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Delay cuts to develop plan, PAR says

The state budget bill that was sent to the governor yesterday relies on passage of two separate bills to minimize reductions to higher education funding. However, both the House leadership and the governor oppose those revenue solutions that would tap the rainy day fund and freeze the income tax break for excess itemized deductions. Their opposition should be reversed to prevent the haphazard undoing of Louisiana’s recent progress in improving higher education outcomes.

Working toward a common goal in these final days of the legislative session, the governor and Legislature still could piece together a plan to provide additional revenue and buy officials some time to plan a better strategy for budget reductions in coming years. Without an unambiguous, statewide strategic plan for reducing expenditures on higher education, the proposed budget cutbacks could severely damage the potential for the state’s colleges and universities to play a meaningful role in long-term economic growth.

The FY 10 executive budget proposed a general fund reduction of 18 percent from the initial budget of FY 09. This represents the state portion of the higher education budget for the four systems and includes the budget relief being provided by federal economic stimulus dollars. Without the additional federal funding, the higher education funding reduction would have been more than twice the proposed $205 million for the systems.

Higher education officials are calling for restoration of general fund money to give them more time to plan a strategic transition to the extremely lean budgets projected for coming years. A boost of $100 million in general revenue not tied to specific programs would ease the pressure on faculty and students as officials work out a better plan for the future. Two controversial proposals could provide this funding: tapping the state’s rainy day fund and delaying a tax break for taxpayers who itemize their tax deductions.

Even with an additional $100 million in general fund revenue, the new budget would require an 11 percent decrease in spending from the original FY 09 budget. That is a huge hit to take without a plan to downsize the state’s higher education enterprise. Good fiscal policy cautions against using one-time revenue for recurring costs. If the rainy day fund were tapped to prop up institutional operating budgets, it would violate that basic guideline. In these extraordinary circumstances, however, that violation would be appropriate. The temporary revenue boost would serve to soften the cuts and buy some time for a more studied approach. Additionally, the delay in the remaining phase-in of the state income tax deduction for federal itemized deductions would ease budget pressure for the next three years.

Lacking a clear strategy, drastic budget cuts could deter potential students and faculty. Not only are student services being threatened, but also institutional capacity for commercialization and technology transfer is at risk. Funding for research centers, art galleries and museums is on the chopping block with little to no public debate regarding the merits and far-reaching impacts of those cuts. A more studied approach is called for to re-size the state’s higher education enterprise in order to minimize duplication of programs, maximize opportunities for consolidation and preserve the cultural and economic benefits of higher education.

The long-discussed enrollment shift from four-year schools to two-year schools must be achieved. Louisiana’s unorthodox enrollment mix is too costly to sustain, and the state no longer has the luxury of planning for a decades-long transition. Which degree programs at each institution are essential to continue? Which are duplicated elsewhere? What services can be privatized rather than terminated? What economies of scale can be achieved with consolidation? What can be done to ease the transition for students and faculty?

Policymakers have had and will continue to have all the tools necessary to craft a plan that answers these questions. It could have been developed prior to the current budget negotiations. That oversight is unfortunate but not unredeemable. This year marks only the first in a projected, several-year run of declining revenue that includes a termination of federal stimulus dollars in FY 12. Meanwhile, the state’s higher education enterprise should be protected from hasty and ill-planned budget cuts even if that means temporarily increasing the amount of nonrecurring revenue that is used to support ongoing expenditures.

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