Author Topic: Flush with cash, North Dakota weighs its commitment to colleges  (Read 3174 times)

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Offline pmp6nl

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Promise on the Plains
Flush with cash, North Dakota weighs its commitment to colleges
By Scott Carlson
Fargo, N.D.
Chronicle.com


North Dakota State University wagered a good bit of money on C. Satishchandran when it lured him from Pfizer to this small, charming town to direct a new program in biopharmaceuticals. Talk with enough people around here, and someone will eventually bring up the talented scientist and the bright future he represents.

When Mr. Satishchandran met with administrators and other influential people here recently, he made a request: Double down.

"The state spent the initial funding to bring me here"—devoting some $2-million to establish the program—"but that is not going to be enough," he says from his campus office. He'll need high-paid colleagues, a staff, and equipment. "I am hopeful that the state will see the wisdom of investing in this."

In many other states, where budget woes dominate conversations about higher education, Mr. Satishchandran's request might be waved off as fantasy. But here in North Dakota, dreams of lavish support are limited only by a persistent Midwestern frugality. The state is flush with money from its oil fields, in the west, and from high demand for its agricultural products. At the end of the state's biennium, in June 2011, North Dakota may wind up with a surplus in the high hundreds of millions. Prosperity like that could continue for decades.

Some advocates for the state's colleges see this as a golden moment. North Dakota could pump money into campus research programs, they say, and lay a foundation for new economic engines to carry the state after the oil runs out. The money could lure top researchers away from other institutions. And young people, who have long left for better opportunities, might find reasons to stay. In the local newspapers, some lawmakers talk about covering tuition for all in-state students.

Or are these just dreams? North Dakotans are fond of pointing out how fiscally conservative they are, and the state's surpluses in the midst of a national recession have vindicated those who believe it should sock more money away and encouraged those who would give it back to taxpayers. There's a long line of people asking for money—and there are real needs, like infrastructure in the bustling oil patch.

Moreover, the Legislative Assembly has had a rocky relationship with North Dakota's flagship universities recently, highlighted in news coverage of an expensive house and a pricey trip to Washington, which last year led to the resignation of the president of North Dakota State. Some legislators talk about reining in higher education.

"We can't afford to provide everything everyone wants," says Robert J. Skarphol, a Republican who chairs the higher-education committee in the state House of Representatives. North Dakota devotes roughly 19 percent of its budget to its 11 higher-education institutions, while 12 percent is the national average. Mr. Skarphol wants to see more accountability from the colleges before shelling out more money. "We're not a church. We don't live on faith here."
How Much, How Long?

Any discussion about what to do with the surplus involves nailing down exactly how much money there is. In casual conversation, some toss around a figure of $1-billion for 2011. But many North Dakotans fit the stereotype of the Scandinavian Lutheran farmers, popularized by the likes of Garrison Keillor, who play down their wealth and tend to avoid doing risky things with it. Elwyn B. Robinson, who wrote the definitive history of North Dakota, said its people were haunted by the "too-much mistake": Early on, the state built more roads, towns, schools, and so on than a relatively small population on a difficult landscape could support. That financial burden has influenced the state's frugality to this day.

So some people here talk cautiously about wealth. "When you talk about the tremendous budget surpluses, you are really talking about a little over $100-million that is uncommitted," insists Judy Lee, a state senator.

The official figure, from the state's Office of Management and Budget, estimates a surplus of $550-million, plus an additional $325-million locked up in a budget-stabilization fund, in the unlikely event of a revenue shortfall.

A wild card right now is the Legacy Fund, proposed by a group of legislators and supported by Gov. John Hoeven, a Republican, which would take 30 percent of the revenue from oil-and-gas taxes and put it in a trust fund that could not be touched for years. A similar fund was proposed in 2008, but North Dakotans voted it down.

The other uncertainty: How long will income from the oil wells keep flowing? The oil field, known as the Bakken Shale Formation, has gone through disappointing times, most recently in the 1980s, when North Dakotans sank money into infrastructure to support the fields, only to see them go bust. Now oil companies are using a new, horizontal-drilling technique that could liberate more than four billion barrels of oil, allowing North Dakota to surpass Alaska in oil production. Some say the boom could last 10 or 20 years, some say more than 40. But it won't last forever.

"It provides the state with a stable window of opportunity that you can really count on," says Dean L. Bresciani, new president of North Dakota State. "North Dakota has an opportunity to invest and provide that insulation in a different way, in a perpetual way. Whether they do or not is going to be an interesting social experiment, because you are going against the traditional culture of the state."

In North Dakota, he says, people appreciate the value of an undergraduate degree but need "a more sophisticated understanding of higher education as an economic engine." In the past five years, the state has started a Centers of Excellence program, which pairs university research with private industry to generate new businesses and jobs. But Mr. Bresciani wants to see the state develop something akin to North Carolina's Research Triangle.

