UK deans scramble to make money for their schools

uk faced with limited budget options

lblackford@herald-leader.com, ctruman@herald-leader.comApril 3, 2011 

Devanathan Sudharshan knows how to make money.

As dean of the Gatton College of Business and Economics at the University of Kentucky, he operates an MBA program in Athens, Greece, a successful executive MBA program in Lexington and numerous other business programs.

The Gatton school is a model for the revenue production that will be needed by all colleges at UK as the institution faces new lows in state support.

Yet the money Gatton makes on such programs — nearly $1 million a year — isn't making a dent in the school's needs.

"At this point, it's just to pay for the basics," said Sudharshan, who is retiring as dean this year. "We're about 50 faculty short of where we need to be ... to be a Top 20 business school."

Sudharshan is one of 18 deans using the intellectual capital of his school to produce revenue for UK's nearly $2.5 billion budget. The $1 million may be a pittance, but it's a start at a time when President Lee T. Todd Jr. —and whoever replaces him in July — have very few budgetary options.

UK is under a statewide mandate to reach the top tier of public universities at the same time that state funding has decreased from 25 percent to 12.5 percent of the budget. Student enrollment has grown by 13 percent in 10 years adding more costs and, because of congressional budget arguments, federal research funding could be in jeopardy.

UK has reorganized, retrenched and re-cut to save $117 million over the past decade. That's kept the institution from layoffs and other more draconian measures happening at other state schools.

Any additional state funding to help UK reach Top 20 status has been written off by officials; now it's a matter of figuring out how to keep moving forward, however slowly.

Mark Kornbluh, dean of the College of Arts and Sciences, is an innovator in digital education, and generated $2 million last summer offering online courses to UK students eager to fill in the gaps in their credit hours.

"I don't think we've faced this perfect storm of financial challenges," Kornbluh said. "We have to figure out how to balance the costs, continue quality research and give students a quality undergraduate education. We have to look at ways to generate other revenues."

Holding the line

State officials said they're still committed to their own mandate for UK to become a Top 20 university.

"We're going to try the best we can to support higher education funding," said Rep. Rick Rand, D-Bedford, co-chairman of the House Appropriations and Revenue Committee, which oversees the state budget. "But it's hard to predict at this point with the ongoing recession."

With the advent of higher education reform in 1997, the state sent unprecedented amounts of money to all of Kentucky's universities, much of it received in matching funds to establish endowed chairs and professorships, known as Bucks for Brains. The state also gave some initial funding to Todd's business plan to reach Top 20 status. But state funding has now slowed so much that the net increase over the past decade is zero percent.

UK has been a careful steward of its money, says budget director Angie Martin.

"We try to maintain sufficient reserves to get us through these periods," she said. "We budget within our needs."

When Todd arrived, he began a series of changes to save money, such as integrating UK HealthCare administrative operations into the rest of the school, which saved $2 million, and academic restructuring, such as eliminating the College of Human Environmental Sciences, otherwise know as home economics, and other academic reorganizations, which he said saved $16 million.

Todd started other initiatives, such as charging athletics and other quasi-independent groups more for administrative overhead, refinancing debts and reducing benefits for retired faculty. All in all, UK officials estimate, that has saved $117 million, which has saved major cuts to academic programs, and allowed the school to concentrate on programs such as hiring more academic counselors for students.

Some of the gaps in the general campus budget have been paid through double digit tuition increases. Overall, tuition has risen 130 percent since 2001, a definite tax increase on parents and students in a poor state. Tuition will continue to rise, but officials concede that they can't completely depend on it to make up for state cuts.

But the needs at UK are dire: Faculty and staff members haven't had a raise in three years, at least half a billion dollars is needed to upgrade aging facilities and an increase of $50 million in scholarships has never been endowed and must come out of the general fund every year.

In addition, UK wants to increase its enrollment even more to get it in line with national peers, but without additional resources the university cannot do that — in large part because it cannot afford to hire more faculty members.

So UK officials have said they will hold the line on spending, and also look to fund-raising to help fill budgetary holes. But in the past few years as he assessed his limited options, Todd also turned to his deans, telling them that when they create money-making programs, they can keep a piece of the proceeds.

