5 Things You Should Know About the Governor’s Budget Hearings

1. The Governor’s budget hearings are where the state budget process begins.
The Governor’s budget hearings serve as a launch point for the State’s budgeting process. All state departments, agencies and entities, including the University of Tennessee System, will lay out their funding requests for the state’s next budget year—requests that the Governor will ultimately weigh as he compiles his 2015-2016 budget proposal. That proposal ultimately will be presented to the legislature in late January or early February and can be amended or passed into law in its proposed form.

2. The Governor’s budget proposal is taken seriously by the Legislature.
In Tennessee’s recent history, the legislature typically has not made major modifications to the Governor’s proposed budget. In fact, last year the legislature did not pass a single substantive amendment modifying the Governor’s spending plan. The only amendments made were at the request of the Haslam Administration in light of dwindling state revenues. To put it frankly: Recent history and experience suggests that if you want your major priorities to be funded, they typically need to be included in the Governor’s proposed spending plan.

3. Last year’s revenue woes are likely to result in a conservatively crafted budget.
Tennessee’s last budget year closed with a $300 million revenue hole—a hole that may result in up to a 7 percent cut to state departments, agencies, and entities. In fact, at the Governor’s hearings, it is expected that each entity will detail what impact a 7 percent cut would have on its operation.

There is some good news in the state’s revenue numbers for the current fiscal year. General Fund revenue is roughly $91 million over projected levels at this point. But given last year’s mid-session revenue crisis where the Governor had to significantly alter his spending plan, we’re likely to see a more conservatively crafted budget to insulate against the possibility of revenues taking a turn for the worse.

4. There is mounting pressure from all sides.
The Governor is facing mounting pressure on both sides of the budget equation—there is mounting pressure to further cut state taxes, which will in turn limit the state’s ability to fund existing services; and there also is mounting spending pressures behind various state services whose needs have been building for a number of years. For higher education specifically, these needs include, but are not limited to, adequate state funding for the day-to-day operations of campuses, funding to improve academic quality and services to students, to maintain existing buildings, and to address aging infrastructure and growth through the funding of needed new facilities.

5. Higher education’s budget hearing is on December 5 at 2:30 P.M. CST.
You can tune in live to watch UT President Joe DiPietro lay out the University’s key priorities or check back here for coverage. To tune in live, click here.   

Meet the New Members of the Tennessee General Assembly

In last night’s General Election, a total of 23 new members were elected to the Tennessee General Assembly.  We invite you to learn about these new members by utilizing the document below. Click on the center of the document to expand full screen.

Please note: This document is based on unofficial election returns provided by the Secretary of State’s Office. For a full listing of unofficial election results, click here.

UT President Joe DiPietro Joins Panel on Higher Ed Workforce Preparedness

Reliable funding that enables excellence while holding institutions accountable is the single-greatest challenge facing public higher education, University of Tennessee President Joe DiPietro told a gathering of Nashville business leaders on Wednesday.

“We really started to address this challenge when our board met in June, and I suggested higher education’s current business model is unsustainable,” DiPietro said. “Since I took office in 2011, I’ve gotten in front of our legislature every year, and frequently, to tell them it’s a problem.

“It’s what keeps me up at night, so we’re rolling up our sleeves to seek a long-term solution that doesn’t require 4 to 6 to 8 percent tuition increases. We have to do everything we possibly can to ensure effectiveness, efficiency and entrepreneurial approaches to filling funding gaps, all while maintaining our excellence.”

DiPietro’s comments came during the Nashville Business Journal’s 2014 annual “Nashville Ahead” program. He joined three other higher education leaders for a panel program titled, “A Discussion on Higher Education and Workforce Readiness.”

More than 100 leaders in business, industry and government attended, and when asked what business could do to most help higher education, DiPietro had a two-part answer.

“First, be truth tellers. If we’re not producing the product you need, pick up the phone and let us know. We seek to produce the best-prepared graduates that we can, and we need your input to ensure that,” he said.

“Second, we have to commit to high standards for education in Tennessee. To say to Tennesseans, ‘We need to have standards’ is nothing new. Having and adhering to standards is critical to the important completion agenda behind Gov. Haslam’s ‘Drive to 55’ effort. It’s critical that students arrive at college well-prepared, and that’s what standards make happen. I encourage your support for high public education standards at all levels in Tennessee.”

UT campuses already actively partner with business to meet needs throughout Tennessee and beyond, according to DiPietro.

“Our campuses have consciously worked with employers to respond to the needs of the market,” he said. “Industry told us we need more engineers in Tennessee, so our UT Knoxville campus, for example, partnered with Eastman to grow STEM (science, technology, engineering and math) education while also enhancing it, and the result is we’re producing more engineers whose education has them very well-prepared.

