Posted by: Louis Lavelle on September 8, 2010
This doesn’t happen very often, so it’s news when it does. It looks like the UCLA Anderson School of Management (Anderson Full-Time MBA Profile) may soon be forgoing state aid. Higher tuition for MBA students is expected.
According to Anderson Dean Judy Olian, the proposal will go to Mark Yudof, president of the University of California system, in coming weeks. If he green-lights the plan, which was first reported by the Financial Times, a phase-in of the withdrawal of state funding will begin next summer.
Olian said unpredictable state subsidies made the move necessary. “We have over the years had significant declines in state support,” she said in a telephone interview today. “This would be a win-win for the school and the university.”
California's state budget deficit totals nearly $20 billion, while the UC system has an $800 million shortfall. About 18 percent of Anderson's $96 million budget comes from state funding, according to Olian, who said she expects private donations, cost containment, and new revenue streams to help fill the funding gap.
But by forgoing the state cash, Anderson also is free to raise tuition, which is apparently what it plans to do. Currently, the school charges $41,000 for California residents and $49,000 for non-residents. Olian says tuition will likely rise to a level comparable with top-tier private business schools such as the University of Pennsylvania's Wharton School (Wharton Full-Time MBA Profile) and the Stanford Graduate School of Business (Stanford Full-Time MBA Profile). Tuition at Stanford for the 2010-11 academic year is about $53,000, while Wharton tuition is $54,000. At the same time, she said, California residents would receive a $5,000 discount.
"What we've done over the years has been [to impose] painful increases for our students," Olian said. "Our tuition is already very close to market. We see tuition going up, as it has, to meet the market on the nonresident side."
Anderson would be one of very few state-funded b-schools to forgo state aid. In 2002, the University of Virginia's Darden School of Business (Darden Full-Time MBA Profile) did just that, opting to get all its financial support from tuition, executive education, and endowment earnings.
In Canada, top ranked b-schools including Queen's School of Business (Queen's Full-Time MBA Profile) and Western Ontario's Ivey School of Business (Ivey Full-Time MBA Profile) have sworn off provincial support years ago, and have thrived. But the most recent Canadian school to do the same, McGill University's Desautels Faculty of Management (Desautels Full-Time MBA Profile), ended up raising tuition 1,600 percent, from $1,500 to $29,500 a year.
As state support has dwindled over the years, other schools have sought to ramp up other sources of income, especially executive education, but have stopped short of kicking the state funding habit. Most states are struggling with budget deficits (46 in all, even after making deep spending cuts, according to the Center on Budget and Policy Priorities) and higher education has taken it on the chin just like everyone else. It seems likely that other schools might consider doing what UCLA did, although it seems just as likely that many would shudder at the thought.
How does everyone see this playing out?