Ted Simons: State universities are facing significant cuts in budgets proposals by both the governor and the senate. The governor calls for $170 million in cuts, while the senate recommends $235 million. Earlier I asked John Haeger, the president of Northern Arizona University, how those cuts would impact NAU. Good to see you again. Thanks for joining us.
John Haeger: Delighted to be here.
Ted Simons: Governor's proposal. $170 million cut to universities.
Ted Simons: Senate's proposal, 230-some odd million cut to universities. Impact to NAU.
John Haeger: The impact is huge, whichever proposal you look at. But we've been very supportive of the governor's proposal at $170 million. That's cut to Northern Arizona University of about $25.8 million. On top of the cuts we've already taken. The senate proposal would add another $8 million to $9 million to that. So in terms of our ability to deal with the situation, the governor's budget is the one that we think makes the most sense in the long term. And -- and doesn't make it almost impossible for the universities to operate.
Ted Simons: The -- I would imagine tuition increases are being looked at to pick up the slack?
John Haeger: We're looking at tuition increases, to try and pick up about a third of the total cut off of the governor's budget. In many ways, we've moderated tuition increases at Northern Arizona University 65% of our students will see no tuition increase next year.
Ted Simons: You have a system up there where a lot of kids are locked in.
John Haeger: They’re locked in, they’re on a pledge program, they'll see a small increase in fees of about $100 and all the other tuition increases, whether graduate or undergraduate are somewhere between 4% and 7%, which makes some sense given the conditions we're in.
Ted Simons: What is tuition now? Resident in state and out of state.
John Haeger: Out of state, pushes up to the $17,000 and $18,000. In state is about $7,400.
Ted Simons: Arizona constitution, tuition is supposed to be as nearly as free as possible. Is that the rearview mirror now? Parents and students complaining about tuition increases, what else is there to do?
John Haeger: There's almost no other way to handle this problem without a combination approach. A third from tuition increase, even with the governor's budget, we'll have to take about $15 million out of the internal operations of the university on top. And so in many ways, tuition is nearly as free as possible, if -- if the state has the money to support higher education and all of the universities understand the money's not there right now and we know we have to do our part.
Ted Simons: Is doing your part also include layoffs?
John Haeger: Doing our part has already included layoffs, could include more, and additional furloughs. We did a hireling freeze at one time – we may have to go back to that concept. It's going to be a multiple strategy.
Ted Simons: You mentioned that the governor's proposal is something you can work with. The senate proposal is something you can't. If something comes down that looks closer to the senate’s version than the governor's, are you ready for that?
John Haeger: We have options and plans we're thinking about. But let me give you an example of the problems that it creates. Over the last three, three and a half years, the universities have taken huge cuts when you put them all told, enormous problems which we'll have to resolve in the future. Two examples of that. We have -- we live in a competitive world and hire faculty from across the country, our faculty are about 16% from market, average salaries in the market. I can't continue to bring in first-rate faculty in the salaries I'm paying but we can get by another two, three years. In addition, the university, because we've had no building renovation money or dollars behind students for three years, the net result is we have multimillion dollars worth of building renovations and some are fire life safety issues and ultimately, we'll have to get back and look at how we fund the universities in the future.
Ted Simons: A lot of critics say they're making more money than they have. What's going on here? There's the concept of administration bloat? You've seen the report, bloat out there as far as staffing is concerned. How do you respond to that?
John Haeger: Let me give you one figure that responds to that. I think a lot of people believe that the universities are inefficient. I have actually 25% more students today than I had three years ago. With very few additional faculty or staff. We have done such efficiencies in the curriculum, increased faculty workloads. So the universities are about as lean an institution as you can find.
Ted Simons: I know you've also combined, merged some programs, cut programs, the high altitude training center. That's no longer there. That’s gone.
John Haeger: That's gone.
Ted Simons: What other -- more merging going to happen here?
