The 1960 Master Plan for ³ÉÈËVRÊÓƵ in California, overseen by University of California president Clark Kerr, created the world¡¯²õ leading system of public higher education in the richest and most populous state in the US. Yet this remarkable system is now struggling, especially in its lower reaches. In its present problems, as in its earlier success, California continues to be emblematic of American public higher education as a whole.

The Master Plan established a design that influenced higher education systems across the world. The model was a tapering pyramid, matching higher education to the hierarchy of wealth in society and the stratification of the labour market. It was hailed for its combination of excellence in the University of California (UC) at the peak with universal free access to two-year community colleges at the base. There was a firm division of labour between the research-intensive campuses of UC, the state colleges/universities and the community colleges. Only the top 12.5?per cent of school leavers directly entered the UC system, but upward transfer between the three levels was meant to provide equality of opportunity.

Kerr and his contemporaries expected the plan to apply for 20 years. It worked for almost a decade longer, but by 1990 the foundations were eroding. The tax revolt in California, beginning with the limits on property tax imposed by Proposition 13 in 1978, undermined the ability of the state to finance higher education. It signified a middle class no longer willing to support access to all, including immigrants moving into California from south of the border. The new era was further marked by national tax cuts, reductions in the role of government and growing inequality under Ronald Reagan¡¯²õ presidency (1981-89). A second Master Plan never happened, the cuts to public funding bit steadily deeper and the state¡¯²õ coordinating authority for post-secondary education was eventually abolished, a casualty of savage cuts to state budgets in the wake of the 2008-09 recession.

Nominally, the 1960 blueprint continues, but its political and fiscal conditions have collapsed. The tip of the pyramid remains healthier than the base, but it too has problems. On the one hand, the excellence mission has been stunningly successful. The UC campuses at Berkeley, Los Angeles, San Diego and the rest are notable not only for research achievements ¨C there are four UC campuses in the top 50 of ³ÉÈËVRÊÓƵ¡¯²õ latest World University Rankings, published today ¨C but also for their number of students from low-income families. Berkeley and UCLA take in more Pell grant students than the top 16 private US universities combined. As American inequality increases, with the top 1?per cent of earners now taking home 20?per cent of all income, Berkeley chancellor Nicholas Dirks remains fond of The New York Times¡¯ description of the California system as an ¡°upward mobility engine¡±. However, California still confines research-intensive education in doctoral universities to the top 12.5?per cent, even as many countries prepare a majority of students in research-focused universities. Furthermore, Berkeley, with an endowment less than 20 per cent as large as that of its neighbour, Stanford University, cannot compete in the upper layer of the academic labour market. UC campuses can expand revenues by recruiting more foreign and out-of-state students, who pay higher tuition fees, but this threatens to reduce the scope for equity admissions, and growth has its limits. There seems no prospect that the state will restore tuition funding.

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The larger problem is that the Master Plan¡¯²õ access mission is in deep crisis. Open access was fatally compromised when community colleges began to turn down applicants because of insufficient funds. The California State Universities have also increasingly restricted entry. The upward transfer function ¨C which always worked better in California¡¯²õ middle-class districts than in poorer areas ¨C has faltered, handicapped by low completion rates in both the CSUs and the community colleges. Underfunded and uneven public schools are also in crisis, with high school completion as low as 50?per cent in poor Los Angeles suburbs. Participation in tertiary education in California has slipped from the highest in the nation when the Master Plan was born to the bottom five of the 50 states.

Where does California ¨C and American public higher education in general ¨C go from here? Can the social values embodied in Kerr¡¯²õ 1960 vision be renewed? Many leaders in the private universities recognise that a strong public system provides essential ballast to higher education as a whole, broadening the spread of science and technological capacity and offering an opportunity structure that private education, by its nature, cannot guarantee on a society-wide basis.

