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Liner Note 57. Selling the Do-It-Yourself Public University
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Cambridge, England on September 26, 2026
With everything going on in the world, from war to AI grasping at everything, it’s more important than ever for universities to have the money to think and work independently. That’s not where they are or where they’re headed. This is particularly clear in my case study, the most recent University of California Board of Regents’ Finance and Capital Strategies meeting. The finance model doesn't bring in enough money to support the academic core, as officials now admit in passing. And this month, they suggested that researchers help fund general operations by giving more research control to venture investors.
Sounds really strange, I know, but that's what I heard, as I'll explain.
Under current conditions, UC (and others)
1. Cannot invest in each undergraduate at the higher levels required by AI proliferation.
2. Cannot fund basic research on campuses at pre-2025 levels
3. Cannot sustain doctoral programs scaled to intellectual needs
4. Cannot construct academic buildings to educate an ever-growing student body
5. Cannot properly maintain existing buildings
6. Cannot operate in the black without massive annual borrowing
7. Cannot avoid a “cuts culture” of continuous roving attacks on program resources
8. Cannot have an open discussion of any of the above.
In the long run, the most important of these is the last.
The best moment for me in this month’s meeting was when UC Office of the President finance chief Nathan Brostorm briefly said the unsayable (to regents), which is that “many campuses are grappling with structural deficits, particularly on their core funds” (“Finance and Capital Strategies Committee,” September 16, 2026, 0’56”). He listed a set of challenges, including “no identified funding for capital projects and deferred maintenance” (items 4 and 5 above). It was great that Brostrom uttered that phrase _structural deficits_ in public, and also tied it to the educational core that’s paid for mainly with student tuition and state funds.
Brostrom and Caín Díaz presented a slide that didn’t appear in the standard background memo for the meeting (folks should read these!).
**Figure 1: UC Core Funding Since 2000**
(Source: Capital and Strategies Committee, Slide 15, UC Regents, September 16, 2026)
UCOP occasionally does state this reality: the campuses have lost over a third of their per-student funding in this century. Díaz also noted that UC is also still 6% below where it was after the biggest cut in UC history in 2008-09.
UCOPs figures nicely confirm the calculations we’ve been producing on this blog for many years (“Essential Charts”; “Peak UC?”; “Shortfall”; and recently, “Stop Hurting,” etc). It’s worth remembering that 38% is the _gross_ reduction in per-student funding. Your department receives (much) less than the per-student totals listed here, given administrative and other costs. In addition, the State of California does not cover employer pension contributions (increasing to 15.5% of payroll) or capital expenditures for educational buildings on campus. These figures understate the restrains on funding at the academic core: see our UC Irvine coverage for examples (Liner Notes 31 and 33; "Laying Off").
These chronic shortfalls create Problems 1, 2, 3, and 7 listed above: undergraduate teaching, research, and doctoral education get poorer and/or smaller or both because of structural constraints and deficits. If you sense overstatement in the phrase "continuous roving attacks" on budgets, you will of course sometimes be right, but often not: see the document, "Financial Stability Strategies Across Campus, FY 2027," from UC Irvine's Office of the Provost and Executive Vice Chancellor.
UCOP has no plan to fix the structural deficits that they do acknowledge, which, to repeat, ongoingly damages UC’s academic core. That core is funded by state appropriations, student tuition, and some smaller flows like endowment income and indirect cost recovery on research grants. These funds just aren’t enough to support the full spectrum of research university functions at a high level of quality.
UC now can’t increase tuition revenues at the 2010s rate: nonresident enrollments are capped, and “cohort tuition” rises are mainly trying to beat inflation. You know what’s happened to research income, which runs at a net loss anyway. That leaves major increases in state funding to fix the core. But UCOP’s finance story excludes any possible call for that.
The undiscussed solution has been borrowing. The result is that UC’s outstanding debt and financial obligations have _doubled_ in the past ten years (see “Stop Hurting” for details). This debt largely funds growth in the medical centers and related operations, which is the only part of UC where revenue growth beats inflation. This month, Brostrom noted stronger headwinds even here, fanned by changes in federal health policy. For example, UCSD’s medical center has recently seen a 20% decline in Medicaid reimbursements.
