The Potemkin Enrollment Policy

Sometimes, the denial is in the details.

The University of North Carolina’s Board of Governors unveiled a new policy proposal on “enrollment expansion and funding” at its November 4 meeting. Both system president Erskine Bowles and chairwoman of the Board of Governors Hannah Gage heralded the proposal—intended to tie enrollment growth to performance—as one of the most important policy changes the system has undertaken in the last few years. Gage described it as “a big philosophical change” for the system because it shifts incentives for the constituent universities from emphasizing growth to improving completion measures.

But when the actual incentives are examined, the proposal is likely to do little to curb enrollment growth and may even spur an increase in the amount of money the system receives from state appropriations for each additional student. 

Certainly, the timing for a policy change that limits growth could not be better. Enrollment has been growing rapidly for many years, much faster than the population. From 2008 to 2009, UNC grew by 3.1 percent, from 215,692 students to 222,322. In 1999 enrollment was 156,263, and then grew 42.2 percent in the next ten years. To put this growth into perspective, according to the U.S. Census Bureau, the estimated growth in North Carolina’s population in the time period 2000-2009 was a mere 16.6 percent.

Furthermore, the state is facing a budget shortfall that is over $3 billion in the upcoming year. With the UNC system accounting for roughly 13 percent of the state budget, serious cuts will have to be made. At the BOG meeting, chief of staff Jeff Davies projected that between 800 and 1,700 personnel cuts would be necessary, most of them faculty positions.

Additionally, in the 2010 legislative session, House members introduced a bill imposing a 1 percent annual enrollment growth cap on the UNC system. While the bill failed last year, the results of the recent election suggest that the new legislature will be much more likely to pass a similar measure into law.

Yet the enrollment expansion and funding proposal unveiled at the BOG meeting hardly seems worth the effort. If its methodology for restricting enrollment were in place today, only one school—UNC-Pembroke—would be prevented from increasing its incoming freshman class. Two others—Western Carolina and UNC-Greensboro—would have the status of “restricted enrollment growth” for incoming freshmen.

Indeed, there appears to be some sort of “disconnect” at the general administration offices in Chapel Hill. The university system is requesting $55 million for new enrollment growth next year from the legislature—while planning for the elimination of as many as 1,700 teachers to save money. Does the left hand not know what the right hand is doing? Or, perhaps, is the desire to grow and expand the university so great that the budgetary realities are denied?

The new enrollment system has been a few years in the making. System vice president Alan Mabe noted that since Bowles took over in 2006, the university system has raised admission standards, established academic retention and graduation programs to help unprepared students, added counselors and advisors, and established goals for retention and graduation for the individual universities—all steps partly made to prepare for this enrollment policy.

The new plan will use three performance measures: retention, graduation, and degree production and efficiency. Retention means how many freshmen return for their sophomore year. Graduation indicates the percentage of freshmen who graduate within six years (there are separate measures for transfer students). Degree production and efficiency is a new statistic indicating the percentage of students enrolled in a given year who will graduate that year. That is, if a school has a high graduation rate, and if its enrollment has not been growing in recent years, it will have a high efficiency score.

Schools’ scores on these measures are weighed against target levels determined for each school, and against the average performance of the schools’ peer groups. (Peer groups are schools with common characteristics. For instance, Chapel Hill’s peer group includes other high-ranking flagship universities such as the University of Virginia, and N.C. State’s peer group commonly includes other well-regarded state land-grant technical schools, such as Virginia Tech.)

Depending on how well they stack up against the goals and peer groups, the schools are assigned one of three categories: no enrollment growth, restricted enrollment growth, and normal enrollment growth.

But the new system does more than just determine enrollment levels. It also helps to determine how much money the universities will receive for their enrollment growth. As a result, the new system actually discourages schools that wish to keep their enrollment stable, while greatly increasing enrollment funding. 

The first step in the process is to estimate enrollment increases for individual universities. This estimate is applied to a formula that determines how much money will be needed to educate the additional students. The salaries of the additional faculty required to teach the new students is the biggest factor.

