It is "a sort of magical land". A place where the mood is of "excitement and adventure", where the salaries are high and the "can-do-ism" is infectious.

If this testimony from UK scholars lured to Californian universities does not seem quite utopian enough, the climate there is also "perfect", they say in our cover story.

Bright blue skies are more conducive to blue-skies thinking, it seems.

Such is the lure of the Golden State that the astronomer Richard Ellis has twice been persuaded to leave the UK for the California Institute of Technology - first from the University of Cambridge and later from a prestigious Royal Institution professorship at the University of Oxford.

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The undeniable quality of Californian institutions from both the public and the private sector is affirmed by the 2010-11 Times ÖйúAƬ World University Rankings. Three are ranked in the top 10, with Caltech in second place, just behind Harvard University. Four more Californian institutions sit among the top 50.

What makes Californian ÖйúAƬ so great? First, there is the statewide culture that embraces diversity and is open to ideas and adventure. Second, there is its huge economy and its traditional recognition that the state's fortunes are tied to ÖйúAƬ, so taxpayers' support for the public university system historically has been strong.

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However, this settlement is being challenged by the state's financial situation and the swingeing cuts to the system's budget proposed this week. Governor Jerry Brown plans $1.4 billion (?900 million) of retrenchment, $500 million for the University of California alone. Its president, Mark G. Yudof, describes the move as a "sad day for California". He's right.

However, there is a third element, perhaps the most vital of all, and it offers a valuable lesson to the rest of the world - especially England as its universities enter the world of market forces with the imminent introduction of genuinely variable tuition fees. The key is a clearly defined mission for all the system's constituents. The coalition is interested: indeed, David Willetts, the universities and science minister, has often spoken of his enthusiasm for the model.

In the 1920s, California established a ÖйúAƬ system with three tiers, each with a distinct role, distinctions reinforced by the 1960 "Master Plan". The University of California, with its 10 separate research-intensive campuses led by Berkeley, occupies the top tier. Below sit the 23 campuses of the California State University system, which offer bachelor's and master's degrees, but not doctorates. This is underpinned by a third component - the massive community college system, with 110 campuses.

The plan imposes differentiation on all public ÖйúAƬ in California: each institution knows its niche and sticks to a well-defined purpose. Quite the opposite has happened in the UK, where universities, pre- and post-1992, look increasingly alike in what has been described as a "race to the middle".

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This is unsustainable. Like its Californian counterpart, the English sector should embrace diversity and differentiation. Universities that fail to establish a distinctive mission and do not carve out a niche may struggle to survive in the coming marketplace.

phil.baty@tsleducation.com.