He talks with state officials about research possibilities in medicine or technology and how they can be economic catalysts. "When I start talking about that, they'll say, How does that apply to agriculture?" They are missing the point, he says. "I'm talking about new industries and new jobs that don't exist here."

The situation in North Dakota is "an alignment of the stars that I have never been a part of before," the university president says. "You've got the chance to bring new leaders, to bring new scholars, to bring students in from out of state, to bring all the best in people who are fleeing from other states."

North Dakotans are accustomed to people fleeing their state, and population trends have been a major concern for policy makers here. Total population in the state has been stagnant, hovering between 600,000 and 700,000 since the 1920s. And the proportion of people ages 65 to 84 is growing considerably, which will put more stress on state services in the next decade. Particularly in the western part of the state, where farms have consolidated and become more mechanized, young people have moved out to find better opportunities elsewhere. (The oil boom has reversed population declines in some western counties, but it's unclear whether those increases will be permanent.)

Policy makers point to a bright countertrend among the college population. North Dakota is a net importer of first-year college students, compared with, say, Minnesota and Colorado, which are net exporters. About 50 percent of first-year students are from out of state, a proportion that has gone up in recent years. (Billboards advertising the University of North Dakota can be seen along Interstate 94 in Minnesota more than 150 miles from the border.)

But the drive to lure students also creates tensions with a traditional North Dakotan mind-set, says Tim Flakoll, who is both a Republican state senator from Fargo and provost of a cross-border consortium comprising North Dakota State; Concordia College, in Moorhead, Minn.; and Minnesota State University at Moorhead.

"On one hand, we have the visionary types who say that higher education is the best recruitment tool we have, with 33 to 35 percent of the students staying here after graduation, and 18 percent of international students staying to work here," he says. But he also hears the counterpoint among his colleagues in the statehouse. "They are like, Why are we paying for these out-of-state students to come here? We should be just funding North Dakota students."

He appeared on a talk-radio show this year, debating the need for tuition discounts for in-state, out-of-state, and international students with Dustin Gawrylow, an antitax advocate. Mr. Gawrylow complained that at his alma mater, Dickinson State University, in the west, "a huge number of students simply can't speak English" and were a burden to North Dakota taxpayers.
The New North Dakotans

Jarrett Brachman, who spent his high-school years in Fargo, may represent a new generation of North Dakotans. The young scholar is a counterterrorism expert who once worked for the CIA. He was at West Point until 2008, when he decided to move back home, seeking a better quality of life.

"Half of my friends said that I was killing my career in a single stroke," he says. Now a fellow at North Dakota State, he has more time for focused research, and he still appears on cable-news programs, through local TV studios. "I am trying to help rebrand North Dakota. What I found is that the closer you are to Washington, the less time you have to think. So there is no place farther from Washington than North Dakota, which is what I have embraced."

He wants to build a world-class counterterrorism-training program for state officials here—and the success of that program depends in part on the state's willingness to invest.

But the challenges he and Mr. Satishchandran face go beyond money to perceptions about North Dakota. "People did a double take when I said I am going to Fargo," Mr. Satishchandran says. "If you ask me what is my biggest challenge, what keeps me awake at night, it's, How do I get these people to come here? I need my team." He is on the phone every day with colleagues, and "the first thing that they ask is, What is the winter like?"

Compared with most American climates, winter is fairly harsh and long, actually. But Fargo itself might pleasantly surprise a first-time visitor. Broadway Drive, the main street through old Fargo, is lined with cute boutiques, hip bars, restaurants that serve local and sustainable fare, even a renovated art-house theater—all testaments to the wealth here. Still, it's not Minneapolis, or even Madison. Humorous local posters and magnets display the world's four great cityscapes: "Moscow. London. Paris. Fargo."

 But Fargo, long considered a locus of power in "Imperial Cass" County, in the far eastern sliver of the state—along with Grand Forks, not far to the north—is different culturally, geographically, and politically from the sparsely populated expanses to the west.

With the oil boom, the western part of the state now has more clout, and its priorities and needs are different. Dennis W. Johnson is mayor of Dickinson, in the middle of the oil patch, and he has served on committees that have helped shape higher-education policy. Right now, he says, the state needs to attend to the areas stressed by the intense development of the oil patch. The population increases require new wastewater-treatment facilities, and the heavy trucking has damaged the roads. Mr. Johnson, who runs a company that manufactures cabinetry, mainly worries that the high-paying oil industry will crowd out other businesses in the region. "In North Dakota, you have to figure out how to foster an environment so that some of these other sectors can flourish after the oil goes away," he says. "Higher education might have a role in that."

 But scandals over money—like the president's house at North Dakota State, which went more than $1-million over the budget the legislature had approved—have tainted higher education. The overrun was one factor that led to the resignation of Joseph A. Chapman, the president.

