UNC System asks legislature for $24.3 million to expedite professors’ retirement, improve on-time graduation rates

As the North Carolina General Assembly begins its legislative session in earnest this week, the UNC System is requesting additional money to reduce salary costs at universities and help students graduate on time.

The UNC Board of Governors is asking for a one-time appropriation of $16.8 million to incentivize eligible professors to retire, and a recurring $7.5 million to assist students at five campuses that need to shore up their on-time graduation rates.

The money for retirement incentives would be available to all campuses, said Jennifer Haygood, the system’s chief financial officer, at last week’s board meetings. However, five campuses would be prioritized: NC Central University in Durham, UNC-Asheville, UNC-Greensboro, Winston-Salem State University and East Carolina University in Greenville.

“These are the institutions that, when we look at long-term trends, have been most impacted by the changing enrollment pattern, so they would have priority,” Haygood said. “If indeed these funds were not necessarily needed at those institutions, we could expand the opportunity for others to benefit.”

The “changing enrollment pattern” has been a key factor in many system policy discussions over the last few years. In the fall of 2022 overall system enrollment declined for the first time in nine years. Total student enrollment at the system’s 16 universities was 239,663 — a decrease of 4,837 students, almost 2%. 

Undergraduate enrollment dropped about 2% and graduate enrollment fell just under that.

Demographics, financial pressures take a toll

A number of factors are contributing to that decline, which is playing out to different degrees nationwide.

Among them is the demographic reality of lower birth rates tied to financial instability during the “Great Recession” that began in 2007. Birth rates have never completely rebounded, portending fewer college students in the future. 

In 2020 North Carolina’s general birth rate was down 14.9% as compared to annual averages from 2001 to 2010, according to data from the National Center for Health Statistics. That’s just under the national decline of 15.9%.

Economic pressure brought on by stagnant wages, a higher cost of living, and skyrocketing housing prices is another factor in enrollment declines, along with a growing skepticism about the value of higher education in general.

The system also began increasing the caps on the number of out-of-state students at several schools, especially Historically Black Colleges and Universities. HBCUs were receiving more interest from students outside North Carolina, who pay more in tuition and can help make up for in-state student declines.

Seeing success there, the system also moved to raise the out-of-state caps from 18% to 25% at East Carolina University, UNC-Asheville, UNC-Greensboro, UNC-Pembroke and Western Carolina University.

The proposed $16.8 million should pay for itself through adjustments to the system budget from the model shift, Haygood told board members last week.

The recurring $7.5 million to assist students in graduating on time would go toward programs at Elizabeth City State, Fayetteville State, NC Central, Winston-Salem State, and UNC-Asheville.

“Essentially what these funds would do would be to enable these institutions to provide additional aid to students who are on track to graduate on time but may be at risk of [stopping] because of some financial barriers,” Haygood told the board last week. “These campuses were selected because of their high proportion of PELL students they serve as well as the fact that we feel these institutions need the tools to really focus on increasing that graduation rate.”

“We’ve talked a lot about in our performance rated funding model that increasing on-time graduation is key to improving those metrics, key to reducing student debt,” Haygood said. “We feel like this is an important tool for these institutions to have to improve those metrics.”

Last year, the UNC System changed its funding model for campuses from one based on enrollment to one pegged to “performance,” with a concentration on-time graduation rates and reducing student debt. Those factors are already figured in to compensation packages for some of the system’s chancellors and UNC System President Peter Hans.

The new model will be in place across the system for the 2024 fiscal year.

This fiscal year, funding will be based on which of the two models will be more financially beneficial.

A better option as budgets shrink

As chair of the faculty senate at UNC-Asheville, Dee Eggers has seen the problems with how universities like hers are funded and the increasing struggles of students trying to complete their degrees.

“UNCA was already underfunded before the tuition freeze in 2012,” Eggers told Policy Watch this week. “Due to UNC Asheville’s mission, growing and growing was not an appropriate path for us.”

Smaller regional universities like UNC-Asheville, as well as larger regional ones like ECU and HBCUs like Winston-Salem State and Elizabeth City State, are key to the system’s mission, Eggers said. They can’t survive if the only way to increase funding is to expand indefinitely in the face of demographic and economic realities that make that impossible.

“One of the great strengths of the UNC System is the diversity of institutions, which allows us to attract and serve all kinds of students,” Eggers said.

UNCA is  among the schools marked for retirement incentives. Eggers said she’s heard from faculty who see such a move as one of the better options when faced with enrollment declines and heavy budget reductions.

“We are grateful to the Board of Governors for requesting funds to incentivize retirement,” Eggers said. “It would be a win-win for the university, members of the faculty who are considering retirement, and the entire state.”

Long-time and tenured faculty who have reached retirement age tend to have higher salaries, Eggers said. When they leave, they can be replaced with younger faculty at lower salaries.

“Don’t get me wrong, we value the senior members of the faculty,” Eggers said. “Their knowledge and institutional memory are vital to the functioning of all universities. At the same time, encouraging some to retire a year or few early would be beneficial to those schools with current budget challenges.”

If this experiment succeeds, Eggers said, it may be helpful to look at incentivizing phased retirement as well, a scheme wherein faculty are full-time for one year and then half-time for two.

Financially strapped UNCA students could also benefit from programs designed to help them graduate on time, Eggers said. One of the most desirable vacation destinations in the state, Asheville now has the highest cost of living of any metro area in the state, but only the fifth highest hourly wage rate. That makes it difficult for college students and even faculty to find affordable housing, Eggers said.

“We’ve had trouble recruiting and retaining faculty who tell us they are having trouble finding decent places to live,” Eggers said. Even basement apartments are out of reach of students and some junior faculty.”

“We’re grateful for any programs that can help with student success, of course,” Eggers said. “We’re also glad they’re looking at what works and doesn’t work, in terms of funding.”