Governor McCrory’s higher education budget proposal is conservative and pragmatic

The beginning of 2015 has been consequential for the University of North Carolina system. In January, the Board of Governors forced president Thomas Ross to resign from his position (he’ll leave in early 2016), and in February the board garnered national attention after voting to close three centers—including the controversial John Edwards-founded Center on Poverty, Work and Opportunity.

As momentous as those events have been, the state budget battle that will take place over the next five months will likely have a bigger impact on the day-to-day operations of the system’s 16 public universities. Last week, Governor McCrory began the process with the release of his 2015-17 budget proposal, which the legislature will debate and amend this summer.

For UNC, the governor recommends a cut of roughly $26 million (or 0.98 percent) in 2015-16 and $14 million (or 0.55 percent) in 2016-17, based on the university system’s current $2.65 billion state appropriations. Although the end result would be a net budget reduction, the recommendations also include a few big ticket expenditures, including:

  • A $42.5 million investment in programs aimed at boosting private sector growth. McCrory wants to connect entrepreneurs to the university system and turn research into commercial innovations that help to create jobs in the state.
  • $130 million to fully fund projected enrollment growth. The UNC system says it expects a 3.2 percent increase in full-time equivalent (FTE) students over the next two years.
  • A $16 million lifeline for East Carolina University’s Brody School of Medicine, which for years has struggled financially. For example, its accreditor requires Brody to have a 90-day cash reserve of $40 million but the school recently reported only $32 million on hand.

The proposed funding for research commercialization is no big surprise given McCrory’s “pro-business” philosophy and history of championing public-private higher education partnerships (especially vocational programs at community colleges). And funding enrollment growth—even if the system’s enrollment growth formula is flawed—is politically expected. What’s more surprising is the support for ECU’s school of medicine.

The Brody School of Medicine, founded in 1969 to increase the number of primary care physicians in the state, is often viewed as “North Carolina’s med school”—as opposed to UNC-Chapel Hill’s medical school, which is viewed as a national school. In the last decade, however, roughly 60 percent of its graduates have left the Tar Heel State for residency training. And the school’s foray into highly specialized fields such as anesthesiology, neurology, and pathology may have been a mistake. In 2014, for example, no graduates in those fields remained in North Carolina.

While the school’s enrollment remains steady, its difficulties may stem—at least in part—from losing sight of its original focus on providing doctors for the state and on primary care. Nevertheless, the governor is ready to prop it up without (apparently) demanding changes to the medical school’s offerings. 

Other items in the proposed budget include $4.4 million in funding to continue a program that provides in-state tuition for military veterans and $2.6 million to “modernize” Elizabeth City State University’s IT infrastructure. (For Elizabeth City, information technology may be the least of its problems; it has experienced a 25 percent enrollment decline since 2010 and Moody’s Investors Service recently downgraded its credit rating.) 

When state budget director Lee Roberts presented the budget last week, he said that the state has a “moral obligation” to use tax dollars efficiently. A couple of provisions in the proposed budget are designed to do just that:

  • The state currently subsidizes universities’ private fundraising efforts. The proposal would cap the amount spent on such activities at $1 million per year for each university. Roberts said that would affect 12 of the 17 campuses and save the state $18 million.
  • The proposal also calls on the UNC Board of Governors to find $49 million in cuts to the system by getting rid of some administrative positions and “adjusting faculty workloads, eliminating redundant and low enrollment programs, restructuring research activities, and using alternative funding sources.”

Responding to the budget proposal, system president Thomas Ross said that he is “disappointed” by the potential funding reductions and that “to continue to improve North Carolina’s economic position, attract new industry, and create needed new jobs, North Carolina must continue to maintain and invest in our strong public university system.”

But the state of North Carolina has invested significantly in the university system. Based on IPEDS data, 43 percent of UNC’s core revenues come from the state, which has helped to keep average in-state tuition lower than that of all surrounding states. And regarding higher education generally (UNC and community colleges), North Carolina has the highest general fund expenditures per student (roughly $8,000 per year) in comparison to the ten most populous states.

Evidence suggests that there is plenty of room to trim university fat without negatively affecting educational outcomes.

In the wake of the Great Recession, budget cuts prompted officials to eliminate more than 500 vacant faculty positions and reduce the number of administrators. Yet graduation rates, one metric of educational success, have increased at almost all system schools. And across the system, universities continue to offer more than 1,000 undergraduate degree programs, 700 master’s programs, and 200 doctoral programs.

Some of those degree programs, however, are in niche fields that don’t attract many students (or that otherwise don’t help graduates land jobs) and may be wasting resources. For university officials who want to find ways to absorb potential cuts, program consolidation—which recently happened at NC State University—and elimination may prove beneficial.

Under Governor McCrory’s proposed budget, a few changes would come to the state’s community college system, too.

The community college system’s base budget is $1.05 billion. McCrory wants to cut that amount by $13.6 million in 2015-16. He would then cut the base budget by $7.6 million the following the year. Five million dollars in recurring funding would go to modernizing the college’s central data system. The governor also wants a one-time $5 million expenditure for “up-to-date equipment and technology used to prepare students for STEM careers.”

Also, tuition rates would be increased by $4 per credit hour. For a full-time resident student, that amounts to a $128 annual increase. Community college funding under the proposal would be based on schools’ year-round enrollment instead of only school-year enrollment. Roberts said that will financially benefit the system and represent a “significant” funding change.

Overall, Governor McCrory’s budget aims to steer North Carolina’s higher education institutions toward more solid financial ground while encouraging university officials to be better stewards of taxpayer dollars. For that it should be commended as a pragmatic, fiscally conservative plan. But the next few months will feature a great deal of special interest wrangling and political posturing. If all goes well, the high stakes legislative season won’t unravel what is in most instances a sensible budget proposal.