Eating Crow: The Reality of Higher Education

Dr. Matthew Ladner has a brief but poignant fact check on the debate taking place over the state budget and Higher Education. We thought you might want to know some basics:

Over the next month, we are going to hear plenty of complaining and screaming as public education advocates pull out the stops in an effort to prevent the State Legislature from making cuts. Now is the time to watch Republican lawmakers carefully and urge them to do the right thing in ensuring the budget gets balanced and cuts are across the board. It’s time to sacrifice or go bankrupt.

Eating Crow: The reality of higher education funding
by Matthew Ladner, Ph.D.

“We could eliminate the nursing school, the journalism school, the law school and the engineering school and still not meet these cuts,” Arizona State University President Michael Crow told the East Valley Tribune regarding proposed higher education cuts. The Arizona Republic quoted President Crow as saying that the budget proposal put Arizona “on the path to resembling a Third World country.”

If the full $150M cut for ASU came to pass, however, ASU would still be getting more general fund revenue in 2009 than they received in 2006. In 2006 Arizonans enjoyed access to journalism training, nursing programs, law schools, electricity and indoor plumbing, despite ASU’s somewhat smaller budget.

Secondly, universities have the opportunity to make up for lost state revenue from other sources, including tuition, private fundraising, and federal funds. How many other revenue sources do state prisons have available?

In any university, departments with high-demand majors (e.g. engineering and business) effectively subsidize departments with low-demand majors. Low-demand majors are an expensive luxury helping to drive up the cost of education, even in the best of times. With the state facing a prolonged and severe downturn in revenues, such extravagance simply cannot be justified. Eliminating low-demand majors will help keep university costs down in the short and long term.

Wrenching, unpleasant decisions lie ahead as lawmakers grapple with the legacy of boom year overspending. In such a situation, reducing costs in state higher education represents choosing the lesser of many evils.

Dr. Matthew Ladner is vice president for research at the Goldwater Institute.


Comments

  1. Antifederalist says

    Nice one, Ladner! Gotta love Goldwater calling out a government flack like Crow and proving him to be a liar. All the state universities should heed Ladner’s advice (including my beloved UA), quit whining about not being able to take as many tax dollars from working citizens and make CUTS. If you need help prioritizing what should be cut and what shouldn’t, Pres. Crow, you can hire me as a consultant for a modest salary.

    Next, all Arizona agencies need to start cutting too. This is a Republican dominated state now. We have NO EXCUSE for not having balanced budgets, including at least some debt retirement, IMMEDIATELY.

    One of the first things I’d do it cut off the spigot for the counties and cities too. They need to depend on their own tax base and taking tax dollars from the state just hides exactly who is spending the money. If the cities and counties want to spend so much, let them raise taxes and see how much the voters tolerate it.

  2. @AntiFederalist –

    You pose an interesting point, “cut off the spigot for the counties and cities”.

    Who can tell me why the state gives the cities and counties money to begin with? Why aren’t the cities paying their own way?

    If the state is paying for state mandate programs, then I can understand it. If not, then that is a good discussion topic.

  3. Dr. Ladner makes some good points, but I think some other data should be considered. Where is a chart showing in-state and out-state tuition over the past 10-15 years? Where is a chart showing total payroll, FTEs and cost per FTE over the past 10-15 years?

    As a comment, don’t understand why nursing education is being constricted. Isn’t there a shortage of nurses?

  4. There is a shortage of nurses, but there is also a shortage of nursing instructors. Between the 3-12 work weeks and the higher hospital pay scale, not enough nurses choose to be instructors.

    A close look at out of state tuition and the criteria for converting to in-state following the first year is a real sore spot that needs immediate attention. The thousands of students who only pay out of state tuition for the first year then qualify for in-state regardless of their true domicile is a missed revenue stream that we subsidize.

  5. Antifederalist says

    Todd,
    I’m not sure exactly why the state gives money to the localities, but I don’t think it has to do with state mandated programs entirely. I think it has something to do with keeping a leash on those governments. The localities are less likely to put their thumbs in the eyes of the state if they’re constantly being given taxpayer dollars. Conversely, the state is very unlikely to get rid of the local governments (they exist at the pleasure of the state since all power flows from the state) because the state has little desire to administer those areas and would rather focus on what they currently focus on.

    I remember Matt Salmon advocating “home rule” and continued revenues to the localities during his campaign for governor. I disagreed with him on the topic. I think it hides the ball from the taxpayers. It gives taxpayers the mistaken impression that the state is spending more than it does, and it absolves local governments from spending what they do spend. If taxpayers had a true picture of what their local governments spend, in the form of direct taxation by the localities to fund parks, fire, police, Garage-Mahals, etc., I assure you that taxpayers would be a HECK of a lot more interested in what the cities and counties are doing and I bet the local government wouldn’t get away with half the shenannigans they currently get away with.

  6. The state gives money to cities — 15% of the state’s income tax, in fact — in exchange for the municipalities not levying their own income tax.

    And the tuition aspect of the discussion is important, inasmuch as the AZ constitution requires the state to provide higher education access to arizonans for “as free as possible.” Choosing not to fund universities in light of more students or requiring the schools to use tuition to supplant state funds coiuld be interpreted as violation of the constitution.

  7. I went and looked at the numbers from the JLBC from here:
    http://www.azleg.gov/jlbc/GF10yearweb.xls

    Here is what is says for 2006 and 2009 numbers for ASU with the difference calculated by me.

    2006 2009 Difference
    ASU – East 15,811,700 30,489,200 14,677,500
    ASU – Main 307,911,900 396,428,700 88,516,800
    ASU – West 44,844,300 53,279,700 10,435,400

    According to this, general fund revenue to ASU has gone up 113.5 million from 2006. This seems to be counter to the claim the a 150 million dollar cut would bring ASU back in line with 2006 spending – it seems to be off by some $40 million. Is there something I am missing in how this is being calculated?

