Budget Cuts and Educational Quality

By Elizabeth D. Capaldi

Public universities are not for-profit businesses with an easy-to-understand bottom line: their financial reports are not designed to convey information to the public fully or to reflect all the costs of teaching and research. Financial reports do track every dollar in accordance with the accounting rules required by auditors, but they do not adequately inform the public about revenues and expenses or productivity and efficiency. They obscure different revenue sources, the actual costs of different functions such as teaching and research, and the subsidization of expensive programs by less expensive ones. In a time of budget cutting, this complexity becomes a problem as confusion about the productivity, efficiency, and cost of higher education leads to decisions that can seriously cripple public universities.

Universities have many sources of funds, but most are restricted, meaning that they may be spent on only one purpose. Gifts for a named professorship, scholarship, center, or building, for example, must be spent in accordance with the terms of the gift. Legislators and others assume that since universities have sources of income other than state appropriations, state funding can be cut without harming universities; what they often fail to realize is that the state and the students themselves are the primary funders of the educational functions of public universities. When state funding is cut, the core enterprise, education, is cut. The recent state budget cuts have thus had a disproportionate effect on the education of students.

Continued at: http://www.aaup.org/AAUP/pubsres/academe/2011/ND/Feat/capa.htm