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Archive for Saturday, September 7, 2002

Universities must be accountable to justify public support

September 7, 2002

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It's clear one of the primary issues in the Kansas gubernatorial contest is how each candidate proposes to meet the fiscal needs of education in light of the state's severe revenue shortfall.

Financing the needs of elementary and secondary schools in the state is one issue, and funding the state's system of higher education is another challenge. At the K-12 level, there seem to be two major questions: Should all state school districts be funded by the same formula, regardless of the size or prosperity of the district? Should districts be allowed to supplement the basic state allocation by a variety of means, such as the added sales tax approved by Johnson County voters to assist districts in that county?

These are sure to be contentious and difficult questions that will play out both in the state Legislature and the courts. The governor proposes a budget and holds veto power over legislation, but the final funding decisions will be driven largely by state legislators.

It's a similar situation with higher-education funding. Nevertheless, the public, those paying the taxes, is interested in knowing the priority the governor's candidates place on adequately funding state universities. Do they favor higher taxes to meet the needs of higher education? What priority do they give higher education compared with many other state-supported programs?

Currently, there is much discussion about how schools such as Kansas University and Kansas State University intend to use the additional dollars they are receiving from recent tuition increases. The Kansas Board of Regents approved the substantially higher tuition only after university leaders pledged that a substantial portion of the new money would be set aside for student financial aid. Aside from this, however, each school was to be allowed to allocate the money as it thought best.

As might be expected, there is divided opinion on how KU proposes to spend this money. Should KU officials use the funds to fill the gaps created by cutbacks in state funding, or should they figure out how to live with the holes and direct the money to other areas they believe should receive special attention? There is no perfect answer, and some programs, some faculty members and some students are sure to feel shortchanged.

Chancellor Robert Hemenway has made much of his desire to have KU ranked among the nation's top 25 public comprehensive research universities. That's his first challenge; his eventual goal is to have KU ranked among the nation's elite schools, public or private.

Time and time again, the question is asked: Why don't state legislators understand the correlation between proper fiscal support of higher education and the development and growth of the state? This is particularly true in Kansas because numerous business leaders point out that high quality research and education at state universities sets the stage and creates favorable climate for economic development of the state.

In a recent presentation at a meeting of the National Association of College and University Attorneys, Judge Jose Cabranes delivered a speech titled "University Trusteeship in the Enron Era." Judge Cabranes of the 2nd Circuit U.S. Court of Appeals, served as the first general counsel to Yale University before his appointment to the federal bench.

The main theme of Cabranes is that accountability and transparency are essential in higher education, as they are in private business, to justify public support and confidence.

He said public corporations are required to adhere to certain practices to assure transparency and accountability but that, in the eyes of many in education, the same standards are not required or necessary. He said universities do not compete in the public market for capital, are not required to make public disclosures to obtain financial support from shareholders and do not have much exposure to lawsuits charging a failure of fiduciary responsibility.

That being the case, he asked, what does transparency and accountability mean to colleges and universities? His answer: "Everything."

It should be remembered Cabranes served as counsel to a private university, not a state-assisted school like KU.

In his address, the judge noted a top Harvard dean's reference to what he called "part owners" or "co-owners" of a university. For a private school such as Yale or Harvard, those people are individual donors, foundation funders, government funders, faculty, students, administrators and alumni. In the case of a state-assisted school, like KU, part co-owners also would include state taxpayers.

Cabranes said, "Attracting and retaining the 'investments' of each of these co-owners determines nothing less than a university's current and future viability. Universities may not promise a direct profit on an investment, but make no mistake, those who become co-owners of a university through giving their time and money (or paying substantial tax dollars in the case of a state-assisted school) or even their careers want good intangible returns, and they want to know the university will not misuse or squander their investment."

The former general counsel to Yale offered many analogies between private business and a university, particularly private schools, hammering away at accountability and transparency.

He ended by pointing out a university's primary asset is its reputation, that is, the respect it commands among current and potential "co-owners," which, like a company's valuation, can be enhanced or diminished by the conduct of its board. This applies to a private school such as Yale, but in the case of a state-assisted school like KU, those saddled with the responsibility of running a school also include the regents and the chancellor.

It is essential KU maintain and improve its reputation among its co-owners if the school is to achieve its lofty goals.

State fiscal support and private fiscal support are critical if KU is to reach its potential of being a truly outstanding state-aided university. Its reputation, based on the excellence of its educational program, along with its accountability and management, will play a major role in its level of support from the governor, lawmakers and the public.

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