  8. Matthew Ladner says

    Todd-

    I discovered I had misinterpreted overall higher ed spending instead of the ASU system. It’s actually a little less than the 2005 number for ASU.

  9. Matthew,
    Thank you for admitting your mistake.

    I am wondering – wasn’t 2006 when the new downtown campus opened? I don’t see it on the JLBC sheet so I perhaps it is listed under the main campus costs. If that is the case, then going back to pre-2006 numbers would mean going back to a budget which included only 3 of the 4 campuses.

    Another interesting note from these numbers is that from 1999 to 2004 the budget stayed almost the same, and actually declined between years 2001 and 2002 as well as 2002 and 2003. For those interested
    Year: 1999
    Total: 305 million

    Year: 2000
    Total: 315 million

    Year: 2001
    Total: 324 million

    Year: 2002
    Total: 319 million

    Year: 2003
    Total: 311 million

    Year: 2004
    Total: 312 million

    Year: 2004
    Total: 335 million

    Based on the information I could find, attendance has gone from 50,000 to 67,000 between 2000 and 2009 and the 150 million cut would bring the budget down to 330 million – only 15 million more than in 2000. All this with one more campus and 17,000 more students. Sounds like these would amount to extremely substantial cuts rather than the minor inconvenience you portray.

  10. David Wright says

    Here is the most recent communication from ASU President Michael Crow:

    “Based on some of the responses I’ve received recently regarding the state budget proposal, I wanted to forward a few key facts to counter the lingering inaccuracies and misperceptions I continue to encounter. The information below provides important clarification related to pending budget concerns and the magnitude of the challenges ASU is facing.

    Fiction: The cut to ASU in the proposed legislative budget is a small fraction (between 4 and 12 percent) of the university’s overall budget.

    Fact: The actual percentages are 35 percent of the 2009 state General Fund budget that is remaining for the year and when the proposed 2010 cuts are added, it totals 40 percent of the university’s state General Fund appropriation in 2008 on a Full-time Equivalent (either a full-time student or its equivalent of two part-time students) basis.

    The percentages quoted by some state legislators are based on a total budget that includes hundreds of millions of dollars in federal research funding as well as bookstore and meal plan purchases and even football ticket sales. ASU’s research enterprise and its ancillary operations from the bookstore to the football team are – and must be – financially self-sufficient and in fact, these activities subsidize a substantial portion of the instructional budget.

    If ASU were to close its dormitories and bookstore and stop doing federally funded research and stop playing football, the revenue associated with those activities would also end. So, it is a fiction that ASU has other revenue that could begin to replace the loss of state revenue.
    State revenue and the tuition paid by students account for 79 percent of ASU’s instructional budget. To make up the loss of state funding, tuition for in-state students would need to be almost doubled to $11,000 a year.

    Fiction: The proposed legislative budget won’t really hurt ASU. The university has gotten a lot of new state money in recent years.

    Fact: The proposed budget cut would take student funding at ASU back about 20 years, from $8,111 per full-time student (or equivalent) in 2008 to $4,902 for 2010, which is lower than the $5,017 ASU received in 1989. To see the full chart of state funding from 1986-2010, click here.
    General Fund per FTE Student (not adjusted for inflation)

    1989 2006 2010
    $5,017 $6,334 $4,902

    The primary mechanism state of arizona uses to fund its universities is an growth formula – if enrollment increases, your funding increases by a proportional amount.

    The State of Arizona has experienced substantial population growth and more qualified students are choosing to attend ASU every year, resulting in an enormous demand for and growth in the university’s enrollment – from 43,000 students in 1989 and 50,000 students in 2000 to 67,000 students today. Enrollment growth funding over the last 20 years has not kept pace with actual enrollment growth. So, most of the “new” money ASU has received in recent years is “catch-up” money, intended to bring Full-time Equivalent student funding back to previous levels.

    Furthermore, the state has no regular capital construction or maintenance budget for its universities. Twice over the last six years ASU has gotten a special appropriation to build badly needed new buildings. These additions are in no way “excess funds” that the university can cut without there being drastic consequences.

    Fiction: The budget proposals on the table are merely options so no one should be overly concerned about them.

    Fact: No other options have been put on the table by the Legislature. Historically in Arizona, legislative budget options often become the actual budget. Even as a starting point, these cuts are so extreme that the ending point could still have dire consequences for ASU. So, there is cause for grave concern.

    Fiction: ASU is unwilling to make cuts.

    Fact: ASU has already taken more than $37 million in state funding cuts and prepared for further reductions by eliminating a total of 500 staff positions and 200 faculty associate positions. We have disestablished schools and merged academic departments while managing to preserve academic quality.

    The university is prepared to take additional cuts but we must be clear about what needs to be done to reach the funding reductions laid out in the proposed legislative budget. These actions could include:

    * Laying off thousands more employees.
    * Having a massive furlough of all remaining employees for two weeks or longer.
    * Increasing tuition and fees.
    * Closing academic programs.
    * Closing a campus or possibly two.

    Fiction: These cuts are no more than short-term pruning or fat-cutting.

    Fact: The intended or unintended consequences of these cuts would be to move ASU away from being a research university – which it became 50 years ago by vote of the people of Arizona – back to being a state college without graduate programs or research.

    To read the January 25 Arizona Republic editorial supporting these facts, click here.

    To watch the January 21 Horizon interview with the presidents of ASU, UA and NAU, click here.

    Michael M. Crow
    President
    http://president.asu.edu

  11. David Wright says

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