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CaliforniaALL, Dianne Feinstein, Freada Kapor Klein, Gibor Basri, Joe Dunn, Richard Blum -- Regent of the University of California; Husband of California Senator Dianne Fienstein, University of California Irvine Foundation

TIMELINE 2012: Richard Blum and The Slow Death of Public Higher Education (TLR Note:Relevant to University of Phoenix-CaliforniaALL-UCI Foundation- UC Berkeley Foundation-Kapors-Joe Dunn- Gibor Basri-Connection)

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…..The for-profit industry that we understand today is much different from the small, local certification programs that used to compose the industry. As of 2009, more than 75 percent of students at a for-profit college are attending one owned by a private equity firm or a company traded on a major stock exchange. Modern concerns with for-profits’ potential abuses—both in duping students and exploiting federal programs—didn’t begin until the expansion of GI benefits for higher education in the period following the Second World War.

In the early 1990s, for-profits were subject to a series of Senate investigations. Georgia Democratic Senator Sam Nunn noted that students were “[v]ictimized by unscrupulous profiteers and their fraudulent schools” and “have received neither the training nor the skills they hoped to acquire, and instead, have been left burdened with debts they cannot repay.” Nunn said this after the committee learned about an Ohio repair school operating out of a fruit stand and recruiters who targeted welfare offices and housing projects for enrollees. Current recruitment practices are just as bad, if not worse. According to internal documents recently made available by a Senate investigation committee, recruiters at the for-profit college ITT were given diagrams of a “pain funnel,” with a series of questions designed to “poke the pain” of potential recruits. A Kaplan document told recruiters that their interactions with potential students should be “all about uncovering their pain and fears.”

The hearings in the 1990s led to a series of for-profit sector reforms and regulations. One key regulation required that at least 50 percent of students be enrolled at a physical campus in order for a program to be eligible for federal student aid. A 1998 pilot program allowed some schools to go below the 50 percent threshold and still receive federal aid, in order to study the effects, but it was the George W. Bush administration that sought to comprehensively remove regulations unfavorable to the industry. A former lobbyist for the (for-profit) University of Phoenix, Sally Stroup, became Bush’s assistant secretary for post-secondary education at the Department of Education and led a successful effort to remove restrictions on for-profit schools, including the 50 percent rule, and to grant them greater access to federal funding. The legislation was only several lines long, and was sneaked into a massive spending bill, but it opened the door to an expansion of the industry beyond what most people could have imagined at the time.

The standard political criticism of the for-profit industry is that it exists only to vacuum up government subsidies; that it is a problematic byproduct of government actions. This diagnosis is perfectly in line with the Reaganite complaint against government interference in the workings of the market. If we look at California, however, we see that this critique has it backward. For-profit education flooded the market only after the state began to abandon its responsibility to create sufficient institutional capacity in the public system. The problem is not government action, but inaction. As the government gave up its Master Plan responsibility to educate California students, the for-profit sector expanded to fill the demand.

As the government gave up its Master Plan responsibility to educate California students, the for-profit sector expanded to fill the demand.

Education expert (and UC Berkeley scholar) John Aubrey Douglass has found a similar pattern in countries such as Brazil, Korea, and Poland, which modernized too fast for the public sector to keep up with demand. The for-profit sector absorbs and even monopolizes the very subsidies that were intended to foster mass education, while providing poorer outcomes than the public sector. But whereas this problem, referred to as the “Brazilian Effect,” arises in developing countries as they seek to build a public higher education structure from scratch, the United States suffers instead from decay.

Under the neoliberal public policy regime of the past thirty years, the United States has moved from providing public goods directly toward providing coupons for the purchase of those goods in the private market. The private market encourages choice, competition, and innovation, its proponents say, especially compared to the gray, static, and inefficient public sector. Government grants, subsidized loans, and tax breaks would unleash market forces and use them to tackle the problems of higher education.

Such an approach would work only if high-quality private universities increased the amount of students they were willing to educate—if, in other words, the supply of good education were “elastic,” stretching to meet the demand of additional students. Instead, students are finding an inelastic market with collapsing public provision. They face skyrocketing prices and the rationing of quality education, with for-profits purveying counterfeit goods to make up the difference.

Sometimes policy failures are accidental. Sometimes there is a trail of breadcrumbs. In the case of California higher education, it is hard not to notice that policy failures have meant big business for the for-profit industry. And in some cases, that trail of breadcrumbs leads directly to the men and women who run the UC. UC Regent Richard Blum, for example, is not only the largest shareholder in two for-profit universities, Career Education Corporation and ITT Educational Services, but also, as Peter Byrne reported in a 2010 exposé, oversaw investments for the UC’s $63 billion portfolio at a time when the UC invested in the very same two for-profits. The problem isn’t anything as simple as pure corruption, but the decline of the public university is corporate capital’s gain, and investment firms like Blum Capital Partners know this quite well. The educational infrastructure of the future—and in many ways, of the present—is being built out of the very same crumbling public sector that men like Richard Blum have been entrusted with stewarding.

Ronald Reagan may not have seen this coming when he first set out to destroy what he saw as the creeping communism of master-planned and state-funded public education. His vision at the time was essentially negative, reactionary. But the conservative project he put in place in California in the 1960s remains with us today. Reagan was the trendsetter in making higher education into a problem to be solved with fee hikes and police. Other governors approached this problem in different ways, but the decision Reagan made to begin the destruction of the Master Plan hangs over all of them. Today, we can clearly see the results. Limiting the ability of the government to plan for the education of its citizens has left us with the worst of both worlds: students and families with too much debt and too few options.


About Leslie Brodie

Leslie Brodie is a reporter, writer, blogger, activist, and a religious leader in the community.


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