Study calls for enhancing public university research to boost N.C. economy, protect wise investment

March 04, 2004

To ensure science and technology remain bright spots in North Carolina’s economy, state leaders should be aggressive in maximizing the competitive advantage that its public research universities provide to economic development and growth, according to a new study.Key legislators were briefed today (March 4) at their request on the study, which was supported by FedEx, GlaxoSmithKline and Winston Hotels Inc. to assess opportunities for research universities to enhance their economic impact on the state. Those corporations have a major stake in North Carolina’s future economic success, the study said, and their leaders recognize the key role that universities play in helping move the state forward.

Members of the General Assembly’s Joint Select Committee on Economic Growth and Development received a briefing on the study by the Huron Consulting Group and The Washington Advisory Group as part of a half-day session focusing on research as an economic engine for the state. The study examined national and state trends, assessed the strategic significance of research universities and strongly endorsed the practice of permitting campuses to retain 100 percent of their overhead receipts – reimbursements for the cost of conducting research paid by grant-makers such as the federal government. The study also recommended several policy changes to enhance North Carolina’s competitive position in areas including personnel, purchasing and construction practices.

“Our study aims to provide guidance as North Carolina considers how best to protect the impressive investments the taxpayers already have made in public university research,” said Jim Roth, group managing director for Huron’s higher education and health-care consulting division. “The support from Governor Easley and the General Assembly for the retention of overhead receipts is directly linked to the recent progress that UNC-Chapel Hill and NC State have made in attracting research grants and improving their research capacity. This decision has proven to be a wise policy move that is in the best interests of the North Carolina economy.”

Led by nationally recognized faculty at UNC-Chapel Hill and NC State, the 16-campus University of North Carolina system annually pumps hundreds of millions of federal and private research dollars into the state’s economy. Those grants from sources including the National Institutes of Health and the National Science Foundation support efforts to cure diseases, improve technology, bring innovation to industries such as agriculture and biotechnology, and spin off new businesses that create jobs.

Research funding at UNC-Chapel Hill and NC State alone increased by more than 50 percent from fiscal 1997 to 2002, generating more than $930 million in spending for the state’s economy, according to the study. Those funds also supported more than 22,000 jobs across the state. For every dollar the faculty attract in research funding, $1.70 worth of spending occurs in the state, the study reported.

Budget forecasts generally predict federal research funding will begin to level off after several years of increases. At the same time, competition among universities in other states that apply for those funds has become increasingly intense. These facts make the competitive position of North Carolina’s research universities more critical than ever, the study said.

“Among the universities’ greatest responsibilities is to translate the faculty’s research into new jobs, improved health and well being for North Carolinians and a larger tax base for our state,” said UNC Chancellor James Moeser. “Those are among the practical benefits that our faculty’s research brings to the taxpayers of North Carolina. We want to keep the pipeline of ideas and innovation strong.”

The life sciences and biotechnology remain among the most critical industries driving progress in North Carolina’s transformation to a knowledge-based economy, said Moeser and NC State Chancellor Marye Anne Fox. Those are among the greatest scientific and technological strengths at UNC-Chapel Hill and NC State.

“Remaining successful in research depends on how well we can position our faculty to respond to the scientific challenges benefiting the people of North Carolina the most,” said Fox. “The Huron study affirms the need to candidly assess the challenges and opportunities in our research university portfolios. The state’s economic future depends upon making the most of the investments North Carolina already has made in its research campuses.”

The Huron study focused on competitive issues facing UNC-Chapel Hill and NC State, but concluded that other UNC campuses likely would benefit if its recommendations were carried out.

Said University of North Carolina President Molly Corbett Broad, “We know beyond a doubt that university research and innovation are crucial to North Carolina’s economic growth and development. We are heartened by this independent confirmation that the expanded flexibility we have sought for UNC campuses would bolster our ability to make even greater contributions to the state’s economy.”

The Huron study found that North Carolina’s public research universities are at a competitive disadvantage in continuing to grow their research funding levels when compared with nationally recognized peers because of constraints affecting business functions and facilities.

The study’s top recommendation called on the General Assembly to permit UNC campuses to continue retaining all overhead receipts their faculty generate through research grants. UNC-Chapel Hill and NC State are successfully leveraging overhead receipts along with funds from the statewide Higher Education Bond Referendum – overwhelmingly approved by state voters in 2000 — and private gifts to build and modernize facilities, attract and retain top faculty researchers and sustain the excellence of academic programs. Overhead receipts also support efforts on both campuses to generate economic activity and create jobs as well as to support the salaries of current employees.

Other study recommendations included the following:

7 UNC-Chapel Hill and NC State should re-examine an already strong collaborative research relationship to look for more opportunities to jointly attract research funding and conduct science. Both campuses should conduct a similar review with private Duke University to maximize the impact of three top research campuses – as anchors of the Research Triangle Park — on the North Carolina economy.

7 The General Assembly should widen the exemption of public research universities from the state personnel system. More autonomy would help accelerate efforts to successfully compete in efforts to recruit top faculty and their research teams who can attract federal and private research funding to North Carolina.

7 The General Assembly should change state purchasing regulations so UNC-Chapel Hill and NC State could have the option to choose alternative vendors that offer lower prices, higher-quality or better services.

7 The General Assembly should ease restrictions on construction and leasing requirements for campus buildings that are built or purchased using non-state funds, which include overhead receipts, private gifts and revenues generated by campus services.

7 In exchange for delegating increased authority in business and facility processes, the General Assembly should expect performance reports at UNC-Chapel Hill and NC State to evaluate the effectiveness of campus business practices. Such evaluations should be based on corporate standards adapted for the campus environment.

Note: Copies of the Huron report are available for download. It will also be posted at http://www.unc.edu/news/newsserv/archives/mar04/ncstate/huronreport.doc on Thursday. Roth of Huron also is available for telephone interviews after the committee presentation.

UNC contact: Mike McFarland, (919) 962-8593, mike_mcfarland@unc.edu

NC State contact: Debbie Griffith, (919) 515-7373, debbie_griffith@ncsu.edu