Lawmakers Unanimously Advance UT Budget

UT budget hearing

UT President Joe DiPietro testifies during Senate Education Committee Budget Hearing

The University of Tennessee had one of its busiest weeks on the Hill so far this session, as lawmakers in three legislative committees heard the proposed UT budget and questioned higher education leadership on a variety of topics.

President Joe DiPietro outlined for lawmakers the urgent situation faced by the UT System:  A $377M forecasted budget gap over the next decade if no corrective action is taken.  Without significantly increased state support, the University must find its own way of fixing its business model—by generating more revenue, finding efficiencies, and doing more with less—all while remaining of excellent quality and striving for improvements.

Some revenue-generating tools outlined by DiPietro raised questions amongst lawmakers.  Representative Ryan Haynes (R-Knoxville) asked DiPietro to explain the need for increasing out-of-state enrollments.  ”I want to make sure our universities stay open to our [Tennessee] students,” he stated.

“We’re talking about modestly increasing our out-of state enrollments while maintaining our in-state enrollments,” DiPietro stated.  Out-of-state students generally pay more in tuition, providing a needed source of revenue for UT schools in an era of struggling state appropriations for higher education.

At UT Knoxville, for example, an out-of-state student pays roughly $18,000 more than an in-state student.  DiPietro has given the campuses discretion to increase their percentage of out-of-state students up to a boundary of 25 percent of total enrollments.  The current average level for UT campuses is between 12 and 13 percent.  National studies confirm that about half of out-of-state students end up staying in the state where they attend college and joining its workforce.

Overall, House lawmakers seemed pleased with DiPietro’s approach to re-evaluating UT’s business model.  House Finance Committee Chairman Charles Sargent (R-Franklin) called it “a wake up call to all of us on the Committee,”  adding, “if we don’t fund UT and the other schools, this is what happens.  These are choices we’re going to have to make.”

The Governor told the press this week that he understands why UT is pursuing these options, citing the sharp decline in funding for public higher education over the years.  “The state’s share of higher education’s funding has dropped from nearly 70 percent 20 years ago to about 30 percent [today].  And as the state’s share has declined, tuition and fees have sharply increased…I think they’re saying, ‘we have to make the economics work for us,’ he stated.

Senate lawmakers also seemed to approve of DiPietro’s approach.  Senator Jim Tracy (R-Shelbyville) told DiPietro, “You kind of stole my thunder… I think we’re going to have to change the paradigm of higher education and you and your Board have started doing that…We’ve got to think outside the box… I think you’ve hit on something.”

The UT budget unanimously passed out of the Senate Education Committee and will next head to the Senate Finance Committee.  So far, it appears there is a solid base of legislative support for the proposal.

The Governor’s FY16 budget proposal is certainly a strong one for higher education, but DiPietro has articulated that the strong proposal is no reason to hold off on being proactive in addressing UT’s “unsustainable” business model.  ”We are not back where we were before the recession,” he said, further noting that there is no guarantee the proposed funding levels will continue in the future.  ”We have to be ready,” he said.

UT Completes House Budget Hearings; Senate Hearing Forthcoming

This week, University of Tennessee President Joe DiPietro presented the proposed UT budget for FY15-16 to the House Finance, Ways and Means Committee and the House Education Administration and Planning Committee. DiPietro praised the budget proposed by Gov. Bill Haslam, saying that it is “one of the better budgets” that he has seen in his tenure with UT. Despite the strong budget proposal, however, DiPietro noted that it does not solve a serious business model problem facing the UT System.

DiPietro stressed the seriousness of the “broken” higher education business model to Committee members, reporting that projections place UT with a $377 million budget gap over the next decade. He highlighted the problems associated with continuing to plug this growing budget gap through increasing student tuition—a burden on Tennessee students and families he referred to as “unsustainable.”

DiPietro reiterated to both Committees that UT is dedicated to finding solutions to address business model concerns. In light of limited additional state revenues, campuses will be asked to implement measures to increase effectiveness, find efficiencies, and become more entrepreneurial while maintaining excellence.

While DiPietro emphasized to legislators that there would be not be “big changes overnight,” he did outline some example pathways to help solve the projected budget gap, including the option for campuses to increase enrollment of out-of-state students to, at most, 25 percent. House Finance, Ways, and Means Committee Chairman Charles Sargent (R-Franklin) recognized the difficult funding situation facing UT, calling the budget gap and DiPietro’s corresponding action plan a “wake-up call” in regard to decisions the legislature will need to make surrounding higher education finance in the future.

Despite hard budget model decisions looming on the horizon, DiPietro was confident in stating that the UT System “will be better because of the journey.”

UT has its final budget hearing, with the Senate Education Committee, on March 4. We will keep you updated on any new information as it becomes available.

