UNC-system schools emphasize efficiency in spending

Efficiency has become the new buzzword across the UNC system in recent years.

Universities have adapted to tough economic and budgetary times by cutting costs in their operations, resulting in the reorganization of administrative structures and academic program reviews.

But one national higher education group says universities in the state have yet to fulfill their goals to operate more efficiently—and administrators should seek to minimize tuition increases until their campuses meet those goals.

The American Council of Trustees and Alumni, a non-profit organization based in Washington, D.C., that advocates for affordability at universities, sent a letter to the UNC-system Board of Governors last month urging members to vote against proposed tuition and fee increases.

Rather than opting “to shift the burden to taxpaying families,” the letter said the board should hold firm on tuition increases until universities become more cost-effective.

Board members ultimately approved an average tuition and fee increase of 8.8 percent systemwide, including a tuition increase of $695, or 13.5 percent, for in-state undergraduates at UNC-CH.

According to information compiled by the Integrated PostSecondary Education Data System, administrative spending outpaced instructional spending at nine of the UNC-system’s 16 universities between the 2002-03 and 2008-09 academic years. Administrative spending at two schools, N.C. Central University and UNC-Greensboro, increased by almost 50 more percentage points than instructional spending during that period.

Administrative spending comprises all expenses related to institutional support, while instructional spending includes expenses for academic support services such as peer tutoring and advising.

At UNC-CH, instructional spending decreased from 39 percent to 35.6 percent of the University’s operating expenses between the 1999-2000 and 2009-10 academic years, while the portion of operating expenses devoted to administrative spending remained virtually unchanged at 3.8 percent.

Anne Neal, president of the council and a member of the academic advisory committee for the John William Pope Center for Higher Education Policy—a conservative think tank based in Raleigh—said universities should strive to reduce costs before “asking for more money from the families of North Carolina.”

The median household in the state contributed 6.4 percent of its income to tuition and fees at UNC-CH in 1999-2000, but that contribution increased to 13.4 percent by 2009-10.

“It’s not courageous to raise tuition, but it is courageous to insist that institutions find ways to use their resources to enhance quality and affordability,” Neal said.

Board Chairwoman Hannah Gage said the tuition plan passed by the board last month references the need to expand upon efficiencies previously implemented across the system. Former UNC-system President Erskine Bowles supervised the elimination of almost 900 administrative positions during his tenure.

Current President Thomas Ross has committed to controlling costs through achieving operational efficiencies, utilizing online technology and re-examining financial aid policies in the coming months, Gage said.

“We have got to do a better job with these three things or we will never be able to bring the costs down, and we’ll be in this spiraling—the same kind of relentless increase that we’ve had for the last four or five years,” she said.

But Gage also noted that recent cuts to higher education have already resulted in thinning staffs at universities, and many campuses have begun to tap their academic core—degree programs, course sections and faculty—to fill budgetary gaps.

The UNC system has absorbed more than $1 billion in state funding cuts during the last five years. A reduction in funding of $414 million, or 15.6 percent, last year prompted universities to eliminate about 3,000 filled positions and hundreds of course sections.

Rising tensions

A climate of fiscal constraint at both the state and university level has contributed to increasingly tense relations between state legislators and higher education administrators.

Some legislators have called for universities to be more efficient before asking for more state money and raising tuition, while administrators have countered that they’re struggling to maintain academic quality on their campuses with reduced funding.

Marilyn Sheerer, provost and senior vice chancellor for academic affairs at East Carolina University, said universities have been diligently responding to the state legislature’s charge to be more accountable by reallocating resources.

“It’s a direct link to what they’e been asking us to do,” Sheerer said. “We’re taking it very seriously, and we’re trying to show as best we can that we’re good stewards of the resources we have.”

Universities have made “a good faith effort” to operate more efficiently since the legislature requested administrative cuts during Bowles’ administration,” said Sen. Jerry Tillman, R-Montgomery and co-chairman of the N.C. Senate appropriations committee on education.

“We quibble a little bit sometimes on what we think is the best way to do it, but we know the state dollars are shrinking, they know that. Their funds are not going to grow until this economy gets much better, in fact they’re probably going to shrink again on top of cuts and cuts on top of cuts.”

“They know where we’re coming from, and we try to understand where they’re coming from.”

Battling ‘in the same boat’

Launched after consulting firm Bain & Co. completed its study of UNC-CH’s administrative structure in 2009, the Carolina Counts initiative has attempted to implement Bain’s recommendations to improve the University’s operational efficiency.

The initiative’s goal since its inception has been to “take ownership” of suggestions in Bain’s report and tailor them specifically for University processes, said Joe Templeton, special assistant to the chancellor for planning and initiatives and leader of Carolina Counts.

Templeton said efforts to meet Carolina Counts’ benchmarks have resulted in several changes, such as the consolidation of human resources and finance units at the UNC School of Medicine. The University has also aimed to limit the number of vendors that it buys products from to take advantage of bulk discounts, working with providers such as Staples to cut better deals.

Individual units and departments have produced ongoing cost savings of $48 million and are on track to reach the five-year target of $66 million, Templeton said. He said there’s always tension between eliminating redundancies and maintaining a minimum level of services to preserve the University’s quality.

“It’s everybody in the same boat battling about as hard as they can,” he said.

Other UNC-system schools have announced recent measures to streamline operations.

N.C. Central University became the first school to move toward substantial changes to its academic programs last month after approving the elimination of four majors and the consolidation of another 10 into five. Pending final approval from the Board of Governors, the program restructuring is expected to result in savings of $500,000.

David Perrin, provost and executive vice chancellor at UNC-Greensboro, said he will present a report to UNC-G’s chancellor in April with a set of recommendations for prioritizing or discontinuing some of the university’s 254 undergraduate and graduate programs.

Cuts to state funding have also prompted the university to eliminate more than 100 administrative positions in the past two years, Perrin said.

“While I certainly understand the challenges faced by legislators, I hope that in turn they understand the difficulties universities are facing with cuts of this magnitude.”

Hope for an ‘April surprise’

As universities aim to restore state funding by demonstrating to legislators that they’re operating more efficiently, the N.C. General Assembly will reconvene in May to consider adjustments to the state’s biennial budget.

The legislature’s Republican majority has opposed calls by Gov. Bev Perdue and Democrats to reinstate three-quarters of a temporary one-cent sales tax that could generate about $750 million in additional revenue. Republicans have cited concerns about raising taxes while the state’s unemployment rate remains as high as 10.2 percent.

Revenues in the state’s coffers are $145 million ahead of projections, but legislators will also have to address funding shortfalls in the range of $400 to $500 million for public schools and the state’s Medicaid program. Rep. Verla Insko, D-Orange, said she hopes there will be enough extra money to award state pay raises for the first time in three years.

“There’s a good chance that we’ll see enough revenue to give teachers raises and stop the hemorrhaging,” she said.

Sen. Tillman said an “April surprise” of more tax collections than projected could give legislators the extra funding needed to plug holes in government programs. Otherwise, the sputtering economic recovery will likely result in another “tight budget” for universities, he said.

“I just can’t see us having that big of a surplus,” he said. “I hope I’m wrong.”