Dick Roberts UA budget director

Spending cuts have plagued state universities for decades

Editor's note: This is the first article in a three-part series focusing on the University of Arizona's ongoing budget crisis.

Part 2: Up close and personal [4.03.02]

Part 3: Facing the inevitable [4.04.02]

In the past 25 years, Arizona has reduced its funding of higher education more than any other state.

The decreases have rarely come in cuts but have come through decisions by the state's Legislature and governor not to maintain a practice of increasing spending on the university system to match anything beyond inflation.

The losses resulting from these choices are immeasurable, University of Arizona administrators argue, because they have prevented the university from being able to spend on poential projects, rather than cutting programs already in place.

While the investment's erosion is not normally as obvious as it has been this academic year, since 1978, the state has halved the percent of tax revenues it spends on its three universities, according to the journal Postsecondary Education Opportunity. Nationwide, spending on higher education has dropped 27 percent during the same time period, which includes nine years of record-setting economic growth in the 1990s.

Now plagued by a deficit that has grown to more than $1 billion, the state Legislature and Gov. Jane Dee Hull must figure out a way to balance a budgetary pendulum that seems to have lead blocks strapped to one side. The state's revenues are rapidly outpaced by its expenses because sales tax dollars, Arizona's largest income source, are much fewer than expected this year, said Francie Noyes, Hull's press aide.

The University of Arizona, Arizona State University and Northern Arizona University, combined, are among the state's largest expenses. When forced to make broad budget cuts, as happened last fall, higher education is a regular participant.

To date, UA has returned about $16 million to the state with its administrators still trying to find another $1 million that can be freed up to cover the remaining tab for 2002.

The way these stars are aligning, UA Budget Director Dick Roberts said things are not looking good in any of the state's universities' futures.

But, as the past three decades have shown, this horoscope is nothing new - just more threatening.

"It not only looks a lot worse, it feels a lot worse," Roberts said.

UA Provost George Davis has already held meetings with the deans and heads of every college and department to be prepared when the Legislature hands down what cuts are needed, a memo from his office states.

Each of the university's academic branches will plan for two funding reductions: a 3 percent cut from next year's operating budget and an additional 2 percent cut that would be permanent, the memo stated.

When the colleges and departments had to reduce their expenses in the fall, a flat 3 percent was eliminated from each, pooling more than $8 million toward the original $15.8 million required by the state, according to budgetary documents obtained from UA.

Planting the seeds

The university is planning for at least a partial recovery from the Legislature that would bring the funding to the pre-deficit amounts in 2004, said Richard Powell, UA vice president of research and graduate studies.

Before the state's shortfall, the university received $347 million annually from tax revenue, a third of the $1 billion it costs to operate, UA budgetary documents state. About $120 million is generated by tuition, $175 million through auxiliary activities that include everything from basketball tickets to carbon dating, and the rest is through a combination of contracts, grants and gifts.

Despite only making up about a third of UA's revenue, the state allocation pays a majority of its salaries and general operating expenses, such as electricity and cleaning services, the documents show.

In the years preceding this deficit, UA received incremental increases in funding, said Lorenzo Martinez, a senior fiscal analyst with the Joint Legislative Budget Committee. The JLBC acts as the Legislature's accountant, and Martinez works primarily with the university system's budgets.

With Hull's office proposing that higher education take a 3 percent hit in 2003, about $12 million to UA, it could require an additional $30 million for the university to get back to what it was being given in 2001.

The likelihood of that, however, depends on Arizona's consumers, Democratic Sen. Ruth Solomon said.

More than half of Arizona's income is earned through sales tax, which, Roberts explains, is great during good economic times and is awful when growth stalls. And since they are based on spending, sales tax revenues are slow to recover from recession, as consumers are still proving hesitant.

Hull's budget office had projected the revenue source would grow a half percent during the first six months of 2002, according to statistics from her office. Instead, it has fallen that amount along with the state's corporate income tax revenue, which has spiraled 45 percent from last year.

"It's bad, and it's going to get worse next year - and it's not getting any better in '04," said Solomon, who chairs the Senate appropriations committee.

This recession and the resulting deficit have been painful for almost every piece of UA, and the damage is not likely to end soon, she said.

