With state officials staring at the worst deficit in Connecticut history, and public colleges and universities still reeling from a series of public fiscal embarrassments, the broad budgetary flexibility higher education has enjoyed for more than two decades could begin to shrink–but not without a fight.

Gov. Dannel P. Malloy said this week that his new administration won’t have time before his Feb. 16 budget plan is due to thoroughly analyze the system that allows higher ed units to manage three-quarters of the $2.9 billion they control outside of the state appropriation process.

But the governor and his budget director, Office of Policy and Management Secretary Benjamin Barnes, said that given the scope of the state’s fiscal crisis, the legislature and the administration should take a closer look at all of these dollars before the 2011 session ends in June.

“I think we need to have some pretty close scrutiny over every section of government,” Barnes said following a Capitol budget forum.

And though he quickly noted that the administration hasn’t formed any conclusions yet about the block grant system enacted during the same fiscal crisis that produced the state income tax 20 years ago, some advantages and disadvantages already are clear.

Barnes noted that all higher education units, and the University of Connecticut in particular, “have prospered in many ways since we began this system.”

But he added, “We need to improve transparency, especially in areas where there has been less,” he said. “There are concerns in higher education.”

“We do have concerns about how efficiently these systems are being run,” said Rep. Roberta Willis, D-Salisbury, and co-chairwoman of the Higher Education Committee.  “Everything is on the table. They will have to make a case for themselves in what they are spending money on.”

The state was facing another budget crisis in 1991when lawmakers enacted the block grant system. They also had a 1990 government efficiency report that concluded the then-current higher education budgeting process was ineffective and overly restrictive. The legislature trimmed the state’s contribution to higher education, but gave university officials authority to decide how nearly all dollars were spent.

University and college officials are fighting to retain their fiscal autonomy.

“Changing the system will inevitably slow things down. Do you really want another layer of bureaucracy?” said Mary Anne Cox, assistant chancellor of the dozen community colleges in the state. “This system was agreed to when the state was facing a similar budget picture. We agreed to get less (money) in exchange for having independence and to keep any savings that we achieve.”

Lawrence D. McHugh, chairman of UConn’s Board of Trustees, said university officials are always looking for ways to save money, and pointed to a study they expect will be completed this spring that will identify $50 million in savings.

“There’s always room for different people to sit around the table and look for savings,” he said. “The money we receive (from the state) is very important and if that is reduced it would cause immense problems on tuition.”

A University of Connecticut report given to state legislators last month also said increased state involvement would be detrimental.

“Placing position control in state agencies that have completely different missions from UConn’s that are not connected to the locations where those decisions take effect, that do not interact with the individuals who are most affected … would be counterproductive and put at risk all the progress achieved,” the report states. “Is there any reason to believe (state) personnel will make better decisions than higher education personnel?”

Higher Education Commissioner Michael Meotti said more oversight is needed of the higher education institutions, but the focus needs to shift from how the colleges are spending and what the education outcomes are.

Higher education units and the large pools of off-budget funds they control could be a popular target for revenue-starved state officials trying to close a nearly $3.7 billion deficit projected for next fiscal year.

Since Connecticut began major capital building programs at its colleges and universities in the mid-1990s, enrollments have surged, along with revenues from tuition and fees and private contributions.

While General Fund contributions covered close to 50 percent of higher education costs about two decades ago, the $676 million in total block grants provided this year to UConn, its health center in Farmington, the Connecticut State University and Community-Technical College systems and Charter Oak State College, now represent a quarter of their total funding.

Those same five institutions expect to receive another $2.21 billion this year from other sources, including tuition and other fees, federal grants, private endowments and other charitable contributions, investment earnings and athletic program revenues.

Combined spending by the state’s higher education systems has grown by nearly 230 percent over two decades, according to the Office of Legislative Research. Meanwhile, in-state tuition and fees increased by 239 percent at the community colleges, 284 percent at UConn and nearly 353 percent at the state university system.

Higher education officials note, though, that they have had to find additional non-General Fund revenues as the state’s contributions have dwindled.

Besides their large budgets, public colleges and universities also could be a tempting target because of increasing criticism over their spending habits.

  • The CSU system has come under fire over the past year for the removal of Cheryl Norton as president of Southern Connecticut State University under an agreement that gave her a one-year sabbatical at full pay.
  • CSU’s administration also drew criticism last year for approving double-digit raises for top officials in the central office in the face of the budget crisis. Although former CSU Chancellor David Carter defended the raises, they were scaled back at then-Gov. M Jodi Rell’s request.
  • A 2006 investigation linked mounting fire and building code violations at UConn student housing complexes to the improper, “construction manager at-risk” contracts. Under such agreements, the contractor sets a maximum price for a project and forfeits a fee if the project goes over budget.
  • Former UConn President Michael Hogan decided not to live in the official president’s residence despite $1 million in renovations ordered in 2004. UConn rented him another house for $49,000 a year.
  • The legislature’s chief investigative arm, the Program Review and Investigations Committee, recently concluded that the block grant system has not led to increased achievements by the public universities and recommends tying state funding to results.

Willis said she supports that approach but also wants to see the universities’ administrative structures dissected and analyzed for savings.

“I don’t think any of us are anxious to revert back to the days without block grants,” Willis said, adding that “we have reason to believe there are areas where we can streamline the duplications and be more efficient.”

Sen. Toni Harp, D-New Haven, co-chairwoman of the legislature’s Appropriations Committee, said an effective compromise might be to close a longstanding gap in the state’s information technology system that has kept higher education finances on a separate network from the rest of state government budgeting.

“All of the things that have happened make some of us think we have to have a little more oversight,” Harp said.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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