Carter: Fiscal ‘headwinds’ will require creative thinking

Facing significant fiscal headwinds, the University of Nebraska System will need to think more creatively about how to best use its limited resources so it can continue to meet the needs of students and the state, President Ted Carter said Friday.

Carter, joined by NU System Chief Financial Officer Chris Kabourek, gave a budget update at the Board of Regents’ first meeting of 2023.

Carter noted that the University of Nebraska, like institutions across the country, is facing “a changing and challenging landscape” marked by:

  • Unprecedented inflation that has driven up expenses, as well as wage growth as the university competes for top talent.
  • Limited new revenues from the state and tuition, the two primary sources that support the university’s day-to-day operations. Gov. Jim Pillen’s proposed two-year state budget includes 2 percent annual funding increases for the university and Carter expressed gratitude for the stable support, but noted that state funding has not kept pace with inflation over the past two decades.
  • Enrollment declines that have added to fiscal challenges and prompted an all-hands-on-deck effort to reverse the trend.
  • A projected decline in birthrates across the nation that will mean a smaller pool of prospective students from which to recruit.

“We are critically thinking about what our future is… ‘Business as usual’ is probably not sustainable,” Carter said. “We’re going to have to re-think ourselves.”

While the NU System has been fortunate to emerge from the Covid-19 pandemic in a position of financial strength thanks to conservative planning, significant cost controls will be needed going forward to ensure the university’s continued strength. Kabourek noted that the ratings agency Moody’s predicts more than half of public universities will operate at a budget deficit this fiscal year, with another 20 percent only breaking even. The University of Nebraska, Kabourek said, does not intend to be among them.

That will mean hard conversations ahead, which Carter acknowledged can be “unwanted and difficult” particularly given that the university has already implemented $75 million in reallocations in recent years by consolidating business functions like information technology, procurement and facilities and making other reductions.

But Carter challenged the university community to view the conversations as an opportunity to think innovatively about how to maximize resources to continue to deliver on fundamental priorities of the University of Nebraska:

  • Providing excellent and affordable education for students. Carter highlighted the creation of the Nebraska Promise financial aid program and two straight years of tuition freezes as steps the university has taken to expand access. He indicated senior leadership will have a conversation with the Board of Regents about whether a continued tuition freeze is sustainable and added that the university will explore other strategies for expanding scholarships so it can attract more students from within and outside the state.
  • Deliver research that improves lives and creates economic growth. The university’s top-100 world ranking in earning patents is a key example of how faculty research not only leads to new knowledge that helps others, but creates a ripple effect in the economy with new jobs, companies and talent that grow the state.
  • Produce the skilled workforce Nebraska urgently needs, particularly to fill the high-skill, high-wage, high-demand jobs that overwhelmingly require a four-year degree. Nebraska ranks only 26th in the nation in the share of residents 25 and older with a bachelor’s degree, regents learned in an earlier presentation, and “brain drain” is a persistent challenge for the state.

Carter will be joined by university supporters in testifying before the Legislature’s Appropriations Committee on NU’s budget request on March 3. The university had requested a 3 percent annual funding increase for the upcoming biennium, slightly more than what Governor Pillen recommended. The Appropriations Committee will produce its own two-year budget package that will be debated by the full Legislature before going back to the Governor for consideration.

Carter will bring a proposed 2023-24 operating budget to the Board of Regents in June, after the state budget is finalized, including recommendations on tuition, salaries, financial aid and other elements. Between now and then, Carter said, he, the chancellors, their teams and the Board will be engaged in ongoing conversations about how best to plan for the future.

“We are going to be thoughtful, we are going to plan, we are going to make sure that this university continues to deliver for the state,” he said.

“The workforce development and the health of this state will only be as strong as our university system.”