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The business of education: state university system at a financial crossroads

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It must be difficult to be the governor of New York during a painful budget crisis. There are so many mouths to feed and so little money to feed them.


You see the state university system as the engine for economic growth, but you can't seem to find the money to fund it. No state funding means no SUNY. No SUNY means no engine for 21st century growth, which can't be good for re-election.


Now is the time for creativity and bold thinking. The Public Higher Education Empowerment and Innovation Act may have represented that kind of thinking, but it did not pass the Legislature. The ideas behind the act and the proposals from SUNY Chancellor Nancy Zimpher offer a possible approach to the problem, but they come with potential risks as well as rewards.


With an average annual cost of $6,250 in tuition and fees, a SUNY education is an amazing bargain. It is less than 20 percent of the cost of similar private universities, including those in the north country. If you begin your college career at Jefferson Community College or one of the other SUNY community colleges, the deal is even sweeter.


SUNY tuition has been raised only 13 times in the past 48 years. The most recent increase of $620 in 2009 didn't completely go to the SUNY system, but was largely swept into the state's general fund. Gov. Andrew Cuomo, like many before him, is loath to raise that tuition and risk losing the access that SUNY offers to students of modest means. Good for him, if we could only make it work.


SUNY leadership had asked for each college to have the power to set its own tuition as well as the power to enter into business deals and partnerships with private investors and some relief from onerous state purchasing rules. The argument is simple. If the state of New York wants a vibrant SUNY system and cannot or will not fund it directly, then the SUNY campuses need the right to do what any business would do — go out and make the money on their own. Good for them, if only we can make it work.


Actually, the situation we face with funding for the SUNY system is not really much different from that of a number of public organizations. While the state is able to fund the organization at a generous level, it can demand the right to shape the organization in accordance with political ends. The SUNY system is a 64-campus behemoth serving almost half a million students, because that is what New York state has made it over the years. The behemoth has a giant appetite, however, and the state's larder is bare.


Something similar happened many years ago to the public television. Originally funded by the federal government, PBS was a noncommercial system whose programming policy was largely set by government employees. The feds paid the piper, so they called the tune. When federal funding began to dry up, PBS demanded and received the right to undertake some commercial activities, to offset the loss of funding.


This explains the fundraising and the commercial programming (I was on the board of our local WPBS for many years. Those are sponsorships, not advertising!), along with a much less highbrow programming policy. SUNY is looking down a well-traveled path.


Although Chancellor Zimpher is no longer proposing differential tuition — letting each campus set its own tuition rate — that idea will certainly re-emerge in the future. What SUNY's leaders are asking for is fundamentally the right to act like independent business units. Like any business, they want to be able to set their own prices, attract outside investors for key projects, and escape from some of the oppressive state regulations that plague so many businesses in our state. That does not sound like an unreasonable request to me, although I tend to be biased toward free enterprise solutions that let people solve their own problems.


Of course, transforming our SUNY system into a set of 64 entrepreneurial businesses could mean significant changes. Such a model could encourage the campuses to compete among themselves in both tuition and in the programs they offer. We should expect to see more specialization, more money spent on marketing and promotion, and some incentives to develop programs that attract more lucrative foreign and out-of-state students versus locals.


Not all of our campus presidents and leadership teams will prove equally adept at managing the new business model, and we should expect some changes at the top, with more recruitment of academic leadership from the business community. Outside investors will have a greater say in what programs are launched or canceled and what courses and experiences are part of those programs.


This vision certainly chills the blood of many of my colleagues on SUNY faculties, but it might, arguably, be a better future than the irrelevant mediocrity that could come from starvation budgets over many years.


Locally, we have three SUNY campuses in Jefferson and St. Lawrence counties and one more in nearby Oswego County. These campuses compete with one another in a more or less gentlemanly way, by offering students different program choices at essentially comparable rates. Undergraduate decisions involve geography as well as program reputation.


If we are going to become a system of entrepreneurs, I have some business advice for SUNY leadership in the north country:


n Expand merit scholarships. Most of the funding streams have been directed at needs-based scholarships to maximize total revenue. That works when you can depend on a state revenue buffer, but if you need to differentiate yourself as a top school, you need a supply of the brightest students you can get.


n Learn to measure the financial contribution of individual programs and activities, and make decisions that include those costs. Well-run businesses learned to do this long ago. If you want to become a business, you need to learn as well. Just ask your accounting faculty for a quick course in something called managerial accounting. Then ask the marketing folks about building a brand.


n If you plan to pick your winners from among your programs, be prepared to select the losers as well. This means adopting the same kind of ruthless weeding of programs and staff that modern corporations must do. Running a business is not for sissies.


Fortunately, our choices for the future are not limited to starvation or corporate control. I have some ideas about what SUNY and our local campuses might do, but I would rather hear from others before I blather any further. Please send me your thoughts on the future of SUNY and I will try to incorporate them into a column.


Right now, I have papers to grade and there is no budget for a teaching assistant.


Greg Gardner is an associate professor of business at SUNY Potsdam. His column on business issues in the north country is published monthly in Money Matters. E-mail him at ggardner@wdt.net.

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