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.