The Impact of State Budget Reductions on UNC Chapel Hill

Robert N. SheltonExecutive Vice Chancellor and

ProvostOctober 3, 2003

The University of North Carolina at Chapel Hill

$252,585

$283,826

$382,372

$331,650

$257,219$255,003$270,700

$302,337

$352,283

$308,245

$383,189$402,205

$368,505$368,024

$163,054

$149,577$132,966

$190,236

$213,230$235,196$244,485$247,950

$262,956$296,722

$321,330

$364,340

$403,684

$431,986

$54,228 $53,050

$59,158 $63,888

$82,721$87,398

$94,458$107,969

$132,285$148,310

$164,640$160,375$180,616

$163,500

$50,221

$60,247$66,718

$81,465$88,478$102,277$105,745$110,400

$46,719$75,531

$121,507$139,319

$150,537

$178,484

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

89-90

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03

In T

hou

san

ds

State Appropriations

Govt. Contracts & Grants

Private Gifts & Grants-as reported toCAE (includes related entities)

Tuition & Fees

Carolina Revenues by Source, 1997-2002

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

% % % % % %

1997 1998 1999 2000 2001 2002

State Appropriations

Tuition and Fees

Federal Contracts andGrants

State Contracts andGrants

NongovernmentalContracts and Grants

Other Revenues

In his August 8th speech to the UNC Board of Governors, Chairman J. Bradley Wilson said:

I believe that the continued compression of the University budget creates an important question for this Board and the people of this state. Does North Carolina want to continue to have a state-funded University, or do we want a state-supported University? There is a difference—a big difference.

Wilson continued:

The proud heritage of the people of North Carolina is that we have a state-funded University that is as ‘free as practicable.’ We must recognize that to continue to cut the University budget—as has been done over the past four years—and to continue to fail to reward our administrators, faculty, and staff with raises and benefits that they so richly deserve, to continue to shrink general fund support for the University and to ask our students to pick up the tab, is a formula for disaster.

Quick FactsBy the Numbers Fall 2001-

2003

Operating budget Permanent Reductions $ 34.10 Million One-time Reduction $ 70.47 Million $104.57 Million

Funding for enrollment increases Academic Affairs $ 26.53 Million Health Affairs $ .49 Million

Increase in operating reserves $ 5.89 million

How Have We Managed?Implemented annual budget planning and hearing process with all deans,VC’s, and UPBACMade differential cuts, abandoning across-the-board approachProtected the classroom as much as possible, while streamlining administration and eliminating programsIncreasingly relied on alternative funding sources to maintain excellence (clinical income, research awards, F&A funds, Carolina First Campaign), but these funds are limited in areas of use

Criteria for Cuts

Protect activities that are central to Carolina’s mission, add value, or are required by law or for compliance purposes Deans and VC’s have discretion, but must manage within resources Academic Plan, Financial plan, unit plans guide reduction and allocation decisionsLook for opportunities to improve efficiency and eliminate duplicationMake decisions consistent with BOT Measures of Excellence

Impact of Budget Cuts:

Elimination of support programsLoss of faculty and staff positionsReduced competitiveness in retentionElimination of academic programsInfrastructure and support deteriorationLibraries affected

Elimination of Support Programs in Past Year

HEELS for Health ($165,000)Office of Continuing Education in Health Sciences ($150,000)Hanes Computer Training Center ($100,000)Arts Carolina ($130,000)Neonatal Nurse Practitioner Program ($75,000)Annual Preceptors Conference, Dept of Health Policy and Administration ($21,000)

Elimination of Support Programs in Past Year

School of Medicine Office of International Affairs ($78,000) Curriculum Technology Support Office ($287,000) Health Ethics Center ($191,000) Carolina Workshops in Molecular Biology ($152,000) Allied Health Rehabilitation Psychology and

Counseling Program ($435,000)

First Year Initiative Living Learning Program ($73,000)Institute for Nutrition ($200,000)Total Savings: $2,057,000

Loss of Faculty & Staff Positions 2001-2003

Instructional positions 157.63 fte Faculty positions (155.63 vacant, 2 filled ) $15.9 Million

