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Public universities plow ahead with billions in construction despite tight budgets

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The Rady School of Management is one of the new buildings on the UCSD campus. (Photo by Crissy Pascual)

Construction cranes sprout from the campus of the University of California at San Diego like towering palm trees in the Southern California sun.

There’s a new engineering building under construction, and a new addition to the school of management. A new office building is now open, along with a new parking garage, biomedical research and marine labs, cardiovascular center, $400 million student apartment and dining complex, and $55 million music center. Construction on new clinical-research and biological and physical-sciences buildings is scheduled to start next year.

In all, $2 billion worth of new facilities are in the planning, design or construction stages at UCSD. The broader University of California system has more than 200 projects under way at its 10 campuses and five medical centers, together valued at $8.9 billion. “The cement never dries on a UC campus,” one faculty member observed wryly.

All of these new buildings seem an odd contradiction in a state that has cut billions of dollars in operating costs from its public universities, which have responded by reducing enrollment, dramatically increasing tuition and laying off employees. But it’s part of a nationwide building boom at universities that shows no signs of abating—despite budget shortfalls, endowment declines and seemingly stretched resources.

America’s universities and colleges have spent more than $11 billion on new facilities in each of the last two years—the depths of the economic downturn—which is more than double what they spent in 2000, according to the market-research firm McGraw-Hill Construction.

“What you’ve seen in California you’ll see in other places, too,” said Mary Vosevich, director of physical plant at the University of New Mexico and president-elect of APPA, previously known as the Association of Physical Plant Administrators, whose members oversee campus buildings and grounds.

Critics are seeing it, and they’re not happy. While they say some construction is justified—at jam-packed community colleges, for instance, where enrollment is increasing—these observers contend that many new buildings are going up on campuses because financial donors want their names immortalized, university presidents like to leave legacies of brick and mortar, and admissions directors are battling for applicants they’re convinced are lured by shiny new amenities.

“You can go into any community and talk to somebody whose son or daughter either can’t get in or can’t finish [college] because they can’t get this or that course,” said David Wolf, cofounder of The Campaign for College Opportunity, which lobbies for higher education in California. “Meanwhile, they go on campus and there’s all that fresh cement. That’s embarrassing, and it’s wrong.”

University officials say that, in addition to private donations, some campus buildings are paid for by government research grants and student fees. More importantly, they say, the money for construction—often raised through taxpayer-approved bonds—is kept in strictly separate capital, not operating, accounts.

“It’s a common misperception,” said Steve Springer, spokesperson for the Los Angeles Community College District, which halted $5.7 billion in construction projects—80 new buildings on its nine campuses—after the Los Angeles Times exposed waste and mismanagement. “People say, instead of putting the money into all these buildings, put it into hiring more faculty or increasing enrollment. But it’s different money.”

Not entirely, said David Kline, spokesman for the California Taxpayers Association. Construction costs are ultimately bankrolled by taxpayers, Kline said. California’s public universities and colleges, for example, are now paying a staggering $1.1 billion a year in interest on those construction bonds, more than double the amount paid a decade ago, the state’s Legislative Analyst’s Office reports.

“People discuss bond money as if it’s free money that isn’t coming out of the taxpayers’ pockets, and that’s exactly where it is coming from,” Kline said.

Once the keys are turned over, the universities also have to clean, heat, light, cool, and maintain these new buildings, the burden of which comes out of hard-pressed operating budgets. Students help pay for the construction spree through escalating fees for things like new dorms and gyms, said Richard Vedder, director of the Center for College Affordability and Productivity.

“The notion that this is somehow being financed in some way that is not costing students or taxpayers money is disingenuous to the extreme,” Vedder said. “The universities seem to treat this like a birthday gift or something. But there is a pain associated with the maintenance of these new buildings.”

