Last week the Board of Regents called a special meeting to review our budget planning. I want to summarize our discussion and lay out our next steps for the weeks and months ahead.
Higher education, as you know, is at something of a crossroads. The University of Nebraska is no exception. On the spending side, inflation is putting intense pressure on our operating and payroll costs.
Meanwhile, our enrollment declines have resulted in lower revenues than we projected, and growth in state funding will be muted for the foreseeable future
This creates a significant fiscal challenge for us. Using our best assumptions, we project we will face a $58 million shortfall across the University of Nebraska System by the end of the 2024-25 fiscal year. That figure assumes flat enrollment, 10 percent growth in health insurance costs, a 3 percent increase in the merit salary pool, and a 3.5 percent tuition increase – the latter of which is subject to Board approval at its June 22 meeting.
That number will grow in future years as costs continue to rise more quickly than new dollars coming in. Most troubling to me, our shortfall represents only what it would take to maintain our status quo. In other words, it includes nothing for strategic investments – no extra funds to make faculty salaries more competitive, to bolster world-class research programs, or to invest in other opportunities that might come up.
We are not alone in facing these challenges. Most of our peers in the Big Ten and across the country are navigating similar headwinds as costs rise, revenue sources dwindle, and public narratives around the value of higher education shift.
Our task is to separate ourselves in how we respond.
The reality is that help is not coming from the outside. State leaders have been steady and generous partners, but they are balancing many priorities and we should not expect significant growth in state appropriations. Meanwhile, while we will seek a modest tuition increase in the coming year, we will not ask students and families to balance our budget. We must look inward to determine how best to deploy our limited resources while ensuring a competitive, accessible, impactful University that our Board and all Nebraskans expect and deserve
Historically, our approach to budget reductions has been to “peanut-butter spread” our cuts across the institution, assigning a proportional cut to each campus and expecting all units to take their share. As I shared with the Board, I am concerned this approach has prevented us from reaching our full potential. A candid assessment of our performance metrics shows we have room to improve. Enrollment has declined for two straight years and all three of our undergraduate campuses are well below their historic highs. We have achieved some progress in graduation rates, but our first-to-second year retention rates have declined.
And while research expenditures are growing, we remain well behind the Big Ten, especially in the key performance area of federal expenditures
I believe Nebraskans expect their University to compete with the best. And our regents have made clear that they expect a different approach going forward – not the “peanut-butter” approach of the past. The Board has tasked me with bringing them a budget on June 22 that applies new thinking to our challenge. In particular, they expect to see a long-term plan that will close our budget delta while also positioning us to compete more effectively in research, enrollment and faculty salaries
Necessarily, we will not have all the answers in a few short weeks. But I intend to have a serious conversation across our entire University community about what our priorities are and what we want our institution to look like in the context of our new realities. I will be engaging key campus leaders on these and other topics. Minimally, I expect that the budget we bring to the Board later this month will include some short-term strategies to preserve cash in the next fiscal year, as well as a framework for how we will attack our longer-term challenge.
This will be difficult work. Without unlimited resources, the University of Nebraska cannot be all things to all people. If there was low-hanging fruit to cut in past years, most of it is gone. We all need to be prepared for hard conversations ahead.
But I am convinced that if we do this right, Nebraska can be the leader in defining the future of higher education.
After all, this is what great universities do during times of challenge: They reinvent themselves. The value of strong public universities that provide life-changing education and research has never been higher. This is an inflection point for our University, and we have the opportunity to lead the way – a credit to the work you do every day.
I will continue to update you as our budget planning moves along. In the meantime, I have set up a suggestion box at email@example.com for your ideas on how we can save dollars and prioritize our investments. No idea is too bold. We will draw on your feedback as we consider our path forward.
Thank you, as always, for all you do for the University of Nebraska and our 50,000 students.
President, University of Nebraska System