‘In your hands:’ UW pushes forward through uncertain financial future amid frozen tuition, declining state investment

As Blank leaves behind a decade-worth of attempts to shift UW’s financial model, it is up to new leadership to piece together university’s budget

· Jun 11, 2022 Tweet

Corey Holl/The Badger Herald

Growing up in China, University of Wisconsin freshman Kevin Yu loved the art of problem-solving.

His father, a computer scientist, would bring devices home from work for Yu to play with. Each new trinket was like a puzzle that needed to be put together.

Years later, when Yu was deciding where he wanted to attend university, he wanted to keep solving problems — leading him to select UW because of its highly-ranked computer science program.

In attending UW, Yu himself became a piece of a much larger puzzle — UW’s funding puzzle.

Amid dwindling state investment and a stagnant in-state tuition freeze, former Chancellor Rebecca Blank led the charge through a host of financial strategy changes, ranging from forays into real estate to increasing the amount of classes taught in the summer. Two of Blank’s key successes included raising out-of-state tuition and soliciting more private donations.

But as Blank steps down after nearly a decade of weathering UW’s monetary storms, Chancellor Jennifer Mnookin must prepare to tackle persisting budgetary challenges while managing a delicate relationship with the Wisconsin state legislature. The university’s delicate financial situation poses pertinent obstacles for administrators and students alike, creating an unclear path for UW’s fiscal future as new leadership takes the helm.

Going Backward

In the months before Blank left UW at the end of May, she was hailed for her entrepreneurial approach to funding UW’s budget.

“One of the things that I thought badly needed to happen at this university when I came was financial stability, and I’ve worked very hard over time to put this university on a path of financial stability,” Blank said in an interview with student journalists last fall.

Blank bolstered the university’s revenue model in the face of two major shifts — decreasing state funding and an ongoing in-state tuition freeze.

During Blank’s 10 years at UW, state funding provided as a portion of UW’s budget decreased by 2%. The Wisconsin legislature also froze UW’s in-state tuition in 2013, making it even more difficult for UW to generate its own revenue.

These factors led Blank to develop an innovative, entrepreneurial approach to funding UW, Blank said in her final address to the UW Board of Regents.

“With frozen tuition, with declining state investment, we’ve needed to generate our own investment income at UW–Madison, and I’ve worked to try to change the culture at UW–Madison around us to tell people your future is actually in your hands,” Blank said in her speech.

In 1991, the average tuition for a public university was $4,160. By 2010, it increased to $9,980. At UW, tuition for Wisconsin residents rose from $3,791 to $8,987 and tuition for out-of-state residents went from $6,832 to $24,237.

One reason public universities have increased tuition is that state funding has been falling since the 1970s, said David Tandberg, the senior vice president of policy research at the State Higher Education Executive Officers Association.

“What we’re seeing is — on average — a privatization of public higher education where the burden has increasingly shifted to students,” Tandberg said. “And where it hasn’t, the operating budgets of institutions have gone down, meaning they have fewer resources to serve their students.”

Months before Blank arrived at UW in 2013, Wisconsin Republicans froze the UW System’s in-state tuition. Later, Gov. Tony Evers extended the tuition freeze, effectively extending the it through the duration of Blank’s tenure and beyond.

The freeze hurt UW’s competitiveness as other Midwest public universities continued to raise their tuition, Blank said in her final address to the Board of Regents.

“As long as some of our closest peer schools receive 50% more in tuition dollars for every in-state student they admit, UW cannot compete with them and maintain the same level of quality,” Blank said. “Over time, we just can’t provide the same educational or research experience at this difference in cost and in revenue.”

The decrease in tuition and state money hit UW in more ways than just the wallet. Most state and tuition money is unrestricted, meaning universities can spend it however they choose. It is distinct from federal and private money, which is often restricted, meaning that universities can only spend it on specific uses, Tandberg said.

The financial flexibility provided by unrestricted funds is important because federal grants and private donors often fail to fund less visible university functions — such as student services — in favor of initiatives with more concrete benefits, such as research or infrastructure, Tandberg said.

