Pullman businesses fear impact of WSU budget cuts

Unemployment up, real estates sales, prices down

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Updated: November 27, 2011, 5:50 PM

 

PULLMAN — There is no escaping the influence of Washington State University in this remote college town.

Big signs for the school stand at the entrances to Pullman. A major bridge has Cougar mascot statues on both ends. The university is perched on a hill and dominates the town like a medieval fortress.

But the connections run even deeper, to the extent that massive cuts to the university’s budget by the cash-strapped state reverberate through the whole economy here.

“Any time there are financial difficulties with the area’s largest employer, there is cause for concern,” said Jack McGrath, who owns The Quilted Heart fabric store downtown.

The land-grant university’s 20,000 students and more than 4,000 employees make it almost a monoculture in the town of 29,000 residents. Pullman’s motto is “High tech, higher education, highest quality of life.”

The university’s brick towers, dormitories and sports facilities rise out of rolling hills covered with wheat fields, and seem like an academic island in a vast sea of grain. Pullman is 75 miles south of Spokane, connected by a two-lane highway through the sparsely populated countryside.

So the fact that the state has cut a whopping 60 percent of its support for WSU in the past four years, prompting more than 500 layoffs at the university — about 12 percent of its workforce — is a big deal. Many fear that even bigger cuts are coming.

Real estate sales and construction in Pullman are down, while unemployment is up. That’s unusual for a local economy that historically has been immune to big swings.

Whitman County for years enjoyed the lowest unemployment rate in the state, in part because half the jobs are government jobs. Unemployment stood at 4 percent as late as 2008, before starting a steady upward march. The rate reached 7.5 percent in July, still lower than the state average of 9 percent.

The local unemployment rate would be even higher if not for hiring at Schweitzer Engineering Laboratories, a Pullman-based company that makes equipment for the electric power industry and has some 1,500 local employees. The opening of a new Wal-Mart store also produced jobs, while big tuition increases and research grants saved some WSU jobs.

But as the state continues to impose budget cuts in the face of lingering economic woes, the unemployment rate is likely to get worse as more WSU jobs disappear.

“We are not a very diverse economy,” said Arum Kone, an analyst for the state Department of Employment Security who covers Whitman County. “If (WSU) is not hiring, it will be a drag on the economy.”

Dick Watters, director of the Southeastern Washington Economic Development Association, said housing sales and prices are among the most immediate victims of job cuts at WSU.

According to the Whitman County Assessor’s Office, residential and commercial construction averaged $47 million per year from 2003 to 2010 in Whitman County. That dropped to $8 million in the current tax year, which ended May 31, a level of construction last seen in the mid-1980s.

Nerves rattled

Most of the WSU layoffs so far involve staff members, rather than faculty. But the layoffs have rattled many nerves at WSU.

Many of those who are laid off just leave the area, because other jobs are difficult to find, said Chuck Pezeshki, a mechanical engineering professor.

“We have a modestly expanding private sector, but it is not large enough to keep all of them,” he said.

Glen Crellin, director of the Center for Real Estate Research at Washington State University, said Pullman’s housing market has taken a hit, with workers who kept their jobs at WSU still filled with a sense of worry.

“My conversations with local real estate agents suggest everybody is taking a wait-and-see attitude,” Crellin said.

According to the center’s numbers, Whitman County in the second quarter of 2011 saw sales of existing homes drop 5.6 percent from the year before (statewide average down 11.3 percent). The median price of $192,700 for a home was down 7.4 percent from the year before, about the same as the statewide average decrease of 7.6 percent.

But homes are still selling, said Lori Cofer, a Realtor with Beasley Realty.

“We have not seen an increase in short sales or foreclosures,” Cofer said. “We also have a great rental market. If you can’t sell your home, you can rent it to make the monthly payments.”

But the state’s persistent money problems mean more budget cuts and layoffs at WSU, Crellin said.

“Eighty percent of the budget is salaries,” he said.

So far, retail trade seems to be holding up, in part because the number of students continues to rise despite huge tuition increases. Tuition has approximately doubled in the past five years, to more than $10,000 per year.

Main Street in downtown Pullman has a few shuttered storefronts, but many businesses remain open.

Gloria Lord, whose family owns Palouse Hills Computing, said they are in their first year and can’t really tell if cuts at the university have had an impact. But more established businesses are struggling, she said.

“Nobody is going out to buy beer or get dinner out,” Lord said.