University of Tennessee looks to fix 'broken' funding model

University of Tennessee looks to fix 'broken' funding model

February 28th, 2015 by Tim Omarzu in Local Regional News

UTC students study in a room with a view at the new UTC library recently. An increase in out-of-state students is just one option in a plan to fix the "broken" funding model for the University of Tennessee.

Photo by Maura Friedman /Times Free Press.

An increase in the number of out-of-state students is just one option in a plan to fix what President Joe DiPietro has called a "broken" funding model for the University of Tennessee and address a projected funding gap that has more than doubled to $377 million.

DiPietro revealed options to cut costs and increase revenue to the university's board of trustees at the full board meeting Thursday in Memphis. Board members endorsed the plan, which starts with fiscal year 2016 and is for the next two budget cycles.

The University of Tennessee at Chattanooga's 2015 voluntary retirement incentive program was among the measures the board approved.

It will offer an estimated 340 UTC employees a lump-sum incentive payment of six months' base salary for retirements effective June 30, 2015. According to UT, the estimated cost of early retirements is more than $4.18 million and the estimated maximum savings in fiscal year 2016 would be nearly $5.6 million.

The $1.38 million difference would be partially allocated to overall budget reduction measures, UT says.

"Any remaining savings will be held at the campus level and reallocated as needed to achieve a better alignment of campus resources with instructional needs," a UT news release said.

Eligible UTC employees must apply by March 31. Details will be sent to employees on Monday, UTC spokesman Chuck Cantrell said, once school resumes after a two-day break because of the snowy, cold weather.

"We believe that the voluntary retirement plan will enable those employees who are considering retirement in the near future to go ahead and take that step," Cantrell said.

Savings could come, Cantrell said, from reassigning the work of people who retire to current employees or hiring new employees at lower salaries than higher-paid employees who are close to retirement.

DiPietro stressed that the university is not in financial ruin, the Knoxville News Sentinel reported. However, he said by adding costs of deferred maintenance and the cost of closing the salary gap for employees, previous estimates of the future of the funding gap grew.

University officials previously had estimated that the system could have a $155 million funding gap over the next decade if the state doesn't invest new money into higher education, UT caps tuition increases at 3 percent and if the inflation rate stays at 3 percent.

That gap is now $377 million with those two added costs, DiPietro said.

The new plan moves the boundary for out-of-state students to 25 percent from the current out-of-state enrollment of about 12 percent, DiPietro said.

Out-of-state students mean far more tuition income for the university. An in-state undergrad admitted to UT Knoxville since fall 2014 pays $5,938 per semester, compared to $15,163 per semester for out-of-state undergrads.

"We can continue to educate Tennesseans at a very reasonable cost ... but we're now going to have a few more out-of-state students to be able to do that for Tennesseans," he said.

DiPietro said that doesn't mean out-of-state students would automatically grow to 25 percent. He also said out-of-state students would be held to higher academic admissions standards than in-state students.

This increase prompted the most questions about the plan from trustees, but board Vice Chairman Brian Ferguson brought up points of support. These out-of-state students would be high-caliber students that UT wants to attract and would be likely to stay in Tennessee after graduation, boosting the economy, he said.

DiPietro's plan had several more choices in what he described as a toolbox for campus chancellors. Approaches included consolidating or realigning programs, reviewing free outreach programs, studying tuition discounts and the system reviewing tenure and post-tenure.

"I'm not tying the chancellor's hands," DiPietro said and added that the toolbox allows chancellors to choose what they want to do.

DiPietro said he knows resulting actions might be unpopular or upsetting, but the university will be better off and won't sacrifice excellence.

Staff writer Tim Omarzu and the Knoxville News Sentinel contributed to this report.