As the 2010s saw the end of meaningful growth in tuition revenues, the 2020s may see the end of the high growth in medical revenues that gives the impression of financial power. That leaves borrowing (via bond issuance and other means) at higher interest rates than when it all began. And even with new borrowing of $3 billion or so each year, and massive gross revenues from UC Health, UC struggles to break even year after year (Problem 6 above).
**Figure 2. Total Income and Losses from Operating and Academic Non-Operating Income**
Source: UC Controller Financial Reports, 2018-19 to 2024-25.
Brostrom & Company added a new member this month, and a new cover-up of the campus problem. This was UC Berkeley chancellor Rich Lyons, a genial former dean of the Haas Business School, as well as the campus's Associate Vice Chancellor and Chief Innovation & Entrepreneurship Officer until taking the chancellor’s post. The standard handoff between Brostrom and Diaz now had Lyons in the middle. His function was to hide the conflict between UCOP and the campuses (UCOP policy locks in structural deficits) by saying at each point that UCOP finance was working great for Berkeley.
Lyons’ satisfactions of course prove nothing about the 9 other UC campuses: Berkeley would be the first to state that it’s a highly untypical campus. But Lyons performed, quite genuinely, a good-natured adaptation to fiscal realities that need not be contested because they cannot be changed, and anyway, he implied, they’re pretty okay.
The most pernicious element here was Lyons’ celebration of fully commercialized science. The budget discussion had been immediately preceded by two gigantic capital projects, for a Berkeley Air & Space Center and a UCLA Research Park. There is no UC money to build either full project. The more absurdly grandiose, Berkeley’s proposed space center near NASA at Moffett’s Field on Santa Clara County property, is to proceed through a limited liability corporation. The other, a conversion of the former Westside Pavilion shopping mall, which has over 9 acres of land in crowded and overpriced West LA, has spent nearly $20 million of UCLA money on planning and is asking to spend another $34 million basically on site preparation.
UCLA chancellor Julio Frenk claimed his project is essential to the future of UCLA research. What’s actually essential to that is maintaining and modernizing UCLA’s existing research plant by ending debt-deepening administrative projects (see “Fight at UCLA”). No matter: the two projects were tranquillizer darts, injecting the Board of Regents with the hyponormalizing sense that UC Big Science still rules the waves.
In that atmosphere, chancellor Lyons helped postulate a new high-growth revenue source for UC—private philanthropy for science and technology. Private Support is now 7% of overall UC funds (“Budget for Current Operations, 2026-27” p. 17). That’s certainly something, but it has several known limits.
First, the majority of it occurs at the medical centers (as far as I can tell; summary breakouts are not available). Second, private support remains 98% restricted to specific projects, units, or activities (page 6), so does not function as general operating money. Third, private support consists of “endowment payouts, campus foundation transfers, and other private gifts, grants, and contracts,” so the UC calculation includes research sponsored by corporations and foundations.
Fourth, private giving comes in on top of public core funding; to be crude, donors want to leverage existing infrastructure and payroll into something cool with the donor’s name on it. Serious donors typically write contracts specifying very high base financial contributions from the University. A famous recent case was investor Charlie Munger’s proposed Munger Hall at UCSB, which was labeled “Dormzilla” and ultimately defeated. Munger wowed the regents with a $200 million gift. But the full cost of the building was $1.4 billion. As Munger said to the board in March 2016, “don’t thank me. You’re going to pay for it!”
In his statements alongside Brostrom and Diaz, Lyons ignored the known cultural laws of philanthropy. He devised a category called “budget-relieving philanthropy.” He said this can “supplement core funds.” He told a story about how this kind of giving allowed him to partially restore some grants that had had their federal funding cut by the Trump administration. This involved someone writing a check for $1.4 million to the Bakar BioEnginuity Hub, “so I wrote a check to backstop faculty research that was canceled.”
