Campus News

UT Board of Trustees endorses plan to save costs, increase revenue to alleviate unsustainable business model

02-27-2015


Contact 1: Gina Stafford

Contact 2: Elizabeth Davis



MEMPHIS – The University of Tennessee Board of Trustees on Thursday endorsed a plan presented by President Joe DiPietro to allow the campuses and institutes to save costs and increase revenue to help efforts to change the university’s business model and address a projected $377 million funding gap over 10 years. UT Martin's share of the funding gap is approximately $20 million during the 10-year period.

The campus and institute leaders will have latitude to use a variety of methods to make changes as long as they remain within several boundaries. These changes will be implemented over the next two budget cycles, starting with FY16.

The plan, using input from a budget advisory group, follows discussions the president has been having since June 2014, when he first presented the need to address the business model, which currently has the university increasing tuition to make up for declining or static state appropriations. The goal is to keep tuition increases as low as possible, this year being within the Tennessee Higher Education Commission’s recommendation between zero and 4 percent.

“We are not insolvent or in financial ruin. The only way to preclude tuition increases is to fix it ourselves. It is about maintaining quality and moving ahead. We will be a different organization in the next four to five years,” DiPietro said.

Gov. Bill Haslam’s proposed budget for FY16 is favorable to the university, but DiPietro noted it has been rare to have a strong or good budget.

“I have been in Tennessee for 10 (legislative) sessions now and recall two (years) like this one. It might seem obtuse to make this change, but we are not back where we were before the recession. We need to be ready,” DiPietro said.

Board Vice Chair Brian Ferguson told DiPietro the board approves of the plan. “We stand ready to support and provide our best advice,” Ferguson said.

The projected $377 million gap is an increase over a $155 million gap provided previously. The gap is based on average inflation of 3 percent, static tuition increases, operating expenditures increased by the inflation rate, salaries increased to address a gap of $153 million over five years and deferred maintenance of $25 million annually.

DiPietro’s action plan includes:

1. Program realignment and consolidation: campuses will address low-performing programs to fund program reinvestment and perform a feasibility analysis and develop a plan for program consolidations to save costs.

2. Allocation and reallocation plans: set aside 3 percent of base year’s total unrestricted E&G expenditures to address strategic initiatives, address deferred maintenance and identify cost savings from voluntary retirement and other workforce development options.

3. Unfunded mandates for tuition waivers and discounts: the UT System Administration will study these discounts, estimated to be $7.4 million annually UT System-wide.

4. Tuition structure review: Options include expanding differential tuition, increase enrollment of out-of-state students and the 15-4 tuition plan.

5. Non-formula fee structure: Non-formula units (Health Science Center, Institute for Public Service and Institute of Agriculture) will review whether outreach efforts are capturing actual cost of delivery and determine whether fees should be charged.

6. Tenure and post-tenure review process: To be conducted by UT System administration and with involvement by the Faculty Council, to look at awarding of tenure, post-tenure compensation and enacting of a de-tenure process.

While choosing from these options, the campuses and institutes must stay within the boundaries of keeping out-of-state enrollment less than 25 percent of undergraduate total, remaining within the top five annually under the Complete College Tennessee Act formula, increasing research expenditures by 6 percent annually, keeping customers and clients of outreach services at this year’s level or higher and increasing the total number of gifts, pledges and bequests by 15 percent annually.

The board heard a report about the Institute for Advanced Composites Manufacturing Innovation, or IACMI, by Taylor Eighmy, UT Knoxville vice chancellor for research and engagement and principal investigator of the project. IACMI is a $259 million public-private partnership announced by President Obama in a visit to Clinton, Tenn., in January. The institute reflects a $70 million commitment from the U.S. Department of Energy (DOE) and $189 million from IACMI’s partners. The selected team, led by UT, includes 122 partners and connects the world’s leading manufacturers across the supply chain with universities and national laboratories pioneering advanced composites technology development and research. IACMI was established as a nonprofit 501(c)(3) in Tennessee by the UT Research Foundation.

Eighmy concluded his report by talking about the growth of advanced manufacturing in Tennessee, and the university’s involvement in recruiting business and industry to the state. In meeting with UT representatives, Burkhard Huhnke, general manager of product engineering for Volkswagen, an IACMI partner, likened East Tennessee to another innovation hub. “What we have here in East Tennessee for advanced manufacturing reminds (us) of what is in place in Silicon Valley for electronics. …It is the same kind of ecosystem here. We have the University of Tennessee and Oak Ridge National Laboratory,” he said.

