Capital Projects for the 21st Century

For a long time now, we've been talking about -- and attempting to fight -- the UC's obsession with capital projects. Back in fall 2009, Bob Meister wrote that the UC was selling bonds (i.e. borrowing money) to launch new construction projects while at the same time proclaiming a financial crisis in order to justify raising student tuition. As Meister (and Bob Samuels) have shown, the tuition increases in fact have far more to do with maintaining good bond ratings, and thereby feeding the capital projects beast, than they do with paying for instructional fees.

Now there's a new kind of capital project. And, as usual, the UC is borrowing money to get it off the ground -- despite earlier promises to the contrary. And, again as usual, what's going to be used to repay those loans? Student tuition. As the Chronicle of Higher Education reports,

In the midst of a budget crisis, the University of California plans to borrow at least $2-million to pay for a controversial project to build online courses rather than relying entirely on outside grants or donations, as university leaders had previously said.

The pilot project, which seeks to offer up to 20 online undergraduate courses by next January, is one of the system’s most ambitious efforts to reshape itself during a historic decline in state support. Leaders hope to eventually expand enrollment and make money by offering fully online undergraduate degrees.

To reduce concerns about the project’s expense, university officials have said it would be supported entirely by external sources, and the project received a $750,000 grant from the Bill & Melinda Gates Foundation last week.

But Daniel Greenstein, a vice provost and the project’s co-founder, said on Friday that finding enough outside support had been a challenge. The university has secured the option to borrow $7-million to help pay for the project and may spend $4-million to $7-million of that money over the next several years, he said.

In order to repay what it borrows, Mr. Greenstein outlined a new plan to offer the online courses to people not enrolled at the University of California, as well as to undergraduates. Tuition from those students will pay the loan back, he said.

[Update Tuesday 9:44 am]: The Daily Cal gets to the story too. There's an interesting tactical possibility in law professor Daniel Simmons's comments:

In a memo confirming the senate's original approval of the project last May, then-chair Henry Powell wrote that the Academic Senate "does not endorse the redirection of existing funds" for the project and that the senate approval is "contingent on the procurement of external funds."

"The whole idea was originally sold a year and a half ago with promises of the ability to raise a great deal of money from external sources," said current Academic Senate Chair Daniel Simmons. "It turns out that those external sources weren't very interested in the program being proposed."

Simmons said that while the senate's role in resolving budgetary issues is ultimately just advisory -- with the final funding discretion residing with UC President Mark Yudof -- it does decide whether to approve the program's courses for UC credit.