For the third year in a row, North Carolina's Promise initiative is facing a multimillion-dollar deficit amid significant enrollment gains across its four member institutions.
Under the program, in-state students at four UNC System schools pay only $500 per semester for tuition and out-of-state students $2,500.
Since launching in 2018, the initiative has led to a 3% jump in enrollment at UNC Pembroke, 11% at Western Carolina University, and a staggering 62% at Elizabeth City State. Fayetteville State University, which became a Promise school in 2022, has seen a 28% increase in enrollment.
It's also led to a "significant decrease" in undergraduate student debt, according to a report from the UNC System.
The state legislature uses taxpayer dollars to "buy down" the difference between the university's regular tuition and the discounted price. This averages about $2,300 for resident tuition and upwards of $11,000 for nonresident.
This supplemental funding allows universities to offer discounted rates without actually harming their bottom line.
But in the 2023-2024 school year, the NC General Assembly only covered 87% of the buydown rate by the universities' summer semesters. Last year, the program had a $6.4 million deficit.
And this year, the UNC System is projecting a gap of $3.3 million.
The state legislature's funding for the program started off strong when the UNC System launched NC Promise in 2018. Elizabeth City State, UNC Pembroke, and Western Carolina received a collective $51 million the first two years of the program. The General Assembly added another $15 million in 2020 and began sending the universities a $66 million recurring appropriation.
The state legislature added Fayetteville State to the program in 2022. Since then, it has incrementally increased the recurring Promise appropriation to $92 million.
Back when NC Promise first launched, critics said they didn't trust the state would continue to fund the initiative year after year and universities would be left with a difficult bill to make up.
Last year when the program faced a $6.4 million deficit, some BOG members were hopeful the state legislature would increase the appropriation to match the universities' needs.
“I know on the Senate side, the intent is to always fund it and I think that will take place,” said BOG member Harry Brown in a committee meeting last year. “I think it’s just a matter of asking at this point.”
NC Promise still ended in a deficit for the 2024-2025 school year. Then, in its August "mini-budget," the state legislature approved a $9.5 million increase to the program for each of the next two years.
UNC System Chief Financial Officer Jennifer Haygood said it's always been a challenge for the System to appropriately estimate the cost of NC Promise which has in turn led to the funding gaps.
"I want to emphasize that (the) shortage is not because the General Assembly has not funded our request. It fully funded our request," Haygood said in an October Board of Governors meeting. "Our request, however, was based on projections that were over-realized."
Haygood said the UNC System projected in-state enrollment would be flat at NC Promise institutions this year. Instead, it was up by four percent.
The System was also off on its enrollment estimates for out-of-state students, which grew by 10% instead of an expected 8%.
"We are continuing to see robust nonresident growth, particularly at Fayetteville State University and UNC Pembroke," Haygood said at the meeting. "It's noteworthy that since FSU became (part) of the program in fall of 2022 their nonresident undergraduate enrollment has more than doubled."
Haygood said that although in-state students significantly outnumber out-of-state students in the program, the "buy down" rate for nonresident tuition is higher. The cost difference and rapid growth have led to the nonresident "buy down" taking up nearly 47% of the total allocation for the NC Promise program.
It's unclear whether the General Assembly will pass an actual state budget this year, but both chambers have expressed an interest in raising NC Promise's tuition rates.
In separate budget proposals, the House and Senate included requirements to charge out-of-state students in the program $500 to $1,000 more per semester. This would increase the semester nonresident rate to $3,000 to $3,500.
"We would encourage that the General Assembly wants to consider making such an adjustment that they would do that hopefully when they have the opportunity soon," Haygood said at the meeting. "We obviously want to have those rates set for the next academic year no later than February, consistent with when this board approves rates for the upcoming academic year."
An initial allocation from the state will provide NC Promise institutions with about $84.1 million.
The UNC System will send $8.5 million to Elizabeth City State University, $17.9 million to UNC Pembroke, $18.4 million to Fayetteville State University, and $39.4 million to Western Carolina University.
That leaves about $7.9 million for the universities' summer enrollments. This is likely when the projected $3.3 million budget shortfall will occur.
Haygood said that, traditionally, the UNC System has not asked the General Assembly to appropriate nonrecurring funds to backfill shortages.
"We have not sought those funds, because obviously the budget would be passed after the completion of the fiscal year where the shortage was experienced," Haygood said. "... we've just been focused on how do we remedy the shortfall on an ongoing, move forward basis."
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