Letter from Board of Regents Chairman Schafer and Vice Chairman Clare to members of the Legislature

Dear Senator:

As you prepare for budget deliberations next week, we wanted to share the testimony that University of Nebraska President Hank Bounds delivered to the Appropriations Committee on Feb. 14. We thought all members of the body might want to read what the President had to say about the University’s role in growing our state and what kind of future we want to leave to our children and grandchildren. We hope this will be helpful as you consider the good work of the Committee under Chairman Stinner’s leadership, and we’d ask you to support their decision to make higher education and the University’s 53,000 students a priority.

We are particularly excited about President Bounds’ ongoing work with the business community to create a plan for economic development in Nebraska. We expect you will hear more about this work and their vision for Nebraska’s future soon.

We also wanted to provide some information about the University that we hope will inform your upcoming conversations. Our constituents ask us any number of questions about our budget and we wanted to be certain you had the facts.

In short, we believe the University of Nebraska has a great story to tell when it comes to stewardship of the dollars you entrust in us. We have become more efficient, we have contained costs, and we have managed our resources in a way that has protected affordability and allowed for investments that serve Nebraskans.

Here are the most frequent questions we hear:

Has the University tried to become more efficient?

The facts are the University of Nebraska is doing more with less. We have approximately the same number of employee full-time equivalents (FTEs) funded by tax and tuition dollars as we did in 2000, even though our enrollment has grown from 45,000 to almost 53,000 and research activity has grown significantly. In other words, we’re growing in the areas where Nebraskans expect us to grow – educating more students and doing more research – without increasing employees.

And we’ve been able to do this even though our state appropriations have grown at a much slower rate than other state agencies. In the past 20-plus years, state support to the University has increased 75%, compared to 246% for corrections, 202% for Medicaid, 137% for overall state spending and 122% for K-12.

On top of all that, we have still been able to make administrative cuts in areas such as information technology, human resources, facilities and procurement. We expect to achieve $30 million in annual recurring administrative cuts by the end of 2019-20.

We’re not saying we can’t find any more efficiencies. Our students and faculty are too important not to keep looking for every dollar we can cut out of our operations, because we know that every dollar saved is a dollar less that we must find from tuition increases or academic programs. But the fact is that we have been forced to become leaner over time while still growing our enrollment, producing more graduates, and doing more research.

Some national studies say higher education is “bloated” or “top-heavy.” Can you explain administrative growth at the University?

The University of Nebraska does business at significantly lower costs than our peers. Some facts:

• UNL administrative costs are 125% lower than its peers.
• UNO administrative costs are 64% lower than its peers.
• UNK administrative costs are 100% lower than its peers.

So compared to the institutions we compete with, we are a lean organization. The attached data backs that up.

At the same time, we are indeed growing – and that’s a win for Nebraska:

• We’re educating more students which requires more advisers, counselors and safety experts.
• We’re conducting more research, which requires more lab technicians, grant writers and compliance officers.
• And we’re engaging in more public-private partnerships, like the Fred & Pamela Buffett Cancer Center, the Health Science Education Complex in Kearney, the Buffett Early Childhood Institute, the Global Center for Advanced Interprofessional Learning (iEXCEL), and the National Strategic Research Institute.While these new programs add to our staffing levels, these investments not only have an economic return for our state, but will make Nebraska a global leading giant in higher education.

Some view growth in employees and payroll as a negative. Smart and strategic growth, which we feel the University’s growth has been, should be viewed as an investment. And we make these investments because we think the University needs to produce more nurses for rural Nebraskans, help more of our students get to the finish line sooner and figure out why cancer rates in our state are above the national average. Could we stop investing and put the brakes on growth? Of course, but the consequences, in our opinion, would not be good for students or Nebraskans.

Are University salaries too high?

We’re in the most competitive marketplace for talent of our lifetimes. So anytime you look at our salaries, you need to compare them to other universities to understand the competitive market pressures we compete against.

While many will point out we have a substantial number of employees earning six figure salaries, the facts are we have fewer employees making six figures than most other Universities like us.

And our salaries are below market, particularly at the executive level, which is especially a concern to the Board as we attempt to retain talent.

So no, salaries are not too high. We’re not leaders in terms of how much we pay our employees compared to other universities, and Nebraskans should be concerned about that. But with the resources we have, we will attempt to offer competitive compensation, and leverage that with all the good things that come with living in this great state, to compete for talent. We think our students and Nebraskans deserve the best.

Is the University actually getting a funding cut, or is your 2018-19 appropriation simply less than you budgeted for?

In 2015-16, our state appropriation was $583 million. Today, our state appropriation is $570 million. Under the previous proposal, that would have been cut to $559 million, and next year’s funding would have been cut down to $557 million. So yes, under the previous proposal, we were getting a cut.

Can you explain why it’s hard to find cuts when the University has a $2.6 billion budget?

That’s akin to claiming that the State shouldn’t have to make cuts because the Legislature should be able to find savings in your $10 billion budget plus a $300 million rainy-day fund. Or suggesting the Legislature can use federal Medicaid funding to build roads.

The University does have a $2.6 billion budget, but two-thirds of that is either restricted, like private dollars or research grants, or part of self-supporting operations like student housing whose revenues are restricted by revenue bond covenants. The remaining one-third supports our general operations, and this is the portion of the budget that’s impacted by cuts in state funding.

The University has millions of dollars of cash. Could that cover a budget cut?

This issue is a concern for us. We do have millions in cash, as any business should have working capital to rely on to make payroll and pay bills. Unfortunately, our cash is dwindling. Our peers have 223 days of cash. We have 173 days, which is down from 182 the previous year. The only universities who have cash positions trending like ours are the institutions in Kansas.

And we’re going to use more cash to manage our budget challenges. That could put us at risk of a bond rating downgrade, which would result in millions of dollars in increased financing costs to the State and students. So, are we concerned about protecting our bond rating? Absolutely.

Is it true Nebraska is one of the top 5 states in the nation in support for higher education?

There is a national study that ranks Nebraska in the top 5, but the data behind that statistic includes property tax support to community colleges. When state support and property tax support are separated, the story is quite different. Adjusted for inflation, the University actually receives less state money per student than we did a decade ago.

The University has generous private donors. Could you ask them to cover budget cuts?

99.2% of donations to the NU Foundation are restricted and can only be used for specific purposes as determined by the donor. Donors don’t generally give to keep the lights on or fix a leaky roof. We’re fortunate that private partners generously support the University – often as a result of state investment that they want to match – but private dollars are a supplement to, not a replacement for, state dollars.

Thank you for the opportunity to share this information with you. More importantly, thank you for all you do to support higher education and the young people of our state. We’re excited about the future, and we look forward to continuing to work alongside you in growing Nebraska.

If we can provide further information that would help as you make your decisions, please don’t hesitate to reach out.

Sincerely,

Rob Schafer, District 5
Chairman, University of Nebraska Board of Regents

Tim Clare, District 1
Vice Chairman, University of Nebraska Board of Regents