Friday, February 7, 2014

UA/UAA| Enough already, the postscript ...

Oddly enough given the popularity of some of the subjects I have written about before, the piece I wrote yesterday ("UAA| Enough already ...") has completely blown past the previous record for most hits in the first 24-hour period after being posted.  The piece hit the 24-hour mark with 700+ hits, which is short of The Drudge Report and maybe even, closer to home, Amanda Coyne's, but is a high number for "oil and fiscal policy nerd" blogs of this ilk.

As those of you reading this follow up will likely already know, yesterday's article was about UAA's request for an additional $2.7 million in state funding to cover the operating costs of its new sports arena, which, unlike every other similar arena built in the United States in the last 20 years, has been built entirely from state funds.  (Most other similar arenas built during the same period have required at least 50% alumni and donor buy-in before turning the first spadeful of dirt.  And, some, like the University of Virginia's John Paul Jones Arena are at the other end of the spectrum, having been built almost entirely with private funds.)

Not unexpectedly given the number of hits, I received a few follow up notes and posts.  Some were critical, saying Alaska is small, unique and its University system is relatively young, and as a result we shouldn't be surprised that the state needs to provide the bulk of the funding for such facilities.

My response to that is simple:  first, the University of Alaska system isn't that young (the University system itself was founded in 1917 and UAA dates from 1970, now nearly 35 years ago); second, UAA didn't even try to raise private funds for the new arena (I recall being at early meetings where I and one other raised the issue of developing an effort to raise private funds, and watching Dr. Cobb, sitting at the end of the table, shake his head and say no, the Legislature will take care of us); and third, if that's true, we should have built a facility more in line with Alaska's fiscal condition, rather than a $109+ million "Taj Mahal" that will likely stand going forward mostly as a memorial to the state's excesses during the early 2010's (the boom before the following bust).

Most writing notes agreed with my points, however, adopting the same basic premise that the University system either needs to develop a supportive revenue stream from alumni and donors or accept that it will receive increasingly lower levels of funding.  One was explicit, suggesting that, in these economic times, other state programs, such as K-12, should not be expected to accept lower funding levels in order effectively to "subsidize" a University system that is failing to help itself by developing the alternative sources of revenue successfully solicited and used by its peers.

And one note in particular was thought provoking.  The comment pointed out that the leaders of both the University system as a whole (Patrick Gamble) and UAA, the system's largest campus (Tom Case) are former military generals, whose careers have continually focused in one way or another on obtaining government funding of various projects.  That skill set, the commentator suggested, is significantly different from that required to raise funds from alumni and private donors.

To a large degree, government funding of the military (or, the reader suggests, a public university) is a given, and obtaining funding is a matter of simply convincing a small group of people to give what essentially is other people's money to your project over another.

On the other hand, convincing alumni and private donors to contribute money is a much different endeavor.  Giving their own (or corporation's) money to a given university is far from a given, and even if they are of a nature to be generous, there is a lot of competition for the dollars among a wide range of institutions.  From personal experience, I can attest that the sales effort required to be successful in a private context is far different, and far more intense, than supporting requests for funding from government.

The writer of that comment ultimately suggested that in order to change the intensity and success of the University's private fundraising efforts, changes in leadership may be required.

That may be the case.  In the same 2011 report to President Gamble referenced in yesterday's piece, the outside consultants he retained had this to say (at p. 63-64) about private fundraising efforts directed toward "major gifts and planned giving effort[s]."  Such targets are the keystone of any successful private fundraising effort:
The Chancellors, in coordination with staff or key volunteers, are crucial to soliciting these gifts and providing careful stewardship and attention to this group of donors.  Planned gifts provide examples for others to follow, and the Chancellors, with appropriate help from the President, must be in the forefront of this fund raising activity.
Certainly, my most recent experiences with Chancellor Case and indirectly, with President Gamble, have not reminded me of past, successful efforts by other university presidents and deans in soliciting my support for their institutions.  I honestly have never dealt before with (or even heard about) an institution like UAA, that takes a donor's money at the same time it takes preemptive actions in secret proceedings.

But that could just be me and Gamble and Case may have the ability, if directed and incentivized, to refocus UA and UAA's efforts on developing external revenue streams.  If so, however, they need to do it quickly.

The commentator who suggested that UA's failure thusfar to develop significant alternative revenue streams is effectively hurting other state programs is correct.   There is a substantial amount of demand within state government for the limited funds that are available.  If UA took less because it was able to rely on another revenue stream more, some other program (or, perhaps more beneficially, Alaska's future generations) would receive the remainder.

Others are going to start reaching the same conclusion soon, perhaps as soon as during this legislative session.  They will want President Gamble and Chancellor Case to have answers.  Either they need to, or the prior commentator may prove right, their usefulness may have reached its end.

Thursday, February 6, 2014

UAA| Enough already ...

