Common Cents:
Balancing budget
cuts with education excellence
by Erin J. Buege
 |
| The Capitol view from David Miller’s UW
System office is a constant reminder of the challenges of his job. Photo by Danielle Chase |
A breathtaking view of Madison’s isthmus unfolds from the windows of UW System Relations Assistant Vice President David Miller’s 17th-story office. Lakes Mendota and Monona, the sprawling UW-Madison campus and the state Capitol appear in the panorama. The clear view of Wisconsin’s legislative center acts as a reminder to Miller of the challenges of his job. When told a state representative called the UW System’s economic impact study “propaganda to improve the position of an interest group,” Miller smiles sharply and nods, pointing to the Capitol from his window. He addresses its occupants as “they” out of frustration. Miller says it is hard to comment on those kinds of remarks because “it’s the back-and-forth thing you don’t want to engage in.”
According to a report released Sept. 12, the economic impact of the UW System on the state is $9.5 billion annually. That translates into 5.5 percent of Wisconsin’s 2000 gross state product. To put the sum in more manageable terms, for every dollar the state endows the UW System, $9.50 returns to Wisconsin’s economy as revenue, according to the study.
On announcing the $9.5 billion contribution, UW System President Katharine Lyall said, “The state’s investment in the university is worth every penny.”
Wisconsin’s ultra-tight budget has the UW System worried about impending cuts. According to Miller, the UW System is not given enough credit for its efficiency. However, Wisconsin lawmakers, while recognizing the merits of the system, expect all state agencies to make cuts, including the UW System. The economic impact study provides an interesting window into a state agency’s fight for funding during a fiscal crisis.
“I speculate that [the UW System is] trying to get out in front of state [budget] discussions,” says state Rep. Stephen L. Nass, R-Whitewater, in response to the study. “I think the UW System is positive for the state of Wisconsin, but like other organizations, it needs to look at the budget.”
Conversely, UW System officials see a lack of organization at the Capitol as an obstacle to both balancing the budget and the mission of the state’s universities. An economic slowdown is not the time to pull funding from education, Miller believes. He says he continues to be frustrated by the lack of a bipartisan consensus on a statewide vision for the university system.
“In terms of efficiency, [the UW System has] hit the wall,” Miller says. “There’s no efficiency gains to be made without quality loss.”
Many happy returns—but
not for long
With
13 four-year universities, 13 two-year colleges, UW-Extension and UW Hospitals
and Clinics, the UW System is a strong presence throughout the state. The
system itself is one of the most well-developed institutions of higher education
in the nation. Its flagship campus, UW-Madison, ranked as the nation’s
seventh best public university in U.S. News and World Report’s 2003
“America’s Best Colleges” guidebook. Among all of the nation’s
universities, public and private, UW-Madison ranked No. 31.
The UW System receives about $1 billion of the state budget, and the economic impact study found the system returns about one-third of that sum—$408 million—in state income and sales tax revenue annually. The study, based on data from the 2001-2002 academic year, updates findings from a 1997 report conducted by the UW-Madison School of Business that revealed the UW System’s impact was $8.2 billion annually. While the system’s economic impact on the state increased from $8.2 billion in 1997 to $9.5 billion in 2002, the return ratio, coupled with increases in state revenues, stayed the same—about 10 to 1. UW System officials anticipated the reappearance of the 10-fold return statistic in the study and were pleased to find the system’s impact did not decrease. “We were very satisfied that [the ratio] stayed the same,” Miller says, “but if state support goes flat or diminishes, that ratio will fall.”
In resolving the 2002-2003 deficit, the UW System received $44 million in cuts. This year, the 2003-2004 budget presents a $1.3 billion deficit. According to Nass, the UW System must share the burden of the “looming budget crisis” with other state agencies. One cost-cutting solution raised by the system has been consolidation, Nass says. Miller agrees the system may be too large, but closing campuses is “too political” to happen. Still, Nass stresses that the UW System “needs to address crunches without putting it on the backs of students.”
