Monday, September 22, 2008

 

Forecasting Fallout

The recent game of “let's see, where did I put that hundred billion?” is likely to lead to some ugly fallout for public higher education. Putting on my prognosticator's cap – and like Easterbrook says, all predictions guaranteed or your money back – a few likely scenarios:

1.Midyear budget cuts. These happen when tax revenues fall below projections, and the states (or localities) can't (or won't) borrow or dip into reserves to make up the difference. Midyear budget cuts are uniquely brutal, since there's typically very little wiggle room in a budget after the annual contracts have already gone out. If someone is on a July-to-June contract, an October or December layoff may require a payout equivalent to what she would have made through June, thereby negating any savings. (Once you factor in the inevitable discrimination/wrongful termination/procedural irregularity lawsuits, it's a net money loser.) Between permanent fixed costs – facilities, tenured faculty – and costs that are fixed at the start of the fiscal year – most other staff – there just isn't much left over, especially if it has to do twelve months of fiscal duty in only eight or nine months. You can cut travel, and some ceremonial/fluffy stuff, but you're dealing in tenths of a percent of an overall budget. It's necessary, but not even close to sufficient. You can reduce your Spring adjuncts, but it's incredibly hard to save money by squeezing the lowest-paid employees, especially when they have a direct connection to your major revenue source. Philanthropy almost certainly won't save you, either, since that money is almost always barred from being used in 'operating' budgets. (Of course, with the financial services crowd running scared, there may not be as much philanthropy sloshing around anyway.)

2.Increased spending on financial aid for students, since economic downturns tend to mean fewer people capable of paying full fare. Combining increased financial aid spending with midyear budget cuts is all kinds of fun. (Cc's may be spared some of this, to the extent that the poorest of the poor elect residential colleges instead, the better to have room and board subsidized.)

3.Tuition increases. This one follows pretty directly from 1 and 2. Admittedly, combining 2 and 3 leads to a chasing-your-own-tail exercise, at some level.

4.Local strategic planning consigned to (increased?) irrelevance. Strategic planning isn't my favorite exercise in the world anyway, but ideally, it's supposed to represent the best hopes of an institution, combined with its best guesses as to future circumstances. If those circumstances change for the worse, abruptly, then those plans quickly become untenable. Yes, we'd love to beef up the Underwater Poetry program, but right now we aren't sure we can cover the cost of heating the buildings. First things first.

5.More of the 'replace retired full-timers with adjuncts and hope for the best' approach to hiring. In the very short term, the cost savings from adjuncting-out the classes that had been taught by a high-seniority full-timer are significant. The damage to the institution is (usually) somewhat abstract at first, and hard to quantify, but the savings are concrete and easy to quantify. When the bulkhead is broken and water is rushing in, the quick fix holds real appeal. If last week's IHE article was right, and the pace of full-timers retiring will slow as the returns on their pensions slip into negative territory, then the pressure to adjunct-out the few who actually do retire will be all the greater. Expect an already unforgiving job market in the evergreen disciplines to get that much worse, at least until the dust settles.

6.More 'votes of no confidence' on individual campuses. Since the faculty can't fire the governor, the voters, or Ben Bernanke, they direct their fire where they can. If I were a betting man, I'd expect to see a spike in these over the next year or two.

7.Little to no help from either Presidential candidate or political party. I'm open to being proved wrong on this one in a few months.

Astute readers will note that most of these represent continuations of existing trends. Attribute that to a lack of imagination, if you want, but I think it's accurate. When 'politically chosen' austerity becomes 'forced' austerity, it's still austerity.

I don't often want to be wrong, but as far as this post goes, I want to be largely wrong. Wise and worldly readers – make me feel better by pointing out how I'm wrong. Seriously.

Comments:
Alas, you're not wrong. The federal bailout of Freddie and Fannie was but one increasingly desparate move to head off a Depression. This, by an administration avowedly "free market."

Since it seems the soon to be defunct Bush administration has socialized the risk while privatizing the profits of investment banking to the tune of at least $1 Trillion (read Krugman and Roubini), neither presidential candidate will have squat with which to work. I expect public institutions to be crammed with students trying to escape a lousy economy. Meanwhile, public instituions will not have the $$$ to really do things at a mediocre level, much less well. Deep-pocketed private U's will have to make some cuts, but should be fine, but SLAC/U's with middling finances might be pushed under.

As a nation, we've never seen this level of fiscal malfeasence by Wall Street, coupled with fiscal malfeasence by DC, coupled with two endless wars.

If you loved the economic fun of the late 1970s and early 1980s (and how this shaped higher education), you're in for some fast times now.
 
More ideological/political calumny disguised as discourse . . .

If you *really* want to know 1) what happened; and 2) what is likely to happen; then you need to stop reading the "Daily Cause" [sic] and pick up the Wall Street Journal.

This knee-jerk Bush Derangement Syndrome is quite frankly childish. Sophomoric at best.
 
Calugg--save it for your drinking buddies. Some of us read this blog for the higher education issues it raises, not for partisan polemics.
 
We have a coordinated (?) statewide board of CCs, and they have projected the mid-year cut that we should anticipate. Its not huge, but enough to prompt deferments of hiring and a halting of out-of-state travel (yes, as noted a few days ago, even if you can find the money from other sources). We won't go so far as replacing retiring FT faculty with PT faculty, but we may not hire any new FT faculty despite enrollment growth. Instead we will (and I REALLY hate the term that some admins use on my campus) "backfill" what could have been FT positions with PT faculty.