I must admit to almost choking last night upon hearing the following as the lead on the 5:00 pm news. "UAA Needs $2.7 million Before Opening Alaska Air Center."
The Alaska Airlines Center on the University of Alaska-Anchorage campus is set to open this summer but the $2.7 million needed to pay for the arena is not yet approved. ... The Alaska Airlines center has already cost more than $100 million .... Athletic director Keith Hackett said Governor Sean Parnell would like to see the $2.7 million operating budget for the center cut nearly in half, to about $1.6 million. ... "[But w]e're hopeful, we're always going to be hopeful, that the [additional] funding is going to be put into place,” he said.
Are you kidding me?
  • The state budget for this year is already $2.2 billion in the red, 
  • the budget for next year already is projected to be more than another $1 billion in the red, even before adding on "legislative priorities" (the Alaska euphemism for "earmarks"), 
  • both of those two together (combined with the Governor's proposal to transfer $3 billion from the Constitutional Budget Reserve to the PERS/TRS accounts) will drain nearly a third of the state's cash budget reserves in two years alone, 
  • the University of Alaska - Anchorage's own Institute of Social and Economic Research reports that in a single year Alaska's sustainable spending level has fallen by 10% (from $5.5 billion to $5.0 billion), 
  • the state has already sunk more than $109 million of state money into the new Center, fully funding a project that in any other part of the country would have required at least 50% alumni and private donor buy-in before a spade of dirt was turned,
  • not to mention that the University system itself already has admitted that its business model is unsustainable and is in the process of cutting programs, and that UAA has gone out of its way to adopt kangaroo-court like policies and procedures that hugely discourage private giving to its programs,
but yet, UAA now wants the state to provide an additional $2.7 million per year -- because you know once we start down this path its not going to stop -- to cover operating costs?  

What happened to the previous assurances, made during the $60 million bond drive and requests for additional state funding, that, once built, the facility would pay for itself through events and sponsorships? What happened also to the assurances that this building would not impair other campus programs?  With UAA now engaged in the "prioritization" of its academic programs, is someone seriously going to try to argue that throwing more state money at the Center isn't coming at the expense of other programs?

The end.  Enough.  Stop the insanity.  Not only should the Legislature reject UAA's request for an additional $1.1 million in funding, the Legislature should root out the $1.6 million that's in the budget now and strike it out.  Use that toward funding the proposed $11 million in additional funding for the Base Student Allocation (BSA) that the Governor requested in the State of the State, but is not included in his original budget; use it toward funding the constitutionally mandated payments to meet the state's PERS/TRS obligations; use it, god forbid, to reduce the deficit that the state otherwise is going to run this year and that, ultimately, will be borne in one way or another by future generations of Alaskans.

Use it for anything other than letting UAA off the hook one more time in doing what every other higher ed institution in the US is doing right now -- reaching out to (and learning to treat fairly) alumni and private sector donors.  When Tom Case, Keith Hackett and no doubt, Steve Nerland and Don Winchester come down to Juneau or call on the phone and ask the state yet again to pitch in more of other people's money to support the project, tell them that its time instead to put in some of their own and that they should redirect their remaining talents and efforts to helping the University reach out to its alumni and other private donors to step up to their share.

In a 2011 report prepared at the request of UA President Patrick Gamble, a group of outside experts assembled by him to take a look at the University concluded 
The condition of institutional advancement—the management of private giving—at the University of Alaska is mediocre at best. Despite some large gifts (mostly of a corporate variety), UA does not have a history of a well-organized contemporary approach that is standard for a comparable system.
Instead, UAA's approach, as former Athletic Director Steve Cobb was once reported to have said about UAA Athletics, historically has been this: “it doesn’t matter how much money this Athletic Department loses, the state is awash in money and we are just going to get a blank check.”

Steve Cobb is now gone; so is the state being "awash in money."  It is time for a new approach at UAA.  

As I said late last year in a different context but that many supported generically: 
The simple truth is Alaska has outstripped its financial capacity to add any more new spending to its mix. Just as each of us face in our own lives, Alaska only has so much earning power and the fact is we are now spending well past our current income.

When each of us face that point in our own lives — when we spend past current income — we institute limits. We don’t buy a new truck, take the next vacation, buy a new cabin or even add HBO/Showtime to our cable line-up.
Of necessity, the same steps are beginning to occur now that we have crossed the line at the state level. Fiscally speaking, at current spending levels Alaska is running on fumes. The state’s fiscal structure can’t tolerate layering on more programs; instead, it is time to start facing up to the fact that even the current programs are going to need to be rolled back.
That admonition applies equally as well here.  Its time for UAA to grow up and become a real university system.  The Governor and Legislature should not enable them by continuing to take out the wallet when the system comes to its parent and asks for more money.  Its time for them to go out and earn it on their own.

Wednesday, February 5, 2014

Discussing the Flint Hills closure on The Dave Stieren Show this afternoon ...

