Mo' Money, Mo' Problems

New Jersey’s opaque process of divvying up $1.3 billion in state money for capital projects leaves many unhappy with the proposed plans. But few “best practices” exist.

May 31, 2013

After a 25-year drought of state bond money for higher education capital projects, the $750 million general obligation bond recently approved by New Jersey voters was a welcome influx of funds.

“This will not only help our institutions of higher learning attract and retain students, and in turn, industries looking for a capable work force, but it will create jobs as improvement projects get under way. It’s an all-around win,” Sheila Y. Oliver, speaker of the state’s General Assembly, said shortly after the measure passed.

Back in the fall, both Democrats and Republics rallied behind the ballot measure, and public and private university presidents pushed for its passage. But as the project moved from an abstract pool of money to a concrete list of projects, the process for determining who gets what raised several divisive issues.

Since earlier this month, when the state’s secretary of higher education released the proposed list of projects to be financed by the bond – as well as $550 million in additional capital funding from various state funds – several items on the list have come under scrutiny, including funding for two religious institutions and a hospital that will soon move outside the auspices of the state’s higher education system. At the same time, some public colleges and universities have argued that they are not getting their fair share. Those criticisms have attracted the attention of state legislators, who have to either approve the entire list of projects or send it back to the secretary's office to be revised.

Tensions around which projects are slated to receive funding are partly the result of the process. Governor Chris Christie's office has refused to make public either the applications from various institutions or the methodology the secretary used to formulate the proposed list of projects. As a result, critics have raised questions about the motives behind the allocation of funds, including allegations that the governor traded public dollars for political support.

The governor’s office said that releasing the applications and criteria would unfairly bias the process and said it would release the criteria only after the legislature votes. Legislators said they should have access to the criteria before they vote to know if the process was fair. "For the administration to suggest to the Legislature and the public that the manner in which these funds were allocated is not information we are entitled to have is as bewildering as it is unacceptable," Oliver wrote in a letter to the governor.

New Jersey also lacks the type of central coordinating authority for higher education that many other states have. Since the state last issued a major higher education bond in 1988, the governance structure of higher education has gone through several iterations, resulting in the decision in 2011 to vest authority for planning, regulation and advocacy in the Secretary of Higher Education rather than a governing board. The lack of one coordinated system with a governing board, like that of Wisconsin or Nevada, or several large systems, like California or Texas, means that institutions tend to pursue funding individually.

The confusion around the process highlights the fact that few “best practices” exist about how to divvy up state bond money. Officials who deal with state and higher education finances, including state budget officers and public higher education executives, said that because large bonds are an irregular occurrence at the state level, most states have few established practices on which to rely. As a result, state policies tend to vary widely, and untested procedures easily raise questions.

“One of the reasons we haven’t done a big systematic study of how states handle this is because it’s almost impossible to do a systematic study,” said Paul Lingenfelter, president of the State Higher Education Executive Officers association. “Even when things are pretty straightforward and you think you have transparent criteria, there are enough fuzzy criteria to complicate things.”

The tensions in New Jersey are exacerbated because of the long drought in funding, said Peter Philip Mercer, president of Ramapo College, who said the $18 million his college is set to receive is far from adequate. “We haven’t received any capital funding since 1988, so it’s important than there be a different result for Ramapo College now, because we don’t know when the next time will be,” he said.

But that could be on the verge of changing. As many states see deficits decrease and tax revenues return to pre-recession levels, officials are starting to express interest in funding higher education. “When an economy improves after reducing or holding higher education funding constant for a number of years, lawmakers tend to want to put money into higher education,” Lingenfelter said. “And they’ll frequently return to non-recurring capital expenses first, since that doesn’t create the expectation of ongoing funding.”

Taking It on Faith

The two most contentious aspects of the New Jersey higher education secretary’s proposal center on the allocation of funds to the two religious institutions.

Beth Medrash Govoha, an all-male Jewish rabbinical school that teaches about 6,000 students, is slated to receive $10.6 million for a new library and academic center – a larger allocation than many of the state’s county colleges (which is how the state refers to its community colleges). Princeton Theological Seminary, which produces Christian ministers, is slated to get $645,000 for technology upgrades.

The original language of the bill to put the measure to voters prohibited the awarding of funds to "any educational institution dedicated primarily to the education or training of ministers, priests, rabbis or other professional persons in the field of religion,” according to The Star-Ledger of Newark. But a last-minute change made those institutions eligible for funds.

