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UNC-Chapel Hill Aims To Close $100M Structural Deficit

Trustees of the University of North Carolina -Chapel Hill heard administration plans to close the school’s $100M structural deficit by June 2022. The structural deficit is important, but it’s not the only debt the school is facing. Administrators at UNC-CH estimate that the institution lost an additional $200M due to the pandemic. It also faces a whopping $850M maintenance backlog.

Structural debt occurs when an organization’s expenses exceed its revenue. In UNC-CH’s case, it has operated with a structural deficit for a decade. Like neglected maintenance, a structural deficit accumulates.

In January, the administration moved to reduce personnel by 1.5%, although they admitted that the “personnel cuts” would actually impact few employees. That likely means the University intends to reduce its personnel costs by eliminating vacant positions and instituting hiring freezes. In addition to the personnel cuts, the University also required its departments to identify reductions in operating expenses totaling 7.5% for the current fiscal year. The university intends to cut its operating expenses by an additional 7.5% next fiscal year. The university will accomplish those cuts largely through program consolidations and increased efficiencies in the use of space on campus.

The administration believes that the nearly 15% cut in operating expenses over two years, combined with personnel cuts will reduce the institution’s overall budget by 3%. They expect this to close the structural deficit.

The school also expects to find some relief from state and federal funds designed to alleviate the school’s $200M COVID-19 losses. The administration believes that it will receive a one-time grant from the state to address the $850M maintenance backlog. The backlog represents about 25% of the institution’s annual budget.

Additionally, the school plans to increase freshman enrollment in each of the next four years. Typically, the school’s incoming freshman class is about 4,500 students.

Structural deficits aren’t sustainable

Ultimately, UNC-CH administrators have come to the realization that deficit spending is not sustainable. Nor is ignoring the maintenance and upkeep needs of a publicly funded campus. UNC-CH happens to be in a position to admit more students any time it wants to. The school receives about 12 times more applications than it accepts. It has some ability to correct revenue imbalances by admitting more students and raising tuition.

WCC is not quite in that position, since its open-door admissions policy means that it accepts all applicants. It can, however, raise tuition to cover budget shortfalls and maintenance deficits.

Washtenaw County taxpayers have given WCC more than one-quarter billion dollars in the last five years in property tax revenues alone. The school has collected about as much from its other revenue sources, including state appropriations and student tuition. Making students pay for the administration’s unwillingness to properly fund the maintenance of campus buildings hardly seems fair. Especially since so much money has been diverted from operations and maintenance to administrative hiring, bond debt and other wasteful expenditures.

Unrestrained spending can quickly spiral out of control. At WCC, it is the Trustees’ responsibility to identify the institution’s spending priorities. Taxpayers should be particularly incensed that WCC repeatedly fails to maintain its campus buildings, but has no problem building more. We need Trustees that understand the responsibilities of their positions and provide actual spending oversight. That is the only way WCC can avoid encountering unmanageable structural deficits and the spiraling cost of facilities neglect.

Photo Credit: xampl9, via Flickr