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Advocacy and Action

Delivering Education Amid Financial Crisis

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The University of Alaska (UA) System has faced an extraordinarily difficult summer as drastic budget cuts proposed by Republican Gov. Mike Dunleavy threw the system, the lone provider of public four-year education in the state, into financial chaos.

While a less extreme budget-cut compromise was eventually reached between the school system and the state, UA still faces a sizable decline in state support and ongoing questions about future stability.

The Budget That Started It All

Following passage of an Alaska state budget by Alaska’s legislature in early summer 2019, Dunleavy enacted a series of line-item spending vetoes across the proposed budget that totaled $440 million in cuts. More than a quarter of those cuts impacted the University of Alaska System, as the governor proposed to eliminate more than $130 million in state support (roughly equivalent to 41 percent of UA’s funding from the state) to the institution. State lawmakers immediately mounted a challenge to the vetoes but were unable to gather the three-quarters vote required to override the governor.

Dunleavy foreshadowed these cuts in the February 2019 budget proposal he shared with state lawmakers, in which he recommended cutting $134 million in state support for public higher education. As with the proposed federal budget that the president submits to Congress, state lawmakers aren’t required to heed a governor’s proposed budget as anything more than a suggestion. So, Dunleavy took matters into his own hands and used the line-item vetoes as a way to force lawmakers to grapple with his spending reductions. Any assumption that the governor’s proposed cuts to UA are an attempt to address a state budget crisis are countered by the fact that the state budget initially passed by lawmakers actually showed a surplus. Additionally, Dunleavy is proposing this budget amid his attempts to raise to an all-time high the annual oil revenue dividend that every Alaska resident receives. Given Alaska’s falling oil industry returns, these dividends would actually cost the state billions of dollars and may ultimately be driving the governor’s cuts to UA funding.

Immediate Aftermath

Following the governor’s substantial cuts, UA’s board of regents was forced to declare a state of financial exigency—essentially the nonprofit equivalent of a bankruptcy reorganization. Once declared, financial exigency allows the UA administration to downsize more quickly than it would otherwise be possible to do and can include everything from laying off administrative staff and both adjunct and tenured faculty to even the wholesale elimination of entire academic programs.

While all involved agreed that this was a difficult step for any institution to be faced with, the chairman of the board of regents, John Davies, stated in a public address that the system was “grappling with survival.” NACUBO president and CEO Susan Whealler Johnston commented to the Anchorage Daily News, “It is a desperately sad state of affairs for public higher education in our nation that the University of Alaska is forced to face [financial exigency]. Done well, financial exigency at least allows an institution time to make hard decisions in a thoughtful manner. Done poorly—that is, without enough time to make the necessary decisions carefully—financial exigency can result in disadvantaging students, mishandling the termination of faculty and staff, adversely affecting the community surrounding the institution, and damaging the institution’s reputation.”

Indeed, shortly after the board of regents agreed almost unanimously that the move was necessary to keep the system afloat, Moody’s Investors Service Inc. downgraded UA’s bond credit rating by multiple grades, stating that the institution’s position was “materially impaired by [its] funding reduction” and that the new rating reflected “the severity and magnitude of the financial challenges confronting the University of Alaska.”

The Politics of Compromise

The unprecedented cuts and UA’s resulting declaration of financial exigency rocked the higher education world. Dunleavy almost immediately faced backlash from students, campus faculty and administrators, and higher education advocates from across the country. In the wake of the outcry, the governor agreed to scale back the cuts considerably. Instead of an immediate cut of more than $130 million, lawmakers and UA eventually negotiated a cut of $70 million over the course of three years. The system will see its current funding of $327 million cut by $25 million in FY2020 and FY2021, and then by an additional $20 million in the third year. While this agreement allowed the system to end the declaration of financial exigency, systemwide cuts will still have to be made to cope with the decreased funding.

UA plans first to tackle administration cuts during the fall 2019 semester, enacting hiring freezes, travel and procurement restrictions, and consolidation of administrative functions before making any significant student-facing changes such as program elimination. The system—which operates three separately accredited campuses in Anchorage, Fairbanks, and Juneau, along with 13 smaller satellite campuses spread throughout the state—initially planned to consolidate all its campuses under a single accreditation. However, facing backlash from students, faculty, and staff over concerns that a single accreditation would minimize the University of Alaska System’s reach, the board of regents announced that it would also explore other cost-saving options.

Just prior to the eventual funding compromise agreement, the Northwest Commission on Colleges and Universities, the organization tasked with accrediting the University of Alaska System and other schools in the Northwest, sent a letter to UA’s board of regents warning it that “Significant additional cuts … could pose a material and significant risk to the quality of education provided to the students within [Alaska] institutions.” NWCCU further warned that “if student success and achievement are demonstrably affected” as a result of further budget cuts, then this “could potentially jeopardize the accreditation status of these institutions.”

While regional higher education accreditors typically are not involved in and do not comment on a state’s political climate, NWCCU took a somewhat unorthodox step, stating: “The additional and, perhaps, inappropriate strong-arm ‘guidance’ of the Alaska governor in place of the proper and shared decision-making processes central to the healthy functioning of an institution of higher learning poses yet another factor as NWCCU considers the long-term viability and accreditation status of the institutions within your stewardship.”

The letter caught the attention of federal lawmakers. A panel that advises U.S. Education Secretary Betsy DeVos on accreditation has now established a special subcommittee to explore the issue of improper action and influence on public universities by state lawmakers.

While the situation in Alaska is certainly unique in many ways, numerous studies have shown that state support for public higher education is decreasing in almost every state. According to a report by the State Higher Education Executive Officers Association, state appropriations for public colleges and universities have still only partially recovered from the drastic cuts and funding freezes enacted during the Great Recession. The University of Alaska System is coping with a difficult and unenviable situation, but unless state lawmakers across the country begin to value higher education as a means of strengthening communities and a driver of statewide economic growth, Alaska’s situation may become common.

NACUBO CONTACT Megan Schneider, senior director, government affairs, 202.861.2547

Related Topics

While the situation in Alaska is certainly unique in many ways, numerous studies have shown that state support for public higher education is decreasing in almost every state.