‘A win-win’: Why the UNC System wants to offer incentives for some faculty to retire

Some tenured faculty at a handful of UNC System colleges could soon have the option to retire with a severance package as part of an effort to address changing enrollment patterns and free up money for other uses within those schools.

The state university system is seeking $16.8 million in one-time money from the state legislature to establish a “faculty retirement incentive program,” which would allow eligible full-time, tenured faculty to voluntarily retire and receive a severance package equivalent to one year of the faculty member’s base salary.

The program is intended to free up, then redirect, the funds used for salaries of some tenured faculty, which are the system’s largest ongoing financial obligations and may be out of touch with current demands at universities, UNC System Chief Financial Officer Jennifer Haygood told The News & Observer.

Though the proposed state law that would be used to create the program would be available for all schools in the UNC System to use, the system hopes to prioritize the spending of any money the legislature may initially allocate to the program on “institutions that have been most impacted by changing enrollment patterns.”

Those priority institutions, as identified by the system, are N.C. Central University, UNC Asheville, UNC Greensboro, Winston Salem State University and East Carolina University.

To qualify for the optional retirement incentive, faculty would need to be tenured, be at least 55 years old, be eligible for retirement under the Teachers’ and State Employees’ Retirement System or be vested in the UNC System Optional Retirement Program, and not be receiving disability or worker’s compensation benefits.

The state Senate has appeared to support the system’s proposal, including in its budget plan the full $16.8 million and corresponding statutory language to establish the program. The House’s budget proposal, released before the Senate’s, did not include funding for the program, nor the statutory language.

The two chambers are currently negotiating a final compromise budget, which is expected to be released later this month.

Haygood said she didn’t “have any insight” into whether the program would be included in the final budget, but added she was “going to be cautiously optimistic.”

Salaries account for nearly half of UNC System budget

Faculty and staff salaries account for the system’s “largest financial outlay,” Haygood said. The system expects to spend more than $4.9 billion on salaries in the 2024 fiscal year, accounting for about 45% of the system’s total budget, according to information presented to the Board of Governors in May.

Within those billions of dollars, salaries of tenured faculty — who are generally employed indefinitely, barring extraordinary circumstances or being terminated for cause — represent the system’s largest recurring expenses, Haygood said, since the nature of tenure gives faculty “the right to hold your position.”

“We’re basically committed to having to pay those costs year after year until they, essentially, decide to retire or take another opportunity,” Haygood said.

Tenured faculty who were appointed to their roles decades ago might have been hired because their university was experiencing increased demand or enrollment in the faculty member’s area of teaching and expertise at that time. But the same demand and need might no longer be seen today — and the university, and the UNC System at large, remains on the hook for paying their salary.

“That really significantly limits the institution’s ability to adapt and be flexible with changing demands and how they need to adjust to fulfill their mission,” Haygood said.

If the retirement incentive program is approved and funded by the legislature, each university participating in the program would generally have autonomy over how to operate the program and the funds made available from it according to the needs on their campuses.

“There may be scenarios where the resources that were supporting the tenured faculty position in one academic discipline, maybe that needs to support a different tenured faculty position in a different discipline and therefore, it would continue to support tenured faculty,” Haygood said. “It very well may be that that is not necessary. It may be that instead of using those funds to support another position, that those funds are reprioritized to increase faculty salaries, either broadly or on a targeted basis.”

However a university might decide to organize and implement the program, “the absolute goal and requirement is that those funds are reinvested in a manner that is strategic, given the institution’s long-term plan and where they’re going,” Haygood said.

If a university other than the five institutions the UNC System hopes to prioritize wanted to offer retirement incentives on their campuses, they could do so “using their own available funds” or with any of the allocated money that was not used by the five priority schools, Haygood said.

Program not intended to end, alter tenure

Though the proposed retirement incentives would be available only to tenured faculty, both Haygood and Wade Maki, a professor at UNC Greensboro and chair of the UNC System Faculty Assembly, said the program is not intended to end or alter tenure appointments at the state’s public universities.

Earlier this legislative session, some House Republicans introduced a bill that would have eliminated tenure for prospective faculty at public two- and four-year colleges in the state beginning in 2024.

The bill — which, along with a handful of other higher-education related proposals, was denounced by nearly 700 faculty at UNC-Chapel Hill in April — did not meet the legislature’s May “crossover” deadline, or the date by which bills were required to pass one chamber in order to be considered during the remainder of the session, with a handful of exceptions.

House majority whip Jon Hardister, a Whitsett Republican, told The N&O last month that the bill is “not going to move forward this session,” but added that “tenure is a subject we have to look at.”

Tenure is generally viewed by faculty and higher education leaders as a way to provide academic freedom for faculty, both in teaching and research roles.

“Tenure provides the conditions for faculty to pursue research and innovation and draw evidence-based conclusions free from corporate or political pressure,” according to the American Association of University Professors (AAUP), a national nonprofit membership organization for faculty.

A handful of other states have considered or enacted changes to tenure in recent years, including Florida, where a bill passed last year made it harder for faculty to retain tenure. Other tenure bills have been considered in Texas, South Carolina and Iowa, among other states.

Haygood said the legislative proposal to end tenure and the UNC System’s proposed retirement incentive program are “completely two separate issues.”

Maki said tenured faculty were heavily involved in a workgroup that helped draft the incentive program proposal “and they came to the conclusion that this is a good deal for faculty and institutions.”

“Regardless of that other conversation, whoever’s pursuing that, we would be pursuing this, just because we feel like it’s very important that our campuses have some tools” to address budget needs, Haygood said.

Maki called the program a “win-win.”

“It pairs willing faculty with institutional need, meaning faculty who are looking to retire, but just can’t do it financially, will get an opportunity to do so,” Maki said, “and institutions can reallocate funds from programs that are in lower student demand to areas in which they have higher student demand or need.”

Timeline of program if approved

Alice Arnold is an art education professor at East Carolina University, one of the five priority universities the UNC System has identified to first benefit from the program if the legislature funds it.

Arnold, who is 73 and has taught in the UNC System for more than 35 years, said she has been thinking about retiring for about a year, but has been somewhat hesitant to do so.

“There’s a lot of things I like about my job,” Arnold said. “That’s why it’s really hard for me to retire.”

But the proposed incentive program, which would provide her with a year’s salary and benefits without the responsibility of teaching or performing other duties, would likely encourage her to take the leap into retirement — if her university decides her position is one from which they would like to reallocate resources.

“I think I can retire relatively comfortably,” Arnold said. “I can travel, I can get to know people better, I can have a little bit more freedom — freedom to live the way I want to live.”

Haygood said if the legislature funds the program, UNC System staff would likely spend the fall “fleshing out all the mechanical details.” But she said she generally expects a timeline in which the first faculty who are approved to participate in the program could begin receiving their retirement packages “in the latter half” of the upcoming fiscal year — or the first half of 2024 — setting them up to no longer be employed at their universities by the following fiscal year.

Though the initial funds for the program would be a one-time allocation by the legislature, per language included in the Senate’s budget proposal, the money would not revert to the state at the end of the 2023-2024 fiscal year, but would “remain available until expended.”

“I don’t think that anyone needs to anticipate that these incentives are going to be, you know, administered such that faculty will be gone this fall,” Haygood said. “It’s going to take a little time for us to work through.”