KNOXVILLE — The UT system is in “a kind of war,” officials said Thursday, as its investments nosedive in the struggling markets and state money is covering fewer campus needs.

“This is a kind of war we are in here,” Doug Horne, a member of the UT board of trustees finance committee, said Thursday in a committee meeting. “In the end, hopefully, we will be leaner and stronger.”

University endowment investments totaled $698 million in June 2007 but have shrunk to $651 million this year, said Charles M. Peccolo, vice president and treasurer of the UT system.

With the tumult on Wall Street, income from those investments plummeted from $175,091 in 2007 to $17,528, according to UT financial statements.

“I am here to talk about a down year,” Mr. Peccolo told the finance committee. “We are in uncharted water. ... The current environment is difficult.”

Along with reviewing investment losses Thursday, trustees and UT administrators discussed improvements at the system’s campuses, including such areas as research and economic development, student success programs and community outreach. They acknowledged, however, that funding likely will continue to drop, leaving many projects on the back burner.

Last year, the UT board of trustees sent a list of projects totaling about $38 million to the Tennessee Higher Education Commission — money beyond what was included in the system’s general budget request, said Gary Rogers, a board trustee. The system only received $3 million, he said.

This year, the finance committee will request $39.7 million for improvements on campuses. But trustees voiced skepticism Thursday about future funding and said they expected the Legislature to contribute very little, if anything, to program improvements.

“We need to keep this in front of the state,” Mr. Rogers said. “We will work to get what we can.”

The UT system also may lose 3 percent to 5 percent in state funding in fiscal year 2010, UT President Jon Petersen said.

Earlier this year, Gov. Phil Bredesen cut $21 million from the state’s higher education budget. This month, Gov. Bredesen said lower-than-expected tax revenues meant another $17 million would have to be cut from higher education.

Before the recent funding drop, the state appropriated $479 million this year to the UT system, according to board documents. In 2010, state appropriations are expected to decrease to $438 million, a loss of more than $60 million in state funding since fiscal year 2008.

To counter budget cuts and funding losses, the finance committee recently formed a subcommittee on effectiveness and efficiency to identify cost-saving measures in the UT system.

The committee launched an online campaign this week to solicit savings ideas from faculty, staff and students. In the first two days, administrators have received about 100 responses, Mr. Horne said.

“If we are perceived to be succeeding in our quest and managing our costs better, I believe our legislators, policymakers and the public will decide to invest more resources with us,” Mr. Horne told the finance committee.

Dr. Petersen said UT schools have no plans to implement a midyear tuition hike to recover from cuts. However, without knowing what cuts await the system, he makes no promises about future tuition increases.

“Whatever we have to do we have to do,” he said following the finance committee meeting.

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