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A New Compact between Higher
Education and Business in Nevada

Presented to the Nevada Development Authority on January 21, 2010

Chancellor Dan Klaich speaking to NDA membersGood morning.  First I would like to thank Glenn Christenson and Somer Hollingsworth for the opportunity to address you today and for the opportunity to introduce myself and let you know my thoughts about higher education and business.

These dates are scheduled months in advance, and I have been thinking about and working on my comments for quite some time.  I remember the great speech that Somer gave last year on the state of the California economy, replete with high energy and entertaining slides, and I have even prepared a few slides of my own.  I thought they might help lighten the mood and deliver the message as I talked to you about working together and giving each other a hand in rebuilding our state.  However, it seems that fate has intervened, and I for one don’t have much of a sense of humor today.  As you know, the Economic Forum will meet tomorrow in an extraordinary special meeting.  They will provide their view of the Nevada economy and how it relates to revenue projections in this state and inevitable reductions in the state budget.  I don’t think any of us are expecting a very rosy report.  In fact, I am expecting tomorrow to be nothing short of a game changer for Nevada and that meeting may well render everything I have to say this morning moot.  But being the eternal optimist, I think the economic news we will hear will make these remarks even more relevant.

My opinions and views are forged by my history.  I am a native Nevadan.  My dad was born in McGill and grew up speaking English as a second language and working in the copper mines of northeast Nevada.  Through public education he changed the trajectory of our family history and gave me the opportunity to be here today.  Whatever I have is the result of hard work, determination, public education and the opportunities afforded by this great State.  I am working to ensure that my story can be the story of all our children, grandchildren, and literally our future.

Let’s be clear, notwithstanding my advocacy for higher education, I am aware that there is a recession in this state and that people and businesses are hurting.  Tough decisions are being made every day that will change lives -- many for the worse.  No one, including education, is or can be immune from the touch of this crisis.  But let me put that in context.

Since l988 when Nevada’s population was just cresting one million, our tax structure has remained virtually unchanged.  Before that, the last major change in Nevada taxes was in the mid-50s.  For perspective, the population of Las Vegas at that time was less than 30,000, less than 60,000 in the entire county.  Ronald Reagan was on the scene but as an entertainer at the Last Frontier, and decades away from his presidency.  Nuclear tests were being conducted above ground in Clark County, a new skyscraper – the 12-story Fremont Hotel – opened in downtown, and late in that decade, the first classes were offered at what would become UNLV.  What we now know as CSN, the largest institution of higher education in the state, was more than three decades from being founded.  Does anyone question what a different state we have become, what a different road we are traveling now, and yet we are supporting ourselves and trying to shape our future with a funding structure rooted in our past and devised for a state, a population and an economy that bears no resemblance to the state we are today.

We are at a crossroads – one hammered home by the ugly recession in which we are mired.  Nevada is changing.  While tourism, hospitality and gaming will remain a mainstay of our economy for the foreseeable future – possibly forever – we can no longer count on it as our sole and possibly even dominant economic engine.  All around us the world is changing from a service and manufacturing economy to a knowledge-based economy - an economy where the single most important asset of any business is the intellectual capital of its employees.

Nevada’s economy will recover.  That is not up for question.  What remains a significant question in my mind is what we will look like in that recovery.  Whether we will embrace a new knowledge and information based economy driven by the intellectual engine of UNLV and the workforce development power of CSN is up for grabs in Nevada in 2010.   The alternative is an economy overloaded with relatively low paying, service level jobs, struggling to support increasing social services network and prison population.  It will come as no surprise to any of you that I think education, and in particular, higher education, is the most critical component in what the answer to that question will be.

In the weeks and months ahead, as we wrestle with the budget of this state and assess our priorities, tough decisions will be made.  They have to be made in order to bridge this crisis.  Yet, we cannot not allow this economic downturn to rob us of our future, or worse yet, seize this opportunity to squander that future.  So let me turn to two points.  The state and you, business leaders of Southern Nevada, need a workforce that is educated as you face the uncertain future.  You need an excellent educational system that will support your needs and recruit new businesses into the state – a Nevada that requires investment from you, the taxpayer.  What level of cost is appropriate and necessary?  Secondly, based on that answer, what kind of state will that create for us and our children for the future?  What do you see Las Vegas like in 10, 20, 50 years?

