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UNC Awaits Budget Action; Double-Digit Cuts Possible

The University continues to face financial uncertainty as the N.C. General Assembly looks for ways to balance the state budget.

The House is considering two steps to help ease the state’s budget shortfall, which is more than $4 billion: an 11 percent cut in state funds for UNC System campuses and an 8 percent increase in tuition.

In the meantime, budget-cutting steps have been taken this spring by the state and the University. Those include furloughs for state employees, the elimination of a top administrative position at Carolina and the launch of an efficiency study.

UNC System President Erskine Bowles ’67 also is asking chancellors to rally support against cuts that he says would be greater than the current state funding of the seven smallest campuses combined.

The system asked campuses in December to plan for up to a 7 percent cut in state appropriations for the 2009-10 fiscal year, which begins July 1; officials now expect deeper reductions in funding.

Rob Nelson, the system’s vice president for finance, asked all campuses to plan for budget cuts of 16 percent after seeing the 11 percent budget cuts proposed in the House budget.

The UNC System could see a total budget reduction of 18 percent, with 16 percent coming from campuses and 2 percent from system expenses.

Richard Mann, Carolina’s vice chancellor for finance and administration, said some legislators are considering taking the 11 percent reduction in part from university centers and institutes, a prospect that concerns UNC administrators because the cuts would not allow the University the flexibility to find other budget solutions. Mann told the trustees in May that University officials will argue that UNC should have the authority to decide where to make budget cuts.

Bowles told members of the UNC System Board of Governors in a letter that “the $337 million in cuts being proposed for the [UNC System] would have severe and lasting negative impacts on student access and the quality of education our universities can offer.” Bowles said that cuts of that magnitude would lead to larger classes, less student advising and counseling, higher faculty-to-student ratios, lower retention and graduation rates, delayed classroom upgrades and laboratory renovations, fewer security personnel, reductions in library services, and reductions in maintenance.

He 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 on Friday.

Despite the economic downturn, enrollment numbers at UNC have not decreased.

“We have seen no evidence of losing students due to the economy,” Chancellor Holden Thorp ’86 told the trustees.

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, Gov. Beverly Perdue approved an executive order that established a flexible furlough plan. University employees are seeing reductions in pay, taken from employees’ base pay, for May and June. The flexible 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.

The 8 percent (or $200, whichever is less) across-the-board tuition increase would add $200 to Carolina’s tuition for fall 2009, raising the rate to $4,065 per year (excluding fees) for in-state undergraduates, and $21,953 for non-North Carolinians.

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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