State universities feel the fiscal pinch, but also see new opportunities

Kathy Cobb | Associate Editor

Published October 1, 1995  | October 1995 issue

Wisconsin—$47 million budget cut by state Legislature for '95-'97 biennium South Dakota—state Legislature authorizes $1.1 million budget increase for state universities; system requested $13.7 million Montana—University of Montana System budget cut by $7 million Minnesota—$32 million in staff and program cuts needed to balance university system budget over next two years; this is on top of $28 million in cuts announced in June.

These Ninth District legislative actions are indicative of the financial dilemma state public institutions of higher learning face. Changing demographics in the district's largely rural states, increasing technology demands and competition for top-notch faculty further complicate the future of the region's public colleges and universities.

Eight in 10 public institutions surveyed by the American Council of Education for its 1994 Campus Trends reported a decreased share of their budget from state funds over the last five years, with 60 percent indicating a decrease of 10 percent or more. The same report concludes: "Most administrators believe that their institutions will be more dependent on tuition and other student charges in the future; many acknowledge that the changed financial environment has caused them to plan academic programs with an eye to their ability to generate revenue for the institutions."

State legislators, spurred by the taxpayers, demand more accountability from the recipients of tax dollars. In a collection of papers published by the State Higher Education Executive Officers (SHEEO) in 1993, editor Rhonda Martin Epper says, "The combination of real trends and perceived institutional tendencies to direct funds away from instruction purposes have damaged higher education's public image, with the result that states are becoming more interested in how public dollars are being spent in public institutions of higher learning." In an interview, Epper, who is a research associate with SHEEO in Denver, adds that more legislatures are tying funding to incentives or performance measures. "Institutions by and large would rather have lump sums with no strings attached," Epper says, "but that's not likely to happen again."

Tuition increases may be a part of the answer to increasingly tight budgets. The University of Wisconsin System (UW) will replace $10 million of a $47 million budget cut for the '95-'97 biennium with tuition increases. With a tuition rate that is among the lowest in the Midwest, says David Olien, the system's vice president for university relations, "there was room to move, but the raise was still above the rate of inflation." Olien is more concerned about federal cuts in financial aid programs: 50 percent of UW students receive financial aid, a figure that places the system 13th in the nation in number of students receiving aid.

In Michigan, keeping tuition at or below the rate of inflation was the challenge posed by that state's Legislature. At Lake Superior State University (LSSU) in Michigan's Upper Peninsula (U.P.), one of four campuses statewide that managed to hold tuition down, a $1.7 million deficit was wiped out over the past few years by cutting 21 positions, largely in the administration area, and by reducing expenditures in non-essential items. But LSSU's president, Robert Arbuckle, says budget cutting works only if the Legislature keeps up its end of the bargain. "I have no problem with this as long as the state is equally accountable in fulfilling its mission to support adequate state university funding." Michigan is unusual in the structure of its public university system; each university is governed by its own board, rather than by a statewide governing body, and submits its own budget to the Legislature.

While public university administrators face waning state budget appropriations and shaky federal support, they also must cope with myriad other changes, including increased accountability, non-traditional students, a competitive market for qualified faculty and a technological revolution that is moving with the speed of traffic on a superhighway. This fedgazette explores how Ninth District public institutions of higher learning are confronting these issues and preparing for the 21st century.

States find creative ways to "work smarter" in view of fiscal constraints

Raising tuition is seen largely as a stopgap. Most state university leaders look to reorganizing their system's administration and reviewing programs to gain some permanent efficiencies. "We have designated certain campuses to perform services for all campuses," says Larry Isaak, chancellor of the North Dakota University System. The University of North Dakota in Grand Forks provides operational services for the system's interactive video network and maintains the mainframe computer for the financial accounting system and registration system for all campuses. The academic mainframe for faculty researchers is housed at North Dakota State University in Fargo, and other functions like central purchasing and human resources are shared by campuses throughout the system. The Valley City and Mayville campuses have shared an administration team for the past three years.

