Business School To Work Alumni: UCLA Anderson eyes ways to make up state money
September 20, 2010, LA Business Journal
When UCLA Anderson School of Management announced its surprising plan to give up state funding, a fundamental question arose immediately: Will alumni come forward with bigger donations to make up the funding 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.
Robert Bruner, dean 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 alumni are also supportive.
Robert Beyer, a 1983 Anderson graduate and retired chief executive of L.A. 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.
The plan, first reported two weeks ago, was designed to allow the university to divert what would have been Anderson’s share of state money toward undergraduate programs to help them amid budget cutbacks. In order to fill 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.
Judy Olian, Anderson’s dean, said only about 18 percent of the Westwood school’s $96 million budget comes from the state. The rest is covered by tuition and fees for degree and nondegree programs, plus some private support. In the 1970s, the state paid 70 percent of Anderson’s budget.
Self-sufficiency, Olian said, would allow the school better to 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.
However, increased salaries would also require additional tuition and fundraising.
The school would adopt the plan only if UCLA could keep the state money for undergraduate programs. The plan is subject to approval by UCLA Chancellor Gene Block and University of California President Mark Yudof. If approved, the state money would start being reduced next year and be gone by 2015.
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 between $53,000 and $58,000, with state residents receiving a roughly $5,000 discount and overall student aid increasing roughly 30 percent.
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 M.B.A. programs, which receive state support, and about 1,100 others in several part-time and executive M.B.A. programs, which are self-funded.
Part of the $18 million that the school would drop would come back on the books instantly: Once Anderson is self-sufficient, it would keep $8 million that it was giving to UCLA. That would leave a shortfall of $10 million. Anderson would look to make up that money through tuition hikes, and increased fundraising and endowment income. Block briefed UC regents on the plan last week.
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, roughly $6.5 million, would be covered mostly from tuition hikes.
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 percent 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 buy 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 co-founded Irvine-based quick-serve restaurant chain Veggie Grill, 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 percent 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.”
Bruner said private gifts haven’t plunged during the downturn, even though alumni of East Coast schools like his were more likely to have worked at the kind of Wall Street jobs that took the biggest hit during the financial meltdown.
Anderson in comparison is better known for churning out entrepreneurs and future executives in a wider variety of industries.
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.
Nevertheless, both Michigan’s Roth and Virginia’s Darden tend to rank near and in some times even above Anderson in national surveys.
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.”