North Carolina’s latest higher education budget has some good features, but could be better.

North Carolina’s state budget tug-of-war concluded August 1 when the General Assembly passed a $21 billion appropriations bill for fiscal year 2014-15. The UNC and community college systems will receive more than $3.6 billion, or about 17 percent, of the total funding. Compared to the 2013-14 certified budget passed last year, the adjusted higher education appropriation represents a net increase of roughly $65 million.

Money and resources will flow to, among other things, salary bumps for community college and university employees, tuition assistance for military veterans, public-private research partnerships, and an internship program designed for N.C. students attending historically black universities. The budget also commissions several special legislative studies, one of which will examine rising tuition costs.

Wrangling over the UNC system’s budget began in February when Art Pope, the state’s budget director (he’s stepping down from that position September 5), sent a pointed letter to the system’s president and Board of Governors. Pope called their operating budget request “not realistic.”

A few months prior, the Office of State Budget and Management had requested that the system find a 2 percent reduction to the previously approved certified budget. Instead, the board asked for an increase of 4.6 percent. Pope responded:

When discussing this matter with President Ross, he stated that the University had a statutory duty to present its “needs” to the Governor and General Assembly. Respectfully, [current law] requires the Board of Governors to submit a “budget,” not “needs.”

Pope expressed concern that the “spiraling costs of higher education…as well as the increasing demands on the state budget, cannot continue indefinitely.”

Some of that concern was manifested in the budget proposal released in May by Governor Pat McCrory. The proposal contained almost a $50 million cut to the UNC system, with a focus on trimming administrative bloat, eliminating low-enrollment programs, and reducing funding for UNC centers and institutes by 20 percent. Unfortunately, the big cuts in McCrory’s proposal—which centered around cutting administrator jobs—were not included in the final budget. (The Pope Center analyzed the Governor’s proposal here.)

While there are similarities between McCrory’s proposal and the budget that made it through this summer’s legislative session, the differences are sharp.

For instance, the latest budget allows the Board of Governors and campuses to “consider” reducing funds for centers and institutes by up to $15 million. But instead of setting potential savings aside or reducing future general fund appropriations, the state will divert the savings to other uses. It will match private donations made to the Distinguished Professors Endowment Trust Fund by up to $10 million and grant up to $5 million to the UNC system for implementation of its “Strategic Plan.” (That plan is detailed in a 2013 report titled “Our Time, Our Future: The UNC Compact with North Carolina.”)

Some centers and institutes provide value and contribute to degree production, but many only benefit a small segment of a campus, are too narrow and specialized, or are ideological on their face. NC Central’s Institute for Civic Engagement and Social Change and Eastern Carolina University’s Institute for Sustainable Tourism are good examples.

There is also a great deal of duplication. UNC-Chapel Hill, for instance, has the Institute for African-American Research, the Sonja Haynes Stone Center for Black Culture, and the African Studies Center.

So, while the provision regarding centers and institutes includes an incentive to trim waste from the system, it’s possible that budget writers would have been more interested in mandating cuts had they asked a few of the questions recently posed by the Civitas Institute’s Bob Luebke: “Does the center or institute perform needed research? What reasons justify continued investment? What benefits has the public received from [past] investments?”

Another provision in the latest budget requires the Board of Governors to allot $29 million to the North Carolina Research Campus at Kannapolis. The research campus, which has been around since 2008, is a public-private partnership between universities, scientists, and firms in the medicine, nutrition, and agriculture industries.

While the universities and firms connected to the Kannapolis project may benefit, it has been incredibly difficult to identify real returns for the general population of North Carolina. If companies see profit opportunities through various university and scientific collaborations, they should be more than willing, and encouraged, to do so without a taxpayer lifeline.

Nearly $55 million in recurring funding—the largest higher education expenditure in the new budget—will go to salary increases for community college and university system employees, as well as increased contributions to the state retirement fund.

Most UNC and community college employees will receive an annual raise of $1,236, including salary and benefits. The pay bumps are across-the-board, and don’t take into account job performance. (Five million dollars in raises will go to “exempt” employees, such as senior administrators, who are not included in the across-the-board increase.)

Another $5.8 million in recurring funding will pay for grants for military veterans, their spouses, and dependent relatives to help “leverage” a federal government program that offers financial aid to qualified military members. That program and this provision of the N.C. budget are designed to fill the gap between tuition aid offered through the federal program and the tuition costs at UNC and community college system schools.

Other parts of the new budget make sense, but will be slow to bear fruit.

Two beneficial changes will be made to the enrollment growth formula, which is used to adjust a university’s instruction funding as enrollment numbers fluctuate. Previously, schools that overestimated enrollment growth received the corresponding increase in instructional funding, but were not required to pay all of it back. One new provision ends that practice.

A related provision ensures that universities experiencing enrollment declines will see concomitant declines in funding. Previously, universities with declining enrollment lost only half of the corresponding funding.

Those two changes will save the state $7 million this year.

The new budget will also require a few legislative studies that could set the groundwork for meaningful future reforms, especially next summer, when long session biennial budget negotiations will begin.

One study, to be conducted by the Joint Legislative Education Oversight Committee, will analyze “the increasing cost of attendance for resident and nonresident students.” That study will compare tuition changes to inflation rates, examine “tuition cost controls or limits that may have been implemented in other states,” and, perhaps most interesting, consider “the desirability of encouraging students seeking an undergraduate degree to enroll first in community college.”

Other studies are aimed at incentivizing faster college completion rates, enhancing bilateral articulation agreements between community colleges and UNC system campuses, offering vocational training for students with intellectual disabilities, and measuring the effectiveness of summer bridge programs.

Finally, another study will help determine what steps to take with Elizabeth City State University, one of the state’s five public HBCUs, and one that has experienced extreme financial and enrollment concerns of late.

In sum, this summer’s legislative negotiations carried North Carolina’s higher education policy one step forward, but two steps back. While the budget makes some progress, many necessary and tough decisions were kicked down the road. Ignoring the UNC system’s expansive administrative bureaucracy—where administrators outnumber faculty at each campus, and where approximately ten percent of administrative staff earn more than $100,000 per year—is just one example of an area that was neglected, despite dire need for reform.

During the next budget go-round, it would help if the Board of Governors, university officials, and state legislators consider the entirety of the UNC budget —a budget which, when accounting for federal money, private grants, and donations, totals nearly $9 billion. They should also bear in mind that the state’s higher education expenditures outpace the national average.

As with most government institutions, the institutions of public higher education in North Carolina are rife with waste and special interests who will defend that waste. Continuing to kowtow to those interests will undermine education in the university system.