Public Universities Plow Ahead With Construction Despite Tight Budgets

Crissy Pascual/California WatchAn addition to the Rady School of Management is one of the new buildings under construction at UC San Diego.

Construction cranes sprout from the campus of UC 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. New clinical research and biological and physical sciences buildings are scheduled to get under way next year.

In all, $2 billion worth of brand-new facilities are in the planning, design, or construction stages at UCSD. The broader University of California system has more than 200 building 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,” Carolan Buckmaster, a researcher active in the UCSD faculty union, observed wryly. In the California State University system, $161 million worth of new construction is going up.

All of these new buildings seem an odd contradiction in a state that has cut billions of dollars in operating money from its public universities, which have responded by reducing enrollment, dramatically increasing tuition and laying off employees. And since there’s not enough money to operate them once they’re finished, they’re further stretching maintenance and energy budgets. At least one new campus building is sitting virtually empty and unused because the university can’t afford to run it.

University officials say all this construction was already in the pipeline before the 2008 economic downturn squeezed state spending for higher education. Some is being paid for by part of a $10.4 billion bond issue voters approved in 2006, for instance, from which more than $3 billion went to public higher education. Some is being underwritten by private donations, government research grants and student fees. About $1 billion came from bonds issued in 2009 under the federal stimulus program – which the universities will have to repay – and $325 million in bonds the UC system issued that year on its own. Individual campuses also issue their own bonds, and community colleges often get construction money from local bond issues.

More importantly, these officials say, the money for construction is kept in strictly separate capital, not operating, accounts. It can’t be used for expenses such as increasing salaries or enrollment.

But David Kline, spokesman for the California Taxpayers Association, said that, by insisting on continuing to build in spite of the financial downturn, the universities are missing the point. The cost of construction is ultimately bankrolled by taxpayers, Kline said. That’s because California’s public universities and colleges are now paying a staggering $1.1 billion a year in interest on those construction bonds, more than double the amount of 10 years ago, the Legislative Analyst’s Office reported in August.

“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.

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 that were cut by $1.4 billion this year, including $650 million at UC.

“The universities seem to treat this like a birthday gift or something,” said Richard Vedder, director of the Center for College Affordability and Productivity, an independent national research organization. “But there is a pain associated with the maintenance of these new buildings.”

Universities are feeling that pain. At UC schools, student fees rose 18 percent this year, and 4,400 employees have been laid off and 3,570 positions eliminated since the beginning of the fiscal crisis.

The most glaring examples of what happens when universities put up buildings they can’t afford to operate is at UC Riverside, which finished one new $36 million building last year for a planned medical school and has another under construction. But it has had to push back the medical school’s opening to next year at the earliest because it doesn’t have the money to run it. Officials are now scrambling to raise private donations to operate the school.

The $8.9 billion in construction under way now on the UC campuses compares to $5.1 billion worth of projects that were in design, planning, and construction 10 years ago. The new construction at nine of the 23 CSU campuses is also an increase from 10 years ago, when it had $153 million in projects under way.

What’s happening in California is part of a nationwide building boom at universities that shows no signs of abating, in spite of budget shortfalls, endowment declines, and seemingly stretched resources. America’s universities and colleges have built more than $11 billion worth of new facilities in each of the last two years – in the depths of the economic downturn – more than double what they did in 2000, according to the market-research firm McGraw-Hill Construction.

And the spending has continued at the same pace this year.

“What you’ve seen in California you’ll see in other places, too,” said Mary Vosevich, director of the Physical Plant Department at the University of New Mexico and president-elect of the national association of 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 – they 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, co-founder 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.”

In addition to donations, research grants, and bonds, the cost of new construction is often also raised from student fees for things like new dorms and gyms, Vedder said. “The notion that this is somehow being financed in some way that is not costing students or taxpayers money is disingenuous to the extreme,” he said.

After it was forced to shut down an entire 11-story dorm last year because of an enrollment decline, for instance, San Diego State this year started requiring incoming freshmen from outside the university’s immediate area to live on campus at costs ranging from $8,072 to $13,848 for the academic year, depending on the meal plan they choose – even though living off campus can often be cheaper.

While universities say they need more buildings, many don’t efficiently use the space they already have, said Lander Medlin, the physical plant administrators’ association’s executive director. Academic buildings at universities are used 30 to 40 percent of the time, she said.

“The optimum time for faculty and staff for classes is from 10 to 2, or maybe let’s give it 9 to 3, and that’s Tuesday, Wednesday, and Thursday,” Medlin said.

The Legislative Analyst’s Office reported in August that almost all California higher-education campuses could accommodate more students by making fuller use of existing space and scheduling more morning, evening, weekend, and summer classes.

That report covered a period ending before the state’s public universities and colleges reduced enrollment by a combined 165,000 places last year alone because of budget cuts. The new construction has continued in spite of this. In the CSU system, it ranges from new parking garages at the campuses in Chico and Long Beach to a new student union with a 12-lane bowling alley, a bioscience center, and the renovation of administrative offices and teaching space for seven departments at San Diego.

CSU Northridge just put the finishing touches on a $53 million student recreation center, and Sacramentoconverted a former office building into labs and classrooms for its nursing department. Sonoma also plans a new student center and just wrapped up a concert hall that opens formally this spring. Planning is under way for an arts and humanities building at CSU Chico, a new academic building at Monterey Bay, and a new science, technology, engineering and math building at CSU East Bay.

“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.”

That’s because, as Medlin quipped, new campus buildings are “the gifts that keep on taking.”

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 to 10 percent, according toAmerican School & University magazine, which tracks that 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.

The UC system already has at least $800 million in deferred maintenance, or needed repairs, and that was in 2008, when a report about it was prepared for the Board of Regents. At CSU, the estimated cost of deferred maintenance has grown to more than $450 million systemwide.

The UC system's own budget office says it is scraping the bottom of the barrel to pay to run these buildings. “Continuing to redirect funds from within strained existing resources to operate and maintain facilities is not sustainable over the long term,” it warned in its 2011-2012 operating budget plan.

Construction accounts for only a third of what a building costs over its lifetime, Medlin said. The remaining cost is for maintenance and repairs.

Some states are considering making universities factor in the expense of operating a new building when they estimate construction costs. Utah already does. But an audit found that Utah universities appeared to be violating state policy 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 will stop. It may even accelerate. 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, public universities are shouldering increasing proportions of construction debt themselves, risking their bond ratings – and facing even higher interest costs over the long run.

Vedder said universities should follow the example of business.

“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,” he said. “So a businessperson says, ‘Do we really have to build this building?’ ”

“There’s no bottom line in higher education,” Vedder said.

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 by, for example, canceling or postponing construction.

“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 as part of a collaboration between California Watch, part of the independent, nonprofit Center for Investigative Reporting, and The Hechinger Report, a nonprofit, nonpartisan education-news outlet affiliated with Teachers College, Columbia University.

This story was edited by Denise Zapata. It was copy edited by Nikki Frick.