Can UNC-System Schools Afford to Show Taxpayers the Money?

A look at the books suggests that state appropriations may be too high.

Some North Carolina residents may not be aware of just how many of their tax dollars go to support the UNC System. Given the massive support provided by the state (i.e., taxpayers), the UNC System is often working with a budget that other schools might envy. In fiscal year 2020, the North Carolina State Legislature appropriated $3.1 billion in taxpayer funds to the UNC System. With billions of dollars spread among 16 schools, a question arises: What do they do with the money?

One might assume that UNC-System schools answer the state’s generous funding by spending generously—and thus that their average expenses are larger than those of their “peer” institutions. However, upon digging into the data and actually comparing the numbers, I found that, while some UNC-System schools do have larger expenses than their peers, that is not the case for the majority of them.

In fiscal year 2020, the North Carolina State Legislature appropriated $3.1 billion in taxpayer funds to the UNC System.The UNC System identifies a list of “peer” institutions for all 16 of its schools. Using the Integrated Postsecondary Education Data System (IPEDS), I gathered data comparing the total revenue, expenses, and in-state tuition per full-time enrolled student at all the UNC-System schools and their respective peer groups. (Note that the data are current as of fiscal year 2020 and exclude private peer institutions). Upon review, the results are far more varied than expected.

Four UNC-System schools spent more money per full-time equivalent student (FTE) than their peers in fiscal year 2020: East Carolina University, Elizabeth City State University, UNC-Chapel Hill, and UNC School of the Arts. The variances between these System schools and their peers ranged from less than $1,000 to over $13,000 per FTE.

Additionally, only one UNC-System school had a higher tuition than its peers: North Carolina Central cost students $446 more.

The 12 UNC-System schools that kept total expenses lower than their peer institutions were largely functioning on similar budgets as those peers. Among these 12, the peer institutions spent, on average, $6,419 more per FTE. There was only one school with a pronounced difference in expenses: UNC Greensboro’s peers spent $29,618 more than UNCG, which was more than the in-state tuition cost at any of the 16 System schools.

After comparing the UNC System with its peer institutions, I still had questions. I decided to research the System schools’ net positions to get a broader understanding of how their budgets are being allocated. Perhaps since they do not have exaggerated expenses per student, they are sitting on piles of cash.

North Carolina Central was the only school that saw a decrease in its net position, even at the height of the pandemic.IPEDS shows the net position data for each of the System’s schools, so I was able to collect data showing the total changes in net positions for fiscal years 2018 through 2021.

There appear to be few patterns in the changes in net positions over the past few years. While most of the System’s schools do not seem to be consistently stockpiling cash, they do tend to show an increase in net position each year, with the amount varying. Fiscal year 2020, unsurprisingly, stunted that growth, with 12 of the System’s schools showing a smaller bump in net position that year. However, North Carolina Central was the only school that saw a decrease in its net position at the height of the pandemic. Even Fayetteville State University, which also struggled, saw a very modest increase in its net position.

Unsurprisingly, UNC-Chapel Hill and North Carolina State University tend to lead the pack most years in net position increase. For example, from fiscal years 2018-2019, NC State saw an increase of $172 million. UNC-Chapel Hill surpassed that with a $406 million increase that same year. In 2021, UNC-Chapel Hill jumped ahead of the crowd with a whopping $1.3 billion increase in net position. Because UNC-Chapel Hill faced a deficit of nearly $1.2 billion early in 2021, its net increase was likely due to its recovery efforts. And perhaps some of the increase was due to hefty fundraising, like we’ve seen from UNC-Chapel Hill this year.

Accounting-standard changes can also play a part in this, for example in App State’s 2019 statement, where a change in accounting standards for pension liabilities increased the school’s net position. But that doesn’t account for all of the change.

Accounting complexity makes the picture even murkier. Financial statements having to be restated complicates the picture. For example, the 2019 net position for App State, per the 2019 statement, was $89 million, but the 2019 net position as restated per the 2020 financial statement was $234 million.

49.91 percent of the state’s largesse went toward increasing North Carolina A&T’s long-term financial positioning.Again, in trying to understand the bigger picture of how the UNC-System schools manage their many dollars, I included the UNC System’s state appropriations (also provided by IPEDS, available for fiscal years 2018-2020). True to form, the mystery did not magically resolve itself.

The following chart shows what percentage of each school’s state appropriation goes toward increasing its net position rather than present-tense educational spending. For example, North Carolina A&T received $95,490,568.79 from the state in FY 2020. Yet the university increased its net position that year by $47,654,802.23. In other words, 49.91 percent of the state’s largesse went toward increasing the university’s financial positioning. One can at least make the argument that the state gave far more than the institution needed that year.

Finally, I decided to compare the UNC System’s state appropriations with the median appropriation of their peer schools. If the UNC System tends to spend less per student, and they are not stockpiling funds, then it seems logical that they would need less funding from the state. Not quite.

Taking the average of the appropriations from FY 2018, 2019, and 2020 for both the UNC-System schools and their peers, 13 of the UNC schools have larger state appropriations than their peer institutions. And five of those have a difference that is nearly the same as their peers’ entire appropriation, if not more.

For example, East Carolina University averaged nearly $170 million more in state appropriations (average of FY 2018, 2019, and 2020) than its peer institutions, which averaged just under $140 million in state appropriations.

The fact that most of the UNC-System schools receive much larger appropriations than their peers raises an important question.The fact that most of the UNC-System schools receive much larger appropriations than their peers raises an important question: Why do they need so much more money? As previously noted, students are not more expensive to educate in the UNC System than at peer schools, yet the UNC System consistently receives much larger state appropriations than its peer institutions.

Surely a detailed investigation could be done of these financial statements. The answer to where the money is going is out there. However, that does not change the fact that, from an outsider’s perspective, the UNC System is likely set up to offer its students even greater benefits due to its large allowance from the state. The UNC System has worked hard to establish and maintain low tuition costs, but it appears that many of the System’s schools could reduce student costs even further.

Students don’t need extravagant housing or athletic buildings; they need a high-quality education offered at an affordable price. With student enrollment dropping, universities’ priorities need to be set correctly. Students also don’t need the burden of mountainous debt before even entering the workforce. Perhaps the UNC System has room to aid its students by lowering tuition further. And if nothing else, it could aid the state’s taxpayers by making it a little easier to comprehend the fruits of our taxpayer dollars.

Ashlynn Warta is the state reporter for the James G. Martin Center for Academic Renewal.