UC Merced at 20: Campus Developments and Key State-Level Takeaways

2024-25 BUDGET UC Merced at 20: Campus Developments and Key State-Level Takeaways GABRIEL PETEK | LEGISLATIVE ANALYST NOVEMBER 2024 www.lao.ca.gov 1 AN LAO REPORT Photos provided by UC Merced. 2 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Executive Summary UC Merced Was Created to Accomplish Several Key Objectives. In the late 1980s, the University of California (UC) projected that enrollment demand would exceed systemwide enrollment capacity by the late 1990s. In response, the UC Board of Regents began exploring sites for a new campus. After considering several locations in the San Joaquin Valley, the board selected Merced as the location for the tenth UC campus. After years of constructing the campus and hiring personnel, UC Merced opened in fall 2004 for graduate students and fall 2005 for undergraduate students. In addition to expanding enrollment capacity for the UC system, UC Merced was intended to help raise educational and economic outcomes in the San Joaquin Valley. Prior to the opening of UC Merced, regional college-going rates were low while regional poverty and unemployment rates were high. Campus Has Grown Over Time. Total enrollment (undergraduates and graduate students combined) at UC Merced crossed the 5,000 student-marker in fall 2011. By fall 2023, the campus had grown to approximately 9,100 students. Academic offerings have increased in tandem— growing from 9 undergraduate majors and 3 doctoral programs in 2005 to 27 undergraduate majors and 17 doctoral programs in fall 2023. The number of faculty and staff also has grown, with the campus having a total of approximately 2,500 employees in fall 2023. The campus has completed two major physical build-outs. The initial build-out resulted in about 1.5 million gross square feet (gsf) of academic and auxiliary space, whereas the second build-out (occurring from 2016 through 2020) added about 1.3 million gsf of space (intended to support a campus of 10,000 students). UC Merced Student Body Is Different From Other UC Campuses. UC Merced enrolls a higher share of undergraduates and lower share of graduate students than other UC campuses. Among its undergraduates, UC Merced enrolls the highest share of resident students and lowest share of students from other states and countries. The campus has the highest percentage of first-generation students (students with at least one parent who does not have a bachelor’s degree) as well as the highest percentage of Pell Grant recipients. UC Merced is the only UC campus with a student body that is majority Hispanic/Latino. The campus also draws more heavily from the San Joaquin Valley than any other UC campus. UC Merced Staff Differ From UC System. Compared to other UC campuses, UC Merced relies more on nontenure-track lecturers for academic instruction. Among its tenured/tenure-track faculty, it relies more on assistant professors (and less on associate and full professors). Relative to other UC general campuses, UC Merced hires substantially fewer academic support staff, whereas it hires substantially more student employees. UC Merced administrators indicate making these hiring decisions because they yield lower associated staffing costs and are thus more fiscally viable for a young campus. As a relatively small campus without the same economies of scale of the larger UC campuses, UC Merced continues to spend a larger share of its budget on institutional support and a smaller share on instruction and research. UC Merced Receives More State Funding Per Student Than Other UC Campuses. UC uses a formula known as the “rebenching formula” to allocate General Fund (excluding General Fund set-asides for specific programs and one-time allocations) to its campuses. The formula is meant to equalize state per-student funding across campuses. UC Merced is excluded www.lao.ca.gov 3 AN LAO REPORT from this formula, as the campus has not yet reached the point where state support under the rebenching formula, its tuition revenue, and local resources are enough to cover its annual operating expenses. Compared to the other UC general campuses, UC provides UC Merced with approximately $10,000 more in state funding per student. In 2022-23, UC Merced received $85 million more in state funding than it would have received under the rebenching formula. Some UC Capacity Has Been Added Due to UC Merced but Growth Has Been Slow and Higher Cost. Since 2005, the UC system has added approximately 44,000 resident undergraduate slots. The 7,500 undergraduate slots created at UC Merced accounts for 17 percent of that growth. While contributing to the increase in UC enrollment capacity, UC Merced has repeatedly failed to meet its campus enrollment targets. Moreover, enrolling additional students at UC Merced comes with a higher state cost than enrolling additional students at the more established UC campuses. The $85 million in UC Merced funding above the rebenching formula equates to roughly an additional 10,000 students that could have been supported at the other UC general campuses, many of which had available capacity. Certain Educational Outcomes in the San Joaquin Valley Continue to Lag Behind Statewide Averages. While more San Joaquin Valley high school students are now enrolling at a UC campus, with UC Merced accounting for the majority of that growth, certain regional educational outcomes continue to be relatively low. For instance, though college going rates have increased in the San Joaquin Valley, they have not increased as much as the statewide average. Similarly, the percentage of individuals with at least a bachelor’s degree in Merced County has increased, but also by less than the statewide average. Regional Economic Indicators Show Mixed Results. It is unclear how much the campus has contributed to overall macroeconomic outcomes in the region. Both unemployment and poverty remain higher in the San Joaquin Valley when compared to statewide averages. Average wages for state-government workers in Merced County, however, have seen a substantial increase since the opening of the campus (growing by nearly 70 percent, notably exceeding statewide wage growth). Employment growth in nonfarm occupations has also increased in Merced County, exceeding the statewide average, but falling behind other regions in the state. Key State-Level Takeaways May Be Learned From the UC Merced Experience. In many ways, UC Merced is like new campuses more generally. For at least their first several decades, new public university campuses are likely to experience slower enrollment growth than planned, rely more heavily on state funding, and devote more of their budgets to institutional support and facilities (and less to instruction and research). New campuses, in turn, are unlikely to be able to offer the same overall quality of academic program for decades. Moreover, new campuses are unlikely to generate significant economic impacts in the short term, beyond what might have been accomplished by other major state initiatives. Furthermore, studies have not determined whether the results produced by new campuses could be accomplished in more cost-effective ways. These takeaways could help inform and guide the Legislature as it undertakes higher education planning moving forward. 4 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT INTRODUCTION University of California (UC), Merced is the overall UC enrollment capacity as well as improve newest of UC’s ten campuses. It opened in 2004 for educational outcomes and increase economic graduate students and 2005 for undergraduates. activity in the San Joaquin Valley. In this report, In fall 2023, it enrolled approximately we first provide relevant background, then review 9,100 students. Located in the San Joaquin Valley, major campus developments to date. Next, we UC Merced is one of the larger employers in the analyze the extent to which UC Merced has region, with a total of approximately 2,500 faculty, achieved its original objectives. Lastly, we highlight staff, and student employees. The campus was key takeaways for the Legislature as it undertakes added to the UC system with the intent to expand higher education planning moving forward. BACKGROUND UC Undergraduate Enrollment Grew substantially from 1965 to 2005, growing to Considerably From 1965 to 2005. In response to 35.8 million (almost doubling). Over the same the post-World War II population boom in California, period, as Figure 1 shows, UC’s undergraduate two UC campuses were added in 1965—UC Irvine enrollment also grew substantially, increasing to and UC Santa Cruz. At that time, the UC system approximately 158,000 students (almost tripling). enrolled approximately 53,000 undergraduate It was the significant enrollment growth over this students, while the state’s population totaled just period that spurred interest in the development of over 18.5 million. California’s population increased an additional UC campus. Figure 1 UC Undergraduate Enrollment Has Grown Substantially Since the 1960s Fall Headcount Enrollment 250,000 200,000 Merced 150,000 2005 100,000 50,000 Riverside Irvine, Santa Cruz 1954 1965 Santa Los Angeles San Diego B 18 e 6 rk 9 eley D 19 a 0 vi 5 s B 19 a 0 rb 9 ara 1919 1960 1863 1873 1883 1893 1903 1913 1923 1933 1943 1953 1963 1973 1983 1993 2003 2013 2023 Note: UC San Francisco (not