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Budget squeeze puts University of Alaska on unsustainable path, Gamble says

Dermot Cole
The sting of a state budget shortfall is expected to be felt across the University of Alaska system. On the Fairbanks campus, pictured here, the anticipated cost of a new engineering building exceeds the funds that have been set aside in the governor's proposed budget. Loren Holmes photo

FAIRBANKS -- At the University of Alaska Board of Regents meeting here Thursday, UA President Pat Gamble said the cuts made by the governor to the proposed university operating budget, a total of $9.6 million, are not likely to lead to layoffs or a pay freeze.

“Those are the very last things we would want to do,” he said.

Gamble said the state intends to fund the obligations and pay raises in its budget, so he said it would be a “misstep” for the university to go in that direction to absorb budget cuts.

Some legislators will want to restore the university budget request and some will seek to add $68 million to the budget to finish engineering buildings on the Fairbanks and Anchorage campuses, two of many reasons why the spending numbers released by the governor are preliminary targets.

'Business model ... not sustainable'

The governor proposed $10 million each for engineering buildings on the Anchorage and Fairbanks campuses, $68 million below what the university says it needs to complete them. Shortly before the proposed budget was released in Anchorage, Gamble and the university’s Juneau lobbyist reviewed the financial prospects and found them bleak.

“On the macro scale, the business model of the university is now not sustainable,” Gamble said. “We’re trying to hold tuition down. The general fund is not going to supply the growth. We’re not getting anything out of interest rates. The discretionary funds that come from grants are limited and probably going to stay at least flat.”

Gamble said the challenge is to develop a business model that pays the bills, which keep rising every year with inflation, meaning that flat budgets are declining budgets.

“We’ve spent two years wringing every bit of efficiency we could find. We’re going to have to wring some more out,” he said. “The business model is going to be one that assumes that there’s going to be flat revenue.” 

Chris Christensen, UA associate vice president of state relations, predicted an “unusually difficult session” because of the budget situation. “I suspect that we may eventually look back on this session as the year that everything changed,” he said. “Oil production is continuing to decline and with it the state’s revenues. “

He said the unexpectedly large deficit for the current fiscal year, now estimated at about $2 billion, is part of the problem.

“Now, that raw number sounds bad enough. But it you look at it as a percentage of what’s available, I think the news is actually worse. Last fiscal year the state had unrestricted general fund revenues of $6.9 billion. This year they’re now expecting only $4.9 billion, which is a 30 percent reduction.”

'Teetering on a fiscal cliff'

The governor and the controlling majorities of the Legislature see the “state teetering on a fiscal cliff” and are going to want to reduce state spending, not just the growth in state spending, Gamble said. About three-quarters of state spending is concentrated in the public school system, health and social services, transportation and the university.

“It’s reasonable to assume that if the Legislature is determined to reduce the cost of government operations, the first place they’re going to look is the ‘big four’ that absorbs three-quarters of the cost of state government,” he said.

Of those four, lawmakers see the university as the only one that can raise some of its own money from other sources, through grants and other ventures. That puts the university at a higher risk of cuts than the other large agencies, he said.

A year ago the governor held agencies to a 1 percent growth rate, reduced by the Legislature to a .5 percent growth rate. Gamble said it’s possible that the Legislature will want to go beyond what the governor is proposing in terms of funding cuts.

Gamble said he will make it a priority to protect classroom funding and students as much as possible.

 “Things like growth, things like planning for new buildings, things like opening up new programs, all those kinds of things could very likely just be off the table,” he said.

“Many of our employees who have been here for 10 or 15 years have never known a year like we’re going to face,” he said.

Dermot Cole can be reached at dermot@alaskadispatch.com. Follow him on Twitter at @DermotMCole.