The South Dakota university system has created 13 task forces—nine administrative and four academic groups—to study institutional efficiencies that would avoid redundancy and provide more value added for each dollar spent. Administrative groups are looking at such operations as student activities, records and admissions, while the academic groups are investigating ways to deliver education more efficiently, for example through distance learning. Currently, the academic task forces include business, engineering, education and the health sciences, but other academic groups likely will join in the retooling process in the future, says Tad Perry, executive director of the South Dakota Board of Regents. "The bottom line is: How can we use resources across the system to reduce investments at each campus?" Perry says. "We're changing from competitive and isolationist campuses to look beyond individual campuses."

South Dakota limited enrollment this year to save money, Perry says, adding that those cuts also served to "bring into better balance the number of students served vs. resources." South Dakota is the second lowest state university system in the nation in resource base for each student-81 cents to the national average of $1, Perry says. "This is an interesting statistic for critics who say we're not efficient."

Minnesota and Montana reorganized their state systems to gain program and budget efficiencies. Montana brought the state's two and four-year colleges under the umbrella of either of the two research universities, Montana State University in Bozeman or the University of Montana in Missoula. In Minnesota this past summer, largely due to efforts of one state legislator, the state universities, community colleges and vocational-technical colleges merged into a 160,000-student, 62-campus system. According to Joseph Graba, interim director of Minnesota's Higher Education Services Office, the consolidation was driven by the Legislature to make transfers between schools easier for students, but the larger payoff may be the efficiencies gained by sharing faculty, equipment and facilities.

The Wisconsin Board of Regents has begun a yearlong review of all areas of the system, including access and affordability, funding and revenue, mission and roles, program array and instructional technology. Committees are made up of regents, system vice presidents and eventually members from the public. "Opportunity is driving this review as much as adversity," says Wisconsin's Olien. LSSU in the UP has formed a coalition, called BRIDGE, with three Canadian universities in Ontario to develop a joint series of baccalaureate programs in the fine and performing arts. The coalition is also studying other shared curricula, including a business degree program that focuses on managing lotteries and perhaps an environmental institute.

But will consolidations and budget cuts be enough?

While university systems throughout the district and the nation look to program consolidation and budget cutting, there are those who believe universities are not looking far enough ahead.

The Public Strategies Group Inc. (PSG), St. Paul, a consulting firm whose focus is reinventing government, has proposed ways to overhaul the structure of higher education. PSG's plan to reinvent higher education is based on what the authors call the enterprise model that focuses on the customer, accountability for outcomes and more positive assumptions about student and employee motivation. Their plan is seen as too radical by many, says Richard Heydinger, a partner in PSG and one of the study's authors. But Heydinger says universities are already using pieces of the reinvented university. It's an "inevitable trend," he says, for universities to privatize some operations and make them independent.

Heydinger says reinventing government is about making government accountable and meeting the needs and expectations of those being served, and the model can transfer just as easily to universities. "We've got the best higher education system in the world," Heydinger says, "a wonderful combination of research and accessibility." He suggests that looking at the returns on investment in students and their income levels clearly indicates the value of a university education.

Heydinger also was involved in a recently published study by the Citizen's League of Minnesota that recommends a drastic change in the way higher education is funded in the state. The report notes that 90 percent of current funding is directed at the institutional systems and only 10 percent to the student in the form of financial aid, and suggests instead a formula of 30-30-30-5-5 funding: 30 percent to the higher education systems; 30 percent to all Minnesota students as lifetime learning grants, applicable to public, private or alternative institutions; 30 percent for need-based financial aid to students; and 10 percent divided between research and new higher education initiatives and technologies. How the state Legislature and university system will respond to such a radical change in funding formulas is uncertain.

Are the states' campuses "technologically fit"?