UT Board of Trustees Endorses Plan to Save Costs, Increase Revenue to Alleviate Unsustainable Business Model

UT President Presents to the Board of Trustees

The University of Tennessee Board of Trustees on Thursday endorsed a plan presented by President Joe DiPietro to allow the campuses and institutes to save costs and increase revenue to help efforts to change the University’s business model and address a projected $377 million funding gap over 10 years.

The campus and institute leaders will have latitude to use a variety of methods to make changes as long as they remain within several boundaries. These changes will be implemented over the next two budget cycles, starting with FY16.

The plan, using input from a budget advisory group, follows discussions the president has been having since June 2014, when he first presented the need to address the business model, which currently has the University increasing tuition to make up for declining or static state appropriations. The goal is to keep tuition increases as low as possible, this year being within the Tennessee Higher Education Commission’s recommendation between zero and 4 percent.

“We are not insolvent or in financial ruin. The only way to preclude tuition increases is to fix it ourselves. It is about maintaining quality and moving ahead. We will be a different organization in the next four to five years,” DiPietro said.

Gov. Bill Haslam’s proposed budget for FY16 is favorable to the University, but DiPietro noted it has been rare to have a strong or good budget.

“I have been in Tennessee for 10 (legislative) sessions now and recall two (years) like this one. It might seem obtuse to make this change, but we are not back where we were before the recession. We need to be ready,” DiPietro said.

Board Vice Chair Brian Ferguson told DiPietro the board approves of the plan. “We stand ready to support and provide our best advice,” Ferguson said.

The projected $377 million gap is an increase over a $155 million gap provided previously. The gap is based on average inflation of 3 percent, static tuition increases, operating expenditures increased by the inflation rate, salaries increased to address a gap of $153 million over five years and deferred maintenance of $25 million annually.

DiPietro’s action plan includes:

  • Program realignment and consolidation: campuses will address low-performing programs to fund program reinvestment and perform a feasibility analysis and develop a plan for program consolidations to save costs.
  • Allocation and reallocation plans: set aside 3 percent of base year’s total unrestricted E&G expenditures to address strategic initiatives, address deferred maintenance and identify cost savings from voluntary retirement and other workforce development options.
  • Unfunded mandates for tuition waivers and discounts: the UT System Administration will study these discounts, estimated to be $7.4 million annually System-wide.
  • Tuition structure review: Options include expanding differential tuition, increase enrollment of out-of-state students and the 15-4 tuition plan.
  • Non-formula fee structure: Non-formula units (Health Science Center, Institute for Public Service and Institute of Agriculture) will review whether outreach efforts are capturing actual cost of delivery and determine whether fees should be charged.
  • Tenure and post-tenure review process:  The UT System Administration, with involvement by the Faculty Council, will conduct a comprehensive review of the University’s established tenure and post-tenure review process.

While choosing from these options, the campuses and institutes must stay within the boundaries of keeping out-of-state enrollment less than 25 percent of undergraduate total, remaining within the top five annually under the Complete College Tennessee Act formula, increasing research expenditures by 6 percent annually, keeping customers and clients of outreach services at this year’s level or higher and increasing the total number of gifts, pledges and bequests by 15 percent annually.

Governor’s Budget Proposal Includes Top UT Priorities

Governor Haslam delivered the State of the State Address last night, the first of his second term as Governor. The yearly address is an important part of the legislative process, formalizing the Governor’s budget and policy priorities and setting the tone for the next few months of legislative debate and action.

The Governor made clear that his focus will remain steadfast on education. UT Advocates may recall this post from December, when UT President Joe DiPietro presented UT’s top five funding requests to the Governor in his annual budget hearings.

Overwhelmingly, UT’s requests were honored in the Governor’s $33.3 billion spending plan. It is now up to the legislature to consider the budget proposal, a process that will take several months. We’ve provided a status update on each UT budget priority below.

icon of $9.7M funding with an approval checkmarkFULLY FUNDED: Request for full allocation of funds based on campus performance. The state’s funding formula for higher education has recommended UT schools receive $9.7 million in new funding based on performance. The Governor proposed full funding of the State’s outcomes-based funding formula in his State of the State Address and the budget document recommends a base budget increase– fully funding this budget request for UT campuses.

Why This Is Important: UT has worked hard to make sure its institutions are the top performers in the state in order for the campuses to be awarded funding. Last year, the University was awarded 34 percent less than the formula recommended. Recurring cuts in state funding for higher education are a main driver of tuition increases, and fully funding the formula helps mitigate the need for a significant increase in tuition.

icon of additional $7.3M funding with an approval checkmarkPARTIALLY FUNDED: Request for $7.3 million in additional funding for UT institutions that provide services to all Tennesseans. The requested funding would cover the Institute of Agriculture (UTIA), which has a presence in all 95 counties, Institute for Public Service (IPS) and Health Science Center (UTHSC). The Governor’s budget proposal recommends an operating increase of $4.9 million specifically for these UT non-formula units

Why This Is Important: These institutions provide services that benefit all Tennesseans. In 2013, UTIA, IPS and UTHSC provided outreach to more than 6 million people. And unlike our traditional campuses, these units have limited or no tuition mechanisms to increase funding.

icon of 4H and laboratory and capital projects with an approval checkmarkFUNDED: Funding requested for the West Tennessee 4-H Center and Knoxville-Science Laboratory Facility. The state’s higher education coordinating agency (THEC) ranked both projects in the top six for funding by the state, and they are both recommended for funding in the Governor’s budget proposal.