Dave Stieren has asked me to join him on his show at 2:30p this afternoon to discuss Flint Hill's announcement yesterday of the anticipated closure of its North Pole (Alaska) refinery.  The Dave Stieren Show is available locally at KFQD FM103.7/AM750 and online here.

Like TAPS, oil production, the military and a few other things, the Flint Hills refinery is one of the linchpins of the Alaska economy.  In various ways, the refinery has an economic reach far beyond its borders.  Its exports of jet fuel to Anchorage's Ted Stevens International Airport, for example, are critical to the economic health of the Alaska Railroad.  It is the fourth largest property taxpayer in the Fairbanks North Star Borough -- a key component in the financial support behind the Borough's government operations and schools.  Its supply of jet fuel to Eielson AFB is a key component of the base's operations.  The 125 jobs the refinery provides are among the best paying in the area and help support both the local real estate market and a number of local small businesses.  Its operations have the effect of reheating the oil reintroduced into TAPS, which is an increasingly important part of TAPS operations.

In short, the loss of the refinery and its economic contributions to the Interior and the state are going to have a significant and wide ranging impact.  Tune in this afternoon at 2:30p to hear Dave and I discuss.

Saturday, February 1, 2014

The University of Alaska and its spending habits ...

According to contemporary news reports, University of Alaska President Pat Gamble had the following to say about the University's current fiscal situation at last December's Board of Regents meeting:
... the business model of the university is now not sustainable.  We are trying to hold tuition down.  The general fund is not going to supply the growth.  We're not getting anything out of interest rates.  The discretionary funds that come from grants are limited and probably going to stay at least flat.
Gamble predicted going forward, "[t]hings like growth, things like planning for new buildings, things like opening up new programs, all those kinds of things could very likely just be off the table."

Earlier in the year, the Chancellor of the University's Anchorage branch announced a plan to analyze all of the branch's various programs and rank them for funding prioritization, with those at the bottom "possibly facing elimination."  According to the University's description of the program, the
[r]anking will be done by placing each program or function in one of five quintiles: Priority for higher investment; Consider for higher investment; Sustained resources; Transform; Subject to further review or consider for phase out. Each quintile for academic programs will contain an equal number of programs ....
That means up to a fifth of UAA's programs and administrative functions will be up for reduction or elimination by the end of the process.

So it was somewhat shocking yesterday afternoon when I was looking through the catalogue for an upcoming art auction in Juneau that I saw the University of Alaska Southeast (UAS) listed (at p. 12) as one of the primary financial backers of the event.  The auction is being put on by the Sealaska Heritage Institute "in an effort to promote Native art, raise funds for construction of the Walter Soboleff Center and to establish Juneau as the capital of Northwest Coast art."

At its level of giving ("Copper Level"), in exchange for its support UAS is receiving:
•Front placement, table of 10, •Handmade copper tináa for each table guest, made by Tlingit artist Héendei, •2 complimentary bottles of wine for the table, •Verbal recognition and name/logo recognized in slideshow display during event , •Recognition in Tináa Art Auction catalog/program, SHI’s website, promotional materials, annual report, and annual video, •Quarter-page ad in Celebration 2014 program, 5,000 copies distributed, •Invitation to Sneak Preview Reception with the artists on January 31, •Alaska Airlines and hotel discounts.
Now, don't misunderstand my point.  At a personal level I deeply support the mission of the auction and, in fact, was looking through the catalogue to see if there were any pieces on which I wanted to bid.  Having recently donated a portion of my collection to a local university where I used to live in Oklahoma, I always am looking for opportunities to build it back up (no doubt, so that I can give it away again).

But as much as I support the mission personally, I am appalled in a period during which the University itself recognizes that it has an unsustainable business model and is headed toward significant retrenchment that it is spending money essentially subsidizing the foundational activities of a profitable regional corporation.  Not only are such expenditures off mission, they are, ultimately, a slap in the face to the employees and students who are being asked to bear the brunt of the retrenchments made necessary by the state and university's current fiscal conditions.

This morning I attempted to identify how much in total the University system -- and indeed the state overall -- are spending on similar efforts, buying tables or otherwise supporting what essentially are fundraising efforts by private and non-governmental institutions.  But the information provided online by the Office of Management and Budget and the Legislative Finance Division doesn't go into that level of detail and, interestingly enough, the state's "checkbook," an effort initiated during the Palin Administration to provide transparency and accountability for state expenditures, doesn't include payments made by the University system.

As the House and Finance Committees continue to consider the University's budget during the current session, however, I and likely others will urge them to keep this experience in mind, ask the University to identify from its own books how much has been spent on such programs in the past and identify the efforts it intends to make to eliminate these non-mission related expenditures in the future.

If we are to leave a legacy for the generations to come, it is time for Alaska government to spend smarter, not more.  Eliminating these types of expenditures at all levels of state government is one of the ways it can and should do so.