Report: UWM faces daunting financial challenges

The UWM student union
The UWM student union

Last updated on July 22nd, 2021 at 11:57 am

The University of Wisconsin-Milwaukee lags its peers nationally in revenue and enrollment, creating a concerning financial outlook for the institution, according to a new report.

Those challenges could put UWM’s “R1” designation – the highest research rating given by the Carnegie Classification of Institutions of Higher Education, which UWM has maintained since 2016 – at risk, according to the Wisconsin Policy Forum analysis.

“We find that UWM stands out among other public urban universities,” the report said. “With respect to enrollment as well as state funding and tuition revenues, almost none of UWM’s peers face such stiff challenges and together they may threaten its very status as a top-tier R1 research institution.”

The university’s financial dilemma is a confluence of several factors, including a decade of enrollment decline, an 8-year tuition freeze and lagging state funding – all of which have been exacerbated by the COVID-19 pandemic, according to the report.

The report, which was commissioned and partially funded by the UWM Foundation, follows a report published by WPF late last year examining how the UW System and UW-Madison specifically are also losing their competitive edge.

UWM’s total revenues (excluding federal student financial aid) rose 11.7% over the past decade, well below the rate of inflation. With federal financial aid dollars included, its total revenue fell slightly over the decade.

As of 2008, UWM’s state funding and tuition revenues were roughly equivalent; today, its tuition eclipses state appropriations. UWM’s total budgeted spending was essentially flat between 2011 and 2021, with the greatest impact falling on UWM’s core activities (including an 11% decrease in spending on instruction and a 25% drop in student financial aid), the report said.

In 2019, UWM received $5,229 in state funding per student, 28% below the average of 15 peer universities and the third-lowest among that group. That same year, UWM received $14,038 in combined state funding and tuition and fee revenue, the second-lowest of its peers.

Meanwhile, enrollment has declined. UWM’s full-time equivalent student enrollment dropped 6.4% from 2013 to 2019, compared to its national peers, which saw an average 3.6% enrollment gain during that time. UWM’s enrollment loss was the fourth largest among its peers.

The report noted that declining enrollment is typical for a university in Wisconsin and the Upper Midwest, given the demographic trends of falling birth rates and net out-migration, but UWM’s losses are worse than others in the state and most national peers. The report pointed to the drop in students in the greater Milwaukee area completing high school over the past decade as one explanation for UWM’s decline. UW-Madison’s prestige, by comparison, may have insulated the flagship university (where enrollment has increased 10% over the past decade) from that trend, the report said.

The report stresses, however, UWM’s important role in the state as the second-largest university in the state after UW-Madison, and the third-largest research institution, after UW-Madison and the Medical College of Wisconsin. It also fills a crucial niche in serving those who are underrepresented in higher ed, having the largest number of Black, Latino and southeast Asian students of any UW campus and a large representation of undergrads receiving Pell grants, the report said.

UWM’s enrollment decline, combined with in-state tuition freezes, has shifted tuition from being a source of revenue growth in the 2000s to being down somewhat since 2019, the report said. It remains to be seen how much tuition will increase moving forward. The 2021-‘23 state budget lifts the freeze, giving that decision-making power to the Board of Regents.

COVID-19 has compounded those challenges. The university recorded nearly $92 million in total losses from the pandemic. While the university in turn received $95 million in federal pandemic relief, UWM is required to direct $42 million of that total to emergency grants for students, leaving $53 million for the institution. UWM has made up most of the gap through $32 million in employee furloughs and reductions in hiring, travel and other spending, the report said.

“The pandemic dealt a sharp blow to UWM’s already weakened finances and threatened lasting damage to the institution,” the report said.

Faculty have been affected by the financial challenges. UWM had 100 fewer faculty members in 2020 than in 2010, and the loss would have been greater if not for the merger of UWM with the Washington County and Waukesha campuses, according to the report.

UWM’s faculty compensation also trails its peers. The average salary at UWM was the second-lowest in its peer group. Full professors at UWM made $105,884 on average in 2020, the third-lowest among its peers.

All of these factors affect UWM as a research institution, according to the report. R&D spending at UWM decreased 12% from 2011 to 2019, compared to an average 13.8% increase in spending among its peers. That drop was driven largely by decreases in state, local and federal government funding, the report said.

“Just as the rise of UWM’s research efforts and its attainment of R1 status have been a benefit for the entire region, the recent decline is one of the most concerning trends for the university and for the Greater Milwaukee area as a whole, given that research can expand a regional economy by attracting federal funding and sparking innovative new products and companies,” the report said.

The report offers several recommendations to address these challenges, including:

  • Increased state and local funding. With state general fund tax collections through June 2023 projected to be $4.4 billion higher than previously expected, the state could afford to direct some additional funding to the UW System and UWM, the report said.
  • Increased financial aid to draw new students to UWM. One approach would be to expand statewide a plan such as Bucky’s Tuition Promise, which guarantees enough scholarships and grants to cover four years of tuition and fees for UW-Madison students with household adjusted gross incomes of $60,000 or less, the report said.
  • Building up its endowment to pay for student aid and programming for low-income students.
  • A “thaw” on tuition. For UWM, a 2.5% increase in tuition would provide an additional $3.2 million a year in revenue to the university, the report said.
  • Better serving students of color, low-income and nontraditional students.

But cuts could be necessary, the report acknowledged. It put forth several possibilities:

  • Consolidating under-utilized academic programs/majors.
  • Cutting some schools and colleges. (At 14, UWM has more than most of its peers).
  • Cutting the Waukesha and Washington County campuses, where enrollment has dropped by about half in the past decade. “If enrollments keep falling, UWM officials will struggle to avoid major cuts at these campuses or even a closure,” the report said.

Other universities in UWM’s peer group for the study included Cleveland State University, Georgia State University, University of Illinois at Chicago, University of Louisville, University of New Orleans, Wayne State University, University of Missouri-Kansas City, Rutgers University-Newark, State University of New York at Buffalo, University of Akron Main Campus, University of Cincinnati-Main Campus, University of Toledo, University of Texas at Dallas and Temple University.

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Lauren Anderson covers health care, nonprofits and education for BizTimes. Lauren previously reported on education for the Waukesha Freeman. She graduated from the University of Wisconsin-Madison, where she studied journalism. In her free time, Lauren enjoys hiking, kayaking, and seeing live music.

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