That controversy might, in a nutshell, capture some of the themes involving education, money, and power in North Dakota. People who saw the news reports about the cost overruns might have missed a detail: The money used for the house was not state money; it was raised from donors. North Dakota's frugality is so ingrained that the state strictly limits the money colleges can spend on projects, even if that money is privately raised.

Observers here say the house was not just a simple financial misstep. It offended North Dakotan sensibilities of modesty and egalitarianism. It was too flashy for farmer stock.

In the early 2000s, the legislature adopted a new paradigm for managing the state universities: flexibility with accountability. People around Fargo say Mr. Chapman, despite the controversy near the end of his tenure, used that flexibility to push North Dakota State light years ahead of where it had been. But following the scandals, that paradigm may be in jeopardy—and along with it, higher education's big visions for the surplus. An audit of North Dakota State, released last week, raised concerns about how money had been handled during the 2007-9 biennium, which gave more ammunition to the skeptics.

"There are people in the legislature who want to go back to the way things were 10 or 15 years ago," Mr. Johnson says. He believes that less legislative oversight is "a good thing, but that is not a universal opinion here."
Balking at More

Mr. Skarphol, the Republican representative from the northwest corner of the state, where he works in the oil industry, says he has "not been a cheerleader" for more flexibility. And he says that the state colleges have not provided accountability—although he also complains that they provide too much information. "Their accountability report is 52 pages," he says. "I would submit that most legislators peruse it briefly and put it on the shelf."

He wants less nuance and more plain results: Stop students from dropping out and bring up those graduation rates, which average 39 percent among nine major public four-year institutions in the state.

Higher education got $593-million in the 2009-11 budget, an increase of $124-million from the previous biennial budget and the largest increase ever. The university system is requesting a 21-percent increase in its base funding, plus $108-million in capital projects, for the 2011-13 biennium.

"The appetite for new buildings seems to be insatiable," Mr. Skarphol says, in what might be an echo of the "too-much mistake." Some $50-million a year in capital projects might not seem like a lot, but it may be a big number in proportion to the population; that figure would translate to $885-million a year in a state the size of Ohio.

Mark S. Jendrysik, a professor and chair of the department of political science and public administration at the University of North Dakota, is skeptical that state leaders will suddenly see a need to spend more money on higher education. Attitudes in the state aren't always compatible with higher education or with the kind of ventures some North Dakotans dream about.

"The state is leery of promises, and they don't fall for grandiose schemes," Mr. Jendrysik says. With the surplus, eventually "someone is going to come up with the grand idea of taking it and giving it back to the taxpayers."

Would that help the state grow and diversify? "That's the thing," he says. "I think a lot of people in this state are not particularly interested in growth. They are interested more in keeping things as they are."
From: http://chronicle.com/article/Flush-With-Cash-North-Dakota/124362
CampusDakota.com

Offline Sal Atticum

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Re: Flush with cash, North Dakota weighs its commitment to colleges
« Reply #1 on: September 14, 2010, 11:08:14 AM »
Wow, that was pretty in-depth.  Good find!

I think there are a lot of good points made by both sides here.  Yes, ND is doing well, but they also need to think about the future when the oil potentially runs out or (as certain people would suggest) we open up drilling offshore and in national parks, which could lower oil prices (well, the proponents say this is why they want to do it)--but this could make it uneconomical to drill in the Bakken until prices rise again.  As was pointed out in the article, ND had too much infrastructure to start off, and infrastructure that goes without use is wasted.  If it becomes uneconomical to drill the Bakken, the workers move out, and we're stuck with "too much" again (I'm thinking specifically of the housing-building boom in Williston right now that was highlighted in the "Running with Oil" special series by Forum Communications.

As an aside, I don't think the Bakken was even on the radar in the 80s because it was uneconomical to drill and not even attainable until horizontal drilling became more widespread.  The general (safer) term for the area is the Williston Basin, which contains rocks that were deposited when that region was being forced downward (and underwater, hence the rocks being deposited) as recently as around 70 million years ago.  The center of the basin is, of course, near Williston, ND.  Oil isn't available everywhere, but many of the horizons are (or were) producing.  The Bakken itself is only about two meters thick.

I'm concerned that this article only touches upon the education of undergraduates and instead focuses on research.  With "33 to 35 percent" of students sticking in North Dakota, it's prime for business startups who are seeking an educated workforce, but we don't see that type of investment.  It would be great to see UND and NDSU lead the way in focusing on undergraduate education by increasing the number of professors (not graduate students), decreasing class sizes, and cultivating a sense of serious work ethic.  If the majority of students graduating in ND had the amazing qualities that the older generations of North Dakotans seem to love talking about (work ethic, fiscal responsibility, outgoing nature, attention to detail, etc.), this state could be a great place to get an education and to live.

Rather than research money coming in to the universities, going out to the state, and then coming back to the universities, I'd like to see more in-house transfer of funds.  Over 35% of grant money goes back to UND, but does that money go back to the primary purpose of the school (educating undergrads), or does it get rolled back into R&D?  Where is the balance?
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