Commentaries
The Three-Day Wonder

The North Carolina Senate rams through a $19 billion budget that shores up UNC finances with taxpayer funds.

By Jay Schalin

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May 21, 2010

Nobody can criticize the North Carolina Senate for its lack of efficiency. After all, the senators managed to introduce and pass their version of the 2010-2011 budget in less than 72 hours. This included amendments, discussion, and votes in all the minor subcommittees, the appropriations committee, and the finance committee, and two full Senate votes, one on Wednesday and one on Thursday, May 19 and 20.

Such efficiency would be highly commendable—if the Senate were a private company. We all like it when our orders get filled or our repairs get done in short order.

But the Senate is a legislative body, and ramming a $19 billion budget through in less time than it takes to read the bill is not how legislation is supposed to be created. Such matters need a good public airing before the vote—lots of discussion and time for the media and other interested observers to rip the bill apart and uncover the all the details.

I don’t know why they were they in such a hurry to pass the budget on to the North Carolina House of Representatives but one thing the Senate obviously wanted to do was to take care of the higher education system. While the overall state budget for 2010-11 drops in the Senate bill (from the amount adopted by the legislature in 2009) by 2.9 percent to $18.99 billion, UNC’s proposed appropriations will increase by 0.4 percent, and the community colleges’ will rise by 5 percent.

Enrollment growth was a big reason why the community colleges will be in the black—the Senate is proposing an $85 million increase in funding to take care of the additional 34,000 full-time equivalent students who attended these schools.

But not all the budget proposals are as clear-cut as that one.  There is nothing in the proposed budget for higher education quite as outlandish as last year’s failed proposal to create a “Star Fleet Academy” at North Carolina A&T. But there is a proposition to fund a $2 million study to capture the energy from ocean waves, which hardly qualifies as a prudent use of revenues in the current economic climate. This research project is a highly speculative venture that is likely to produce no results for many years, if ever. It will likely not create any more than a few research positions for highly skilled scientists who are already employed in academia.

The bill’s higher education portion has one major theme that received a lot of attention from the legislature (and dollars as well)—financial aid.

The community college system is making a fundamental change to its financial aid system by mandating that all schools participate in the new federal loan program. While this law makes access to student loans easier for some state residents, the mandate is also an aggressive intrusion into the principle of local control. Many community colleges have shied away from the federal loan program for fear of losing other federal benefits. This is because a high default rate of 25 percent, for three successive years, by former students who took out these loans can jeopardize all other federal aid benefits. Yet according to the North Carolina Center for Public Policy Research, the federal government rarely carries through with such penalties.

Furthermore, participation in the loan program generally forces schools to add personnel to process and administer the loans. To help the community colleges handle the onslaught of financial aid applications and other demands for student services made likely by the ruling, the Senate’s proposed budget also shifts $50 million dollars from “instruction” to student services.

But making credit easier for community college students could very well have a negative impact on their general welfare. A large majority of such students do not graduate and receive the full income benefits of their education, and increasing their debt load could result in very high default rates.  Additionally, this $50 million shift away from academic matters such as instruction is in addition to a proposed cut directly to the flexibility account of $13.5 million and another $14 million cut for 2010-11 already made during the 2009 legislative session Thus, the result is a total of $77.5 million removed from academics. The question arises whether academic quality will be sacrificed for the sake of access.

In the university system, the Senate bill shuffled some funding around that will permit a UNC tuition hike to be used primarily for need-based scholarships. In the 2009 legislative session, the legislature imposed an average 8 percent tuition that raised $34.8 million to be used for general purposes, and reduced the state appropriations by an equal amount. This Senate bill eliminates the 8 percent hike for this year, and restores the $34.8 appropriation to the universities from the general fund. It also shifts the burden from tuition-paying students onto the taxpayers.

Additionally, the UNC system has already declared its intention to impose an average 5.2 percent tuition increase on students, 51 percent of which will be used for need scholarships.  This puts some of the weight back onto tuition-paying students—but that 51 percent won’t go for the students’ own instruction; it will pay for the education of others.

The university system has been rapidly expanding its need scholarship programs in recent years. Counting the anticipated $11.1 million from the system’s 5.2 percent tuition hike, UNC will have $17.7 more to spend for need-based scholarships in the upcoming year—an increase of over 10 percent over 2009-10’s total of $139 million.

Another form of financial aid is tuition waivers at community colleges for select groups, such as police and fireman, and senior citizens. One major change in the proposed Senate budget is a reduction from $32.9 million to $20 million for free education for prisoners. However, $17.6 million of the remaining appropriation are now recurring rather than non-recurring, as they were previously. This means that the money is automatically appropriated each year, without any vote required. Given the potential for problems with this program, it might make sense to continue the annual scrutiny.

Another questionable allocation is giving $307,000 to the Institute for Emerging Issues for academics—faculty and students—to study economic development. This, too, is extremely speculative and quite likely redundant, given the focus on economic development throughout the government and university system. At best, this program is likely to produce nothing of value. At worst, it might produce some justification to initiate a new money sink in the name of job creation, such as UNC’s $22 million annual burden at the Kannapolis Research Center, or the Global TransPark.

And there are, perhaps, some concerns about the supposed impartiality of the Institute, particularly in light of a revelation from the proposed budget. One provision gives $15 million to the K-12 system to provide teachers with hand-held electronic devices to be used as “diagnostic” tools. It has been discovered that former Governor Jim Hunt, who is still heavily involved in the state’s public education at all levels, is the chairman of the advisory board of the device’s manufacturer. He is also the founder and board chairman of the Institute for Emerging Issues. In light of the many corruption charges against important Democratic politicians in the state, both of these appropriations require further examination.

Another bill proposed by the Senate that has some potential for controversy permits the community colleges to use any state-appropriated funds for any purpose within its Institutional Effectiveness Plan.  While it adds to the flexibility community colleges need to meet the ever-changing demands, and adds somewhat to local control, it also permits the schools to effectively bypass the will of the legislature to implement the will of the education bureaucracy. The schools could possibly shift money from programs acceptable to the citizens—through their elected representatives in the legislature—for purposes that they would not ordinarily choose to give additional funds.

With so many controversial elements, one would think that legislators might tread carefully before passing it onto the House to craft the final version, especially in another down revenue year. Before the Senate convened for the Wednesday vote, minority leader Phil Berger (R-Guilford) said that the bill was not only rushed through after it was introduced, but that it appeared so suddenly right before its introduction as if “beamed up by the Starship Enterprise.” He added that the haste employed from introduction to vote made it essentially impossible to effect meaningful and necessary changes.

 


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