This lab sits empty in a brand-new building at the University of California at Riverside, part of a planned medical school the university cannot afford to open. (Photo courtesy of UC-Riverside)

One glaring example of what happens when universities put up buildings they can’t afford to operate is at the University of California at Riverside, which opened a new $36 million building last year and has another under construction, both for a planned medical school. But it has had to push back the medical school’s opening to at least next year because it can’t afford to run it.

“We’re cognizant of how much it costs to operate and maintain” new buildings, said Deborah Wylie, the UC system’s associate vice president for capital resources management. “Each campus just has to figure out how to absorb that into their operations, and they aren’t very happy about that.”

New campus buildings are “the gifts that keep on taking,” quipped Lander Medlin, executive vice president of APPA.

The added cost of maintaining new buildings comes at a time when universities have already trimmed the proportion of their budgets that goes to maintenance and operations from 11 percent to 10 percent, according to American School & University magazine, which tracks such spending. The amount of square feet maintained per full-time custodian has increased by 16 percent, and the amount per full-time maintenance worker by 13 percent.

“You’ll find that offices are no longer cleaned, except maybe once a week. Trash isn’t pulled,” said Medlin. “And all the stuff that’s behind the walls is not getting the kind of preventive maintenance it needs to, and that begins to reduce the lifecycle of that new building,” which costs even more down the road.

“It’s pay me now or pay me later,” Medlin said.

Construction accounts for only a third of what a building costs over its lifetime, Medlin said. The price triples when maintenance and repairs are added.

Some states are considering making universities factor in the expense of operating a new building when they estimate construction costs. Utah already does. But a 2011 audit found that Utah universities appeared to be flouting the rule by siphoning $4.3 million from the maintenance budget for older buildings into operating 23 new ones.

Lindsay Hogan, an economist at McGraw-Hill Construction, said there’s no sign that the building boom will stop. It may even speed up. Philanthropy is rebounding, she said, “which has helped some colleges move forward with projects that were in the pipeline.”

But she also warned that, as state legislatures become stingier about paying for new buildings, universities are shouldering increasing proportions of construction debt themselves, risking their bond ratings—and facing even higher interest costs in the long run.

Vedder compares this unfavorably to the way things work in business.

UCSD construction projects include the Structural & Materials Engineering Building. (Photo by Crissy Pascual)

“There’s no bottom line in higher education,” he said. “The private sector has a bottom line, and in calculating the bottom line, you have to calculate the cost of these buildings, and maintaining them, which cuts into profits. So a businessperson says, ‘Do we really have to build this building?’ ”

But Wolf sees the situation as a symptom of what he calls the ossification of America’s universities and colleges—their unwillingness to change the way they do things in the face of new realities.

“There’s no evil force on every campus that is creating what appears to be inefficiency and wasteful behavior,” he said. “What it is, is the result of a combination of things going on in a period of extraordinary change, when old systems need to be reexamined, and aren’t being reexamined. And you sum all that up and you get a situation that doesn’t make any sense.”

This story was produced in collaboration with California Watch, part of the independent, nonprofit Center for Investigative Reporting.

 

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Concrete Engineer

” “The cement never dries on a UC campus,” one faculty member observed wryly.”
There are two reasons for that: 1. It is concrete. Cement is a constituent of concrete, but concrete is placed in buildings. 2. It does not dry, it cures. The water reacts chemically with the cement and becomes part of the concrete. The sidewalk you walk on and the wall against which you hit your head, ;-) ,has a lot of water bound in chemically .

Fred Q Public

And how deep in debt is the State of California???
Just asking.

Georgia Auditor

What is the plan for these buildings when courses are online and students are scattered around the globe?

