<p>The research brings in money argument certainly has some validity. But, if the whole "institute" is non-existent prior to the grant money being received, then it doesn't offset any already allocated funds for general education purposes or for painting the hallways. Yes, Famous Professor teaches a few classes, and his post docs and grad students may cover a few more, but if they are doing high level neuroscience research, they won't cover that many freshman bio classes!
California isn't a great example of research colliding with undergrad education (except for those wild propositions you guys seem to pass which throws a monkey wrench into everything), because the state is large enough and has such a high caliber and well-organized system of CCs and "lesser" colleges. UCB could become a purely grad school, and the young people of CA would still be well served with excellent undergrad opportunities - there's room in the system for both, but I'm not sure there is money in the system for both.</p>
<p>Maybe it is because of the mandated social services. I am a "guest member" of the California Society of my specialty - it is so large that it has excellent cont ed opportunities, and lots of OOS members. SO I periodically get their newsletter which outlines in great detail any changes in MediCal, and other big insurers in CA - Medicaid in California is quite generous.</p>