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Misplaced Priorities 101 

Amid a drastic budget crisis, why is the California State University system spending $400 million on computers? And where is the money coming from?

Wednesday, Jul 10 2002
To Prof. Patricia Hill, who teaches history at California State University's campus in San Jose, budget problems are never clearer than when she walks into a classroom -- and sees students without desks.

"There are classes in the social sciences for juniors and seniors where there are 10 or 15 students sitting on the floor, waiting for people to drop [the class], so they can literally have a seat," she says. "My colleagues are told to accept as many students as possible, even for a seminar class. So you'll have 40 or 50 people in a seminar. There's nothing wrong with classes that size.

"But they're not seminars."

To the extent people outside the system know anything about CSU, they know it's huge and broke. Unlike its smaller, more prestigious, better-funded UC cousin, CSU -- or just "Cal State," as it often is called -- did not prosper during the 1990s boom. Rather than load up on new, tenure-track faculty and watch endowments bulge, CSU spent much of the last decade in brutal labor negotiations and harrowing budget disputes. Full-time faculty ratios dropped; enrollment soared. But if CSU missed the boom, it got a full share of the bust: This spring, Governor Davis slashed the system's already razor-thin budget by $43 million.

Amid the budget carnage, Cal State Chancellor Charles Reed has instituted and is continuing to push a $400 million plan to centralize the system's computer operations, using PeopleSoft software, which has been connected to massive cost overruns at other schools.

CSU officials say the package -- funded, in a less than transparent fashion, from a variety of sources within the system's already-strapped budget -- will save the school millions in the long run. But as controversy swirls around a $95 million state government contract for Oracle software, auditors are attempting to determine where the money for the CSU installation -- the largest in the history of American higher education -- is coming from, and whether the project is harming State's academic programs.

University staff and faculty, meanwhile, are fuming.

"We don't have enough chairs for our students," says California Faculty Association spokesperson Alice Sunshine. "This is $400 million over seven years. I don't think we can afford to be taking the chancellor's word for it."

Late in 1996, word spread in tech circles of a fruitful and almost endless contracting opportunity: California State University was seeking to centralize its disparate computer systems. At least as far as higher education goes, the scope of the project was unprecedented. With 23 campuses, nearly 400,000 students, and 42,000 employees, the CSU system is the largest in the country and, from a technology perspective, a long way from being wired. The system's mountains of data on employees, finances, and students were stored on incompatible systems at 23 separate computing hubs around the state.

The project -- eventually known as the Common Management System, or CMS -- was aimed at dropping all CSU data into a slick database accessible all over the university system. Centralizing business practices via snazzy new software "suites" was a common goal in 1996, when much of America was fretting over the computer-freezing possibilities of Year 2000. Cost-conscious colleges were easily enticed by promises that their costly, cumbersome, and often redundant ways of tracking personnel, spending, grades, enrollment, and admissions could be streamlined.

Major software vendors -- including, obviously, Oracle and PeopleSoft -- were able to build huge businesses in the 1990s while selling such Enterprise Resource Planning software to business, government, and educational institutions. College campuses all over the country invested heavily in the software (sometimes with far-from-optimum results), but no entire university system tried to fully integrate computing operations -- until Cal State made the leap.

"I was at Oracle at the time, and I can tell you the competition [for the contract] was fierce," recalls Jim McGlothlin, a regional vice president in PeopleSoft's education and government division. "Between CSU and SUNY [the State University of New York, which was weighing, but later abandoned, a similar project], we actually contemplated acquiring a company to help us get the contract."

Oracle's inability to provide the student administration component -- the piece of the software suite responsible for enrollment, class registration, financial aid, admissions, and grade reporting, among other things -- wound up being the difference. PeopleSoft knew exactly how big its victory was. "We may not be building the pyramids," a PeopleSoft attorney wrote to a CSU contract official (who had just returned from Egypt), "but a state-wide standardized HR, Financial and Student system for [the] California State University system is still quite an undertaking."

Considering what some schools have experienced while trying to make PeopleSoft software work, a working PeopleSoft system for CSU's 23 campuses might be every bit as wondrous as anything Pharaoh ever contemplated.

When installed properly, PeopleSoft suites have saved hundreds of businesses millions of dollars by streamlining and integrating the traditionally disjointed realms of human resources, finance, and, on college campuses, student administration. But the systems are not easy -- or cheap -- to install properly, and perhaps nowhere has that been clearer than in the field of higher education, where PeopleSoft blow-ups have been frequent and sometimes catastrophic.

On the Midwestern campuses of the Big Ten -- where Ohio State University overran its budget by $30 million and the University of Minnesota spent $18 million more than its $42 million allotment -- seven different university presidents authored a letter of protest to PeopleSoft's chief executive in 1999.

Earlier this year, the University of Missouri announced it had blown a $40 million budget by nearly 20 percent. Cleveland State University, probably the poster child for PeopleSoft problems, was still dealing with malfunctions after quadrupling its $4 million budget.

And at the University of Colorado, which spent $33 million over four years, a top payroll official described the implementation problem this way for the Associated Press last year: "It's tremendous stress, a tremendous amount of work. Every month, I wonder about who's not going to get paid."

About The Author

Jeremy Mullman


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