Higher Education in Louisiana
Higher Education and Overall Trends in Fiscal Policy
For universities in Louisiana and nationally, tuition hikes were the traditional methods used to generate funds to expand and enrich programs. Recurring years of reduced state support, however, pressed tuition into service as a means of backfilling lost state funding. Across the United States, many colleges and universities recognize the probability that any future program expansions will depend on tuition and fee hikes. At the same time, higher education institutions are increasingly testing the limits of remaining affordable.
Like other states, Louisiana and its state agencies, including LSU System institutions, have deferred expenses, putting off investments in infrastructure expansion and have delayed maintenance projects to cope the loss of state funding as a result of the prolonged economic downturn.
As the economy recovers, any corresponding state revenue growth would likely have to be used to deal with deferred expenses and, therefore, would not be available to lessen pressure on tuition and fees at public universities.
Political efforts to reduce the national debt would also probably mean fewer federal dollars for research and support of programs for financially needy students. Replacement of those federal funds can only come from increased state support or tuition increases. The FY 13 Executive Budget for Louisiana contains funding to cover the TOPS reimbursement for tuition increases but includes no increase for Go Grants that help non-TOPS eligible students to partially offset the increasing cost of tuition and fees.
The national recession also took a heavy toll on the budgets of local governments, including parish school boards. Lacking sufficient local revenue to continue vital programs, and with little or no prospect of federal intervention, local governments are turning more and more to state government for help. States cannot increase support for local governments without negatively impacting support for higher education. Protecting higher education at the expense of quality at the K-12 level would likely hurt higher education in the long run.
The 2012 Regular Session of the Legislature saw a number of bills aimed at addressing the large Unfunded Accrued Liability (UAL) of statewide retirement. Most of those bills, however, were not approved. While the UAL is already being addressed in a constitutionally-mandated amortization schedule, that schedule calls for increasing amounts of state funding that will reduce funds available for the rest of state government, including higher education.
Overall, the recession has demonstrated how vulnerable higher education funding is to revenue drops, especially prolonged economic downturns. Legislators will have to confront the state’s current funding priorities and decide whether it makes sense to allow all of higher education’s state support to be susceptible to budget cuts. Some believe that this will become less of a problem as tuition and fees become a larger percentage of the funding stream for higher education but as this occurs there will be fewer opportunities to offset cuts in state support, however small that support may be, with tuition and fee increases because they will have been stretched to the limit by then.
Many states, meanwhile, have borrowed heavily to deal with the effects of the recession and, despite very low interest rates, will find themselves having to carve out revenue growth dollars to service that debt in the future. Some of this debt is in the form of increases in the unfunded accrued liability of retirement systems that have seen their portfolios diminished because during the recession. Pressure from bond rating agencies to shore up these liabilities would further divert dollars from its current dependence on discretionary funding.
Elected officials are using alleged poor performance by higher education institutions as a justification for cutting higher education funding. While it is true that a number of campuses do not compare as favorably with peer campuses in other states as should be the case under normal circumstances, the statistics must be put in perspective and budget cuts are not likely to have a positive impact on performance.
Perks like tenure and sabbatical leave are also under attack and it appears that state legislatures in Louisiana and elsewhere are getting more involved in reshaping higher education policy especially if “reforms” have any connection to funding. Unfortunately for higher education, legislators are generally ill equipped to make such decisions on their own, so the challenge falls to higher education leadership to provide appropriate templates for these types of policy discussions.
Despite deep cuts to higher education and other vital public services, many governors and legislators continue to press for further reductions in taxes and the dedication of funds that would otherwise be available to higher education. For example, in 2008, the Legislature dedicated the state sales tax on motor vehicles to the Transportation Trust Fund, which supports the operation of the Department of Transportation. This was done because the current 20 cents per gallon gasoline tax does not produce revenue to cover the operational and construction needs of the department. A dedication of the sales tax was more politically acceptable than increasing the tax on gasoline and in pre-recession 2008 it looked as though the state would have plenty of revenue for everything.
However, as a precaution against a revenue downturn, a provision in the 2008 law delayed implementation of the dedication if the state’s official forecast dropped below the 2008 level, which it promptly did right after the law was passed. While the dedication of the sales tax is being held in abeyance until revenues increased to 2008 levels, it will become fully operational at that point and the General Fund would lose approximately $340 million annually to the Transportation Trust Fund. Should the Legislature not step in and amend this law before revenues return to the 2008 levels, higher education would stand to lose approximately 42 percent of the $340 million of the State General Fund loss since its current funding comprises about 43 percent of the discretionary General Fund budget.
Simply put, there appears to be no appetite either among legislators or the general public for reviewing and eliminating existing exemptions and there is no coordinated political or public voice ready to raise the question of “why not?”
Increasing tuition to support core higher education services while governors and legislators continue to push for tax cuts and dedications means that Louisiana college students and fellow students across the country are indirectly bearing the growing cost of general government services through tuition increases that supplant loss state support.
Policy changes in the form of legislation and executive orders aimed a coping with five years of fiscal turmoil have created a challenging environment for the recruitment and retention of top quality faculty at all colleges and universities in Louisiana. Fiscal Year 2013 marks the fourth straight year of no pay raises for the majority of higher education employees. On top of that, had many of the retirement bills introduced in the recently concluded legislative session passed, retirement benefits for faculty and staff at all institutions would have been dramatically reduced.
Recurring budget cuts also have increased class sizes, required cutbacks in equipment and supplies, and in some cases have resulted in employees being furloughed. The LSU, Southern, University of Louisiana, and LCTCS systems continue to seek replacements for top-level administrators and faculty. The great difficulty of administering an enterprise that has been under considerable fiscal stress for the past five years with no end in sight will be a factor that will be weighed heavily by potential candidates for these positions. The same holds true for the recruitment of faculty that have left for a more stable environments as well as the retention of faculty who may be updating their resumes.