“The needs of the population and of healthcare providers we partner with to serve the population called for expanding our efforts to train doctors, nurses, dentists and pharmacists. As a result of that, our UT Health Science Center is working with Saint Thomas Health here in Nashville to greatly expand our presence in Middle Tennessee. At the same time, in West Tennessee, UT Martin is expanding capacity in rural communities like Parsons to produce more nurses.

“In Chattanooga, we have numerous ventures with Volkswagen that serve both that manufacturer and students at our UT Chattanooga campus very well, and Volkswagen is just one of many business partners UT Chattanooga is working with.”

DiPietro was joined by Western Governors University Tennessee Chancellor Kimberly Estep, Middle Tennessee State University President Sidney McPhee and Volunteer State Community College President Jerry Faulkner to discuss current trends in higher education to prepare students to be better-prepared employees.

DiPietro routinely meets with business, industry and economic development leaders through formal and informal events. Alumni and industry councils also help campus leaders keep in touch with the business world.

“The University of Tennessee leads our state in helping students complete their degrees, and we are becoming more entrepreneurial in the ways we partner and work with business and industry to provide a well-trained workforce that ultimately benefits all of Tennessee,” DiPietro said after the program.

New Fiscal Year Starts With Revenue Bump

The numbers are in for the first month of the State’s new fiscal year.

The State Department of Finance and Administration announced last week that revenue collections have ticked upwards, with overall August revenues $31 million above collections one year ago.  The revenues are better than anticipated– coming in at $24.4 million above the State’s budgeted estimate.

“Sales taxes collected by retailers in July grew 6.73 percent, the largest month-over-month growth we have experienced in the past 27 months,” Finance and Administration Commissioner Larry Martin said.  “Corporate tax collections grew by 9.25 percent, but were still slightly under budgeted expectations.  All other taxes, taken as a group, had negative growth of 5.33% but were $6.1 million above the budgeted estimate for August.

“While we are encouraged by the August numbers, we continue to be concerned about the relatively slow economic recovery in Tennessee. It is important for us to maintain our close controls on state spending and to carefully monitor revenue trends.”

The budgeted revenue estimates for 2014-2015 are based on the State Funding Board’s consensus recommendation of December 17th, 2013 and adopted by the second session of the 108th General Assembly in April 2014. They are available at http://www.tn.gov/finance/bud/Revenues.shtml.

UT Board of Trustees Kicks Off Discussion on Multi-Year Initiative

Benchmarking, economic forecasts and hypothetical strategies to overcome declining state appropriations and make the University of Tennessee more effective, efficient and entrepreneurial was the subject of the UT Board of Trustees’ Wednesday workshop.

UT President Joe DiPietro had set the stage for Wednesday’s discussion about funding at the trustees’ annual meeting in June. The board’s workshop covered the issue more in depth and allowed trustees to ask questions. The purpose of the discussion was not to devise strategy but gain a better understanding of the issue in order to plan a multi-year initiative.

Projections are that the University could face a gap in state funding of more than $150 million over the next decade–assuming the University could limit tuition increases to 3 percent annually, inflation did not exceed 3 percent annually, and state funding did not increase. To cover such a gap, tuition would need to be compounded to 55 percent or 4.5 percent each year.

DiPietro has said that continuing to increase tuition to cover declining state appropriations is a business model that is struggling, and it is not sustainable to continue to pass along additional costs to students and their families. The University has three options: take no action, get smaller or start on a bold initiative to fix the problem, he said.

“We own this problem. We have to fix it,” DiPietro told trustees. “Change is normally painful for everybody. We will seek broad input. We will make tough decisions.”

Dr. Bill Fox, director of the Center for Business and Economic Research at UT Knoxville, provided the trustees a forecast of state revenues, and each chancellor presented initial thoughts on ways to streamline operations and increase revenues.

The trustees looked at data comparisons with other university systems and heard the president talk about ways other university systems and universities have addressed similar funding issues. UT has been using cost-saving measures since the 2008-09 recession and identifying lean processes. Ideas pitched included increasing enrollment of out-of-state students to raise revenue, reviewing academic portfolios, and analyzing better uses of campuses’ space.

“The current funding model of the University of Tennessee is perilously close to broken. Given the fiscal constraints on the state budget, which includes a structural budget deficit, it is unlikely that significant increases in state appropriation to the University of Tennessee will be forthcoming unless the sense of priority for funding higher education becomes widespread and improves. Thus, it is incumbent upon the University to be become more entrepreneurial, efficient and effective, by enhancing existing revenue streams, reducing expenditures, and reallocating existing resources to better achieve system/campus goals and objectives,” according to a UT benchmarking analysis submitted to the trustees.

The board next meets Oct. 2-3, when the discussion will continue. A more set strategy is expected to be revealed at the winter meeting Feb. 25-26 in Memphis.