Shrinking tuition revenue, growing expenses put UW campuses in potentially precarious position

Karen Herzog | Milwaukee Journal Sentinel

A gap is growing between how much money University of Wisconsin System campuses collect in tuition and how much they budget for costs directly tied to educating students, such as faculty pay and advising.

That raises serious questions about what could be ahead.

Could stretched budgets force cuts to academic programs or student services? How will campuses balance cash flow so they can deliver the same quality education if declining enrollments continue to shrink tuition coffers that cover teaching costs, personnel costs keep rising to compete for talent, and state funding is flat or cut again?

More financial pressure is coming, as four-year campuses absorb the UW's two-year colleges into their operations.

RELATED: Merger would keep UW System's two-year campuses afloat despite steep enrollment losses

Some of the tuition-dependent, two-year campuses were in such precarious financial shape before the merger that was formalized this month that they were in danger of having to close, according to UW officials.

Bucky's Tuition Promise About 800 state residents admitted to the University of Wisconsin-Madison next fall will get free tuition and fees, depending on income.

The number of college-age students has dropped precipitously because birth rates started declining years ago, especially in northern Wisconsin. The two-year colleges can't reach far beyond their own counties to attract more students.

Students from two-year campuses also typically need more support services, such as advising, which adds to instructional costs.

"I don't want to close any of these campuses," UW System President Ray Cross said Friday. "I want to explore every alternative I can."

A tuition freeze for resident undergraduates at four-year campuses is entering its sixth year this fall. "This has helped make college more affordable for students in the short-term, but it also presents some challenges," UW System spokeswoman Heather LaRoi said.

The UW Board of Regents in August will consider whether to propose an inflationary increase in tuition for the 2019-'20 academic year.

"If we don't raise tuition some, we start to put quality in jeopardy, and we're going to have to reduce expenditures," Cross told the Journal Sentinel when pressed about the ramifications of the gap between tuition revenue and budgeted expenses.

"If we were allowed (by state officials) to raise tuition at CPI (Consumer Price Index), I think we could be fine," Cross said.

Republican lawmakers say the university system needs to live within its means.

Costs directly associated with teaching students are covered by a combination of tuition and state support.

Those costs Include faculty salaries and fringe benefits, which make up the largest portion of instructional costs; supplies and services; administration; libraries; student services; and other support costs.

The state used to subsidize more of the cost of instruction, but increasingly, those costs have become tuition-dependent. The state's contribution toward instructional costs, including debt payments on academic buildings, is now 41%.

Money can't be diverted from other parts of the budget because of restrictions for how each category of funding may be spent.

When campuses shift more faculty and staff salaries to tuition funding, and then experience enrollment declines, it creates a perfect storm of financial pressures.

Since 2014, more than 600 full-time equivalent positions funded by tuition and state support have been eliminated and another 600 have been held vacant. UW officials say they also have found ways to reduce administrative expenses by regionally consolidating functions such as purchasing, human resources and IT.

Conversations about cutting academic programs are already occurring at UW-Stevens Point with a goal of preserving student support services such as academic advising.

UW-Milwaukee's gap

UW-Milwaukee had a $24 million gap between budgeted tuition expenditures and actual tuition revenue in fiscal 2017. UW-Stevens point had an $8.9 million gap.

The gaps for UW-Oshkosh and UW-Green Bay were $5.9 million and $8.2 million, respectively in fiscal 2017.

In addition to ongoing expenses, one-time, planned expenditures are included in those numbers.

UW-Madison is the only campus without a gap between money coming in and money going out for instructional costs.

The state's flagship campus has grown tuition revenue by finding ways to be more efficient, by expanding summer term enrollment and by raising tuition for out-of-state and graduate/professional students in line with what peer universities charge, according to UW-Madison spokeswoman Meredith McGlone.

Other campuses have dealt with tuition revenue gaps through other strategies, and have been using one-time fund balances as a short-term fix. Many campuses have already depleted those fund balances, or at least have spent them down significantly.

Rethinking academic programs is nothing new, but UW-Stevens Point is taking it large-scale.

How many programs UW-Stevens Point ultimately cuts will be decided in October, though it's not just about cutting, but about updating offerings to reflect a changing workforce, officials there said.

RELATED: UW-Stevens Point plans to cut 13 majors, add or expand 16 programs

UW-Stevens Point has improved its four-year graduation rate significantly in recent years, which has led to students completing degrees more quickly and drops in upperclassmen enrollment, said Greg Summers, provost and vice chancellor for Academic Affairs.

In addition, that campus is grappling with demographic declines in central Wisconsin that are shrinking the number of high school graduates pursuing college degrees.

"Because UW-Stevens Point has fewer offerings for those who prefer online education, we’ve felt the demographic shift especially acutely," Summers said.

"We're trying hard to preserve the number of student services in part by reducing the number of majors," Summers said. "If we don't change the number of academic programs we offer, our only alternative is to change student services."

UW-Milwaukee describes its financial condition as "a delicate balance." That campus has seen a big drop in enrollment, from 31,000 students in 2010 to about 25,000 today.

UWM is growing its online programs and recruiting more students from Illinois and other countries to offset declines in Wisconsin student enrollment, according to Chancellor Mark Mone. The number of new freshmen and transfer students went up slightly last year.

Mone said the university is not cutting advising or student resource centers.

"In fact, we've added advising and technology to support advising," he said.

The university is looking to grow STEM-related academic programs, Mone said.

"We initiated fairly substantial budget streamlining cuts years ago. There's absolutely no question we're leaner than we were."

Mone said the campus can grow and adjust academic programs because it has "more critical mass" than a smaller campus like UW-Stevens Point.

UW-Green Bay spent significant one-time dollars on a "student success" initiative that created a large gap between budgeted tuition expenses and actual tuition revenue In 2016, according to Sheryl VanGruensven, vice chancellor for business and finance.

That gap grew in 2017.

As campuses approach a new academic year this fall, they will need to balance growing needs with limited resources.

The merger of four-year and two-year campuses will allow the UW System to maintain a higher education presence in out-state Wisconsin counties.

But at what cost?