Most states already embrace technology as a means to increase efficiency in teaching methods and delivery of information, but Heydinger believes that current higher education institutions won't change rapidly enough to meet the needs of the marketplace. He envisions brokers who will connect the needs of the buyer, or student, with providers of education, whether they will be distant learning video degree programs, correspondence classes or weekend programs across the country. "Some of this is of course already happening," says Heydinger, citing a cable television network in Colorado that beams courses leading to a MBA program into suburban Twin Cities' living rooms.

Richard Crofts, deputy commissioner of the Montana University System, says Montana has an extensive telecommunications interactive network in about a dozen sites and plans to offer courses over the Internet, using presentation software for lectures and e-mail between students and professors.

"The most dramatic changes are occurring in the delivery of education," says LSSU's Arbuckle. " The Internet may be a gimmick now, but it will be a powerful tool for education before long," Arbuckle says. "Delivery systems will change dramatically-at some point students will get a degree from home. The university is not the only delivery system for education-there's growing competition."

Michigan Technological University, Houghton, has also made a commitment to delivery alternatives, with a budget request for $300,000 for distance learning technology in the next biennium budget. The university already transmits classes to General Motors in Warren, Mich., and to a government research facility elsewhere in the state, says Fred Dobney, executive vice president and provost.

South Dakota's Perry says the greatest change he sees for that state's university system revolves around technology; last spring $1.4 million was invested in infrastructure, hardware and software for distance education.

With over 25 percent of North Dakota university students over 25 years old, "people want to avail themselves of education services near their homes or in their homes via Internet," says system chancellor Isaak. "Even our traditional students will want to receive instruction by computer," he adds. "What this means for the state and our campuses is more investment in keeping technologically fit."

The tremendous increase in classroom technology has raised student expectations for greater independence and more individualized instruction, UW's Olien says. At the UW Milwaukee campus, business administration students have a new lecture hall where they have computer terminals at their seats and access via the Internet to about 30 Milwaukee area companies, which allows them to problem solve using real-life situations and information. Technology also allowed the same students to use their terminals to watch Congress debate a topic germane to their class via C-Span II. To meet the increasing demands for technology in the classroom, $23 million has been allotted for a dedicated building on the Madison campus to deliver distance education technology throughout the system.

Distance education is the base for course offerings between the Madison-Eau Claire and Stout-Platteville campuses. And the first joint degree in nursing will be given in '96, a collaboration of four UW campuses.

Nothing keeps the students away, but what about faculty

According to Campus Trends 1993, published by the American Council on Education: "For most institutions, the major problem is reduced funding, not reduced student demand. ... Among public-sector institutions, two-thirds have seen no real increase in their operating budget over the last five years." Most administrators surveyed reported that levels of faculty compensation have suffered along with faculty morale. One-third are limiting enrollment and cutting back on faculty. Campus Trends also reported that budget constraints have led to increased use of part-time and adjunct faculty.

Two-thirds of all reporting colleges and universities expect an increased pace of faculty retirements in the near future, according to Campus Trends 1994. At public doctoral universities 28 percent saw an increase in the number of faculty 70 and older.

North Dakota's Isaak says it's a struggle to recruit and retain faculty with the state's low salaries (see graph on page 3). But, he says, faculty have a fair amount of freedom to pursue their work and the state has a low crime rate and sells itself as a good place to raise children.

South Dakota's Perry says his state doesn't even have competitive fringe benefits to make up for low salaries. With a high workload and no research infrastructure to speak of, Perry says, "it's tough and will become increasingly difficult [to attract faculty]. There are fewer Ph.D.s and more people wanting them."

Montana, near the bottom of the national faculty salary scale, lost a faculty candidate for Montana State University, Bozeman. The candidate, who lived near Annapolis, Md., turned down the position because he thought the cost of housing in Bozeman was too high. On the other hand, says Montana's deputy commissioner Crofts, "we are successful because Montana has certain advantages-I'm sitting in my office [in Helena] looking out on the Rocky Mountains."