Then the schools are checked to see if they qualify for incentives (also called cost factors). In the past, the system offered four incentives for gaining additional enrollment funding: 

  • A school received an additional 5 percent of its determined enrollment funding if it had “a larger-than-normal population of disadvantaged students,” meaning that one-third or more of its students qualified for federal Pell grants;
  • It received an additional 5 percent for “diseconomies of scale,” which means that the school’s enrollment was so small that it had higher than average per-student overhead costs to maintain basic services;
  • It received 10 percent more enrollment funding if it had a “liberal arts mission” (UNC-Asheville only);
  • It gained 10 percent in funding if it had a “non-doctoral mission.”

Under the current system, small schools benefited—particularly UNC-Asheville, which routinely had its enrollment funding increased by 25 percent. Schools with many low-income students did well also: Elizabeth City State gained 20 percent, Fayetteville State, N.C. A&T, N.C. Central, UNC-Pembroke, and Winston-Salem State all get an additional 15 percent. However, those are the six schools with the lowest admission standards and the worst retention and graduation rates.

The new system purports to change directions—instead of incentivizing for growth, it makes additional funding dependent upon the performance measures mentioned above. The incentives that now add to enrollment funding are:

  • Still 5 percent for high levels of low-income student enrollment;
  • Still 5 percent for “diseconomies of scale”;
  • 5 percent for achieving retention goals;
  • 5 percent for achieving graduation goals;
  • 5 percent for achieving the standards for the “productivity and efficiency” statistic.

Once the schools’ qualification for the different incentives is determined, the amount needed to educate the students is then multiplied by one plus the sum of the incentives. For example, if a university figures that it will cost $5 million to educate its additional students in the upcoming year, and it qualifies for two incentives of 5 percent apiece, then $5 million is multiplied by one plus 10 percent, equaling $5.5 million. (The actual process is more complicated, but the results are the same.)

The biggest problem with this new plan is that it will likely increase both enrollment growth and the amount of money appropriated for enrollment growth. Under the current system, big schools like Chapel Hill, NC State, and East Carolina, which serve primarily middle-class students and can absorb hundreds of new students in a year without much initial impact, get no additional enrollment funding. In the new scheme, each of them could possibly qualify for 15 percent more; using this year’s performance, each would get 10 percent more.

Therefore, a lack of growth is a penalty in this system; it is to every school’s financial advantage to have at least some growth as long as it is meeting its performance goals. For example, if NC State chose not to add any new students next year, the 10 percent earned through achieving performance standards would be for naught. That is, NC State would receive no additional funding under this program even though it met performance goals.

To correct this, Bowles said he is considering taking $1 million from the president’s discretionary spending fund to reward schools with consistently high performance, without considering enrollment growth. But that amount pales compared to the amounts that can be garnered by growing rapidly.

Another problem is that the higher admittance standards cited as a means of improving performance and reducing enrollment have been watered down by the creation of summer academic “boot camps” or bridge programs. Those programs permit students whose academic qualifications are below the minimal acceptance standards to enroll as long as they successfully complete six-week programs in the summer before they begin. While UNC administrators tout the success of such programs, it is hard to imagine that six weeks of close instruction can truly improve performance enough to make such marginal students successful for the entire four years of college. And the amount of close instruction and supervision students receive adds to the cost of educating these students as well.  

Furthermore, with millions of dollars at stake in trying to meet retention and graduation standards, administrators will be tempted to lower students’ workloads and increase grade inflation in order to meet their goals.

In sum, if the proposed system were in place today, any financial benefits of stopping enrollment growth at UNC-Pembroke and placing some restrictions on WCU and UNCG would be completely offset—and surpassed—by the cost of bridge programs, by the cost of additional low-income students, and by the larger schools’ ability to pad their enrollment funding through performance incentives.

It is time for the UNC system to stop fooling itself by proposing reforms that accomplish very little. Perhaps, if the university system cannot put immediate and sensible limits on its unchecked expansion, then it is best left to the adults in the legislature to do so.