Financing

Fully Funding the Master Plan

Since the University of California was created in 1868, the people of California have intended that “as the income of the University shall permit, admission and tuition shall be free to all residents of the state.”58

This idea was reaffirmed in the 1960 Master Plan for Higher Education in California, which called for all three segments of California’s public higher education system to welcome students tuition-free.59

The political presumption has been that reinvigorating the Master Plan is prohibitively expensive. Our analysis shows that it is eminently feasible.

We can afford all qualified California students tuition-free, top-quality higher education—if the political will exists to do it. It is within California’s reach to restore quality, guarantee access, remove economic barriers, and eliminate most (if not all) future student debt.

This analysis aims to answer one fundamental question: How much will it cost California families to do just that?

Restoring the full Master Plan

Table 1, below, shows the calculations that produce the answer to this question. Because the CSU’s and UC’s funding model and history are quite different from the CCC’s, we treat the CCC separately.

For the CSU and UC, we seek to restore state funding to a level supportive of the Master Plan for Higher Education, assigning a 2000-01 base year for these two segments. 2000-01 was the last year before funding for higher education was shifted dramatically from state taxpayers to students and their families.

Restoring the Master Plan for CSU and UC | Starting with the amount of state funding and full-time equivalent (FTE) enrollment numbers for the CSU and UC in the 2000-01 base year, we divide the total state funding by the number of FTE students to obtain the state funding per FTE student. (FTE data comes from the individual higher education systems; state expenditure data comes from the Legislative Analyst’s Office).

CSU UC CCC
FTE students State support per student FTE students State support per student FTE students State support per student TOTALS
2000-01 base 289,523 $11,764 171,245 $26,074 1,046,344 $3,752
2016-17 current 409,382 $8,548 264,633 $13,247 1,244,836 $4,639
Difference

from 2000-01

-$3,216 -$12,826 +887
Reset of state support $1.32 billion $3.39 billion No reset required $4.71 billion
Tuition revenue

2016-17 net

$1.89 billion $2.41 billion $426 million $4.72 billion

 

Next, we inflation-adjust these 2000-01 dollar amounts to their equivalents in 2016-17. We then multiply the larger FTE enrollments at CSU and UC anticipated in 2016-17 by the inflation-adjusted, base-year 2000-01 funding per FTE student to obtain the total amount of state funding required to restore Master Plan support for CSU and UC.

The gap between this amount and what the governor has proposed for 2016-17 represents the additional funding the state would need to provide. Using this method, we estimate that restoring 2000-01 funding per 2016-17 FTE student at the CSU and UC would cost an additional $4.71 billion.

Unlike CSU and UC, funding per FTE student for the CCC did not decline from 2000-01 to 2015-16; it increased. Restoring the full Master Plan at CCC simply requires elimination of the student fees anticipated in the governor’s 2016-17 budget while maintaining the proposed per-student funding level.

Eliminating student charges across all segments | If the CSU, UC and CCC were made tuition-free in 2016-17, and the state replaced all anticipated tuition and mandatory fee revenue, it would cost $4.72 billion.

Total cost to restore the full Master Plan | The total cost to restore state support to California higher education to the 2000-01 level per FTE student and eliminate tuition and mandatory fees for in-state students: $9.43 billion.

California can afford the best. It can’t afford any less.

Without more federal funding for higher education,60 can California’s tax-paying households afford to restore the Master Plan? Table 2 outlines how the $9.43 billion cost of restoring tuition-free access to top-quality higher education for all qualified California students would be distributed among state taxpayers.

We obtained data from the Franchise Tax Board for 2014 showing state income taxes paid by adjusted gross income.61 Note that the categories are for individual filers (where individual returns are often joint returns for families), partnerships and Subchapter S corporations, as well as corporations that pay income taxes.

For the median personal income taxpayer (including families), restoring the entire public higher education system while eliminating in-state student tuition and fees would cost $48—less than it costs to acquire a special interest license plate. Table 2 shows the cost for taxpayers in all income brackets.