shown in the figure) dates its founding to 1864. It serves only graduate and professional school students in the health sciences. www.lao.ca.gov 5 AN LAO REPORT UC Merced Was Created in Part to Expand going (the percent of recent public high school UC’s Enrollment Capacity. In 1988, the UC graduates entering colleges and universities) in the Board of Regents received updated campus San Joaquin Valley was 45 percent—5 percentage enrollment plans that showed enrollment demand points lower than the state average. Even more would exceed UC’s existing capacity by 1999. notable, San Joaquin Valley public high school In response, the UC Board of Regents began graduates were about half as likely to enroll in a exploring possible locations for opening a new UC campus compared to high school graduates campus. In 1993, the state enacted Chapter 567 statewide (3.5 percent compared to 8 percent). (AB 47, Dills), which provided $1.5 million in bond Similarly, in 2000, the percentage of San Joaquin funds for the purpose of preparing environmental Valley residents age 25 and older with a bachelor’s impact reports related to the selection of a site degree (as their highest degree) was far below the for a new UC campus in the Central Valley region. state average (9.7 percent compared to 17 percent), After considering multiple locations in the San as was the percentage of San Joaquin Valley Joaquin Valley, the board selected the Merced site residents age 25 and older with a graduate or in 1995 to be the location of the tenth UC campus. other advanced degree (4.5 percent compared to To further increase enrollment capacity, the board 9.5 percent). Providing another higher education in 2005 made UC Merced a referral campus for campus—specifically a research institution—in the freshmen and transfer students who were not San Joaquin Valley was meant to address these admitted to their UC campus of choice. regional gaps. UC Merced Provides a UC Presence in the San Joaquin Valley. Figure 2 In the 1980s and 1990s, population San Joaquin Valley Had No UC Campus Prior to 2004 growth in the San Joaquin Valley started UC Campuses and Their Total Enrollment as of 2004ª to outpace statewide population growth. As a result of this accelerated growth, the San Joaquin Valley went from comprising 8.2 percent of California’s population in 1970 to 9.8 percent of the state’s population in 2000. In 2000, 12 community colleges and 3 California State University (CSU) campuses were located in the San Joaquin Valley. UC Davis Enrollment: 29,210 As Figure 2 shows, prior to UC Merced opening, the closest UC campuses to UC San Francisco the San Joaquin Valley were located in Enrollment: 2,754 UC Berkeley Enrollment: 32,803 the Bay Area, the greater Sacramento region, and Southern California. UC Santa Cruz Enrollment: 15,036 UC Merced Is Intended to Raise Educational Outcomes in the Region. San Joaquin Valley Having a UC presence in the San Joaquin Valley, in turn, was intended to improve overall college going, UC UC Los Angeles UC Santa Barbara Enrollment: 35,966 enrollment, and education attainment Enrollment: 21,026 UC Riverside in the region. In the decades leading Enrollment: 17,104 up to the creation of UC Merced, all UC Irvine Enrollment: 24,344 of these educational outcomes in the UC San Diego Enrollment: 24,663 San Joaquin Valley were relatively low. Based on data from 1999-2002, college a Enrollment reflects total headcount students enrolled in fall 2004. 6 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT UC Merced Is Intended to Raise Economic Growth Expectations for UC Merced Are Outcomes in the Region. Economic and Set Forth in Its Long Range Development Plan employment outcomes in the San Joaquin (LRDP). Every UC campus maintains an LRDP, Valley, which has an agricultural-based economy which guides campus development by identifying impacted by seasonal variations, were also low in enrollment, staffing, and space targets. An LRDP the decades leading up to the creation of the UC typically covers a 10- to 20-year planning period, Merced campus. The unemployment rate for the remaining in effect until it is replaced by an updated San Joaquin Valley was nearly double the state’s LRDP. As Figure 3 shows, UC Merced has been average in the decade prior to the opening of the guided by three LRDP’s since its inception. The campus (averaging 11.9 percent compared to first LRDP guided the initial campus build-out. 6.3 percent). The unemployment rate specifically for The second LRDP centered around a doubling Merced County was even higher (13.2 percent)— of campus space to accommodate a projected averaging more than double the state’s rate over doubling of enrollment. The third LRDP is the active that decade. The poverty rate for the San Joaquin plan now guiding campus developments. UC Valley also exceeded that of the state average Merced’s most recent LRDP projects that campus the decade prior to the opening of UC Merced enrollment will reach 15,000 full-time equivalent (20 percent compared to 14 percent). (FTE) students by 2030. Figure 3 Growth of UC Merced Has Been Guided by Three Long Range Development Plans Select Projections for Development of UC Merced 2002 2009a 2020 Merced 2020 Project Year Plan Adopted Initial Campus Build-Out (Second Campus Build-Out) Post-2020 Development Enrollment Projectionsb • 5,000 students by 2009-10. • 5,000 students by 2011-12. • 5,000 students by 2011-12. Aimed to reach • 10,000 students by 2018-19. • 10,000 students by 2019-20. • 10,000 students by 2021-22. approximately: • 15,000 students by 2027-28. • 15,000 students by 2028-29. • 15,000 students by 2030-21. Staff Projections • 315 faculty and 1,200 staff • 500 faculty and 2,180 staff by • 680 faculty and 1,400 staff by Aimed to reach by 2009-10. 2018-19. 2027-28. approximately: • 580 faculty and 2,040 staff • 790 faculty and 1,780 staff by by 2018-19. 2027-28. • 850 faculty and 2,900 staff by 2027-28. Space Additions and 1.5 million gross square feet An additional 1.3 million gsf, for An additional 1.7 million gsf, for Projectionsc (gsf), with capacity to support total space of 2.8 million gsf, total space of 4.5 million gsf, the first 5,000 students. with capacity to support 10,000 with capacity to support 15,000 students. students. a The 2009 plan was amended in 2013, 2016, and 2017. b All three of the Long Range Development Plans (LRDPs) set forth an enrollment level of 25,000 students at full implementation. c Space projections are taken from the LRDPs as well as from a UC Merced Physical Operations report. Space additions in 2002 and 2009 include all completed projects from their respective LRDPs. Space projections for 2020 identifies the additional campus space to be added upon full development of the 2020 LRDP. www.lao.ca.gov 7 AN LAO REPORT CAMPUS DEVELOPMENTS In this section, we review major developments over the past 20 Figure 4 years relating to UC Merced’s Profile of UC Merced enrollment, student outcomes, Comparison to Other UC General Campuses faculty and staff, campus facilities, and finance. Figure 4 provides an overall profile of the campus • Lowest total enrollment (approximately 9,100 students in fall 2023). drawing on the highlights of this • Largest share of undergraduate students (more than 90 percent of campus enrollment). section. Throughout this section, • Smallest share of graduate students (less than 10 percent of campus enrollment). we provide various comparisons • Highest shares of first-generation and low-income students. of UC Merced to the rest of • Highest shares of Hispanic/Latino and Black students. the UC system. When making • Greatest reliance on nontenure-track lecturers. comparisons to the UC system, • Greatest reliance on student employees. we exclude UC Merced, such • Highest student-to-employee ratio. that we are reflecting the average • Highest state per-student funding rate. of all of the other UC campuses. • Least diversified funding portfolio, with less local, federal, and philanthropic support. For comparisons involving • Highest debt-service obligations per student (due to rapid capital expansion). undergraduates, we compare UC Merced to the average of the other eight general UC campuses, excluding UC San Francisco (which serves only 772 students), though the drop was small. Graduate graduate and professional school students in enrollment rebounded in fall 2023. The campus the health sciences). For comparisons involving continues to aspire to have its graduate enrollment graduate students, we compare UC Merced to the reach 10 percent of its total enrollment. In fall average of all of the other UC campuses, including 2023, graduate enrollment comprised 8.5 percent UC San Francisco. of its total enrollment. Across the rest of the UC system, graduate enrollment exceeds 20 percent of Enrollment total enrollment. Campus Had Initial Undergraduate Growth UC Merced Undergraduates Differ From Spurt, Followed by Slower Growth Over UC System. As Figure 7 on page 10 shows, Past Decade. Figure 5 shows that UC Merced the undergraduate student body at UC Merced experienced rapid undergraduate enrollment differs in marked ways from the rest of the growth from 2005 through 2013. Undergraduate UC system. Compared to the UC system, UC enrollment also grew noticeably from 2013 through Merced’s student body has much higher shares 2019, though the rate of growth