Ed Lane: Prior to becoming the president of The University of Louisville you served as the state budget director for Gov. Paul Patton. How does the state’s current revenue forecast and anticipated expenditures compare to budget concerns you experienced when you were budget director?
James Ramsey: When I became budget director, the Patton administration had concerns similar to those that Gov. Steve Beshear now has. We had a structurally imbalanced budget – recurring revenues were less than recurring expenditures. I have no doubt the magnitude of Gov. Beshear’s problem is worse now.
Secondly, there has been a slowdown in the Kentucky economy over the last year. In my view, we’re seeing very modest growth in employment in the state. That’s impacting revenue growth in the state’s general fund. In the current fiscal year (ending June 30), there is very modest revenue growth – less than 1 percent.
Revenue growth is currently estimated to be about 2.4 percent the next fiscal year, and 3.6 percent the year after. The rates of growth forward are very modest by historical standards.
When the Patton administration took over in 1995-1996, we had a structural imbalance, but the economy was robust. Towards the end of the Patton administration in 2002, we experienced a slowdown in the economy and had to make budget cuts at that time. Gov. Beshear is inheriting a structural imbalance and a slowdown in the economy – simultaneously – at the beginning of his administration.
EL: Do you feel it is more likely that the General Assembly will increase some revenues – like the cigarette tax – as opposed to making major budgets cuts in funding K-12 and postsecondary education?
JR: The magnitude of the problem suggests that there will be cuts. I think there will be discussions about alternative revenue sources from gaming and perhaps increasing the cigarette tax. I just can’t predict there will be new revenue at this time; but I do believe there will be cuts. There’s no question.
EL: When House Bill 1 was passed (in 1997), it mandated that the University of Louisville’s goal was to be a premier, nationally recognized, metropolitan research university. Can you touch on a few of the areas in which UofL is now conducting research?
JR: In 1997, the University of Louisville was given a mandate from state policy makers. In fact, a year earlier the Louisville community came together and, I would say, UofL was also given a community mandate. If you look at the Louisville community, it has historically been a great economy. Manufacturing continues to be very important in our employment both here and statewide. Over the last decade, Kentucky has lost a lot of manufacturing jobs. Those are good-paying jobs. So Louisville a decade ago said that our community needed to develop new economic clusters to grow and improve our quality of life.
The two economic clusters that were identified for Greater Louisville as targets of opportunity were a health care and sciences cluster and, secondly, logistics and distribution. Much of our effort at the University of Louisville has been to focus strong research programs and economic activity on health care, life sciences, logistics and distribution. In the last decade, we’ve seen where the work of the University of Louisville has had a profound impact growing those economic sectors or clusters and helping diversify growth in our region’s economy.
EL: Is UofL an economic engine for Greater Louisville and Kentucky?
JR: No question. The way I like to say it is, “For Kentucky to grow and prosper, Greater Louisville must grow and prosper.” For Louisville to grow and prosper, the University of Louisville must take a leadership role because the university impacts the local economy in so many ways.
Certainly, our research is economic development. It’s new money coming into the community. Those research dollars have a multiplier effect. UofL has been responsible for start-up businesses, and we say we’re taking our research from the mind to the market place. UofL is very focused on translational research that can be commercialized; that’s economic development.
UofL impacts the economy in key other ways. I call it the Brown-Forman effect. Brown-Forman is an international company that must recruit the very best talent to be successful in the international marketplace. So you ask, why would someone be willing to come to Louisville and work for Brown-Forman? The overall social, cultural and artistic vibrancy of our community is exceptional, and we at the University of Louisville add that. From our research to the contributions we make throughout the community, UofL is a key driver of Louisville’s economy.
EL: In FY 08, UofL is budgeted to receive approximately $191 million from the state’s general fund. If you have to make a cutback between now and the end of the fiscal year (ending June 30), how many dollars must be cut?
JR: UofL’s cut is actually $5.1 million.
EL: Would UofL be able to offset this cut with one-time surplus or reserve funds?
JR: Yes. Actually in UofL’s case, this year’s enrollment was a little bit bigger than what we had budgeted, and that would account for about $1.5 million. The remaining amount could be funded by positions that won’t be filled by year end. There will be some ways for UofL to manage this year’s cut in state funds. Where the impact becomes a real challenge is in fiscal years ‘09 and ’10.
If UofL is to continue to improve the quality of its students, their success, retention and graduation rates, we must spend more money on financial aid, student engagement, career counseling, etc. Kentucky’s postgraduate universities are trying to “double the numbers” by graduating more students and keeping the very best students in Kentucky.
UofL has been trying to recruit 20 new research faculty a year for the last five years. That’s a hundred new faculty. A budget cut would mean we wouldn’t be able to continue to grow our research programs.
Very candidly, UofL’s outstanding facility are just like winning coaches. There is a market for research superstars, and other schools want successful researchers. They want to recruit our researchers away from us and have our researchers bring their grants with them from the University of Louisville. Kentucky’s universities must not lose their momentum, energy and excitement.
The biggest problem is that budget cuts motivate academics to begin to look at other states for employment and funding opportunities. If universities are building research in other states but yet Kentucky doesn’t have the ability to do that, we can lose energy, momentum and our very best faculty.
EL: Postsecondary education was budgeted to receive about $1.37 billion from the general fund in FY 09. If the budget allocations were reduced by 12 percent, that would be about $160 million.
