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On Nov. 7, Nebraska voters will consider ballot initiative 423, also known as the spending lid or SOS (Stop OverSpending) Nebraska initiative. The following analysis of how a spending limit would impact the University of Nebraska was prepared by the NU Budget Office.
Background
Initiative 423 seeks to limit state spending increases to the combined rate of inflation plus population growth. According to an analysis done by the Legislative Fiscal Office, under Initiative 423 the average allowable budget growth over the past 10 years would have been 3 percent.
What would the University of Nebraska look like today had a 3 percent annual spending lid been imposed a decade ago?
Based on assumptions that total state spending would have grown 3 percent per year from 1997-2007 as allowed under the lid, and that the budget category of “state aid to individuals,” which contains mandated programs including Medicaid, would have grown at its actual rates during these years (an average of 7.9 percent), the impacts would be:
1. Higher education would be less affordable for Nebraskans.
If reductions in state appropriations had to be offset with tuition dollars, tuition at UNMC would have increased nearly 300 percent – from $75 per credit hour in 1997 to $283 in 2007 for a resident undergraduate student. As a result, a full-time undergraduate student at UNMC would now pay approximately $8,500 per year in tuition compared to the actual 2007 cost of $4,800.
2. Fewer dollars would be spent educating students, conducting research and providing service and outreach to Nebraskans.
• At a minimum, the appropriation to the University of Nebraska for FY 2006-07 would be $134 million less than it is (actual = $454 million; under the lid = $320 million).
• Historically, during times of budget stress, higher education has taken a larger share of budget cuts than state agencies or aid to local governments, so it is likely that the reduction would be significantly more than $134 million. In the budget-cutting period from 2001-03, the state budget was reduced 2 percent, while the university budget was reduced 10 percent.
• This amount ($134 million) exceeds the entire share of the university’s state appropriation allocated to the University of Nebraska Medical Center for FY 2007 ($108 million).
If Initiative 423 is approved, what would be the long-term impact on the University of Nebraska?
Based on assumptions that total state spending would grow 3 percent per year from 2007-2035 as allowed under the lid; state aid to individuals, which includes mandated programs including Medicaid, would continuing growing at 7.9 percent per year; and allocations to higher education and state agencies are reduced to offset increases in state aid to individuals, the impacts would be:
• Appropriations to the university begin to decline in 2009 and continue at an increasing pace until 2025, when funding is completely depleted.
• Without state support, it is likely that the university will lose key faculty . and they will take other faculty and research dollars with them.
• Each $1 million in lost research funding = 34 jobs lost in the state of Nebraska.
• Tuition — now the only source of funds for the state-aided budget — increases to $986 per credit hour for resident undergraduate students at UNMC in FY 2025. The annual cost of tuition for a full-time undergraduate Nebraska resident is nearly $30,000.