Finding money to cover USU
The Center on Budget and Policy Priorities reported earlier this month that Utah faces a budget gap of $620 million for the 2009 fiscal year and a projected $721 million for the 2010 fiscal year. Utah has been adversely affected by the current recession, and faces many impediments to funding all its current obligations. One of the most important steps the Utah state legislature can take is to shield education from the brunt of inevitable budget cuts. By doing this, the state will be investing in and protecting its future.
After ascertaining the need for protection of higher education (which I have attempted to do in my previous three columns), an important question remains: How can we finance higher education? Some argue that we ought not to protect higher education at all, and allow higher education budget cuts to happen as they come. I believe that this position is absurd, and will endeavor to examine different arguments that would preserve higher education for the foreseeable future.
It is necessary for the government to invest money. Capital can come from four different sources – capital already saved (such as the state’s expansive rainy day fund), cutting funding for other government financed projects, by raising taxes, or some sort of credit. The state legislature must be willing to pursue one of these actions as an investment in Utah’s future.
In our current economic conditions, it is not prudent to raise taxes. Funding for other state-financed projects could be diverted to fund higher education. But, the state legislature has already made significant cuts to the budget, and I expect that many spending projects that can be put on hold or canceled already have been.
The third option is that the state could tap into the rainy day fund. However, the interest on the fund does pay for a number of state services, and diminishing the reserved capital there would decrease the amount of interest earned. On the other hand, we could hope for a quick return to economic normalcy, which would allow the fund to be restored quickly. That would be just a hope, though, and the economy may take a few years to recover, which would mean the fund wouldn’t be returned to its current status for some time. The lack of revenue generated from the interest would lead to a need to dip further into the state’s rainy day fund, once again diminishing saved capital. Also, to take capital that is currently being used in markets (thus generating interest) could be hazardous to other forms of economic growth.
The final option is to use some sort of credit. If Utah doesn’t have access to the funding it needs for good investments like education, then we could expect to see a downward spiral in our local economy over the next few years. The best solution to the need for capital without any current means of providing it is to sell large amounts of bonds to finance the education budget deficit. The interest to be paid on the bonds in the future will be more than provided for by the tax revenue generated by the now well-educated citizens of Utah. Bonds are generally low-interest, very secure investments that should attract plenty of investors looking for solid investments. The greater education given to Utah’s citizens will lead to greater revenue that far outweighs any costs incurred now. By bonding education, we can meet the interests of all people involved – the state, the students, and the investors.
I believe that higher education is a valuable resource. However, it is only worth saving if students make themselves worth something. As students, we ought to be the most industrious people we can be. We ought to be going to classes attentive and strive to gain as much knowledge as possible while in school. We are being afforded a great opportunity by our high-quality, inexpensive education. The most important investment Utah can make right now is in its human capital, but if that human capital will not generate a return on the investment through its sheer ignorance and unwillingness to work hard, then saving higher education is not worth the cost to the state.
This editorial is the last installment of a four-part series and was written by Richard Kelly, a graduate student studying political science. Comments can be sent to richard.kelly@aggiemail.usu.edu.