was slower. Over of California residents, first-generation students the past five years, undergraduate enrollment (that is, students with at least one parent who has been nearly flat. Whereas it took the campus does not have a bachelor’s degree), and Pell Grant seven years for its undergraduate enrollment to recipients. A deeper look at students by household reach 5,000 students, it still has not reached the income shows that UC Merced’s student population 10,000 mark after nearly 20 years. has the lowest income distribution. For example, in Graduate Enrollment Grew Steadily Until 2022-23, 46 percent of UC Merced undergraduates Past Few Years. Figure 6 shows that graduate had household incomes less than $60,000, enrollment at UC Merced grew notably from 2004 compared to a UC system average of 31 percent. through 2021. In fall 2022, graduate enrollment Fifteen percent of UC Merced undergraduates dropped for the first time (from its previous peak of had household incomes greater than $180,000, 8 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Figure 5 UC Merced Undergraduate Enrollment Growth Slowed Over the Past Few Years Undergraduate Headcount by Residency Status, Fall Term 9,000 International 8,000 Nonresident Domestic California Resident 7,000 6,000 5,000 4,000 3,000 2,000 1,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Figure 6 After Growing Quickly, Graduate Enrollment Dipped for the First Time in 2022 Graduate Headcount by Residency Status, Fall Term 900 International 800 Nonresident Domestic California Resident 700 600 500 400 300 200 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 www.lao.ca.gov 9 AN LAO REPORT also serve as referral campuses Figure 7 for transfer students. Since 2005, UC Merced Undergraduates Differ Considerably 11 percent of the transfer students From Rest of UC System referred to UC Riverside enrolled Undergraduate Student Profile, Fall 2023 at that campus and 27 percent referred to UC Santa Cruz enrolled UC Merced Other UC Campusesa at that campus.) Student Demographics UC Merced Graduate California residents 99% 84% Student Body Also Differs From First-generation students 64 36 UC System. The racial/ethnic Pell Grant recipientsb 61 33 composition of the graduate Student Race/Ethnicity student body at UC Merced Hispanic/Latino 54% 26% Asian 27 36 also differs from the rest of the White 9 21 UC system. Like UC Merced’s African American 9 5 undergraduate student body, its International — 9 graduate student body also has Otherc 2 4 larger shares of Hispanic/Latino San Joaquin Valley Participationd and African American students. Applications 14% 5% Admissions 14 6 In fall 2023, UC Merced’s graduate Enrollees 30 6 student body was 23 percent a Reflects average of other UC campuses, excluding UC Merced and UC San Francisco (which Hispanic/Latino and 8 percent serves only graduate students). b Fall 2022 data (most recent data available). were African American, compared c Includes American Indian and Pacific Islander as well as those who did not identify their to 15 percent Hispanic/Latino race/ethnicity. d Reflects data for freshmen. Shows the share of applications, admissions, and enrollees that are from and 5.9 percent African American California high school seniors who attended either a public or private high school in the San Joaquin across the rest of the UC system. Valley. UC Merced’s graduate student body had a smaller share of white compared to a UC system average of 29 percent. students and about the same share of Asians as the UC Merced also has a much higher shares of rest of the UC system. Hispanic/Latino students and Black students. Additionally, San Joaquin Valley participation is Student Outcomes much higher at UC Merced compared to the rest of Undergraduate Persistence Rates Are Lower the UC system. at UC Merced Than UC System. Persistence rates Small Percentage of Students From Referral for freshmen are lower at UC Merced compared to Pools Enroll at UC Merced. As a referral campus, the UC system average. From 2005 through 2022, freshman applicants not admitted to any of their UC the persistence rate from freshman-to-sophomore campuses of choice are admitted to UC Merced. year averaged 83 percent at UC Merced, compared Only a small fraction of freshman applicants to a UC system average of 93 percent. First-year referred to UC Merced end up enrolling at the persistence rates for transfer students were campus. From fall 2014 through fall 2022, a total higher than for freshmen at UC Merced, averaging of more than 150,000 students were placed into 87 percent over this period. This rate, however, the freshman referral pool, and only 2,165 students still fell below the UC system average transfer (1.4 percent) from that pool enrolled at UC persistence rate of 93 percent. (At the end of this Merced. The trend has been similar for transfer section, we identify a few factors that might explain referral students. Since 2005, 3.8 percent of the why student outcomes at UC Merced are worse transfer referral pool has enrolled at UC Merced. than the UC system averages.) (Whereas UC Merced is the only referral campus for freshmen, UC Riverside and UC Santa Cruz 10 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT Undergraduate Graduation Rates at UC Time-to-Degree for Undergraduates Is Merced Are Lower Than UC System. As Figure 8 Shortening but Is Still Longer Than UC Average. shows, freshman cohort graduation rates at At UC Merced, freshman cohorts on average UC Merced also fall below the UC system average. take longer to graduate than their peers across While the four-year graduation rate for freshman the rest of the UC system (4.3 years compared cohorts at UC Merced generally has improved to 4.1 years for the 2016 freshman cohort). Since over time, it is still more than 20 percentage the campus opened in 2005, time-to-degree for points below the UC system average (52 percent freshmen at UC Merced has consistently been compared to 74 percent for the 2019 cohort). longer than the UC system average. The same UC Merced’s six-year graduation rate has modestly basic trend holds for transfer students, with the improved since the campus opened, but it too is 2016 transfer cohort taking an average of 2.5 years still substantially lower than the UC system average to graduate at UC Merced, compared to 2.4 years (71 percent compared to 86 percent for the 2017 across the UC system. In addition to taking longer cohort). For a few years, graduation rates of transfer to graduate, both freshmen and transfer students students at UC Merced compared favorably to other at UC Merced accumulate more academic units UC campuses. For the transfer cohorts entering than their UC peers. For the 2017 freshman cohort, in 2013 through 2017, the three-year transfer students accumulated an average of 8.1 more units graduation rate for UC Merced nearly equaled the at UC Merced than the UC average. For the 2017 average of other UC campuses. Transfer graduation transfer cohort, students accumulated 13 more rates at UC Merced, however, have dropped below units at UC Merced than the UC average. the UC system average for more recent transfer Students of All Racial/Ethnic Groups Have cohorts. For the most recent transfer cohort Worse Outcomes at UC Merced Than UC (entering in fall 2020), the three-year graduation rate System. As Figure 9 on the next page shows, was 68 percent at UC Merced, compared to a UC freshmen and transfer students across racial/ethnic system average of 83 percent. groups on average perform worse at UC Merced Figure 8 UC Merced Freshman Cohort Graduation Rates Are Notably Below Other UC Campuses 100% 90 UC System Six-Year Graduation Rate 80 UC Merced Six-Year Graduation Rate 70 60 UC System Four-Year Graduation Rate 50 40 30 UC Merced Four-Year Graduation Rate 20 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Note: Chart shows data according to the year each freshman cohort entered UC. For example, the chart shows the share of the freshman cohort entering in 2019 that had graduated by fall 2023. "UC System" excludes UC Merced and UC San Francisco. www.lao.ca.gov 11 AN LAO REPORT Figure 9 All Student Racial/Ethnic Groups Perform Worse at UC Merced Than at Other UC Campuses Select Outcomes by Student Race/Ethnicity First-Year Retentiona Four-Year Graduationb Six-Year Graduationc UC Merced UC System UC Merced UC System UC Merced UC System Freshmen Students Asian 87% 95% 46% 76% 75% 89% White 82 93 44 71 69 87 Hispanic/Latino 81 89 39 55 65 78 African-American 81 90 38 52 65 76 First-Year Retentiona Two-Year Graduationd Three-Year Graduatione UC Merced UC System UC Merced UC System UC Merced UC System Transfer Students Asian 90% 94% 38% 54% 74% 84% White 87 93 38 59 73 84 Hispanic/Latino 87 92 42 52 70 80 African-Americanf n/a 91 n/a 46 n/a 74 a Average from 2005 through 2022. b Average for 2005 through 2019 freshman cohorts. c Average for 2005 through 2017 freshman cohorts. d Average for 2005 through 2021 transfer cohorts. e Average for 2005 through 2020 transfer cohorts. f UC Merced’s cohort sizes for this group were too small for comparative analysis. Note: “UC System” excludes UC Merced and UC San Francisco. n/a = not available. compared to their UC peers. For example, Asian Pell Grant recipients, whereas the UC campus students have a lower first-year retention rate at with the next largest share was UC