Non instructional positions 218.78 fte Vacant positions (62.78 fte) and layoffs

(154 SPA, 2 EPA) $ 5.5 Million

63% of the permanent reduction ($34.10M) has been in position funding

Position Reductions

60.78

0.11

60.89

35.28

61.52

96.8

122.72

96

218.72218.78

157.63

376.41

0

50

100

150

200

250

300

350

400

2001-02 2002-2003 2003-2004 Total

Staff

Faculty

Total

0100200300400500600700800900

1000

1999 2000 2001 2002 2003

AA TenureAA FixedHA TenureHA Fixed

Full-Time Faculty 1999-2003

Total Full Time Faculty1999-2003

0200400600800

100012001400160018002000

1999 2000 2001 2002 2003

Tenure

Fixed Term

Reduced Competitiveness in Faculty Retention

The issue is not the loss of faculty due to retirement, non-reappointment, or career changeThe issue is the competition for our best faculty: those we treasure most, and who are most attractive to our peer institutions

Faculty Retention

In the mid-1990’s we lost 2.0% of our faculty to competing institutions; by 2002-03, our rate of loss had climbed to 2.9%Within Arts and Sciences, we’ve shifted from keeping 60% of those we fight to retain to losing 60% of those we fight to retain.Average salary difference in Arts and Sciences is $30,000 less than competing institutionFaculty received average raise of 2.48% plus one-time bonus of $550 for 2003-04, and average raise of 2.55% for 2002-03.

Faculty Retention

In 2002-03, we lost 53 of 76 retention bids across the University, or nearly 70%Outlook for 2003-04 is uncertain at bestEach case is unique, depending on faculty needsUniversal factor: benefits

60,630

13,400

970

60,504

13,250

1,246

59,419

12,737

2,844

58,911

12,707

3,382

57,793

12,358

4,849

56,544

12,337

6,119

56,220

12,260

6,519

55,811

12,010

7,179

55,594

12,074

7,332

54,736

12,083

8,181

54,702

12,250

8,048

53,173

11,705

10,122

52,514

11,176

11,310

Comparison of Annual Amount After Benefit Costs, FICA and Federal TaxesSalary of $75,000

Take Home Taxes Benefit Cost

Key Findings

Employees “take home” a significantly smaller share of their pay checks than employees at peer institutions

Family health insurance coverage is the biggest driver of high employee benefit costs

Employees also pay the highest out-of- pocket medical expenses of employees at peer institutions

Employees pay a higher than average share of retirement contribution

Moving Toward our Peers—Items for Consideration

Health How can we increase University contribution for dependent coverage? Should we implement sliding scale for premiums based on salary? Can we increase number of plan options offered?

Retirement How can we decrease employee contribution to retirement plans? How can we increase University contribution to defined contribution

plan? Should we decrease vesting period for defined contribution plan?

Other Should we subsidize dental insurance? Should we provide employer-paid life insurance? Should we consider a cafeteria style benefit plan?

Benefits Structure Should our benefits be comparable to programs offered to government

employees in southern states or should they be comparable to universities with whom we compete for faculty and staff?

Solutions

Endowed professorshipsResearch supportPhysical facilitiesBenefits and base salary improvementsRetention fund

Endowed Professorships

321 distinguished professorships as of 2000-01 247 unit based 74 University-wide

We added 18 University-wide distinguished professorships in 2001-03

Progress towards our goal of 200 endowed chairs

Progress since then: 16 chairs fully endowed and filled 18 chairs fully endowed and waiting to be filled 12 chairs completed and waiting for state match 46 chairs with pledge made and in process of

collecting remaining funds 13 chairs with pledge made but no payments yet 95 seeking donors (your name here) Total: 200

Academic Program CutsIncrease in average number of students per class section For freshmen and sophomores, class size

increased from 34.8 to 36.84 students For juniors and seniors, class size increased

from 22.9 to 24.1 students

The College of Arts and Sciences lost 36 faculty members but could only replace 1414 elective courses eliminated from BSBA, MBA and MAC programs

Academic Program Cuts

SILS eliminated core course lab and reduced TA’sSPH eliminated 10 TA’s from Health Behavior and Health Education classes HBHE postponed two new courses in Global Health and Health Communications due to lack of state funds to hire new facultyDept. of Epidemiology eliminated Doctoral Seminar program

Academic Program CutsEnvironmental Health Sciences Techniques course cancelled in ESESocial Work field education supervisor position eliminated, reducing help to 250 students in fieldDept. of Allied Health Services reduced admissions from 118 students to 80 studentsSOM eliminated Medical Informatics Track for BME studentsSOM cancelled development of spinal cord research program in Physical Medicine

