Budget woes in higher education

Across the country, the bursting of a real estate housing bubble in 2006 and the related financial crisis begun in 2007 are forcing government officials to make difficult decisions on how to allocate their shrinking budgets.

Although Missouri Gov. Jay Nixon has spared universities the budget ax, policymakers will look to higher education as one of the few discretionary spending areas to make future cuts and balance the budget. When the budget ax does fall, careful examination will reveal that many of the wounds to higher education were self-inflicted.

Many observers take the financial crisis and real estate bubble as evidence of the inefficiency of market outcomes. However, the euphoria and bubble spilled over to financial custodians in the public sector as universities like Southeast Missouri State University were able to access funds for new buildings from tax credits and government grants.

In 2007, the River Campus and Aquatic Center opened at Southeast, subsequently adding $10 per credit hour to student tuition and hundreds of thousands of dollars to staffing, energy, maintenance and transportation costs. During the summer of 2009, more than $450,000 was spent to build a fountain and plaza between Scully and Johnson Halls, bringing the number of fountains built since 1999 to at least six on campus.

According to data taken from the Blue Book (Official Manual State of Missouri) the school year 1995-1996 was a recent high-water mark in the allocation of people to the actual teaching of students at Southeast Missouri State University. In that year, faculty accounted for 37.8 percent of all employees and 52 percent of the total salary budget. During the last 15 years 238 new jobs were added at the university, but during a time of record enrollment only 58 of those jobs were for teachers.

The most recent figures from 2009-2010 also indicate that the share of salaries going to faculty declined to 45 percent as staff and administrative salaries swelled to a 55 percent share. Since 1995 price inflation has averaged 40 percent, the average faculty salary at Southeast has grown by 30 percent, and the average staff and administrative salary increased by 58 percent, so faculty salaries are not the problem or place to balance the budget.

Even more discouraging for those of us who care about classroom quality is that while Southeast Missouri State University styles itself as a teaching institution, in 2008 it had the third-lowest proportion of operating expenditures allocated for instruction and research (35 percent), trailing other public universities like Lincoln University (36 percent), Missouri Southern State University (38 percent), Northwest Missouri State University (39 percent), University of Central Missouri (42 percent), Missouri State University (41 percent), Missouri Western State University (43 percent), Truman State University (43 percent), University of Missouri-St. Louis (49 percent), University of Missouri-Kansas City (53 percent), and Missouri University of Science and Technology (63 percent) (source: Missouri Department of Higher Education). Only the University of Missouri-Columbia and Harris-Stowe State University spent a smaller proportion of their total operating budget on instruction and research.

Compared to 2008, the Missouri budget is forecast to shrink by $775 million in 2011. Higher education will not be immune to cuts. The bulk of those cuts should come from non-academic programs, as those were the programs that grew the most in the last 15 years. Far too much of the budget has been used to expand the bureaucracy and the physical -- bricks and mortar -- capital at the expense of the classroom and human capital.

The recession will end when the economy again begins to create real economic value, not maintain the status quo via the latest federal stimulus funds. The wisest use of public money will be for human capital in the classroom and library resources, not bureaucracy or vanity public real estate ventures.

Dr. William Weber is a professor in the Department of Economics and Finance at Southeast Missouri State University.