Overview of the Financial Situation for Higher Education in - PowerPoint PPT Presentation

Overview of the Financial Situation for Higher Education in Louisiana; The Environment for Academia in the Trump Administration – and What We Can Do About IT! Howard Bunsis Professor of Accounting, Eastern Michigan University Chair, AAUP Collective Bargaining Congress February 2017 1

Financial Situation of the State of Louisiana and the Appropriation for Higher Education 2

Change in State Support for Higher Education, 2016 to 2017 Source: Grapevine, 2/6/2017 3

2016 Revenue Distribution of Louisiana Publics Source: System Audited Financial Statements % State % Tuition % Aux % All Other 100% 90% 80% 70% 60% 41% 44% 47% 44% 42% 40% 50% 29% 39% 41% 38% 42% 39% 29% 40% 26% 23% 29% 17% 33% 30% 22% 4% 20% 9% 9% 31% 29% 23% 23% 22% 22% 21% 20% 20% 20% 20% 19% 18% 18% 18% 18% 18% 18% 16% 16% 15% 14% 10% 0% South Louisiana CC Delta CC LSU Eunice Fletcher CC Northwestern Baton Rouge CC Southern BR UNO Health Sci, Shrev Southeastern LSUA Bossier Parish CC UL Monroe McNeese LSU Shreveport La Tech Nichols Southern U Shreveport Grambling Health Sci, NO ULL LSU A&M 4

Average Percent of Total Revenues from The State and Tuition 2008, 2012, 2016 Sources: Audited Financials and IPEDS (Integrated Postsecondary Education Data System of the U.S. Dept. of Education) 2008 2012 2016 45% 38% 40% 35% 31% 30% 25% 24% 25% 20% 17% 20% 15% 10% 5% 0% State Tuition 5

More Trouble Ahead for Louisiana Public Higher Education Louisiana colleges and universities bracing for cuts, shift of costs to students The Acadiana Advocate January 26, 2017 The one bright spot, says Higher Education Commissioner Joe Rallo, is that the actual dollars lost won’t be that much — $22 million to $60 million — because the state has so often reduced its support over the past eight years. Of greater concern is that the withdrawal of support has shifted the bulk of a college education’s cost from state government to individual students. The change endangers higher education’s traditional mission of helping lower and middle income students to move up the economic ladder. Higher education leaders have long stressed the importance of providing an avenue for upward mobility in a state with such high poverty and low incomes. 6

More Cuts to Higher Education in Louisiana Gov. Edwards wants higher education stability, but more cuts loom January 11, 2017 Nola.com Gov. John Bel Edwards vowed that he won't allow the budget "to be • balanced on the backs of our students," while later acknowledging that's more of a long-term aspiration than a pledge he can immediately fulfill. As he marked the one-year anniversary of his tenure in office, the • Democratic governor talked of his administration's ongoing work to stabilize the state budget after he inherited the worst financial problems Louisiana's seen in nearly 30 years. The cut was $12 million out of a total appropriation of $900 million – • significant, but not huge Funding of the TOPS program is only at 42% this semester • Higher education is a loser again in Louisiana's latest budget battle November 17, 2016 Nola.com 7

Louisiana Unemployment Rate Source: Legislative Fiscal Office, State of Louisiana Louisiana Relative Unemployment Rates, December 2016 13.0 Unemployment Rates: LA, South, and U.S. 12.8 12.5 Monthly Obs, Seasonally Adjusted (sa) 12.3 12.0 Data through Dec(p) 2016 11.8 11.5 11.3 11.0 10.8 10.5 10.3 10.0 9.8 9.5 9.3 9.0 8.8 8.5 8.3 8.0 7.8 7.5 7.3 7.0 6.8 6.5 6.3 6.0 5.8 5.5 5.3 5.0 4.8 4.5 4.3 4.0 3.8 3.5 3.3 P = Jan'80 3.0 P = Jul'90 P = Mar'01 P = Dec'07 T = Jul'80 2.8 T = Mar'91 T = Nov'01 P = Jul'81 T = Jun'09 2.5 T = Nov'82 2.3 2.0 Jan-76 Aug-76 Mar-77 Oct-77 May-78 Dec-78 Jul-79 Feb-80 Sep-80 Apr-81 Nov-81 Jun-82 Jan-83 Aug-83 Mar-84 Oct-84 May-85 Dec-85 Jul-86 Feb-87 Sep-87 Apr-88 Nov-88 Jun-89 Jan-90 Aug-90 Mar-91 Oct-91 May-92 Dec-92 Jul-93 Feb-94 Sep-94 Apr-95 Nov-95 Jun-96 Jan-97 Aug-97 Mar-98 Oct-98 May-99 Dec-99 Jul-00 Feb-01 Sep-01 Apr-02 Nov-02 Jun-03 Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16 Nov-16 U.S. Recession US_UnRate_sa LA_UnRate_sa South_Un_sa National Recession Bars: Peak & Trough Months One of the most referenced metrics of economic performance at the both the national and state levels is the unemployment rate. 8

