Frederica Freyberg:

But first Governor Walker will reveal his nearly $70 billion budget proposal Tuesday night at the State Capital. The 2015-17 Budget would include an historic cut to the UW System. Wisconsin Public Television is a part of the University. The give and take of the Governor’s plan includes a $300 million cut while also making the UW a public authority, giving it flexibility over spending. It would fund the System with a State Block Grant and continue the tuition freeze for two more years. UW System President Ray Cross issued this statement saying in part, To get through the demanding times ahead, we know that we will be called on to make challenging and difficult decisions. It won’t be easy. Taking a longer view our new relationship with the State will allow us to leverage the System’s great resources, talents, and ideas to better serve the people and economy of Wisconsin. The Governor calls these the tools that will save money and allow a strong UW System in the future.

Governor Walker:

I have heard for years, long before I was Governor, about the request from Chancellors, from the Administration, from supporters and Alumni, talking about the cost savings that would be inherent if we were to free them of some of the detailed bureaucratic oversight that they got traditionally from State Government.

Freyberg:

News of the proposed changes and budget cuts rocked Bascom Hill at the UW-Madison this weekend. The flagship school is led by Chancellor Rebecca Blank. I talked with the Chancellor after the cuts were announced, and started by asking whether the Governor’s plan came as a surprise.

Chancellor Rebecca Blank:

Well, I certainly knew that the conversation about relatively deep budget cuts and some flexibilities have been on the table. The System is the main negotiator, for all the Universities, with the Governor, but the specifics of the deal are just relatively recently in terms of how they come out.

Freyberg:

I’m sorry, what is your reaction to the $300 million number?

Chancellor Blank:

It’s a very big number. It’s the biggest cut this University has ever received in its state funding. I’m particularly concerned about the way in which it’s phased in, which is that it’s not phased in. We take $150 million cut immediately starting July 1, and that’s going to be very hard to do. That’s just a very large cut in a very short period of time. It would be much better if there was a bit of a deployed path here. But, you know, if this is what the State Legislature approves, we’ll do what we have to do.

Freyberg:

And what percentage of this kind of cut does UW-Madison specifically absorb?

Chancellor Blank:

So historically we’re 40% of the system, so we get about 40% of the cut. So if this is $150 million cut each year that says we have a $60 million cut. It’s — unfortunately, and we’re not unique in this, as you know, the state handed cuts down two years ago, and they told us don’t take the cut. Fill it with your reserves, and then we’ll give you the money back once you’ve used up your reserves. So I’m sitting on a $23 million cut from two years ago. My reserves — my discretionary reserves are essentially close to zero, and that has to be added to this, so it’s a $60 million cut that would start this year. I also have 23 million that I have to implement. That’s $82 million cut to implement in one year. This is well over 15% at my University. It’s very big.

Freyberg:

How frightening is that?

Chancellor Blank:

Pretty scary.

Freyberg:

Where do you go first?

Chancellor Blank:

Well, there’s two things that you can do in the short run to save money, right. You’re only limited how far you can go with this. It’s clear we’re going to have to find a way to fill a bit of a gap because you can’t take this whole cut in one year. First of all, you do look at budget cuts, and we’ve been doing exercises with the various schools and colleges, and we’re clearly going to be at the upper end of those exercises. Every school and college will do staff layoff. We’ll be cutting advising staff and programming staff. We have to do that in the face of this and that will not be to the benefit of our students, right? And of course I need to spread this out of the educational area, which is where all the state dollars are spent, and find ways to put it in some of the other areas and the rest of the University bears these cuts too. That’s first. Secondly, we’ve had a tuition freeze the last two years. I expect there to be an ongoing freeze in undergrad tuition. What’s striking is this being a budget cut without discretion to raise in-state tuition, and other years with big budget cuts, we’ve been able to do it with in-state tuition increases, but I don’t think we’ll be allowed that this year. But I’ll be going to the Regents to talk about out of state tuition increases. And we are in a somewhat position of being low relative to our peers, so we have market room to move there. I’m going to have to raise out of stay tuition close to market to fill that budget gap.

Freyberg:

Are you also going to have to enroll more out of state and international students?

