Sizing up the University Budget Cuts: The 2.5% Fallacy
The Governor’s budget proposes cutting state funding for the University of Wisconsin System in the 2015-17 biennium by 13% below the current level, and by 17.8% below the level requested by the university. A cut in state support of that magnitude, coupled with frozen tuition, would not only hurt students, but would also be a tremendous blow to one of the engines of Wisconsin’s long-term prosperity.
However, the Governor’s office and some proponents of the budget bill contend that a better way to look at the proposed cut is that it’s just 2.5% of total spending for the University System. For a number of reasons I think the 2.5% figure is misleading and inaccurate. It’s a lot like saying that a 13% cut in Social Security benefits would only amount to a tiny drop in the total net worth of all retirees in the U.S. That might be an accurate statement about the aggregate wealth held by retirees, but it’s of little or no consolation to most Social Security recipients.
There a number of more specific problems with framing the proposed cut as being just 2.5% of university spending, including the following:
That figure doesn’t account for inflation – Because costs are rising, freezing a funding level requires making spending cuts. If the inflation rate is 2% per year, then after two years a 2.5% cut would for all practical purposes be a 6.5% cut, and a 13% cut would effectively be a 17% loss of spending power. Although lawmakers sometimes downplay the effect of inflation and contend that a freeze is not a cut, they know better. That’s why early this year the Assembly increased their per diems by 56% for each night that state Representatives are in Madison.
The cutbacks are likely to compounded – Another significant flaw with the 2.5% figure is that it assumes that the university’s federal funding won’t be adversely affected. Although cutting state support for the university system doesn’t automatically reduce federal funds, it is likely to indirectly reduce federal revenue. State funding cuts will hurt the UW system’s ability to hire and retain top-tier faculty, which can be expected to reduce the amount of federal grant funding that comes into the UW campuses.
Federal funding is inflexible and unevenly distributed – Even in the unlikely event that federal grant funding doesn’t take an indirect hit, that’s not much consolation because those grants are awarded for specific research purposes and can’t be used to prevent the layoffs and other sorts of cuts that would result from a 13% drop in state funding. Furthermore, federal funds aren’t distributed across much of the university system. Regardless of how successful a few departments at UW Madison or UW Milwaukee are in receiving research grants, that funding is irrelevant to the vast majority of students in other departments and on other campuses.
Tuition is capped – The argument that the denominator used for calculating the size of the cut should also include other revenue sources, such as tuition, might be a bit more defensible if the university had the flexibility to generate more revenue from those sources. However, the Governor’s plan would freeze tuition for the next two years, and some legislators have suggested even longer restrictions on raising tuition. Since it appears that tuition revenue won’t even keep up with inflation during the 2015-17 biennium, it seems a bit disingenuous to use figures that imply that tuition and federal revenue will cushion the impact of a 13% reduction in state funding.
I wish I could say that the debate over the size of the proposed cuts for the UW System is just an “academic” matter, but that clearly is not the case. Even before this round of proposed cuts, funding for the university system had dropped significantly, and a new and deeper round of cuts will have negative implications far beyond campus walls.
In order to help build a strong middle class and develop the skilled workforce necessary for our state to compete in today’s global economy, policymakers should be striving to increase the number of well-educated college graduates, rather than taking actions that reduce the quality of and access to higher education for Wisconsinites.