Legislators Pass $32 Billion State Spending Plan: No Raises for State Employees, No Complete College Tennessee Outcomes Funding

The House and Senate passed the state’s FY14-15 budget this week as legislators rapidly approach the end of session.

According to an article by Knoxville News Sentinel reporter Tom Humphrey, House Finance Committee Chairman Charles Sargent (R-Franklin) said that this budget marks the “first time in institutional memory” that the General Assembly has approved a state budget without adopting any amendments proposed by individual legislators.

Although they ultimately failed, legislators filed several amendments as attempts to provide some type of state employee raise as well as full funding for the Complete College Tennessee outcomes-based formula.

These amendments included ones filed by Sen. Mark Norris (R-Collierville) and Rep. Mike Harrison (R-Rogersville), which appropriated over $20 million the Complete College funding formula if tax revenues rebounded.  These measures were ultimately withdrawn.

Simply put:  The budget, which now heads to the Governor’s desk, includes no state dollars for higher education employee salary increases or the outcomes-based funding formula for the coming fiscal year.  These items, although included in the original budget proposal, were removed primarily due to lower than anticipated state revenues.

The Tennessee Higher Education Commission recommended in November that $29.6 million be provided to fund the Complete College formula to meet the production and outcomes successes of the top performing Tennessee higher education institutions.

Senators File Budget Amendments

The Senate Budget Subcommittee met last week to hear budget amendments filed by members.  The amendments, 154 in all, were voted on by committee members this week.

Below are the Senate amendments that would have impacted the University of Tennessee System.  None of the amendments passed, dying either from the lack of a motion or the sponsor’s decision to withdraw.

Senate Amendment

Senate Sponsor

Purpose

Recurring

Nonrecurring

11 Norris Funds the higher education funding formula from any excess revenue collections $20,310,200  
19 Burks Funds the higher education funding formula at THEC recommendation $29,600,000
28 Gresham Purchase of Lone Oaks Farm/TN 4-H Camp $50,000
72 Summerville Eliminate funding for UT Access and Diversity Initiative -$5,688,900
73 Summerville Reduce funding for UT University-Wide Administration -$1,000,000
119 Finney Supporting institutional missions at all academic formula units (THEC recommendation) $29,600,000

Governor’s Budget Amendment Released: Salary Raises, Higher Ed Increase Foregone

Governor Bill Haslam released his budget amendment Tuesday morning, cutting $160 million from his FY14-15 budget proposal and an additional $150 million in the current fiscal year.

The cuts, necessitated by an ongoing decline in state revenue collections, eliminate proposed new funding for higher education and pay raises for state employees.  State employees were originally slated to receive a 1 percent salary increase this year.

No doubt troubling for higher education leaders, the amendment represents the first time since the adoption of the Complete College Tennessee Act that no new dollars will be allocated to reward outcomes achieved by Tennessee’s public colleges and universities.  The Tennessee Higher Education Commission (THEC) had recommended a minimum of $29.6 million in funding towards that end.

The Governor’s original budget proposed that $13 million, representing the state’s portion of a 1 percent salary increase for higher education employees, be run through the Complete College outcomes-based funding formula in lieu of THEC’s funding recommendation.

Under the proposed amendment, higher education will receive no new dollars towards employee salary increases or the outcomes-funding formula for the coming fiscal year.

Governor Delivers State of the State and FY15 Budget Proposal

On Monday evening, Governor Bill Haslam delivered his last State of the State Address of his first term.  The State of the State outlines the Governor’s priorities for the upcoming year and is given in conjunction with the release of his proposed budget.

Relating to higher education, this year’s address focused predominately on community colleges and technology centers, key components to the Governor’s Drive to 55 Initiative.  Below, we’ve culled through both the address and the budget to provide you with major proposals that impact the University of Tennessee.

There is no doubt that it was a tough budget year for the State.  Revenues have been consistently below budgeted estimates, making the proposed FY15 budget even more difficult to prepare.  All in all, the University of Tennessee was spared from any budget cuts, while the entire state budget took a 2.4% reduction.

Complete College Tennessee Outcomes Funding Formula
The Complete College Tennessee Act of 2010 changed the way colleges and universities were funded to reflect how well they perform rather than how many students they enroll.

Under the first three years of the new model, the “outcomes” funding formula has been fully funded as recommended by the Tennessee Higher Education Commission (THEC).  This year, the Governor’s budget has the formula funded at less than 33% of the $29.6 million THEC recommendation.

Specifically, the Governor’s budget proposes $9.3 million in funding for “formula units.”  This funding represents the total of new operating dollars to be allocated across 9 state universities, 13 community colleges, and 27 Colleges of Applied Technology.  Additionally, a $3.6 million increase is proposed to be distributed amongst all non-formula units (including the UT Institute of Agriculture, UT Institute for Public Service, and the UT Health Science Center).

It is important to note how the Governor’s CCTA funding recommendation was derived.  Rather than putting General Fund money into the funding formula, the Governor has opted to use the funding that would have otherwise provided the state’s portion (55%) of a 1% salary increase to higher education employees.  The state portion (the $9.3 million) represents the only new monies toward the funding formula this year.  Higher education has historically been expected to leverage the remaining 45% of any salary increase pool through future tuition increases.

