The agreement reached yesterday by Governor Sandoval and Democratic leaders sets state general fund support for NSHE at the level approved by the legislature on May 24 – which is to invest in the Nevada System of Higher Education an additional $40 million more each year of the biennium than the governor had originally recommended and to replace the $120 million in Clark and Wahoe County property tax revenues with general fund dollars. This means that instead of the original 29-percent cut in state general funds proposed by the Governor, the cut will be 15 percent from the 2009 level.
Make no mistake: This is a still a very severe budget cut; the largest of any state agency. And it comes on top of the 20-percent cut from state support in 2009-2010.
The agreement means that the NSHE Chancellor and Regents’ “four point plan” was accepted in large part, so the proposal bore fruit, and offers a guide about how NSHE and its institutions can proceed with restructuring and operating over the next two years.
Things certainly could have been worse, as we all know, but they also could have been better. Fifteen per cent is still the largest budget cut on any entity for which the state is responsible, and hundreds of faculty and staff positions will still be cut, permanently, though we have some hope that through careful budget planning by administrations (in consultations with faculty leadership) the number of outright layoffs on each campus should be greatly reduced from the worst-case scenarios we have been planning for.
Still, many educational opportunities will be lost for students, thousands of whom will not be able to get classes they need, and student fees will still have to be increased markedly – perhaps as high as 28 percent over the biennium.
NSHE's four point plan has not been widely reported upon and may not have been well understood , so it is worth reviewing the key points here. It is based upon a principle of shared sacrifice among state, students and faculty, and all four points are equally important to achieve fairness and financial stability.
Part one was the “smoothing” that has been discussed, whereby the budget cut is larger in the first year (requiring some internally developed “bridge” funding) and resulting in there being about $35 million more in the base budget at the end of the second year than the governor originally recommended. The smoothing was approved in the budget closing, and was included in today’s budget deal.
Part two of the plan involved a commitment from the Chancellor that NSHE campuses would make a total of $40 million in permanent reductions in operating expenses each year of the next biennium. This means we will have to consider, on a campus-by-campus basis, program reductions, loss of positions and potentially further layoffs. This will be necessary even with the level of funding in the final agreement. But the cuts will have to be deeper if the other points are not adopted as well.
Part three included significant additional contributions from students in the form of additional fee increases of 13 percent each year of the biennium, which amounts to a total increase of 28 percent over 2007 levels. This is a steep increase, but a necessary one. After roughly 15 percent of additional revenue is set aside for financial aid, this point would generate an estimated $21 million in additional revenue in fiscal year 2011-2012 and then an additional $43 million the second year, as the two separate tuition increases were to be compounded. The student leadership agreed reluctantly to support this increase, in an effort to save jobs, classes, and entire programs, and the student leadership reiterated that support in a letter to legislative leaders this week.
However, the closing documents approved last week included only the first 13-percent increase, which the budget committees had voted to cap at a time when they were voting to add back $100 million in state funding – thus covering the hole. Also at that time, the budget committees made clear their intent that a cap in student fees should not result in additional cuts to instructional programs (and thus deeper faculty layoffs), as they were under the impression at the time that NSHE had adequate uncommitted reserves to cover this hole.
In fact, a cap on student fees – as desirable as that might be – still leaves a significant hole in the NSHE budget and shifts the balance in the four-point plan from shared sacrifice to steeper cuts in faculty and staff and thus in instructional programs.
We have urged legislative leadership to reflect the full intent of the budget committees in their communications to the regents, and NFA will call upon the regents to exercise their constitutional autonomy and revisit this issue at their June 16-17 meeting, as they will have to balance the desire to limit fee increases against the impact this loss of funds would have on instructional programs on our campuses. A rough estimate is that the loss of those funds could mean up to 200 more people losing jobs System-wide.
Part four of the Plan was that the State would put in $40 million additional funding each year. This funding is apparently included in the agreement reached yesterday, and for this, we all should be grateful.
Still, the budget includes significant additional sacrifice from faculty and staff: All faculty and staff will see a 2.5-percent salary cut, plus a 2.3-percent cut in pay due to a six day per year unpaid furlough. Retirement contribution will be paid on the 2.3-percent portion, but not the 2.5-percent salary cut. And the 2.5-percent salary cut will be reduced from base pay. And there will be no COLA or merit pay for another biennium.
There are other aspects of the NSHE budget closing which are worth noting, such as consolidation of accounts, which should give greater authority to campus presidents to prioritize instruction moving forward.
Importantly, there seems to be agreement for the legislature to fund a study of NSHE funding formulas during the interim, an important goal for the entire system.
Some issues remain unresolved. One is the Millennium Scholarship funding, which has yet to be approved. If what the governor recommended is not approved the fund will run out of money within months, which would be a severe problem for many students seeking an education.
Also, the Knowledge Fund that is in AB 449, the economic diversification bill, still has no funds. We can only hope and assume that someone has a method of infusing some funding apart from forcing NSHE institutions to produce the funding needed.
Finally, there are still bills outstanding that would allow NSHE campuses that do not currently maintain reserve accounts to retain year-end money and/or establish a rainy day fund.
PEBP will be cut severely, an action we have long opposed. The element added in yesterday's agreement is to make any staff or faculty (or other state public service workers) hired after January 1, 2012 ineligible to earn any credits at all towards retirement subsidies for health coverage after retirement. Those individuals will have to rely on personal resources to participate in PEBP or anther health plan after retirement. During their working lifetime they would be expected to accumulate funds in their health savings account for use in their retirement years for health care.
Other PEBP issues were approved as presented by the PEBP Board, so the plan will be considerably different this coming biennium, and Medicare eligible retirees will be shifted off PEBP into the private market, but with at least a modest subsidy.