The day after Texas A&M University President Elsa Murano's June resignation, members of the campus community packed a special meeting of the A&M System Board of Regents expecting to hear a discussion about the governance of their school.
Many said they were surprised when regents seemed focused on another agenda item -- the financial situation facing A&M and rising education costs for its students.
The regents viewed a 30-minute presentation that detailed a $2,339 spike in tuition over the past decade and discussed how university expenditures had risen drastically in recent years. They then approved a broad, but unspecified, plan to cut costs by merging certain services now handled separately by A&M and the system office that governs it.
They also ordered Murano's interim replacement, R. Bowen Loftin, to cut $20 million in administrative costs from next year's budget.
The regents seemed to be making the statement that the recent turmoil about A&M had occurred at least in part because of rising expenditures at the school.
Many faculty members and administrators were skeptical and said the statements about financial troubles were overblown. The real motive for the cuts in cost was to distract the university from the system's true goal of gaining more control of university research and other important operations at the school, they said.
An independent review of A&M's finances and tuition costs by The Eagle, using numbers provided by the university and from state and federal databases, indicates that costs have risen sharply in the past decade but that they have remained lower than those at most of the schools with which A&M compares itself.
The university undoubtedly faces a tougher economic outlook than it did a few years ago, but the severity of the situation is a matter of debate. The potential impact of the proposed cuts on the quality and reputation of the university is also unclear. Regents say that it will have no effect, but many in the community are skeptical.
The regents are set to meet and review next year's budgets for all system schools and agencies late this week. They are also expected to review initial reports on the cost-cutting measures.
Meanwhile, system officials and regents have been conversing with skeptical members of the university community frequently over the past few days, but it appears that the tension and concerns have not been resolved.
Origins of dispute
Prior to the June special meeting, a public quarrel had developed on and off campus about the governance of A&M. Murano, faculty members and current and former administrators were upset about public comments by system officials that dismissed the use of shared governance and a cost-cutting proposal being considered to merge the A&M president position with that of system chancellor.
A job review of Murano by Chancellor Mike McKinney stoked those worries. McKinney complained that Murano should be working "with the faculty not for the faculty" and that she hadn't kept promises she made to the board about whom to hire for the important vice president for research position.
In Murano's response, she cited instances in which system officials had entered into contracts or agreements related to university research without contacting or consulting university officials.
Critics of the system's cost-cutting plans point to such disagreements as a sign that the plan is more about the system gaining control of research and other important university business than saving money.
"I think the critical issue is we are not aware of the finance issues that are emerging as the result of our president resigning," said Dennie Smith, head of the Teaching, Learning and Culture Department in A&M's College of Education and president of the university's Department Head Council.
Smith, like many other members of the faculty, has acknowledged that the cost to attend A&M has increased and that the economic times have become tougher, but he said that he thought statements about skyrocketing costs and financial crisis might be overblown. Skeptics also said they had heard little concern about the situation until the regents and McKinney came under fire in recent months.
Value versus cost
A&M was recently ranked the best value among universities in the U.S. by Smart Money magazine, professors and some administrators pointed out.
The cost of attending the school has gone up, they said, but not faster than that of other schools across the country. For instance, while Texas A&M's average tuition rose 95 percent between 2000 and 2007, the University of Texas' tuition jumped 220 percent.
But regents have argued that other schools' increases shouldn't provide A&M a free pass to raise its costs. And with the economic tumult causing worry for all kinds of government and private organizations, the school needs to save as much as it can, they said.
The controversy began after word got out about a cost-cutting plan to merge the chancellor and president positions, they noted. That plan may have been unpopular, but it was rooted in the overall goal of lowering expenses, regents said.
"It is our obligation as a fiduciary to look at the ways we can improve Texas A&M University and the entire A&M System," Regent Jim Wilson recently told a group of professors in an effort to explain the cuts. "We do not believe it is proper to ignore that issue simply because people tell us we are getting a good value."
Critics argue that the idea of making $20 million in cuts seems hastily conceived -- no system official has publicly explained why officials chose to cut $20 million instead of $10 million or $40 million -- and appears only to be aimed at administration of the flagship College Station campus. Other system agencies and campuses haven't felt as much pressure to cut back, they said.
