As the North Carolina General Assembly begins its legislative session in earnest this week, the UNC system is asking for more money to cut university payroll costs and help students graduate on time.
The University of North Carolina Board of Governors is requesting a one-time $16.8 million to reward eligible retired professors and a recurring $7.5 million to help students on five campuses who need to increase their on-time graduation rate.
The pension incentive money will be available to all campuses, Jennifer Haygood, the system’s chief financial officer, said at board meetings last week. However, priority is given to five campuses: Central University of North Carolina at Durham, the University of North Carolina at Asheville, the University of North Carolina at Greensboro, Winston-Salem State University, and the University of East Carolina at Greenville.
“When we look at long-term trends, these are the institutions that have been most affected by the enrollment change, so they will be prioritized,” Haygood said. “If these funds weren’t really needed in these institutions, we could expand opportunities for others.”
“Changing the Enrollment Scheme” has been a key factor in many of the systemic policy discussions over the past few years. In the fall of 2022, the total enrollment in the system dropped for the first time in nine years. The total number of students enrolled in the 16 universities of the system was 239,663, which is 4,837 less, i.e. by almost 2%.
Undergraduate enrollment fell about 2%, and graduate enrollment fell just below that.
Demographics, financial hardships take their toll
A number of factors contribute to this decline, which manifests itself to varying degrees throughout the country.
Among them is the demographic reality of lower fertility associated with financial instability during the “Great Recession” that began in 2007. Fertility rates never fully recovered, which portends fewer students in the future.
In 2020, the total birth rate in North Carolina decreased by 14.9% from the annual average from 2001 to 2010, according to the National Center for Health Statistics. This is just with the all-Russian decline of 15.9%.
Economic pressures from stagnating wages, higher living costs and skyrocketing housing prices are another factor in the decline in enrollment, along with growing skepticism about the value of higher education in general.
The system also began to increase limits on the number of out-of-state students at several schools, especially at historically black colleges and universities. HBCUs have attracted more interest from students outside of North Carolina, who pay more in tuition and can help offset student exodus in the state.
Seeing success there, the system also moved to raise out-of-state limits from 18% to 25% at East Carolina University, UNC-Asheville, UNC-Greensboro, UNC-Pembroke, and Western Carolina University.
The proposed $16.8 million should be recouped through adjustments to the system budget due to the change in model, Haygood told board members last week.
The regular $7.5 million to help students graduate on time will go to programs in the states of Elizabeth City, Fayetteville, NC Central, Winston-Salem, and the University of North Carolina at Asheville.
“Essentially, these funds will allow these institutions to provide additional assistance to students who are on their way to graduating on time but may be at risk. [stopping] because of some financial barriers,” Haygood told the board of directors last week. “These campuses were chosen because of the high proportion of PELL students they serve, and also because we believe these institutions need the tools to really focus on increasing graduation rates.”
“In our Performance Ranked funding model, we talked a lot about how increasing release timeliness is the key to improving these numbers, the key to reducing student debt,” Haygood said. “We believe this is an important tool for these institutions to improve those numbers.”
Last year, the UNC system changed its campus funding model from an enrollment-based to a “performance-based” model, with a focus on timely graduation and student debt reduction. These factors are already included in the compensation packages for some system chancellors and UNC system president Peter Hans.
The new model will be rolled out system-wide in fiscal year 2024.
This fiscal year, funding will depend on which of the two models is more financially beneficial.
Best option as budgets shrink
As chairman of the faculty senate at the University of North Carolina at Asheville, Dee Eggers saw the funding problems of universities like hers and the growing struggle of students trying to earn a degree.
“UNCA was already underfunded before the tuition freeze in 2012,” Eggers told Policy Watch this week. “Because of the mission of the University of North Carolina at Asheville, growth and growth was not the right path for us.”
Key to the system’s mission are smaller regional universities like UNC-Asheville, as well as larger regional universities like ECU and HBCU like Winston-Salem State and Elizabeth City State, Eggers said. They cannot survive if the only way to increase funding is to expand indefinitely in the face of demographic and economic realities that make it impossible.
“One of the strengths of the UNC system is the diversity of institutions, which allows us to attract and serve a wide variety of students,” said Eggers.
UNCA is among the schools flagged for retirement incentives. Eggers said she’s heard from educators who see the move as one of the best options when faced with enrollment cuts and significant budget cuts.
“We are grateful to the Board of Governors for requesting retirement stimulus funds,” Eggers said. “It would be a win-win for the university, faculty who are considering retirement, and the entire state.”
Eggers says long-serving teachers who have reached retirement age tend to earn higher salaries. When they leave, they can be replaced by younger teachers with lower salaries.
“Don’t get me wrong, we value senior faculty,” Eggers said. “Their knowledge and institutional memory is vital to the functioning of all universities. At the same time, encouraging some to retire a year or so early would be helpful for those schools that have current budget problems.”
If this experiment is successful, Eggers said, it could also be useful to consider incentivizing phased retirement, a scheme in which faculty members work full-time for one year and then two part-time jobs.
UNCA students who are struggling financially can also take advantage of programs designed to help them complete their studies on time, Eggers said. One of the most desirable vacation spots in the state, Asheville now has the highest cost of living of any urban area in the state, but only the fifth highest hourly wage rate. This makes it difficult for college students and even faculty to find affordable housing, Eggers said.
“We’ve had trouble recruiting and retaining faculty who tell us they’re having a hard time finding decent housing,” Eggers said. Even the apartments in the basement are inaccessible to students and some junior teachers.”
“Of course, we are grateful for any programs that can help students succeed,” said Eggers. “We’re also happy that they’re looking at what works and what doesn’t, in terms of funding.”