RALEIGH – A great deal has already been said about the General Assembly’s 2009-10 budget deal. Some of it is actually true.
For example, there are real budget cuts in the final document. That much is true. What isn’t true is any assertion that there are large cuts in the proposed 2009-10 budget. If you account properly for the transfer of many programs from the General Fund to federal bailout funding, the 2009-10 budget will be about $100 million higher than the $20.3 billion the state spent in FY 2008-09.
If you then consider escalating caseloads for some programs, you might end up with a slight decline in real, per-person spending. But the truth is that all the really major budget cuts have already occurred, during the 2008-09 fiscal year. North Carolina survived the experience.
What this new plan essentially does is raise taxes by $1 billion to keep the state budget level. If you think that’s a sound policy decision, fine. Explain it honestly.
It’s also true enough to observe that the University of North Carolina system is being ordered to trim tens of millions of dollars in spending in such areas as administration and special research centers. However, UNC is also getting tens of millions of dollars in new spending, on projects such as the biotech research campus in Kannapolis. At this writing, it looks like UNC can fairly be called a big winner in the final deal – faring much better than the public schools and community colleges, for example.
When the state budget catches cold, in other words, just about everyone comes down with it to some degree. But UNC seems to have a built-in immunity.
Why is that? Most state politicians reflexively put K-12 education at or near the top of the list whenever they are asked to state their budgetary priorities. Certainly Gov. Beverly Perdue does so every chance she gets, and probably not just because the NC Association of Educators is looking over her shoulder.
The reason state universities typically do better than other state agencies during tight budget years is the same reason they typically get one of the biggest increases in state spending during boom times – they enjoy disproportionate lobbying power. There are few more powerful lobbies in all of state politics.
UNC benefits from several factors. First, they exploit the myth that maximizing state subsidy of higher education will maximize the number of college graduates, which is said to maximize state economic growth (also a myth). Second, they exploit the political value of university sports teams, cultural offerings, and alumni networks. Third, they exploit the fact that most key state lawmakers are either alumni of UNC campuses themselves or have children who are current or former students. Not very many legislators have as personal a connection to community colleges, and being a graduate of a North Carolina public high school just doesn’t create the same kind of personal bond with the institution.
As for the institutions themselves, there are very few incentives working in favor of cost containment. As retired economist Robert Martin explains in a fascinating new paper from the Pope Center for Higher Education Policy, universities have a “shared governance” structure encompassing the faculty, the board, and the administration. Those who supply the funds (e.g. donors and taxpayers) and those who consume the services (e.g. students) don’t really have much of a say in decisionmaking.
“The principal/agent problem, the nonprofit status of colleges and universities, and the emphasis on reputation maximization lead to a bias against reform, a preference toward increasing revenues, and a revenue-to-cost spiral in higher education,” Martin writes. “The evidence – both anecdotal and objective – that cost increases are excessive is compelling. The cost increases not only create an unnecessary burden on students, their families, and society as a whole, but they represent a significant wealth transfer from families and the public to higher education.”
The very significance of that wealth transfer helps to explain why UNC prevails year after year at the Legislative Building. Their leaders and lobbyists have a lot of money at stake and know what they must do to protect it. Taxpayers don’t individually have a lot of money at stake and don’t know what they must do to protect it.
Of course, collectively taxpayers do have a lot of money at stake. Their only recourse is to vote for state lawmakers who will keep spending in line with available revenue at current tax rates. Right now, the General Assembly is still run by politicians who think North Carolinians are undertaxed.
But don’t blame them. Blame their UNC economics professors.
Hood is president of the John Locke Foundation