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Countries now hitting excellence and equity goals simultaneously, much as the 1960 Master Plan imagined, include the Nordic nations, South Korea and Taiwan. These are also societies that rank highly in Forbes magazine¡¯²õ surveys of good countries in which to do business, and they all have strong creative cultures in both arts and industry. They have varied rates of taxation, but without exception taxation is sufficient to support excellent and accessible higher education at near-universal levels of participation, creating a great pool of resources and ideas from which to draw.

In other words, the vision of the Master Plan for higher education in California can be achieved. In the US, the ultimate solution is to regain a positive notion of government and education for the common good, and implement that in policy. This needs a sea change in the political economy ¨C an end to blind faith in the justice of market forces, steps to reduce income inequality and the rebuilding of taxation, the essential basis for collective policies.

But this will not happen soon, and Californian higher education cannot wait for another Franklin Roosevelt New Deal or another Lyndon Johnson Great Society to come along. Still, there is much that could be done in the interim. Two elements seem essential. The first is about the fiscal capacity of government and the rising cost of tuition. The second concerns the shape of the Californian pyramid.

The solution to access to community colleges is not to abolish all tuition fees, as the Obama administration has suggested. Without an expanded tax base, this would worsen chronic problems of institutional poverty and state fiscal incapacity. The solution is a system of higher education tuition funding grounded in income-contingent student loans, along the lines of England and Australia. But such a scheme must be implemented on a federal basis because it would necessarily replace existing government-supported loans programmes. Federal loans would bypass the states and their chronic fiscal problems.

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The US uses commercial student loans based on mortgage-style timed repayments. Graduates from poorer backgrounds who cannot generate loan repayments are in jeopardy. Women face greater difficulties than men, who earn more on average. These are deterrents to participation. Defaults are ultimately borne by government, a considerable public subsidy. What is needed is a tuition loans regime that works across a range of tuition charges but has minimal deterrent effect at the point of entry, and minimal socio-economic bias: that is, a regime in which no student from any background is blocked on financial grounds.

In an income-contingent loans system, students pay tuition at the point of enrolment using government-backed loans, with the transaction taking place between institutions and government. Students handle no money. The loans are repaid through the tax system on a percentage of income basis. Repayment begins when income reaches a threshold level. Prior to that, the graduate carries the debt without the obligation to repay, although the debt slowly increases on the basis of sub-commercial interest charges. Not all graduates repay their loans, particularly those who work for low rates of pay and those who spend long periods outside the workforce. Public subsidies are used to support access and equality of opportunity, rather than to compensate loans companies. The only category of students whose participation has dropped since English fees were tripled to ?9,000 in 2012 has been part-time working students.

For government, the extent of public subsidy can be tweaked by altering the terms governing the loans, including the interest rate on debt, the income threshold for repayment and the percentage of their income that students are required to repay. Government would need to impose a ceiling on the scheme, particularly in the private sector.

The second necessary change in California is a matter of state policy: the balance between the different levels in the pyramid. Two-year qualifications now lack weight in graduate labour markets. California needs more four-year places, while the number of campuses with recognised research capacity is too low given the size of the state and the need for broadly distributed technological education.

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Four-year places can be increased by expanding the enrolment of the CSUs and the University of California, and developing more community college programmes at four-year level. The research university experience could be broadened by creating new research and doctoral campuses in selected CSU sites, without funding them at the same level for research as the UC. Other CSU sites could merge with community colleges. With the lower tiers upgraded, the vertical stratification of state public higher education would be less steep. Education in the lower tiers would be lifted, and the state¡¯²õ research capacity would expand. These are the elements of a second Master Plan for higher education.

Simon Marginson is director of the ESRC/Hefce Centre for Global ³ÉÈËVRÊÓƵ at the UCL Institute of Education. This article is an amended version of the final chapter of his book The Dream is Over: The Crisis of Clark Kerr¡¯²õ California Idea of ³ÉÈËVRÊÓƵ, which has just been published by University of California Press. It can be .

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