“What we found is that when we have greater public investment, the institution takes those state dollars, and the areas where they invest the most are in instruction, academic services and student support services,” Tandberg said. “Those areas are the areas that are most correlated with student success.”

Though the Wisconsin legislature froze UW’s in-state tuition, there were no restrictions placed on how much UW could raise the tuition for students attending from outside of Wisconsin.

When Blank arrived at UW, nonresident students at UW could only make up 27.5% of the undergraduate student population. In 2015, Blank asked the Board of Regents to replace this cap with a requirement that UW enroll a minimum of 3,600 in-state students a year, which was on par with how many Wisconsin residents UW had been admitting until then.

The Board of Regents agreed to replace the cap. In later years, the board approved Blank’s requests to raise out-of-state tuition.

The effects were almost immediate. In 2013, there were 2,000 out-of-state students in the incoming freshman class, compared to 3,828 out-of-state students in the freshman class of 2021. Despite the tuition freeze, tuition revenue went from 17% of UW’s budget in 2014 to 21% in 2021. Other peer universities, such as the University of Minnesota and the University of Michigan, have also been attempting to net more out-of-state students over the years, Blank said in her final address to the Board of Regents.

While some critics have raised concerns that increasing the number of out-of-state students may go against a public university’s mission of serving its home state, UW has argued the opposite.

Post-secondary enrollments in Wisconsin have been falling since 2011, and in 2021, the state saw more deaths than births for the first time in state history. Having more out-of-state students offsets this population gap while bringing in more high-skilled workers into Wisconsin, Blank said in her speech to the Regents.

UW has said that it has maintained its commitment to Wisconsin, pointing out that in 2021 — the year when it enrolled its largest-ever amount of out-of-state students — it enrolled the most Wisconsin residents it had in 20 years.

In the fall interview with student journalists, Blank said the hike on nonresident tuition has impacted the university’s revenue streams in a “substantial way” without damaging its promise to serve the state.

“We have taken this really rapidly growing pool of high-quality out-of-state students, and increased our class size so we don’t decrease our Wisconsin commitments by admitting more [out-of-state students],” Blank said in the interview. “That’s actually been the biggest increase toward having some investment money that we in turn, put back into more scholarships, put back into increasing our faculty funding, and put back into some programming.”

Yu is one of the out-of-state students subject to the rising nonresident tuition prices. While he was attracted to UW’s academic reputation, Yu said that the higher tuition is difficult for him and his family to pay.

“It’s a great financial burden for my parents,” Yu said. “We don’t necessarily have the means to do this, but we still are doing it because we think it’s a worthwhile investment.”

All Ways Forward

Along with nonresident tuition dollars, private funding has culminated to help UW continue its services and support Wisconsinites.

A flaunted example of this dual-funding method is Bucky’s Tuition Promise. Created under Blank’s tenure in 2018, Bucky’s Tuition Promise guarantees free tuition to any Wisconsin student whose family made less than the annual median income.

Blank funded Bucky’s Tuition Promise entirely from revenue generated by UW and private donations — no tax dollars went to it.

For students like Marguerite Packard, Bucky’s Tuition Promise made all the difference.

When she was a child, Packard would spend whole days wandering the shelves of her local Door County library. It was in the library that Packark realized what she wanted to do with her life — be a library kid, forever.

But as high school graduation approached, Packard didn’t think she would be able to attend a university without going into debt. She was looking at community colleges and financial aid packages when she heard about Bucky’s Tuition Promise.

“[Bucky’s Tuition Promise] just kind of lifted so much pressure off of the rest of my life,” Packard said. “I decided that I really didn’t want to go into debt, but I wasn’t sure how I was going to make my life work without going into debt, so it made a big difference.”

Another success story of Blank’s dual-funding approach is the Computer and Data and Information Sciences School. In 2019, UW united its Computer Science, Information and Statistics departments into its School of Computer and Data and Informational Sciences.

