It won’t come as a surprise to most of you that the state budget woes are causing some panic at public universities across Michigan.
When all is said and done, Eastern Michigan University is looking at 15 percent or more reduction in state funding next year.
We’ve heard a lot of talk about what might get cut. Various programs, events and employees are at risk. Many people would prefer we push a pay cut on the administrators.
No matter what side you’re on, you probably have an opinion on where the cuts should be made.
However, before you start targeting what you deem to be the most worthless university expenditure, you might want to take a moment to exhale. The sky isn’t falling. There is no crisis.
Holding everything else—like enrollment—equal, the university will need to operate at 85 percent of this year’s costs.
That can be done with virtually no cuts and no tuition increase, excluding the rise from inflation.
Madness? Not at all. The university just needs to eliminate waste and be honest about the amount of funding they need.
Waste is everywhere, and it’s too often dismissed as a minor factor in budgeting. It’s not.
At last month’s Undergraduate Symposium, one presenter discussed the cost of waste in the health care system.
According to the Price-Waterhouse study he cited, 55 percent of health care spending is waste. I’ll repeat that for emphasis: 55 percent.
Some waste is unavoidable. Errors happen and mistakes are made. But, much of the waste we see in all industries is a lack of oversight and a dismissal of the amount that could be saved.
A lot of money could be saved. Maybe not the whole 15 percent, but a sizable portion.
Higher education operates so far outside of the laws of supply and demand there isn’t much incentive for administrators to cut costs through waste reduction.
Any cost increases can be offset with tuition increases. When tuition goes up, federal loans go up.
The university still gets the money up front at the expense of a hefty student loan, with you and the government taking on all the risk.
Andrew Ferguson’s new book, Crazy U, addresses this problem in one of the concluding chapters more thoroughly than a weekly newspaper column ever could, and it’s worth your time to learn more.
Health care costs function in a similar way with hospitals standing in for universities and insurance companies standing in for student loan companies and the federal government, which is why the earlier comparison works so well.
But even with all that waste eliminated, we might fall short of making up that 15 percent.
Yet, that shouldn’t be a problem either if the university is honest about what it costs to run this place.
Think of it this way. If EMU can operate at the same level of output, for 85 percent of the cost, then even in good times, the state will only give the university that smaller sum of money.
In other words, if EMU admits we can run at this level of funding, we’re admitting we don’t need any more money, which means we won’t get it in the future.
You can see the problem. If we tell Lansing it costs $250 million (for example) a year to run the university, they’re likely to say they can only afford to give us $215 million this year.
If EMU is then able to operate at the same level of output, then Lansing knows the university only needs $215 million, even if they ask for more when the economy improves.
So naturally, the university has a built-in cushion for just such an occasion.
EMU’s first request to Lansing is always going to be more than it needs, because that way any cuts made at the statehouse can happen without cuts being made in Ypsilanti. It’s Budgeting 101.
But, we’re arrived at an impasse. The university won’t admit they do this, because then future dollars are at risk.
As a result, the university is about to make cuts it doesn’t have to in order to keep the charade going.
What that means for you is programs, events and employees are going to get cut, and tuition is going to go up, even though it doesn’t have to.
EMU and the state of Michigan are not alone in this. They’re part of a system that fosters this behavior.
Instead of worrying about funding reductions, worry about the budgeting charade. Both sides are guilty, so everyone pretends they’re innocent.
Do not be fooled. By trimming the fat and admitting the budget is padded for just this kind of situation, we can survive a 15-percent funding reduction.
Anyone who tells you differently is either misinformed or lying.
