economists seem to think is sensible policy."

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