Funding the Flagship is a guide to help you understand how the University of Arkansas operates financially.1 In these pages, we’ll discuss the sources of our funding and break down how our funding is allocated – for instance, how much goes toward supporting our teachers and researchers, and how much is set aside for student scholarships.
The University of Arkansas receives the great majority of its operating income from two sources: funds from the State of Arkansas — called state appropriations — and student tuition. For the University to remain nationally competitive in teaching, research, and outreach, state appropriations and tuition revenues must keep pace with increases in the size of enrollment and inflation. Private support of the University of Arkansas has been spectacular in recent years, but private giving cannot take the place of state support in maintaining facilities, paying for utilities, and addressing the basic operating needs of the University.
The frequently-asked-questions section covers topics such as tuition increases and the role of state support in funding the University. Important terms are defined throughout Funding the Flagship. For a look at our finances “by the numbers,” please see the bottom of this page.
What is the funding formula for higher education?
The funding formula for higher education, adopted by the Arkansas General Assembly in 2005, ensures that each four-year public university in Arkansas receives state appropriations in a fair and equitable manner. Similar academic courses are funded at the same level on each campus – for instance, first-year English courses are funded at the same level at the U of A as at Arkansas community colleges.
Despite the adoption of the funding formula, most four-year public universities in the state are under-funded. For instance, the University of Arkansas remains under-funded by the State of Arkansas by $36 million per year, according to the Arkansas Department of Higher Education.2 To put this in perspective, the University would have to raise enough private money to more than double its endowment of roughly $763 million to make up the gap in funding.
Full funding of the formula is essential to ensure the State of Arkansas will provide quality, affordable education to its citizens. In our increasingly connected, rapidly changing world, knowledge and education are more important than ever. Fully funded colleges and universities will help keep Arkansans globally competitive.
How does funding at the University of Arkansas compare with its counterparts in other states?
The University of Arkansas ranks in the bottom third among the universities of the Southeastern Conference in the sum of state appropriations and tuition resources available. Full state funding of the formula would bring the University’s funding to a competitive level among SEC universities.
Defined
State Appropriations – funds provided by the State to universities.
How much of the university’s budget is covered by state appropriations and tuition and fees?
The University of Arkansas depends on tuition and fees for 43% of its education and general budget. The State of Arkansas provides 45% of the education and general budget. As a result, an increase in state funding is an increase in only about half of the University’s budget.
Defined
Education and General Budget – how the University of Arkansas expects to spend its unrestricted funds, such as tuition revenue and state appropriations, in a year. Areas covered under the education and general budget include faculty and staff salaries and utilities.
Restricted Funds – funds whose use is restricted by an external entity, such as a donor or a federal funding agency. Restricted funds can only be used for designated purposes, such as endowing a faculty position.
Unrestricted Funds – funds with no external restrictions, such as tuition revenue and state appropriations. These funds are applied to the areas which will best serve the goals of the University, based on the education and general budget.
Why are tuition increases necessary?
When state support increases do not keep pace with necessary increases in employee salaries and benefits, the rising cost of utilities, and general inflation, the University must turn to increasing tuition to make up the difference. Inflation in costs at institutions of higher learning has jumped to 5%,3 making larger tuition increases all the more necessary just to stay even.
Why doesn’t the University increase tuition for new students only?
Costs increase every year, and these costs are not fully funded by state appropriations. The difference is paid for by tuition increases. New student enrollment is less than one-fifth of our total enrollment. If tuition increases were shouldered only by new students, their tuition increase initially would be at least five times greater than if we spread the increase across the entire student body.
Rather than forecast costs for the four to five years a student will be enrolled and introduce a very hefty tuition increase for new students, we ask for increases when we have a better sense of what the true costs will be. Also, we recognize most students do not have the resources available to “pay up front” for costs that will occur over the course of their college career.
Why does tuition increase faster than the general inflation rate for the State and nation?
Colleges and universities use the Higher Education Price Index (HEPI) as a measure of inflation, instead of the general public’s Consumer Price Index or business’s Producers Price Index. HEPI typically increases at a faster rate than other measures, because of factors such as increases in costs of faculty salaries in highly competitive fields, health insurance, laboratory equipment, library holdings, and utilities. The University of Arkansas tries to limit tuition increase requests to HEPI rates, but it’s not always able to do so when state appropriations do not keep up with enrollment and HEPI increases.
Defined
Higher Education Price Index (HEPI) -- the measure of inflation used by colleges and universities. It typically increases at a faster rate than the general rate of inflation.
