Clear, strong thinking about what higher ed needs to do now, from Cal State chancellor Charles B. Reed and ASU president Michael M. Crow:

"Dumb public policies," like mandatory-sentencing laws that drive up states' costs for prisons and leave less for education, may be part of the reason colleges are in such financial straits, the leader of the California State University system said at a forum here on Thursday, but that's just a piece of the problem.

The bigger issue is that most colleges are too concerned with trying to compete for prestige rather than serve their students and their communities, said Cal State's chancellor, Charles B. Reed. He and Arizona State University's president, Michael M. Crow, spoke on a panel at the "Smart Leadership in Difficult Times" forum, sponsored by the TIAA-CREF Institute.

"Public higher education has done it to itself with generic state institutions" that all try to do the same thing, Mr. Crow told the gathering of 130-plus college presidents and other leaders. The duplication of expenses among so many colleges that are "insufficiently differentiated" adds to states' costs and leaves legislators and other potential supporters with little inspiration to support colleges when they come looking for money, said Mr. Crow. "People fall asleep," he said.

Mr. Reed noted that the racial and economic diversity of the Cal State system's 440,000 students reflects a wave of changing student demographics across the country. Rather than worry about how they rank against their peers, he said, "public universities need to get off their campuses" and into local schools--"way down to the fifth and sixth grade"--to help ensure that young people prepare for college before it's too late and they drop out.

The two leaders' comments came during a panel called "What's the New Normal?" Both Mr. Reed and Mr. Crow offered their typically blunt assessments.

"The sky is not falling. We just have less money," said Mr. Crow.

"We're never going to go back to the way it's been for the last 20 years," said Mr. Reed.

Mr. Reed said he had been criticized by faculty members for not lobbying harder in the state capital for money. "Well, you know what? There isn't any money in Sacramento," he said.

Instead, Cal State and the State of California will have to find money by becoming more entrepreneurial, more creative, and more efficient, he said. For example, "if people taught one more class a semester, the efficiency of that is tremendous."

Another idea, Mr. Reed said, is to eliminate 12th grade--"the biggest waste of time" for many students--and reallocate those resources for schools and colleges. "We need a different model," he said.