Northern Michigan University (NMU) in Marquette will face its own spate of faculty retirements at the same time a nationwide faculty shortage is predicted. "At this point we're not concerned, but in another 10 years with more retirements we may have some difficulty replacing faculty," says William Vandament, NMU president. With that situation in mind, NMU is leaning toward offering early retirements to stagger faculty hiring.

Michigan Tech was listed in the top 50 percent of national universities by U.S. News and World Report, Dobney says, "so we're competing with that top 50 percent for faculty." But Michigan Tech is drawing faculty who want to be part of a big-time engineering institution, he adds. "Not many institutions offer industrial archaeology, or have 45 to 50 faculty in mechanical engineering."

While salaries and the region's perceived remoteness may account for some difficulty in hiring faculty, large research institutions like the University of Wisconsin, Madison, face different pressures. "We're competing with private enterprise," says the system's Olien. While UW faculty fared well in national rankings, Olien says, the German department dropped from second to 10th. He believes that drop is attributable directly to the loss of two faculty members to private colleges. And after a 6 percent salary increase in '94, budget cuts this year and next hold faculty salary increases to 1 percent this year and 2 percent in '96. "If we string out these 1 percent and 2 percent years, we'll lose the ground we worked so hard to make up," Olien says. "The lakes and beauty of the surroundings will carry us only so far."

Changing enrollments and student needs drive the future

Budget constraints may be the impetus for many changes at state universities, but changing demographics and student needs are also important considerations for the future.

According to the Campus Trends 1994 survey of public college and university administrators, 36 percent reported a slowdown in enrollment for first time freshmen. Most predicted small growth of 1 percent to 5 percent over the next five years. In Ninth District states, for the most part, the picture is similar.

Michigan Tech's enrollment, which generally fluctuates with the engineering job market, has dropped 8 percent over the last three years. Dobney attributes the decrease to a low high school population that has bottomed out, and Tech's enrollment is expected to grow. At LSSU, there has been a 17 percent increase in the freshman class, which Arbuckle attributes mostly to the unique programs offered, like the fishery and wildlife major and the aquatic lab. The third UP university isn't faring quite as well. Northern Michigan lost more than 800 students due to the closure of Sawyer Air Force base; creating a loss of at least $1.7 million out of a $60 million general budget. Northern's Vandament says he isn't worried; the freshman class is up by 200 students from last year and transfers are up about 100.

Montana expects moderate increases in student enrollment for the next six to 10 years. According to the system's Crofts, the number of high school graduates is not rising as rapidly as in other Western states. But Crofts reports an interesting phenomenon at Western universities, especially in California and Oregon. The West has traditionally been known for low-tuition institutions, he says, but with tightening budgets, those schools are recruiting more out-of- state students to raise more money-using the out-of-staters to supplement the cost of educating resident students. As a result, Crofts says, some home- state students are turned away and forced to look out of state.

North Dakota may face the greatest enrollment challenge: High school graduates are projected to drop by 25 percent over the next 25 years (see graph on page 7). In recent years enrollment numbers actually grew at a time when the number of high school graduates declined, Isaak says, due to increased enrollment by nontraditional students-a trend Isaak expects may continue.

And while South Dakota's enrollment numbers are down by design, over the next five years about 600 new students are expected each year throughout the system. South Dakota, which has one of the nation's lowest proportion of adults with a bachelor's degree or higher (17.2 percent vs. 20.3 percent nationwide), according to Perry, is attempting to draw more nontraditional students.

Freshman enrollment is up at the University of Wisconsin campuses. According to Olien, the baby boom echo is beginning to appear, and figures point to a 10,000 new-student bulge or higher by the year 2000. Continuing student numbers are down, however. Olien suspects the good economy accounts for that drop. And demographic figures point to increasing numbers of families with children moving into Wisconsin, many from the Chicago area, but also increasing numbers from California, Olien says.

