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UT Board of Trustees Endorses Plan to Save Costs, Increase Revenue to Alleviate Unsustainable Business Model

NOTE: A correction has been made to this press release regarding the review of the University’s tenure and post-tenure review process by deleting the inadvertent and incorrect reference to “de-tenure” under the sixth bullet of the president’s action plan noted below.

MEMPHIS—The University of Tennessee Board of Trustees on Thursday endorsed a plan presented by President Joe DiPietro to allow the campuses and institutes to save costs and increase revenue to help efforts to change the University’s business model and address a projected $377 million funding gap over 10 years.

The campus and institute leaders will have latitude to use a variety of methods to make changes as long as they remain within several boundaries. These changes will be implemented over the next two budget cycles, starting with FY16.

The plan, using input from a budget advisory group, follows discussions the president has been having since June 2014, when he first presented the need to address the business model, which currently has the University increasing tuition to make up for declining or static state appropriations. The goal is to keep tuition increases as low as possible, this year being within the Tennessee Higher Education Commission’s recommendation between zero and 4 percent.

“We are not insolvent or in financial ruin. The only way to preclude tuition increases is to fix it ourselves. It is about maintaining quality and moving ahead. We will be a different organization in the next four to five years,” DiPietro said.

Gov. Bill Haslam’s proposed budget for FY16 is favorable to the University, but DiPietro noted it has been rare to have a strong or good budget.

“I have been in Tennessee for 10 (legislative) sessions now and recall two (years) like this one. It might seem obtuse to make this change, but we are not back where we were before the recession. We need to be ready,” DiPietro said.

Board Vice Chair Brian Ferguson told DiPietro the board approves of the plan. “We stand ready to support and provide our best advice,” Ferguson said.

The projected $377 million gap is an increase over a $155 million gap provided previously. The gap is based on average inflation of 3 percent, static tuition increases, operating expenditures increased by the inflation rate, salaries increased to address a gap of $153 million over five years and deferred maintenance of $25 million annually.

DiPietro’s action plan includes:

  1. Program realignment and consolidation: campuses will address low-performing programs to fund program reinvestment and perform a feasibility analysis and develop a plan for program consolidations to save costs.
  2. Allocation and reallocation plans: set aside 3 percent of base year’s total unrestricted E&G expenditures to address strategic initiatives, address deferred maintenance and identify cost savings from voluntary retirement and other workforce development options.
  3. Unfunded mandates for tuition waivers and discounts: the UT System Administration will study these discounts, estimated to be $7.4 million annually System-wide.
  4. Tuition structure review: Options include expanding differential tuition, increase enrollment of out-of-state students and the 15-4 tuition plan.
  5. Non-formula fee structure: Non-formula units (Health Science Center, Institute for Public Service and Institute of Agriculture) will review whether outreach efforts are capturing actual cost of delivery and determine whether fees should be charged.
  6. Tenure and post-tenure review process: The UT System Administration, with involvement by the Faculty Council, will conduct a comprehensive review of the University’s established tenure and post-tenure review process.

While choosing from these options, the campuses and institutes must stay within the boundaries of keeping out-of-state enrollment less than 25 percent of undergraduate total, remaining within the top five annually under the Complete College Tennessee Act formula, increasing research expenditures by 6 percent annually, keeping customers and clients of outreach services at this year’s level or higher and increasing the total number of gifts, pledges and bequests by 15 percent annually.

The board heard a report about the Institute for Advanced Composites Manufacturing Innovation, or IACMI, by Taylor Eighmy, UT Knoxville vice chancellor for research and engagement and principal investigator of the project. IACMI is a $259 million public-private partnership announced by President Obama in a visit to Clinton, Tennessee, in January. The institute reflects a $70 million commitment from the U.S. Department of Energy (DOE) and $189 million from IACMI’s partners. The selected team, led by UT, includes 122 partners and connects the world’s leading manufacturers across the supply chain with universities and national laboratories pioneering advanced composites technology development and research. IACMI was established as a nonprofit 501(c)(3) in Tennessee by the UT Research Foundation.

Eighmy concluded his report by talking about the growth of advanced manufacturing in Tennessee, and the University’s involvement in recruiting business and industry to the state. In meeting with UT representatives, Burkhard Huhnke, general manager of product engineering for Volkswagen, an IACMI partner, likened East Tennessee to another innovation hub. “What we have here in East Tennessee for advanced manufacturing reminds (us) of what is in place in Silicon Valley for electronics….It is the same kind of ecosystem here. We have the University of Tennessee and Oak Ridge National Laboratory,” he said.

The board elected Rickey McCurry as vice president for alumni affairs and programs. He also will serve as president and CEO of the UT Foundation, Inc., which is the University’s interdependent, not-for-profit fundraising arm. McCurry will join UT on May 15. He is currently serving as vice president for institutional advancement for Rose-Hulman Institute of Technology in Terre Haute, Indiana. McCurry and his family are returning to Tennessee, his native state. He served as associate vice chancellor for development and alumni affairs at UT Knoxville from 1993-2000.

In other action, the board also approved:

To view an archive webcast of the meeting and supporting materials, go to http://www.tennessee.edu/.

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