In budget, echoes of past cuts

In 1991, the economy was slow, there was a war in Iraq and the N.C. General Assembly had a $1.2 billion dollar budget gap.

Now, 14 years later, the wheel of fortune has come full circle — especially for the General Assembly, which once again is laboring to cover a similar shortfall.

The cure was the same then as it is now: Either raise taxes or cut costs.

“We don’t know which pill to swallow,” said Sen. Bob Atwater, D-Durham.

Rep. Joe Hackney, D-Orange, and Sen. Richard Stevens, R-Wake, both said legislators are considering a strategy similar to the one used to bridge the 1991 gap: erasing half of it with cuts and covering the other half with taxes.

While both were quick to note that the current gap is more manageable, UNC-system officials still are worried that this year’s cuts could be the straw that breaks the camel’s back.

“We can look at that budget that was passed in 1991, but if they pass a budget like they did in 1991, there will be a negative impact on the quality of education received by students,” said Mark Fleming, the system’s lobbyist.

Compounding cutbacks

This year’s proposed cuts, which might reach 4 percent, or $90 million, come on the heels of five straight years of funding reductions.

And system officials repeatedly have warned of the possible implications of slashing funding this year.

“Any significant cut that is passed by the legislature this year would affect the classroom,” Fleming said.

The proposed cuts would result in fewer classes taught by tenured faculty, higher student-faculty ratios and a smaller, less diverse selection of classes, according to a UNC-system report to the General Assembly.

“The cumulative effect of the cuts we’ve experienced the last couple of years added with the fact that we’ve added enrollment to each of our 16 campuses (is that) they’re cut to the bone,” Fleming said.

A record 189,615 students enrolled in the system this fall, an increase of 3.4 percent from fall 2003.

Although the state accounted for increased enrollment each year, it has subtracted an almost equal amount of existing funding, said Jeff Davies, UNC-system vice president for finance.

These previous cuts are straining the offices of system schools, making the idea of additional reductions hard to swallow.

Julie Mallette, director of scholarships and student aid at N.C. State University, said her office was hit hard by past cuts.

“(In) the last round of budget cuts that happened last summer, we lost three positions,” she said.

While the office improved technology to help cover the losses, she said, it’s now as efficient as it will get: “We can’t afford to lose another body.”

Shirley Ort, UNC-Chapel Hill director of scholarships and student aid, said her office also is feeling the strain.

While cuts this year wouldn’t affect scholarship or financial aid money, they would affect Ort’s operating budget, possibly decreasing it by $35,000.

Since no more people can be spared, Ort said, the cuts would mean fewer employee conferences and less travel, as well as less distribution of scholarship information.

Although this year’s exact cuts haven’t been decided, officials say, they’ve already reached maximum efficiency.

“(Another round of cuts) would be hugely detrimental to the environment of the university,” Davies said.

All of this comes at a time when the system has expanding priorities, such as providing financial aid and training more teachers and nurses to work in the state.

“There are so many needs for increased funding,” Fleming said. “Yet here we are, talking about shortfalls.”

Ghost from the past

The impact of this year’s $1.3 billion deficit seems to echo from a time few still around seem to remember.

In 1991, tuition was increased by 25 percent systemwide. At UNC-CH, in-state tuition rose 20 percent, while out-of-state tuition rose the full 25 percent.

Still, system officials who worked at the time repeatedly underscored that the situation wasn’t that bad.

Felix Joyner, vice president for finance of the UNC system at the time, said that everyone felt the crunch and that money for new projects was especially rare.

But, he insisted, the cuts “were not terribly drastic.”

While some legislators have focused on this year’s similarities to the 1991 situation, system officials focus on the differences.

C.D. Spangler, UNC-system president in 1991, noted three distinctions: dwindling resources, the attitude of the General Assembly and the state’s financial situation.

“The General Assembly had a more favorable response to the university at that period of time,” Spangler said. He added that the system benefited from growth in the state as a whole.

But the biggest difference is the lurking effect of N.C. Gov. Jim Hunt’s tax cuts during the late 1990s, Spangler said.

Some say the cuts, which were designed to lower taxes while allowing the state to ride out on economic growth, have proven financially harmful.

“It’s come back to haunt us for a number of years, especially when the recession came in,” Atwater said.

The timing of the current cuts — just as the economy begins to recover — is problematic for some.

“To issue a 4 percent cut when the economy is on the rebound, that’s another very difficult thing for the university to deal with,” said William Burns, a member of the system’s Board of Governors.

Joyner also noted that the nature of system funding has changed since the early 1990s.

“One major difference between now and then is the ability to get money from students,” he said.

Since 1991, the UNC system has relied more on tuition increases than state money for revenue.

Last year, the system used more than $112 million in campus-based tuition revenue to retain faculty and pay for enrollment growth.

But Atwater said a potential tuition freeze obstructs that option. The BOG approved last month a halt on all in-state tuition hikes for the 2005-06 academic year.

Bridging the gap

Despite the dire situation, legislators are optimistic about their ability to complete a manageable budget.

Stevens pointed out that the deficit is much smaller now than it was in 1991. He said the cuts and taxes in 1991 amounted to $1 billion each, as opposed to $500 million each this year.

And Hackney indicated that possible sources of revenue are available.

“The gap this year is 40 percent, closed simply by extending the (half-cent) sales tax,” he said. He added that support for a cigarette tax and the possibility of an education lottery also brighten the picture.

Hackney also said the UNC system isn’t without its supporters.

“I think there’s a realization that our number one priority is public education.”

Contact the State & National Editor at stntdesk@unc.edu.