Kristen Harris
Analyst, Research
Kristen Harris is a research analyst at the Milken Institute. Her research focuses on regional economics and demographics. Harris's most recent projects include a look at the relationship between minority populations and affordable housing in South Los Angeles and a California regional quarterly forecast.
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California held back by educational decline
By: Kristen Harris
November 19, 2013

A dozen years from now, California will be hard-pressed to maintain its economic leadership unless it finds a way to boost its output of college graduates. The state is likely to need 5.5 million of them among its vast population, along with technical certificate holders. At the current rate, however, itaEUR(TM)s on track to have only 3.2 million by then aEUR" a 42 percent shortfall.


This is only one facet of the stateaEUR(TM)s vexing struggle with education and human capital development. Indeed, one of the most startling findings of the Milken InstituteaEUR(TM)s upcoming report, aEURoeCaliforniaaEUR(TM)s Position in Technology and Science 2013,aEUR? is that the state known for innovation and entrepreneurship has fallen to 20th nationwide in the Human Capital Investment Composite aEUR" its lowest ranking since we launched the index in 2002.

The Human Capital Investment Composite encompasses 21 indicators, among them educational attainment, test scores, STEM focus and appropriations for higher education. ItaEUR(TM)s one of the five data sets that are combined to create the State Science and Technology Index rankings.

CaliforniaaEUR(TM)s slide can be traced to two indicators, state appropriations for higher education per capita and percent change in state appropriations. California fell to 22nd place in appropriations in 2012-13, spending $9.4 billion on higher ed from the General Fund, or less than $250 per resident. ThataEUR(TM)s down 5.7 percent in one year. But thanks to the stateaEUR(TM)s improved financial status, the governoraEUR(TM)s 2013-14 budget musters a rebound, providing $11.9 billion, or 13 percent more than the revised 2012-13 budget. Funding is important, certainly, but money is not the only problem, or solution.

How do we make graduation a reality for larger numbers of capable students? Although more than 80 percent of University of California enrollees graduate within six years, only 47 percent of Cal State University students achieve that milestone in the same period. Graduation or transfer rates are even worse for California Community Colleges — only 23 percent within three years. Budget cuts imposed a setback on many, as classes were canceled and it became harder for students to finish their degrees, especially at the CCC level.

CaliforniaaEUR(TM)s poor graduation rates are only going to exacerbate future human capital issues in the state. California Competes, a nonpartisan research group, forecast the 2025 graduate gap in its report aEURoeThe Road Ahead,aEUR? published last year. To bring the system back up to speed, the authors explained, the state will need to expand its graduation pool 4% annually between now and then. Greater accountability on the part of the higher ed establishment is in order. Assembly Bill 94, which would require schools to report performance indicators, including on-time graduation rates, is a step in the right direction.

The Little Hoover CommissionaEUR(TM)s recently published report, aEURoeA New Plan for a New Economy: Reimagining Higher Education,aEUR? is another example of much-needed forward thinking. It pushes CaliforniaaEUR(TM)s leaders to create a new master plan for the field. The state still references the 1960-1975 Master Plan for Higher Education, but population growth, technology and demographics have made this document obsolete. A modernized approach would invest in fresh learning methods, including online classes, and make education affordable again. We believe itaEUR(TM)s time to look past institutional barriers and focus on student success through innovation.

Education is crucial to CaliforniaaEUR(TM)s drive to remain competitive, and it needs to reverse the trend. In our Science and Technology Index, the state fell from third to fourth in 2013, behind Massachusetts, Maryland, and Colorado. Unlike California, those three rank in the Human Capital Investment Composite top 10, with Massachusetts and Maryland finishing first and second. If the state canaEUR(TM)t make lasting improvements, it risks a painful slide not only in the index, but in its long-term economic performance.