California taxpayers’ costs might be somewhat lower if plans broadly discussed at the national level in 2016 were implemented—including tuition- free community colleges for all and tuition-free, public 4-year colleges for families below a certain income cap.

The takeaway, however, is that California can well afford to restore its full Master Plan with its own resources. The world’s sixth largest economy was built, in large part, by the foresighted leaders who conceived the Master Plan nearly six decades ago, inspiring similar educational and economic breakthroughs in states and countries with whom California competes today.

Virtues of the income tax surcharge

In these Master Plan scenarios, income taxes are presented as the source of state revenue to be used to reclaim public higher education. An income tax surcharge is the simplest way to illustrate the cost for typical taxpayers, but alternatives are available. The important point of this calculation is that any tax plan, if equitably distributed, would cost the large majority of Californians a small amount of money and avoid increasing student debt.

 

Table 2 | Additional state income tax needed to restore 2000-01 base year funding per student and eliminate tuition, by taxpayer’s Adjusted Gross Income

 

Adjusted Gross Income (AGI) class

Number of tax

returns

Total tax liability ($ 1,000s)  

Percent

Liability per tax return (average) Additional tax needed to restore public higher education Cumulative percent of all tax returns
Negative 177,388 $11,899 0.02% $67 $8.54 1%
Zero 9,792 $1 0.00% $0 $0.01 1%
$ 1 to $ 999 178,862 $65 0.00% $0 $0.05 2%
1,000 to 1,999 167,147 $125 0.00% $1 $0.10 3%
2,000 to 2,999 157,564 $187 0.00% $1 $0.15 4%
3,000 to 3,999 182,034 $385 0.00% $2 $0.27 5%
4,000 to 4,999 193,890 $1,368 0.00% $7 $0.90 6%
5,000 to 5,999 189,598 $1,703 0.00% $9 $1.14 8%
6,000 to 6,999 219,104 $2,712 0.00% $12 $1.58 9%
7,000 to 7,999 218,654 $1,791 0.00% $8 $1.04 10%
8,000 to 8,999 218,088 $3,332 0.00% $15 $1.95 11%
9,000 to 9,999 277,644 $1,987 0.00% $7 $0.91 13%
10,000 to 10,999 241,175 $1,543 0.00% $6 $0.81 15%
11,000 to 11,999 254,420 $2,680 0.00% $11 $1.34 16%
12,000 to 12,999 264,294 $4,719 0.01% $18 $2.27 18%
13,000 to 13,999 260,307 $3,929 0.01% $15 $1.92 19%
14,000 to 14,999 264,601 $4,638 0.01% $18 $2.23 21%
15,000 to 15,999 249,280 $5,146 0.01% $21 $2.63 22%
16,000 to 16,999 252,993 $6,142 0.01% $24 $3.09 24%
17,000 to 17,999 248,039 $7,571 0.01% $31 $3.89 25%
18,000 to 18,999 241,152 $9,556 0.01% $40 $5.05 27%
19,000 to 19,999 241,824 $15,333 0.02% $63 $8.07 28%
20,000 to 20,999 242,496 $13,309 0.02% $55 $6.99 30%
21,000 to 21,999 225,721 $13,781 0.02% $61 $7.77 31%
22,000 to 22,999 219,003 $14,385 0.02% $66 $8.36 32%
23,000 to 23,999 217,999 $16,546 0.02% $76 $9.66 34%
24,000 to 24,999 209,612 $22,748 0.03% $109 $13.82 35%
25,000 to 25,999 205,509 $23,366 0.03% $114 $14.48 36%
26,000 to 26,999 182,291 $22,600 0.03% $124 $15.79 37%
27,000 to 27,999 197,468 $29,492 0.04% $149 $19.02 38%
28,000 to 28,999 180,545 $25,935 0.04% $144 $18.29 39%
29,000 to 29,999 183,629 $31,883 0.04% $174 $22.11 41%
