Warning That Their ‘House Is on Fire,’ Alaska President Urges Regents to Act Quickly on Budget Crisis

Each day that goes by without a cost-slashing plan deepens the financial crisis facing the University of Alaska. But deciding where to cut, and when, has become an agonizing ordeal for the university’s regents, who met on Tuesday to hash out dueling options.

Whatever they do, they’ll have to do it fast, the system’s president, James R. Johnsen, told the regents. With a sweep of his budget pen, the state’s governor, Michael J. Dunleavy, cut $130 million from the university’s state budget for the fiscal year that began on July 1. Combined with legislative cuts, the university lost $136 million, or 41 percent of its state budget and 17 percent of its budget over all.

“The board has to decide whether its house is on fire or whether it’s just toast burning,” Johnsen told the regents. “In my view,” he added, “our house is on fire.”

Responding to that sense of urgency, the board, after a nearly seven-hour meeting, voted 8 to 3 to authorize Johnsen to begin cutting administrative costs immediately and to start working up a plan for further consolidations. The approach Johnsen and state lawmakers support would take the system’s three separately accredited universities, in Anchorage, Fairbanks, and Juneau, along with their 13 community campuses, and combine them into one accredited university.

The board stopped short of endorsing any of the specific models of consolidation the president proposed, but authorized him to draw up a plan for a single-university approach. The board will meet again in September to vote on which cost-cutting option to take.

An alternative to the one-university plan would divvy up the cuts among the three universities and the central administration. The system’s three chancellors proposed a variation of that option during Tuesday’s meeting — a cooperative model that calls for the three to maintain separate identities but work behind the scenes to streamline academic offerings and reduce administrative costs.

Then there’s the option that Dunleavy unexpectedly threw onto the table on Friday. Faced with a fierce backlash over his cuts, Dunleavy said he wanted to “soften the blow” by spreading them out over two years instead of one.

But the offer came with a catch; regents would have to cut the programs his administration has targeted — a demand the university’s accreditor warned was inappropriate meddling in university governance.

The $136-million cut in the university’s state appropriations was instigated by budget vetoes by Dunleavy, a Republican who became governor in December. His aim, he said, was to plug a state deficit without raising taxes, while also securing a $3,000 annual payout for each Alaska resident. That payout, financed by oil revenue, is called the Permanent Fund Dividend.

On Friday, Dunleavy’s administration issued a one-page proposal from the Office of Management and Budget to the Board of Regents that calls for a budget cut in the 2020 fiscal year of $85 million and a $38-million cut in the 2021 fiscal year. In order to get the cuts spread out over two years, they would have to be “confined to identified categories,” the memo said.

Alaska’s University System Faces Its Fate

How a governor’s vetoes fostered a financial crisis on the campuses of the Last Frontier.

• U. of Alaska President Acknowledges Contributing to a ‘Fractured’ System
• Alaska Board Suspends Consideration of Controversial Merger
• Former Alaska Chancellors Express Alarm Over Accreditation Letter

In a written statement, the university system said the proposal “would present an unprecedented restriction of the regents’ authority to allocate the Legislature’s appropriations.”

The office’s policy director, Mike Barnhill, insisted during Tuesday’s board meeting that the offer had been made “in the spirit of compromise” and wasn’t a mandate. The administration was concerned, he said, that a pro rata cut across the three universities would hurt academic programs while not cutting enough into administrative overhead.

Complicating matters for the regents is the uncertainty swirling around the budget process, and the remote possibility that a significant portion of the cuts could be restored.

Alaska lawmakers voted on Monday to restore most of the money Dunleavy cut in his budget vetoes. The Senate on Monday passed a supplemental funding bill that would add $110 million to the university’s fiscal-2020 operating budget.

It’s unclear, though, whether Dunleavy would sign or veto such legislation and whether lawmakers would be able to muster support for an override if he did.

