Carter: Facing Challenges, 'Great Universities Reinvent Themselves'

Note: Power Point slides that University of Nebraska President Ted Carter and Chief Financial Officer Chris Kabourek presented at today’s special Board of Regents meeting are available here.

With higher education at a crossroads, the University of Nebraska must find ways to reimagine itself in order to become a stronger and more competitive institution even as it navigates new fiscal realities of rising costs and muted revenue growth, President Ted Carter said Wednesday.

In remarks during a rare special Board of Regents meeting called by Chairman Tim Clare to review the university’s budget planning, Carter told the Board that NU, like institutions around the country, has reached an inflection point in its history. Facing inflation that is driving up payroll and operating costs, declines in enrollment and tuition revenue, limited growth in state funding, and changing public narratives around the cost and value of a college degree, a “business as usual” mindset will not be sufficient to ensure the university’s long-term success, Carter said.

“The conversation about the future of higher education is happening all across the country, and I want Nebraska to lead the way,” Carter said. “A competitive and high-quality University of Nebraska is too important to the success of our state to not be bringing our best and most innovative ideas to the table.

“After all, this is what great universities do when the world around them changes. They reinvent themselves.”

The NU System faces an estimated $80 million deficit by the end of the 2024-25 fiscal year, driven by inflation, rising health insurance costs, a projected 3 percent increase in the merit salary pool and anticipated flat enrollment that follows two consecutive years of declines, according to Chris Kabourek, NU senior vice president and chief financial officer. State funding will increase by 2.5 percent each of the next two years.

With a 3.5 percent tuition increase for 2023-24 built in for planning purposes – the Board will consider tuition as part of the 2023-24 operating budget at its June 22 meeting – as well as cuts currently in progress at the University of Nebraska-Lincoln, the biennial shortfall is reduced to about $58 million. But that figure would grow each year into the future as costs continue to rise at greater rates than new dollars coming in.

More troubling, that number represents only what would be necessary to maintain the status quo – in order words, it includes nothing for additional investments in faculty salaries, high-growth research programs, student mental health or other strategic opportunities.

Kabourek noted that the university has adequate cash reserves that can provide a short-term runway to manage budget shortfalls, but that cash is not a permanent solution. Most of NU’s cash is committed; for example, some is held for the university’s farm operations to be able to buy seed corn, and other cash represents advance payments made by Husker football season ticket holders.

Nor, as Carter has pledged, will the university use tuition to balance its budget. Double-digit tuition increases in previous decades resulted in enrollment declines that took years to reverse.

Historically, the university has taken a “peanut-butter” approach to budget reductions, in which each campus assumes a proportional share of the shortfall and cuts are spread across the institution.

Carter noted that approach could weaken the institution across the board at a time when the university already has room to improve in key performance areas. Enrollments at all three undergraduate campuses, for example, are declining and are well below historic highs. Four-year graduation rates have improved over time, but first-to-second year retention rates are down. Total research expenditures have grown, but growth in federally funded research expenditures has been slower and lags Nebraska’s Big Ten peers.

Regents made clear they want to see a different approach.

“If we’re truly going to be the best we can be, we have to have these discussions,” Clare, of Lincoln, said.

“The data shows that in some of these areas, we need to be more competitive in terms of research and enrollment. We cannot continue status quo, we cannot cut our way to prosperity. We’ve got to look at our operations and be critical of what we’re doing, and come out stronger and leaner.”

Said Board Vice Chairman Rob Schafer of Beatrice: “The only constant in life is change. We have to change and reinvent ourselves. We’re going to have to do a better job. We’re at a time when competition is immense for time, money, resources and, most importantly, students.”

“Time is of the essence,” said Regent Jim Scheer of Norfolk. “If a business person was looking at this, you’d be changing by this afternoon.”

Several regents credited Carter for identifying access and affordability, student recruitment and success, quality education and research excellence as foundational priorities going forward.

“I know that we’re going to have to make decisions that aren’t going to be easy, but I do appreciate that we’re keeping the focus on maintaining high-quality excellent education that’s accessible to our students,” said Regent Elizabeth O’Connor of Omaha. “At the end of the day, that’s why we’re here.”

Clare ended the meeting with a directive to Carter to build a plan before the June 22 regents meeting that addresses the challenges raised at Wednesday’s special meeting. Clare set the following parameters for Carter:

• The budget plan should include vertical, not horizontal “peanut butter” cuts. All options should be on the table, including structural change.
• The plan should be university-wide, with no campus exempt.
• The plan should include strategies to address areas where the university needs to improve, including enrollment, faculty salary competitiveness, and federal research growth.

Carter pledged a collaborative process as the university charts its path forward.