Olien also says that college campuses today are no longer the domain of 17 to 23 year-olds. He cites differing needs of students, for example, day care facilities on campus, and he says upwards of 40 percent of students on some Wisconsin campuses work 20 to 30 hours each week. Alumni have tremendous desires for continuing education, Olien says. "One of the challenges we face is there will always be more students than we anticipate."

Northern Michigan's Vandament says his institution is providing education increasingly to older people, that is, the 27 to 35 age group. "The student profile of the average summa cum laude graduate is a 32-year-old woman with one or two children."

LSSU's Arbuckle says he expects more older and part-time students, and the university is designing class schedules to include more evening and weekend offerings to fit their needs.

Enrollment is one of the real issues facing Minnesota's systems, Graba says. While high school graduating classes are expected to increase, there is also the issue of a more diverse student population, Graba says, especially in what they need to learn. "The biggest unmet learning need is with the currently employed," Graba says. Companies trying to upgrade the knowledge of their employees spend millions, says Graba, adding that for example Motorola Corp. spends $250 million per year on employee education.

Are universities preparing students for the workplace, meeting the needs of business?

According to the results of a University of Pennsylvania study published in February, US employers lack confidence in the ability of schools and colleges to prepare young people for the workplace. Ninth District university officials don't agree and point to the successful job placements of their graduates and say they keep an ear to the business community.

In the UP, Michigan Tech has a 90 percent placement rate for its graduates within three months of graduation. But while most would like to stay in the UP, Dobney says, there are not enough jobs.

Northern Michigan's Vandament concurs. "We have a rather interesting paradox," he says. While 90 percent of NMU grads get jobs or go on for higher degrees, Vandament says, "this is a mixed blessing." NMU is contributing a group of overtrained, overeducated people for the local job market, he says, but to find professional employment, about 70 percent of the graduates move downstate. "By providing opportunity, we're also providing a brain drain," Vandament says. (See Vandament's column.)

Even though the state's economy may not use as many graduates as in other places, South Dakota's Perry says, there are significant job changes taking place over a period of time. "We're not an atom-based but a byte-based, mind-driven economy," Perry says. "One needs a college education to be prepared for this world."

Michigan Tech faces three pressures, Dobney says. "Industry has said diversify your student body, you need an accredited business school and train students to work in teams." To keep up with engineering trends, Tech has advisory boards locally and nationally. Vice presidents of such companies as Novell, Intel, Boeing, Dow Corning meet twice a year with the university's president and a faculty representative to review programs.

North Dakota employers have told university officials that they need to improve students' communication skills, teach them to work in teams and have an appreciation of public affairs because of the global nature of business-and they must have an interest in the community, according to Isaak. "They want people who have broader skills, which speaks to the importance of a general, or liberal arts, education."

Minnesota's Graba believes that business is dictating the focus of education in some ways, and if this adds to the educational foundation, fine, but he also says if corporate needs take precedence over general education, that is not acceptable. "Knowledge has quietly become the key strategic resource in our society," Graba says, like land and natural resources earlier in our country's development.

Despite budget crunches, don't expect state campuses to disappear

Many Ninth District university graduates may leave their university communities upon graduation, but while they attend school, students have a huge economic impact on the communities in which their institutions are located, in addition to the local jobs generated.

Some believe that small rural campuses have outlived their usefulness and could be merged with the larger campuses to save money and give students more options. But most university officials say there's little to be gained by closing a campus-and a lot to be lost by the communities in which they are located.

The Montana University System is about the third largest business in the state, says system Deputy Commissioner Crofts. "Take a few hundred jobs out of a small town and you have real economic hardship." With a steady market for traditional students in Montana, Crofts says, "a campus would almost have to wither on the vine before it would be shut down."

Montana State University in Bozeman recently published a report on its economic impact to the state and Gallatin County, where MSU is the largest employer. The report states that MSU-Bozeman directly added $75.5 million to Montana's economy in 1994-a figure that is greater than the total annual payroll for coal mining in Montana. The university estimates that its total economic impact was more like $141.4 million in fiscal '94.