Dunleavy called in to the regents’ meeting on Tuesday, saying he hoped the university would accept his invitation to help manage the cuts.

“This is an opportunity for the university to have a real look in the mirror as to whether we can do better” for students, faculty members, and others, Dunleavy said. “Some of our outcomes could be a lot better. There’s no doubt about it.”

On Monday the university’s accreditor, the Northwest Commission on Colleges and Universities, warned against the governor’s injecting himself into the regents’ decision-making process.

The commission’s president, Sonny Ramaswamy, wrote that while the accreditor respects the rights of all constituents to express their views, continued accreditation requires “an independent and functional Board of Trustees or Regents.”

Ramaswamy also reiterated his earlier warning that the steep cuts the governor had made through the veto process could jeopardize the university’s accreditation. He reminded the regents that if accreditation were yanked, students would be ineligible for federal financial aid. That, combined with the loss of state scholarships that got tangled in the state’s budget mess, “could be a death knell for the University of Alaska,” Ramaswamy wrote.

The governor has defended his cuts, blaming them on poor graduation rates, overpaid administrators, and an overreliance on state funding. He said that while a 17-percent reduction is a lot, it isn’t the 41-percent overall budget hit some characterized his veto as representing.

But others have pointed out that the veto would set off a series of reductions in other areas, from lost tuition as enrollment declines to research-funding losses as faculty members leave and take their grant money with them. Skittish donors would probably withhold gifts if the university’s future appeared shaky. Taking such factors into account, Johnsen has estimated that the losses could reach $200 million.

The board’s chairman, John Davies, objected strenuously to the governor’s suggestion that state money for research be zeroed out. “We’re not going to run bake sales” to keep important research operations afloat, he said. He also objected to the governor’s call to eliminate funding for the University of Alaska Museum of the North and its “archive of priceless, irreplaceable materials” about fisheries, climate change, and other issues important to the state.

Mary K. Hughes choked up when she read a motion, which was later amended, that the board give Johnsen the authority to start consolidating the universities into a single university. She wanted to reassure Alaskans, she said, that “the university has been in Alaska for 100 years, and in 100 years it will still be here.”

Another regent, Andy Teuber, said he worried that rural Alaskans would lose access to classes. “Education is the single most significant intervention in prolonging life and enhancing the quality of life,” he said.

While the governor has said that residents could beam in from remote locations through distance learning, a university administrator pointed out in an interview that some areas of the state don’t have the bandwidth to stream videos online.

When people in the lower 48 states hear rural, “they think about a 40-minute drive to the nearest town or city,” said Evon Peter, vice chancellor for rural, community, and native education at the University of Alaska at Fairbanks. For many of Alaska’s students, “it could take multiple plane rides and up to two days to get to one of our urban campuses,” said Peter, a former chief of the Neets’aii Gwich’in Native American tribe in Arctic Village, in northeastern Alaska.

A single-university model would not be unprecedented. In 1974 the university was restructured from a single university to three separately accredited universities and numerous separately accredited community colleges. In 1987 the community colleges were integrated into the universities, resulting in the current organizational structure.

The regents voted 10 to 1 last week to declare financial exigency after lawmakers were unable to muster the votes needed to override the governor’s veto. Opponents of the cuts needed to secure approval from 45 out of 60 state lawmakers, but a third of the lawmakers were missing for the vote because they had heeded Dunleavy’s call to hunker down in his hometown of Wasilla instead.

Maria Williams, a professor of Alaska Native studies and music at the University of Alaska at Anchorage who is chair of the Alaska Faculty Alliance, said she was concerned that “the governor and his OMB are dictating the future of the university” while insisting on a budget that could jeopardize accreditation.

Many students, meanwhile, have objected to a one-university model, which they argue would dilute the unique character of each of the universities.

Katherine Mangan writes about community colleges, completion efforts, and job training, as well as other topics in daily news. Follow her on Twitter @KatherineMangan, or email her at katherine.mangan@chronicle.com.