John Haeger: I think there will be additional mergers, potentially of departments. I think you're going to see the university has used stimulus money from the feds, we used that for only one-time purchases. And what we did is we developed a lot of new technologies that we're going to apply to business processes at the university and as the workforce shrinks, the technology, we hope, moves in and saves us additional money.
Ted Simons: And some of the worst case scenarios I would imagine, some of the branch campuses around the state, are they in jeopardy as well?
John Haeger: Everything is on the table right now. I have a study going on on campus looking at -- we have 31 sites across the state. In small rural areas in addition to sites in Phoenix and we have to decide whether continued investments in those sites is justified.
Ted Simons: Real quickly, for those listening and watching right now, what kind of criteria would be used to make the decision?
Joh Haeger: We would look at obviously is the cost of the site. The number of credit hours the site produces, is it an area we can say it's revenue neutral. Not costing the university additional monies. Those are the things we're going to look at. Because it's a financial decision.
Ted Simons: Speaking of financial decisions, financial aid programs in Arizona, some are saying it's time to take another look at these programs, whether it's the AIMS scholarship or any of these offerings here. What do you feel? Is it time to look again at this? Is the state unable to afford those kinds of programs?
John Haeger: I think we can always take a look at them. I think the three presidents in the regents are -- need-based aid is important for students particularly in a time where tuition going up. We don't want to make it impossible for the needy students to get a baccalaureate degree. Depending on what budget emerges, is merit-based financial aid. That's a big pot of money. The universities sponsor their own merit-based programs and we may have to dip into that pool of money.
Ted Simons: Is that something you think is likely to happen?
John Haeger: Certainly, if the senate budget were to hold, that would definitely happen.
Ted Simons: Is there any success or progress in the concept of a long-term state compact? Some taxing authority, some sort of stability in the process so you can look out five, 10, 15 years and know that amount of money is going to be there?
John Haeger: Actually, I think those plans have been laid out really by the board of regents and the three presidents in the strategic realignment. And we understand there has to be a new compact with the state. Going from one budget year to the next not knowing if there's support behind students doesn't work in the long term. And so really -- and I'll use Northern Arizona University as an example. We're looking at very different cost structures across the state. Any NAU, Flagstaff, residential environment, more expensive for students to attend. But let's say that's at 7200, 7400, we've developed a new campus at NAU Yavapai, which you can attend for about 4600 and we're trying to give Arizona reisdents a choice between different institutions all leading to high-quality baccalaureate degrees.
Ted Simons: We’ve talked a lot about the impact to NAU. I know that in 2020, the goal is 9,000, I believe, more students for you, better graduation rates, better freshmen retention. Is that doable?
John Haeger: It is doable. If we can development almost a compact with the state that here's how we're going to support the universities as we build our way out of this recession. Short of that compact, it will be very, very difficult.
Ted Simons: Last question: NAU, big deal in Flagstaff. It's a big presence up there. These cuts to the universities in general, NAU in particular, how does it impact Flagstaff?
John Haeger: It has an enormous impact in Flagstaff. The university is the major employer in Flagstaff and any move we make to cut faculty, staff back, if we freeze hiring has a ripple effect throughout the community. One of the things that's helped Flagstaff is most of our growth has been on the Flagstaff campus over the last three years and that infusion of students and dollars into the community has been very helpful.
Ted Simons: Here's my last question. I'm a lawmaker, I'm telling you we don't have the money and you're going to have to bite the bullet. Convince me that's a wrong thing to do but there's an alternative out there to it.
John Haeger: What I do is make the value proposition for higher education. I want the lawmaker to understand that universities are places that provide the jobs for the future and an educated workforce and want them to take NAU as an example. $1.25 billion economic impact on the state each and every year. The research that is done on the research-based campuses is critical to the movement of the economy forward and the solution of social problems. So I think lawmakers almost what you want to say is we really got to be careful not to do damage to the basic internal structure of these institutions.
Ted Simons: Thank you so much for joining us. We appreciate it.
John Haeger: Thank you.