This statement made no sense to me. Either that was an unrestricted gift for $1.4 million or Lyons misappropriated a restricted gift. Since he’d hardly announce doing the latter in a public meeting, and since I assume he wouldn’t do it in the first place, I’d define this as an unrestricted gift, and put it in the 2% of giving that is too rare be presented as a solution to campus budget issues.
This non-solution comes at a great cost: Lyons also co-proposed a major shift in Berkeley (and UC) research towards “VC sponsored fundamental research.” The idea is that basic research would be funded and therefore steered by outside investors rather than faculty and other campus researchers. This kind of research in “Pasteur’s Quadrant” (practical research that reveals deeper principles) is valuable and fairly common, but as a rule consists of donors giving funds to professors so they can implement their own scientific judgment in setting both aims and means. It operates as "normal science" with everyday academic freedoms. A contrast remains: investors steer research towards returns for them, regardless on the impact on knowledge or research in general. (This is the investor's job within capitalism.)
Lyons gave as an example a lab director who asked him if UC Berkeley could participate in the first funding round of his spin-off company. Lyons both overstated the novelty of this staple of Bayh-Dole Act (1980) commercialization and implied to the regents that commercialization and academic science could and should be made the same. This is an old, widely-critiqued idea that wrongly denies knowledge loss from replacing faculty intellectual leadership with investor choice. And has never helped campus finance (e.g. chapters 12-13). What is newer is Lyons’s studied indifference to academic freedom _and_ to the financial autonomy required by deep, long-term research.
The UCOP term for all this is “fungible philanthropy.” It comes from the little-known Budget Management Workgroup about which the Academic Senate has expressed some concerns. The concept reflects UCOP's long-term move away from growing the big standard revenue streams for the core and towards “alternative strategies."
**Figure 3. UCOP Alternative Fiscal Strategies**
(Source: Capital and Strategies Committee, Slide 18, UC Regents, September 16, 2026)
These alterantive strategies are multiple, technical, and small, even structurally inadequate. Lyons praised them and expressed gratitude for “this wider menu of assets that have been made available” to the chancellors. Some of the funds are created by the action that caused the downfall of UCLA’s last vice-chancellor for finance, which was the unilateral sweeping of departmental accounts and pooling their funds into investible assets. The UCLA senate saw such intrusions as a violation of shared governance, and they are indeed not academically neutral “balance sheet initiatives.”
I focused on what I believe is the new aspect of this financial tale, this untenable plan for “fungible philanthropy to support core operations.” It will add administrative positions and generate many reports about exciting donor activity, but it will also, as coded in the next bullet, allow officials like Lyons to direct operating funds toward “restricted revenues”—toward favored donor projects--without really reversing shortfalls.
What will this mean in practice? Donors still won’t be writing multi-million dollar checks for “current operations," so they’ll do the usual and fund individual projects with restricted gifts, and managers will move campus resources towards those projects. Only now this will be structurally pressured as a budget solution and _good for everyone._ Every research project, in many cases each individual faculty member, will need to be seeking outside funds not only for their research but _also_ for its infrastructure _._ This means fundraising for operations: in this model, your center won’t get campus funds for staff and facilities costs, for you’ll be raising that yourself. Maybe the campus will provide a match for the donation you got. And you’re in a specialized or deeply non-commercial area, well, good luck to you.
“Every scholar a fundraiser”! Many faculty have accepted this, but with the understanding that the money directly supports their distinctive and independent research. In the UCOP-Lyons vision, it looks like they'll be raising money for the operating budget as well--hence the DIY public university. Nathan Brostom noted that UC had a great year with the state but it wasn’t enough to sustain enrollment growth “or the academic excellence of our campuses” (1’11”). And yet he and his UCOP colleagues again aren’t seeking _no-strings funding_ for the academic core at the proper scale. Instead, it's self-fund your research or fundraise for your basic infrastructure.
We'll need much stronger faculty attention and intervention to protect and extend basic research at our endangered public research universities. This must include a coherent _funding_ theory--a materialist theory--of research.
