Report: UNC System Should Alter Enrollment Formula

RALEIGH, N.C.— The University of North Carolina system should streamline how campuses calculate what money they need to justify yearly enrollment changes because the current formula is prone to errors, and tie increases in funding to academic success, the Legislature’s watchdog agency said Wednesday.

The Program Evaluation Division’s report for General Assembly members focused on the formula administrators use at 15 of the 17 UNC-system schools. It’s served as the basis for an additional $386 million in state funds over a six-year period ending in 2009 that ultimately comprised 16 percent of the UNC system budget that year.

While the overall system does a reasonable job determining the number of projected student credit hours, individual campuses overestimated enrollment by as much 12 percent at North Carolina A&T State University or underestimated by up to 5 percent at East Carolina University in 2009, the report said.

When faculty, staff and other administrative costs are added in the equation, a small error in one area can lead to swings reaching millions of dollars when UNC comes to the Legislature seeking money. The UNC system also didn’t justify to administrators beyond past expenditures why they add 11.5 percent more to their requests to fund libraries to meet the enrollment demand and 54 percent for “general institutional support,” the report said.

“UNC enrollment funding is based on inaccurate projections, with projecting inaccurate funding as its consequences,” lead evaluator Michelle Beck told an oversight committee. “The formula’s complexity contributes to the projection errors.”

The report comes as UNC is likely to face a third consecutive year of steep spending cuts for a campus system of more than 220,000 students, an increase of 60,000 over the past 10 years. The General Assembly returns next year expecting to close a $3.2 billion budget gap next summer and a Republican majority that has vowed not to increase or extend temporary taxes. Outgoing UNC system President Erskine Bowles has said a 10 percent budget cut would mean trimming $270 million and 1,700 jobs.

Campuses and the Legislature could consider hefty tuition increases. A UNC-Chapel Hill governing committee recommended Wednesday that tuition be raised 6.5 percent next fall to generate $15 million.

In a written response to the report, the UNC system said the current funding formula, which began in 1999 after perceptions the old per-student method didn’t recognize cost difference in academic disciplines, is based on accurate data but will never be completely foolproof.

Overall, UNC system enrollment of more than 5 million student credit hours have been within 0.5 percent of projections the last two school years, said Jeff Davies, chief of staff to Bowles. Changing the broader enrollment funding formula to a more simplified model could be easier to manage but could lead to funding inadequacies, Davies said.

While there are some mistakes in measuring financial needs for certain campus disciplines, Davies said he stood by the system data.

“We don’t think our projections are inaccurate,” Davies told the committee. “They’re the absolute best projections that we have. They’re based on past performance.”

Davies said the UNC Board of Governors already has been planning on meeting one report recommendation to tie enrollment growth funding to academic performance. The board could decide by January whether campuses can seek extra funds from the General Assembly or tuition increases if they meet goals for graduation rates and keeping students in school.

Beck said the board’s performance funding looks more like incentives for extra funding, rather than making funds for expanding the student body contingent on meeting academic goals.

The report also said the General Assembly should require the UNC system to establish procedures and policies for campuses developing enrollment projections and what happens to extra money a campus received if they overestimate enrollment growth. Davies said the system agreed.