- In a 10-1 vote, the University of Alaska System's board of regents earlier this week moved to declare financial exigency, which allows the 16-campus system to lay off faculty and wind down programs more quickly, the Anchorage Daily News reported.
- The vote was in response to Alaska Gov. Mike Dunleavy cutting $130 million from the system's budget through line-item vetoes last month atop an earlier $5 million reduction approved by the state's Legislature.
- The board is mulling two restructuring options: distributing the cuts proportionally across the system's three universities, which are separately accredited, or merging the three institutions to reduce administrative overhead.
Financial exigency is an "unfortunate state for any college or university," wrote Susan Whealler Johnston, president of the National Association of College and University Business Officers, in an email to Education Dive.
When done well, it can allow an institution time to make tough decisions thoughtfully, she explained. However, when done without the time for careful consideration, "financial exigency can result in disadvantaging students, mishandling the termination of faculty and staff, adversely affecting the community surrounding the institution, and damaging the institution's reputation."
Raymond Scheppach, a public policy professor at the University of Virginia, told Education Dive earlier this month that Dunleavy didn't give the U of Alaska enough time to prepare for the cuts.
"If you were going to cut 40% out, you'd want to it over a four- or five-year period to give them time to restructure and make good decisions," he said. "In this kind of situation, you're just going to have to cut whatever is the most expensive to get the dollars down."
Earlier this month, the state's Legislature failed to get the 45 votes needed to override the cuts, which amount to a 41% drop in the U of Alaska's state funding. The university estimates it will need to lay off at least 1,300 staff and faculty members and possibly shut down entire campuses in response to the cuts.
Several options for the university's future were floated during the board's meeting on Monday.
One would spread the cuts' impact proportionately across the system's three universities, which will each be reduced to its "core." In this model, a larger share of Alaskans would have access to the state's higher education system than if the state were to eliminate one of the universities or some of its campuses.
Another option is to create a single accredited university from the three separate institutions. This option would reduce administrative overhead and eliminate duplicative programs, but it would require the U.S. Department of Education's approval.
The board is scheduled to decide on the U of Alaska's fiscal year 2020 budget and new structure next Tuesday. U of Alaska President Jim Johnsen urged the board members to act quickly, as the needed cuts will grow the longer they wait to decide, the Daily News reported.
Last month, Moody's Investors Service downgraded the system's credit rating by several notches in response to the cuts. "With significant uncertainty around the pace of action and resulting impact on financial results and liquidity, future ratings actions could be multi-notch," analysts wrote.
It will be critical for the U of Alaska to downsize quickly without depleting its cash reserves in order to improve its rating, the analysts added. The system does not have enough money to sustain it's "current operations through the year," according to a presentation given to the board.
U of Alaska may receive some financial relief from the state's Legislature. On Monday, the House advanced a bill that would restore $110 million to the U of Alaska, though Dunleavy could veto the legislation if it passed.