A new building that will be constructed to house the school is the first on campus completely funded by private donations. It was made possible by $175 million in donations from the Wisconsin Alumni Research Foundation and alumni John and Tashia Morgridge.

The school itself was also heavily funded by private companies. American Family Insurance, which had donated over $40 million to UW during Blank’s tenure, gave UW another $20 million to help create the American Family Insurance Data Institute in 2019.

The institute promised to serve both UW and American Family Insurance’s interests, fostering collaboration between data science and other academic disciplines while also offering researchers grants to study data science subjects relevant to the insurance industry.

Blank set out to increase UW’s fundraising abilities the moment she became chancellor, overseeing the public launch of the All Ways Forward fundraising campaign in 2015. The campaign was only UW’s fourth “comprehensive fundraising campaign” ever, and by far the biggest, Blank said in 2015.

In her farewell address to the Board of Regents, Blank said she originally set the goal of the campaign to raise $3.2 billion. When it concluded at the end of December 2021, after a six-year run, the campaign had raised over $4.2 billion.

“This is a game-changer for us,” Blank said in her speech to the Regents. “It’s one of the reasons we have a lot of new student scholarship dollars. It’s one of the reasons we’re better at retaining faculty with all sorts of additional faculty research funds and faculty chairs.”

At the campaign’s end, UW had increased endowment funding by 200% for scholarships and fellowships and 300% for faculty. UW also garnered more than $336 million for research and $367.2 million for campus infrastructure.

But the endowment has its limits. In an interview with student journalists last year, Blank said some of the money pledged has not yet arrived and some pledges come from other endowments which only allow the university to access a certain percentage of money each year.

“I want to be clear that $4 billion, doesn’t mean I have $4 billion to spend,” Blank said in the interview. “It’s often interpreted that way, and it’s just wrong.”

Blank also worked to attract more industry investments to UW by forming the Office of Business Engagement (OBE) to improve UW’s relationships with businesses, Blank said in her speech to the Regents.

The OBE’s mission was to help companies discover how they could partner with UW through sponsored research, strategic investment, talent solutions, professional development and UW technologies.

In 2020, businesses donated $12 million more to research at UW than in 2013, and funded $5.2 million more in undergrad scholarships in 2021 — a jump from just under $1 million in 2011.

Uncharted Waters

Blank’s entrepreneurial approach to funding affected more than UW’s revenue streams. By enrolling more nonresidents — while also maintaining its number of Wisconsin students — UW significantly increased the size of its student body. The class of 2021 not only featured more nonresident students than Wisconsin students — it was the largest class in UW’s history.

UW Housing had to turn the Lowell Center into another residence hall and convert group spaces into bedrooms to accommodate the additional students. Even with these adjustments, University Housing still had to deny transfer and exchange students housing, University Housing said in an email statement to The Badger Herald.

Faculty growth has not kept pace with the growing undergraduate student body, Blank said in her speech to the Regents. Though UW added over 200 new faculty members during Blank’s tenure, it was still 100 short of how many UW had 30 years ago with 8,000 fewer students on campus.

Building on these uncertainties is UW’s tense relationship with the legislature. Blank said in her fall interview with student media that the university’s complicated relationship will continue to pose problems for the university’s budget — and its next leader.

“There’s no question that some of the challenges that this university faces are around the constraints the state imposes upon it. We are deeply micromanaged by the state, you know, even though they funded quite a small share of our budget these days,” Blank said in the interview. “It’s a challenge. I think it’s time for someone else to take on it.”

UW’s increased leverage of private and corporate donations also brings its own set of stipulations.

Because most wealthy donors stipulate how they want recipient organizations to spend their money, there is a theoretical power imbalance between the giver and recipient, said Mary Beth Collins, the executive director of UW’s Center for Community and Nonprofit Studies.

In the past, recipients of donations would let donors drive their agenda, Collins said. Now, recipients are more careful with how they accept donations and are working to change the power dynamic. For universities, Collins said that means having talented people at the helm of receiving donations to ensure donations don’t compromise the university’s academic integrity.