Riverside at UC Merced (87 percent) than they have across 49 percent. Since the opening of the campus, Pell the rest of the UC system (95 percent). Similarly, Grant recipients at UC Merced have had a first-year among freshman cohorts, white students have retention rate that is 9 percentage points lower, lower four-year graduation rates at UC Merced a four-year graduation rate that is 20 percentage (44 percent) than they have across the rest of the points lower, and a six-year graduation rate that is UC system (71 percent). Among transfer cohorts, 17 percentage points lower than the UC Pell Grant Hispanic/Latino students have lower two-year recipient system average. graduation rates at UC Merced (42 percent) than Graduate Student Outcomes at UC Merced the UC average (52 percent). African-American Are Improving but Still Generally Are Lower freshman cohorts at UC Merced also perform Than UC System. Doctoral students entering worse across all the measures shown in the figure UC Merced from 2008 through 2010 had a two-year than their African-American peers across the retention rate of 83 percent, a four-year retention UC system. rate of 68 percent, and an eight-year completion Pell Grant Recipients Also Have Worse rate of 62 percent. All of these rates have improved Outcomes at UC Merced Than UC System. for subsequent cohorts of doctoral students. Of all UC campuses, UC Merced’s undergraduate Doctoral students entering UC Merced in 2014 and student body has the highest share of Pell 2015 (the most recently reported cohort), however, Grant recipients. In the 2021-22 academic year, still had rates that were lower than the rest of the 61 percent of UC Merced’s undergraduates were UC system. For this cohort, UC Merced had a 12 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT two-year retention rate of 90 percent, compared though many of those programs are offered only to to a UC system average of 93 percent; a four-year matriculated doctoral students (effectively allowing retention rate of 75 percent, compared to a UC students to earn a master’s degree while working system average of 83 percent; and an eight-year toward their doctoral degree). completion rate of 66 percent, compared to a UC UC Merced Has Increased Its Faculty and system average of 71 percent. Despite these rates Staff Over Time. As the student population falling below the UC average, doctoral students at at UC Merced has increased, there has been UC Merced have been completing their degrees a corresponding increase in the number of in less time. For students graduating in 2019, faculty and staff. When UC Merced opened 2020, and 2021, time-to-doctorate at UC Merced for undergraduate instruction in fall 2005, the averaged 5.6 years compared to 6.1 for the other campus employed 45 FTE tenured/tenure-track UC campuses. faculty members and 19 nontenure-track faculty Student Outcomes Likely Are Worse Due to members (mostly lecturers). By fall 2023, the Student and Institutional Factors. UC Merced campus employed 275 FTE tenured/tenure-track likely has worse student outcomes than UC system faculty members and 153 nontenure-track faculty averages in part because of the composition of its members. In fall 2023, slightly more than half student body. Research across higher education of all FTE faculty taught in the School of Social settings generally finds that the average educational Sciences, Humanities and Arts; nearly 30 percent outcomes of certain student groups, including taught in the School of Natural Sciences; and the first-generation students and low-income students, rest taught in the School of Engineering. Over the are worse compared to their peers. UC Merced has past 20 years, faculty growth has been greatest particularly high shares of these student groups. in the School of Social Sciences, Humanities and Student demographics (and related underlying Arts. Beyond faculty, other campus staff have issues), however, are unlikely to tell the full story. also increased in number over time. Whereas the Some institutional factors, such as fewer student campus employed approximately 1,120 FTE staff in support staff, also could contribute to worse 2011-12, it employed nearly double that number in outcomes. (We discuss institutional factors in the 2022-23 (approximately 2,200 FTE staff). next few sections.) Composition of Faculty Differs From UC System. As Figure 10 on the next page shows, Faculty and Staff one notable difference is that the percentage of UC Merced Has Increased Its Academic tenured faculty at UC Merced is roughly half that Offerings Over Time. When UC Merced of the UC system (based on data from fall 2011 launched undergraduate instruction in fall 2005, through fall 2022). Moreover, UC Merced employs it offered nine undergraduate majors across three a higher share of professors at the assistant level schools: the School of Engineering; the School (rather than the associate or full professor level) of Natural Sciences; and the School of Social compared to the UC system, as doing so is more Sciences, Humanities and Arts. As the campus’s financially viable for a young campus. Beyond these undergraduate enrollment has grown, the number trends, UC Merced employs a much higher share of majors offered has increased, with the campus of nontenure-track lecturers—roughly triple that of offering 20 undergraduate majors in 2013 and the UC system (from fall 2011 through fall 2022). 27 majors in 2023. The campus plans to offer four Lecturers also have the budgetary benefit of costing new majors beginning in fall 2024, bringing the total less than tenured/tenure-track professors. (In the number of undergraduate majors offered to 31. “Finance” section of this report, we discuss why UC Similar to the growth of undergraduate academic Merced faces greater fiscal challenges than other offerings, the campus has been increasing the UC campuses.) number of graduate degree programs it offers. Composition of Staff Also Differs From Over the past ten years, the campus has grown UC System. Compared to the rest of the UC from 6 to 17 doctoral program offerings. The system, UC Merced relies more heavily on student campus also has some master’s degree programs, employees in lieu of professional personnel. www.lao.ca.gov 13 AN LAO REPORT Figure 10 UC Merced Employee Pool Differs From Other UC Campuses in Notable Ways Share of Full-Time Equivalent Employees by Category, 2011-12 Through 2022-23 Faculty UC System UC Merced Tenured Tenure Track Lecturer Note: "UC System" reflects the average of UC campuses, excluding UC Merced and UC San Francisco. In the top charts, "Tenured" consists of associate and full professors. "Tenure Track" consists of assistant professors. In the bottom charts, "Faculty" includes tenured/tenure-track faculty, clinical/in-residence faculty, adjunct faculty, and lecturers. "Management" includes the senior management group, along with other managers. "Other Academic Staff" includes other academic employees, postdoctoral scholars, and medical interns/residents. "Other Staff" includes senior professionals as well as professional and support staff. "Student Employees" consists of academic and nonacademic student workers. All Employees UC System UC Merced Faculty Other Academic Staff Management Other Staff Student Employees 14 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT UC Merced administrators indicate that relying vacancies with little difficulty as a result of the on student employees has the dual benefits of UC name brand. They mention the lack of certain providing income to students to help them cover amenities in the region, however, as recruitment their college expenses while also helping reduce drawbacks. Specifically, they cite the region’s lack the campus’s operating expenditures given student of high-quality elementary and high schools, limited employees are lower cost. access to high-quality health care, and limited Student-Employee Ratios Differ From access to recreational and cultural amenities as System Averages. From 2011-12 through 2022-23, reasons why some candidates chose to not accept UC Merced maintained a noticeably higher employment offers at UC Merced. student-to-employee ratio for several employee Campus Facilities and Utilization categories. The student-to-faculty ratio at UC Merced (19:1) exceeded that of the UC system (15:1) UC Merced Has Undergone Two Major over this period. Among other employee groups, Phases of Campus Build-Out to Date. Figure 11 on the next page shows the areas of campus the greatest difference was for academic support developed under each of these first two phases. staff (nonfaculty, nonstudent staff). UC Merced’s Stage 1 represented the initial campus build-out student-to-employee ratio in this category was as outlined in the 2002 LRDP. The construction 69:1 compared to 18:1 for the UC system. UC of these facilities took place from before the Merced administrators indicate that its notably campus opened in 2004 through 2016. During higher student-to-employee ratio also is due to its this period, the campus added nearly 1.5 million fiscal challenges. gross square footage (gsf) of space, accounting for Employee Retention at UC Merced Is Similar state-supported and auxiliary facilities combined. to UC System. For faculty, the annual voluntary (Auxiliary facilities include student housing, parking, turnover (resignation) rate