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Open Access Publications from the University of California



The business models under which most public universities in the U.S. operate have become unsustainable. They were put in place when state economies were stronger and there were fewer programs making competing claims on state funds. The current Great Recession has made things worse, but the unsustainability of current business models derives from longer-term trends that will prevent state investment in higher education from rebounding to prior levels. States and universities are making both incremental and structural changes in response. Incremental changes work within existing financial and governance parameters to effect cost savings and/or to extend services; they stretch the use of existing or shrinking resources. Structural reforms change financial and/or governance parameters to create different incentives, which focus on performance, outcomes, and stabilizing capacity. A number of these new models are summarized including: “charter” and “public authority” models, the Virginia tiered system model, the Oregon public endowment model, and the UK income-contingent model. Current conditions create both a challenge and an opportunity for statewide higher education systems to re-define their missions and priorities to sustain their public universities for the future. Whether changes are made by drift or by design will determine how well public universities can contribute to the growth of the country in future decades.

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