Unfortunately, when I say you need an excellent educational system, the question arises about whether higher education in Nevada is adequately or even over- funded.  I wish I could put that issue to rest. Yet, I know that to some extent it is unrealistic to try to do so given that there will always be those who believe public colleges and universities squander tax dollars unnecessarily and higher education is a luxury offering little economic value to a community. I can also understand the temptation for young people to set aside a college education for those quick dollar jobs that require little formal education yet do not offer the long-term security that a quality education provides. 

I also do not dispute that higher education costs, but as I have previously indicated on so many occasions, investment in higher education is an investment in Nevada’s future and its citizens with long term tangible returns.  As education levels increase, income to support expenditures increases, dependence on social services decreases, incarceration levels decrease, and levels of activity in the social fabric of the state and community increase.  These are facts and are real benefits to the state that simply cannot be ignored or brushed aside. In fact these are the very things that will make us a great state, a place to raise our families, and a place of opportunity for all.

There is no doubt that higher education competes for public funds with other state priorities, such as public safety, prisons, health services, and basic support for children. All are extremely important.   

Yet, today, Nevada’s colleges and universities are facing unprecedented challenges with growing demands for an educated workforce and corresponding increases in enrollments, at a time when state funding allocated to higher education is declining.  Nevada’s colleges and universities are not overfunded. We have fought to create a college going culture in this state and have made some progress.  But now our institutions are doing more with less, often at a high cost to our students.  The unfortunate reality is we cannot continue on this path of falling state support indefinitely without drastically impacting the state’s future. 

Let’s look at the facts.

Declining General Fund Support
This depression has resulted in a steep decline in state funding for higher education.  The 2009 Legislature reduced higher education appropriations more than other areas of the state budget - the share of the General Fund appropriated to higher education falling to 15.6 percent for fiscal year 2010, compared to 19.3 percent in fiscal year 2009 before budget reductions were imposed. 

To put that into historical perspective, over the past 30 years, the percent of the General Fund allocated higher education has been in the range of 18 to 21 percent, even during recessionary periods experienced in the early 1980’s, early 1990’s and after the 2001 terrorist attacks on New York City and Washington, DC.  Proportionately, current state funding for higher education is substantially less now than it ever has been in the past 30 years. Even before looming budget cuts, real dollars for higher education have returned to the early years of this millennium.

Growing Enrollments
The irony of the current situation is that while state funding for higher education is declining, demand for higher education is growing.  Not surprisingly, during this recession when so many Nevadans are out of work, many have chosen to return to school.  Some do so by necessity since their former jobs no longer exist.  Some do so to improve their employability.  But, in most cases, their former jobs are never coming back, not in this information age. 

Nevada, the nation and the world are changing before our eyes.  The economy of the next decade and beyond will require more degrees and certificates at every level of education.  It will require workers who possess knowledge and critical thinking skills provided by higher education.  As the number of jobs the average worker will have in his or her lifetime continues to grow, workforce flexibility and adaptability are more important than ever.    

Even as Nevadans seek to move off the unemployment rolls and gain new job skills, we are turning students away as class sections are filling at faster rates than ever before.  For the first time in our state’s history, we are having discussions about enrollment caps. We cannot continue to serve a growing student base with decreasing state dollars. 

But you already know all of this.

Increasing Accountability
It seems to me that for too long, despite what I believe should be the obvious partnership and interdependence between business and education, we have been at odds with each other.  I believe that the root cause of that divide is a lack of credibility for higher education and a belief by the business community that a dollar of taxpayer money invested in higher education does not return that value or more to the state and to the business community.  If we are to move forward to rebuild our economy and our future, that has to change, and I am here to pledge to you that I will do everything that I can as Chancellor to make that occur.  Let me tell you about a few of the initiatives that are in progress to gain your trust, and with your trust, your support.

