The University of Alaska’s Board of Regents declared a financial emergency this week, a sign of the extraordinary pressure created by a drastic cut in state funding and a first step toward rapid reductions in spending.
The board’s formal declaration is known as “financial exigency,” which allows the university to begin rapid downsizing, a measure that is necessary given the scale of the drop in state support. The university does not have enough money to get through the current budget year, which began this month.
The regents had delayed a vote on the extreme measure in hopes that legislators might be able to restore some funding. But last week, the university’s credit rating was downgraded sharply, and it was given a negative outlook by Moody’s Investors Service because of the severity and magnitude of the financial challenges it is facing.
The board voted 10 to 1 in favor of declaring financial exigency.
"We will not have a university after February if we don’t make a move,” Regent Gloria O’Neill said.
Faculty leaders responded with dread.
“It’s very frightening to see things happen, and happen so fast,” said Maria Williams, chairwoman of the University of Alaska’s Faculty Alliance, who compared the chaotic situation to a dystopian drama.
The alliance had asked regents to delay such a declaration in hopes the legislature would restore some funding, resulting in a less extreme solution. The vote is a symbol of defeat to lawmakers, she said, as though the university is just accepting the budget cuts. “It sends a very bad signal to our students, and certainly to faculty,” she said.
Legislators this month failed to overturn vetoes by Gov. Michael J. Dunleavy (R) that slashed funding for education and other services. The University of Alaska faces a loss of more than $135 million in the current fiscal year, a 41 percent drop in state funding. There is a legislative effort to restore funding, but several university officials said they do not have much hope of staving off problems.
The board is facing a long list of unknowns, including what legislators may be able to accomplish, how the governor might respond and timing.
The chancellor of the University of Alaska at Fairbanks, Daniel M. White, said last week that even if a compromise was reached on a capital budget, a step that could ease the crisis, “there will be things we will have to stop doing.” At each of the three large campuses, officials have been trying to project the ripple effect on enrollment and research.
White has sought to reassure federal agencies that the university will honor research commitments. “If the agencies don’t have confidence, obviously they won’t invest in us,” White said.
The governor has had to make tough decisions, said spokesman Matthew N. Shuckerow, crafting a budget that ensures the state doesn’t spend more than it takes in, protects core services, doesn’t raise taxes and doesn’t draw from the Permanent Fund Dividend.
Dunleavy pledged to Alaskans during the 2018 governor’s race that they would receive a higher Permanent Fund Dividend, the annual checks sent to state residents from a reserve created through the state’s oil wealth. The previous governor and legislature had lowered the dividend after dropping oil prices created revenue shortfalls.
But Dunleavy emphasizes that the state needs to align expenditures and revenue, regardless of the dividend, Shuckerow said. “We’re so out of line.”
Analyses of the University of Alaska have concluded that many programs are duplicative, Shuckerow said, such as engineering, business and education programs at more than one campus. The system offers hundreds of degree programs, he said, and the governor wants it to focus on those that serve the state and serve the workforce.
Alaskans should know that #akleg still has the time and tools available to come to an agreement on the capital budget. My staff & I are ready to assist lawmakers in coming to agreement & passing a capital budget that provides the maximum benefit to Alaskans as quickly as possible
— Governor Mike Dunleavy (@GovDunleavy) July 22, 2019
Johnsen gave the board options to consider, outlined in a report.
“We have to start by looking at our enrollment,” Johnsen said. “We have 26,000 students, with various majors, in multiple locations. How do we organize and resource ourselves to meet their needs?”
Classes are expected to begin as usual this fall.
In September, the board will consider cuts to programs. Johnsen predicted the full impact of the cuts could be closer to $200 million because of anticipated drops in tuition revenue and research grants. If the $136 million cut stands, at least 1,300 faculty and staff members are expected to be laid off — about 20 percent of the University of Alaska’s employees.