Budget Season Is Upon Us

Reductions in administrative bloat, a focus on improving UNC system efficiency, public-private economic partnerships, and special scholarships and internships for favored groups are features of the higher education portion of Governor McCrory’s state budget pitch.

The proposal released last week contains an almost $50 million cut to the UNC system (representing a 1.9 percent decrease from the previously approved budget) and a roughly $17 million, or 1.6 percent, increase for the community college system. Under the plan, total state appropriations for higher education (for both the community college and UNC systems) would amount to approximately $3.6 billion.

North Carolina’s legislature, which began its short session last week, will review, debate, and modify the proposal and finalize the budget this summer. Just how much of the governor’s proposal survives remains to be seen. Certainly, events of the last five months presage intense pushback from some of the UNC system’s powerful officials and lobbyists.

When the state’s budget director, Art Pope, asked university system officials to find a 2 percent reduction to their operating budget last December, they responded with a request for a 4.6 percent increase. Pope countered by calling the request “not realistic.” And last week, after the governor’s budget was made public, UNC system president Tom Ross said that the cuts would “make it increasingly hard for UNC campuses to recruit and retain the best and most accomplished faculty.”

In our view, the governor’s 2014-15 budget outline contains some good measures as well as some questionable ones. The following breakdown highlights “the good,” “the bad,” and “the political.”

The Good

McCrory is requesting that the UNC system’s Board of Governors find $44 million of reductions by focusing on “reducing senior and middle management” and “eliminating redundant and low-enrollment programs.” A related recommendation calls for the UNC system to cut almost $2 million by “curtail[ing] the recent growth in university administration.”

The proposal also calls for a $13.1 million cut to UNC centers and institutes. This is a welcome development. While the UNC system’s Center for International Understanding and UNC-Chapel Hill’s Environmental Finance Center, for example, may offer some benefits for interested students, many centers are extracurricular entities that don’t advance student education. Taxpayers and the student population should not be on the hook for such programs.

The governor’s focus on excessive administration and the cost of non-education-related centers and institutes is a good start, but more substantial cuts could be made without affecting education quality. After the UNC system experienced massive budget cuts in 2011, the dire predictions from system lobbyists and officials did not materialize.  

Indeed, funds seem readily available for non-educational purposes. UNC-Chapel Hill’s Title IX compliance department—which just added at least six people—illustrates that. It will cost $479,000 per year. And statistics from 2010-11 show that 11.3 percent of administrative staff in the system earned more than $100,000 per year. How many of those administrators are enhancing student learning?

There are a few other excellent budget reforms in the governor’s proposal. They include provisions to end duplicative funding for the Teacher Prep Distance Education Program (currently funded by both operating funds and enrollment growth funding), make universities’ utilities budgets reflect actual expenditures, and adjust the enrollment growth formula (that formula is used to help fund instruction costs as they vary with enrollment changes) to ensure that universities’ enrollment declines are met with corresponding funding reductions.

The governor also wants to end public funding of Fayetteville Technical Community College’s botanical laboratory, and instead have it “focus its efforts on industry- and community-supported activities.” This cut would save $100,000 annually. The governor’s proposal would also make community college boards of trustees find “institutional funds” to pay for workers’ compensation costs.

The Bad

The McCrory proposal would set aside $3 million for universities to “convert discovery into innovation.” One of the aims of the proposal is to provide “competitive funding” to campuses for purposes of “commercializ[ing] intellectual property.” North Carolina’s research universities are already deeply entrenched with regional and national firms. This is just one more de facto subsidy for private industry.

NC State recently secured several multi-million dollar partnerships with the federal government. Its latest collaboration with the Energy Department is intended to create the “Next Generation Power Electronics Innovation Institute.” NC State’s prior negotiations with the DOE required that the state chip-in $10 million. McCrory’s proposal would provide the Institute with $2 million annually for five years.

There is also a less-than-desirable recommendation related to the community college system. McCrory wants to create a $16.8 million fund for specific degree programs because “there are jobs in North Carolina that are unfilled due to the lack of qualified workers.” The money,which comes from a previous surplus resulting from the 2013-14 enrollment decline, will go to community college degree programs that the government designates as “high-demand” fields, such as health care and technical education programs.

The program, called “Closing the Skills Gap,” adds another bureaucratic layer to the system’s enrollment funding formula and gives campus officials, according to an April 10 Associated Press article, full discretion to spend the money for things such as “buying equipment or increasing instructor salaries.” This “pro-business” initiative could quickly waste those surplus dollars.

The Political

Some portions of the governor’s budget are aimed at providing pay bumps and special programs for particularly favored groups. In that sense, the following proposals are especially “political.”

Last July, Governor McCrory signed a bill ending salary bonuses for K-12 teachers who earn master’s degrees. Evidence shows that those with master’s degrees teach no better than those without them. But McCrory had a change of heart. His proposal would have the pay bump reinstated for teachers who have completed coursework toward a graduate degree and for those who “have received a master’s degree and are teaching in-field.” (This language implies that those with a graduate degree in education, as opposed to a specific academic discipline, would not be rewarded.)

Another proposal would give all North Carolina community college and university system employees a $1,000 salary and benefit increase. The price tag for that increase is roughly $52 million dollars.

Next, there’s the NC Scholarship for the Education for Returning Veterans (NC SERV). It would use $5 million of lottery money to establish a scholarship program for out-of-state military veterans pursuing their first baccalaureate degree and who plan to become North Carolina residents. The minimum scholarship will be $7,500 and recipients will receive the funds for two semesters, after which they are expected to have full residency for in-state tuition purposes. McCrory wants a similar program at the community college level. His proposal would allot $1.8 million to offer qualified out-of-state student veterans in-state tuition prices.

Finally, sixty students who attend an approved historically black college or university (HBCU) in the state will be eligible to enter a pilot internship program if the governor’s budget is adopted. The program would link selected students to North Carolina-based companies. $317,500 would go toward the internships.


The budget proposal looks like a mixed bag of fiscal-mindedness and political maneuvering, but overall it appears to be a small step in the direction of budgetary responsibility and an improvement over prior appropriations. But the proposal’s makeup could change significantly after it goes through this summer’s legislative wringer.