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Budget chief: Higher ed to take biggest hit from state’s rising health costs

Budget pressures on the state include rising health care costs, growing school populations and rising numbers of prison inmates, Arizona Budget Director John Arnold told a Washington conference Tuesday. (Cronkite News Service Photo by Joshua Armstrong)

WASHINGTON – Arizona’s colleges and universities will likely bear the brunt of budget cuts forced by rapidly rising health care costs, the state’s budget director told a Washington audience Tuesday.

John Arnold, director of the Office of Strategic Planning and Budgeting, said that Medicaid and other health-care expenses are predicted to grow to as much as 40 percent of the state budget by 2015. That will force the state to cut higher education funding because there are few other options, he said.

“It certainly seems to be on a collision course,” Arnold said in a speech to an American Institute of Certified Public Accountants conference.

Higher education officials reacted to the news by saying that public universities are reaching a “breaking point,” after seeing their state funding reduced from $1.2 billion in fiscal 2008 to $682 million this year.

Schools cannot continue to raise tuition without significantly hurting enrollment, said Katie Paquet, spokeswoman for the Arizona Board of Regents.

“We’re going to start to have an access issue if state budgets continue to decline and we’re forced to continue to raise tuition,” she said.

But higher education spending is where the Arizona Constitution allows the most flexibility, Arnold said in an interview after the speech.

The constitution says the state must provide higher education that is “as nearly free as possible” but does not specify spending requirements.

A spokesman for Gov. Jan Brewer said it is “simply a fact that higher education is a large bucket when it comes to state funding.”

“It’s something where the state has discretion in terms of cuts,” said Matthew Benson, the spokesman.

State Rep. Tom Forese, R-Gilbert, said he is concerned by the idea of further cuts to higher education.

“We’re really putting ourselves in a position where we’re not going to be able to meet these unfunded federal mandates without taking part in several very bad positions,” said Forese, the chairman of the House Higher Education, Innovation and Reform Committee.

State funding currently accounts for about a quarter of university and college revenues in the state, Arnold said.

“Could we completely get out of university funding and still meet that constitutional requirement? I don’t know,” he said.

Paquet said the board of regents plans to submit a performance-based funding recommendation Oct. 1 with its fiscal 2013 budget request. The recommendation would include a baseline budget that would increase based on degrees granted, research activity and credit-hours earned by students.

“We feel like that’s a pretty bold move on our part, to say, ‘Hey, of course we want revenues, but we’re willing for them to come to us based on meeting those performance goals,’” Paquet said.

Regents Chairman Fred DuVal wrote in an email that the state put correctional facilities spending and tax cuts ahead of education spending.

“Pitting Medicaid against education is not a full disclosure of the choices,” he wrote. “If education is their fourth priority — they should just say so.”

Arnold said some savings could be found in prison budgets, but they would be small because Arizona’s prisons are already fiscally efficient.

Benson agreed that cuts to other areas would be hard to find.

“When you look at things like public safety and corrections and things like that, there’s difficulty in reducing spending in those areas, so higher education often has a target on its back,” Benson said.

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