Pruning in the Garden State

June 19, 2006

This is looking like a very good year for higher education in the states -- but try telling that to the folks in New Jersey.

In a year in which virtually all states are expected to increase spending on public colleges, some of them significantly, New Jersey's colleges are facing proposed cuts of more than $300 million, which would reduce state support for some campuses by a third and have led at least one college to warn of furloughs and layoffs.

Since new Gov. Jon Corzine announced the planned reductions in March, college leaders, faculty unions and student groups have lobbied intensely to urge legislators to set aside some of the cuts by the June 30 deadline for completing a state budget. Although some college officials are hopeful that at least some of the funds will be restored, legislative leaders and Corzine do not seem close to an agreement, and the situation is seen as volatile.

Even if a partial restoration should occur, New Jersey remains what Travis Reindl, director of state policy analysis and assistant to the president of the American Association of States Colleges and Universities, calls a "island of misery in a sea of plenty." That is especially true because the underlying statewide fiscal problems that necessitate the cuts in higher education were long in the making and won't be resolved quickly.

"There is a structural deficit in the state budget that this governor has inherited from his predecessors, so this isn't a new story," says Darryl G. Greer, executive director of the New Jersey Association of State Colleges and Universities. What changed this year, however, was Corzine's refusal in his first budget as governor let deficit spending continue, says John B. Wilson, president and CEO of the Association of Independent Colleges and Universities of New Jersey. "The approach is to match revenues and expenditures," Wilson says, "and higher education is caught right in the middle of that."

Corzine, a Democrat who is widely seen as a friend of higher education, stunned many New Jersey college leaders when his 2007 budget plan called for significant cuts in discretionary spending to try to resolve the continuing shortfall in state revenues, which many analysts attribute to a flawed tax structure. Because Corzine sought to shield the state's neediest residents from the budget knife, higher education was asked to absorb a disproportionate share of the cuts he proposed. "The governor is not going to sign a budget that has more gimmicks in it," said Jane Oates, the former top aide to U.S. Sen. Edward M. Kennedy (D-Mass.) who in March became Corzine's top higher education aide and executive director of the state higher education commission.

The governor proposed cutting operating support for the state's public four-year and two-year colleges by about 10 percent each, which would amount to a loss of $89.6 million for the "senior" colleges and $16.3 million for the community colleges. Support for the state's private colleges -- which receive direct appropriations from the state in part because residents of the Garden State make up about three-quarters of their students, an unusually large proportion -- would be cut in half, a loss of $11.9 million.

Corzine also proposed eliminating about $60 million in funds for other college programs.

But the budget plans that were hardest for college leaders to swallow were proposals to ask the colleges to pick up the tab for increases in salary and fringe benefit payments that the state had negotiated with employees, to the tune of nearly $122 million in the 2007 fiscal year. College officials were particularly troubled by the policy shift that would make the state's four-year colleges responsible for the first time for any increases in employees' pension, health and other benefits, which would add $80 million in expenses to their budgets in 2007.

"Transferring from the state, the additional cost for fringe benefits would only act to compound pressures on institutions' financial stability and on tuition as a resource," the state college association said in a policy paper opposing the idea. "The shifting of the responsibility for these costs would dramatically change the relationship between the state and its public colleges and universities, calling into question the purposes and expectations of state investment in its public universities." Greer, the association's top official, says "colleges would never recover" from that such a "huge" policy shift.

Taken together, the proposed cuts would amount to a 32 percent decrease in state support for the College of New Jersey, says R. Barbara Gitenstein, the institution's president, who said she has "never seen anything this big" in terms of budget cuts in her years in public or private higher education.

Last month, Gitenstein's administration alerted employees that the college might consider a weeklong "temporary layoff" next January. She says the college had made the announcement to comply with union rules that require notification at least six months in advance of any such step, even though she is hopeful that legislators will restore enough money to make such a dramatic action unnecessary.

In recent weeks, Corzine has urged legislative budget setters to make restoring the higher education funds their top priority if they find additional money, and legislators appear poised to drop the idea of having the colleges pick up the costs of the salary and fringe benefit increases for employees, at least.

But even if they avert some of this year's budget cuts, college leaders know they're not out of the woods, given the state's continuing structural budget deficits and the impact on perceptions of higher education of the continuing mess at the University of Medicine and Dentistry of New Jersey, which is under federal monitoring in the wake of findings of significant financial and other wrongdoing by the institution's former leaders.

"I also think that we are suffering from a series of scandals that are focused on one institution," Gitenstein says of UMDNJ. "Those are some extraordinary stories, but it's really unfortunate when the assumption is that all institutions are run that way."

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