Oil Prices Strike Education
The University of Alaska (UA) system serves over 31,500 students throughout the state, its three primary campuses are University of Alaska, Anchorage (UAA); University of Alaska, Fairbanks (UAF); and University of Alaska, Southeast (UAS); the UA system also provides online services. The University system employs almost 8,000 people in various capacities. UA’s ability to maintain its current level of academic offerings, research, and services is highly dependent on the State of Alaska to appropriate adequate funding to sustain the University system. The UA system is currently facing economic challenges that could result in cuts and closures that would negatively impact the students and the state at large. Why is this happening?
Since 2013, The State of Alaska has spent more money than it earned. The difference between revenues and expenditures result in a gap or deficit. Cuts have been made, but they did not equal the gap between revenue and spending. This year, it is estimated that the State will have a deficit of almost $4 billion. The Constitutional Budget Reserve Fund provides a $6.7 billion in savings, but that would last only two years at most if the deficit continues to grow at the current rate.
The deficit is a result of declining oil revenue. Oil revenues fund more than 90 percent of the State’s Operating Budget which comes from Unrestricted Income, i.e., money that may be spent in any way the Legislature decides fit. According to the Alaska Department of Revenue, the price of Alaska North Slope crude has dropped more than 64 percent since January 1, 2013. In addition, the U.S. Energy Information Administration reports that production went from over 63,000 barrels per day in 1988 to about 15,000 in 2015. Combined, these factors mean that the amount of money we are capable of generating from oil has greatly decreased, and even if the price of oil were to increase, production continues to decline.
Several options have been put forward to try to reduce our deficit, all of which require financial sacrifice. Dr. Gunnar Knapp, director of UAA’s Institute of Social and Economic Research, explained those options in simple terms: increase revenues by implementing income or sales tax; reduce or cut the Permanent Fund Dividends (PFDs); save less of the dividend earnings, or cut spending. While the other options are still being debated, it seems certain that the State will cut spending.
The University of Alaska will feel the impact of these and any cuts made by the Legislature, as State funding for it accounted for eight percent of Alaska’s unrestricted funds, or $356 million in 2016. The amount allocated through the State is approximately 43 percent of the University’s budget. By comparison, the next largest source of revenue, or 24 percent, is made up of tuition and student fees. In 2017, it is estimated that the University system will receive only $300 million from the State. Losing over $50 million, the UA could experience a deficit of between $15-20 million.
In an e-mail sent to the students, the University said that, “Cuts of that magnitude could result in the loss of 600-1000 faculty and staff positions, and countless programs that benefit students.” Preemptive measures have already been taken to reduce spending. A total of 17 employees have been laid off, and like the State, there is also a hiring freeze and travel restrictions.
There are plans to cut expenses further in the areas of support services, such as administration; these will not impact students’ academic options directly. However, it could result in the loss of academic advisors and student jobs on campus, possible closure of buildings, and longer wait times for administrative services.
A smaller, but still significant portion will be cut from academic functions. Underutilized programs may be eliminated. Programs that are offered at multiple campuses may be centralized: UAA would focus on social and policy sciences, such as education and health; UAF, a research university, would focus on science and engineering; environmental programs would be housed at UAS.
Cuts in spending alone will not bridge the $15-20 million gap in the University’s budget. An initial tuition increase of nine percent was proposed last year, but after students testified that such a large increase would place undue financial strain on students, many of whom work to pay for college, the UA Board of Regents approved a ve percent tuition increase instead. On top of the University’s tuition increase, the College of Business and Public Policy has proposed raising tuition 20 percent for their upper-division classes over the next two years.
The University System’s 2017 budget is in a precarious position, and the impact of several factors are still unknown, including but not limited to changes in enrollment during the spring and fall semesters, staff benefits, and utility rates. Additionally, the exact amount the State will give UA will not be finalized until May or June, after the first Legislative Special Session concludes.