Merger Mania: Clout Not Cash

Most people think two-year colleges automatically get more money by being affiliated with one of the two large university systems in Arkansas, but Lu Hardin emphatically says, “No.”

Well, that’s “no” for any immediate benefit, but in the long run, Hardin concedes, such an affiliation probably provides some financial benefits, because the University of Arkansas and Arkansas State University systems have full-time lobbyists around when the Arkansas General Assembly meets every other year.

Hardin, director of the Arkansas Department of Higher Education, cited ASU at Mountain Home as an example.

In the last legislative session, Robert Evans, ASU’s vice president for governmental relations (i.e. lobbyist), set out to get more money for the school in Mountain Home that ASU adopted in 1995.

As a result, an extra $200,000 was appropriated to ASU-Mountain Home in the last days of the legislative session.

“Your independent, two-year schools do not have someone who is involved in governmental relations at the Legislature,” Hardin said. “Long term, it could certainly make a difference, and I think it will.”

“They’re a relatively new school and have relatively low funding per FTE [full-time equivalent student],” Evans said of ASU-Mountain Home.

If a school has a lobbyist at the Legislature, “intelligence” can be gathered and immediately provided to lawmakers when a funding issue comes up, Evans said.

Hardin said lobbyists for small colleges are usually the college presidents, and college presidents frequently have other things to do besides lobby the legislature for funding. The state’s mid-sized colleges — such as the University of Central Arkansas, Arkansas Tech University and Henderson State University — have other staffers who are required to be on hand when the Legislature meets.

Formula Funding

System affiliation doesn’t necessarily translate into more funding from the state, but there’s a general consensus that, over the long run, affiliation with the UA or ASU is probably a good thing financially.

Barbara Anderson, associate director of finance for the DHE, said funding is based on mission, level and discipline — not on being part of a larger university system.

As the state’s primary research institution, the UA in Fayetteville receives more funding than other schools because it costs more money for it to do research. That’s the “mission” of the Fayetteville campus.

The formula used to determine funding for two-year colleges’ is different from that used for four-year colleges, and schools that offer graduate courses require additional money.

And geography is another funding factor. Schools in the Delta sometimes need additional state funding because they teach more remedial classes. Mid-South Community College in West Memphis, for example, saw its state funding increase by 417 percent from 1990 to 2000, from $770,000 to almost $4 million per year. That was the second-largest increase in the decade, second only to a 461 percent increase for the UA Community College in Batesville (Gateway Technical College until 1998).

Because of these factors, Anderson said, dollars per FTE, an often-cited barometer of college funding, isn’t appropriate.

“It doesn’t reflect mission,” she said. “You have a research component in Fayetteville that should make that dollar per student larger than at UA Monticello, but Monticello is higher because they don’t have enough students.”

As a result, this article will concentrate on state funding per institution, not per student.

The numbers for some schools look out of whack because those institutions morphed from vo-techs with 150 students to community colleges with 1,000 students within the 10-year time frame, Hardin said.

Also, the state of the economy in general and the disposition of legislators affected funding from year to year. In 1997, the Legislature was particularly generous to the state’s two-year schools.

“The hefty increase in 1997 was blind to affiliation,” Hardin said.

The state’s two-year schools got another good increase in funding in 1999.

Over the decade from 1990 to 2000, the two-year colleges received much higher percentage increases in funding from the state than did the four-year schools.

The average 10-year increase for the four-year colleges was 71 percent. The average increase for the two-year schools was more than twice that amount at 179 percent.

In 1990, Arkansas’ 10 four-year colleges received $265.4 million from the state, and the 23 two-year schools got $47.5 million, only 15.2 percent of the total.

In 2000, the state’s four-year universities received $453.4 million, compared with $132.5 million for the 26 two-year colleges now in existence. During the decade, the share of state money for higher education going to two-year colleges increased by 7.4 percent to 22.6 percent.

To Merge or Not to Merge

Hardin said Arkansas went through a phase about a decade ago when the state urged colleges to merge because there were too many schools in the state.

Now, that may be changing.

During the past decade, the UA system took in five smaller colleges: Phillips Community College in Helena and Red River Technical College in Hope, both in 1996; Gateway Technical College in Batesville in 1998; and Cossatot Technical College in De Queen and Petit Jean Community College in Morrilton, both in 2001.

The UA, which was founded in Fayetteville in 1871, already had two campuses in Little Rock and one each in Pine Bluff and Monticello.

ASU has had a campus in Beebe since 1955, but that university system added campuses in Newport and Mountain Home within the past 10 years. ASU adopted Delta Technical Institute in Marked Tree earlier this year.

When asked why the UA would want to adopt Westark College in Fort Smith, B. Alan Sugg, president of the UA system, said “It’s part of the University of Arkansas’ mission as a land-grant institution to serve education throughout the state of Arkansas,” adding that the additional campus would make the system stronger. That “merger” will become official on Jan. 1.

Petit Jean Community College joined the system as the UA Community College at Morrilton on July 1. Nathan Crook, chancellor of UACC-Morrilton, said he didn’t do it for financial gain.

“There’s no guarantee of any additional money,” Crook said. “All we brought with us was our appropriation and our state funding. … I think anyone who joins the UA system or ASU system because they think they’re going to get more money is doing it for the wrong reason. It may happen as a sideline down the road, but it may not. There’s nothing in it monetarily for them either.”

Crook said the main benefit is the prestige the UA system has.

“The public suddenly understands who we are and what we do,” he said.

But Hardin thinks it may be time for people at the two systems to sit back and take a good look at what they’ve done. Are the systems really benefiting by taking in these campuses? The question is one of both academics and finances.

“There probably won’t be any more mergers within the next one or two years,” Hardin said.

“Basically, everyone is focusing on a survival mode … The story is, will the independents survive or be part of a system in 10 years?

“Candidly, I think we need some independent two-year schools. With the economic situation the way it is, I think we will continue to have independent two-year schools for a while.

“I think there will be a cooling off period to see what the effect of the acquisitions has been.”

Hardin thinks a thorough analysis of the state’s college situation is in order before the answer will be known.

One thing’s for sure, he said: “We don’t need any more schools.”

A day after we talked to him, Hardin called back to say another merger may be in the beginning stages of negotiation. But he wouldn’t say which schools are involved.

“It’s in very early negotiations,” Anderson said. “It’s a maybe.”