Sematech and You

How UT's Industrial Policy Screws Students

By Tom Philpott and Scott Henson
November 1989; pages 4-5, 12; Volume 1, No. 2

As the students who couldn't get required classes this fall know, a dramatic "overenrollment crisis" - what Polemicist calls an understaffing crisis - plagues the University. President Cunningham complains that the problem stems from a lack of funds for undergraduate education. What he doesn't tell you is where those funds went.

Cunningham may be ashamed to admit it, but his university has become little more than a romper room for wealthy capitalists anxious to divert public funds into research projects for their private businesses. Economists call this practice "industrial policy." Even as the University spends tens of millions of dollars to attract high-tech and defense industry, students sit herdlike in huge auditoriums with barely a shepherd - often a graduate student - to guide them.

Depsite the rhetoric of UT presidents, chancellors, and Texas politicians, this policy undermines both undergraduate education and the state's economy. So, Polemicist decided to delve into this history and politics behind UT's industrial policy, to pose the question: Does industrial policy really benefit either education or the state?

Industrial Policy and the UT student

One great myth of the understaffing crisis states that the UT System is somehow too impoverished to hire teachers. Actually, the UT-Austin budget has more than doubled than 1979, while growth in undergraduate enrollment and faculty has been modest (see "Cunningham," page nine). What follows is a preliminary look into a few of UT's more famous forays into industrial policy, by no means an exhaustive list. But the question remains: Where has all the money gone?


One place it's gone is to buy land, capital and personnel for Microelectronics and Computer Technology Corporation (MCC). According to the Ex-Students Association's Alcalde magazine, UT spent $14 million in 1983 for land and buildings as part of an incentive package to draw the consortium. As part of the agreement, MCC pays the University only $2 rent per year, over a ten-year period, to utilize the facilities. Assuming UT would have earned nine percent interest compounded annually (a low estimate considering current interest rates and the bull market's effect on UT's stock portfolio), Polemicist calculates that UT loses some $22 million in interest on these facilities over ten years by not leasing to MCC at market value.

Apologists for the deal would note that, as Alcalde reports, UT receives a $1.76 million annual kickback from MCC. But look at that kickback: six one-third-time adjunct faculty members (who never come in contact with undergraduates); half-time employment for 45 graduate students; summer jobs for 15 graduate students; and almost $1 million in grants to UT researchers. Notably absent from this quid-pro-quo is any benefit to undergrads. What this means is UT undergraduates are not only denied the $14 million principal, but also $22 million in future interest. In other words, undergraduates lose a total of $36 million in present and future money.

Yet Bill Cunningham can claim that undergraduates' "educational experience is greatly enhanced by [research] programs." How? He never explains.

Percentage Increases Since 1979

Department Undergrads Faculty
Economics 335.8% 17.1%
English 72.3 -3.8
French/Italian 25.6 2.4
Government 44.3 -12.0
History 88.6 6.9
Spanish/Portuguese -15.7 2.3
Astronomy 10.2 4.9
Computer Sciences 40.8 94.8
Mathematics 50.5 6.1
Microbiology 91.8 0.0
Electrical/Computer Engineering 14.6 46.1
Mechanical Engineering 15.3 37.3

In addition, UT-Austin agreed to beef up its computer science and electrical engineering departments. In fact, these two departments are virtually the only ones at the University that experienced significant faculty growth in the '80s (see chart). The increase in both department's faculty dramatically exceeded the number of new undergraduate enrollees. Meanwhile, departments like English and government, which teach courses required for all undergraduates, struggled with growing classes and teacher shortages. Even in natural sciences like physics and math, faculty growth never matched enrollment increases. Ironically, over this ten-year period, undergraduate enrollment in the engineering college actually declined by 10.4 percent - its budget, however, skyrocketed by 155.6 percent.

The Budget Crunch

But the MCC debacle occurred when times were good. In 1984, the oil crash caused the state to lose hundreds of millions of dollars in tax revenue. At Gov. White's urging, the Legislature responded in 1985 by tightening budget outlays to the University. This inspired the UT System to impose austerity on undergraduates - but not on the corporations that benefitted from the System's generiosity.

In February of 1985, John Newtown, then-Board of Regents chair, Peter Flawn, then-UT president, and UT System Chancellor Hans Mark held a press conference to endorse doubling tuition in 1986 and tripling it in 1987.

Later that year, Chancellor Hans Mark threatened to lay off 3,000 employees if the state enacted its proposed five-percent budget cut. He also advocated abolishing summer school, a move which would save $20 million. In the same time period, the University was cutting library hours drastically and imposed a freeze on faculty hiring.

