Interim LSU System President Tom Galligan says he sees a glass as half full “even when the glass is broken.”
That optimism preceded his telling LSU faculty Wednesday that he ordered department heads to plan for 5% to 10% budget cuts.
The upside, he said, is that all those years lawmakers balanced state budgets by cutting higher education means that the expected blood-letting in coming weeks because of the coronavirus won’t hurt as much as it did a decade ago. Nowadays, the public colleges and universities depend mostly on student fees and tuition to pay their expenses. Taxpayers only contribute about 25%. A 10% reduction in state appropriations will be easier to handle, he said.
As Louisiana colleges and universities began Wednesday to officially access federal dollars aimed at recovering from campus closures to slow t…
Galligan made his comments in a meeting of the Faculty Senate about two hours after the system’s chief financial officer, Dan Layzell, publicly stated: “It is too early to speculate.”
Still, given that higher education money is the Legislature’s traditional go-to source when revenues are short, administrators are understandably skittish facing a new world in which efforts to slow the community spread of the novel coronavirus has thrown more than 351,000 people out of work.
And Layzell is correct that much of Louisiana’s fiscal future remains unknown. How much have sales tax receipts declined? What is the impact of no casino activity? And how far did oil and gas severance taxes fall?
Moody Analytics last week issued a report noting that state economies dependent on tourism and energy, like Louisiana’s, face the biggest hurts in the coming months. And this was in an analysis by Wall Street economists, who influence the cost of borrowing for state governments, that predicts at least 21 states, perhaps 34, would “have to go through the painful process of filling budget holes of 10% or more even after using all of their available reserve balances."
Edwin Litolff, University of Louisiana vice president of business and finance, asked Loren Scott to scratch out on the back of an envelope some projections for higher education and the Baton Rouge economist came up with an about $400 million reduction.
Litolff applied those estimates to the budgets of the nine UL System schools, which educate 90,167 of the state’s 214,205 post-secondary students. The Board of Regents report that LSU campuses around the state have 51,051 students.
The UL System colleges, which include University of Louisiana at Lafayette and Southeastern Louisiana University in Hammond, have total operating budgets of $908.9 million, of which state taxpayers kick in $240.8 million.
If legislators cut the state appropriation by 5%, the system loses $11.1 million.
But how does that impact individual campuses? Take the University of New Orleans as an example of the money pressures facing an individual campus.
In explaining factors that impact campus budgets beyond a reduction in the state allocation, the UL System model considered pension repayments, costs leftover after federal stimulus grants, the impact possible reduced enrollment, as well as less state money to illustrate possible budget scenarios. UNO could take a $15.2 million total hit, a 15% decrease in its $97.3 million operating budget, according to the UL System.
UNO receives $27.5 million from the state, from which the university has to kick back $9.14 million as its part of the state pension debt that came about because legislators, for years, didn’t adequately fund retirement accounts.
The federal government is giving UNO $5.6 million from the recently enacted CARES Act to help cover coronavirus losses. At least $2.8 million of the federal money must go to help students directly. The university is left a like amount, but as of Tuesday had already paid out $4.7 million in unexpected coronavirus expenses. The remaining $1.9 million comes out of UNO’s budget, unless additional federal monies are forthcoming.
If lawmakers cut the state’s allocation by 5%, UNO would lose an additional $1.25 million.
About 75% of the college’s revenues come from student tuition and fees. UL System President Jim Henderson acknowledges dozens of higher ed studies project a 15% drop in student enrollment nationally for the upcoming fall semester. But he hasn’t seen those indicators and predicts fall enrollments will increase for UL colleges.
Despite being another “glass half-full” guy, Henderson nevertheless had his financial staff include enrollment drops in their budgeting models. At UNO, if 5% fewer students attend the fall semester — that is 412 fewer students — then the school loses another $2.9 million.
Just how Louisiana higher ed leaders would close a 15% gap between revenues and expenses, they won’t say.
Around the country, university leaders talk about higher tuitions, suspended courses, or reductions in staff pay among other ideas.
Last week, for instance, University of Arizona faculty and staff being paid more than $150,001 were ordered to take a 17% pay cut. This is on top of a hiring freeze and executives taking a 20% pay cut already in place.
University of Arizona President Robert Robbins then told a Tucson radio station Thursday that the Wildcats may not play football this fall. “My sense, right now, I just don’t see that happening,” he said.