After Gov. Matt Bevin announced his proposed two-year budget Tuesday night, higher education leaders breathed a sigh of relief.
The Republican governor’s plan to cut the state’s allocation to public higher education by 6.25 percent — about $72 million a year — was less than many had expected.
“I was stunned because we were expecting a much bigger number,” said Robert King, president of the Council on Postsecondary Education, who recalled dire warnings from legislators in recent months about potential cuts. “So it’s hard to say we’re thrilled, but given what we thought was coming, we’re at least relieved.”
But then on Wednesday morning, university presidents started delving into the 70 programs Bevin wants to eliminate from the state budget, many of them housed at state universities, and the ballooning pension obligations regional universities must pay without extra help from the state.
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At Morehead State University, for example, the 6.25 percent cut equals a $2.5 million reduction next year on top of a $2.7 million increase in next year’s pension obligation. In addition, the university would lose all $200,000 in funding for one of Morehead’s prized programs, the Kentucky Folk Art Center.
“That’s the pain we know of right now, plus we have to add it to the regular increase in fixed costs,” said Morehead President Jay Morgan. Altogether, the university could face as much as a $9 million hole in each of the next two year’s budgets.
“Right now, we’re not looking at tuition increases,” Morgan said. “We’re reserving judgment to see what the General Assembly decides to do.”
Eastern Kentucky University will lose about $5 million each year of the biennium, plus a $10 million increase each year in pension costs. The school’s board of regents has already decided not to raise tuition.
The University of Kentucky and the University of Louisville are not part of the state’s pension systems, so they don’t have those increased obligations.
UK estimates it will lose about $16 million from its state appropriation next year because of the 6.25 percent cut, plus an additional $10 million from Bevin’s plan to eliminate state funding for specific programs. Those include cancer screening programs, the Robinson Scholars Program that offers scholarships to first-generation college-bound students from Eastern Kentucky, the University Press of Kentucky and the UK Center for Entrepreneurship.
Some UK programs would only lose part of their state funding. The Center for Applied Energy Research, which has a $17 million budget for research on coal, batteries and other energy products, would lose about half of its $5 million in state funding.
“We do recognize this is the first step in a very long process,” said UK Chief Budget Officer Angie Martin. “But we have been working with the deans to figure out how to handle this kind of reduction over time.”
At Western Kentucky University, the budget cuts will take about $4.6 million each year, plus an increased pension obligation of nearly $9 million a year. That’s on top of a $15 million deficit the school is currently working to solve.
“It’s important to understand that this is the beginning of the legislative process,” said WKU President Timothy Caboni. “We will work diligently with policy makers throughout the session to advocate for a more positive final outcome for higher education and WKU.”
In his speech, Bevin made it clear that universities should dip into whatever cash reserves they have to offset the losses.
“We have universities with hundreds of millions of dollars in reserves,” he said.
But UK’s Martin said a large school like UK depends heavily on its cash position to run daily operations, and bond ratings agencies use the size of reserve funds to determine if the institution is financially healthy.
“We cannot raid (cash reserves) because it’s just not being a good steward of these resources,” Martin said. “We have to maintain sufficient balances, in case there was a disruption to one of our revenue streams,” particularly at UK HealthCare.
In the silver lining department, Bevin’s budget establishes a $300 million bond pool to help pay for long-deferred renovations on many aging Kentucky campuses. In 2019, universities would have to provide a $1 to $1 match; in 2020 it would be $1 in state help versus $1.20 from universities. The budget language does not say how universities can raise their portion of the money, but it does not rule out using their own agency bonds.
Also, despite dire warnings, Bevin left the state’s three major scholarship funds alone. KEES provides all high school students with money according to their GPA, while the College Access Program and the Kentucky Tuition Grant Program help low-income students with tuition at public and private universities. Those programs are all funded through the Kentucky Lottery, which Bevin pledged to use only for education. In past years, legislators have swept millions of dollars in lottery proceeds into the General Fund.
Bevin’s pledge pleased the Prichard Committee’s Student Voice Team, which has worked to increase scholarship dollars for low-income students.
“It’s no secret that over the past decade, the cost of attending colleges and universities in Kentucky has shifted from the state to the backs of students,” said Sahar Mohammadzadeh, a senior at Dunbar High School and member of the Student Voice Team. “This burden is reflected in our conversations with students across the state — who have the ambition and drive to attend college but not the resources. It’s encouraging to see that the governor’s proposed budget commits state lottery funding to student financial aid, including support for Kentucky’s primary need-based college scholarships like CAP and KTG.”