LB22 Appropriations Committee Hearing
Testimony of University of Nebraska President Hank Bounds
January 17, 2017
Chairman Stinner and members of the Appropriations Committee, I am Hank Bounds (H-A-N-K B-O-U-N-D-S) and I am president of the University of Nebraska. Thank you for the opportunity to be here. And thank you for your thoughtful approach to these budget conversations.
Today I hope to paint a picture for you of the very real impact that budget reductions would have on your university. As I consider the fiscal environment and the likely challenges ahead, I am deeply concerned that our affordability and accessibility, our unique role as a driver of economic growth and workforce development, and our statewide presence could all be impacted.
For almost 150 years, Nebraskans have benefited from a strong partnership between the state and its university. That partnership has endured through economic ups and downs, thanks to the good work and foresight of this committee and the full Legislature.
“As I consider the likely challenges ahead, I am concerned that our affordability and accessibility, our unique role as a driver of economic growth and workforce development, and our statewide presence could be impacted.”
Look at the results. Today the University of Nebraska is a $3.9 billion economic engine for our state. Each year we educate more than 50,000 future farmers and ranchers, nurses and doctors, teachers, bankers, business leaders and entrepreneurs. We have an academic health science center that is transforming medical care and research across our state and beyond. We are a source of global expertise in areas like water and agriculture, national security and defense, cancer and infectious disease, and early childhood education. Private donors have seen the state’s willingness to invest in a consistent and sustainable way and have partnered accordingly. And we are growing enrollment, aware that our state’s demand for college-educated workers outpaces the current supply.
We’ve done this despite some troubling funding trends. Since I arrived in Nebraska I have spent quite a bit of time studying the data. Here is what it tells me. The University of Nebraska’s state appropriations have been growing at a far smaller rate than many other state agencies’ and less than state spending growth overall. Our share of the state budget pie has shrunk dramatically over the past 30 years – from 21 percent to 13 percent. And even as our enrollment has grown, our state funding per student has not kept pace with inflation – meaning we are having to do more with less.
I am grateful for the state’s partnership. At the same time, when budget cuts enter the discussion, it must be with the understanding that the impact of any cut would be exacerbated by the trends of the past several decades. Our commitment to affordable, high quality education means cuts are felt even more deeply since we have not asked our students to bear a disproportionate burden of budget reductions.
I know you have difficult decisions ahead and I don’t envy your position. I have pledged to the Governor and each of you that the University of Nebraska absolutely will be a partner in managing this downturn. Last fall we began slowing our hiring and other spending, one-time steps that would help us manage a cut in the current fiscal year. Make no mistake, the cut proposed in LB22 would be painful. But I am much more worried about the next biennium and the long-term impact that additional cuts would have on the university and all those we serve.
I know that today’s hearing is focused on the current fiscal year and we will have opportunities later on to discuss the biennial budget. I do want to make clear that in view of the Governor’s proposals, the University of Nebraska could have quite a mountain to climb. Our budget gap could exceed $50 million by summer 2019. I know there has been some shock about that number. The truth is that even if we were to receive flat funding, we would still have to close a gap of tens of millions of dollars because of cost increases that are beyond our control, like health insurance and collectively bargained salary increases.
I’m sometimes asked why a university with a $2.5 billion budget can’t handle a cut. This is not an accurate depiction of our budget. The day-to-day budget that supports our educational activities is actually $945 million. Two thirds of that is funded by the state. The other third is funded by tuition revenue. And most of our budget – more than 80 percent – goes toward employee salaries and benefits.
So we would have limited options for closing a budget gap. I would be guided by two principles in this process. One, we will do everything we can to remain affordable for students and families. And two, we will protect our academic enterprise to the greatest extent possible.
Nevertheless, history is a useful guide and we know that reductions in state funding in past years resulted in double-digit tuition increases, job losses, program cuts, and drops in enrollment that took us several years to recover from. I don’t know what decisions we would make this time. I do know that while we will look for opportunities to become more efficient, past budget cuts mean we are a lean institution already. And I know that since we depend on two sources of revenue for our operations – state funds and tuition – we will have to carefully consider what kind of tuition increases would help us meet our financial obligations while not running counter to our mission of accessibility.
Before I close, I want to draw your attention to the recommendation in LB22 that three-quarters of unspent Nebraska Research Initiative carry-forward funds be lapsed back to the state. This essentially equates to a $5.1 million budget cut for us. NRI funds allow the university to buy laboratory equipment to make our research enterprise more competitive. In some cases these funds are contractually committed to an item for which we will not be billed until it arrives many months later. Without the ability to carry over unspent NRI funds, we would not be able to make the most strategic purchases possible. I ask you to not lapse these valuable funds.
Additionally, I am concerned about the proposed cut to the Nebraska Opportunity Grant. This is the state’s only need-based financial aid program and it provides critical support for low-income Nebraska students. The proposed reduction would cut about $135,000 in aid for University of Nebraska students – an additional burden on needy students at a time when we need to be focused on expanding access, not restricting it.
In his State of the State address, the Governor said that the way to grow Nebraska is to grow the number of people who live in our state and create more and better-paying jobs. I completely agree. And I think the University of Nebraska can be a great partner to the state in these efforts. We have a long record of partnership and momentum and we are well-positioned to continue to be a talent magnet and a job creator for Nebraska. There is no question that we are navigating a difficult fiscal environment, but we cannot take our foot off the accelerator because of a temporary economic downturn.
I look forward to working together in the months ahead to achieve our shared goals for making Nebraska a great place for our children and grandchildren to live, work and raise a family. Thank you for your partnership and service to our state. Now I would be pleased to answer your questions.