But that freeze didn't prevent the University from continuing to recruit professors to fill 32 $1 million endowed chairs in science and engineering, several of which were reserved to perform research for MCC. These chairs were created in 1984 and funded with $16 million from the UT System and $16 million in private donations. One June 1985 headline in the Corpus Christi Caller-Times - just four months after the call for a tuition hike - declared: "Money is no object as Texas lassos top academicians." The freeze also failed to prevent the University from lying to the The Daily Texan, which dutifully reported that these chairs continued to be filled because they were funded only with private donations.

In October 1985, the Board of Regents voted to spend $20 million in proceeds from the PUF to purchase a Cray supercomputer exclusively for UT System research projects. Jess Hay, then-chair of the Board of Regents, linked that purchase directly to the above-mentioned endowed chairs. The computer, he said, is "an essential step if we are going to maximize the use of the 32 endowed chairs."

This adds up to $36 million more - $16 million for the reearch professors, $20 million for the computer - diverted from state education funds into research and development.

Also that fall, Chancellor Mark proposed funding for a slew of new research facilities, including a new robotics institute at UT-Arlington to complement the General Motors plant there, a new materials research center at UT-Dallas, a new biotechnology center at UT-San Antonio, a materials research institute at UT-El Paso and a high-energy physics research center at UT-Permian Basin. Of these, the UT-Arlington, UT-San Antonio and UT-Permian Basin facilities were eventually funded and built, at a cost Polemicist was unable to ascertain before publication.

Mark justified these extravagant outlays for research plants by explaining that only budgets for particular units in the university system that have "clear applications of creating new jobs" would be increased. While Mark never makes clear how a robotics institute - which by definition displaces workers - would boost employment, this statement reveals much about the UT System's priorities.

At a time when libraries were closing early and budget cuts were imposed on most UT departments, Hans Mark saw the role of the UT System as executor of state economic policy, not as an educator of the students. Hotshot professors could be hired for MCC research projects, but not to teach undergraduate English or economics classes. Industrial policy had overridden education as the primary function of our state's higher-education system.


With the Austin economy still faltering in 1988, the UT System doled out $50 million of Austin's $68 million package to attract Sematech - a semiconductor research consortium consisting of Defense Department and 14 of the wealthiest high-tech firms in the world. Of this $50 million, UT spent $12.3 million to buy and renovate the old Data General plant in Southwest Austin. This land was leased to the consortium for $1 per year for 20 years according to The Chronicle of Higher Education. UT also allows Sematech free use of its supercomputer, which costs the University thousands of dollars per hour of use.

Austin overcame heavy competition to land Sematech - seven other states offered more money. But as Chancellor Mark explained it, Austin won out because "we [UT] put green money on the table ... Other places also said they'd go to their legislatures. But we said, 'When you get to town, you'll have a bank account you can draw on.'" The thousands of college students who stood in long lines for financial aid that year would have loved to have heard the same thing.

The remaining $38 million of UT's commitment was generated fhrough a bond issue, which the legislature paid back the following year. But not before the UT System had eaten $3 million in interest payments. By Polemicist estimates, UT will lose $56 million in interest on that land (at 9 percent compounded yearly) over the course of the 20 year contract. Combined with the $15 million in "green money," this comes to some $71 million in current and future monies lost to the state's higher-education system in the name of industrial policy.

And what kickbacks does UT receive for this "green money"? The Chronicle of Higher Education says UT will receive savings from hiring Sematech employees as adjunct faculty, from use of equipment purchased by Sematech that will be available to the University and from having a handful of graduate students employed at the facility. In addition, some UT faculty members will receive research grants for high-tech projects.

Some of these "savings" - like hiring Sematech employees as adjunct, non-teaching faculty - will yield dubious benefits as cost-cutting devices. But no one can, in good conscience, argue that any of them benefit undergraduate edcuation.

Industrial Policy and the Economy

How UT's industry policy screws undergrads
Left: Balcones Research Center. Right: The Jesse H. Jones Communications Center. One of these buildings houses millions of dollars in research capital. The other houses facilities with no profit applications. Can you guess which is which?

Despite all the losses to higher education Polemicist has outlined, however, industrial policy advocates will argue that these expenditures are really investments in the future. But are those investments really worth the costs?

To a student at the University today, investments in Texas' future economy mean little. Most students are here only for four or five years, and then move on. If their educations are bastardized by skewed spending priorities, their futures will be limited by the poor education they received in their youth. And as Polemicist has shown, massive expenditures on research today translate into long-term funding shortages because of the loss of interest and dividend income UT would have gained.

And there's no guarantee that these investments will boost employment. In 1982, when the deal was cut to bring MCC to Austin, the city's unemployment rate stood at 5 percent. Since then it has risen steadily to well over 6 percent, despite the supposed growth in high-tech fields. If UT's industrial policy has created any jobs, they would appear to be statistically insignificant.

