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OUR OPINION: Oregon case shows higher education in flux

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Grand Forks Herald
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Anyone who says there's nothing new under the sun hasn't been following the news in higher education recently. Case in point: A radical, first-in-the-nation proposal to by the president of the University of Oregon that would change the university's financing forever.

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It would do so by loosening the traditional tie that puts the word "state" in state university. Elsewhere in Oregon, there's talk -- and worry -- about cutting those ties completely.

As another college president in Oregon asked, "Is there a point at which we cease to be a public university?"

Here's how UO President Richard Lariviere's "New Partnership" proposal would work, as reported by The Oregonian newspaper in Portland, Ore.:

"The president has proposed the state use the money it now spends on UO, $63 million, to make annual payments over 30 years on bond money for the university. Payments at that level would support the financing of about $800 million in bonds.

"The plan would be a bargain for the state, the president argued, because its annual obligation to the university would remain $63 million a year and not increase for 30 years.

"The university in turn would match the $800 million with private donations and put the entire $1.6 billion into its endowment, which would be invested by the university's foundation.

"The university would then draw 4 percent to 4.5 percent of the fund each year for its operations. The foundation projects it could on average reap a 9 percent return on the endowment, which would grow to $6.9 billion in 30 years."

Oregon's support has become too volatile to be depended on, Lariviere says. The university would prefer the guarantee of $63 million a year (to service the $800 million bond) over the uncertainty of annual state budgets, even though those budget amounts likely would increase over time.

Furthermore, "legislative appropriations currently make up less than 9 percent of the UO's annual budget, and that amount will likely drop to about 7 percent for the coming year," Lariviere wrote in a recent op-ed.

"Tuition and fees account for about 40 percent of the UO budget. ... Just a generation ago, state funding per student at the UO was twice the amount received in tuition."

Lariviere will present his plan to the Legislature for consideration.

Its prospects there are in doubt, probably because of a key figure: 9 percent, the assumed -- read, "hoped for" -- rate of return on the big new endowment.

As pension funds (and college endowments) around America have learned, assuming wildly optimistic rates-of-return can plunge a fund into a very deep hole.

And besides, as one critic wrote, "Since when is floating a loan the way to pay annual expenses?"

So Oregon lawmakers probably will be skeptical. But the scope of Lariviere's proposal shows the power of the forces affecting higher education, and the likelihood that in the next few years, there'll be more big changes to come.

-- Tom Dennis for the Herald

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