Why are there fees on top of tuition?
Fees focus more attention on particular activities and services and their costs to students. This attention is healthy in creating discussion about the importance of the activity or service the fee supports. A committee of students, called the Student Fee Review Board, meets regularly to examine expenditures to ensure value is being received for the fees collected. The Student Fee Review Board also suggests and approves new fees. In most cases, mandatory fees support activities that are considered essential to the campus or in the best interest of students, such as the Student Health Center fee.
Defined
Mandatory Fees - Mandatory fees support services or activities beneficial to the entire campus. These services and activities are available to all students. The fees are charged to all students.
Other Fees – “Other fees” are charged for services which students may choose to utilize or for particular services, such as a Parking Permit or transcript copies.
Why isn’t the University’s growth in enrollment generating enough money to offset the expenses caused by that growth?
As the enrollment of the University increases, we require more faculty and staff, more support for our programs, more student housing, and expanded facilities to support our students. Increased tuition revenue from enrollment growth helps to address these needs, but state support must increase in step with enrollment increases in order to offset expenses.
Why didn’t the billion dollar fundraising campaign eliminate the need for tuition increases?
Funds raised during the billion dollar Campaign for the Twenty-First Century were almost all given for specific purposes, such as endowed faculty positions, scholarships and new construction. More than half the billion dollars went into our endowment, whose principal cannot be touched and whose earnings are restricted to uses specified by the donors. Almost all the private funds raised during the Campaign can only be used as designated by the donor and not for general operating expenses.
Defined
Endowment – a permanent source of income for the University. The endowment is made up of funds, property, and other assets donated to the University. The endowment supports faculty positions, academic programs, libraries, and student scholarships.
What is the University doing to control costs so that tuition and state support increases are minimized?
Every year, departments throughout the University are asked to prioritize activities that can be cut from their annual budgets and to highlight activities that require new funding. The University takes funds from the activities that are cut and makes investments in areas that will provide future savings or immediate improvements. For instance, the utility infrastructure on campus is being upgraded to provide savings in energy costs.
In the past nine years, $16.2 million has been reallocated to address high priority needs of the University.
How do non-resident students affect the University’s financial and educational picture?
In the words of University of Arkansas Chancellor John White, “For the past eight years we have worked hard to stem the ‘brain drain’ from Arkansas, as well as create a ‘brain gain’ for Arkansas by recruiting high ability students from all over the world. Our diversity goals include providing a community of students, faculty, and staff from all over Arkansas, all over the region, all over the U.S., and, indeed, all over the world. Having students on campus from various parts of the nation and world enhances the education of students from Arkansas.”
Not only do non-resident students contribute to “brain gain” and a more diverse campus community, but they also add to the tuition revenue for the University.
Are state or student funds used to support athletics?
No funds from the State of Arkansas go toward the University Athletic programs. Likewise, Athletics receives no student tuition or fees from the campus, with the exception of waiving non-resident tuition. The University Athletics programs are self-sufficient. They pay for all costs unique to their activities, including tuition and fees of scholarship student athletes.
Footnotes
1 In any discussion of University funding, it is important to be aware of whether the information is budgeted (anticipated revenues and expenditures) or reported in a Financial Statement (actual audited revenues and expenditures). Some financial information such as the funding from the General Assembly is aggregated as the UA Fund that includes the main campus, the System Office, the Division of Agriculture, the Archaeological Survey, the Criminal Justice Institute, the Clinton School and the Arkansas Science and Math School. Often what is seen by one group, such as the General Assembly, is not precisely what is seen by another such as Faculty Financial Advisory Committee since they are viewing the information from different perspectives. For clarity, Funding the Flagship will footnote the sources but not try to present all the subtle differences that will make the numbers different in different contexts.
2 Arkansas Higher Education Coordinating Board recommendation adopted August 4, 2006
3 http://www.commonfund.org/Commonfund/Archive/CF+Institute/HEPI_ PressRelease_June06.htm
4 2005-2006 Financial Report Supporting Schedules (for the Fiscal Year FY04) reports on both unrestricted and restricted funds for the Fayetteville campus only in Exhibit C.1 (Fayetteville) and C.2 the Agriculture Experiment Station but not the Cooperative Extension Service. The Annual Financial Statements that include Fayetteville, Agricultural Experiment Station, Cooperative Extension Service, Arkansas Archaeological Survey, Criminal Justice Institute, and the Clinton School are found at http://avcf.uark.edu/ for the years since FY99. Supplementary Schedules that separate these various units are available at the same web site since FY01.