In face of cuts, flexibilty for UW has to be real

If the governor and legislature are going make deep cuts in the budget of the University of Wisconsin System, and if they are going to give System flexibility in return, they better be serious about giving campus leaders a freer hand.

The magnitude of cuts bandied about inside the beltway in Madison sounds heavy, as much as 300 million. With a projected state deficit of nearly $1 billion just for continuing operations in the 2015-2017 biennium, and a promise by Republicans not to raise taxes, and a governor running for president on a lower-tax platform, there is really no place for them to go than major cuts.

This exodus from university funding by Republicans could be a big mistake, unless managed properly. No one in the economic development world disputes that universities are major engines of economic growth, job creation and prosperity. No one.

By most measures, Wisconsin ranks relatively high among the states for spending on higher education. But we don’t get the payoff in long-term job growth, for which we rank 30th. Something major is amiss.

So, how to go about the near-certain reductions in the UW budget without damage to one of our best assets? Cutting cost across the board is a blunt instrument. It is a weak manager’s way of passing the pain around evenly with little regard to the varying impacts on the mission of the organization. As any good executive who has had to do downsizing knows, it has to be done with scalpel, not a meat ax.

That’s where this undefined term “flexibility” comes in. The term “charter” university” has also been injected into the early dialogue. So has “public authority. “No one knows exactly what those terms mean.

The UW System leaders have already been given some leverage over hiring and pay for faculty and staff members. They would like to be free from state requirements on purchasing, which add great cost to building projects.

But the big-ticket item where they need major relief is benefits, mainly health costs. That piece of “flexibility” didn’t wasn’t front and center in Gov. Scott Walker’s pronouncement this week on his massive proposed UW cuts.

The university has some 32,000 employees who get their health care through the Employee Trust Funds (ETF) at about $17,000 per employee. That’s a bill of more than $500 million annually. Best practice private companies bring in high quality health care for $6,000 less than that.

If the campuses were cut loose to contract for their own health care on regional markets, two things would happen: 1. The 26 UW campuses could save $30%, more than $150 million a year, enough to offset some the looming cuts. 2. Better coverage could be offered in consumer-driven plans designed to keep people out of dangerous hospitals.

That’s an important insight. There is an inverse correlation between price and quality. Cheaper is better. Anyone who understands quality and lean systems knows that to be true. The best providers reduce waste, errors, infections and poor quality service. In addition to better value for patients, those disciplines reduce their costs and prices.

UW System may have been fat in the past, but some of that fat was rendered in spending cuts during the Great Recession. It may have had understated reserves in the past, but those were melted down in the current biennium via tuition freezes.

And, like it or not, the revenue fairy is dead. Federal R&D dollars are going down, not up. And the tuition cap may continue. It is not clear at all if the legislature would give the new public authority complete control over tuitions. My guess is not.

In the face of a major budget crunch, UW System needs help in taking hard look at what it should fund and what needs to go — so promising new initiatives like the College of Freshwater Sciences and the Innovation Campus at UW Milwaukee can go forward.

That help could come from a blue ribbon commission of smart citizens who ask these kinds of questions:

• What majors are duplicative across several campuses? For instance, how many journalism programs are needed as news rooms shrink?

• Has UW — Extension outlived its time? Could its resources be repurposed?

• There are two schools of health at UWM. Could they be consolidated? Are consolidations on other campuses possible?

• UW – Madison has dozens of “centers” that are largely unaccountable. Are they all needed?

• The reciprocity program with Minnesota works great for Gophers, who largely go back home after Badgers subsidize their graduations. Should this uneven exchange be terminated?

• Should the 26 UW campuses be reorganized on a regional basis so overheads could be consolidated and the campuses better aligned to economic development?

• Should there be a K-16 council to consolidate the deliverables at the two-year UW Colleges and the state’s 16 technical colleges?

• Should the billion in off-balance sheet assets at UW – Madison be consolidated on a UW balance sheet, and should they give back at least 5% per year to the university, a typical foundation outlay?

• Could UW experts help the state with the cost elephant in the room, health costs for state employees and Medicaid? Growth in Medicaid costs, even with its paltry reimbursements to providers, is killing the state budget. Wisconsin’s Medicaid program, which is asking for an increase of more than $800 million in the biennnium, is crowding out all other state priorities, like university allocations. Innovations, like programs to keep ailing people in their homes, are out there. Find them.

Presidential candidate Walker can’t raise taxes and has to balance the budget. Hence the cuts. But he could use the Wisconsin Idea to create a deep-digging commission of experts from across the state as he puts forward the concept of “flexibility” to provide some relief for the cuts he has proposed.

That kind of deep dig can’t be done in an attention-deficit legislature or in an attention-draining presidential campaign.

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