Several critics of the proposed list argue that it is wrong for the state to provide money for religious institutions. Critics of the governor, including his his opponent in this year's election, question whether the state money is a reward for the political support from the yeshiva's influential leader, who supported Christie's opponent in 2009 but backed him this year. Christie has denied that there was anything improper about the way the money was awarded.

The two religious institutions are not the only private universities receiving funding through the process, though the other awards have not been controversial. Fairleigh Dickinson University and Seton Hall University are both set to receive more than $10 million in state funding. Princeton University, which had an endowment of almost $17 billion on June 30, 2012, will receive about $6.5 million in public support for renovations and improvements.

“New Jersey has a long tradition of supporting private institutions,” said John B. Wilson, president of the Association of Independent Colleges and Universities of New Jersey. “It’s one of the only states where private universities can qualify for direct operating support from the state.”

Another contentious part of the proposal is the decision to award about $37 million to University Hospital, currently part of the University of Medicine and Dentistry of New Jersey. The hospital will no longer be part of the university system as of July 1, becoming a freestanding, state-owned hospital, though administrators said some teaching activities will continue to take place.

The awards to the religious institutions and hospital are especially frustrating to administrators who don't feel like their institutions are getting enough from the bond. Mercer has been particularly outspoken about the process. “I feel as president of Ramapo College that my institution hasn’t received its fair share of the bond money,” he said. “We have received less than our contemporaries, and that is not satisfactory.”

Ramapo applied for about $37 million of funding in capital funding; the $18 million it is currently set to receive is lower than that for all but one other senior public institution in New Jersey and lower than that allocated for many two-year colleges. None of the money will come from the bond, but rather from other state sources.

Mercer said in an interview last week that he was not sure why Ramapo was not awarded more, and that his attempts to get an explanation from the secretary of higher education were unsuccessful.

Ramapo has only about 6,000 students, so it makes sense that it is receiving a small share of the overall funding. But two colleges only slightly larger -- Richard Stockton College of New Jersey, with about 8,000 students, and the College of New Jersey, with about 7,000 students -- are both receiving about three times as much as Ramapo.

Other institutions are relatively happy with their share of the funding. A spokesman for Thomas Edison State College, which was allocated about $16.6 million, said the university was happy with its share. While Thomas Edison has one of the state’s largest enrollments, with about 21,000 students, most of them are adult students who take classes primarily online.

The idea that New Jersey would wait until after the vote to determine the list of projects is not unprecedented, higher education officials said. While some states formulate a list of projects before votes, many wait until after.

"There are lots of variations between the states," wrote Matt Hamill, senior vice president for advocacy and issue analysis for the National Association of College and University Business Officers, in an e-mail. "The measures that go before the voters are generally not tied to a specific and fixed allocation of funds to individual projects. There is often a general justification behind the amount put forward for approval, but then the hard work has to be done to assess every possible project, which ones are ready to move forward, and so forth.  It is, in some ways, an inherently competitive process within the state, and you are seeing the results of that."

When North Carolina held a bond referendum in 2000, the university system outlined a set of projects prior to the vote, while the community college system received a lump sum and divvied up projects on its own after approval. When Virginia lawmakers put a referendum for a higher education bond to the voters in 2002, they outlined projects ahead of time.

Unprecedented Process

It’s difficult to say whether the process New Jersey is following is unusual, since higher education bonds work differently in each state. The structure of state higher education governance, the criteria for awarding money and previous statewide coordination efforts all play a role in determining how money will be allocated, Lingenfelter said.

Some leave it to lawmakers to determine the list of projects, while others rely on state boards. Some rely on existing lists of requested projects, while others create a whole new competition for funds.

Statewide coordinating boards often play a large role in determining which projects get funded. “When there is a statewide governing board or a statewide coordinating board that has a role in budgeting, often they develop a capital priority list based on criteria or a review of requests,” Lingenfelter said. “These lists are more or less ‘rational,’ but I can’t imagine a situation, even when there is such a board, that local interests and local legislators play no role.”

One reason New Jersey’s process is causing so much consternation is that the state has changed how it coordinates higher education since the last bond issue. When state last passed higher education bonds in 1984 and 1988, public universities were organized under a state board of higher education.

That board was scrapped in 1994 and replaced with a Commission on Higher Education. In 2011, Gov. Chris Christie reorganized the state’s higher education administration again, eliminating the commission and transferring authority to the secretary of higher education.

Lawmakers have 60 days from the time the list is produced to reject it or the list becomes law. Since the state is also currently debating the state’s budget, higher education spending is likely to take a back seat, at least for the time being, officials said. But higher education officials said lawmakers are also eager to get projects under way in time for November, when the governor and many state legislators face re-election.


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