We understand that doing more with less is not going to go away after this economic crisis.  For many sectors of society, and in particular higher education, leaner funding is here to stay.  As we compete for precious state tax dollars, we have the responsibility to show the state and the taxpayers we are using every dollar we receive with maximum efficiency and effectiveness.  That is why the Board of Regents has launched an initiative to review and change current practices to conform to future funding realities.  We will question all academic and business practices, and we will seek to find and incorporate the best practices into the core mission of our campuses. This effort, which requires nothing less than a change of our entire culture, is about doing more with higher quality in the face of constrained resources.
                  
An important aspect of this discussion is accountability and productivity.  Has higher education done the job it should in producing graduates to this point?

No. 

We can and must do better.  We can debate the reasons for low graduation rates in Nevada and devolve into a never ending battle of finger pointing which does nothing to solve the challenge of improving Nevada’s constant placement at the bottom of measures of quality of life and education.  

The bottom line is that UNLV, CSN, and Nevada State College, as well as their sister institutions in the rest of the state, must produce more credentialed students at every level with the tax dollars they are given.  Anything less is not satisfactory.  Ultimately it is the responsibility of our presidents to see that students are recruited, retained, make progress toward their degree and graduate, and I intend to evaluate the presidents of each of our institutions on this basis.  I will insist on metrics that we will measure and report.

We have suspended our current tuition and fee policy and have a system wide group that will produce a more realistic policy based on cost sharing, adequacy of tuition rates and more institutional independence by retaining fee increases at the campus level.  Our students and their families have stepped up during this crisis, already shouldering increases in the basic fee rate of 39% over the past five years.  I believe they are willing to do more and we are working on a policy that will accommodate that.  However, I cannot endorse a simple shift of the cost of college from the state to the students to solve the current crisis.  Not only is that a selective tax on one group but it robs the system of using fee dollars in the future to increase the quality of education without having to run to the state, something that will be critical to our long term health.  We must also be mindful that financial aid in this state to low income students is among the most meager in the nation and we are risking closing the door to higher education to whole segments of our society, and disproportionately to low income and other under-represented minorities. 

We will require collaboration and its attendant efficiency at every level of the system.  When looking at any program or practice we will ask four questions:  Is there collaboration within the institution?  Is there collaboration across all institutions?  Is there collaboration with business?  Is there alignment with the goals of the state?  Programs and practices that cannot meet these tests will be at risk.

Finally, when we ask the state to share the cost of higher education we must do it in a way that is understandable and fair.  While I believe our current formula for funding higher education has served us well, we need to improve it.  It must be capable of being understood by more than a handful of back office persons.  It must distribute funds equitably, support our missions and drive behavior that enhances those missions, rewards positive achievement and discourages destructive and unacceptable competition among sister institutions.  I have worked with the Board, the governor and legislative leadership to study potential improvements to our funding formula to achieve these goals and we are moving forward at this time.

Moving to the Future
To be economically competitive in the future, Nevada needs more college graduates.  Given our current and potential future even lower funding levels we cannot meet those demands.  So what is an appropriate level of state support for Nevada’s public colleges and universities? 

It is the level at which all of us agree that Nevada flourishes economically and socially because excellent institutions, which use taxpayer dollars wisely and efficiently, bring new businesses to the state.

It is the level at which all Nevadans are educated to the level they wish, and the state is a magnet for the best and the brightest to build our future. 

The data indicate that this has not happened yet.  Over the years, progress has been made through the commitment of the Legislature and taxpayers, but we are still in a building phase by any standards one can apply.  Right now all that we have built is being threatened. 

Only those whose vision of our future is focused in the rear view mirror of history and want to keep Nevada limited to the whims of a service-based economy would be so naive to argue otherwise. 

I think we have become numb to hearing our state land at the bottom of every list measuring education quality and achievement.  These are not meaningless statistics to be shrugged off; they are an indictment of our commitment to our children’s future.  We should be outraged by this failure.  I am here today to ask you for your help.

I have often said that education will lead us out of this recession.  That thought is not complete.  Only through a strong and vibrant partnership with business can we build the educational system we need for this state and with it our future.  I am here today with proposals from the education side of that partnership that no one can argue constitute business as usual.  I am here asking for your help in building that partnership and building a new Nevada. 

I am open to any ideas and any potential solutions.  Please talk to me afterwards if you have any ideas.  Leave me your business cards, call me.

I am not open to failure, the stakes are simply too large, even for this gaming town.

Thank you for your time and attention.