The board elected Rickey McCurry as vice president for alumni affairs and programs. He also will serve as president and CEO of the UT Foundation, Inc., which is the university’s interdependent, not-for-profit fundraising arm. McCurry will join UT on May 15. He is currently serving as vice president for institutional advancement for Rose-Hulman Institute of Technology in Terre Haute, Ind. McCurry and his family are returning to Tennessee, his native state. He served as associate vice chancellor for development and alumni affairs at UT Knoxville from 1993-2000.

In other action, the board also approved:

•2015 UTC voluntary retirement incentive program, which would offer a lump sum incentive payment of six months’ base salary, and retirements under the program would be effective June 30, 2015. The estimated cost of the program would be $4,180,093, and the estimated maximum savings in FY 2016 would be $5,562,680. The savings will be partially allocated to overall budget reduction measures. Any remaining savings will be held at the campus level and re-allocated as needed to achieve a better alignment of campus resources with instructional needs.

•UTHSC regional tuition rate program for certain degree programs in nursing and health professions. The discounted out-of-state tuition rate would apply to students who reside in Mississippi or Arkansas within a 50-mile radius of Memphis. Eligible students would receive a 75 percent discount on out-of-state tuition, effective fall 2015. The discounted rate would apply to students earning bachelor of science in nursing (including RN to BSN), master of science in nursing, doctor of nursing practice, bachelor and master of clinical laboratory science, master of science in occupational therapy and doctor of physical therapy. The proposal is for a three-year trial period to review the impact on enrollment.

•Acquisition of two properties in Memphis adjacent to the Health Science Center campus. The first at 20 Dudley St. is being acquired for parking and the control and future use of the land base. The second at 45 S. Dudley St. is being acquired for use as a vivarium and office space.

•Acquisition of 1302 White Ave., Knoxville, for the construction of a new classroom/laboratory facility. The facility will house research and teaching laboratories, associated support services, faculty and departmental offices, and a vivarium.

•Designation of the University of Tennessee/West Institute for Cancer Research as a foundation authorized to receive and hold gifts for support of cancer research and education at UTHSC
FY15 revised operating budget with no significant changes to recurring revenues, expenditures and transfers.

•Honorary degree of doctor of humane letters at UT Knoxville to Marian Wright Edelman, an advocate for disadvantaged Americans and founder and president of the Children’s Defense Fund, a nonprofit organization whose purpose is to ensure a level playing field for all children.

•Honorary degree of master of fine arts in acting at UT Knoxville to actress Dale Dickey, a Knoxville native, and an alumna of UT Knoxville. She has been featured in several long-running television series, including My Name is Earl, True Blood, Breaking Bad and Christy.

•Amendment of the rule on the use of university property that follows up on changes made to university rules in 2014 to further clarify authorized users and permissible uses of university property; establish standards for the issuance, appeal, and enforcement of a “no-trespass notice,” which is a written directive requiring a person to leave and/or not enter all or part of University property; and establish restrictions on the use of unmanned aircraft on university property.

•Amendment of the rule on residency classification in response to recent state and federal legislation on classifying students as in-state or out-of-state. A student may be classified as in-state if the student is a U.S. citizen; resided in Tennessee for at least one year immediately prior to admission; and graduated from a public or private high school in Tennessee or earned a high school equivalency diploma in Tennessee. Other amendments address the Tennessee VETS Act and two federal laws addressing veterans and military personnel.

•Revised policy on approval of student fees, mostly technical or editorial in nature but needed to ensure greater clarity and, therefore, more consistent application. The most significant revisions are a new section on differential tuition and clarification of the section on online and distance education course fees.

•Grant of tenure to UT Knoxville faculty members, John Zhanhu Guo, associate professor in the Department of Chemical and Biomolecular Engineering, and Subimal Datta, professor in the Department of Psychology, under expedited procedures.

•Revised UT Martin faculty handbook that includes a five-point rating scale for Faculty Performance Reviews, non-tenure track faculty duty and workload, freedom as a citizen and a process to revise the handbook.

•Proposal for a program of study leading to the degree of master of science in strategic communication at UT Martin.

•Revision of math unit requirements for undergraduate admission to UT Martin to
include Core Math I, II, and III as equivalent to Algebra I, Geometry, and
Algebra II.

•Revised affiliation and services agreement with UT Foundation, Inc., which incorporates previous amendments and makes various revisions related to operations, as well as some general housekeeping revisions.

To view an archive webcast of the meeting and supporting materials, go to http://www.tennessee.edu/.

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