A Common-Sense Budget for UNC

Governor Pat McCrory unveiled his proposal for the state’s biennial budget on March 20. The University of North Carolina system received a small cut compared to the previous biennium, and the budget also specifies changes that should cut waste and expand key initiatives.

“We’ve had to make some tough decisions on this budget,” McCrory said in a press conference that morning. One of those tough decisions was asking UNC to tighten its belt slightly—rather than loosen it, as the university had proposed. If McCrory’s proposal is adopted, annual state appropriations for the system will drop from the current fiscal year’s $2.552 billion to $2.521 billion in fiscal year 2013-14, a $31 million decrease—small, but a cut nevertheless.

The governor’s budget is just the first of three versions—the House and Senate budgets come next, with a final budget due before fiscal 2013-14 starts July 1. In recent years, the governor’s budget gave little signal of what the final outcome would be. But this year, because the House and Senate have Republican majorities and the governor is a Republican, the governor’s budget may carry may more weight than in the past.

The modest reduction to UNC’s budget was not treated as modest by the university and some of the media. “I am very concerned by the magnitude of the new cuts proposed for our campuses,” said Tom Ross, president of the UNC system, in a statement, “particularly in light of the more than $400 million in permanent budget reductions we absorbed two years ago.” (That $400 million apparently refers to a reduction from the what the budget would have been with its automatic, built-in increases; appropriations actually fell by about $220 million, from $2.74 billion to $2.52 billion, between fiscal 2011 and fiscal 2012.)

Ross wasn’t alone in his espoused concern. Inside Higher Education called the cut “$135 million” and the Durham Herald-Sun pegged it at $138 million.

The reason for these discrepancies is, basically, the same reason that “cuts” in the federal government in Washington, D.C., often turn out to be not cuts at all—they are just reductions to proposed increases. In North Carolina’s state government, annual increases are legally built-in, so that the budget amount that a new administration or legislature starts out with is already larger than the previous year. Thus, even though UNC appropriations will go down only slightly and revenue from tuition will actually increase by about $200 million if the proposal goes through, appropriations to the UNC system are “officially” being cut by $189 million.

The biggest part of the budget cut is called “management flexibility.” The proposal includes a $101 million reduction in this category; thus, the system would receive $101 million less than it anticipated, and system officials would have to figure out how to make those cuts. The proposal does include suggestions for areas to cut, however. They include reducing the number of middle management positions, eliminating low-performing or redundant programs, and adjusting faculty workloads. These changes, by the way, are ones that the Pope Center has advocated over recent years.

The proposed budget also would mandate specific savings, including $10 million in administrative and operational efficiencies. Those would include savings from sharing administrative duties between campuses, purchasing commodities in cooperation with state government, eliminating redundant business practices, and improving energy efficiency.

Another savings measure is consolidating programs, combining some of UNC’s 1,700 degree programs. (The Pope Center proposed something similar in item number 11 of our Twelve Reforms of Christmas).

The budget would increase revenues by proposing an increase in out-of-state student tuition, which would rise by an average of about 6 percent at each school. In addition, the proposal carries further the decision made in 2010 to charge out-of-state students full tuition even when they are on athletic scholarships. In 2010, the legislature required university donors who paid for athletic scholarships to pay full out-of-state tuition; previously, state taxpayers picked up the difference between in-state and out-of-state tuition.

Now, the governor proposes that the donors of academic scholarships to out-of-state students (such as Morehead-Cain scholars at Chapel Hill and Park scholars at NC State) be charged full out-of-state tuition as well. In all, the governor expects the system to receive an additional $63 million from tuition increases.

Balanced against these cuts are expanded funding in some areas, especially in accordance with the strategic plan recently adopted by the UNC Board of Governors.

For example, the budget proposes $1 million for a new performance improvement fund, which rewards UNC constituent universities for meeting specific measures of academic achievement (such as graduation rates, space utilization, and energy efficiency). The Pope Center’s Jenna Ashley Robinson praised such an idea in an article last month. However, the budget does not provide the amount of money that was requested. For example, in its strategic plan the university estimated that its funding model would cost $9.5 million in 2013, nearly ten times higher than the amount proposed. 

Another expansion is $600,000 for competency-based assessment. In other words, the UNC system will try to determine how much students are learning, using a tool like the Collegiate Learning Assessment (another item the Pope Center has repeatedly called for).

A few other notable expansion items include $3 million for eliminating the additional charge to students who take distance education classes, $200,000 for experiential internships (internships that give students hands-on experience), and restoration of free tuition for graduates of the North Carolina School of Science and Math (which was being phased out).

The figures mentioned above represent the changes proposed for the 2013-14 fiscal year. The budget also includes comparable figures for the 2014-15 fiscal year, although they would be subject to change by the legislature when it meets next year for its “short session.”

The governor’s budget, if carried out, would take steps toward cutting waste and installing accountability measures in the UNC system—all in a not-very-painful way.