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Comment by obblekk | Hacker News Reader

One thing I don't understand - if these universities are: 1. Running at a profit (growing endowments) 2. A path to the middle class

Why doesn't the government just roll the profits from the current pool of public uni's to new public uni's until prices start falling and demand is satisfied? Seems like it could only be good for society?

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Public universities are not profitable. Quite the opposite: tuition and fees cover only part of their operating costs; the rest comes from the government. In California, AFAIK, public universities don’t have endowments. Government funding of universities is seen as an investment in the state’s economy and in greater opportunity for all Californians. That’s the story at least.

Theoretically they should be self-sustaining on the large scale: education -> greater economic output -> higher tax revenue -> funding for education. Unfortunately that hasn’t really proven to be sustainable in California for a variety of reasons.

UC's have an endowment (~$10B), and for UCLA (where I work), the state funds contribute to about 6% of revenues. Tuition is only about 10%.

That is misleading because they are counting their hospital’s revenue in the pie. That only matters if the hospitals are generating profits the rest of the university can use. Otherwise, the hospital is revenue coming in and costs being spent with no relation to the education arm of the system.

The hospital does account for ~33% of revenues[0], but the Med School and the Hospital also account for ~55% of total expenses[1] so it doesn't seem entirely unfair to include them in the revenue stream.

0: https://ucla.app.box.com/v/acct-pdf-AFR-15-16 page 37

1: https://ucla.app.box.com/v/acct-pdf-AFR-15-16 page 28

Didn't realize how close the UCs were to being essentially private universities these days. No wonder they're targeting higher percentages of out of state enrollments.

But still not as much as private ones. Even the highest, Berkeley and UCLA, have about 21-22% of OOS and international students. The remaining UCs have less than 20%.

Thanks for the numbers. I was a bit skeptical but I found sources:

- student tuition and fees, 10.8% - state educational appropriations, 7.2%

See page 37 of https://ucla.app.box.com/v/acct-pdf-AFR-15-16

Thanks, I stand corrected.

The other way to look at it is that state universities are ludicrously profitable, but the boundaries are drawn in the wrong place.

Can you explain what you mean? What kind of boundaries are you referring to?

What I meant was profit/loss and other systems of accounting are meant to sum up the quantities within and the flows across the boundaries of a given system. If you externalize all of the profit and internalize all of the cost then of course it's going to look like a university loses money.

That sounds like it would destroy the incentive to do a good job in the first place (and the incentive to donate/make endowments to your alma matter, why bother when that money will just be taken away?). Instead, why don't these univiersities roll their own money into expansion?

I'm still not sure why people donate either.

People donate through what are known as charitable gift annuities. It's a tax minimization and income strategy.

Does that actually work? You're still parting with $X after all.

Yes, it works. There are a lot of ways to use charities, trusts, and similar things to avoid taxes.

Plus they can get their name on a campus building.

I donate so other students can have the same benefits I had.

Endowment funds are usually given with a specific purpose attached. There's no legal mechanism for government to seize them.

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