at UC Merced has and dining facilities.) The initial campus build-out averaged just under 2 percent over the last five cost $737 million ($530 million for academic years. UC Merced administrators indicate this rate facilities and $207 million for auxiliary facilities). is slightly above that of the UC system over the Stage 2 was set forth in the 2009 LRDP, with same period. One reason cited for its higher faculty construction occurring from 2016 through 2020. separation rate is its greater reliance on assistant The expansion during this period resulted in a near professors, which tend to have higher separation doubling of the campus’s gsf—adding 1.3 million rates than associate and full professors. UC Merced gsf of academic and auxiliary space combined. administrators also indicate that it regularly loses This second phase of growth cost an estimated some of its faculty to other institutions with greater $1.2 billion ($772 million for academic facilities and name recognition. For career staff positions, UC $395 million for auxiliary facilities). Merced retains staff at about the same rate as the overall UC system. From 2012 through 2021, UC Facility Utilization Currently Is Below Merced averaged an 8.6 percent separation rate Legislative Standards. Prior to the second phase of the campus’s build-out, UC Merced’s compared to a 9 percent separation rate across the utilization of its classroom spaces was generally rest of the UC system. close to reaching legislative standards whereas its UC Merced Administrators Highlight Some utilization of teaching laboratory spaces exceeded Recruitment Issues. UC Merced administrators those standards. With the major build-out that indicate the campus has both recruitment occurred between 2016 and 2020, the campus’s advantages and challenges. One recruitment facility utilization has fallen below legislative advantage is the Merced region’s relatively standards. The most recent facility utilization report affordable housing rates. The U.S. Department (2022) reported average classroom utilization at of Housing and Urban Development produces 79 percent of legislative standards and average an annual report on market rents that shows teaching laboratory utilization at 87 percent of Merced County remains one of the more affordable legislative standards. housing areas in California. Administrators also indicate the campus tends to be able to fill its www.lao.ca.gov 15 AN LAO REPORT Figure 11 UC Merced Campus Footprint Has Grown Substantially Since Its Opening Solid blue line reflects the Phase 1 build-out. This phase resulted in the development of nearly 1.5 million gross square footage of academic and auxiliary facility space. Solid purple line reflects the Phase 2 campus build-out. This phase resulted in the develop- ment of nearly 1.3 million gross square footage of academic and auxiliary facility space. UC Merced Housed Nearly Half of Its State Recently Approved Funding for Student Population in Fall 2023. In 2005, Additional Academic and Student Housing UC Merced brought eight student housing facilities Projects. The state recently approved funding for online, providing accommodations to a total three major new capital projects at UC Merced. of 874 students. By fall 2023, the campus had All three projects are to be financed using UC 18 housing facilities with a total of 4,367 beds, bonds, with the state covering the associated debt housing 45 percent of its student population. service payments over the next approximately Nearly all of the students living on campus are 30 years. One project, authorized by Chapter 23 of undergraduates, with fewer than 20 graduate 2019 (AB 74, Ting), is construction of a medical students living on campus. As of spring 2023, education facility. This project is estimated to have UC Merced housed a larger share of its students a total cost of $300 million (covered by $243 million than the average of the other UC general campuses state General Fund and $57 million nonstate (38 percent). Like other UC campus housing funds). Beginning in 2024-25, the state is providing programs, UC Merced’s housing program was $14.5 million to make associated annual debt entirely self-supported (that is, funded from user service payments. A second project, authorized by fees) from its inception through 2022-23. Chapter 38 of 2023 (AB 102, Ting), is construction of a new classroom and office building. This project 16 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT costs a total of $95 million (all state support), with to the rebenching formula. UC Merced will remain the state providing $6.3 million annually to make funded using the current add-on approach until associated debt service payments. The project is at least 2031, at which time UC will reassess the estimated to add 60,000 gsf, with space designated campus’s progress toward self-sufficiency. The UC for larger lecture halls as well as student support Office of the President (UCOP) indicates that it will and faculty spaces. The third project, authorized by deem UC Merced self-sufficient when the campus’s Chapter 50 of 2023 (SB 117, Committee on Budget enrollment has grown such that its tuition revenue and Fiscal Review), is an intersegmental student together with state support under the rebenching housing project involving UC Merced and Merced formula and any local resources are sufficient to College. It cost a total of $100 million (all state cover its annual operating expenditures. support). This project will result in an additional UC Merced’s Share of General Fund Is 478 affordable beds, with 60 percent of these beds Smallest of All UC Campuses but Is Growing. reserved for UC Merced students and the rest Despite UC Merced receiving a notably higher reserved for Merced College students. Associated per-student funding rate, its General Fund debt service is estimated at $7.1 million annually. allocation is the smallest of all UC campuses given its small size and disproportionate reliance on Finance undergraduate education. As Figure 13 on the Most UC Campuses Receive a Uniform next page shows, UC Merced received just over Amount of State Funding Per Student. UC uses a 5 percent of UC’s General Fund appropriation formula to allocate state General Fund among most (excluding set-asides for specific programs and of its campuses (excluding General Fund set-asides one-time allocations) in 2022-23. Though having for specific programs and one-time allocations). the smallest General Fund allocation, UC Merced’s Designed to equalize per-student funding across share of UC’s General Fund appropriation has been campuses, the current approach, known as the increasing slightly over time, as Figure 14 on the “rebenching formula,” was phased in over six next page shows. years (from 2012-13 through 2017-18). The formula UC Merced Relies More Heavily on State allocates funding based on the number and type Funding Than Other UC Campuses. We of students that campuses educate, with the same compared UC Merced’s mix of revenue streams amount per type of student provided to every campus. The rebenching formula currently applies to all UC campuses Figure 12 except the UC San Francisco and UC UC Merced Receives Substantially More State Merced campuses. UC excludes the Funding Per Student Than Other UC Campuses San Francisco campus due to its unique student population and mission, whereas Unadjusted Annual Per-Student State General Fund Support it excludes UC Merced because it cannot yet cover its annual operating costs $20,000 without additional state support. 18,000 16,000 UC Merced UC Funds Merced Campus at a 14,000 Higher Per-Student Funding Rate. As 12,000 Figure 12 shows, UC Merced receives 10,000 approximately $10,000 more per student 8,000 than the amount of per-student funding 6,000 Other UC Campusesa 4,000 provided by the rebenching formula 2,000 used for the other general campuses. UC has indicated that once UC Merced 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 reaches “self-sufficiency,” the campus a Excludes UC Merced and UC San Francisco. will transition to being funded according www.lao.ca.gov 17 AN LAO REPORT over the past decade to other UC campuses Figure 13 that do not have a medical center (Berkeley, Riverside, Santa Barbara, and Santa Cruz). UC Merced Has Smallest General Fund Allocation... UC Merced’s largest revenue stream Campus Share of State General Fund Allocation for UC, 2022-23 continues to be from the state, with state General Fund averaging 48 percent of all its revenue over this period. By comparison, Merced state funding comprised an average of Santa Cruz 20 percent of total revenue at the other UC Los Angeles campuses without a medical school. In San Francisco contrast to this trend, aggregate tuition and fee revenue over the past decade has been 11 percentage points lower at UC Merced Berkeley Santa Barbara than the average of other UC campuses without a medical center (21 percent Riverside compared to 32 percent). A major reason aggregate tuition revenue is lower at UC Davis Merced is because it has fewer professional Irvine degree programs, which charge much San Diego higher tuition levels than undergraduate and academic doctoral programs. Additionally, compared to other UC campuses without a medical center, UC Merced receives less Note: In 2022-23, the state provided UC a total of $3 billion General Fund, excluding set-asides funding from grants and contracts as well as and one-time allocations. less private giving. Figure 14 ...But Its Share of General Fund Has Been Increasing Over Time Change in Share of State General Fund Allocation by Campus From 2016-17 Through 2022-23 San Diego Riverside Merced Santa Cruz Irvine Davis Berkeley Los Angeles Santa Barbara San Francisco -0.8 -0.6 -0.4 -0.2 0.2 0.4 0.6 0.8 1.0% Note: General Fund allocation excludes set-asides and one-time funding. 