By Amanda Albright and Nic Querolo / Bloomberg News
NEW YORK — Alaska Gov. Michael Dunleavy, a Republican, is pushing his alma mater to the financial brink so the state can avoid raising taxes or dipping into the oil industry money it doles out to residents.
Dunleavy, a former teacher and school board member, last week vetoed $130 million for the University of Alaska system, a nearly 41% decline in state funding. The unprecedented cut has left university leadership, faculty, and students scrambling to persuade the Republican-led legislature to override the veto. If they don’t, the university warns, it may dismiss as many as 2,000 people, slash programs, shutter campuses and lose students to other states.
“There’s nothing that can escape a cut of this magnitude,” said Jim Johnsen, president of the system composed of three universities with more than 26,600 students total. He said the school may for the first time have to declare financial exigency, a rare move that can make it easier to slash spending and eliminate positions.
Alaska’s austerity measures are in stark contrast to other states that have started to increase higher-education funding as the economy keeps expanding. In fact, 41 states proposed more money for colleges and universities for fiscal 2020, according the National Association of State Budget Officers.
But Alaska, which is largely reliant on the energy industry for revenue, has repeatedly slashed funding to the university system as declining oil prices pinched its budget. The governor’s latest move may further pressure the state and only create more economic problems, advocates say.
“These cuts are alarming and significant,” said Robert Anderson, president of the State Higher Education Executive Officers Association, who noted that the university’s fiscal year started July 1. “Having to quickly turn around and make plans with these cuts in mind is unparalleled.”
It may be one of the biggest yearly pullbacks from public higher education by a state in modern history, according to association data going back to 1980. New Hampshire lowered funding by about 39% in 2012 after the recession, only to boost funding later to make up for the decline. Alaska is an outlier among states that have “back-filled” funding after the economy improved, Anderson said.
For decades, Alaska, with a population of just 737,000 people, benefited from the riches of a growing oil industry that helped support about 85% of the state’s budget. Since 1982, the state has given residents a portion of the investment earnings from mineral royalties, known as the Permanent Fund Dividend.
Since oil prices began to decline in 2014, the state has been hit with credit-rating downgrades and a shrinking economy. Its unemployment rate is still the highest of any state. And lawmakers began dipping into the dividend money to help close budget deficits, sending payments in 2016 down 50% to $1,022 per person.
Dunleavy, who took office in December, said the overall $678 million decline in state spending as part of the fiscal 2020 budget would enable the state to prevent further reductions to those checks without instituting new taxes. He called the legislature into a special session starting July 8 to make sure a full payment to residents can be made.
“Our budget should be sustainable, predictable and affordable,” the governor, who studied education at the flagship University of Alaska at Fairbanks, said in an address to residents.
Matt Shuckerow, a spokesman for the governor, said the state still spends more than its peers on higher education and needed to find a way to tackle an estimated $1.6 billion deficit. “We’re out of time and money,” he said.
Because the state doesn’t have a broad-based levy like an income tax, the checks have become unaffordable, said state Rep. Andy Josephson, a Democrat. The money “is competing with government itself, and it is being used in my view as a pretext to essentially cut government,” he said.
After slashing funding to higher education after the recession, most states have begun boosting their investments. Moody’s Investors Service noted this year that funding for public colleges and universities increased in 43 states in fiscal 2019, which the ratings company said is a help for a sector struggling with rising expenses.
At the University of Alaska, state appropriations are the biggest source of revenue, according to financial documents. If Dunleavy’s veto goes through, state appropriations for the University of Alaska system would total just $191.8 million, almost half the peak in fiscal 2014, according to figures provided by the system that date to fiscal 2000.
Financial exigency can allow colleges to dismiss tenured faculty members. It would allow the school to rapidly slash services, which means students might not be able to finish programs, research contracts might be “unfulfilled” and there could be issues with accreditation, the university warned. Johnsen said exigency would be unprecedented for the school.
The Southern University System, a historically black college system in Louisiana, declared exigency at a campus because of lower state funding in 2011, and Moody’s went on to downgrade the system in 2015. Chicago State University declared exigency in 2016 after Illinois lawmakers failed to enact a budget.
Moody’s said on July 2 that exigency would likely result in fewer students at the University of Alaska. The ratings company said it might downgrade the system over the “unprecedented” drop in appropriations.
University leaders say that the system is key to unlocking much-needed economic revitalization. It estimates that 65% of Alaskan jobs will require postsecondary education by 2025.
Further austerity measures could ripple beyond the campuses. In Fairbanks, the university is one of the largest employers. The borough warned in bond documents recently that the area has already seen 200 positions cut at the campus between 2013 and 2017.
“This is a huge budget cut and especially in Fairbanks, the university is so critical to the economy,” said Audrey Kirby, a rising senior at the university who has been lobbying lawmakers to restore funding. “If they were to cut it, it would have devastating impacts on Alaska.”