We began the session in a huge hole dug for us by Governor Sandoval’s recommendation that we be cut 29 percent below the current level of funding, which the governor justified in his State of the State speech by arguing that the Nevada System of Higher Education had "failed."  That sentence in the State of the State speech is still very galling to think about, given that we have one of the smallest faculties in the nation on a per-capita basis, doing a solid job of delivering education to as many students as possible. The governor also had suggested that the budget hole should be filled entirely by tuition increases and salary cuts.

To cover the $162 million which he proposed to cut in state support, student tuition and fees would have had to be increased by 73 percent or faculty and staff salaries across the board would have had to be cut by more than 60 percent. Neither was a reasonable option and both were dismissed out of hand by the regents.

Put clearly, it was no exaggeration to say that this budget would have pushed the System into dire financial straits, likely a declaration of exigency, and certainly the termination of dozens of degree programs, possibly hundreds of tenure-earning and tenured faculty, and a drastic reduction in the numbers of students who would be enrolled into higher education  – up to 20,000 per year. Closure of sites and even entire campuses were rumored to be under consideration.

No one felt very good about these prospects for most of February and March.

The System responded in April by proposing an alternative – voiced by Chancellor Dan Klaich and supported by the regents, campus presidents, student leadership and faculty leadership – that was well-received and ultimately supported by the democratic leadership in the legislature, notably Assembly Majority Leader Marcus Conklin and Senate Majority Leader Steven Horsford and Democrat members of both money committees.

That plan included a willingness by NSHE to make massive cuts in exchange for some matching support from the State, plus tuition increases that would in amount match the permanent cuts and the contribution by the State. It was a 40-40-40 plan, which meant that NSHE institutions would agree to cut $40 million each year from current operating levels, in exchange for $40 million above the governor's recommendations from the State, plus tuition increases that would, by the second year of the biennium, total about $40 million per year.

Another element of the plan was what was called “smoothing” which mean that NSHE institutions would take a larger than proposed cut in the first year of the biennium in exchange for a smaller than proposed cut the second year. This element was agreed to, and will have the effect of having the base budget for NSHE about $35 million higher at the end of the second year of the next biennium than would otherwise have been the case.

Overall, this plan means that NSHE will be cut a bit more than 15 percent for the coming biennium, which is a great improvement over where we started the session, but still is a very sad state of affairs with many implications for higher ed in Nevada, and for economic diversification as well. And it is by far the largest cut of any entity for which the State has funding responsibility.

While the Four Point Plan was somewhat successful in communicating an idea of shared sacrifice, it represents a reality forced on NSHE by the huge cut in state support proposed by the governor. That reality is that this was a plan to administer real cuts and to impose significant fee increases on students – predicated on a significant increase in state support above the huge cut proposed by the governor. As we stated at the time, it represented real "shared sacrifice by students, staff and the state."

Since this plan involved an additional 15-percent cut in state support for NSHE in 2011-2013, on top of the 20-percent cut in the current biennium (2009-2011), it left no margin of reserves on which to draw to cushion any additional cuts. Any cut above the proposed plan would mean loss of programs, faculty and staff positions, and student educational opportunities due to caps in enrollment and reduction in classes, degree programs, and departments.  

In this respect, the financial integrity of the Four Point Plan, and the principle of shared sacrifice among staff, students and the state, was unexpectedly undermined when the joint budget committees voted to disallow the second year half of the proposed fee increase – which NSHE student leadership had supported! When the committees originally adopted this cap on student fee increases of 13 percent, it was in the context of $20 million more in state support than the final budget close (in effect, substituting state dollars for student fees) and in what appeared at the committee hearing to be a mistaken belief that the System was holding sufficient reserves to prevent any further cut in academic programs should total state and student support be reduced.

This strange turn of events could leave NSHE institutions having to cut even more deeply into academic programs – and thus into faculty and staff lines – than had been proposed in the Four Point Plan. The NFA will urge the regents to make every effort to ensure access for students and keep college affordable, but also to balance the cost of removing the second year of tuition increase from the Four Point Plan. (Doing so, for instance, will result in another $5.5 million cut from academic programs at UNR and $8.4 million at UNLV, as the largest examples.)

NFA has urged the legislative leadership to recognize the autonomy of the regents to determine whether a second-year tuition increase will be necessary to avoid even deeper cuts to academic programs and student opportunities. Since 15 percent of all fee increases are set aside for in-state need-based scholarship aid, and federal and state financial aid will further account for some of this increase, an increase in fees will be less drastic on student opportunities than closing or capping programs.

By now, all know that the Supreme Court finally intervened a week before the session was to end, and forced a dramatic change in plans for both some of the Rs and, most importantly, by the governor.  While it is hard for some of us to forget the early claims of the governor in the State of the State speech that the System had "failed," we should be grateful that in the end, the governor did not, after the Court decision, decide to cut even more. Instead, he admitted that deeper cuts to education would harm the state irreparably and agreed to allow most of the sunsetting taxes to be renewed for another two years.

So, we ended up with the Four Point Plan approved in principle (though still needing clarification in execution). We are now learning what this means on  each campus, but in general terms, it will mean somewhat fewer than 1,000 faculty and staff positions will have to be eliminated and somewhere between 7,000 and 8,000 students across the state will be denied access to courses that they need each year of the biennium.

In brief, although we all realize that “it could have been worse,” it is difficult to celebrate this outcome very enthusiastically.

