A fundamental question arose immediately after UCLA Anderson School of Management announced its surprising plan to give up state funding: Will alumni come forward with bigger donations to make up the gap?
Some are skeptical. But at two prominent business schools that dropped state funding—University of Virginia’s Darden School of Business and University of Michigan’s Roth School of Business—the answer was yes.
Dean Robert Bruner at Darden said his school’s done fine since 2002, when it made a move comparable to what Anderson is planning.
“A professional school, if it’s doing its job well, should be able to look to the profession it serves to help meet its needs,” he said.
Some UCLA alumni are supportive.
Robert Beyer, a 1983 Anderson graduate and retired chief executive of Los Angeles-based fund manager TCW Group Inc., said he’s a believer.
“The gap Anderson would have to fill under self-sufficiency really isn’t that daunting once the school gets its tuition and fees in line with other top business schools,” said Beyer, incoming chairman of Anderson’s Board of Visitors, an advisory group.
UCLA’s plan, first reported last month, is designed to allow the university to divert what would be Anderson’s share of state money toward undergraduate programs to help them amid budget cutbacks. In order to fill what would be an annual loss of about $18 million to the school, the plan calls for raising tuition to levels comparable with those of private colleges, along with increased fundraising.
The management school’s tuition is $41,000 for California residents and $49,000 for out-of-state residents. Under the self-sufficiency plan, that’s likely to increase to $53,000 to $58,000, with state residents receiving a roughly $5,000 discount and overall student aid increasing.
Funding
Judy Olian, Anderson’s dean, said only about 18% of the business school’s $96 million budget comes from the state. The rest is covered by tuition and fees for degree and non-degree programs, plus some private support. In the 1970s, the state paid 70% of Anderson’s budget.
Self-sufficiency, Olian said, would allow the school to better attract and retain star professors by offering star pay.
“The flexibility we gain will better enable us to be competitive in our salaries and maintain the excellence that attracts students, while at the same time helping out the university,” she said.
The plan is subject to approval by UCLA Chancellor Gene Block and University of California President Mark Yudof. If approved, the state money gradually would start being redirected to undergraduate programs next year, with the shift completed by 2015.
Anderson, which ranked 15th in U.S. News & World Report’s most recent comparison of graduate business schools, has 720 students in its full-time MBA programs, which receive state support, and about 1,100 others in several part-time and executive MBA programs, which are self-funded.
Olian said private gifts and endowment income will have to grow from about $10 million annually to at least $14.5 million. The rest of the deficit mostly would be covered from tuition hikes.
Endowment
In addition, Olian said she wants the school’s current $102 million endowment—smaller than many public and private schools of similar reputation—to triple. Income from that would help Anderson in the future.
Stanley Lanier, a 2002 graduate who is president of San Francisco-based market research firm Chatter, is another supporter of the plan.
“If less than 20% of their operating budget is coming from the state, then we should be able to make up that difference,” Lanier said.
He also sees other advantages.
“I think alumni will (understand) that faculty and staff at Anderson can be more creative and flexible when they don’t have to slog through the UC bureaucracy,” he said.
Others are skeptical.
T.K. Pillan, who graduated in 1997 and cofounded restaurant chain Veggie Grill with two Irvine locations, is among them.
“People may be cautious about making commitments right now because of the state of the economy,” Pillan said. “I value the education I received at Anderson, but I don’t know that I personally would give any more than I already do.”
But Pillan also said that the school’s plan for self-sufficiency might give fundraisers a more potent marketing tool. In other words, a self-funded Anderson would be able to make a better case to alumni who aren’t giving as much as they could.
In weaning itself off state money, which at the time made up less than 20% of its operating budget, the University of Virginia’s business school won more control and flexibility over its tuition fees and faculty salaries, Darden’s Bruner said.
“In reality, we didn’t give up that much,” he said. “The writing was on the wall. We knew things had to change if we were going to maintain quality.”
At University of Michigan’s Roth School of Business, alumni support has been crucial to keeping the school running, said Robert Dolan, Roth’s dean. The state’s university system became largely self-sufficient in the 1970s when the auto industry began a long decline.
Alumni support has been crucial to maintaining Roth’s reputation, Dolan said. And self-sufficiency allows him a greater degree of autonomy.
“When a professor comes to me saying that he’s gotten an offer from Yale, I can tell him right away what I can do for him,” he said. “That flexibility is well worth any additional state money we might have gotten.”
Crowe is a staff writer with the Los Angeles Business Journal