18 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT A Smaller Share of UC Merced’s Expenditures remains substantially higher—more than double— Are for Instruction and Research. In 2022-23, other UC campuses that lack a medical facility. 24 percent of UC Merced’s expenditures were Over the past five years, institutional support for instruction and research (combined). By expenditures at those campuses averaged comparison, other UC campuses without a medical 8 percent of total expenses. school reported much higher shares of spending on UC Merced Spends Proportionally More on instruction and research (an average of 46 percent). Its Buildings and Infrastructure. As a newer This differential has remained about the same over campus that has constructed many new buildings the past decade, with UC Merced consistently and infrastructure within a relatively short amount spending notably less on instruction and research. of time, UC Merced has higher associated spending UC Merced Spends Proportionally More as a share of its total spending than other UC on Institutional Support. “Institutional support” campuses. In 2022-23, 8.2 percent of UC Merced’s includes various costs entailed in operating a expenditures were for interest payments on its campus, including general administrative services, bonds for capital projects, compared to 3 percent executive staff, legal and fiscal operations, space for other UC campuses without a medical center. management, and public relations, among others. UC Merced anticipates that it will continue spending Institutional support has comprised, on average, a relatively high share of its annual budget on 18 percent of UC Merced’s expenditures since it interest payments for at least a few more decades opened. This share has declined slightly over the as much of its debt for capital projects is being past five years—averaging 17 percent. This rate financed over about 30 years. ASSESSING EXTENT KEY OBJECTIVES WERE MET In this section, we analyze the extent to which UC Enrollment Capacity Merced has fulfilled its original objectives relating UC Merced Has Not Met Its LRDP Enrollment to expanding UC enrollment capacity, improving Targets. Across all three of its LRDPs, UC Merced regional educational outcomes, and improving has fallen short of its enrollment targets. Its 2002 regional economic outcomes. Overall, the evidence LRDP, for example, projected FTE enrollment to is not strong that UC Merced had a major role in reach 8,316 students by 2014-15. After falling short expanding UC enrollment capacity and improving in meeting its enrollment targets in the mid-2000s, regional educational and economic outcomes. UC Merced revised the target for 2014-15 down to Though some regional educational and economic 6,630 FTE students in its 2009 LRDP. Despite the outcomes in the San Joaquin Valley are better downward revision, UC Merced still fell short of today than prior to the opening of UC Merced, other meeting the revised 2014-15 target—missing it by regions of the state have experienced comparable 414 FTE students. As Figure 15 on the next page or greater improvements. The evidence is stronger shows, UC Merced also has fallen short of the that UC Merced has made a positive impact in two enrollment targets it established in 2013. The 2020 particular areas—perhaps unsurprisingly. First, as LRDP further lowered the campus’s enrollment the paragraphs in this section detail, more students targets. (Unlike earlier LRDPs which tended to from the San Joaquin Valley are attending UC, with set annual targets, the 2020 LRDP set enrollment a large share of those student enrolling at the UC targets for only 2020-21 and 2030-31.) UC Merced Merced campus. That is, the campus has increased fell short of its 2020-21 target (9,700 FTE students) access to UC for students in that area. Second, UC by 515 FTE students. Merced likely has contributed to higher employment Other Young Campuses Also Have Missed in certain sectors and higher wages for state Their Enrollment Targets. UC Merced’s enrollment government employees living in that area. challenges are not unique for a new campus. CSU www.lao.ca.gov 19 AN LAO REPORT is still far below its initial LRDP goal of Figure 15 27,500 students (enrolling 18,770 FTE students in 2022-23). UC Santa Cruz’s Since Its Inception, UC Merced most recently approved LRDP (2021) Has Not Reached Its Enrollment Targets projects enrollment will not cross the Full-Time Equivalent Students 27,500 mark until 2040—50 years later than initially planned. Enrollment Targets Set in 2002(cid:14)ª UC Access and Capacity Has 9,000 Target Actual Increased but Small Share Is 8,000 7,000 Due to UC Merced. As a system, 6,000 UC capacity for educating resident 5,000 students has increased since 2005. 4,000 Whereas UC enrolled an estimated 3,000 7.4 percent of California public high 2,000 1,000 school graduates in 2005-06, it enrolled an estimated 8 percent in 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2014-15 2022-23. Since 2005, UC has added ª The 2002 Long Range Development Plan did not provide enrollment targets for 2011-12 through 2013-14. approximately 44,000 resident Enrollment Targets Set in 2013 undergraduate slots. UC Merced accounts for 17 percent of this growth. 12,000 UC Merced added the greatest number 10,000 of resident undergraduate students 8,000 of any UC campus, with it growing by 6,000 approximately 7,500 students since 2005. UC Riverside and UC San Diego, 4,000 however, each added nearly as many 2,000 students over the same period, growing by about 7,300 and 7,100 resident 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 undergraduate students, respectively. Adding Capacity at UC Merced Has Been Relatively Costly. Over Channel Islands, the most recently constructed the last several years, UC Merced has received CSU campus (opened in 2002), anticipated approximately $10,000 more in state per-student enrollment to grow to 12,000 FTE students by 2020, operating funds compared to the other UC general but its peak to date has been only roughly half that campuses. Consequently, adding enrollment amount (6,406 FTE students in 2019). UC Irvine and slots at UC Merced has been costlier than adding UC Santa Cruz, the two most recently constructed slots at the other UC campuses. In 2022-23, UC UC campuses prior to UC Merced (both opening in Merced received $85 million in state per-student 1965), were also unable to meet initial enrollment funding above the level it would have generated projections. For example, UC Irvine’s first LRDP under the rebenching formula had it been any (approved in 1963) projected total enrollment to other UC general campus with a comparable reach 27,500 students by 1990, but it fell short, student body. Had that funding been allocated to reaching only 16,151 students. UC Irvine did not the other general education campuses instead, cross the 27,500 mark until 2014-15—25 years later the state could have supported an additional than initially planned. UC Santa Cruz’s first LRDP 10,060 UC students. (also approved in 1963), projected enrollment to reach 7,500 students by 1975 and 27,500 by 1990. UC Has Capacity to Enroll Additional Its enrollment reached 6,103 students by 1975 Students at Established Campuses. One reason and grew to only 10,052 by 1990. UC Santa Cruz to establish a new higher education campus is in 20 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT response to capacity constraints—specifically, Educational Attainment in Region Has having existing campuses at or exceeding their Increased but by Less Than State Average. As physical capacity. While some campuses have Figure 17 on the next page shows, the percentage exceeded legislative facility utilization standards for of individuals with at least a bachelor’s degree certain-sized classrooms and laboratories at times has increased in Merced County since UC Merced over the last decade, systemwide facility utilization opened but by less than the statewide average. has been below legislative standards. Figure 16 Whereas the share of individuals with at least a shows that UC has academic facility space at its bachelor’s degree in Merced County increased existing general campuses to enroll thousands from 11 percent in 2000 to 14 percent based on of additional students. For each year shown, the most recent data collection (2017-2021), the the amount of space available at the other UC share increased from 27 percent to 35 percent campuses would have been more than sufficient to statewide over the same period. The other counties support UC Merced’s entire student population. in the San Joaquin Valley (Fresno, Kern, Kings, Madera, San Joaquin, Stanislaus, and Tulare) Regional Educational Trends similarly have experienced growth in the shares Regional College Going Rates Have of individuals holding at least a bachelor’s degree Increased but Still Lag Behind State Average. (growing collectively from 13 percent in 2000 to Since UC Merced opened, college going among 18 percent across 2017-2021). Other areas of the high school graduates has increased both regionally state, however, have shown similar improvement. and statewide. As of 2021-22, the college-going Counties in Northern California (Del Notre, Siskiyou, rate of high school graduates from the San Joaquin Modoc, Trinity, Shasta, Lassen, and Plumas), for Valley was 54 percent, up from 45 percent before example, saw their share of individuals with at UC Merced opened. The college-going rate in least a bachelor’s degree collectively increase from Merced County was 39 percent, up slightly from 14 percent in 2000 to 19 percent across 2017-2021. 