Pare higher education first, then stabilize with megafund

Despite the feelings, and pretty decent arguments, of some, the fact of the matter is higher education in Louisiana is going to endure some significant cuts simply because much of what can be cut to balance the state’s budget already lies in that area. Since it must be done, a plan to do it in a way that best retains the capacity of higher education to serve as an input to economic development must be pursued.

As a part of the exercise, the appropriate level of reduction must be established, which means that, although a static figure has been produced of $219 million in deficit, revenue enhancement may reduce that figure if it proves too detrimental for higher education to serve its mission. To determine whether this is necessary, first reductions to the point of incapacitating the mission must be formulated.

In doing this, above all else, the paramount principle for the enterprise must be to target cuts and not make them across-the-board or indiscriminately. One decent start is the performance formula that is nearing completion, so long as procedures are put in place to prevent gaming the system and to recognize the mobile nature of today’s student population, i.e. if a student starts at one Louisiana public institution but graduates from another, each should share in the credit for that successful outcome. This means some institutions’ cuts will be buffered while others would become more severe.

Logically following this, consolidation of institutions should occur as well, for reasons that have been made obvious. That alone could reduce the deficit significantly. But it is not a short-term situation which does not remove its desirability, but such moves would be of limited utility for this upcoming year. Also vital but without a large initial impact would be reviewing the status of dedicated vs. non-dedicated funding by law and in the state Constitution. As recommended elsewhere, this process needs to begin this next fiscal year in order to better allocate funds to priorities such as higher education and reduce the needs for large cuts in deficit times in this area (and in health care), and the general law covering a response to a deficit needs alteration to put less burden on higher education. If nothing else, it prevents the long-term problematic nature of the current funding regime from becoming worse.

After these, it is up to the institutions themselves. Again, it is important to assess the management of each of them because some do a better job than others in efficient use of taxpayer dollars. Even some simple accounting measures should reveal this kind of information, and better-run institutions need to be rewarded for their thrift.

If as a result of this process it is determined the minimally-acceptable service level still would produce a deficit, three revenue sources should be considered. First, while some students will be unhappy at it, the fact is tuition at Louisiana state schools is a bargain compared to most states. Institutions are able to increase tuition costs as much as five percent and many students because of the Tuition Opportunity Program for Scholars won’t see any increase. However, this also means that, as far as overall state spending goes, a tuition hike won’t produce that much revenue, perhaps just in the tens of millions of dollars.

While some have suggested using the Budget Stabilization Fund, a giant savings account the state can draw a third from every other year, to stabilize the situation that probably is not wise. The Gov. Bobby Jindal Administration astutely recognizes the fiscal year after next could be even worse, and the federal spending bill runs out the following year from that, so the fund could be crucial in later years with the initial paring done this upcoming fiscal year.

But begging to be used is the so-called “megafund” initially designed by the Gov. Kathleen Blanco Administration to attract new business prospects of at least $100 million with 500 jobs created. Perhaps the biggest blindspot of the Jindal Administration has been its slavish devotion to the notion that it can bribe business into coming into the state with this fund of now over $400 million. Yet last week its purpose suddenly became altered when only $10 million of it was to be used not to create jobs, but to “save” them at a chicken-processing plant, and there has been talk of “saving” additional existing enterprises with it.

This demonstrates the bribery concept is not working, and at the same time if this money is to get used to subsidize retaining business, that’s a similar principle to retaining higher education. This is the optimal pot of money to be used this upcoming fiscal year should higher education need support. Unfortunately, it may take concerted legislative action to snap Jindal out of the spell of incentive-based economic development nonsense to allow this diversion.

If these strictures are adopted, higher education in the state would become positioned admirably to assist in economic development so desperately needed in Louisiana. Ignore them, and its ability in the near future to provide this crucial input would be severely impaired.