Outlay deviation proper to address inefficient system

Moving through the legislative process is SB 204, a bill that causes perplexed and contradictory reactions, but seldom any real understanding of its genuine meaning going forward.

The bill sponsored by state Sen. Robert Adley would allow the Louisiana Community and Technical College System to undertake a series of capital improvements worth $250 million across the state. It gathers a 12 percent match from private sector concerns, who figure the improvement will increase the pipeline of skilled workers to them, and then gets the state to pay in $20 million a year over 20 years to pay it all off.

Controversially, it goes outside of the normal capital outlay process, where the Legislature puts up a list of projects, which if it exceeds the net state tax supported debt limit then is culled by the State Bond Commission. The bill exempts this outlay from that limit. Treasurer John Kennedy raises the alarm about the precedent set in this ability in a technical sense to exceed that limit, as this could increase interest rates faced by the state and obviously creates increased obligations in the future.

It also has provoked cries, particularly coming from the rest of the higher education community, that the process becomes less fair and more politically charged. In part, the present process came about because it presumably minimized political considerations in capital budgeting decisions in favor of what met truly important needs with a statewide impact. This deviation reduces the ability of the Board of Regents to plan and coordinate.

The problem from the perspective of the two-year system was it was the only part of higher education growing – partly because of conscious policy decisions to steer more students to the system that delivers at less cost, partly because of macroeconomic cost considerations by students facing the fallout of the Pres. Barack Obama economic slowdown, and partly because the marketplace has continued to signal the value of a two-year degree is increasing relative to many of the four-year variety – while baccalaureate-and-above institutions continue to fight enrollment declines. While the outlay system is supposed to allow for most and highest immediate needs to come to the front of the funding line, in practice a good deal of deference is given to time spent in the queue, which in the case of higher education is ordered by the Board of Regents. So, this bill allows, in essence, opening up another line where deserving latecomers can get to the front.

Kennedy thinks this presages opening up a lot more lines, hence a rapid debt expansion to the detriment of the state. The Regents say that $1.7 billion in deferred maintenance on other campuses is getting short shrift. This leads one observer to opine that Gov. Bobby Jindal and apparently the entire Legislature to date supports the bill because they perceive the demand for occupations needing education beyond high school but not requiring a baccalaureate degree and give this priority over the idea that reconstituting facilities will attract more students to those institutions that confer baccalaureate and higher degrees.

But none of this thinking gets to the real issue. That is, Louisiana has an inefficient, overbuilt system of higher education. It’s noticeable at all levels: in per capita terms, the state ranks in the top five (behind states with much smaller populations) in most institutions, and is in the top ten each for number of associates–and-below and baccalaureate-and-above institutions. However, as far as the former that slowly is changing, as in the past several years their enrollments continue to climb and in the past couple of years there have been campus consolidations going on (one working its way through the Legislature this session). Yet with the latter there’s clearly duplication when states with populations the size of Illinois’ and Florida’s have about the same number of four-year schools as does the much less populous Louisiana.

Naturally, the best solution would be the merging, demotion, or closing of baccalaureate-and-above institutions but, just as naturally, politics has interfered with this from happening. Another solution would be to pursue that strategy of building to attract students, but there remain big doubts about whether the changing landscape of higher education makes this a viable option. In essence, changing federal policy, marketplace demands, and technology makes the four-year public university sited to deliver education to a place-bound, price-inelastic audience increasingly obsolete and unsustainable, so why put more resources into supporting what is surplus to begin with?

Thus, backing SB 204 may signal relative to higher education policy a willingness to pursue a strategy of a benign neglect of slack resources while addressing the need for increased resources elsewhere. While the Regents continue to treat all parts of the overbuilt structure with slack resources equally, this bill takes an outcome-oriented approach. Where an institution cannot demonstrate its facilities have reached the bursting point in usage, it should receive only enough to stave off inoperability of the assets it can prove it can use. Stinginess by the state here can force these institutions into planning for more efficient use of these resources. Indeed, many of the baccalaureate-and-above institutions would argue that already by default such a strategy is in place.

As for where demand is immediate, dollars should flow to these areas, and only to those areas. If the mechanism of something like SB 204 is necessary to address critical growth needs, and only those needs (thereby avoiding Kennedy’s prediction that this process will mushroom out of control), then its use is legitimate and wise policy.