Budget Bust Part 3: University as a business entity

10/17/08 - Two business professors at the University of Rhode Island said the campus's budget situation is unique as it is an unconventional business. Joseph D'Adamo said that since the university is not a profit-driven business, it is more difficult to make budget cuts. He said the university's product is an educational experience, and pointed out that traditional businesses have stockholders, whereas URI does not.

"The trick is to find those functions, those activities, that are most essential to providing [an educational experience] to the students," D'Adamo said. The ideal situation, he said, is to find activities or functions that are not key to providing a quality educational and social experience. "In a school in particular it's very, very hard to make those judgments."

D'Adamo said businesses also have to make "wise" decisions about how they invest their money, in both the short and long term. And if those wise decisions are made, the second step is to ensure the allocation of funds is also executed wisely, "So you don't take away from the quality of the service just to save some money," D'Adamo said.

Another problem facing the budget cuts is conflicting interests. D'Adamo said the very idea of a quality experience is "a matter of perspective."

"I think the administration is in a very, very tough position that I don't envy at all," Charles Hickox, another URI business professor, said, explaining The administration will disappoint a group of people regardless of where they make a budget cut.

Hickox said cutting football could offend alumni, while cutting other academic or athletic programs could offend respective audiences interested in those subjects.

When facing cuts, Hickox said the effect of the cut has to be considered, and the alternative to budget cuts is an increase in revenue.

But revenue increases are difficult for URI, Hickox said, because grants from various foundations have to be allocated for specific things. He gave examples of research programs or for new buildings, which don't exist. He pointed out that they do not provide money for things that already exist.

Increasing tuition or receiving more state funds, he said, are open to allocation.

"If we increase tuition, at some point, students are going to say there are better [university] choices elsewhere," Hickox said, adding that increased tuition can affect the quality of the applicant pool, and also affect the demand of higher education.

On the state funding level, if the state commits to spending on higher education, it will have to cut somewhere else.

"If they say [spend money on] schools, that means we let some prisoners out," Hickox said, also saying that, for instance, road maintenance might suffer.

"If you have places where you can reasonably cut, it's easier to cut...At some point you have to say, what do you cut next? First you cut the fat, then you cut the lean, then you cut the bone."

D'Adamo agreed with Hickox on the subject of the ease of cutting costs.

"It's easy to cut costs, you could just stop doing things," D'Adamo said, adding that one would run the risk of weakening the product. "Just cutting costs arbitrarily isn't the way to go."

But because of the nature of URI as a business, D'Adamo said deciding what to cut is harder, because a conventional business has specific products and quantitative measurements, such as market share, performance, profits and consumer satisfaction.

"In business, it's probably a bit easier to make those decisions," D'Adamo said. "Some of those measurements just don't exist at a college or university."

Dean of Admissions Cynthia Bonn said despite rising tuition, the quantity of applications is going up. For the fall semester of 2003, Bonn said there were 12,965 undergraduate applications, and for the fall semester of 2008 there were 15,888 applications, and Admissions is 36 percent ahead of where it was this time last year.

But the number of students who apply compared to the number of students who chose to attend has been affected, Bonn said. Out-of-state students who apply to URI are choosing to go elsewhere, while the number of in-state students who apply to URI and chose to go is staying about the same.

Despite the troublesome fiscal situation, Bonn said academic life at URI has not been compromised. "The primary goal has been to preserve the academic integrity of the programs," Bonn said. "They've bent over backwards to protect the quality of academic programs."

Of 46 faculty who retired, 32 new faculty were hired, Bonn said.

Hickox said he thought the university was mandated by law to have a balanced budget -university Budget Director Linda Barrett confirmed - and if cuts had been avoided, tuition would have rose about 25 to 30 percent for both in-state and out-of-state students.

Reporter's Note: Budget Bust Part 2 was found in last week's paper, on Friday, Oct. 10, under the title "Fine Arts Center Galleries remain open despite budget crisis." The sub-title was forgotten due to an editorial error.