Is Louisiana State University preparing for “academic bankruptcy”?

LSU president F. King AlexanderThe president of Louisiana State University announced that he had started planning for “financial exigency.”  This follows that state’s governor’s call for major cuts to public higher education, which I noted two months ago.

Louisiana’s flagship university began putting together the paperwork for declaring financial exigency this week when the Legislature appeared to make little progress on finding a state budget solution, according to F. King Alexander, president and chancellor of LSU.

“We don’t say that to scare people,” he said. “Basically, it is how we are going to survive.”

Other Louisiana public campuses might do this as well:

[Sandra Woodley, president of the University of Louisiana system] said several of her campuses — though she would not specifically mention which ones — would have to file for financial exigency if no additional state funding is found.

The Times-Picayune explains what this means:

Being in a state of financial exigency means a university’s funding situation is so difficult that the viability of the entire institution is threatened. The status makes it easier for public colleges to shut down programs and lay off tenured faculty, but it also tarnishes the school’s reputation, making it harder to recruit faculty and students.

“shut down programs and lay off tenured faculty”: yes, exigency makes it easier to perform a queen sacrifice.

Here’s the magnitude of possible state funding reductions: “Louisiana’s higher education community is facing an 82 percent funding cut if no extra state money is found.” [emphasis added]

This follows a ratings downgrade by Moody’s, from “positive” to “stable”.  Where did this come from?  An assessment of

limited prospects for sustained revenue growth due to potential reductions in state operating funding, tight state control of tuition pricing, and pricing sensitivity limiting out-of-state enrollment revenue growth…

Offsetting factors include material declines in state operating support, with a large and increasing share of revenue dedicated to pay growing pension and Other Post-Employment Benefits (OPEB) commitments.

Note that Moody’s doesn’t see increased state support as a potential reason for possible optimism in the future.

Cathy Yang offers an interesting take on this:

Cathy Yang's tweet: "It reads like it is part of a political ploy, as most of the schools @ LA are planning 2 do the same. Still scary, tho."
It reads like it is part of a political ploy, as most of the schools @ LA are planning 2 do the same. Still scary, tho.

That would not be a crazy move for Louisiana politics.

What does this tell us?  At the very least this year’s multi-state move to seriously cut public higher education funding is pressing those universities fiercely.  Last week we saw the University of Wisconsin-Madison announce plans for serious faculty, staff, and program cuts.  If these cuts or some remnant of them take effect, this represents another ratcheting down of American public tertiary education.

Note, too, Moody’s assessment.  Yes, take it with a huge grain of salt, but the details they drew attention to are not fantasies: growing retirement obligations; declining state support; controls on tuition hikes.  Perhaps this exigency call is a move to get the latter lifted, so LSU and other state schools can boost tuition on out of state students, as Wisconsin’s doing.  Plus charging in-state students more.

What do you think?

(thanks to Chris Lott for the pointer)

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2 Responses to Is Louisiana State University preparing for “academic bankruptcy”?

  1. awd says:

    Growing retirement obligations: these obligations should not come as a surprise to anyone. Public retirement system benefits everywhere have been over-promised and under-funded since at least the 1970s. Since at least the early 1980s the attitude has been: well, these promises won’t affect us (the >60 year-old decisionmakers back then) so 1. we don’t need to worry about funding them with actuarially-valid contributions, and 2. we can put money in, but then borrow that money and pay ourselves back at a low rate (which only compunded the problem)
    Declining state support: good public education transitioned from necessity to luxury sometime in the 1980s, too. Nobody seemed to be able to explain what benefits good public education provided; since there was no immediately monetizable ROI seen or even concieved of it became a luxury and therefore that much mor difficult to justify. Plus, getting elected to public office became a circus so the true servant-leader type people lost out to the hucksters and grifters.
    Controls on tuition hikes: without these, public higher eductaion would be even more expensive than it already is. Take PA as an example, if the 14 PA State System universities (~7k/year tuition in-state tuition) did not have tuition hike controls (historically 4% max anually, but often less) they would probably be as expensive as PennState (which is a “state related” university; the state land grant university, but a private entity with no tuition hike limits, >$17k/year in-state).
    With that drastic a cut in state funding, LA state universities will either qualify for exigency or must steeply raise tuition like CA universities did back around 2011 (~28% iirc).

    Like

  2. Pingback: Louisiana considers a whole pile of academic sacrifices | Bryan Alexander

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