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Facing a massive and unprecedented 41 percent cut in state funding, the University of Alaska’s Board of Regents voted 10 to 1 to declare financial exigency, a move that will precede layoffs and program elimination.

The vote comes as a financial crisis looms over the state’s public higher education system -- the cut represents a loss of $135 million in funding. Moody’s Investor Service has already downgraded the credit rating of the system to BAA1 as a result of the cuts, citing a “high likelihood of a material reduction in the university's liquidity over the next year.” After the downgrade, the Board of Regents moved its meeting earlier, to Monday.

The cuts are a result of Governor Mike Dunleavy’s decision to veto parts of the proposed state budget affecting a number of public institutions in the state, in the hopes of moving more money to Alaska’s Permanent Fund, which provides a dividend to Alaskan citizens based on oil revenue. Many stakeholders in the Alaska system had hoped to lobby the state Legislature to override the veto, but their efforts were unsuccessful.

Additionally, the Northwest Commission on Colleges and Universities, the university's accreditor, warned in a letter that due to the size and implications of the cuts, the university risked losing its accreditation status, a move “that could be felt for generations.”

Typically, financial exigency is used as a tool during times of extreme fiscal concern at universities to make reductions to faculty or programs at a faster rate. Financial exigency also traditionally allows colleges and universities to terminate long-standing or tenured faculty members.

“We are working diligently to move towards reduction,” University of Alaska at Anchorage chancellor Cathy Sandeen said at the board meeting.

Sandeen originally told Inside Higher Ed earlier this month that the estimates for how many faculty positions may have to be eliminated across the system “conservatively” came in at 700 positions.

Jim Johnsen, president of the Alaska system, also presented three possible structuring models for the university in the wake of the cuts -- which Johnsen wants the board to consider.

According to the presentation Johnsen presented to the regents, the first proposal would have one or more of the system's three campuses eliminated from the system. The benefit of this model outlined in the presentation was that the cuts would be contained and the other two campuses would remain largely unaffected. The downsides listed were that it denied access to many Alaskans, would have a large economic impact on the communities around the affected campus and that it would encourage “inter-university and regional conflict.”

Some of that inter-university conflict has already sparked up, ­with a Faculty Senate committee at the Anchorage campus authoring a report suggesting that the Fairbanks campus should absorb most of the financial pain.

The second option Johnsen submitted would proportionately divvy up the effects of the cuts to each university, asking all three campuses to reduce to its own unique “core.” Johnsen told Inside Higher Ed in an April interview that the system was unique in the sense that each campus within the system offered a distinct quality. The plan outlined the positives: it would be more equitable to each campus, could reduce duplicative programs and maintains some educational access for more Alaskans. However, the risks were that for each campus to endure such a large financial blow, each could risk accreditation and financial viability, as well as student choice.

The third choice was a recommendation for a “New UA,” which would include a single accreditation model with higher integration between programs, creating overarching colleges to extensively cover students in certain degree fields. For example, all three campuses have education colleges or schools, and the new model would create an overarching Alaska College of Education with a common statewide curriculum.

Johnsen listed the benefits of this approach -- again, duplicative programs would be eliminated, and it would decrease administrative bureaucracy and foster collaboration. However, the plan would require “substantive change in institutional accreditation and U.S. Department of Education approval, requiring time and significant effort.”

Toward the end of the meeting, some regents expressed concern at making such a large decision in a short span of time, but Johnsen said a proposal would have to be decided on soon in order to prepare properly. The board will meet again on July 30 to tentatively approve a plan to move forward.

“It’s a terrible situation we’re in, but I think we can move through it, and do it with speed,” Johnsen said.

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