Budget Bust Part 8

11/21/08 - If anyone questions the economic trials facing Rhode Island, they can look to the fact that the some of the state's higher education administration positions have been eliminated to save money, according to University of Rhode Island President Robert L. Carothers. And the university will be the last to complain of the position eliminations; it is a rare instance in which URI will benefit from a state burden.

In addition, for the first time in its history, financial aid will exceed state funding in the Fiscal Year 2009, Carothers said at yesterday's Faculty Senate meeting.

A serious state disinvestment in higher education has prompted the university to explore alternative funding methods, which range from eliminating financial aid to requesting the state give funds to students directly, instead of the university.

"I understand that's a shift away from our historical land grant mission," Carothers said. "But the state has already made that decision. They no longer fund the land-grant mission." Land grant universities, historically, were to provide an affordable higher education. More conservative financial options involved "rainy day funds."

Carothers said the land-grant mission was based on a "three-part stool," which includes federal, state and county money.

"We never had the third leg, now we don't have the second," he said. "So what we have to be able to do is design our own university, a new model."

The unprecedented measures come in the wake of a time when funding has been at a level which is almost an all-time low.

A revenue shortfall in Rhode Island has trickled down through all state institutions, and budget predictions last night said URI might only get $54 million in state funding for the Fiscal Year 2009. The figure takes future state revenue shortfalls into account.

If the predictions are correct, it means the university will receive $11 million less from the state, said Vice President of Administration Robert Weygand, and URI would only receive 11 percent of its budget from the state.

The cuts during the last two years have taken a total of $30 million from the university, Weygand said. And even when somewhat modest reductions, such as $1 million or $2 million, are made to the budget, increasing employee benefits and other expenses can quickly cause a fiscal crisis.

"Some of what you do not see is the other side of the ledger," Weygand said. "That's the increase in expenses."

Within seven years, the University of Rhode Island could be a hybrid between a private university and a public institution, Carothers said to the Senate last night.

The presentation Carothers gave the Faculty Senate also included non-financial options, such as "separating from the state government for management."

The state's own financial woes have eliminated some of the bureaucratic positions involved with higher education administration, so the university has already gained some autonomy, but more independence is desired.

"And frankly, that is going to happen in the next year to a significant extent," Carothers said. "We're going to have a quantum leap in our ability to control" university administration. Purchasing will be transferred from the state government to the university, he said.

After the meeting, Carothers said one of the few dangers about government independence is the speed at which it occurs. "If they took $55 million out of here tomorrow, we'd be in trouble," he said. He pointed out that slowly receding state funding allows the university to slowly adjust to the drought of funds.

The University of Vermont is one of the few institutions that already has the "hybrid" status, Carothers said. They are "a much more tuition driven institution," with lower state funding than URI gets.

URI Provost Donald DeHayes was hired from that institution, and said URI needs to think of state funding as an endowment, which shrinks and grows. Income, the other perspective of state funding, needs to increase, and doesn't have the volatility of an endowment.

Another lesson URI can learn from UVM, DeHayes said, was the quality of the student and faculty experience. "You want to get and keep great people," DeHayes said.

While government independence may take care of itself, alternate funding options are being explored. An elimination of financial aid would bring tuition fees down, and Carothers said the "aid" would be a low tuition price.

A second option would be to tell the state to give the funding to the students directly, which Carothers said was, politically speaking, a better idea because parents would complain if scholarships to students were reduced.

The philosophy behind elimination of financial aid was to achieve a low tuition and a low aid status. Another model is a high tuition, high aid model. Carothers said URI has a low tuition, high aid model-"the worst of both worlds."

Under a model in which the state gives a subsidy directly to students, instead of the university, in-state students would pay $15,610 with an $8,900 subsidy from the state government. Those two numbers add up to $24,510, the approximate cost of education per student. Out-of-state students already pay the full $24,510, Carothers said.

In addition to the stated model, university-administered aid would be restructured, and the university would give it out on either a financial need basis or to focus it on a specific goal, such as increasing the presence of ethnic minority groups at the university.

Financial predictions showed that URI would be completely without state funds by 2015, which Carothers has previously predicted.