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N.C. House Leans Toward Softer Budget Cut for Universities

The University got a glimmer of hopeful news on the financial front when the N.C. House in June passed a draft of the state budget that includes an 8.7 percent budget cut for the UNC System. That’s down from the 11 percent in reductions – or about $338 million – that the House had been considering across the state’s public campuses.

The 8.7 percent cuts, which were going to the Senate at press time, would amount to $263 million. Legislators have been looking for ways to balance the state’s budget shortfall of more than $4 billion.

It was not immediately known how such reductions would affect the Carolina campus, where administrators, deans and department heads have been cutting expenses since March. In April, Carolina issued emergency budget guidelines freezing the use of state funds for personnel, supplies and equipment, travel, and capital repair and renovation projects until July 1, the beginning of the new fiscal year.

The guidelines permit spending for classroom-related expenses, such as teaching positions or supplies and equipment directly related to classroom instruction. The University also is allowing the hiring of public safety officers and the filling of health care positions that provide direct care to patients. State funds can not be used for other new or vacant positions or for salary increases.

So far, the University has avoided eliminating faculty positions.

At the time of the initial cuts, Gov. Beverly Perdue had proposed a 5 percent cut, but that later was believed to be unrealistically low in the face of a steady stream of bad financial news.

The House budget includes a revenue plan that would raise tuition $200 or 8 percent – whichever is less – for all UNC System schools. For Carolina, the increase would be $200 for all students and would begin this fall.

“We are extremely grateful that House members made the very difficult decision to recommend a modest revenue package to help balance the state budget and thereby lessen deep cuts to education and other critical state services,” UNC System President Erskine Bowles ’67 wrote in a statement on the budget draft. “The revenue package added to the House budget today would restore about $75 million of the cuts that had previously been assigned to the University.”

The difference between the 11 percent and 8.7 percent cuts would save 600 jobs and allow the UNC System to keep 1,300 more class sections, Bowles wrote.

But he added: “We remain gravely concerned that the remaining $263 million of cuts proposed by the House would have a severe and lasting negative impact on student access and the quality of education our universities can offer our students. This reduced cut is still greater than the current state appropriations of our six smallest campuses combined.”

If the 8.7 percent cuts are approved by the Senate and then by Perdue, Bowles wrote, UNC System campuses will see larger classes, less student advising and counseling, higher student/faculty ratios, lower retention and graduation rates, delayed classroom upgrades and laboratory renovations, fewer security personnel, reductions in library services and reductions in maintenance.

The proposed House budget also would cap 2010-11 enrollment levels to UNC System campuses at current levels.

Despite the economic downturn, enrollment numbers at UNC have not decreased for the upcoming school year. “We have seen no evidence of losing students due to the economy,” Chancellor Holden Thorp ’86 told the UNC trustees in May.

Thorp said Carolina has seen more students apply for financial aid than in past years, though not all students have qualified because financial aid decisions are made based on income and assets, and while some students’ families may have experienced a loss in income, they still have assets.

In April, Perdue approved an executive order that established a flexible furlough plan for state employees. University employees saw reductions in pay, taken from employees’ base pay, for May and June. The furlough plan applies to part- and full-time nonfaculty employees, UNC faculty, postdoctoral research associates and temporary employees; student workers were not included.

UNC eliminated the position of vice chancellor for public service and engagement, held by Michael Smith ’78 (JD), dean of the School of Government.

In early June, Bowles asked the chancellors to “please send out a clear call to your trustees and other key supporters that describes specifically what an 11.1 percent funding cut would mean for your own campus in terms of the jobs that would be lost and the negative impact on the quality of education you would be able to offer your students.” The GAA’s Tar Heel Network, in response, sent a call to action e-mail to its nearly 1,000 members.

Also in April, a consulting company – hired with funds from an anonymous donor to help identify ways to increase efficiency in University operations – presented an interim report after gathering information from 315 employees and students. The study by Bain & Co. found that administrative expenses per student at UNC have grown faster than academic expenses. From 2004 to 2008, the University added more than 1,000 full- and part-time employees, the majority in support roles. Meanwhile, the consultants found the University’s management structure to be inefficient. According to the report, there are as many as nine layers of management from the staff level to the chancellor’s office, and 50 percent of managers supervise only one to three employees.

Operational inefficiencies were found in UNC’s finance and human resources systems and in other areas across the University.

Bain is expected to present a final report to the Board of Trustees at its July meeting. The consultants are expected to identify and present opportunities for the University to reduce complex operating systems, increase efficiency and identify possible savings across campus.


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