Capital Projects
THEC is responsible for establishing the capital project priority list for all of higher education. That this list has historically been addressed in priority order.  The Governor’s budget includes only capital outlay for two community college projects.  This leapfrogs the #1 THEC priority—a UTK Science Laboratory Facility.  While there is no capital outlay funding for new UT buildings in the proposed budget, there is $39.4 million of needed funding included to maintain existing UT facilities.

Tennessee Promise Scholarship
The Governor also proposed a last-dollar scholarship—the Tennessee Promise.  Under the proposal, Tennessee students seeking to attend community colleges and technology centers would be able to complete two years of education at no cost to the student.  After all financial aid and scholarships are utilized (i.e. Pell Grants, HOPE scholarships, etc.), the Tennessee Promise would cover students’ remaining costs.  The proposal is estimated to cost $34 million annually, and calls for moving roughly $300 million from the Lottery Reserve Fund into a new endowment. The current Reserve Fund sits at roughly $400 million and the change will leave $110 million in reserves for HOPE Lottery scholarships.  At this point, the impact of the Tennessee Promise Scholarship on the University of Tennessee is somewhat unknown.  While UT supports the intent of the proposal, it is unclear how it might impact enrollment at regional institutions such as UT Chattanooga and UT Martin.

8-Semester Lottery Eligibility
The Governor’s budget calls for changing the terminating event for HOPE lottery scholarships from 120 hours (with exceptions for some majors) to 120 hours or 8 semesters, whichever occurs last.  This change allows for students to more easily double major, pursue a complex minor, or exceed minimum requirements for degree completion while maintaining their HOPE for a 8-semester (four-year) period.

This change is coupled with an alteration to the current structure of HOPE scholarships.  Right now, eligible students receive $4,000 annually at four-year institutions.  Under the proposal, freshman and sophomores attending four-year schools would receive $3,000 annually.  Juniors and seniors would receive $5,000 annually.

UT Peds
$3 million is included in the Governor’s budget to continue the state’s 5-year, $15 million funding commitment for UT Peds—a joint pediatric research venture for the UT Health Science Center, Le Bonheur Children’s Hospital, and St. Jude Children’s Research Hospital.  This is the second year of the state’s 5-year commitment.

What Will UT Advocate in 2014?

The 108th Tennessee General Assembly reconvenes for its second legislative session on January 14, 2014.  Lower than expected state revenue collections—a factor that will certainly weigh heavily on lawmakers as they consider a state budget—precede the upcoming session.  Year-to-date revenue collections are $171.1 million below budgeted estimates.

This session also leads up to the 2014 election cycle—where voters will head to the ballot box for all House districts and half of the Senate districts—almost guaranteeing a session that is shorter-than-usual as candidates gear up for a primary election that occurs on August 7.  Capitol Hill chatter indicates that lawmakers hope to adjourn in early April.

Some items the University of Tennessee will be advocating for include:

Full funding of any state-mandated salary increases for UT Employees.
The state currently provides only 55 percent of the needed funds for state-mandated salary increases at UTC, UTK, and UTM (UT’s formula units).  Other state agencies receive 100 percent of the needed funding to provide for such increases, whereas UT campuses have had to utilize tuition dollars to cover 45 percent of the increases in the past.

Full funding of the Complete College Tennessee (CCTA) outcomes formula.
The University of Tennessee fully supports the outcomes-based funding approach for higher education and encourages the state to continue funding the formula at 100 percent.

Enhancement Funding for “Non-Formula” Units.
UT “Non-Formula” Units are significant contributors to Tennessee’s economy and help improve the quality of life for Tennesseans.  These units, not included in the CCTA funding formula, include the Institute for Public Service, the Institute of Agriculture, and the UT Health Science Center.  The University of Tennessee supports the Tennessee Higher Education Commission’s (THEC) funding increase recommendation for these units of 3.6 percent.

Funding to improve retention and graduation rates.
Better retaining and graduating students is critical in meeting the Governor’s “Drive to 55” Initiative.  Each UT campus has proposed initiatives to increase student retention, and $2.25 million in state funding has been requested to make improvements in academic advising—a key to improving student retention.

Capital Projects & Maintenance Funding.
There are a number of UT capital projects in the pipeline, but UT’s top 2014 priorities include a UT Knoxville Science Laboratory Facility and a UT Chattanooga Academic Classroom Building Renovation.  The University of Tennessee supports the $45 million THEC funding recommendation for capital maintenance.  Capital maintenance monies are utilized for projects such as HVAC improvements, roofing repairs, steam line upgrades, etc.

Supercomputer Funding.
Last year, a commitment was made by the state to appropriate $5 million annually for 4 years to leverage grant monies and institutional commitments to fund the Tennessee Supercomputing Center.  This four-year funding commitment continues to be a priority for the University of Tennessee, as the Center will help facilitate the state’s goals of creating and attracting high-tech jobs, making industries in the state more competitive, and having real impact on our state education systems from K-12 to graduate education.

As our advocates know, many policy issues that impact the University arise as the legislative session unfolds, and much more will be known, particularly on matters of budget, once the Governor delivers his State of the State Address.

The UT Government Relations and Advocacy team will keep advocates informed on the most pressing issues via this website and our weekly, in-session emailed report, The Weekly Watch.  To access live updates, follow @UTAdvocator on Twitter.