Art Pope rejects UNC System's budget proposal

by Jane Stancill, News and Observer, March 4, 2014.

Art Pope, the state budget director, has kicked the UNC system’s budget proposal back to the Board of Governors for a rewrite, saying it “simply is not realistic.”

In a memo on Feb. 28, Pope took university leaders to task, saying they’re asking for far too much money at a time when the state has competing priorities such as Medicaid and raises for K-12 teachers and state employees. He said the university system had basically ignored his office’s instructions in December to come forward with budget expansion requests of no more than 2 percent.

Pope, a retail magnate and Republican campaign financier, has been a high-profile critic of the university system going back to his days as a legislator. Now, as state budget director, he wields considerable power over state agencies, including the university system.

Polite but pointed, his memo was peppered with the word “respectfully” even as he scolded the university’s leadership. He wrote that Republican Gov. Pat McCrory supports the UNC system and its impact on the state’s future prosperity, but added a warning.

“However, the spiraling cost of higher education, the increased costs to students and their parents, including growing personal debt, as well as the increasing demands on the state budget, cannot continue indefinitely,” the memo said. “The University of North Carolina has a responsibility to its students and to the state to operate and improve the university in the most cost effective and affordable manner as practicable.”

At issue is the UNC system’s proposal for budget adjustments in 2014-15, the second year of a two-year cycle. The legislature will convene this spring in a short session to tweak the state’s spending plan.

‘Make our case’

University leaders say they are preparing a detailed response to Pope.

“We welcome tough questions about how the university proposes to spend public dollars,” said Peter Hans, chairman of the UNC system’s governing board. “The Board of Governors is asking those tough questions as well. In that sense the state budget director is doing what taxpayers should expect him to do. I also think the university has good answers to those questions and we will make our case thoroughly and realistically.”

This year, the UNC system received $2.5 billion in state money for operations and another $64 million for building repairs and construction.

Pope said the board has requested an increase of $288 million, or 11.3 percent over the current year’s state budget for UNC. Those figures do not include any raises for employees.

While the state’s economy is improving, an 11 percent increase is a fantasy, he said. Such a spending increase for UNC, Pope said, would require the governor and legislature “to make major reductions in other state agencies and programs, such as our courts, the ‘K-12’ public schools, and health care.”

Pope combined operating funds and one-time building repairs into one figure to come up with the 11.3 percent increase. The operating increase alone is 4.6 percent.

A university spokeswoman, Joni Worthington, said in an email that the request for more operating funds is “actually quite modest.” The university is funding $38 million of its strategic changes with its own cost-cutting measures.

The board’s request seeks to restore $50 million in cuts, including $27 million from a tuition increase for out-of-state students mandated by the legislature.

The university listed its repair and renovation request at $163 million, but Pope pointed out that the entire state government renovation fund this year was $150 million.

‘Budget’ vs. ‘needs’

Of the repair request, Worthington said the university did not expect that all projects could be funded at one time and the university would only anticipate its typical share of whatever construction money is available.

Pope wrote that UNC President Tom Ross had told him it was the university’s statutory duty to provide the governor and legislature with its “needs.” Pope responded that the statute “requires the Board of Governors to submit a ‘budget’ not ‘needs.’ ”

Ross could not be reached for comment Tuesday.

In an interview Tuesday, Pope said he sent a similar memo last year to the state lottery commission and held conversations this year with other agencies. The UNC memo was the only one he sent this year, he said, “because of the large dollar amounts involved and the impact that has on the overall budget.”

Of the UNC budget request, he said, “It was not what I was expecting.”

University leaders have said that they have borne more than their fair share of cuts during the economic downturn.

‘Academic quality’

From 2007-08 to 2012-13, appropriations per student have declined 7 percent while tuition receipts per student have jumped 47 percent, according to the university system’s budget proposal. Controlling for inflation, education spending per degree at UNC has declined by 18 percent, UNC said.

“Further reductions and large tuition increases hamper UNC’s ability to meet instructional needs and threaten academic quality,” the budget request said.

The budget request vote by the Republican-dominated UNC board on Feb. 21 was not unanimous. Some members said it was pointless to ask for a repeal of the legislative tuition increases.

One board member, Marty Kotis, said the university builds its budget not based on its total revenues and spending of more than $8 billion, but only on the state-funded portion. That, he said, “is irresponsible.”

Such comments have rarely been uttered in the UNC board room in the past.

Pope, too, seems to be casting his eye toward the university’s ability to pay its own bills.

He pointed out that the system had a cash balance of nearly $269 million by the end of the 2012 fiscal year and collected $228 million in overhead payments accompanying grants and contracts, mostly from the federal government.

“How much of the overhead receipts are being used for the repairs and renovations for the facilities used to generate the overhead receipts, as opposed to requesting $163 million in General Fund appropriations for repairs and renovations?” Pope asked in his memo.

Stancill: 919-829-4559