Monday, January 24, 2011
Let's Play...What Would You Cut?
Let's say that you're a chief financial officer at a community college. You've been told that next year's state allocation will be half of this year's, and the political tea leaves suggest that the direction after that will continue downward. Since the state allocation is already, say, half of your budget, this amounts to about a 25 percent cut.
What would you cut?
To get a sense of just how bad this is, you could reduce every salary at the college by 25 percent, and still not make up the gap. (That's because labor isn't the only cost.) Alternately, you could lay off 25 percent of the employees and still not make up the gap.
The 'squishy' things would be the first to go. That means travel, professional development, and food for college functions. This adds up to well under 1 percent.
Obviously, any new full-time hiring for non-unique positions is out of the question. Normal attrition, unreplaced on the staff side and adjuncted-out on the faculty side, might get you another percentage or two.
You'd take an axe to the library acquisition budget, the software budget, and the technology upgrade budget. Depending on how ambitious you got on the software/tech side, you might gain something here.
You'd raise tuition and fees, to the extent that you could. I'd be surprised to see this gain you much more than maybe five percentage points, assuming the most extreme case.
You'd call a halt to all non-emergency building maintenance. Construction projects that use college operating money would stop. (Projects based on separate bond issues might continue, oddly enough.)
You'd stop all pay raises, and maybe impose furloughs. This could net you a few points overall. Now, maybe you're at about ten to twelve points total. Where do you get the rest?
Larger class sizes, both minimum and maximum.
Admittedly, I'm making several assumptions. I'm assuming that many of the low-hanging fruit for raising money – renting out unused classroom space for conferences, running profitable noncredit offerings – have already been done; they're part of the baseline. I'm skipping over severance packages for the laid off. I'm also assuming flat energy costs, flat health insurance costs (ha!), flat legal costs (ha!), and no other significant exogenous shocks. (In my neck of the woods, this year's snow removal budget is taking a severe hit. I'm guessing that's not an issue in Arizona.)
So even with several rosy assumptions, a significant tuition hike, and some unsustainable parsimony in physical plant, you're stuck with layoffs.
You could draw from reserves (or “rainy day funds”), assuming your college has any. But most cc's have only a month or two of their operating budgets in reserve. Worse, once they're gone, they're gone. In practice, you'd probably have to use reserves to pay for severance packages. A reserve draw could make sense in the context of “teaching out” the last semester of a dying program, but barring a political sea change, using a reserve draw more globally would simply prolong the inevitable.
I play out this thought exercise to illustrate a basic point: the choices administrators make are not always the choices they (we) would like to make. This is the fallacy in the oft-heard line that “budgets reflect priorities.” They also reflect constraints. When external funding shocks are severe and unremitting -- this year’s cut reflects the fourth year in a row -- and certain costs are either fixed or simply uncontrollable, your room to maneuver is much smaller than many people seem to imagine.
That’s not to say that the choices are entirely dictated or automatic, of course. But I’m constantly amazed at just how little my personal preferences -- or those of my colleagues -- actually matter. When resources are relatively flush, it’s possible to have significant agency. But when cuts pile on top of other cuts, there are only so many choices you can make. Blaming those who have to make the choices doesn’t help.