State Treasurer Bill Lockyer had some explaining to do.

In an Oct. 1 report assessing California's financial outlook for the next 20 years, Lockyer suggested that the state might want to consider cutting off all funding to the University of California — saving the state $7 billion a year by 2027-28.

The notion made the headlines, of course, and people all around the UC system no doubt spilled their morning coffee as they asked: "Is he serious?"

"Dean Sheffrin and I discussed the need for further dialogue," economics professor Alan Olmstead said Jan. 30 to great laughter among some 75 people who had gathered in the AGR Room at the Buehler Alumni and Visitors Center to witness that "dialogue" in person with the state treasurer.

The occasion was Lockyer's address at a noon-hour event presented by UC Davis' Institute of Governmental Studies. Olmstead, the institute's director, introduced the guest speaker: "Treasurer Lockyer, very much to his credit, agreed to come into the lion's den."

The audience included Social Sciences Dean Steven M. Sheffrin and other deans, Chancellor Larry Vanderhoef and vice chancellors, and officials from the campus budget office. All of them know full well the state's situation: a $14.5 billion deficit, and a call from the governor to reduce spending 10 percent across the board. UC figures its budget shortfall, with the governor's plan in place, at $417 million.

Lockyer, seasoned politician that he is (25 years in the Legislature before being elected attorney general for two four-year terms and then treasurer) quickly corrected the record in regard to "privatizing" UC.

That is "not exactly" what he said, "but that's how it came out, and I have to live with that."

The idea surfaced in his Debt Affordability Report, which the state treasurer must produce annually. His aim, Lockyer said, was to provoke discussion about where the state seems to be headed.

The state already has cut UC funding more than half, from providing 35 percent of the UC budget just a few years ago, to 17 percent today.

"This is de facto privatization," he said. "If you're going to run a private system, be honest about it." And, he said, when Californians become aware of the possibility of losing their public university system, maybe then they will step up to save it.

A private UC is the last thing Lockyer wants. In fact, the UC Berkeley graduate said he wants more state support.

He said people generally believe in the value of public universities, but have a funny way of showing it. He cited a survey that asked what people really wanted to protect from budget cuts: 57 percent said kindergarten through 12th grade education, 19 percent said health and human services, and 14 percent said higher education.

By suggesting the elimination of all state support to UC, Lockyer is trying to make the opposite point: California cannot afford to give up UC. "It really isn't supported the way it deserves to be," he said.

Economics professor Hilary Hoynes questioned Lockyer's use of the "privatization" label. "I'm not sure what the benefit is," she said during a question-and-answer session.

Lockyer said people need to know that UC's privatization is already happening, as a result of the state's "inattention or disinterest."

After the program, Ann Stevens, an associate professor of economics, suggested what Lockyer is really saying is that the state is "abandoning" the UC system.

Lockyer agreed, and he urged people in the audience to be strong advocates for the UC system.

The Democratic treasurer said two things are clear: California needs more revenue (i.e., taxes), and the likelihood of that happening is slim, given the Republican Party's steadfast opposition.

Every GOP legislator but one has signed a pledge "to never, ever vote for a tax increase," Lockyer said.

Without GOP support, the Democratic Party stands no chance of passing a tax increase or a budget — given the requirement for two-thirds majority approval. The Democrats just do not have the numbers.

So, rather than put out a report that focused completely on revenue increases that are never likely to come about, Lockyer said he needed to propose some budget cuts as well.

They included the early release of prisoners, something that Gov. Schwarzenegger included in his draft budget for 2008-09.

And Lockyer's plan included his UC "privatization" suggestion. At least one UC Davis professor said the idea is worth considering.

Greg Clark came to UC Davis from the University of Michigan, which he described as "essentially private, but nominally public."

Why? Because Michigan admits a greater number of out-of-state students and charges them more, and is "quite aggressive at raising private money," said Clark, chair of the Department of Economics. He is the author of the best-selling A Farewell to Alms, in which he postulates that people's aspirations and abilities drive economic change more so than institutions.

He said a "private" UC, free and clear of state regulations, could boost its revenue by establishing a new structure of higher fees and enhanced, means-tested financial aid, so students who could afford more would pay more.

The University of Michigan's Web site lists in-state resident tuition and fees of $10,448 for freshmen and sophomores, $11,776 for juniors and seniors, and $15,892 for graduate students for the 2007-08 academic year. In the same categories, out-of-state students pay $31,302, $33,500 and $31,802, respectively.

Compare those costs with UC Davis' 2007-08 undergraduate fees of $8,925 for residents and $28,545 for nonresidents, and graduate fees of $9,651 for residents and $24,639 for nonresidents.

The disparity makes Clark long for the "paradise" of Michigan, he told Lockyer.

Lockyer invited people to continue the dialogue by contacting him at billlockyer@aol.com.