Chancellor Blank:

As you know we have a cap on out of state students at 28.5%. I would expect I have to raise it to 30%.

Freyberg:

What does that say to the Wisconsin students?

Chancellor Blank:

It will reduce the number of Wisconsin students, but again, if the state is giving us less money, there are less Wisconsin subsidies. We’re not alone. In fact, we still have a very high share of in-state students relative to many of the big flagships around. I want to keep our Wisconsin students. I want to keep the vast majority of our students from Wisconsin but as state dollars shrink it becomes harder.

Freyberg:

In return for this $300 million cut, flexibilities are promised. Are those flexibilities an even trade for this cut?

Chancellor Blank:

So the promise that we would get the authority — the ability to be a public — would be a public authority, which gets us out of from under some of the requirements as a state agency we’re currently under. There’s no question in my mind that we can manage this University better and probably more efficiently with some of the authority that I’m expecting to be in the details of the Governor’s budget. I’m very much in favor of this. I think if the state share shrinks giving us more independence is inevitable. Having said that, it takes time to set up a public authority. You don’t just do that overnight.

In order to take advantage of these flexibilities we have to put systems in place, we have to hire people because it lets us do things we haven’t done here. We haven’t managed this here on our campus so it will take a little bit. My expectation in the next two years there won’t be budget gains at all from these flexibilities. After a couple of years I think if we do this right, we will start seeing some benefits, but it doesn’t help me manage the next two years of cuts.

Freyberg:

And in terms of these flexibilities within the public authority, what perhaps would be the most important one?

Chancellor Blank:

Probably the most important one for us is flexibility throughout construction.

Currently, even when we build a building that is entirely paid for by donor funds, not a penny of taxpayer dollars, we have to go through a very extended process with the public building commission. We end up spending about 150% of — you know — 1.5% times what the private sector spends to build a building on campus.

Freyberg:

How concerned are you about faculty loss?

Chancellor Blank:

I’m very concerned about that, we are already — this is actually the third budget in a row with substantial cuts to the University. We are 10% below — our faculty are 10% below their peers in big 10 institutions. Less than Minnesota, less than Illinois, if you look at comparable faculty. We don’t begin to compare with Stanford or Duke. This will make it harder to catch up with faculty. I can’t afford to fall further behind. I already had huge increases the number of people trying to raid Wisconsin faculty, because the faculty, at the end of the day, are the reputation of the University. They bring research dollars in that attract students that are, you know, the front door of our University is our faculty reputation and we have to maintain our faculty or we lose our quality very quickly.

Freyberg:

What would you like to say to the people who are fashioning this budget?

Chancellor Blank:

I do understand it’s a very difficult state year and almost all State Institutions are going to get big budget cuts. My first comment is, absolutely, please do not deepen this cut, because I worry that folks will want to protect their favorite children and the University is big and large and they say, Oh, they can take another $50 million. This is a devastating cut for the University. It can’t go any deeper or we will really be facing problems that threaten the quality of higher education here in Wisconsin, a number of ways. My second comment is if there are any opportunities to lessen this cut as revenues come in and as people are looking at this budget, that would be very important for us, and particularly to give us a little lower cut this first year, you can’t just absorb this much this quickly.

Freyberg:

What would you say to students and families who are concerned that this kind of action will just mean a very large increase in tuition and access going forward?

Chancellor Blank:

So as I say, we’ll likely have a tuition freeze in the next two years. I’m never a fan of price freezes. I’m an economist, right? And you have to make it up at some point because the costs continue to increase underneath us. That said, the people who say we’re just going to raise tuition willy-nilly aren’t paying attention to for what universities do.

I compete in a market for students. And my tuition costs have to be pretty equivalent to the costs of my competitors, particularly among public universities. So that will really limit my ability to raise tuition and in a ways. I mean, we have a strong responsibility to the people of the state to keep this University as accessible as possible, but there will be tuition increases in the future. There’s just no question about that, as there have been in the past. Our costs will continue to go up, and if we want to maintain the depth and the breadth and the quality of this University, it over time costs a little bit more. And there are a number of ways to deal with that but one of them has to be at least some small and reasonable steady increase in tuition increases, as you see in virtually all other schools.