Tuesday, January 21, 2014

Neutron Budgets

“[Gov.] Beshear proposes budget cuts and building projects for Kentucky universities” -- Headline in Lexington Herald-Leader (hat-tip to Lee Skallerup Bessette for highlighting it)

Readers of a certain age will remember the neutron bomb.  It was billed as a breakthrough in warfare back in the 70’s.  Its selling point was that it would kill people by the thousands, but leave buildings standing.  That way, the eventual winner of the war would be able to take possession of the assets of the vanquished, instead of the smoldering (or glowing) piles of rubble left by more traditional weapons.  I don’t know whatever became of it, but I remember it making quite an impression.  

People in higher education have become familiar with neutron budgets, of which Kentucky’s is the latest.  It’s a budget in which colleges get money for buildings while, at the same time, taking cuts in the money to pay people to work in those buildings.  From the perspective of folks on the ground, neutron budgets are both devastating and demoralizing.  But from the perspective of a state legislature, neutron budgets can actually make a kind of sense.

(Shameless plug alert: I addressed this in chapter two of my book.)

The politics and accounting around buildings are very different from the politics and accounting around people.

The accounting is the easier one.  Buildings are considered “assets.”  People are considered “labor costs.”  Put differently, buildings are credits and people are debits.  

That’s not as silly as it sounds.  Buildings can be rented out or sold.  On my own campus, and we’re not unusual in this, one small revenue stream comes from renting out space for meetings and conferences.  In that instance, counting rentable space as an asset makes sense.  

Buildings also provide fundraising opportunities, particularly in naming.  The major cost of a building is upfront; once it’s built, the maintenance cost is far lower than the construction cost, especially in the first decade or so.  Buildings provide their own collateral, making it easier to borrow money to pay for them.  (That isn’t necessarily true in Massachusetts, for complicated reasons, but it holds in most places.)  And in the case of new construction, contracts for construction are major political plums.  A cynical sort might suggest that that’s why it’s easier to get money for new construction than for deferred maintenance.  

People, on the other hand, are recurring costs that just get more expensive over time.  And the revenue sources that pay for people are fewer, and more contested, than the revenue sources that pay for buildings.  If you float bonds to pay for a building, you’re investing.  If you float bonds to make payroll, you’re sending a signal that you’re insolvent or are about to be.  People are not collateral.

Research universities and very high-end liberal arts colleges often have endowed chairs, in which philanthropy is used to pay salaries.  Most community colleges and less selective four-year public colleges don’t.  Here, salaries have to come from operating funds (and sometimes from grants, or what we call “soft money”).  Grant-funded positions have expiration dates, which means that it’s impractical to use grant funding to pay for tenure-line faculty.  Those positions have to come from college operating budgets, along with everything else.  And those are the budgets that tend to get hit by annual cuts.

On the ground, none of that matters.  It can be maddening to have a gleaming new facility and nobody to teach there.  The in-your-face juxtaposition of an increasingly adjunct faculty with a shiny new building is hard to ignore.  But neutron budgets have a logic of their own.  Making the choice to overcome that logic and do what needs to be done on the ground requires conscious acts of political leadership.  Defaulting to the logic of existing systems results in proposals like the one in Kentucky.  

The neutron bomb may have gone the way of the leisure suit, but the neutron budget is alive and well.  It isn’t inevitable, but it’s the path of least resistance.  My condolences to Kentucky.