JR: Yes. If UofL were to implement a worse case scenario plan – a 12 percent cut in FY 09 on top of the 3 percent cut this fiscal year – the total of 15 percent equals $25 million in cuts. Cuts of that amount really would have a devastating impact in terms of UofL’s undergraduate activities, on research, on working with community groups on educational programs, economic development, health care and so forth. But beyond that, UofL doesn’t want to send the wrong message and have our best faculty in the marketplace. UofL doesn’t want to lose the energy and enthusiasm that we have at this time and which is also evident within our community.
EL: Most business owners and corporate executives realize the infrastructure of a technology-based economy is a well-educated workforce. Do you expect businesses would support a tax increase or some type of one-time surtax for education?
JR: I don’t know. Those are tough political issues. Kentucky does need additional revenue. Increasing the cigarette tax – it really isn’t an elastic or growing tax as a revenue source, but it does have health care benefits. So whether or not it’s through a short-term cigarette tax revenue increase or through the longer strategy of trying to develop alternative revenues, there is no question that to keep the momentum the state will need additional revenue.
EL: Is the University of Louisville taking a position on gaming or are you staying neutral in that area?
JR: I, on behalf of the university, have been supportive of additional gaming. I see it as one of the possible revenue sources that could help education. Also, gaming would be good for our neighbor, Churchill Downs, and they are a good corporate citizen in Louisville. I take the position that anything that’s good for Churchill Downs is good for the University of Louisville.
EL: Will budget cuts impact development of UofL’s Health Sciences Center, in which the university plans to invest about $2.2 billion to build about 3 million s.f. of health care and research facilities over the next 20 years in Louisville’s central business district?
JR: Budget cuts are going to have an impact because the $2.2 billion investment is driven from a lot of fund sources. Certainly, UofL is looking to private developers for a large piece of the revenue to fund this. Tax increment financing has been approved for a big piece of this. We’re also looking for clinical income from our medical operations. But a lot of the funding will come from UofL, so cuts will potentially impact this project.
EL: How closely is the University of Louisville working with the Mayor Jerry Abramson’s office and Greater Louisville Inc.? How is that partnership working out?
JR: All three entities work very, very closely together. The mayor is chairman of the Louisville Medical Center Development Corporation, which is the lead group on developing the (former) Haymarket (block downtown). I’m vice-chairman. The mayor and I meet on a regular basis – from projects like Museum Plaza, to UofL’s business school downtown, to the arena. The mayor and I work closely with Joe Reagan, (president and CEO) at GLI, a great partner. So we really are all working as a team in terms of understanding that we are in the era of the knowledge-based economy. Developing Louisville’s workforce is critical to our growth as a community. We’re all working together with the common purpose of increasing economic opportunity and the quality of life for greater Louisville and Kentucky.
EL: Why is the Ohio River Bridges Project so important to Kentucky?
JR: Louisville is a community within about 500 miles of 75 percent of the nation’s population. Louisville really is a transportation center. When we say that, many people think primarily of UPS Airlines (whose global hub is in Louisville), but the Ohio River and interstate highway systems (I-64, I-65, I-71) are also very significant to Kentucky’s economy. The interstate highway and the bridges are antiquated and really don’t fulfill the region’s future transportation demands. The bridges project is an important economic development project for our community and Kentucky.
EL: Do you favor legislation that would grant state universities the ability to authorize bonds for income-generating facilities like dormitories and hospitals?
JR: Absolutely. The state’s universities have to have flexibility so we can continue to generate resources through public/private partnerships and move forward at a time when the state just doesn’t have the resources to help us.
EL: How are the graduation rates at the University of Louisville?
JR: Very good. UofL has gone from a 32 percent graduation rate when I became president to 44 percent – that’s a 35 percent increase. We’re not satisfied. UofL’s goal is to take the rate to 60 percent. UofL must have the advising, counseling and student-engagement programs to achieve that goal. We don’t want our goal jeopardized as part of a budget cut.
EL: Since the issue of budgets cuts came up, how closely have the CEOs of Kentucky’s postsecondary educational institutions collaborated?
JR: We’ve had numerous meetings. The presidents and Council on Postsecondary Education submitted a joint letter to Gov. Beshear trying to outline the severe impacts of budget cuts. All of the institutions have been working very closely together.
EL: Could you describe the postsecondary education leaders’ face-to-face meeting with Gov. Beshear on January 3?
JR: It was a very positive meeting. The governor talked about the budget, trying to make sure we understood the reasons and the magnitude of the problem. The governor reaffirmed his understanding of the importance of higher education, and asked us for our thoughts and advice.
We all realize the economy and budgets go through cycles, and there are some times that are better than others. Now is a very difficult time. The light at the end of tunnel allows us to keep on track and keep our energy and momentum going.
EL: How do you see progress at UofL?
JR: Our team is very excited about what’s happening at the University of Louisville. Our graduation rates are up; they are not where we want to be, but they are up. We are going to continue to improve. UofL has more graduates than we’ve ever had, more Ph.D. graduates, research is at record levels,and we’re starting new companies. UofL really is making a difference in our community and our state. We are going to do everything we can to keep that momentum moving forward. It’s going to be difficult with the magnitude of the budget cuts that we’re talking about, but we’re going to stay focused and do the very best we can under these circumstances.