By RICHARD VEDDER
Governor Michael Dunleavy of Alaska caused quite a stir in American higher education when he used his line item budget power to reduce the appropriation of the University of Alaska (UA) by about $130 million, or about 40 percent. Since the university depends on those appropriations for about 40 percent of its budget, this was a brutal, severe cut, enough to compel a declaration of financial exigency and, with that, the likely dismissal of some tenured faculty.
The University’s State appropriation had already fallen by over $50 million between 2014 and 2019. Immediately the higher education establishment recoiled in horror, and the school’s regional accrediting agency, the Northwest Commission on Colleges and Universities, issued a thinly veiled threat that it might revoke the school’s accreditation if the cuts were not reversed. Moody’s significantly reduced the ratings on the UA’s $270 million in general revenue bonds.
My initial thoughts were: “This is too much. Universities are inefficient and probably need downsizing fiscally, but reductions of this size pose abrupt disruptions to people’s lives and severely damage the future of higher education in Alaska.”
I was inclined to agree with George Mason University economist Tyler Cowen, who opined in a Bloomberg opinion piece “Alaska is showing a depressing lack of commitment…” Moreover, this seemed particularly true because the governor was trying to protect Alaska’s unique equivalent of a negative income tax — dividend payments to all citizens from its Permanent Fund — royalties derived from Alaska’s massive natural resources.
But then I explored things further and I think the governor had a point.