Sacramento, Calif.
When Arnold Schwarzenegger took over as governor in November, California higher-education leaders didn't know quite what to expect from the former body builder and action-movie star, who had never held political office.

Mr. Schwarzenegger, a Republican, rarely mentioned higher education during the brief and frenzied campaign leading up to last fall's recall election. But when he released his first budget in January, his ideas about higher education became clearer to college officials, and they didn't like many of them.

The governor's spending plan calls for reining in the nationally recognized, and rapidly growing, need-based Cal Grant aid program while recommending that public colleges raise their tuition for the third year in a row. It proposes freezing enrollment at universities and directing some freshmen who were eligible to attend the four-year institutions instead to community colleges, where it is cheaper to educate them. And it suggests eliminating state funds for university programs that help disadvantaged elementary- and secondary-school students prepare for college.

Over all, Mr. Schwarzenegger has proposed cutting state funds to the University of California system by 7.9 percent, or $228-million, and to the California State University System by 9 percent, or $240-million. For the community colleges, he calls for a modest 4.4-percent increase, or $211-million.

That includes enough money to pay for enrollment growth of 3 percent, but two-year college administrators say that will not be enough to meet demand.

Aides to the governor say the goal in putting together the budget was to protect core academic instruction at the public institutions as much as possible, while helping to close California's $14-billion budget gap.

The details of a final spending plan for 2004-5 will be hashed out this spring by the governor, higher-education leaders, and state lawmakers. The stakes are high: At risk, many say, is the future of California's master plan for higher education. Developed more than four decades ago, the master plan outlined who should be guaranteed access to which state institutions and placed the state's fast-growing but unorganized web of public colleges into three well-defined tiers, setting up a national model that other states have tried to emulate.

Under the governor's plan, leaders of California's public institutions say they may begin to lose their battle to maintain the master plan's guarantee of access to higher education to all state residents, regardless of income or ethnic background. The college officials say they were already struggling to preserve that promise. Like their counterparts in many other states, California colleges have seen their budgets cut several times during the past two years, leading to double-digit percentage increases in tuition. And the reductions have come as the state's college population is booming. Enrollment at California public institutions is projected to increase by 22 percent, to almost 2.9 million students, by 2012.

Given the sheer number of students and the state's history as a leader on higher-education policy, it is especially important for California to find a way to shore up the quality of its public colleges and preserve access to them, observers of national higher-education policy say.

"Because of the circumstances we're dealing with, we are on the cutting edge," says Patrick M. Callan, president of the California-based National Center for Public Policy and Higher Education. "If California fails, there's a fairly good chance that the country will fail as well. We need a new model, like California provided in the 1960s."

Universities On the Edge

In early March, the leaders of the state's three public higher-education systems crowded into a meeting room at the Capitol here for this year's first legislative hearing on the governor's proposed budget for colleges. The officials were quick to raise their concerns.

Leaders of the University of California and California State University said the quality of their institutions was teetering on a precipice. The chancellor of the community colleges, while appreciating the proposed new dollars for his system, worried that sharp tuition increases would nevertheless limit access.

All of them said that the governor's budget threatened the state's long-articulated promise of making higher education affordable for its residents.

"Let me say this and say this clearly: We are on the edge right now," Robert C. Dynes, president of the University of California system, told members of the education-budget subcommittee in the state Senate.

"Our great public research university cannot be sustained if we have to absorb drastic budget cuts year after year, with no end in sight."

The university, Mr. Dynes said, is losing its competitiveness as faculty salaries fall below market averages, the ratio of students to faculty members increases, the level of financial support for graduate students falls, and the state spends less on research.

College officials and state lawmakers also criticized the governor's proposals to simultaneously raise tuition and scale back student aid. Mr. Schwarzenegger's budget recommends that tuition increase by 10 percent for in-state undergraduates at the University of California and California State University, by 20 percent for out-of-state undergraduates, and by up to 40 percent for graduate students.

At community colleges, the governor's budget called for a 44-percent tuition increase, and an even higher rate for students at two-year colleges who already hold bachelor's degrees.

At the same time, the governor's plan would eliminate an existing requirement that the maximum Cal Grant increase as tuition goes up. He proposes reducing, by 10 percent, the maximum annual income for families in the program and lowering the maximum grant for state residents attending a private institution in California by 44 percent, to $5,482.

The governor also suggests that universities no longer set aside for student aid a third of revenues from tuition increases. Citing the state-budget crunch, Mr. Schwarzenegger said that institutions should instead devote only 20 percent to student aid so that they could use more of the revenue to help absorb reductions to their operating budgets.

