Here’s Why Alaska’s Governor Thinks His University System Needs Steep Cuts — and Why Experts Say He’s Wrong

The situation is grim: The University of Alaska system is facing a financial crisis because Gov. Michael J. Dunleavy decided to cut its state funding by 41 percent. On Tuesday the system’s board will have to figure out what a new, smaller university should look like.

The basic explanation for Dunleavy’s move is that he wanted to cut state spending while also securing a $3,000 annual payout for each Alaska resident. That payout, financed by oil revenue, is called the Permanent Fund Dividend. Dunleavy didn’t want to use tax increases to close the state’s deficit and simultaneously meet that $3,000-per-person goal. So he raided the University of Alaska’s budget.

Dunleavy joins a growing list of governors, most of them Republicans, who have recently singled out public higher education for cuts, often in an effort to curb government spending while also taking aim at common right-wing targets, like administrative bloat and supposedly extreme-liberal professors.

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Scott Walker in Wisconsin, Bobby Jindal in Louisiana, and Matt Bevin in Kentucky were some of the other budget-cutting governors. However, Dunleavy’s single-year cut — $130 million, plus a cut from the Legislature that brings the total to $136 million, from the previous funding level of $327 million — could have an even more significant impact. (A spokesman for the governor said there are discussions about giving the university some one-time “transition funding.”)

Dunleavy’s rationale may be a sign of what’s to come in other states where policy makers want to create leaner public universities. So why, exactly, did he slash funding from the university system?

The University of Alaska system relies too much on state money, Dunleavy says.

The university system has historically enjoyed high levels of state support, but that must change, according to the governor. After oil prices plummeted in 2015, Alaska’s finances went into a tailspin. Now the state must close a $1.6-billion deficit, said Matt Shuckerow, a spokesman for Dunleavy.

In a recent budget memo, Dunleavy pointed to Moody’s Investors Service, the credit-rating agency, which downgraded the university multiple times from 2015 to 2017. The reason, according to Moody’s, was that the Alaska system’s reliance on state money resulted in “exposure to the fiscal and economic challenges of the state caused by low oil prices.”

University-system leaders have known since 2013 that current state funding levels would not continue, Shuckerow said. On top of Alaska’s fiscal challenges, the university system’s enrollment has dropped by nearly 20 percent in recent years, he said.

As a result, the system’s state spending per student has increased to $16,391, more than double the national average of $7,642. The governor’s cuts drop that figure to about $11,000 per student.

The university system also has many other sources of revenue to tap, Dunleavy said in the memo, including federal funds, tuition, donations, a reserve fund, and an endowment.

“There’s absolutely nothing wrong with encouraging a university to diversify its revenue stream,” said David Tandberg, vice president for policy research and strategic initiatives at the State Higher Education Executive Officers.

But comparing Alaska to the national average doesn’t make sense, Tandberg said. Alaskans are widely dispersed. Travel is often by plane or boat. Many low-income students need extra academic support and can’t pay a lot, so universities can’t increase tuition much. “It’s just completely different than, say, Connecticut,” he said.

Even if the governor has decided that Alaska can’t be as generous as it once was, such a transition should be done over several years, said Donald E. Heller, provost of the University of San Francisco and an education scholar.

Dunleavy believes the university is a bad investment for the state because of low retention and graduation rates.

On the Fairbanks campus, the six-year graduation rate is 39.2 percent. At Anchorage, it’s 24.9 percent, and at Southeast, it’s 19 percent. Retention rates for first-year students are 64 to 75 percent. Nationally, the average six-year graduation rate at public universities is 60 percent, and the average retention rate at institutions with open-enrollment policies is 62 percent.

“This represents a poor return on the investment of state money,” Dunleavy said in the budget memo. He believes those lackluster outcomes are in part due to excessive program duplication and “the lack of academic and administrative focus.”

The university system says many of its students attend part time and aren’t included in those figures, which include only first-time, full-time students. Part-time students also don’t tend to complete their degrees within that time frame.

Experts say taking away state funding will probably make student outcomes worse. David J. Deming, a professor at Harvard University’s Kennedy School of Government, said research by him and Christopher R. Walters of the University of California at Berkeley shows that a 10-percent cut in state funding reduces enrollment by 3 percent, bachelor’s-degree completion by 4.5 percent, and associate-degree completion by 14 percent.

The response of state leaders should be to invest in targeted areas to improve success rates, said Kevin P. Reilly, a former president of the University of Wisconsin system. He suggested that Alaska’s policy makers and university leaders try some version of performance-based funding: They work together to set goals for retention and graduation, and if institutions succeed, they keep the money.

The university system doesn’t need multiple schools of arts and sciences, according to the governor.

Dunleavy disputes that Alaska needs “two separately accredited full-service universities,” in reference to the Fairbanks and Anchorage campuses. At a news conference last month, the governor said that the university system could no longer be “all things to all people.”

In the budget memo, the governor suggested that the system’s campuses restructure their degree programs such that there’s only one business school, one school of arts and sciences, and so on. The university could close or sell campus buildings with a backlog of deferred maintenance. “Location disruption for students can be mitigated by live-streaming classes,” he said.

University-system leaders argue that they’ve already curbed redundancies and that merging the engineering, education, arts and sciences, and business schools would save less than $25 million.

Phasing out programs with low enrollments is sometimes necessary, Heller said. But, he said, “we know the vast majority of college students, particularly those at publics, are near home and don’t want to travel far.” That means you can’t just expect them to pick up and move hundreds of miles away to attend an engineering school.

Tandberg agreed: “In a state like Alaska, you’re going to have some duplication.”

Lastly, Dunleavy makes a familiar argument: There are too many administrators, and many are overpaid.

Because of that excessive duplication of academic programs, Dunleavy said, the university has been forced to expand its administrative ranks too much. More than half of the system’s staff members are “administrative or support in nature,” he said in the budget memo. The university system puts the figure at 35 percent.

“There are a lot of funds spent toward faculty and staffing, and the university population doesn’t support that,” Shuckerow said, given the enrollment declines.

In the memo, Dunleavy also took aim at the “extensive and redundant high-paid executive staff” at the university. He said the Alaska system has “more than 130” senior administrators who make an average of $175,000 a year in salary and benefits, while just 10 percent of employees are full professors. The university system contends that 75 percent of its senior staff members are paid well below their peers at other institutions.

The administrative-bloat argument is a common one for state policy makers. Heller said much of the growth stems from regulatory burdens and increased access to higher education, necessitating more people in student-services and support roles. At the University of San Francisco, officials regularly review how many administrators they have. Heller hasn’t seen any research backing up the narrative that universities employ lots of people who do nothing.

These days, it’s easy for politicians to gain traction with arguments about “overpaid elite snobs” at universities, Reilly said. “Part of what we need to do better,” said the former Wisconsin-system president, “is convince politicians that we in higher ed are listening to people out there around the state, many of whom have legitimate complaints.”

Sarah Brown writes about a range of higher-education topics, including sexual assault, race on campus, and Greek life. Follow her on Twitter @Brown_e_Points, or email her at sarah.brown@chronicle.com.