30,000 to 30,999 178,975 $34,376 0.05% $192 $24.46 42%
31,000 to 31,999 178,130 $38,557 0.05% $216 $27.56 43%
32,000 to 32,999 166,311 $35,055 0.05% $211 $26.84 44%
33,000 to 33,999 168,708 $39,674 0.05% $235 $29.95 45%
34,000 to 34,999 164,887 $42,307 0.06% $257 $32.67 46%
35,000 to 35,999 145,475 $40,328 0.05% $277 $35.30 47%
36,000 to 36,999 165,362 $55,064 0.07% $333 $42.40 48%
37,000 to 37,999 156,557 $54,141 0.07% $346 $44.04 49%
38,000 to 38,999 152,472 $57,203 0.08% $375 $47.77 49%
39,000 to 39,999 140,823 $53,090 0.07% $377 $48.01 50%
40,000 to 49,999 1,229,026 $676,081 0.91% $550 $70.05 58%
50,000 to 59,999 966,780 $906,695 1.22% $938 $119.42 63%
60,000 to 69,999 770,856 $1,073,854 1.45% $1,393 $177.39 68%
70,000 to 79,999 639,247 $1,186,512 1.60% $1,856 $236.35 72%
80,000 to 89,999 523,448 $1,266,756 1.71% $2,420 $308.16 75%
90,000 to 99,999 444,525 $1,321,065 1.78% $2,972 $378.43 78%
100,000 to 149,999 1,344,009 $6,527,053 8.81% $4,856 $618.40 86%
150,000 to 199,999 636,171 $5,566,060 7.52% $8,749 $1,114.12 90%
200,000 to 299,999 473,588 $6,834,617 9.23% $14,432 $1,837.68 92%
300,000 to 399,999 170,913 $4,015,092 5.42% $23,492 $2,991.42 93%
400,000 to 499,999 81,703 $2,706,437 3.65% $33,125 $4,218.10 94%
500,000 to 999,999 120,235 $6,708,679 9.06% $55,796 $7,104.98 95%
1,000,000 to 1,999,999 41,086 $5,517,828 7.45% $134,299 $17,101.38 95%
2,000,000 to 2,999,999 10,160 $2,673,193 3.61% $263,110 $33,503.74 95%
3,000,000 to 3,999,999 4,489 $1,749,934 2.36% $389,827 $49,639.66 95%
4,000,000 to 4,999,999 2,531 $1,296,972 1.75% $512,435 $65,252.21 95%
5,000,000 and over 7,429 $14,681,417 19.83% $1,976,231 $251,648.51 95%
Corporations 828,080 $8,593,087 11.60% $10,377 $1,321.40 100%
Totals / Averages 16,684,099 $74,051,983 100.00% $4,438 $565.19

Income classes based on all tax returns, which include individual returns, joint (family) returns, partnerships and Subchapter S corporations.

 

One benefit of using the income tax, which is progressive, is that every California student can attend tuition-free without giving wealthier families a free ride. High-income households pay more to restore the Master Plan, just as they pay more to fund other public priorities—because they derive an even larger benefit from an expanding economy. Using the income tax solves a problem with California’s current “high-fee, high-aid” higher education model, which requires arduous fee-waiver applications from lower-income families and hits higher-income families twice: once at tax time and again in prices for public services the taxes are supposed to provide. A better solution would be to charge the wealthy (and everyone else) once, through the income tax, and then to provide tuition-free education for all Californians.

Personal and corporate income taxes bring in nearly 75 percent of all state revenue.62 Allocating a portion of the cost to other taxes would dilute the effect on individual taxpayers. The scenarios above also assume that the costs will be distributed as a uniform surcharge across all income tax categories. If the surcharge were allocated more or less progressively, its effect on individual taxpayers would change.