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September 16, 2014

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DAILY MEMO: Higher education:

Pay raises clash with cuts

At UNLV, this recurring expense might have been a smart offering to spare programs

One problem at the root of the subprime mortgage mess was that, for years, Americans were spending money they didn’t have, tying themselves to future liabilities they could not afford.

Now families are losing homes. In exchange for short-term benefits, they are suffering long-term pain.

When state legislators convene in February, they will find similar principles have been at work in Nevada government.

This summer, lawmakers preserved “cost-of-living adjustments” for state employees. Those and other raises could deepen the distress future budget cuts will cause.

Just take a look at what UNLV is up against.

The governor has asked Nevada’s higher education system, along with other public agencies, to slash its state-funded budget by 14.12 percent. (The reductions could grow even larger, with the state budget director estimating that the agencies would have to chop 30 percent to meet new revenue rejections.)

Some colleges in the system might cut a larger percentage than others. But for some perspective on the size of the cuts, UNLV would have to decrease spending by $60.7 million from July 2009 to June 2011 if it were to lose 14.12 percent of its state funding.

That would likely entail cutting academic programs. The school is already holding fewer classes and laying off workers.

At the same time, the Legislature has directed UNLV to give employees about $7.9 million in state-funded cost-of-living raises this fiscal year, an expenditure it will have to repeat each upcoming year.

Dan Klaich, the higher education system’s executive vice chancellor, has been critical of the raise, saying, “There’s no money to pay it.”

“If I had a choice of maintaining a workforce at a current level or giving selective raises in a declining economy and letting someone go, I’d choose giving no raises.”

Michael Wixom, chairman of the Board of Regents, which governs public colleges, said he asked the governor and some legislators in the spring to rescind the pay increases. Wixom would have favored eliminating the raises for higher education employees even if other state workers got theirs.

“I felt like I was yelling fire and nobody was listening,” he said. “The numbers were absolutely obvious. It was clear we had a problem.”

“We could have saved ourselves a great deal of money, a great deal of pain.”

But regents, too, could have done more. They could have suspended merit raises, which faculty and professional employees such as advisers receive. Instead, regents delayed merit pay by six months this fiscal year. So the increases kick in Jan. 1 and are expected to cost UNLV about $3.3 million annually thereafter.

Competitive salaries help attract and retain personnel, and many stakeholders say promised money is sacrosanct when employees are picking up extra duties and struggling to pay bills. Faculty and professional staffers don’t get the longevity increases many other state workers receive.

Still, the cost-of-living and merit raises at UNLV carry an annual price tag of more than $11 million — a third of what the university would have to hack from yearly budgets to meet a 14.12 percent cut.

That $11 million is more than UNLV’s law or dental school receives annually from the state general fund. Though layoffs, buyouts and hiring freezes will result in a smaller workforce, a large portion of that liability will follow the school into the next biennium.

Many people hope legislators will find more funding for public services.

But if that doesn’t happen, employees will be enjoying their raises while students pay more for a lower-quality education. In a June memo, UNLV Executive Vice President and Provost Neal Smatresk wrote that a 14 percent cut would result in “a ‘death spiral’ of declining services and funding.”

If so, powerbrokers might look back in coming years and wonder how much of the doom they could have averted by sacrificing those raises.

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