Julia Gilden

I am trying to contact Jon about this story. I am a union organizer (these days — in former times I was a newspaper reporter) for CWA, and we are currently organizing UC’s 16,000 administrative professionals. I am very interested in a background piece of the article, namely, how do the percentages and amounts campuses are spending break down by category (investors, federal funds, students fees, industry, research grants, bonds, etc). Can you help me, or let me know where I might find this information?
Thank you for your help.
Julia Gilden
San Francisco Bay Area

Milan Moravec

Public University of California Berkeley now more expensive for Californians than Harvard and Yale. UC Berkeley Chancellor Birgeneau’s recruits born abroad and affluent out of state $50,600 tuition students who displace qualified Californians; spends $7,000,000 + (prominent East Coast university accomplishing same at 0 cost) for OE consultants but stops consultants from examining Chancellor office for inefficiencies; pays ex-politician $300,000 for a couple lectures; tuition to Return on Investment drops below top 10; QS ranking below top ten. On all-in cost Cal. is now the most expensive public USA university – more expensive than Harvard, Yale. Chancellor Birgeneau’s fiscal track record is dismal indeed.

Birgeneau would like to blame the politicians, since they stopped giving him every dollar asked for, & the state legislators do share some responsibility for the financial crisis. But not in the sense he means. Every year Birgeneau ($450,000 salary) would request a budget increase, the timid UC Regents would agree to it, and the legislature would provide. The hard questions were avoided by all concerned, & the Birgeneau leadership inefficiencies just piled up to $150 million +.

It’s not that Birgeneau was unaware that there were, in fact, waste during his 8 year reign. Faculty & staff raised issues with Birgeneau however, when they failed to see relevant action taken, they stopped. Finally, Birgeneau engaged expensive ($7,000,000 +) OE consultants to tell him what he should have known as a leader or been able to find out from the bright, engaged people. (Prominent east-coast University accomplishing same at 0 costs)

Cal’s senior management is either incompetent or culpable. We are sympathetic to the running of higher education with declining state money. However, Cal. has been badly damaged by Chancellor Birgeneau. Good people are loosing their jobs. Recommendation: You never want a crisis to go to waste. Increasing Cal’s budget is not the solution. Honorably retire UC Berkeley Chancellor Birgeneau. Email opinions to UC Board of Regents marsha.kelman@ucop.edu

(The author has 35 years’ consulting experience, has taught at University of California Berkeley where he observed the way Cal. senior management work)

Quick Hits (3.20.12)

[…] still sprouting like towering trees. “America’s universities and colleges have spent more than $11 billion on new facilities in each of the last two years—the depths of the economic downturn—which is […]

Liat

I wonder if the person who wrote this article has ever actually seen a budget or knows how budgeting is done for universities. The state of California keeps slashing the budget by millions. Obviously, these buildings are not getting built on the same budget, but a non-discretionary budget.

[…] Medlin, of the Association of Physical Plant Administrators, says that construction typically accounts for only one-third of the lifetime cost of new […]

[…] Meanwhile, public universities are spending on new buildings [6], but they’re sharply hiking tuition as well as either cutting or just maintaining enrollment. (University of Wisconsin in-state tuition has doubled in just the last decade.) The Public Policy Institute of California (PPIC) found [7] that the share of young people enrolled in U.C. or California State University campuses dropped 20 percent in the five years between 2007 and 2012. “You can go into any community and talk to somebody whose son or daughter either can’t get in or can’t finish [college] because they can’t get this or that course,” David Wolf, co-founder of the Campaign for College Opportunity, told California Watch. “Meanwhile, they go on campus and there’s all that fresh cement. That’s embarrassing, and it’s wrong.” […]

We must hate our children |

[…] Meanwhile, open universities are spending on new buildings, though they’re neatly hiking fee as good as possibly slicing or usually progressing enrollment. (University of Wisconsin in-state fee has doubled in usually a final decade.) The Public Policy Institute of California (PPIC) found that a share of immature people enrolled in U.C. or California State University campuses forsaken 20 percent in a 5 years between 2007 and 2012. “You can go into any village and speak to somebody whose son or daughter possibly can’t get in or can’t finish [college] since they can’t get this or that course,” David Wolf, co-founder of a Campaign for College Opportunity, told California Watch. “Meanwhile, they go on campus and there’s all that uninformed cement. That’s embarrassing, and it’s wrong.” […]

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