College budgeting bill creates wrong spending incentives

Don’t be fooled when state Rep. Walt Leger claims his HB 222 is about fairness – it’s about populism that cripples Louisiana’s ability to induce competent and efficient use of taxpayer resources when it comes to higher education.

The bill, which recently passed out of its House committee without dissent on its way to another, would amend the Constitution so that in years where tuition and fees at universities exceeded the previous year’s total, that would prevent any reduction in state support, except when the state forecasts an overall budget deficit when a slight reduction may occur. It does not exactly specify that it is the previous year’s state appropriation out of general and dedicated funds level that is to be maintained, but that would be inferred. If passed by voters this fall, it would take effect at the beginning of fiscal year 2016, presumably supplanting the GRAD Acts formula that now determines state support.

Leger framed his argument in terms of “fairness” in that supplanting self-generated for taxpayer-generated revenues the state therefore in a sense, because it was reducing its own commitment while asking students (assuming the increase in self-generated revenue came from increases in fees and tuition as opposed to more students showing up more often) for more was reneging on a commitment to provide better education quality – as if the only variable in determining the quality of higher education was financial resources.

This turns the GRAD Acts on their heads. The original and its successor based some funding of schools on their demonstrated quality, even if imprecisely measured, where performing the service better and more efficiently brought greater financial rewards. By contrast, this amendment locks in an amount based upon a total created by the dynamics of budgeting for this upcoming FY 2015 invariant of performance and extends into perpetuity, save very minor potential downward revisions from time to time. This reduces incentives for schools part of an overbuilt statewide system to serve efficiently.

In a larger sense this also sustains unwise policy-making. With so little taxpayer-generated revenue available not already dedicated in a straitjacketed fiscal system, lawmakers should look to loosen constraints where money going to low priority, if even necessary, expenditures (or being warehoused in funds for that purpose where there never would be any good reason given that purpose to spend these) rather than become available for diversion to higher education or other areas of higher priority. Instead, this approach makes matters worse, leaving state government less able than ever to allocate money on the basis of priority.

All of this is lost on Leger with his “fairness” cosmology, which in reality rests on a false assumption born of myth – that somehow tuition at its present level, even after hikes approaching 50 percent over the past few years, asks too much of Louisiana students. In fact, as of the latest data available, average tuition in the state is ranked 47^th highest among the state and District of Columbia – and this does not even include the fact that about a fifth of all students get free tuition through the Taylor Opportunity Program for Students – while its per capita income ranks 39^th, meaning that in a proportionate sense Louisiana students aren’t being asked to pay for enough of what their total educations costs, which taxpayers subsidize. (Ironically, Leger calls the notion of supplanting self-generated revenue for taxpayer-generated revenue a “tax” upon students when actually it represents the reduction of a subsidy by taxpayers to students.)

It’s not a totally wacky idea, as the amendment would do, to smooth out funding apogees and perigees that exist in higher education, especially accentuated in Louisiana because of the rigid fiscal structure that disproportionately thrusts variances upon higher education. In that sense, by making schools more reliant upon tuition as has occurred over the past few years, in this state’s case that does actually reduce volatility. And the ideal way to do this would be to follow the proposal once made by the University of Oregon to become free of state money for operating expenses and eventually even of capital outlay requests, using only self-generated and endowment dollars to fund its delivery of higher education.

However, this bill reduces volatility in a way that neither promotes efficient service delivery nor enables better aligning of revenues with spending overall. In the final analysis, it’s more of a play on the populism that, while eroding, still resonates throughout Louisiana’s political culture: with this guaranteed funding floor, pressure is reduced on schools to match an appropriate amount of tuition charged (which would be aided by the Legislature getting rid of ridiculous constraints such as its approving of tuition increases and capping tuition paid at the equivalent of 12 hours per semester) to ability to pay, thereby becoming yet another state subsidy designed to build political support for state officeholders.

The bill reverses reforms to make Louisiana, which ranks 18^th per capita in spending on higher education, a wiser user of that money and endorses poor budgeting practices overall. It should not become law.