FROM THE ECONOMIST

Students at the University of California at Berkeley will protest about almost anything related to global politics. Their militancy might be better directed closer to home. Across the UC system, research projects and libraries are low on cash, and student health services and some classes have been scaled back. Gray Davis, California's cash-strapped Democratic governor, has cut $170 million in aid to UC for the fiscal year ending in June.

That may seem small when set against the state's annual contribution of around $3 billion, let alone UC's total budget of $10 billion. But enrollment is rising fast, and as the headlines in The Daily Cal, Berkeley's student newspaper, make clear, things will get worse. Davis wants to cut another $140 million next year, and with the state still facing a budget shortfall of $20 billion or so, some harsher souls in the Legislature want to deprive UC of $400 million more.

This story will be familiar to public universities across the country. The University of Texas at Austin is bracing for possible cuts of 10 percent in state aid next year. At the 16-campus University of North Carolina, the state last year reclaimed nearly $60 million in already-pledged money – and ordered another $200 million in cutbacks.

Patrick Callan of the National Center for Public Policy and Higher Education points out that state universities experience extremes of the economic cycle – pampered in good times, spurned when budgets turn red. During the 1990s state aid grew by around 60 percent. But this downturn is different, he says, because the number of high-school graduates is rising to a peak in 2009. UC is still adding a 10th campus in Merced, in the San Joaquin Valley.

Compared with their counterparts in Britain, U.S. public universities are reasonably diversified. At Chapel Hill, the University of North Carolina's flagship campus, only a quarter of the budget comes from state government. As state handouts shrink, the universities are turning even more to private sources.

Many are raising tuition fees – some by more than 20 percent – and wooing out-of-state students, who pay more than locals do. Law and business schools are particularly aggressive fundraisers. They are also pushing money-making courses such as executive education. Howard Frank, dean of the University of Maryland's Smith School of Business, says that state money now fills about a tenth of his coffers, against 50 percent to 60 percent five years ago.

A few politicians and professors are even rethinking the basics of public universities. Mitt Romney, the slash-and-burn governor of Massachusetts, has raised hackles in academia by proposing to privatize, in large part, three campuses at the University of Massachusetts, to revamp its Amherst flagship campus with money from more out-of-state students and – most heretically – to do away with the office of the university president (currently occupied by one of his political foes). Colorado recently rejected a higher-education voucher system.

Will this mean that state universities will lose students and professors to their private competitors? Students tend to stick with state universities during hard times. The University of Connecticut, for instance, which is surrounded by rich Ivy League colleges, has reported a 28 percent surge in applications this year.

Tuition fees for locals at state universities may have crept higher, but they rarely amount to a quarter of the $25,000 or so a year charged by the cream of the private sector. State universities have also virtuously kept financial aid for poorer students in place.

Academics might be more tempted to drift away. A recent study found that UC professors earned about 7 percent less than their counterparts at comparable institutions (public and private) around the country, and the disparity is expected to grow next year. Still, as Callan points out, faculty positions at private universities are hard to come by – not least because private schools are feeling the pinch too.

Donations to private universities fell last year for the first time since the late 1980s, according to the Rand Corporation's Council for Aid to Education. Their endowments have also shrunk with the stock market. In February Moody's downgraded the debt ratings of 11 private colleges. Stanford University, faced with a $25 million shortfall next year, is freezing professors' salaries. That, at least, may give Berkeley protesters something to smile about.

The Economist is a London-based international news magazine.