Closing a campus "harms the economic development of a town in a big way," says PSG's Heydinger. The solution is for states to exhort those campuses to "make them earn their own way," Heydinger says. "Don't execute the patient; instead, challenge them to survive."

In North Dakota, a campus may serve a two- to three-county area and in many cases is the cultural center of the community. "They make a difference in the quality of life of the communities, in addition to being a major employer," Isaak says. Because North Dakota has a largely rural population, access is important, he adds. "Closing a campus is as much a political issue as an education issue," Isaak says.

South Dakota's Perry agrees that closing a campus is a legislative question. "It looks good on the surface," he says, but adds that the university system would have to move students and build up infrastructure at other campuses, aside from the economic impact on the local community.

"The trend in higher education is to make it more accessible in more locations because students are older and bound in place," says Northern Michigan's Vandament. In fact, he adds, more community colleges want to offer baccalaureate programs. NMU employs about 1,000 in Marquette, and of those, 60 percent are indigenous, Vandament says.

If Lake Superior State had to close, it would have a dramatic impact on nearby communities: It is the only university within 160 miles. LSSU is the region's physical education recreation center, the cultural center scheduling about 12 to 15 performers each year, the area's largest banquet and wedding reception facility and the major conference center, university president Arbuckle says. About 200 area residents are employed directly or indirectly by LSSU.

"If we left there wouldn't be much of a community," says Michigan Tech's Dobney. With a $115 million annual budget and an economic multiplier two and one-half times that, the impact on the Houghton area is $300 million, Dobney says. In addition, more than half of the 1,300 staff are from the area.

"It's not the number of campuses but accessibility that counts. You save little by closing a campus," says University of Wisconsin's Olien. "The investment is in people not buildings."

What about the university of the future?

So while state university officials grapple with what appear to be ongoing budget crises, they also face the consequences of changing student populations, faculty defections and shortages, fluctuating workplace needs and, above all, technology that is transforming the delivery of information and knowledge.

"The status quo isn't an option any more," Minnesota's Graba says. "There's growing evidence that we can't meet the learning needs of society; enrollments are escalating, but we can't meet needs because of budget crises everywhere," he says. "We need to go to expanded uses of learning technology and alternative models of delivery."

As many university administrators have described, distance education and interactive video systems are in use or under development throughout the Ninth District. And when the Peterson's Guides, the publisher of traditional college directories, includes in its series of publications The Electronic University-A Guide to Distant Learning Programs, it's clear that the region's public higher education institutions are acting none too soon.

Evidence of electronic education is everywhere. The British Open University system, described by Graba as the grandparent of alternative delivery of education, grants 10 percent of the bachelor's degrees in England on less than 5 percent of a standard university budget-with no campus and no faculty, just self-directed learning through a highly sophisticated correspondence method. Graba also points to an example of the changing trends in this country: The National Technological University, located at Colorado State University in Fort Collins, teaches engineering courses via satellite. National Tech buys engineering courses from the 40 top engineering colleges in the country and sells its programs to corporations at 380 download sites. And the Virtual On-line University offers 350 courses on the Internet that are taught by faculty all over the world.

Many students likely will be acclimated to distance learning well before they enroll in a university. An example of the trend in alternative education delivery is a company in Spokane, Wash., currently selling elementary and secondary courses to 3,000 school districts around the country from New York City to Guam-largely courses that rural or financially strapped school districts can't afford to offer.

Graba, chair of Minnesota's Telecommunications Council charged with connecting the state's educational resources in an integrated learning system, says that every higher education institution in Minnesota was connected to a statewide network this fall, and the Legislature has determined that the state's K-12 schools and libraries also should be added to the network.

"Education is in the midst of an unbelievable revolution," Graba says. "Higher education in the '90s is where the railroads were in the '40s," he says, recalling companies' dominance in freight and routes before the explosion in truck traffic and air freight.