Ted Simons: Governor Brewer's plans to deal with a huge budget shortfall include substantial cuts to higher education. In a moment, we'll hear from the president of Arizona State University and the chair of the Arizona board of regents. But first here's what the governor's budget director had to say about proposed cuts earlier this week on "Horizon."
John Arnold: There's no question that budget reductions are placing a strain on the University system as they have on all of state government. Certainly higher education is a big portion of the state budget, we spend about $900 million on the University system. So what we are proposing is a reduction of that support of $170 million. It's about 20% of their total state support.
John Arnold: You look at the total funds the state University system, there's state support, there's tuition dollars that flow into the system, enterprise funds that come into the system. And then also federal dollars. And federal dollars are largely dedicated to specific projects. But it's money that comes into the University system. So the question has been, if you reduce state support, does that necessarily mean that tuition goes up? And we don't believe so. What the governor has called on the state University system to do, and she called for this two years ago, recognizing that this cliff, this budget cliff was coming, she said, we need you to look into your processes, what you're doing, what your education and finance models are, and find new ways to educate Arizonans at a high standard at a lower cost.
Ted Simons: Here now to talk about the proposed cuts to higher education is Anne Mariucci, chair of the Arizona board of regents. And Dr. Michael Crow, president of Arizona state University. Good to have you both here. Thanks for joining us. Higher -- we're talking $170 million reduced for FY-12. Impact, on Arizona State University, on all Universities here in the state.
Anne Mariucci: Well, I'll comment on behalf of the system, all three universities together. The number is not a tremendous surprise to us. It's a serious number, but more importantly, I think we focus on what's happened on a cumulative basis since the cutting started in fiscal '08. And on that basis, we've been cut $400 million. While our system has grown in enrollment by just about 20% of the students. So we measure everything on a per FTE, full-time equivalent student basis, and on that basis, our state appropriation has been cut by 46%, or just under $5,000 a student. And that's serious business.
Ted Simons: Serious business?
Michael Crow: Absolutely serious. On the per student basis, the way to look at this, we're working our way through and we're all trying to carry a part of our -- part of the challenge, if you will, of living through this economic shift in the Arizona economy and the American economy. It's serious business because for us, the first round of the cuts in '08 was a 30-year reduction on a per student basis. The proposed recommendations coming from the governor, which I know is a very difficult decision for her, because she is committed to education, are represent for USA 50-year reduction on a per student basis. So these are serious challenges for which we've got to do all kinds of things to respond to them.
Ted Simons: What kinds of things? Are we talking enrollment caps, larger class sizes, fewer class options, furloughs? Is everything now being considered with a cut of this size?
Michael Crow: I think the most important thing we're looking at is how can we innovate. How can we drive the University into new ways of doing things that can improve our quality of our outcomes, enhance our efficiency and our effectiveness, and lower our cost on a per student basis. So the first thing we're going to do is continue to advance innovations, and then in addition to that, we will have to reduce our costs in certain programs, we will have to shift programs, link programs, and combine programs, we'll have to do all of that.
Ted Simons: We heard from the governor's budget director, saying universities have to find new ways to educate Arizonans at a higher standard, but at a lower cost. First of all, is that doable, and secondly, is that process underway?
Anne Mariucci: It's absolutely doable. It is our mandate. It's something that we’ve been working on for, you know, many years now. The pace will accelerate because this level of crisis has proven to be a real accelerator. Some of those things can be done with minimal amount of capital investment, others that have been suggested and called for such as the state college system, obviously is an enormous brick and mortar undertaking, and the capital to finance that is of unknown means at this time. But online education, more efficient academic delivery on campus, off campus, regional partnerships, more partnerships with community colleges, all of that is not new to us, we're well down the road of implementing that. This just provides an accelerator.
Ted Simons: Is that how you see it as well? You talked about an opportunity for innovation. I'm hearing accelerator as well. It's still $170 million out of that next fiscal year budget. That's a lot of money.
Michael Crow: This is a massive reduction, and the state in its wisdom will have to decide at what point it's not going to be able to really advance the Universities as the powerful drivers of social and economic success that they have been for the last few decades. They have a duty to do that, and they're in my opinion very close to that point where their duty needs to be carefully thought about. But having said that, it also is our responsibility to determine how to scale the model, so as public higher education continues to be of higher demand, we have to find ways to provide it at a cost that's not ever increasing. So that means through some combination of tuition investment, private investment, and public investment, we have to find a way to operate the University without its costs continuing to rise.
Ted Simons: Can you do that without increasing tuition? We're close, are we reasonably close now to the national average? How much more can -- can tuition be raised?