As for low-income students opting for residential campuses, that is not a trend that I have observed in our state.

- Pac NW CC Dean
 
Ah, yes, the Wall Street Journal, that bastion of objective, non-biased information about the economy. Why, all week they've been telling us that the real solution to our current problems is more deregulation and privatization. Why didn't I think of that? Brilliant...

Anyone who isn't pissed off at the Bush administration over this mess is truly living in a fantasy world. Whatever; it seems nicer than the real world these days.
 
Okay, Shane. If you wouldn't mind, could you share with us just 4 or 5 headlines/stories from the WSJ that even come CLOSE to the story-line you attribute to them?

And while you are at it, explain why we should be upset with the Bush Admin? I mean, conservatives/libertarians should, but liberal/socialists are actually gleeful that the government is stepping in an nationalizing large banking institutions.
 
No one would ever confuse the CNBC staff (generally McCain cheerleaders for deregulation) and regular commentators (e.g. Mohamed El-Erian of PIMCO) with liberal flunkies.

Check out this from today:
http://www.cnbc.com/id/26441422
"Bailout Plan Will Be Drag On Fragile US Economy"

That will affect tax income in states and counties, and it will affect both the funding and demand for higher education.

Either way, one reading of most commentary on this subject is that there is only one thing worse than the cure.
 
One possible silver lining. As energy costs grow, savvy communities may be willing to float bonds to pay for building upgrades that decrease facilities costs. In a tight credit market, these bonds will have lower than average interest rates because so few alternative investments exist and investors see state bonds as a better bet than other interest bearing investments. The increase in the number of retirees also increases the demand for this type of investment as retirees transition to more fixed income assets.

The retrofits will cost less than projected because of advancing technology (brought about by R&D tax breaks on green energy that lead to more research in these areas). The money that is released by this change will go back into the college budget for personnel and the number of full time faculty hires will increase.

Well - maybe not - but a girl can dream....
 
Ivory:

Wow.

Where to begin?

Please take a basic Macro course from a local CC please.

Or was the post TIC/satire?

I have to ask because that sounds a lot like the Mayor Dinkins "we like crime because it means more jobs for window and glass fitters" type of logic . . .


But then again, there are still plenty of "Bring Back Roosevelt and the WPA" billboards in Appalachia!

(p.s. for bonus points: 1) what president signed the law burning down the firewall between "mortgage banking" and "investment banking?" 2) what political party put increasing heat on mortgage lenders to make loans to increasing numbers of unqualified borrowers? 3) What political party owns the architects of the current failer- Frank, Dodd, and Schumer? 4) What current political party has been in power in the Congress [p.s. what role does the Administration have in these same issues?] during the time these failed policies have been implemented and the laws changed?)

Shame. If you are a Demmican/Republicrat you have NOBODY to point a finger at except for YOURSELF!
 
YACP: Going out on a limb here, but let me guess...

Clinton... and Democrats?

That's what I thought..
 
Yeah, well, and I didn't even get into McBama's/Obains' economic advisers and how tightly they are all wrapped up in it . . .

What *really* cheeses me off is that I have struggled to raise a family and live within my means with a mortgage I can afford to PAY OFF while my mouth-breathing no-account neighbors have lived high on the hog for ten years in homes that 1) aren't worth what they have borrowed against; and 2) have pissed away second and third mortgages on gong to Vegas, taking cruises, etc. etc.

AND I END UP PAYING FOR IT AFTER ALL!!!!!
 
Confused,

Are you bitter or confused, or both? They're different, you know. Maybe you should have bellied up to the hog trough. Lord knows, my wife and kids and I have been good enough liberals--even though we take the WSJ and even sometimes read it--that we realized early on there was money for the takin', son, and we took it. Borrowed big against our house--home equity line, low low interest, don't worry about payments--took it on down to the Indian Casino and let it ride. Doubled down and . . . Oh , shit. No one to blame but our mouth-breathin' selves.

Work? That's for conservatives. And people who are confused. We just knew Schumer, Frank, and Dodd would cut us the check eventually. After all, liberals like to stick together: that's why we've been so successful in the presidential elections.

By the way, if your neighbors are "no account" "mouth-breathers," that must be because they are from Appalachia, a region which apparently longs for the New Deal: you know, electricity, running water, health services, that sort of thing. I guess they could rely on the coal and timber companies....

One could take your ideas a little more seriously if they weren't so clearly . . . imbalanced.
 
Grumpy

Might I suggest that we, as academics, be more willing to actually see past what we perceive to be an "imbalance" and rather focus on the ideas themselves.

If we do that, we (You) might find that YACP's comments and ideas actually have merit.

One of our challenges as academics is to see through the smoke, and past the bluster, of our students, and try to determine if they really do grasp the material. It is a tough skill, but one I find worthy of work.
 
I liked it better when people who commented on this blog didn't go out of their way to snark at and condescend to those with whom they disagree.
 
Wholeheartedly agree.

There are enough hate-filled political disinformation sites on the interweb already.

I mean, really.
 
YACP,

Actually, I was directing that comment towards you. You were rather rude to me in this comment thread and I didn't appreciate it. Please stop.
 
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