insights (2006-19)

It’s Higher Education’s Turn

The state’s coffers are awash with revenues in excess of expectations, and a feeding frenzy is underway in Nashville to lay claim to the surplus.

A robust economy has generated growth of more than 7 percent in sales tax collections—by far the state’s largest source of revenues—for the first nine months of the fiscal year that ends in June. Corporate franchise and excise taxes collections—the next largest source—have been growing at a double-digit rate.

As a result, the state’s Funding Board has raised its projection of state tax revenues for the current fiscal year by at least $116 million above the $9.9 billion that was assumed in the budget Gov. Phil Bredesen submitted in February. That increase also serves to raise the revenue base for the fiscal year ahead. Indeed, the Bredesen administration is now projecting a $170 million increase.

The surplus for the current fiscal year is deemed non-recurring funds that can be spent only on one-time projects or allotments. By contrast, the increase in next year’s budget base is deemed recurring funds that can go to increase or initiate funding for programs on an ongoing basis.

Bredesen has identified education, pay raises and health care as the administration’s top priorities. But legislators and lobbyists can also be expected to push for everything from an increase in highway funding to more money for the State Film Commission to help get more movies made in Tennessee.

The surest bet is that the Legislature will augment the 2 percent pay raise that Bredesen recommended for state employees and public school teachers. Increasing it to 3 percent would cost an additional $40 million (with the portion for state employees perhaps going to relieve what’s called compression in the state’s pay scale rather than an across-the-board raise).

Bredesen also recommended a 2 percent pay raise for higher education, but he didn’t provide any money to cover its $28 million cost at the state’s universities and community colleges. Instead, he stipulated that they come up with the money on their own through tuition increases or other sources of revenue.

That disparity illustrates the stepchild status to which higher education has been relegated ever since Bredesen took office. In his initial austerity budget in 2003, the governor exempted K-12 education funding but not higher ed from the 9 percent across-the-board cuts he imposed on most state spending (TennCare also excepted). In subsequent years, those cuts have been fully restored to state revenues that are shared with local governments and partially restored for highway construction.

The only semblance of an increase in operating funding that UT has received over that span of time is $2 million last year and an additional $4.5 million this year for recruiting distinguished scientists to conduct research at the four joint institutes that the university has established in partnership with Oak Ridge National Laboratory. (After a two-year quest, UT has finally filled the first of 15 anticipated joint positions at these institutes. An English native, Jeremy Smith, will be moving here from his present post as professor of computational molecular biophysics at Heidelburg University in Germany.) One-time funding has been forthcoming for several new or renovated buildings, but their completion will only accentuate the dearth of operating funds that is the bane of Chancellor Loren Crabtree’s existence.

It’s true that, unlike most of state government that’s totally dependent on state funding, universities have another source of revenues to which they can turn: namely, tuition increases. It’s also true that even after the 13 percent hike imposed on students on the Knoxville campus this year, UT’s tuition is still less than the average of a peer group of southern public universities. But UT president John Petersen has estimated that a further 9 percent tuition increase will be needed this coming academic year for UT just to hold its own in the absence of any more state funding.

The Senate Education Committee, with Sen. Jamie Woodson at the helm, has taken the initiative in recommending a $28 million increase in higher-education operating funds. It’s more than coincidental that this equals the amount required to cover the cost of a 2 percent pay raise at all of the institutions involved. For complicated reasons having to do with the way the money gets allocated, Petersen would prefer the increase in operating funds to pay-raise coverage, and this preference is shared by the Tennessee Higher Education Commission. But if bigger pay raises are awarded, higher education funding should go up accordingly.

In my own view, it would set a terrible precedent for higher ed personnel not to be included in a state-funded pay raise as they have been in the past.

Where non-recurring dollars are concerned, higher ed in general and UT in particular have lots of pressing needs for building renovations. Some $35 million for infrastructure, including roads and utilities to support a major campus addition on the present Cherokee Farm site is also high on UT’s list. My own sense of the top priority is funding a long-standing Peterson request for $50 million to be matched by private contributions toward establishing endowed faculty positions. This inducement should serve to spur the $1 billion private fundraising campaign that UT is preparing to launch. And Crabtree is clear that 15-to-20 new endowed chairs on the flagship Knoxville campus would go a long way toward elevating its stature to achieve his goal of goals, which is joining the ranks of the 64 prestigious schools that have been admitted to the Association of American Universities.