State Sen. Jack Scott, a Democrat and chairman of the education-budget subcommittee, said he worried that the proposals would curtail access for students from low-income and minority families. "Unfortunately, students of color tend to come from lower incomes," Mr. Scott said. "If we suddenly cut financial aid and raise fees, we know who is going to be cut out."

Charles B. Reed, chancellor of the Cal State system, urged lawmakers to help preserve the promise his institution holds for Californians of all backgrounds to be able to improve their status in society. About 40 percent of students at the system's 23 campuses speak English as a second language, Mr. Reed testified.

"You have the opportunity to join the middle class if you get a baccalaureate degree," he said.

Mr. Reed and others also said they worry that the proposed budget lacks money for more enrollment growth. By the end of last year, he noted, a record 15 Cal State campuses had closed admissions for new students for the spring of 2004. Students interested in attending Cal State are accustomed to applying right up until classes start.

"We want to do our part to help the state" during tough budget times, Mr. Reed testified. "But we don't want to do more than our part to help this state."

Paying the State's Bills

Officials in Mr. Schwarzenegger's administration defend the spending plan, saying that the governor had made tough choices to begin fixing California's financial problems that his predecessors largely avoided. H.D. Palmer, a spokesman for the California Department of Finance, says previous governors had borrowed more money and used other budgetary techniques to delay the pain of sharper cuts.

"The bill came due this year," Mr. Palmer says. For higher education, he explains, "what the governor tried to do, to the greatest extent possible, was to maintain core education functions."

He also did his best to preserve access, while saving the state money, Mr. Palmer says. For instance, he proposed reducing the number of new freshmen at the state's four-year campuses by 10 percent, or a total of 7,000 students, by directing them instead to start their studies at community colleges.

In 2004-5, the cost to educate a student at a community college is expected to total $4,559, compared with $10,623 at Cal State and $19,883 at the University of California. The students redirected to the community colleges would attend the two-year institutions free of charge and would be guaranteed a slot at a university campus after two years.

The governor also sought several ways to capture more revenue for the state, Mr. Palmer says. For example, Mr. Schwarzenegger pitched the increase in community-college tuition as a way for the state and its students to take better advantage of federal student-aid programs.

Now, tuition at California community colleges is too low -- $540 per year for a student taking a full courseload -- for students to be eligible, under federal law, for the maximum Pell Grant of $4,050. Under the governor's plan, students would not have to pay any more out of their own pockets since they would be able to receive the maximum federal grant, which could also be used to cover the cost of books and other educational expenses. At the same time, colleges would collect some $100-million in new tuition revenues.

Some higher-education and budget analysts praise the governor for presenting fresh ways to make the most effective use of state colleges when funds are limited. And for all the talk of preserving the master plan, some say there are legitimate questions about how much of the document's tenets remain intact anyway.

Richard P. West, executive vice chancellor for Cal State, says that the master plan's delineation of missions for the three higher-education sectors "still serves the state well." But the question of whether the document's promise of access for all at low, or no, cost has survived is not as clear, since tuition has been rising. "It's a matter of degree," he says.

Mr. Callan, of the national higher-education center, argues that the master plan is threatened each time the state faces an economic downturn, so it is time for California to face up to the reality that it cannot adequately pay for the blueprint's ideals anymore. State leaders everywhere, he says, need to develop new ways to protect access and affordability as state budgets dwindle and student populations grow. He argues that Mr. Schwarzenegger's budget may help invigorate such a debate in California.

"It is a much more thoughtful budget than what was proposed in each of the times of financial hardship in the past," Mr. Callan says.

Mr. Schwarzenegger's budget certainly has failings, such as its proposed cuts to aid programs, in Mr. Callan's eyes. But he praises several of the governor's ideas.

He likes, for instance, that the governor has proposed paying for enrollment growth at community colleges before universities. That way, Mr. Callan says, more slots are kept open for students at all levels.

The budget also includes incentives for universities to ease student transfers from community colleges by providing the University of California and Cal State $500 per student who attends a two-year college because of the governor's proposed reduction in new freshmen at universities. And Mr. Schwarzenegger has also called for more-predictable tuition increases, suggesting that they be tied to growth in per-capita personal income. He would allow institutions to increase their rates beyond that, but would limit annual increases to 10 percent for in-state undergraduate students.

A Fresh Face

Higher-education administrators have also found some aspects of Governor Schwarzenegger himself refreshing, despite the austere budget he has proposed.

Mr. Dynes calls the governor student-oriented, so much so that he "bubbles" when he is around students. The governor is also well aware of higher education's contributions to the state economy.

More broadly, Mr. Dynes speaks of Mr. Schwarzenegger as being open-minded and willing to consider changing his positions as he learns more about issues facing the state.

