UNC seeks 1.9 percent budget increase, more buildings

by Jane Stencil, News and Observer, December 4, 2014.

The UNC system’s $2.57 billion budget request to the legislature for next year asks for a 1.9 percent increase, with a short list of priorities, such as research, an infusion for the state’s two medical schools and bumped-up contributions to employee retirement plans.

But UNC leaders are putting forth a more ambitious pitch for construction spending to address a backlog of repairs and to build new facilities for science and nursing programs. The request for next year is $84 million for repairs and renovations, plus another $122 million for 11 new or revamped engineering, nursing and science buildings across the state. The projects were chosen based on areas of job growth projected in North Carolina.

The priorities were adopted by the UNC Board of Governors’ Budget and Finance Committee on Thursday and are likely to be given the green light on Friday by the full board.

The wish list anticipates the start of the budget season, with the legislative session opening in January. State agencies were told to plan for 2 percent reductions in their operating budget. In UNC’s case, that will be offset by a projected 2 percent increase in money to cover additional students next year.

While all indications are there won’t be much new operational spending, UNC officials say they’re hearing talk in Raleigh of plans for borrowing to shore up state facilities that have been neglected. A debt affordability analysis, due in January, is expected to shed light on how much room the state has to borrow, said Charles Perusse, UNC’s chief operating officer.

Finance Committee Chairman Harry Smith said that if the state undertakes more borrowing over the next several years, UNC would seek $1 billion for new construction and $500 million for renovation.

Some worried that a future construction boom could mean higher tuition costs for students. “We’re setting them up for that,” said board member Marty Kotis. “There’s no way to avoid that.”

The only sticking point in Thursday’s budget discussion was a proposed $10 million for medical schools at East Carolina and UNC-Chapel Hill. The schools have faced shortfalls because of reduced Medicare and Medicaid reimbursements for clinical care. But some board members said they thought ECU needed the lion’s share of the proposed increase. In the end, the board approved $8 million for ECU and $2 million for UNC.

The board discussed two other measures Thursday: a $50 per student annual fee to improve campus safety and the possibility of cheaper tuition for out-of-state students at UNC campuses near other states.

A system report this year recommended $13 million in security improvements at the public campuses. The proposed fee would generate $9 million, and one-third of that would go to improve salaries of law enforcement officers. Campuses say they have a hard time keeping campus police on the job because they get better pay at local agencies. The money would also go to training and compliance with federal laws governing sexual assault and campus crime reporting.

While board members supported the security steps, many said a new systemwide fee was not the way to accomplish it. They will continue the debate in January.

“I could see this be a fee that keeps going and going and going,” said board member Roger Aiken. “I have a lot of questions about it.”

There was also skepticism about allowing two UNC campuses to lower out-of-state tuition to lure students from across the border – in Elizabeth City State University’s case, from Virginia, and in UNC Pembroke’s case, from South Carolina. The committee agreed to allow the chancellors of those campuses to present their case to the board early next year.

The tuition would be larger than that of North Carolina students but less than the current out-of-state rates, and would help the two campuses fill available seats, supporters said.

Champ Mitchell, a board member, said if campuses can’t survive on the state support they receive, “then we’ve got overcapacity and we’ve just got to bite the bullet and recognize that.”

Out-of-state students would still be capped at 18 percent of incoming freshmen, but charging them less could be a tough sell politically, some admitted.

“We’re tiptoeing into something that’s very different for this university,” said board member Hannah Gage.