The 'new normal'

That's been an interesting challenge to Michael Tick, the dean of the College of Fine Arts.

The fine arts are very instructor-intensive, with lessons in such disciplines as voice and instrumental music being largely one-on-one endeavors.

But he has proposed that UK begin offering the nation's first totally online public university degree in arts administration.

After an initial investment of $125,000 to $175,000, Tick figures, UK could make at least $200,000 a year with a class of 33 students. Add the variables of out-of-state tuition or a larger class size, and the profit grows.

But the money would not be going for new programs. Instead, it would pay for basic academic needs that risk going unfunded as state money for higher education continues to shrink.

"It's not going to buy full-time faculty," Tick said. "But it's money that can be used for student travel, to send ensembles around the country and around the world. It's revenue that can be used to hire adjuncts (part-time instructors). ... It's revenue that can be used to purchase music and music stands."

Fine Arts will get 60 percent of the new revenues, while 40 percent goes back to UK's central administration.

Like Fine Arts, the College of Social Work is another school that doesn't necessarily have obvious money-making ability. Dean James Adams says that while social work is about helping people identify resources for their lives, the college will have to turn inward and find new resources for itself.

That includes saving even more money and looking at ways to monetize their specialities, such as child welfare and violence against children. The expertise of faculty can be used to try to attract more grants for the school.

"Those dollars are also shrinking, so we have to be highly competitive, but fortunately, we have the expertise to be competitive."

Adams is also looking at long-distance learning to increase enrollment for people who may be interested in social work graduate degrees, but don't live in Lexington.

"We know the new normal is here," he said. "We want the state to think about education and invest in it, but we're thinking of ways in which we can continue to deliver a quality education and meet the needs of our college at the same time."

Dan O'Hair, dean of the College of Communications and Information Studies, has also looked into more online classes, following its online masters degree in library sciences.

O'Hair said they're also investing in an office to secure more grants and contracts, and developing certificate programs in new and emerging areas, such as risk management and multimedia journalism.

Community access

Of course, the public, including state lawmakers, needs to understand this new mode for UK will have consequences, says Scott Smith, dean of the College of Agriculture.

Because UK is a land-grant institution, its extension service has offered a multitude of resources for farmers in every county in Kentucky for more than 100 years.

"One of the core values of extension has been open access," Smith said. "As a result of that, it's called cooperative extension because it's supported by local people, county funds, state funds and federal funds. If it's to generate revenue by charging, it will certainly influence the relationship between local governments and the university."

Smith used an example that legislators could hear a lot about: 4-H camps, attended by thousands of Kentucky children for a fraction of the real cost, which is defrayed through county extension offices, could cost parents more.

Agriculture does make some money, for example, from fees charged at the veterinary diagnostic lab at Coldstream Research Park.

And Smith believes that legislators who control the budget will be sensitive to the historic compact between Kentuckians and their land-grant school.

"In the long run, the people of Kentucky have been very supportive of those things that have been beneficial to them in their community," Smith said, "and their legislators have been sensitive to that."

'Teaching money'

Britt Brockman, chairman of the UK Board of Trustees, said the board understands UK's financial problems and members have spent most of their interviews with presidential candidates talking about how to make UK more stable.

They will continue to push for more state funding and increased flexibility with issues such as bonding, he said.

A wide range of options has been offered by the candidates being interviewed, he said, including expanding online instruction, increasing programs abroad and recruiting more out-of state students — who pay more tuition. And they've certainly talked about increasing development and philanthropy.

"But we will continue to rely on state support to fund the basic operations of the institution — those dollars are, as President Todd says, 'our teaching money.' That won't change," Brockman said in a statement to the Herald-Leader.

"And we have sought assurance that regardless of financial circumstance, they (presidential candidates) are fully committed to fulfilling our obligation as Kentucky's flagship university to our goals of enrollment growth and access. The challenge for the next president is how best to get that done."

Reach Linda Blackford at (859) 231-1359 and Cheryl Truman at (859) 231-3202.

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