The 2009 budget for the system offices -- excluding money spent on debt services -- was 82.5 percent higher than it was in 2006, when McKinney took the helm. A&M's budget for 2009 was 22.4 percent higher than the budget for 2006.
System officials and all but one of the regents declined to be interviewed for this story through a spokesman, saying they would rather talk after the upcoming meeting. System spokesman Rod Davis did point to various public comments the officials have made in recent weeks as signs of their intentions.
Cost of an education
A&M's 2010 budget projects $1.27 billion in revenues and $1.22 billion in expenses, according to university officials. It hasn't been released publicly, and the exact distribution of the money is unclear.
But the amount of money coming in from major revenue sources -- state funding and tuition -- has been released and, in most areas, major decreases aren't anticipated.
Regents have warned of possible decreases in revenue looming on the horizon. State funding, investment earnings and the Available University Fund all could be harshly affected if the broad economic tumult continues, they said.
"The current economic situation in this state and country cannot be overlooked," Wilson told professors.
Because most of the university's money comes from tuition or state funding, a drop in one means that an increase in the other is necessary.
In 1997, A&M embarked on Vision 2020, an ambitious plan to elevate the school to a top 10 public university. The plan included goals to increase research funding and improve the faculty at the school.
A&M was inducted in 2001 into the American Association of Universities, an organization of 62 North American universities that have reached "tier one" status. Early in his tenure, A&M President Robert Gates embarked on an expensive faculty reinvestment plan to lower the student-to-faculty ratio.
Since that time, expenses at A&M have risen drastically. The 2002 budget called for $903.2 million in expenditures -- 25 percent less than expenditures in the projected 2010 budget.
As university expenses have increased, general revenue from the state hasn't kept up. As a result, state funding dropped from 32 percent of the school's revenue in 2002 to 26 percent in 2008. During that time, tuition and fees rose from 26 percent to 32 percent of the revenue.
Nonetheless, Murano bragged about A&M's success in the recent legislative session just days before she resigned. During the 2009 session, A&M was appropriated $530 million for the upcoming two years, a $41 million increase over the 2007 amount.
"Texas A&M-College Station reaped the funding in this legislative session," said state Sen. Judith Zaffirini, D-Laredo, who is chair of the Senate Higher Education Committee.
Wilson, however, has said that the university must prepare for the possibility that it won't be so lucky in the next session, which comes in 2011.
"The state budget was balanced only because the Legislature saved $3 billion from the budget surplus and the $12.1 billion from the federal stimulus money," Wilson said. "That may not come back in the future."
Zaffirini said he was "absolutely right."
For the students
A possible lag in state revenue would mean that costs would need to be cut or tuition would have to increase. Given the choice, regents said, they would choose to cut costs for the sake of students and their families.
Mark Gold, a senior biomedical sciences major who served as student body president last year, said most students expect a tuition increase of a certain amount each year.
"Most of my peers have been here for the last two, three or four years, and every time we have been in school, tuition has gone up," he said. "We aren't necessarily excited about it, but I think it is the expectation."
As part of his duties as student body president, Gold was one of seven students to serve on the Tuition Policy Advisory Council, which met frequently with Murano to make recommendations about tuition. He said he believed Murano did her due diligence to keep costs down.
"I know that we as a committee and Dr. Murano were all committed to keeping tuition as low as possible while still allowing A&M to grow and improve," he said, adding that he thought he got a good deal on his education. "We are very persistent in trying to maintain our status as the best value in Texas, not necessarily the cheapest university."
In presentations to students last year about the tuition plans, Murano described a detailed budget review "conducted to reduce operating costs wherever possible."
She proposed that regents allow her to increase tuition by between 1 percent and 13 percent for the 2010 fiscal year. In May, regents unanimously approved to cap tuition increases for all system schools at 4 percent.
Economic slump
Other revenue streams have decreased or failed to grow at the pace of A&M's expenditures.
The school uses revenue from its investments to pay for one-time projects, such as a $16 million loan to the athletic department four years ago, but troubles in the financial market have removed that option in recent years.
In the 2007 fiscal year, the school earned $75.6 million from investments, but it is projected to lose $17.2 million in the current fiscal year. The 2010 budget projects earnings of about $14.3 million.
