Unfettering New York’s Public Universities

Fiscally beleaguered presidents of public universities around the country like to wisecrack: “public universities used to be publicly funded, then they were publicly assisted, now they are publicly named.” While easy to dismiss as a self-serving whine, there is something to their complaint, at least as it applies to the two public university systems in New York, CUNY, the City University of New York, and SUNY, the State University of New York. Looking just at SUNY’s budget, for instance, out of a total annual system-wide expenditure of $11 billion, only $3.5 billion – or 32 percent – actually comes from New York State’s taxpayers. The other 68 percent comes from students, research foundations, users of SUNY facilities, and generous donors. The CUNY proportions are roughly comparable. In other words, to quote a top SUNY financial official, New York State today “is only a minority shareholder” in its public universities.
The problem is that New York’s legislators treat all of this non-taxpayer money as if it were actually theirs to collect and to disburse. They not only insist on setting the level of university tuition and then “appropriating” it so that it can be spent, they even want to control the disposition of externally provided research and philanthropy dollars. To add insult to injury, as external funding has gone up, legislators have reduced the state’s tax levy allocation – often by an even greater amount. Understandably, this infuriates the public universities’ primary financial backers – students, research grantors and philanthropists – who see their contributions being used not to enhance the state’s colleges but to indirectly underwrite other state expenditures.
This travesty might finally end (or at least be curtailed) under a proposal now being debated in Albany that is so controversial that its resolution is holding up approval of the 2011 state budget. Called The Public Higher Education Empowerment and Innovation Act (PHEEIA, pronounced “fee-ah”) – supported by Governor David Paterson and the state senate but strenuously resisted by the assembly – this legislation would allow both CUNY and SUNY to set their tuition levels without the legislature’s prior approval and keep all the resulting tuition revenue, accept and retain all funds from research grants and philanthropic gifts, more easily enter into contracts with private vendors and enterprise partners, streamline hospital operations (mainly an issue concerning SUNY’s three hospitals), fast-track campus facility construction, and lease portions of their campuses to other parties for purposes consistent with their academic mission. Naturally, all of these new operational freedoms are hemmed in by myriad restrictions: tuition increases would kept under the higher education price index, all expenditures and contracts would still be subject to state financial accounting rules, land leases and contracts would be tightly overseen by newly established state boards, just to mention a few of the bill’s many constraints.


The basic ideas incorporated in PHEEIA are not at all new. Back in 1985, when Clifton Wharton was chancellor of SUNY and Mario Cuomo was governor, a blue-ribbon commission appointed by the SUNY trustees advocated something quite similar. Scorned at the time by both the governor and the legislature, the commission’s reforms never saw the light of day. Repeatedly, when George Pataki was governor, the SUNY board got nowhere in its periodic pleas for a “rational tuition policy” that would end the decades long tendency of the state legislature to keep tuition frozen during economic good times when parents might actually be able to afford increases, only to impose massive hikes during recessions (as happened this year). So, given this history, it is both surprising and heartening that, with both gubernatorial and senate support, PHEEIA got this far in Albany’s political mud-wrestling process.
Beyond the obvious immediate benefits that the new financial freedom might confer on CUNY’s and SUNY’s managers, who are desperately trying to educate 700,000 students on 86 campuses with an ever-diminishing state outlay, PHEEIA might help resuscitate the state’s moribund economy. Outside of the vital complex of global industries centered on Manhattan, New York State’s economy has very few engines of dynamism other than its higher education institutions -most of them in its two public systems. Not only does the education of 700,000 students itself contribute a large increment to the state’s GDP, but the only glimmers of vitality to be found in the state’s non-Manhattan industries rely heavily on academic research, much of it originating in its public research campuses. The MRI was invented at SUNY’s Downstate Medical Center; the bar code was launched at SUNY Stony Brook; SUNY Albany’s College of Nanotechnology is ushering in a new generation of computer chips being tested and manufactured in the Hudson valley; SUNY Buffalo is the driver of its entire metropolitan economy (which is why Buffalo’s Democratic state senator, William Stachowski, won’t sign on to a comprehensive state budget deal without PHEEIA); units of CUNY have spurred pathbreaking policy reforms in transportation, criminal justice and gerontology.
The state Assembly’s bitter opposition to PHEEIA, unaccountably seconded by both the CUNY and SUNY faculty unions, is hard to fathom. The ostensible concern for student affordability is both misplaced and insincere. Misplaced because New York’s Tuition Assistance Program underwrites, on a sliding scale tied to level of need, much or all of low-income students’ tuition burdens. Insincere because the state has not, over the long term, even kept tuition levels below the higher education price index (the PHEEIA limit), it just increased tuition in huge leaps at the most economically inopportune times – and then stole the tuition revenue to offset losses in general tax receipts. Even so, one suspects that the governor’s endorsement of PHEEIA is not merely the product of enlightened policy analysis. Because CUNY and SUNY are among the few agencies whose budgets are not hostage to politically powerful interest groups like unionized health care workers and teachers, giving them the ability to raise their tuition as needed would make it easier for the state to reduce their tax levy allocations.
Whatever his motive, however, the governor is right and the assembly is wrong. Higher education is one of New York State’s most critical economic anchors. CUNY and SUNY account for two-thirds of the state’s higher education enterprise. Unless they can count on stable and predictable revenues, and have the flexibility to deploy them effectively to assure a high quality of instruction and research, these great universities will slowly wither and the state’s economy will wither along with them.

Peter Salins

Peter Salins is University Professor of Political Science at Stony Brook University and director of its graduate program in public policy.

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