U-3 and U-6 Unemployment Rates for Southern States per Bureau of Labor Statistics, January 2017 Southern States as defined by the U.S. Census Bureau U-3 U-6 13% 13% 10.7% 12% 12% 9.6% 11% 11% 10% 10% 9% 9% 8% 8% 6.2% 7% 7% 6% 4.8% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% NH/SD (Low) Arkansas Delaware Texas Oklahoma Georgia Virginia Maryland Tennessee U.S. Florida South Carolina Kentucky North Carolina Mississippi Alabama West Virginia Louisiana NM/AK U-3: Standard unemployment Rate U-6: Numerator = total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons 9 Denominator = civilian labor force plus all marginally attached workers.

Relative Economic Indicator Performance, December 2016 Louisiana Rela,ve Coincident Indicator Performance Feb 2010 = 100, Louisiana Na,onal Recession Trough 128.00 Last ObservaCon: Dec 2016 U.S. = 122.72 South = 121.42 LA = 111.42 123.00 118.00 113.00 108.00 103.00 98.00 Jun-10 Aug-10 Dec-10 Jun-11 Aug-11 Dec-11 Jun-12 Aug-12 Dec-12 Jun-13 Aug-13 Dec-13 Jun-14 Aug-14 Dec-14 Jun-15 Aug-15 Dec-15 Jun-16 Aug-16 Dec-16 Feb-10 Apr-10 Oct-10 Feb-11 Apr-11 Oct-11 Feb-12 Apr-12 Oct-12 Feb-13 Apr-13 Oct-13 Feb-14 Apr-14 Oct-14 Feb-15 Apr-15 Oct-15 Feb-16 Apr-16 Oct-16 LA US South 10

State Revenues Are Forecast to Increase in 2017 TAXES, LICENSES AND FEES by fiscal year $14 Stat Deds SGF $12 $10 $8 Billions $6 $4 $2 $0 2011 2012 2013 2014 2015 2016* 2017* Fiscal Year * Forecast 11 Source: Governor’s Executive Budget 2016-17

State Revenue Forecast for 2017 to 2021 LA State Revenue Forecasting Conference, 1/13/2017 Sales Tax Increase set to expire for 2019 General Fund Dedications 14 12 10 8 6 4 2 0 2017 Adopted 2018 2019 2020 2021 2017 Original (1/2017) (6/2016) 2017 Original 2017 Adopted In Billions 2018 2019 2020 2021 (6/2016) (1/2017) General Fund 9.62 9.28 9.47 8.39 8.61 8.75 Dedications 2.41 2.51 2.57 2.55 2.55 2.56 Total 12.03 11.80 12.04 10.94 11.16 11.32 Oil per barrel $30.00 $48.13 $51.41 $53.37 $53.93 $54.55 12

Is Louisiana a Poor State? Louisiana has the 2 nd highest poverty rate 6 th lowest per capita income Source: US Census Bureau, 2015 Rates Median Household Income % Below Poverty Line 25% $80,000 U.S. Average 19.6% $70,000 20% $60,000 $45,727 $50,000 15% $40,000 10% $30,000 $20,000 5% $10,000 0% $0 Kentucky Louisiana Arkansas WVA Georgia TN SC NC Oklahoma Texas Florida US Average NH MS NM Alabama Delaware Virginia Maryland 13

$304 Million State Deficit To Fill Total budget is about $12 billion, so $300 million is 2.5% of the • total Louisiana Budget Project: Jan. 30: Fees, but no taxes in special • session – Governor Edwards said no new taxes, but fees could go up – Mix of budget cuts and using the rainy day fund What is off the table: • – K-12 schools – Departments of Corrections and Children and Family Services. What is on the table for cuts: • – Health care services, – Higher education – Offices of other statewide elected officials 14

State S&P Bond Ratings, 2016 Source: Pew Charitable Trust, December 2016 AAA AA+ AA AA- A+ A A- AK ID AL CA KY IL DE MA AZ MI NJ FL MN AR PA GA NM CO WV IN NY CT IA OH HI MD OK KS MO OR LA NE SC ME NC TN MS ND VT MT SD WA NV TX NH UT RI VA WI WY 15

2016 Total State Revenue Breakdown Source: State of Louisiana 2016 Comprehensive Annual Financial Report 6% Operating Grants (Feds) 9% Capital Grants Charge for Services 14% 44% Income Taxes Sales Taxes 14% Other Taxes 10% 3% Other Revenues In Billions Dollars % of Total 44% 10.6 Operating Grants (Feds) 3% Capital Grants 0.7 10% Charge for Services 2.5 14% Income Taxes 3.3 14% Sales Taxes 3.3 9% Other Taxes 2.1 7% Other Revenues 1.6 16 100% Total Revenues 24.1