“The ones doing the work should be setting the standards for how the work gets done,” Collins said. “And then they should be matchmaking with the right donors that respect and support that.”

Another way to mitigate the power dynamic is “trust-based philanthropy,” where donors give recipients money without any restrictions — trusting that the recipients will put it to its best use, Collins said.

The idea is relatively new in the nonprofit world, and even donors that have a good relationship with UW — such as American Family Insurance — may not have heard of its principles, Collins said.

While Tandberg is not aware of any research proving that private funding influences the curriculum of higher academia, he thinks it is a potential concern.

“People have certainly made the observation and the argument that the drive for more revenue would — and in their opinion, does — impact the priorities of the institutions,” Tandberg said. “It may shift from what might be perceived as really important areas of instruction that serve the public good towards more revenue-generating academic programs.

In her final address to the Regents, Blank pointed to several signs indicating that her approach to funding was successful.

From 2007 to 2020, UW increased its institutional financial aid from $25 million to $100 million, Blanks said in her speech. In 2021, nearly 800 students new to UW received Bucky’s Tuition Promise, allowing them to attend college without falling deep into debt.

The money from private funding and nonresident tuition has also helped UW pay its professors more, going from paying faculty the least out of 12 peer universities to the fifth highest salary-payer, Blank said.

“The private funding has gone up, but that’s not the main source of additional revenue for the university,” Blank said in the interview with student journalists. “It is our effort to try to increase other sources of revenue.”

But Blank admitted to the Regents that the gains UW saw wouldn’t be enough without ending the tuition freeze and improving state funding — leaving lingering challenges for Mnookin to address during her own tenure.

The biggest problem facing UW is the nationwide polarization of public education, Blank said. Where once funding public universities received bipartisan support, it has become increasingly political over the recent years with Democrats and Republicans both using UW to score political points, Blank said.

The 2013 tuition freeze by Republicans forced the UW System to spend down their annual savings, hurting their financial flexibility and competitiveness. During the pandemic, some Democrats strongly criticized the way UW was enforcing its health and safety rules — something which Blank said was not helpful to UW.

 There is empirical evidence showing that public spending makes higher education more accessible — especially to underrepresented groups, Tandberg said.

“No institution can survive long as a public institution without public support,” Blank said to the Board of Regents. “Sometimes that [political] criticism is warranted and we need to improve, but sometimes it’s just political posturing, and we need all of you to be a consistent voice of support for the value of a world-class research university.”

Besides increasing state funding, Blank advocated for ending the tuition freeze. If UW has the ability to set competitive prices on its in-state tuition, then it can better subsidize the tuition of lower-income students with Bucky’s Tuition Promise, Blank said.

Though the tuition freeze has gained substantial bipartisan support. In 2021, Wisconsin Republicans voted to end the tuition freeze, and in his 2022 State of the State Address, Evers announced that he would prolong it — while aiming to increase state funding to UW by $25 million to help offset the freeze.

Chief academic turned chief fundraiser

To maintain UW’s competitiveness, the next chancellor will have to continue having an entrepreneurial approach to funding UW, Blank said. As the trend of public divestment from higher education continues, the role of a chancellor has changed, Tandberg said.

“[The] need to raise alternative revenue sources just goes up and so seeking donations, advocating for grants contracts advocating for state funding — that’s almost become the whole of college or a university president’s job or chancellor’s job,” Tandberg said. “So that the role has shifted away from kind of [being] the Chief Academic towards the chief fundraiser.”

Many colleagues of Mnookin have said she possesses a strong fundraising abilities. In addition to her ethos of “collaborative leadership,” her supporters maintain she will prove essential to managing an institution that depends so much upon the political waters of the Wisconsin legislature.

Blank said that she believes one part of her legacy was bringing financial stability back to UW. But she warned the Board of Regents that one bad year without funding from the state would be enough to erase all of UW’s gains.

“These institutions, despite the solidity that you see when you drive down the street, are fragile institutions, particularly in this day and age,” Blank said. “And this is just a warning that you can’t stop now. There is more to be done, and I’m counting on all of you to make it happen.”

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