KRISTIN ELVES/Arizona Daily Wildcat Richard Powell, vice president of research and graduate studies, said the university is planning for at least a partial recovery from the Legislature that would bring the funding to the pre-deficit amounts in 2004.

Searching for life support

Arizona's institutions of higher education have upheld a tradition of low tuition through past economic crises, but next year students may be facing a 10 percent increase in their rates.

The Arizona Students' Association has been active with this issue for many years in university and state politics, said Jenny Rimsza, an ASA representative.

However, students have met little success in either arena in terms of affecting policy or how much students pay to attend class at UA.

So, in the spirit of "if at first you don't succeed, try, try again," student government, Rimsza said, is planning a myriad of ways students can apply pressure to where it's needed: the Legislature.

Instead of just asking for more funding, she said the student governments are planning to focus on the state's tax structure, which is likely to be a volatile topic in the election of Arizona's next governor in November.

During past elections, the student groups have worked to register students and direct them toward candidates friendly to the university, but next fall, Rimsza said the hope is that all students living in UA dorms will be provided everything required to vote by mail. Eventually, she said, ASUA would like to establish a polling location on campus.

She argues that to have an impact on funding anything in Arizona, you need to be able to affect who in the Legislature gets re-elected.

When choosing between keeping prisoners in prison and making sure an astronomy professors are earning their market value, the decision is not difficult, said state House of Representatives Appropriations Committee Chair Republican Laura Knaperek.

The casualties of budget cuts and reduced spending on higher education do not bleed and thus receive less media attention and importance in legislative agendas, he said. Even other state agencies whose terrible things may have immediate and shocking results find it difficult to wrest dollars from the Legislature's palm.

Falling dominos

As recessions go, and Federal Reserve Chairman Alan Greenspan has declared the most recent one gone, this economic plunge is being considered relatively minor, said JLBC Revenue Section Chief Tim Everill.

However, Roberts said the "structural weaknesses" the state had already put in place caused this year's revenue shortfall, one he believes could have been avoided with a tax structure less reliant on economic prosperity.

"The size of the problem we're looking at today, the seeds of this were, in my view at least, planted over the last 10 years."

As stated, Arizona relies heavily on sales tax money to pay for its roads, schools and other services. When those revenues dry up, the Legislature has few dollars coming in to divert toward the agencies and programs affected by a cash drought. Rather than being able to find ways to protect its branches, legislators and the governor often must slice into them to protect the fiscal health of the whole, Everill said.

This predicament is due, in part, to how state government handled the excess revenue generated during the 1990s when Arizona and especially Maricopa County were among the fastest-growing regions in the nation. From 1992 to 2002, the legislature passed and the governors signed more than $800 million with tax breaks in the idea that allowing citizens more money prompts more spending, according to documents from the JLBC.

A majority of those dollars were returned in the form of personal income tax breaks, which were doled out in a series of tax relief bills beginning with multiple $100 million reductions approved in 1994, the documents show. That year, UA was struggling to close its journalism department due to a budgetary shortfall.

The failure to invest in and protect the universities then could continue to prove costly for the UA in the coming decade. Each year, the state universities' budgets are set using the previous year's allocations as the base from which to work, Lorenzo said.

If the 2004 budgets are based on the amount following these next cuts, any additional money received for some time afterward would only be making up what was lost, Roberts said. And that is only if the state is able and willing to shunt new revenues toward higher education once fiscal prosperity returns, something that has not happened in the recent past.

While in Phoenix talking with legislators about the revenue shortfall and how it was affecting the university earlier this spring, Greg Fahey, vice president for government relations, said one of them pointed out that even if the state were able to find $20 million extra that day, none of it would be spent on higher education.

"Legislators and legislative staff live in two-year snatches of time (between elections)," Fahey said. He said solutions to long-term problems, like education funding, are often shoved aside in favor of dilemmas more important to their immediate political futures.

The result for the situations that do not yield instant gratification is that the Legislature is "always just using these quick fixes," he said.

For this recurring problem to cease, Roberts said, the legislative dynamics have to change or the university must find new revenue sources to rely on besides the state.

"It is not for me to decide the future directions of the state of Arizona, or for yesterday's politicians to decide," UA President Peter Likins wrote to the campus community after the first cuts in December. "The decisions rest with the citizens who will act when they finally understand."