Michael Crow: For us it's not so much the price of tuition but the cost to the individual student. What we are operating under is what we call a modest tuition high financial aid model. That model for ASU and for our sister institutions, has been more successful than the low tuition, low financial aid model. That was a less successful model. This is a more successful model. We now have to take that model to the next level. Can we advance without tuition adjustments? The answer is we can't adjust that quickly. Even if we were innovating at the fastest possible rate. And so it's probably going to be some combination of cuts and tuition adjustments that we'll be proposing to the regents.
Ted Simons: I asked the question because I know a lot of folks watching right now are very concerned about tuition rates, and see them going up and say, wait, a minute, I thought it was supposed to be as close to as free as possible, and under constitutional mandates, what's going on here. What is going on? What can you tell them?
Anne Mariucci: Well, what I can tell them is that we are very, very sensitive to it. It's become more sensitive as we have hit that midpoint compared to national averages. At the same time, I think the public needs to understand some nuances underneath those numbers. And just let me give you an example. We've increased the sticker price of tuition by 50% in the last three years. However, almost 50 cents of every incremental dollar has gone to financial aid. As a result, I think the Arizona public would be very surprised to know that the average tuition, actually paid by an in-state undergrad student is $2200 a year. 45% of the undergrad students are paying zero. So just like anything you shop for today, rarely do you really pay sticker. Never before has that relationship been more pronounced at the universities. I would say that at $2200 a year, that's about the greatest bargain for a higher education with the quality that we put out of the state than anybody could ask for. At the same time, we're very, very sensitive to it.
Ted Simons: We had the legislative leaders on last week, we talked about the University cuts, and they both mentioned that they considered universities among those protected from cuts compared to the rest of the state government. And that there's no pot of money anywhere for anything much less something like University. That's basically what they said. How do you respond to that?
Michael Crow: I think that the error in the calculation might be if you look at our total budget, all of our revenue sources, and you take some of our funding away from the state, you'd say well it's a small percentage of cut. Unfortunately, our instructional programs have two sources of revenue. Tuition and state investment. And within those areas of the University's operation, we can't move in money from federal grants and from gifts for program X or from other kinds of programs that we have, it doesn't work that way. So there might be a miscalculation in the cut, the cuts are on a per student basis, at least at ASU, we're at 50% with these additional recommendations being made on a per student basis. At the same time, if you look at the overall budget of the University, it would appear to be small, but you can't look at it that way.
Ted Simons: We did have one lawmaker look at the overall budget of the university, and he said he found that the Universities have a more money today than they did in 2008. First of all, is that accurate? And secondly, how do you respond to it?
Anne Mariucci: In a way, it is accurate. And it goes largely to what Michael just said. There's resources that come into the Universities that are for very specific dedicated purposes. We can't use them for instruction. If you're counting those, the research -- the research functions at the Universities have had banner years, and I'm very proud of that. That brings distinction to this state. On the other hand, the amount that we have to spend on a per student basis to educate our young people has irrefutably decreased by 40-50%.
Michael Crow: Let me just add to that. Speaking now only for ASU, because I know the numbers better, our total amount of resources that we have on a per student basis, even with tuition going up, is actually less than it was when we started this process. So our total amount of money has gone down on a per student basis that we have available to us.
Anne Mariucci: to be fair to that point of view, we were uniquely benefited by the federal stimulus to the tune of $220 odd million. But that's a -- that was a one-time windfall, per say, that gave us a reprieve, gave us breathing room for a year to prepare for the cliff as Governor Brewer aptly refers it to. It is not a long-term sustainable permanent addition then to our funding, it was a one time deal. So we're -- and I credit -- the universities and the presidents for not spending that money the minute it came in the door. So have they created a bit rainy day fund to allow for some of this cliff coming yes, and I think that's been good management and good leadership.
Ted Simons: Last question, I'm a lawmaker, talk to me. Convince me that $170 million dollars cut in FY-12, when everything is getting cut, that this is going to seriously impact the Universities and it's something that lawmakers should reconsider.
Michael Crow: Well, I think all lawmakers have to look at issues that are actually higher level than this. That is, this is -- this problem, this $170 million cut is a symptom of a structural problem in Arizona financing. There are deep structural issues. We have the largest structural deficit of all 50 states. That structural deficit, even with these cuts, isn't going to go away. So my hope is, and one of the things that I've been urging legislators to do is to sort of go up to the 50,000-foot level from the 20,000-foot level, where they're trying to adjust this and adjust that and really look at that structural deficit. It's not a deficit that's driven by the economy going up or down. It's a deficit that's inherent in the structure of a not well-aligned overall financial model for the state.
Ted Simons: All right. We've got to stop it there. Good to see you. Thanks for joining us. We appreciate it.
Michael Crow: Thank you.