$40 million to higher education could temper possible tuition increases

Wednesday, February 8, 2012 | 8:56 p.m. CST; updated 11:18 a.m. CST, Thursday, February 9, 2012
On Tuesday, Missouri Gov. Jay Nixon proposed using $40 million from a possible settlement with mortgage lenders to reduce state cuts to public colleges and universities. These are the governor’s recommendations to split the money among state-supported schools.

COLUMBIA — If a nationwide mortgage settlement nets money for the state, proposed MU tuition hikes might be softened, university Budget Director Tim Rooney said Wednesday.

At a presentation to faculty, Rooney calculated that if $40 million comes back into the higher education budget, MU could reduce its proposed tuition increases from 7.5 percent to 5 percent.

Gov. Jay Nixon said Tuesday that $40 million from the settlement might be allocated to two- and four-year public colleges and universities in Missouri, lessening the 15 percent cut to higher education he proposed in January.

No guarantees

Rooney emphasized at the presentation that the allocation of the money — and its potential effects on MU's budget — are far from certain.

Even if the money comes through, it won't change anything after the 2012-13 fiscal year, Provost Brian Foster said.

"That's one-time money," Foster said at the meeting.

State Budget Director Linda Luebbering said there is still a process to go through to finalize the amount of funding higher education receives from the state.

The legislature is in charge of deciding the final amount that is put in the state budget, which will be divided among Missouri's public colleges and universities. The legislature must have the decision about the amount of funding, along with all appropriation bills, finalized by May 4.

Luebbering said that any proposed increases to funding are estimates at this point. She said Attorney General Chris Koster's statement that Missouri will be participating in the settlement is a good sign, but there is no guarantee that the money will come through.

Regardless of the amount, the funds would not be available until the start of the new fiscal year in July. 

Where MU stands now

If the $40 million doesn't come through, Nixon's proposed 15 percent cut to higher education will likely become a reality.

"The governor's proposed budget is almost always the one that's approved," Rooney said.

Even before the cut, MU's state funding is behind that of most other states.

Here's how the state measures up:

  • Missouri ranks 44th in the nation in per-pupil state funding for higher education for the 2011-2012 fiscal year.
  • The state's per-pupil higher education funding is far below that of the other states that contain Southeastern Conference schools.
  • MU's tuition and fees for 2011-12 amount to $8,989, compared to an average of $10,434 for public institutions in the Association of American Universities. The discrepancy means that MU is not bringing in as much revenue from tuition as other AAU members.

Rooney described MU's budget as a tree. The roots are tuition and state funding. The trunk is the operating fund, which is the $510 million part of the budget that MU can freely allocate. It includes funding for building maintenance and salaries for faculty and staff.

"A good trunk of a tree needs a good root system," Rooney said.

The branches of the tree represent funding designated for specific areas, such as grants, gifts and school- and service-specific fees. University-based businesses, such as KOMU, MU athletics, the bookstore and the hospital, cover their own expenses and generate their own income, but pay an overhead cost to MU.

None of those branches could function without academic programs, Rooney said.

The roots must balance each other: Rooney said when state funding goes down, tuition must go up.

"There's a direct relationship between those two," he said.

How should MU fill the gap?

Rooney said one option was delaying a proposed 3 percent merit-based salary increase for MU faculty.

At a University of Missouri System Board of Curators meeting held Feb. 2, several curators said that if possible, they would like to retain the proposed salary increases.

Another possibility is using evening hours to teach classes, Rooney said. That would free up building space during the day, which would make increasing enrollment easier to manage.

At some point, there could be program reductions, Rooney said. But programs bring in revenue, and it takes years to reduce them.

Chemical engineering professor Galen Suppes suggested implementing hybrid teaching methods: Some classes could be taught partially in a classroom and partially online, reducing classroom use.

Foster said Suppes' idea is a good one, but that hybrid teaching can't be put in place overnight, and there would be costs for added technology. However, at the curators' meeting last week, a new eLearning system was widely discussed and is already in early stages of operation.

For now, furloughs and early retirement are not on the table, Rooney said. Those decisions would need to be made on a system-wide basis.

Looking ahead

With the exact amount of higher education funding still up in the air, the Board of Curators has not yet discussed budget options that include the extra $40 million. 

UM System spokeswoman Jennifer Hollingshead said the System is pleased with the proposed reductions in higher education budget cuts, but the Board of Curators does not yet have a plan about how the proposed increase in funding will affect issues discussed at last week’s board meeting, including tuition, the merit pool and maintenance needs.

The board plans to meet sometime in mid-to-late February to vote on the proposed tuition increase. 

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Richard Saunders February 9, 2012 | 11:07 a.m.

Okay, so tuition doesn't increase as a result of the "settlement," but guess what, the price of everything else will! Why? Because the banks aren't paying for the settlement, you and I are, as they will be using bail out funds provided by us to make the payments.

Once again, this is nothing but government borrowing at one level to fund in at another (just with some smoke and mirrors that appear to be "tough on banks"), all paid for by tax revenues, or by higher prices due to the inflation of the money supply.

In other words, this is no real solution, but rather a continuation of the problem, wrapped up in election year rhetoric.

I have to wonder though, will this be the straw that breaks the electorate's back, and brings Dr. Paul to the forefront? Will the sheeple wake up before it's too late, or will they continue to celebrate their own slaughter in the form of government borrowing and spending?

As Mises said, there is no escape from the consequences of a credit-fueled crack-up boom. The only options are to allow the adjustment to happen now, or to delay it by making things worse until a complete currency collapse occurs.

Our entire lives have been marked by the continual worsening of the purchasing power of the currencies used world-wide (the delay choice). We are rapidly approaching the destruction of all of them, as one can never solve a debt problem by going farther and farther into debt. Their only remaining solution is to run ALL sovereign interest rates to zero (ZIRP) in an effort to eliminate their debt servicing "problem" of interest payments consuming all revenue.

Of course, like all actions, this one has consequences. In this case, it's the death of the financial system that relies upon interest revenue (like your local bank, retirement fund, or insurance company, etc...). As with the dying private mortgage industry, they will nationalize the dead entities, creating zombie institutions of every stripe, where service provided changes from an economic consideration to a political one.

This folks, is the ramifications of the unholy alliance between Wall St. and Rome on the Potomac. The banking system along with the political system has been used as a mechanism to transfer wealth from the productive people in the world to the unproductive.

How much more of these solutions can YOU afford?

(Report Comment)
Ellis Smith February 9, 2012 | 12:49 p.m.

The bar graph is fascinating! I am not referring to its vertical axis, but to its horizontal one: the number of state higher educational institutions shown and named.

The same sort of bar graph for the state of Iowa would have just THREE institutions! That may represent an extreme case in terms of "few," but the bar graph shown in this article just might be an object lesson in "way too many."'s no worse than [insert the name of some other state]. Maybe not, but if everybody in [name of other state] were to up and jump off a cliff, should we jump also?

Every one of these institutions, Missouri or Iowa, has its own administrative overhead, and let's not even get into redundancy of academic offerings (we can argue that facet without ever leaving University of Missouri System).

Can we as Missouri taxpayers truly afford all this grandeur, and should tuition need to reflect the obvious redundancies?

Ever since the first big disaster at the turn of this century some of us have been wondering how bad things must get before some people quit making minor alterations and address the problem. Do you remember the Greek myth concerning Hercules and the Aegean Stables?

(Report Comment)

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