Tuesday, June 16, 2009

The World Won't End in 2012

We're pretty sure it'll be fiscal year 2011.

This article struck a chord, since I've been hearing the exact same thing on campus.

State and local tax receipts have been plummeting for some time, and still are. (The rate of decline has slowed a bit, but in absolute terms, the trend is still downward.) For this fiscal year and next, we have stimulus money to cushion the decline. We're being cautious with how we use it, since we know it's non-recurring, but at least it's there to give us some time to think through what we're doing.

For FY 2011 – meaning, July 1 of 2010 – we're told the stimulus will be gone, at least from higher ed. And the odds of tax receipts having bounced back to 2007 levels by then are vanishingly low. I've been hearing phrases like “that's when the wheels fall off” and “that's when we hit the wall.”

I've seen three different reactions to the foretellings of doom, each rational in its own way.

One is simple denial. The future is unreadable, a year ago we thought we had money, who knows what might happen in another year? Besides, you people were all gloom-and-doom-y this year, and a pile of money just landed on us. All will be well, this too shall pass, so stop crying wolf. Use the stimulus money to compensate for this year's cut, and leave the future to the future.

Psychologically, it's understandable, but it's also incredibly dangerous. GM used this strategy for many years, and actually caught a few breaks along the way. But sooner or later the money fairy doesn't drop by anymore, and the truth hits. I'd like to avoid going the way of Pontiac.

The second I'd describe as “smoke 'em if ya got 'em!” I've heard some intelligent people argue that we should treat the coming year as a sort of Fat Tuesday, a last blowout before a long dry spell. (The article's mention of large numbers of administrators planning their own retirements to coincide with the end of the stimulus package strikes me as consistent with this. Stick around for the party, then go home.) If we're looking at several lean years to come, and possibly a lower baseline for many years beyond that, then let's fund sabbaticals and pet projects and Special Events while we still can. Get while the getting's good, because who knows when it'll be good again?

Again, there's some truth to this, but it strikes me as basically fatalistic. A year goes surprisingly fast – any parent of young children can attest to that – and then what? Squeezing off one more hit is not a plan.

The third, which I consider the best of a bad lot, takes the stimulus money as an opportunity to pay for things that lower the college's long-term operating costs. Money spent on, say, energy efficiency lowers our baseline expenses in future years, making it slightly easier to weather future cuts.

Psychologically, this is the eat-your-vegetables solution. It's unsatisfyingly pedestrian. Emotionally, it just doesn't match the scale of what we're facing. But it makes sense. Unlike the other two, it cuts future expenses. Better, it cuts them in ways that don't compromise our mission, and that can be sustained over time. If the predictions of gloom and doom turn out to be overstated, then the future windfall can go into cool stuff. If the predictions are spot-on, then the lower operating costs will at least cushion the blow. Unlike the other two, it doesn't rely on either luck or omniscience to bail us out.

Even if the third option works, though, the payoff in future savings won't be anywhere near the magnitude of the cuts we're hearing bandied about. This makes the sell harder, since even success would result in, at best, a mild palliative. Saving a couple hundred thousand is great, but if the state cuts several million, we're still in for a world of hurt.

I'm still hoping that the economy turns around faster than anyone expects, that tax revenues skyrocket, that we get the hell out of Iraq and realize the savings from single-payer health care. But the odds of all of that coming to pass before next July are not encouraging.

I'm too young to retire, so that's out. Maybe I can fall back on the relative safety of show biz...