Outside of short-term construction jobs available when these plants are initially built, most jobs with high-tech firms are filled with talent from California, Illinois, North Carolina or Massachusetts, seldom from Texas. In addition, high-tech expenditures by universities only boost research projects. Most high-tech goods are actually assembled by low-paid women in the Third World. Texas Instruments may contribute research funds to Austin's Sematech and to MCC, but its production facilities have shifted to factories in El Salvador and some 16 other Third World nations.

And high-tech ventures, once hailed as "clean" industries, have proven to be among the worst of environmental polluters. In Silicon Valley, the poisonous chemicals necessary to manufacture microchips have leaked into the air workers breathe and the water they drink, resulting in illness and birth defects. Moreover, the Austin plant of Advanced Micro Devices - a Sematech member - was recently cited by the National Wildlife Foundation as one of the 500 worst polluters in the country. Over time, environmental cleanup and rising health care costs resulting in high-tech pollution will strap, not boost, the economy.

The Bi-Partisan Consensus

Like most of our country's bad policies, diverting state education funds into research and development springs from a broad bi-partisan coalition.

The UT System's involvement in Texas' industrial policy began in 1982, when then-Governor Mark White, with the aid of former UT president Peter Flawn, maneouvered to use UT funds and facilities to lure MCC to Austin. In response to failling oil prices in 1984, White formed the Texas Science and Technology Council - an ideologically balanced committee packed with heavyweights from politics, academia, and industry. Their mandate was to formulate a "five-year plan" to diversitfy the economy and boost Texas into "a leading position in fostering research and development and advanced technology."

Members of the Council included many familiar faces, included now-Secretary of Education Lauro Cavazos, Henry Cisneros, UT-Austin provost Gerhard Fonken, MCC chief and former CIA deputy director Adm. Bobby Inman, Robert Kirk (CEO of LTV Aerospace and Defense Co.), UT System Chancellor Hans Mark, Austin lawyer and Sematech attorney Pike Powers and Texas Instruments chairman Mark Shepherd, among others.

Texas politiciams joined the call with nary a dissenter. All 29 members of the Texas U.S. congressional delegation met in a closed meeting with the likes of Fonken, Mark and other Council representatives to formulate plans to pursue high-tech projects. It was only the second time in the 99th Congress that the entire delegation joined in a meeting. Even the liberal gadfly Jack Brooks jumped in, proclaiming that "it boils down to our getting more Texans appointed to the appropriate national scientific boards ... That's what it takes."

Arch-conservative Texas Senator Phil Gramm agreed: "We're all going to have to push together to make sure that Texas has good representation on national scientific boards, where research grant determinations are often made."

Gramm's Democratic counterpart, Sen. Lloyd Bentsen, even designated an aide to perform liason functions between "any university in Texas that wants to go after a major scientific contract and the government agency that intends to grant the research award." Supporting Bentsen in this effort was his long-time political foe and former Republican state party Chairman Peter O'Donnell.

With the 1986 election of Bill Clements, the consensus escalated. With many of the same public figures as his allies, Clements led the battle to draw Sematech to Austin, using tens of millions of tax and tuition dollars as incentive.

Texas politicians and power brokers are a rowdy lot - their varied interests give them much to argue about. But when oil prices crashed in the mid-'80s, they rallied behind a single principal: that Texas must spend public funds to "diversity" the economy by drawing high-tech industry. To compete with other states trying to do the same thing, Texas would need capital - both physical and intellectual. That capital, these decision-makers agreed, would be developed at and drained from the state's public universities.

The solution: rebellion

Proponents of industrial policy know that citizens can't vote to stop these policies - the bi-partisan consensus ensures that. And of course, no one can vote for or against UT officials. But much of the inertia behind these policies comes from the sheer ignorance of their supporters about their effects on students' education.

While faculty generally support research projects, it's unlikely that most of them make the mental link between funding for research and understaffing on university campuses - the faculty without vested interests in the policy are a potential source of support for students' cause.

Students at other universities have already begun demanding an end to industrial-policy-driven austerity. According to the Oct. 30 Nation, students at the University of New Mexico occupied the president's office for thirteen days last spring. And at Rutgers, reports The Nation, 71 students clashed with police after storming the dean's office. Their chant - "fight, fight, education is a right" - could serve as an apt rallying cry for austerity-plagued UT students. Austerity protests also broke out at Stanford, Ohio State, University of Wisconsin, and Cal-Berkeley.

All these schools have lower student-teacher ratios than the University. We have no excuse to be docile. If we don't demand that our school's fund go to education instead of industry, no one will do it for us.

A demonstration will be held at noon on the West Mall, Friday, November 3 to show Cunningham and the Board of Regents that students won't sit back while their educations are denigrated for the sake of profits. Come join us and show your support for students' right to receive the education they pay for. Or, wait until next spring, and grumble while you wait in line at adds and drops.