Higher education cuts may yield drastic solution

The word on the street is that UNLV and the rest of the state’s colleges and universities could go bankrupt because of budget cuts.

But is it really that bad?

"Absolutely," said Dan Klaich, the higher education system’s chancellor. "I think you have to think carefully about what the alternatives are."

Budget cuts proposed by Gov. Brian Sandoval are anywhere from about 10 percent to up to 42 percent of the higher education system’s budget, depending on how you measure it.

"Pick any percentage you want and you can make it real," Klaich said. "But you can’t run away from the fact that this means $162 million out of the budget of the Nevada System of Higher Education."

That amount equals the entire annual state support for:

■ Nevada State College

■ Great Basin College

■ Western Nevada College

■ UNLV’s law and dental schools

■ And virtually all of the University of Nevada, Reno, including the medical school.

There will be student fee increases to help cover the gap. There will probably be pay cuts. Some programs and departments are likely to be eliminated too.

But all that might not be enough. Something drastic will have to happen. Short of shutting down a couple of the community colleges and the state college — and those sorts of moves are being considered — that something might be bankruptcy.

The fancy term for that is financial exigency (rhymes with "excellency").

It’s not exactly like bankruptcy, but it’s similar. Think of it like this: The employees are the creditors in this form of bankruptcy. Declaring it will ruin your reputation and your credit rating, but at least you can ditch your creditors.

A formal declaration of financial exigency would allow the colleges and universities to fire anyone without much notice, regardless of contractual obligations. That includes tenured faculty.

"They could basically get rid of people more quickly than they could without a declaration of exigency," said Gregory Brown, a history professor at the University of Nevada, Las Vegas and president of the university’s chapter of the Nevada Faculty Alliance.

Without a declaration, it wouldn’t be that easy. For example, let’s say UNLV decides it wants to eliminate its College of Engineering because it’s really expensive to run. Because of contracts, the university would be required to give a year’s notice to those employees who have been with the university for more than three years. That would mean most of the savings wouldn’t be immediate.

And what’s more, tenured faculty can’t be fired for any reason other than poor performance — unless there’s a declaration of financial exigency. That’s just the way higher education works.

That’s why Klaich said he and the Board of Regents are seriously considering financial exigency as an option. It would allow immediate savings on a vastly larger scale than not declaring it would.

But, as always, it’s not that simple.

A financial exigency declaration could also have terrible, long-lasting consequences.

A declaration could ruin the reputations of both universities and the research institute. It would be difficult to recruit top research professors after a declaration because they might not want to risk working there.

Without top faculty, research grants could drop dramatically. Grants and contracts brought in nearly $300 million to the three institutions last year.

A declaration could also damage the system’s bond rating. That’s similar to your credit rating. Damaging that could mean higher interest rates for the institutions, which would mean more money down the drain.

It could also open the system up to legal liabilities. In other words, fired workers could sue. Exigency is a very little used tool. It’s not well defined either in statute or in case law. Someone who is fired under what they believe were unjust terms could sue the system or the university, piling up legal fees for years. They might even win.

Limited forms of exigency have been used here three times, all in the 1970s, according to a review from the higher education system’s vice chancellor for academic and student affairs, Crystal Abba, that was sent to legislators on Friday.

In 1977 and 1974, the Board of Regents declared financial exigency for certain programs at the Desert Research Institute. It did it again in 1977 for a business unit at CSN. The Board considered it in 1982, and again last year, but avoided it.

Financial exigency or its equivalent is also being considered elsewhere as states grapple with budget cuts. Arizona’s higher education leaders declared a limited form of it to impose furloughs. News reports indicate that a junior college in California is considering it, as are several public school districts in Texas and Louisiana. It has also happened in a few cases elsewhere in the past.

But it appears that no major university or higher education system has declared exigency or is seriously considering it right now. Except Nevada.

And right now that’s all Nevada is doing, considering it. No cuts have passed the Legislature, and they probably won’t until June.

"We are going to fight these budget reductions tooth and nail until the final gavel comes down," Klaich said.

He said all options will be on the table if cuts do come down. Exigency, whether limited in scope or systemwide, mass firings, closing whole schools.

If schools are closed, programs are eliminated, faculty are fired en masse, and entire colleges at the universities are shut down, it is likely that thousands of college students will have nowhere to go.

They are already complaining that classes they need are full because there is no money to add more classes or hire more professors.

Contact reporter Richard Lake at rlake@reviewjournal.com or 702-383-0307.