About Me

When not at work with students, I spend my time in my room either reading, calculating something using pen and paper, or using a computer. I read almost anything: from the pornographic to the profound, although my main interests are mathematics and physics. "When I get a little money I buy books; and if any is left I buy food and clothes." -Erasmus

Sunday, March 17, 2013

On State Universities and Fees (1)

The trending news right now in the University of the Philippines is Kristel Tejada's decision to take her life because she could not enroll due to the high fees. I am saddened by it, but can't take the view that it's the responsibility of the UP administration. The fees are ultimately dictated by the finances of the University, and even a not-for-profit (which UP is!) must remain solvent; that is, cash inflow should at least be equal to the outflow.

The place to begin is tuition fees. UP professors claim that the tuition fees are subsidized by the national government, even for those who pay full tuition. One way to put a lower bound on the amount of subsidy is to look at tuition fees in De La Salle University or Ateneo. Tuition fees at these schools would be around PhP 60 K per term, versus fees at UP that  go at around PhP 20 K to at most PhP 30 K per term. So the subsidy per student goes from PhP 30 K to PhP 60 K per year at the minimum. 

Again, this is a lower bound on the subsidy. What people do not take into account is the cost of keeping faculty, and faculty development. Faculty take a financial hit when they decide to teach at the University of the Philippines; they can, after all, decide to work elsewhere, where they're better paid, sometimes three or four times what they could make at University. Reasons they choose to stay include: the opportunity to interact with better students (it's frustrating having to teach underprepared students), and the opportunity to engage in research (which is a form of faculty development). 

These would be considered psychic rewards, and when students find out how much the faculty make, some of them even look down on the faculty because they choose psychic rather than monetary rewards. Which in turn encourages some faculty to leave to preserve their self-respect.  If faculty were paid at the going rates internationally, you can expect a larger shortfall in funds. So if you happen to be a UP student complaining about your professor, keep in mind that you're mooching off him or her! 

The administration also take a financial hit, including the UP System President and the Chancellors of the various campuses, because if they performed the same job elsewhere, they would be paid a lot more. The point is, aside from the subsidy from the national government, there is also a hidden subsidy from the faculty and the admin.

Where does a university get its funds? A university depends on tuition fees, gifts, and funding from the national government. On gifts: elsewhere, this is actually a large funding source, sometimes large enough that the income from the funds leads to a discount in the fees paid by the students. UP does not have that kind of money; in terms of giving by alumni, I think UP does a lot worse that Ateneo and DLSU. Alumni giving leads to lower fees. So if you're a UP alumnus, setting up a trust fund for UP's use does help. 

Another source of funding is income from rents from business establishments that operate within the University. UP is in a bind here; whenever the administration considers taking advantage of the income from rents, many students and faculty (who should know better!) raise an outcry about commercialization and its evils.What they don't realize is that such income is used by universities elsewhere to lower the fees paid by students. Knowing that this is a legitimate source of funding means I actually support allowing commercial establishments to rent unused UP land, provided that the process is transparent, and we don't encounter tenants who behave like the people from Gotesco

Now let's consider the national government as a source of funds. No matter how much the administration, from the UP President downwards wish for zero fees (and I think that they do wish for it!) , the people who dictate the amount of money from the national government is not the UP President. What the UP admin can do is plead for more funding funding from the House of Representatives, because it is congress that controls the UP budget. It's not a matter of the UP admin's political will; no matter what reasons they give, or rallies they join, if congress really doesn't want to raise UP funding, it won't happen. After all, the national government is already running a deficit, and more funds for UP means less funding for other things (such as pork, for example).

Some students raise the possibility of defaulting on government debt. What they don't realize is that government is already funding the deficit using debt. Any default means government will no longer have debt as a source of funds. Defaults increase borrowing costs; any further debt that the government takes on after the default must have very high interest rates, because lenders want to be compensated for their willingness to lend money to governments that have defaulted before. It doesn't matter if the debt was due to previous administrations. Government's willingness to pay for debts from yesterday give lenders the belief that debt that is incurred today will also be paid in the future. So diverting money from debt servicing is out. If we want to lower the cost of borrowing (interest rates), we'd better pay our debts to insure a good credit rating and hopefully get a credit rating upgrade so that we'll have lower interest rates in the future.

What does this all mean? Congress must work with what's left of the budget, and this is where the chicanery begins. So if you want to blame anyone, I say blame your congressman. 

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