Skeptics of the regents' position acknowledge that some cost-cutting probably will be needed, but they point to the revenue from the Available University Fund as a sign that the system is attempting to gain control of the finances.
AUF revenue is derived from earnings from state-owned land in West Texas set aside as the Permanent University Fund. While tuition and state revenue are allocated straight to the university, the AUF is allocated to the system and then disbursed to the individual institutions.
In 2006, when McKinney arrived, the system received $122.9 million from the AUF and allocated $82.5 million, or about 67 percent, of that money to A&M.
By 2009, the system budget projected AUF revenue at $179 million, a 45.6 percent increase from that of 2006, but the university's share of that was budgeted at $91.1 million, a 10.4 percent increase. Next year, the university's share of AUF revenue will drop back down to $82.5 million.
The system office increased its share of the money from $6.8 million in 2007 to $12 million, which it allocated to itself in 2008 and again in 2009. It plans to keep $10.5 million for itself next year.
Most of the new revenue from the AUF has gone toward paying off systemwide debts. In 2007, the system paid $43.3 million in AUF money for debt service, and in 2009 that number was $86.1 million. The projected debt payment from the AUF in 2010 is $53 million.
System officials said that 95 percent of the debts paid were construction costs. Fifty-two percent of that was for A&M projects, less than 1 percent for system office projects.
The AUF may not bring in as much money in the future, however, because of the struggling economy, system officials said.
Critics of the system say that A&M's financial problems would be less severe if its share of the AUF had remained constant over the years. If A&M's share of the AUF revenue had remained around 67 percent, A&M would have received almost $40 million more last year.
Quality of education
Whether cutting costs and keeping tuition down would affect the quality of education and reputation of A&M is not known.
Regents insist that the cuts will be directed at administrative areas of the school and will be designed to leave the classrooms and the research labs unaffected.
"We are not going to do anything to cut back on having the best instructors and researchers that we possibly can," Regent Gene Stallings said. "We are just trying to find where one person can do the jobs that two people are currently doing. Any business would do that."
Regents have argued that merging some system and university administrative duties would reduce costs even more by cutting payroll expenses and allowing the offices to take advantage of economies of scale. Some faculty members, however, have expressed concern that the larger offices would be less responsive and more impersonal and would provide lower-quality service.
"The ability to get individual service is difficult when the office works for thousands of people instead of a few hundred people," Distinguished Professor John Junkins said at a recent meeting of university researchers.
A&M leaders have bragged for years about their efficiency at the administrative level. The school spent 4.1 percent of its budget on administrative costs in 2008 -- the lowest proportion in the state and about two-thirds of the national average, according to Department of Education numbers.
'Excellence is not cheap'
Some skeptics have said that keeping the administrative offices functional and simply reducing waste wouldn't be enough to keep tuition from increasing.
In fact, keeping tuition low while maintaining the prestige and quality of a school can be a difficult task, administrators and academic experts said.
The University of Florida, which has the lowest tuition among all tier one universities, has remained inexpensive because of state restrictions on tuition. However, the Florida Legislature recently passed a bill allowing the schools to raise their tuition by 15 percent annually until it reaches national averages.
The bill was supported by all 11 presidents of Florida universities.
"Cultivating [an elite] environment has become nearly impossible," the 11 presidents said in an open letter signed this spring. "Two trends are to blame: Florida's low tuition, and major budget cuts in the last two years."
Zaffirini, the state senator, said she was aware of such problems in other states. Even though A&M has done an excellent job of increasing its funding, state appropriations haven't kept up with the school's growth, she said.
In a state that is seeking to increase its number of tier one schools, A&M needs to stay among the elite, she said, and paying for it requires a shared effort.
"Excellence is not cheap," she said. "That is just a reality of life."
Compared to that of other public "tier one" research schools, A&M's cost is relatively low.
According to data provided by the U.S. Department of Education and compiled by The Eagle, A&M had the fourth-lowest total average cost among public tier one schools for in-state students living on campus in 2008 -- the latest year for which data were available.
Stallings said that other universities' financial situations were irrelevant.
"I am not concerned about what other universities are doing as much as what we can do for A&M," he said. "We have no agenda other than trying to have the best university we possibly can and make it as affordable as we possibly can."
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