"He is thinking about this stuff," Mr. Dynes says of the state's commitment to the master plan. And, Governor Schwarzenegger, as a relative newcomer to politics, seems to have more freedom to chart his own course because he doesn't owe anyone anything, Mr. Dynes adds. "He doesn't have any political baggage."

Being a newcomer also means that the governor is still learning about higher education, college officials say. Mr. Reed says he has been impressed by the quality of Mr. Schwarzenegger's staff and how well briefed he has been. The governor tried to hire away some of Mr. Reed's staff members at Cal State, but the chancellor says he needed those officials to stay put at the university system, and they did.

For advice on higher education, the governor seems to rely especially on members of former California governor Pete Wilson's administration, Mr. Reed says. Those include William Hauck, who was Mr. Wilson's deputy chief of staff and is now a member of Cal State's Board of Trustees, and Russ Gould, who was director of finance under Mr. Wilson.

"Arnold has everybody off balance in California because of the way he thinks," says Mr. Reed, who was chief of staff to U.S. Sen. Bob Graham, a Democrat, when he was governor of Florida in the 1980s. While previous governors in California have spent energy calculating the politics of their decisions, Mr. Schwarzenegger "just wants to know how do you get from point A to point B," Mr. Reed says. "His focus is on solving the problem."

Resistance on Many Fronts

Even so, many of the governor's proposals are meeting with resistance. Last month more than 8,000 students and faculty members from community colleges held a rally at the Capitol to protest the governor's plan to raise tuition and to continue to cut the overall budgets of higher education.

College leaders say they will fight such proposals as cuts to Cal Grants and the elimination of state funds for outreach programs.

Mr. Reed says, too, that Cal State will need to increase tuition by more than the 10 percent proposed under Mr. Schwarzenegger's budget in order to finance basic operations and support current levels of enrollment.

At the University of California, Mr. Dynes says that the governor's proposal to raise graduate-student tuition by up to 40 percent "just cannot happen." He argues that such a large increase would make it hard for the university to assemble competitive financial-aid packages to lure top students to California.

At the budget hearing last month, State Sen. John Vasconcellos, a Democrat, added his own concerns. The senator worried that graduate schools often serve as a pool from which universities draw their next generation of faculty members, and that many minority students would be shut out of that pipeline if sharp tuition increases were enacted.

"If we wipe out all outreach programs and increase graduate program fees, there will never be any black or brown faces at the university in the next 30 years," Mr. Vasconcellos said. "It is like closing the door at both levels and the result is an all-white university."

"You said it better than I," Mr. Dynes replied.

Later in the hearing, Mark Drummond, chancellor of the California Community Colleges System, tried to impress upon lawmakers the problems inherent in the governor's proposal to raise to $50 per course, from $18, the tuition for community-college students who already hold a four-year degree.

Doing so, Mr. Drummond argued, would mostly hurt students who are returning to college for job training in a bad economy rather than simply taking courses for their own recreation. In the past, the chancellor said, raising fees for those students did not even result in more revenues for campuses because the students simply chose not to attend.

As he did often during the hearing, Senator Scott indicated that he shared some of the college officials' concerns. But, like the governor, lawmakers are in a tough spot, Mr. Scott said, and budget realities are looming.

"Unfortunately education is not going to be totally spared in this budget," Mr. Scott said.

"If we decide not to accept the governor's proposal, we have to find the money someplace else. And we may have to make some hard choices."

TIGHTENING THE BELT IN CALIFORNIA

Gov. Arnold Schwarzenegger, a Republican, proposed several changes to California's higher-education policy when he released his first budget in January. His plan seeks to close the state's $14-billion budget deficit. Here are some of his recommendations for students and public colleges:

Student aid

Eliminate requirement that Cal Grant awards must increase as tuition rises.

Reduce, by 10 percent, the maximum family income for Cal Grant eligibility. The new limits would range from $22,320 to $70,290 depending on family size.

Lower the maximum Cal Grant for state residents who attend private institutions in California by 44 percent, to $5,482.

Reduce the proportion of tuition revenues that institutions must set aside for student aid from 33 percent to 20 percent.

Tuition

Increase tuition rates by 10 percent for in-state undergraduate students at the University of California and California State University systems.

Increase rates by 20 percent for out-of-state undergraduate students at four-year universities.

Increase rates by up to 40 percent for graduate- and professional-school students.

Increase rates by 44 percent for community-college students.

Increase tuition to $50 per credit hour, from $18 per credit hour, for community-college students who already hold bachelor's degrees.

On other fronts

Eliminate state funds for university programs that provide college preparation and other outreach to students at elementary and secondary schools.

Freeze enrollment at the University of California and California State University systems.

Reduce the number of new freshmen at four-year universities by 10 percent, or 7,000 students, and redirect them to community colleges, where those students' tuition would be free.