CULLOWHEE (April 7, 2022) – We’re all feeling the bite of inflation.¹ Our universities are, too.

And despite a state budget that granted 5% raises over two years to university employees last fall, the board that governs the 17-campus UNC System this week began discussing the need for more raises and operating funds – including increased tuition – for the first time in years.

As members of the UNC Board of Governors discussed the System’s agenda Wednesday for the approaching 2022 legislative session, Chair Randy Ramsey asked how campuses are dealing with 8% inflation over the past year.

NC State University Chancellor Randy Woodson replied that when all its funds are included, NC State’s buying power is down $50 million.

“We haven’t had a tuition increase for resident students for six years now,” Woodson said. “It’s beginning to impact our ability to meet the needs of the state.”

Ramsey said he’s worried about the impact on the UNC System’s smaller campuses in particular. Campuses are finding it increasingly difficult to operate, he said.

“We are almost certainly going to have to look at raising tuition going forward, because I don’t see how we’re going to be able to sustain it,” Ramsey said.

Jim Holmes, Chair of the Board’s Budget and Finance Committee, said such a move could have long-term implications. Because the state guarantees students fixed tuition for four years, any move to raise tuition would affect university budgets for at least four years.

Jennifer Haygood, the System’s Chief Financial Officer, noted that the System spends $900 million a year on energy alone – and energy has seen dramatic price spikes of late.

Woodson said repair and renovation projects at NC State now routinely come in 15-20% over budget.

“Inflation is hitting us in all sorts of ways,” he said.

NC State isn’t alone. UNC-Chapel Hill Chancellor Kevin Guskiewicz said the estimated cost of a new building at UNC’s Kenan-Flagler Business School is now 18-20% more than it was a year ago.

In the full board’s meeting today, Holmes said the Board needs to resolve the challenges. “This isn’t going to get better anytime soon, and our project costs are going to continue to rise,” he said.

Housing markets in North Carolina’s larger cities are also a challenge in hiring, said Guskiewicz, noting that Chapel Hill is trying to hire several deans right now.

“I think that speaks to the way we need to reconsider tuition,” he said, in addition to salaries.

Inflation challenges aren’t limited to the System’s biggest campuses.

UNC Pembroke Chancellor Robin Cummings said he has offered the highest salaries in the institution’s history to make recent hires.

“You have to,” he said, adding that additional incentives are sometimes needed to attract faculty to rural campuses like Pembroke or Western Carolina University in Cullowhee.

“Our people are affected dramatically by this,” said UNC Wilmington Chancellor Zito Sartarelli, who noted that UNCW has lost audit, information-technology and human-resources professionals as well.

UNC President Peter Hans said that in discussions with state legislators, the System Office is trying to place inflation and the erosion of revenues “on the front page.”

But rather than compute “a huge number” to determine the cost to campuses, he said, university officials hope the System will be part of a broader statewide solution.

Haygood added that inflationary pressures are not unique to the UNC System, and the problem needs to be addressed across state government.

But Sartarelli, a former business school dean, disagreed with that approach, contending that university officials need numbers to clearly state their case for relief.

“We’ve got to calculate this quickly,” he said.

OTHERWISE, THE BOARD’S legislative request seeks a total of $57 million in additional funds – an increase of 1.7% over the University’s base budget:

• $38.1 million for growth in enrollment this year, using a new funding model – a first step toward performance funding – that focuses more on completed credit hours than enrollment. UNC System staff have made adjustments in recent weeks to provide more funding for master’s and STEM programs and arts and sciences. Budget and Finance Chair Holmes said adjustments to the formula will continue. “This isn’t over,” Holmes said. “This is a start.”

• $1.6 million to help launch the NC School or Science and Mathematics’ new Morganton campus.

• $1.5 million to support nine “lab schools” – K-12 schools established by UNC System colleges of education in underperforming districts. Appalachian State will open a second such school this year, with one 60 miles from campus and the other 90 miles away. Haygood noted that the schools have a higher percentage of exceptional students who require additional attention. “All of our institutions are subsidizing these schools,” she said.

• $5 million for additional security at the System’s six Historically Minority-Serving Institutions, due to a series of bomb threats this year at minority-serving universities across the country.

• And a list of $140 million in capital projects – one at each UNC System institution – if the General Assembly has non-recurring funds to distribute this year. The list includes $15 million for Appalachian State to set up a new campus in Hickory, $3 million for tele-health efforts at East Carolina University, $1.7 million for Elizabeth City State’s Aviation program, $8 million for a Military Affairs/Veterans’ Academic Center at Fayetteville State and $20 million for roof replacements at UNC Greensboro.²

A REPORT also revealed that thanks to an infusion of state and federal COVID relief and robust investment returns, the UNC System ended 2020-21 strong, increasing its financial position by $2.5 billion (16.3%). Every institution in the UNC System increased its operating margin by at least 14%.³

Haygood noted that many state universities invest their endowments with UNC Management Co., which had a 43% return last year. But the revenues that drove the universities’ financial performance were “temporary in nature,” she warned – “something to celebrate, but not anticipate.” 

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¹ https://www.wral.com/grocery-and-restaurant-prices-rise-average-household-paying-296-more-a-month/20224044/. 
² https://www.northcarolina.edu/apps/bog/doc.php?id=66654&code=bog, pp. 102-117.
³ https://www.northcarolina.edu/apps/bog/doc.php?id=66654&code=bog, pp. 12-24.