Energy Boost

June 26, 2008

Colleges and universities across the country are struggling with major budget cuts, but a few states that are big on energy production are flush with funds.

Take North Dakota, where higher education leaders are so optimistic about the state’s economy that they’ve pushed for a 23 percent increase in recurring funds for colleges and universities over the next two-year funding cycle. That’s on top of the $82 million request for campus security upgrades, deferred maintenance and other one-time projects.

In contrast, states like Arizona, Florida and Nevada are dramatically cutting budgets. And while those states are among the hardest hit by the economic declines brought on by the housing market, most other state leaders are also expressing concern about the 2009 budget picture, according to the National Conference of State Legislators.

Charles Kupchella, president of the University of North Dakota, says he realizes his state is uniquely positioned for growth in an otherwise gloomy economy. That said, he’s not boasting about North Dakota’s good fortune.

“I guess I’m politically astute enough not to crow about it,” said Kupchella, who is stepping down as president Monday after nine years at the helm.

Furthermore, Kupchella is all too aware of how quickly economic outlooks can shift.

“Easy come, easy go,” he said. “Some days it’s boom; some days it’s bust. And you have to manage somewhere short of spending all that you have.”

As with North Dakota, higher education leaders in Wyoming and Alaska are expecting an infusion of funds in the coming year. In a recent survey of legislative offices across the nation, those three states were the only ones to express optimism about 2009. The common link? Energy production. With oil prices now soaring to near $140 per barrel, North Dakota and Alaska are seeing strong returns. Likewise, Wyoming’s natural gas production has contributed to an economic boom in the Cowboy State.

North Dakota will finish its 2007-2009 funding cycle with an estimated $700 million left in state coffers. But even with such a rosy economic outlook, some lawmakers have criticized university leaders for proposing a big-ticket budget.

Responding to critics, North Dakota’s Board of Higher Education recently curtailed its one-time funding request by $50 million, eliminating a proposed endowment pool. Even so, the budget proposal would raise the 11-campus system’s base budget to $544 million, an increase of $103 million.

William Goetz, the North Dakota system’s chancellor, assures that the current proposed budget is a “needs-based” budget. To that end, the budget includes $50 million for deferred maintenance and $21 million for emergency preparedness.

The strong economy in North Dakota also presents a window of opportunity for higher education to make up some ground. The state’s per student appropriations were $4,726 in 2006-7, which is $2,095 less than the regional average and $1,992 less than the national average, according to a report released in March by the university system.

Goetz, who has begun a series of editorials about the university system’s needs, is still struggling to convince residents and lawmakers that current funding levels are inadequate.

“We have a challenge to get out and visit with the public and legislators and legislative candidates to interpret what these increases entail,” he said. “At this point, the message has not been conveyed.”

Staying Focused in Wyoming

University of Wyoming officials say they’ve been working for some time to explain the importance of higher education to lawmakers and the public. As such, they’ve tied the mission of the state’s lone university to Wyoming’s own future: energy. Five of the university’s seven colleges have some energy emphasis, and the university launched its School of Energy Resources three years ago.

Rick Miller, who works with the Legislature on behalf of the University of Wyoming, said it’s been important for the university not to shift its mission and focus just because the state is in the midst of an economic upswing.

“This [economy] is good news for higher education, but it’s not like ‘oh, this is a great year, let’s dream up things we haven’t dreamed up before,’ “ said Miller, vice president for governmental, community and legal affairs. “It’s part of the [established] plan. [Lawmakers] have a pretty good idea what our priorities have been.”

The university’s sales pitch appears to have been effective. In March, lawmakers approved a two-year budget of $393 million, a 16 percent increase from the $340 million allocation the university received in its previous biennial budget. Community colleges received a similar percentage increase in state aid, which rose from $186 million to $219 million.

Double-Edged Sword

While energy producing states have a clear advantage in today’s economy, rising oil prices aren’t necessarily the windfall they may appear to be. In Alaska, where officials expect surpluses in the billions of dollars, university leaders say they’re still struggling to maintain quality.

“We’re one of the richest states in the nation, and sometimes you wouldn’t know it by looking around,” said Kate Ripley, spokeswoman for the University of Alaska System.

The state finished its most recent legislative session with a $1.3 billion surplus, and that figure could could grow to $8 billion or more depending on oil prices, according to the Office of Management and Budget.

But the rising oil prices that have bolstered Alaska's economy have also increased the cost of doing business for colleges and universities. Alaska has the second-highest gas prices in the country at $4.564 per gallon, and prices can be nearly twice that much in rural areas.

Alaska’s 30,000-student system is largely spread across three primary campuses, but there are students in extremely remote areas that rely on annual barge deliveries for heating oil.

“You don’t even want to know the cost of heating oil out in these villages,” Ripley said.

Despite rising costs, there’s still some cause for celebration in Alaska. The system received a 7 percent ($20 million) increase in recurring funds for the 2009 fiscal year. Additionally, universities were given $107.2 million in non-recurring funds, about half of which went to maintaining facilities.

While Alaska’s universities heavily invested in infrastructure, the system’s budget isn’t all heating oil and building repairs. Lawmakers actually declined a request for a new biological sciences lab, opting instead to build a $15 million sports arena on the Anchorage campus.

“They were all excited because our Seawolves did so well this year,” said Ripley, referencing recent basketball successes. “They were riding that wave of support there.”

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