Other issues from the Session:

• See http://www.leg.state.nv.us/Session/76th2011/Reports/TablesAndIndex/2011_76-index.html for a complete listing of the dozens of bills introduced that dealt with NSHE institutions and operations. Look under NSHE. Here are a few highlights worth noting.
• The much-needed bill to do another formula study (which had been requested for the past several sessions), SB 374, passed, and this important project will move forward. The committee will have three senators, three assembly members, three regents, and seven people appointed by the governor (three voting members and four non-voting members).
• The much-discussed bill to loosen oversight of concealed guns on campus, SB 231, passed the Senate but failed to get out of the Assembly Judiciary committee. NFA and the System took a strong position against this bill, as did law enforcement throughout the state. But the bill also had strong proponents and the NRA was always lurking in the background. This was a good win, and we thank the members of the Assembly Judiciary Committee, especially chair William Horne and vice-chair James Ohrenschall, for giving a full and fair hearing of the bill.
• The Millennium Scholarship Program, facing elimination until the final days of the session, was funded through 2015, with approval of the Sandoval recommendation of an additional $10 million in the fund, to complement the $7.6 million per year from the Unclaimed Property fund and the money coming from the tobacco settlement. This is a rare bit of good news for Nevada students!
• The regent redistricting plan developed by the NSHE staff, led by Scott Wasserman, also passed and will be signed by the governor – the only redistricting plan to this point which will become law.
• Some of the more than two dozen separate budget accounts were consolidated in ways that should make managing the budget cuts somewhat easier. Also, the regents were granted more authority to move money among budget categories.
• However, SB 434 sat in Senate Finance until the last day and failed to gain approval in the Assembly. This bill would have allowed NSHE institutions to retain funds not spent at the end of the fiscal year instead of having to spend or revert them. Also, the bill would have gotten NSHE out from under the control of the Public Works Board, which would have saved money and time on NSHE building projects. Sad to lose this one, but it died.
• The arena bill to help fund for a large sports arena in Las Vegas came too late, and died. UNLV had a great deal of support for its privately-funded proposal to construct an arena on campus and reconstruct Thomas & Mack into a student services center, but failed to overcome the issue of three separate arena proposals fighting for the right to move forward with development.
• Perhaps one of the oddest bills was AB 449 that was supported by both parties in the legislature, by the business community,  and by the governor. The bill was designed to promote economic diversification in Nevada, and was modeled after such efforts in Utah. However, Utah funded this effort with more than $24 million per year. The Nevada Knowledge Fund created by this bill – designed to allow the two universities and DRI to compete for funds that would foster economic development – originally was slated for $8 million per year from the two universities and DRI but ended up with no funding at all! Thus, the Knowledge Fund will be, for the coming biennium, more symbolic than real in its effects.
• AB 128, sponsored by Assemblyman Paul Aizley, to limit smoking on campuses, did not reach the floor of the Assembly. However, campuses will of course be able to consider tobacco-free programs on their own initiative.

Pay and Benefits

The news is not too good on this front either, although, again we can take solace in knowing that it could have been worse. The governor originally proposed a straight 5-percent cut in salary for all employees of the State, but the legislature did not agree and worked out a compromise that is slightly better, for which we are grateful.

All employees, including tenured professors, will take a 2.5-percent pay cut, plus they will be required to take 48 hours (six working days) worth of furloughs, which means another 2.3-percent pay cut. The benefit of the furlough is that the pay should revert to only a 2.5-percent cut after this biennium, and retirement benefits will be paid on the 2.3-percent cut resulting from the furloughs. At the same time, the merit pool from which performance-based pay enhancements have been allocated in the past, was not funded again. Thus, NSHE professional employees will see a third and fourth consecutive year pass with no cost-of-living increases, performance-based pay increases, or step increase (at the colleges.) Higher education faculty and staff compensation in Nevada will thus fall even farther behind national averages (according to no less than the Las Vegas Chamber of Commerce), and we will need to fight hard to make sure the merit pool is reinstated in the near future to keep our state competitive for the best research and instructional talent.

The governor also proposed major changes in health benefits offered through PEBP that went far beyond what the PEBP Board had already been forced to do based on directives from the State Budget Office. AB 553 would have cut retirement subsidies for all future hires, frozen current employees with the current years of service for purposes of subsidies upon retirement, and also cut the subsidy level for many part-time employees significantly (60 percent of the subsidy for those working between one-half and three-quarters FTE). NFA and others worked hard to defeat this bill and succeeded with two of the three items. Future hires will see no subsidy for their health care upon retirement unless future legislatures change this provision.

As you all know by now, PEBP has been changed dramatically effective July 1, with Medicare eligible retirees being shifted off PEBP and into the private market, but with a modest subsidy, something NFA and others fought for very hard. Also, active employees on PEBP will have a new high deductible, no-co-pay plan that is called “consumer driven.” The only part that makes this at all palatable is the establishment of the Heath Savings Accounts (HSAs) for those employees (and somewhat similar accounts, HRAs, for non-Medicare retirees). PEBP will place money in the HSA each year and employees can add to those account through payroll deduction. This money will accumulate each year if not spent and thus represents an opportunity for individuals to save for future health expenses. Faculty members can add to their HSA through payroll deduction, and should consider doing so as a way to save for health related costs in the future.

In conclusion, we can only hope that in the coming biennium, the state economy will stabilize and, more importantly, a consensus will be forged on the need for revenue reform and on adequate funding for quality, affordable higher education. Only if that happens will the next legislative session provide an opportunity to start the rebuilding process for higher education in Nevada.