36 percent. Though both of these rates are up, UC Freshman Admissions From San Joaquin college going statewide increased more markedly. Valley Have Nearly Doubled Since Opening of Statewide, college going was 62 percent in UC Merced. Though the evidence is weak that 2021-22, up from 50 percent over the same period. UC Merced has had a uniquely positive impact on college going or educational attainment Figure 16 in the region (when compared to gains made statewide), the evidence is UC Has Existing Capacity to Enroll Additional Students stronger that the campus has improved Additional FTE Students That Could Have Been Enrolledª access to UC for students from the area. As Figure 18 on the next page shows, Additional Capacity in Summer Term since 2005 there has been a substantial 50,000 Additional Capacity in Fall-Spring Terms increase in the number of UC admissions 45,000 offers received by San Joaquin Valley 40,000 35,000 high school graduates. While an offer 30,000 of admission does not guarantee that a 25,000 student will enroll at a particular campus, 20,000 it ensures that a student will have a spot 15,000 reserved should they wish to enroll. 10,000 In this sense, an offer of admission is 5,000 a proxy for access to a campus. In fall 2010 2012 2014 2016 2018 2022 2023, the number of UC admissions a We calculated enrollment capacity based upon legislative facility utilization standards for UC. UC did not offers received by San Joaquin Valley complete a facility utilization report in 2020 as remote instruction was implemented due to the COVID-19 high school graduates was nearly double pandemic. FTE = full-time equivalent. the amount received in fall 2005 (about www.lao.ca.gov 21 AN LAO REPORT Figure 17 Educational Attainment Has Not Advanced More Quickly in Merced County Percentage of Population Ages 25 and Older With at Least a Bachelor's Degree by Region 40% 35 California 30 25 Inland Empire 20 Northern California 15 Other San Joaquin Valley Counties Merced County 10 5 1990 2000 2008-2012 2017-2021 Note: Includes individuals who attained a graduate or professional degree. "Other San Joaquin Valley Counties" include Fresno, Kern, Kings, Madera, San Joaquin, Stanislaus, and Tulare. "Inland Empire" includes Riverside and San Bernardino Counties. "Northern California" includes Del Notre, Siskiyou, Modoc, Trinity, Shasta, Lassen, and Plumas Counties. The dotted vertical line signifies the year UC Merced opened. Decennial Census data used for 1990 and 2000. American Community Survey (ACS) data used for 2008-2012 and 2017-2021. Since the ACS was implemented in 2005, the Decennial Census no longer asks questions about educational attainment. The ACS derives estimates over five-year periods, as those estimates are more reliable. Figure 18 More UC Admissions Offers Are Being Made to San Joaquin Valley Students Number of UC Freshman Admissions Offers Made to San Joaquin Valley High School Graduates, Fall Term 14,000 UC System 12,000 UC Merced 10,000 8,000 6,000 4,000 2,000 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Note: "UC System" excludes UC Merced and UC San Francisco. A student may receive multiple admissions offers from UC campuses. 22 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT 6,900 compared to about 13,200). The increase Over this period, poverty rate averaged in admissions offers far exceeds the growth in the 20.2 percent in San Joaquin Valley and 21.8 percent college-age population from the San Joaquin Valley, in Merced County (up from 19.9 percent and which grew by 11 percent from 2005 to 2022. 21.2 percent, respectively.) Over the same period, More Students From San Joaquin Valley the statewide poverty rate fell slightly, to 14 percent Are Enrolling at UC. Data also show that more (from 14.4 percent). students from the area are choosing to enroll at Wages of Private-Sector Employees Remain UC, particularly at the UC Merced campus. In Lower in Region Than State Average. One the decade prior to the opening of UC Merced to benefit of a UC campus could be stimulating activity undergraduate students (1995-2004), public and throughout the regional economy, such that wages private high school graduates in the San Joaquin in the private sector increase more than otherwise Valley accounted for 4.9 percent of UC’s resident expected. As the left-hand side of Figure 19 on freshman class. By 2023, this percentage had the next page shows, the evidence is not strong grown to 7 percent of UC’s total resident freshman that this has happened in the case of UC Merced. class. Merced County in particular has experienced San Joaquin Valley counties (excluding Merced) substantial growth in UC attendance. From saw inflation-adjusted average weekly wages from 1999-2002, only 3 percent of high school graduates private establishments increase by 5 percent from enrolled at a UC campus. By 2021-22, 17 percent of 2005 to 2023, but these wages grew 12 percent Merced County high school graduates who enrolled statewide. Merced County’s wage growth among at a college or university enrolled at a UC campus. private establishments fell behind both the state Of the San Joaquin Valley counties, Merced now and San Joaquin Valley averages, increasing by produces the most UC enrollees per capita. 2 percent over this period. In 2023, UC systemwide enrolled 2,940 freshman Wages of State-Sector Employees Have students from public and private high schools in Increased in the Region. Though UC Merced the San Joaquin Valley, with 25 percent of that total does not appear to have helped accelerate (722 students) enrolled at UC Merced. wage growth in the private sector, the region has seen substantial growth in average wages for Regional Economic Trends state-government workers since the campus was Unemployment Rate Remains Higher in opened. The right-hand side of Figure 19 shows Region Than State Average. As it was before the that wage growth in the state government sector opening of UC Merced, the unemployment rate in (including UC Merced) has been strong. Merced Merced County continues to exceed the average County’s growth in state government wages of the other San Joaquin Valley counties as well (69 percent) vastly exceeds the growth at the state as the statewide average. This is the case whether level (13 percent) over this period. This increase in measured since the campus’s opening or just average wages is consistent with what one might over the past decade. From 2014 through 2023, expect when the state adds a substantial number of for example, the unemployment rate in Merced relatively high paying government jobs to a region. County averaged 10.1 percent, compared to Employment Growth in the Region Has Been 9 percent in other San Joaquin Valley counties and Higher Than State Average. Merced County also 5.9 percent statewide. has seen above-average growth in the number Poverty Rate Remains Higher in Region of individuals employed in nonfarm occupations. Than State Average. As it was before the opening From 2005 through 2022, the number of individuals of UC Merced, the poverty rate in the region employed in nonfarm establishments grew by has continued to exceed the statewide average. 24 percent in Merced County, compared to From 2005 through 2022, poverty rates in the 18 percent statewide. (Over the same period, the region were slightly higher compared to the decade population in Merced County grew by 19 percent, prior to the opening of UC Merced (1995-2004). with the state population growing by 9 percent.) www.lao.ca.gov 23 AN LAO REPORT Figure 19 In Merced County, State Government Wages Have Grown Notably Change in Average Weekly Wages by Type of Establishment for Select Areas From 2005 Through 2023, Adjusted for Inflation 80% 70 60 50 40 30 20 10 -10 California Inland Redding Other Merced California Inland Redding Other Merced Empireª County San Joaquin County Empireª County San Joaquin County Valley Valley Countiesb Countiesb Private Establishments State Government Establishments ª Includes Riverside County and San Bernardino County. b Excludes Merced County. Includes Fresno, Kern, Kings, Madera, San Joaquin, Stanislaus, and Tulare Counties. Though employment growth in Merced County to a 13 percent increase in jobs in the local services and the San Joaquin Valley more broadly have sector (with students and campus employees been above-average, they are somewhat below increasing demand for things like restaurants, other regions. For example, employment growth in haircuts, and health care). The economic impact the Inland Empire (Riverside and San Bernardino reports commissioned by UC Merced and UCOP Counties) increased