Why: Both projects are critical to moving the University forward. The West Tennessee 4-H Center would fulfill a key part of the University’s outreach mission, providing youth in west Tennessee with a camp experience in addition to serving as a conference center. The science laboratory will provide new facilities to educate students and produce groundbreaking research. The University has already raised matching funds for these projects.

icon of maintenance hard hat with an approval checkmarkPARTIALLY FUNDED: Funding requested for building safety and maintenance. The University requested $53 million for 11 projects that will improve building safety and upgrade some existing facilities. The Governor’s budget proposal recommends funding six of these projects, totaling $23.8 million.

Why This Is Important: This funding will go toward ensuring our campuses are providing safe learning and work environments for our faculty, staff and students. Projects included in the Governor’s budget proposal include upgrades for ADA compliance, fire safety upgrades, roof replacements, and security upgrades. There are maintenance projects for UTC, UTK, UTM, and UTHSC included in the Governor’s proposal.

icon of salaried employees with an approval checkmarkFUNDED: Salary increases requested for UT employees. President DiPietro requested, at a minimum, a cost-of-living salary adjustment. The Governor’s budget proposal authorizes a 1.5 percent merit pool increase for public higher education employees. Based on the Governor’s proposal, increases and compensation adjustments will be allocated based upon merit. They will not be across the board.

Why This Is Important: The University has a $150 million market gap in terms of employee pay that it is trying to close over time. As state employees, the University is asking the state to help fund increases for UT employees, as their work is critical to the state’s future. UT employees did not receive a cost-of-living adjustment in last year’s budget. Further, funding these adjustments will help UT remain a competitive employer in higher education.

FUNDED: UT Pediatric Research Initiative
The Governor’s budget proposes $3 million in matching funds for a joint pediatric research initiative of the UT Health Science Center, Le Bonheur Children’s Medical Center, and St. Jude Children’s Research Hospital. The initiative, ‘UT Peds,’ has helped reduce childhood obesity and asthma as well as assisted in recruitment of world-class staff, researchers, and physicians to treat Tennessee’s children.

This is year three of a five-year state funding commitment of $15 million.

We’ll keep you updated throughout the legislative session on these priorities and other issues that arise that impact the University of Tennessee. As always, thank you for your support of the University of Tennessee System.

 

Governor Delivers State of the State Address

Governor Bill Haslam delivered the State of the State Address tonight–the first of his second term as Governor.  The yearly address is an important part of the legislative process, formalizing the Governor’s policy priorities and setting the tone for the next few months of legislative debate and action.

The Governor made clear that his focus will remain steadfast on education.

“I truly believe that getting education right is critical to the well-being of our state – today and in the future.  We have to keep going full speed ahead.  We can’t afford to go backwards.  We’ve come too far to sell ourselves short. It would be an injustice to our students, to our teachers, to Tennessee families, and to ourselves,”  Haslam said.

Notable higher education investments the Governor mentioned include:

  • $260 million for capital projects, including the land acquisition for the UT Institute for Agriculture’s 4-H Camp and Conference Center and a new science facility at the University of Tennessee, Knoxville,
  • $25 million to fully fund the Complete College Act formula; and
  • $10 million for need-based scholarships for students;

The Governor also spoke of specific workforce development investments geared to helping achieve the Drive to 55 Initiative.  These include:

  • $2.5 million for statewide outreach efforts geared toward adult students, technical assistance to local communities that are finding ways to support adult learners, and a one-stop portal for adults;
  • $2.5 million to support the success of the SAILS (Seamless Alignment and Integrated Learning Support) program which addresses remediation in high school;
  • $1.5 million to provide last dollar scholarships to adults with some post-secondary credit to attend community college;
  • $1 million to establish competitive grants to 2-year and 4-year institutions to develop initiatives specifically designed for veterans; and
  • $400,000 to establish the Tennessee Promise Bridge Program, which will bring first-generation college students to campus prior to fall enrollment, which is one more step in making sure they have the best chance possible to succeed.

Other highlights of the budget include:

  • $48 million for state employee pay raises and compensation tied to performance and ongoing market adjustments; and
  • $36.5 million dollars for the Rainy Day Fund to bring it to $528 million.

We will send out a more detailed report on how the Governor’s budget proposal impacts UT’s budget priorities shortly.