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“Stabilizing” University of Oregon Funding – At the Expense of Everything Else

Cascade CommentaryGeorge Leef

“Stabilizing” University of Oregon Funding – At the Expense of Everything Else

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By George Leef

Almost everyone has to worry about money. A worker’s income depends on satisfying bosses, clients, patients or even voters. Businesses worry about earning enough to cover their costs—i.e., whether they pass “the test of the market.”

And most educational institutions have to worry about money. University presidents lose sleep over the possibility that enrollments might fall, donations decline or politicians decide to spend less on them and more on other things.

Life would be a lot nicer if you didn’t have to worry about money.

These thoughts are occasioned by a prominent op-ed in the November 23 Wall Street Journal, “Saving Public Universities, Starting with Mine,” by University of Oregon President Richard Lariviere. From the headline, you might think the Beaver State’s flagship university is in danger.

Actually, the University of Oregon isn’t in jeopardy. All Lariviere wants to be saved from is the need to keep persuading Oregon politicians to fund it at the level he wants.

Government appropriations for the University of Oregon have been declining for years and now amount to only 8 percent of the budget, while tuition and fees have risen to 40 percent, Lariviere says. Tuition has been increasing for the past 38 years.

Those facts may sound troubling; but in most states, the percentage of the budget for state universities that comes from appropriations has been falling. Also, tuition at the UO is lower than at many other state “flagships.”

But with Oregon “looking at a decade of deficits” (according to Governor Ted Kulongoski), Lariviere is worried that appropriations for the university could be reduced further. He contends that “bold action” is needed to “stabilize” the university’s financial situation.

His proposal has several components, the crucial one being that the state government issue $800 million in general obligation bonds to create half of a $1.6 billion endowment for the university. (The other half will come from a campaign the university will mount to raise $800 million in donations.) With that endowment, the university will earn at least as much revenue as the state has been supplying. Funding for the University of Oregon thus would be “stabilized.”

Here’s the deal Lariviere is suggesting to taxpayers: The government will put you further in debt so that officials at the University of Oregon won’t have to compete for limited tax dollars in the legislature. The “stability” he seeks for his university comes at a cost, namely less flexibility to deal with all the other things in the state budget that you might regard as more important, such as K-12 schools, roads, parks and so on.

Once you grasp that guaranteed resources for one university mean more infighting over remaining state tax dollars for everything else, this proposal seems like Tom Sawyer persuading his friends that it would be fun to whitewash his aunt’s fence. It’s a one-sided deal.

Let’s hear Lariviere’s proposal in full, though, before we dismiss it.

Another part of his plan is that university spending of this revenue stream will be overseen by a publicly appointed board that will guard against waste. The trouble is that such boards almost never have the will to do battle against wasteful university spending. They are toothless tigers.

In contrast, Lariviere and his administration would have a strong reason to cut out needless spending, since they’re worried that politicians might reduce appropriations if they found that some money allocated to the university was being put to poor use.

If I were an Oregon taxpayer, I would rather have full political competition for tax dollars than a guarantee of funding for one use of those dollars—the University of Oregon—combined with a promise that an appointed board will prevent waste.

To sweeten his deal further, Lariviere adds a requirement that some portion of this new university endowment will be invested in local companies “so we can help jump-start the state’s economy.”

The phrase “jump-start the economy” has become almost irresistible to anyone who wants something from government, but this plan won’t do that. If business owners and entrepreneurs have profitable ideas, they’ll find the capital necessary to go ahead with them without this endowment.

Remember that this plan calls for the state to borrow half of the endowment. Why not raise all of it through voluntary donations?

Persuading people to part with their own money is harder than persuading politicians to fork over taxpayer money. Furthermore, donors might prefer to target their giving to particular programs that they have confidence in, as opposed to just ladling money into an endowment—even with an oversight board.

Those are reasons why it’s preferable to raise university funds voluntarily. Competition for customer loyalty keeps a business on its toes. The need to compete for donors in a world with a huge number of beneficial uses for capital keeps university presidents on theirs. State universities better serve the citizenry when their leaders have to keep making their case to politicians and potential donors.

George Leef is director of research for the John William Pope Center for Higher Education Policy in Raleigh, North Carolina. He holds a Bachelor of Arts degree from Carroll College (Waukesha, Wisconsin) and a Juris Doctor from Duke University School of Law. This Cascade Commentary was excerpted with permission from Dr. Leef’s longer version at
http://popecenter.org/clarion_call/article.html?id=2443.

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