Getting down
to business
The
UW System serves approximately 160,000 students. And those students play a
significant role in the system’s impact on the stateæboth before
and after they graduate. NorthStar Economics, the firm responsible for the
impact study, found students contributed about $3.3 billion to the UW System’s
$9.5 billion effect. David J. Ward, founder and president of NorthStar, reports
people visiting students spend about $220 million annually. The state gathers
a 9 percent return from higher taxes paid by UW System graduates, and, if
the graduate stays in Wisconsin, the state is paid back in less than 10 years
for educating a system baccalaureate student. As for the students, a UW degree
pays off. The study found system baccalaureate degree holders are paid back
for their college time in less than three years, and they will earn nearly
$1 million more than high school graduates during their careers.
Yet, Nass expresses skepticism of the UW System on behalf of its students. In some ways, the system acts as a double-edged sword for students. While degree holders earn significantly more than high school graduates, Nass points out Wisconsin’s high taxes—prompted in part by the UW System—keep businesses with high-paying positions out of the state. As a consequence, many UW System graduates leave Wisconsin in search of better-paying jobs, a trend commonly referred to as “brain drain.” The trend has been a hot topic among UW System officials, Wisconsin business leaders and state legislators since the mid-1990s.
However, Miller says the “brain drain” in Wisconsin is misunderstood. He cites a lack of high-wage jobs as the reason college graduates stay away from Wisconsin, not high taxes. Miller calls the phenomenon a lack of a “brain gain.” Eighty-two percent of resident UW System graduates stay in the state, but Wisconsin ranks 50th in attracting college degree holders.
“A start-up company isn’t going to grow if it can’t attract people to the state,” Miller says.
Furthermore, UW System officials argue increasing funding to higher education may lower taxes. If Wisconsin catches up to the national personal income average, Miller says, the sum would yield an additional $388 million in tax revenueæwithout raising taxes.
As the UW System fights for a greater share of the state budget while legislators attempt to repair a deficit in the billions, the system emphasizes its role as one of Wisconsin’s top businesses. According to the study, UW System activities employ 5.5 percent of the state’s workforce.
“Just on the face of it, if one-twentieth [of the state’s gross product] comes from one business, it’s a major contributor,” Ward says. “No private business contributes more.”
Credit where
credit is due
Ward
calls the systemwide impact study “groundbreaking,” adding that
he does not know of a report of similar magnitude at a comparable university
system. Miller also says he is unaware of a commensurate study. According
to Ward, the timing of the report’s release may have been political
maneuvering, but holds that all studies have political meaning. The wide-reaching
effects of the UW System, he says, from the teachers it develops to the doctors
it trains and the manufacturing it supports, override the potential damage
to integrity presented by the study’s strategic release.
“It’s hard for me to imagine anyone in the state who’s not affected by the UW System,” Ward says. “It’s kind of like saying, ‘I’m not affected by the K-12 system because I have no kids in K-12.’ Those kids are going to be making decisions for you some day.”
Nass says he thinks most state legislators view the report’s release as a political move and consider the UW System a special interest group. He says he would not be surprised by similar reports emerging from other state agencies before the budget is finalized in February. The whole state is in a budget crisis, Nass stresses, and every group will have to make sacrifices, including the UW System, no matter how much they contribute to the economy. “It’s a positive report for the universities ... but there shouldn’t be an expectation that the UW System should go uncut,” he says.
Miller says the study’s release was part of a statewide campaign to educate the public on the UW System’s contribution to the state and to raise awareness of the budget situation. He flips through a PowerPoint presentation titled “The University of Wisconsin System: Worth Every Penny.” Miller pauses at a slide near the end that shows a bar graph comparing the UW System to peer university systems. According to the chart, the UW System spends $115 million less than the national average on administrative costs. He points at his windows, saying, “What you can put off, you will.” Like so many UW System facilities, his office needs repairs. Miller says his windows leak horribly when it rains.
“We get zero percent credit for this,” he says. “At what point do we get credit for efficiency?”
