Economist: University cuts pose challenges to Alaska business

Published: Jul. 1, 2019 at 6:44 PM AKDT
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While Gov. Mike Dunleavy's veto of $130 million for the University of Alaska has immediate implications for faculty, staff, students and prospective students, economists expect that Alaska businesses will bear the burden of education cuts for years.

The university faces a budget reduction of around 41 percent compared to the previous fiscal year. On Friday the 2,500 employees of the University of Alaska system received furlough notices.

"A high school senior will have to think twice about attending the University of Alaska if it becomes a shell of its former self," said Mouhcine Guettabi, an economist with UAA's Institute of Social and Economic Research. "Whether it be accounting or economics or engineering, and the university no longer offers that option or the number of faculty gets reduced by 80 percent, then the quality of the university decreases."

And an even more important effect might be with the quality of locally trained talent. Guettabi says that it’s easier to recruit locals who have graduated from the university system than to convince outsiders to move up to Alaska.

"It's not longer as attractive," he says about a reduced university. “The likelihood of you moving out of state increases substantially and it's very well established that if you leave the state for college, the likelihood of you coming back is considerably lower."

Even with the university system operating at its current capacity, business in several industries are hard pressed to fill jobs with qualified workers. That includes in high-demand trades.

"If we have these massive cuts, there's no way we can keep all of our programs and all of our faculty, all of the staff that support them," said Denise Runge, Dean of the Community and Technical College at UAA. "Every day we get calls looking for more people who are qualified to be diesel mechanics and maintainers - more calls that we have students now. So if there's any reduction in what we can do in the diesel program, that just means those employers are going to have much harder times finding qualified personnel. The same is true in aviation all across the board."

University faculty do not know which programs would be restricted or eliminated if funding is not restored. Faculty have been telling current students that they will be able to finish their degrees. The outlook for prospective students is less certain.

UAA's engineering program also works to fill strong demand for skilled jobs in the state.

"About three out of every four of our students already have jobs by the time they graduate. With us and with Fairbanks together, we're not meeting the engineering need for the state, the demand is pretty high. Our students are essentially getting gobbled up right when they graduate," UAA College of Engineering Interim Dean Kenrick Mock said. "I'm concerned for the state's future because it will be hard to meet the engineering needs for the entire state. You think about the aftermath of the earthquake and how many engineers were fixing the roads at record speed and inspecting buildings. Those would all be things that would be impacted with this pipeline of engineers being disrupted."

If more college-bound students do leave the state for university degrees, Guettabi says existing businesses will have to expend more resources recruiting employees -- plus the state will be less competitive for businesses looking to expand.

"With fewer college educated individuals, that has ramifications because it affects the quality of life, it affects business startups, it affects whether or not a firm chooses to come to a place where it’s going to have a real difficulty in finding engineers or accountants or people with a Master's in Public Administration and so on. It renders doing business more costly because you're all of a sudden having to do national or international searches," Guettabi said. "It's not just a one-time shock, its an effect that can potentially last for decades."

A spokesperson for the governor said that the changes to university funding reflect differences in the State of Alaska's contribution to the university system is higher per student than the national average for land-grant universities.

University president Jim Johnsen disputed that comparison at a recent press conference after the budget cuts were announced, and said the governor's Office of Management and Budget "extremely selective" in the numbers they used.

"We can no longer be everything to everyone. We must go back to more core services," Gov. Dunleavy's press secretary Matt Shuckerow said. "When it comes to the university we will likely have to see a more efficient, lean university that may not offer every program, but can focus on the needs of our workforce and our youth."

Guetabbi says that restoring the PFD to a full dividend can have a positive economic impact, but Alaskans must spend the money for it to be beneficial to the economy.

"We find that an additional $100 million in the aggregate size of the PFD distribution does add short term jobs. Sometimes close to 700 or 725 jobs for every additional $100 million, but those are jobs that are short term. They last two, two-and-a-half, three months at most. They're typically in low-paid occupations," Guettabi said.

So will a larger PFD counteract the damage that is done through the reductions of the university?

"No," says Guettabi, "because you're comparing apples to oranges. You're potentially eliminating full time year-long positions that are high paid, and you're stimulating the economy with short term jobs."

Copyright 2019 KTUU. All rights reserved.

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