UNC competes for public money when we need higher ed most

(Feb. 22, 2007) Administrators, editorial writers and parents are all wringing their hands these days over rising university tuition. But for public universities, the fact is that unless the state legislature does its part to pay for higher education, it adds to pressure on tuition.

The public university enjoys a proud tradition in North Carolina. Through much of its history, the state has supported its universities. Spending on state universities in North Carolina has grown from $840 million to $2.1 billion since 1985.

But other parts of the budget are growing faster, and analysts see a “crowding-out” effect on higher education. Though the amount the state spends on universities has risen, it has shrunk from 17 percent to 12 percent of the state budget since 1985.

The competition for public funds has real implications for the tuition students pay.

State universities rely on a three-legged financial stool – appropriations from the legislature, tuition and outside grants. When the General Assembly can’t do enough, or budget shortfalls keep the state from meeting universities’ growth in a global, knowledge-based economy, university leaders often must turn to tuition.

“States have … reduced the percent of state budgets that (is) appropriated to higher education, and state appropriations as a share of public university revenue are down,” said the National Conference of State Legislatures’ Blue Ribbon Commission on Higher Education. “States are shifting the burden of paying for higher education from the state to the family and the institution. States now pay less of the total cost of higher education and students and families pay more.”

That’s why a policy recommended by UNC President Erskine Bowles and adopted by the UNC Board of Governors links limits on tuition to action by the legislature.

“While tuition and fee charges are necessary as a secondary source of funding, the General Assembly has the principal responsibility for funding the University,” the Board of Governors’ Tuition Policy Task Force reported. “For years in which the General Assembly is able to provide sufficient increased revenues, the need for increases in tuition should not be as great.”

The pressures are nationwide, and not unique to North Carolina.

“There is a crisis in American higher education,” said the NCSL report. “It has become clear that the states and the federal government have neglected their responsibilities to ensure a high-quality college education for all citizens. … It is up to the states – and specifically state legislators – to alter the course of higher education. States bear the major responsibility for higher education.”

In North Carolina, legislative leaders appear to understand the connection between state support and tuition.

“Our public universities are world-class,” House Speaker Joe Hackney said after he was elected speaker on Jan. 24. “Our investment in them will help to prepare the thinkers and researchers of tomorrow. We must continue to be sure that all our citizens have the resources to go to college and graduate.”

Marc Basnight, the president pro tempore of the N.C. Senate, said the opening day of the 2007 session that the state must keep its universities both among the nation’s best and among its most affordable.

“We must continue to subsidize the students in our higher-education system at the level that we presently do in this state, which ranks us as one of the greatest buys in all of public education or private education in all of America,” Basnight said.

While local editorial writers and others decry a rise in tuition charged by the UNC system, national publications continue to cite UNC-Chapel Hill as the best deal in the country. For the sixth year in a row, Kiplinger’s Personal Finance magazine named UNC-Chapel Hill the best value in public higher education this year.

Some 35-40 percent of revenue from tuition increases is dedicated to need-based financial aid, and the Carolina Covenant is a national model for college access. Begun in 2004, the Covenant assures qualifying low-income students – those whose families make up to $37,000 for a family of four – that they graduate debt-free from Chapel Hill. For those students, “We will remove any financial barrier,” said Chancellor James Moeser.

Even as its mission grows, though, the university’s revenue sources are shifting.

The University of North Carolina at Chapel Hill
FY 2005-06 Revenues by Source: $2,025,216
(Dollars in Thousands)

Self-Supporting, Investment Income, Other $    835,217 (41%)
State Appropriations                                    $    440,070 (22%)
Contracts and Grants                                   $    554,047 (27%)
Tuition and Fees                                           $    195,882 (10%)
                                                          $ 2,025,216

UNC-Chapel Hill now depends more on federal and private grants ($554 million in 2005-06) than it does on dollars from the state ($440 million in 2005-06). State money that accounted for 35 percent of the university’s overall budget in 1992 accounted for 22 percent in fiscal 2005.

Meanwhile, other schools are building endowments to compete for faculty and students.

UNC-Chapel Hill just surpassed a fundraising goal of $2 billion. But UCLA, the University of Chicago, Johns Hopkins, Michigan, New York University and Virginia have also set goals of $2 billion. Since 1999, Columbia, Duke, Harvard, MIT and the University of Southern California have completed campaigns of $2 billion or more.

North Carolina has a tradition of generous appropriations to its university. But forces that this and other states face continue to build pressure on tuition. Without greater state support, university officials feel that pressure more acutely.