Patterson: Universities’ plan not something to build on - East Valley Tribune: Opinion

Patterson: Universities’ plan not something to build on

Font Size:
Default font size
Larger font size

Posted: Sunday, April 20, 2008 11:27 pm | Updated: 8:54 pm, Fri Oct 7, 2011.

Arizona’s public universities recently stepped up to the plate to help improve our state’s sagging economy. No, they didn’t offer to defer or minimize spending since times are tough.

They offered instead to accept $1.4 billion of campus construction projects, to be paid for with debt financing of $81 million annually for 25 years. They’re even willing to put up $21 million yearly of their “own” money to cover additional financing costs.

It’s odd, though. Even the report touting the Construction Stimulus Program, as it’s called, notes that “Arizona’s economy is too dependent on construction.” The universities’ own economists have been saying the same thing for years. So how could bailing out the commercial construction industry, one of our healthiest economic sectors, be the answer to anything? Commercial permits are down just 2 percent from last year, industrial permits are up 14 percent.

But even if the largess went to a more deserving beneficiary, the economic logic would be suspect. Any possible benefit to today’s economy would be at the expense of the future. If spreading public money around without raising taxes expands the economy, then taking money out of the economy to service debt will contract economic growth in the future.

Worse, we have to pay back more, much more, than we took out because of accumulated interest.

Still, the beneficiaries of government spending and even some businessmen argue there’s nothing wrong with debt. Families and businesses use it all the time to manage their finances, so why shouldn’t the state? But the analogy doesn’t hold.

Businesses use debt to acquire assets that generate income, which is used to service the debt. But government assets are money sponges. Government may provide valuable services, but it doesn’t produce income or generate wealth. “It takes money to make money” doesn’t apply in the public sector.

Families and individuals use debt for large purchases such as homes that would otherwise be unaffordable. But especially for a state like Arizona, large capital expenses are the norm. The state spends $400 million every year on school construction. We have to pay for the schools, but we don’t have to pay additionally for the use of the money. It’s just an added expense. Think of buying food and clothes with a high interest charge card that you expect your children will eventually pay off and you get the picture.

There’s another problem. The Construction Stimulus Program would be of minimal benefit to the present economy. Economically it works like a rebate, where government takes money from some people and gives it to others. The lucky beneficiaries are pleased but there is no net incentive to work, save or invest. There’s nothing that would foster economic growth.

Moreover, no correlation can be shown between states’ spending on higher education and economic growth.

If we’re serious about long-term economic growth, there are far superior options out there. According to Stephen Voeller of the Arizona Free Enterprise Club, the state corporate income tax could be entirely eliminated at a “cost,” based on static analysis, of $1 billion. Now that would juice up the economy, eventually improve state revenues and reduce our dependence on construction.

There’s another point sometimes lost in this discussion. Do we really want our large public universities to keep growing indefinitely? Arizona, although just a medium-sized state, already has two of the largest universities in the nation. Along with NAU, ASU and UA dominate the local higher education market to an unparalleled degree. College-bound students in Arizona, even those with meager qualifications, tend overwhelmingly to end up in a gigantic, publicly funded, national research university with relatively low tuition. With few exceptions, liberal arts colleges, religious-based colleges, smaller, more excellent or intellectually diversified colleges have been unable to compete against the public monopoly.

ASU recently announced a goal to reach 100,000 students. That’s a nice round number, but should that be the priority when ASU is struggling with a mediocre academic reputation, when six years is the new norm for a bachelor’s degree, when professors, parking and privacy are already in short supply?

We already have a huge debt load and huge universities. More debt for bigger universities doesn’t add up.

  • Discuss

Facebook on Facebook

Twitter on Twitter

Google+ on Google+


Subscribe to via RSS

RSS Feeds

Your Az Jobs