by double the state average also note that UC Merced has been a significant (36 percent) over the same period. regional employer. Additionally, those reports Economic Impact Reports Emphasize Greater found UC Merced had been a large-scale buyer Employment and Spending in Region. We of goods and services in the region. The report reviewed three economic impact reports about UC commissioned by UC Merced estimated that Merced. Specifically, we reviewed an academic campus spending accounted for 0.3 percent of total study by Lee (2019), the most recent study UC gross regional product in the San Joaquin Valley in Merced commissioned (2020), and the most recent 2018-19. Campus spending was concentrated in study UCOP commissioned (2021). Findings from the areas of campus payroll and construction. the Lee study suggest that UC Merced contributed 24 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT KEY TAKEAWAYS In this section, we highlight key state-level classrooms, laboratories, and offices. Growing takeaways that could help inform and guide the these three areas in tandem—students, staff, and Legislature as it undertakes higher education space—is a significant challenge. Building space planning moving forward. As this section shows, or hiring staff before students enroll means added the UC Merced experience is largely a cautionary costs without as much underlying revenue, yet not tale. On many fronts, new campuses are likely to having space and staff in place means students take much longer than expected to fulfill central have no programs in which to enter. Until a campus goals. For several decades, despite their focused reaches a certain level—with a certain number of efforts, new campuses are likely to see their students, type of students, and revenue streams— enrollment increase more slowly than planned, nearly all aspects of campus development not only while also having higher per-student costs, fewer are more daunting logistically, but they cost more funding sources, less extensive academic offerings, per student. Until economies of scales are reached, and smaller auxiliary programs compared to larger, campus developments come at a higher cost more established campuses. The UC Merced per student than supporting the same number of experience also suggests that overall college going students at larger, more established campuses. and educational attainment in the vicinity of a new New Campuses Likely Will Not Be Able to campus might not advance more quickly than Offer Same Quality of Program for Decades. in many other areas of the state, at least within Despite their higher per-student costs, new the initial 20 years. Moreover, the UC Merced campuses likely cannot offer the types of programs experience suggests that new campuses are and support that more established campuses unlikely to generate pronounced economic effects offer. With lower enrollment, new campuses need in the near term beyond those that might have been to direct a higher share of their spending toward achieved by other large state projects. institutional support and capital outlay. In turn, New Campuses Take Longer to Grow Than new campuses spend less on instruction and Many Expect. As exemplified by the experiences student support. New campuses also typically take of UC Merced, along with other new UC and CSU many decades to diversify their funding streams. campuses over the past 50 years, new campuses For example, it may take several decades before have not reached their initial enrollment targets. a new campus has sufficient faculty established One reason could be that initial enrollment targets in their fields to attain substantial federal research are unrealistic, with campus planners generally funding. It may also take years to develop graduate thinking enrollment can grow more quickly than is professional degree programs that can bring in practical. Another reason could be that the location additional revenue through supplemental tuition of new campuses are not ideally situated, lacking charges. Similarly, building up alumni support and sufficient regional population growth or statewide cultivating philanthropic donors could take a few attraction to meet campus enrollment targets. decades. With a less diversified funding portfolio, Higher Relative Costs of New Campuses new campuses are not as likely to direct as much Are Likely to Linger for Decades. All new funding toward their instructional and research campuses share certain challenges reflected in programs. Additionally, new campuses will need the UC Merced experience. To gain students and about three decades to begin retiring debt service build their enrollment levels, new campuses need on their first round of capital projects (including to offer high-demand academic programs. To be their residential housing facilities, parking facilities, able to offer those programs, new campuses need and other auxiliary enterprises). Once debt service to be able to recruit faculty and staff. To educate is retired, existing funds not only can be freed up for students and accommodate faculty and staff, new programmatic activities but new revenue generated campuses typically need physical spaces, including from housing and parking charges can be used for www.lao.ca.gov 25 AN LAO REPORT associated capital improvements and expansions. related to campus employment (payroll spending) Given these dynamics, new campuses will tend to and construction activity. Similar impacts might be have smaller auxiliary programs for many decades expected for any state agency that employs a large before being able to bring them to the scale of staff and constructs new facilities. For example, larger, more established campuses. the move or expansion of a large state department New Campuses Make More Fiscal Sense (such as the Employment Development Department When Existing Campuses Are Nearing Their or California Environment Protection Agency) or Physical Capacities. UC has substantial untapped a large new courthouse also would translate into physical capacity to enroll additional students at higher employment and more construction activity its long-established campuses. From 2010 through in the selected area. Theoretically, a university 2022, capacity at other UC general campuses was campus might yield higher economic benefits more than sufficient to enroll all of the students who related to research, but such benefits could take enrolled at UC Merced. UC and CSU also are facing many decades to materialize. After 20 years, the other factors that would tend to reduce justification Merced area is not seeing pronounced economic for new campuses or centers. Importantly, benefits due to its research activities. California’s college-age population is projected to Key Information About Relative decline by 15 percent over the next decade. Such Cost-Effectiveness Is Lacking. UC Merced a decline would typically translate into smaller new appears to have made its most positive impacts freshman cohorts, potentially relieving enrollment in two areas—providing more access to UC for pressure. Moreover, both segments have goals to students in the San Joaquin Valley and increasing expand their online offerings. More online offerings employment in certain sectors in the San Joaquin would also help slow the need for expansion of Valley. To date, studies have not determined physical campus space. whether these results could have been obtained in New Campuses Could Have Mixed Impacts on more cost-effective ways. The state, for example, Regional Educational Outcomes. Data from the might have sought to increase access to UC for UC Merced experience suggest that a new campus students in the San Joaquin Valley by creating can increase access to UC in the affected area. targeted outreach programs (such as sending more A new campus, however, might not result in higher college recruiters into the area) or financial aid educational attainment in the area. One reason programs (such as providing more grant assistance why a new UC campus might not result in higher to students coming from that area). Strategies like educational attainment in a region is that UC degree these conceivably could have increased access holders may feel that they have more advantageous to UC at lower cost. Similarly, the state might have employment opportunities elsewhere in the state. sought to increase economic outcomes in the Absent other strategies to retain college-educated San Joaquin Valley through other means, such as workers in an area, a new university campus might providing businesses with tax credits for hiring have an unintended effect on the out-migration of workers in the region who face certain economic college-educated workers. disadvantages or funding a geographically targeted expansion of the California Competes program. Direct Economic Activity of New Campus Opportunities exist for researchers to further study Is Likely Similar to Other State Projects. the relative cost-effectiveness of these and other A substantial amount of the estimated economic state policy options. activity associated with UC Merced is directly 26 LEGISLATIVE ANALYST’S OFFICE AN LAO REPORT www.lao.ca.gov 27 AN LAO REPORT LAO PUBLICATIONS This report was prepared by Ian Klein, and reviewed by Jennifer Pacella and Ross Brown. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 28 LEGISLATIVE ANALYST’S OFFICE