Infrastructure and Support Deterioration

$5.1million in maintenance cuts = loss of funding for 1.15 million square feet of space87 maintenance-related positions lost – equivalent to a 15% reductionOver 2,100 preventative maintenance tasks eliminated by reducing scheduled frequenciesState allocation for R&R in last three fiscal years was: $0, $0, $0.9M (historical mean of $14M)

Infrastructure and Support Deterioration

Closed five residence hall computer labsClosed computer lab in Greenlaw and computer classroom in VenableEliminated all public access modem linesReduced IT service to instructors (MyUNC and Faculty/Staff Central) with layoff of three staff

Libraries AffectedPriority area protected from reductions through year end investments Permanent - $955,000 (cut would have been

>$1.2M if applied across the board) (Added $1,858,600)

Temporary - $1,239,066 (Added $1.5 M)The Health Sciences Library reduced monograph purchases by 60% and video purchases by 80%Unable to replace 125 computers that are over seven years old in Davis LibraryReduced student assistant hours by 6,900 in Health Sciences and Academic Affairs libraries$130,000 in serial cancellation in Law Library over last three years (from total acquisition budget of $1.1 million, 85% of which are serials)

State Appropriation & Permanent Reductions

Three Year Cumulative Permanent Reductions

State Appropriation92% $390M

Permanent 8% $34M

Lost Expenditure Capacity for the Period$104M

Temporary, $70M

Permanent, $34M

State Appropriation & Enrollment Increase

Enrollment IncreaseFall 2000 to Fall 2003

Fall 2000 24, 870

94%

Increase - 1,490 6%

Three Year Cumulative Permanent Reductions

State Appropriation92% $390M

Permanent 8% $34M

SummaryWe continue to pursue academic excellence and initiatives, despite the cuts. These include:

Implementation of the Academic Plan Launching the new undergraduate curriculum New investments in research computing Creation of a new biomedical engineering program in

partnership with NCSU Creation of the Institute for Advanced Materials, Nanoscience

and Technology Development of Carolina North An aggressive building campaign Continued progress towards completion of the Carolina First

case statement goals, including 200 new professorships and 1,000 new scholarships

Closing Questions and Comments

Tenured/ Tenure-Track

Fixed Term Total

Tenured/ Tenure-Track

Fixed Term Total

Tenured/ Tenure-Track

Fixed Term

Grand Total

921 260 1,181 861 559 1,420 1,782 819 2,601

894 269 1,163 868 628 1,496 1,762 897 2,659

911 180 1,091 876 615 1,491 1,787 795 2,582

943 189 1,132 891 678 1,569 1,834 867 2,701

941 193 1,134 875 720 1,595 1,816 913 2,729

Academic Affairs Health Affairs Total University

Full Time Permanent Faculty

Fall 1999-2003

UNC-Chapel Hill Current Funds Revenues by Source

(in thousands)

1997 1998 1999 2000 2001 2002

State Appropriations $331,650 $352,283 $382,372 $383,189 $402,205 $368,505

Tuition and Fees 102,277 105,745 110,400 121,507 139,319 $124,661

Federal Contracts and Grants 221,548 231,687 259,152 276,548 311,821 $365,172

State Contracts and Grants 26,402 31,269 37,570 44,782 52,519 $38,512

Nongovernmental Contracts and Grants 40,092 44,729 51,128 56,764 70,343 $75,536

Other Revenues 340,313 361,535 380,059 416,648 480,465 $515,049

Total Current Funds Revenues $1,062,282 $1,127,248 $1,220,681 $1,299,438 $1,456,672 $1,487,435

1997 1998 1999 2000 2001 2002

% % % % % %

State Appropriations 31.2% 31.3% 31.3% 29.5% 27.6% 24.8%

Tuition and Fees 9.6% 9.4% 9.0% 9.4% 9.6% 8.4%

Federal Contracts and Grants 20.9% 20.6% 21.2% 21.3% 21.4% 24.6%

State Contracts and Grants 2.5% 2.8% 3.1% 3.4% 3.6% 2.6%

Nongovernmental Contracts and Grants 3.8% 4.0% 4.2% 4.4% 4.8% 5.1%

Other Revenues 32.0% 32.1% 31.1% 32.1% 33.0% 34.6%

Total Current Funds Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

For the Year Ended June 30,