When Todd Leach’s son was applying to colleges last year, his high school guidance counselor suggested that he take advantage of the in-state tuition match offered by the University of Maine.

It wasn’t the kind of suggestion the chancellor of the University System of New Hampshire enjoys hearing about, whether made to his son or any other Granite State high schooler. Neither was Catherine Provencher, the vice chancellor for financial affairs, thrilled when her trip to Hampton Beach last summer was interrupted by a plane pulling a banner advertising the same University of Maine tuition match.

The university system’s leadership is well aware that they are now in fierce competition with colleges in neighboring states for New Hampshire’s future workforce. More than 60 percent of high school graduates who plan to attend a four-year college leave New Hampshire to do so.

That’s the highest rate in the country, according to the U.S. Department of Education, and with unemployment at 2.4 percent, the lowest in the nation, businesses are desperate for qualified employees.

But New Hampshire is also at the bottom in another field: State government appropriated $2,701 per full-time student in fiscal year 2017, which according to the State Higher Education Executive Officers association was less than any other state besides Vermont, which appropriated $2,695 per student.

USNH’s state appropriation has been level-funded at $81 million for the last five years, not even increasing with the rate of inflation. That will become seven years unless the Legislature increases the block grant Gov. Chris Sununu proposed in his budget for the next biennium.

USNH officials aren’t raising an emergency warning, but they say that if the trend continues it will threaten their ability to both keep tuition low and remain competitive.

“I worry about our ability to keep the cost down,” Leach said. “I worry about how rapidly we can respond to workforce needs if we don’t have the strategic funding to allow us to move in new directions.”

“We are not going to put ourselves in a position where we need a state bailout,” the chancellor added. “What we need is a state partner in order to help keep … addressing the needs that industry has in the state.”

Sununu’s two-year budget included a $24 million one-time investment to expand capacity for nursing and STEM programs — $3 million less than the university system asked for — and $18 million for capital improvements.

Those are vital investments that will allow several state institutions to improve their capacity in fields in need of trained workers, Leach said.

But there appears to be less consensus about state aid for the system’s annual operating budget, most of which goes toward cost reductions for students.

“The governor believes that we must reform our funding model for public higher education and that by the state government, USNH and private business partnering together to provide funding, design curriculums and create direct pathways to employment we can achieve better results than simply by increasing the block grant amount,” Mac Zellem, Sununu’s budget director, said in a statement. The block grant refers to the $81 million USNH has received in each of the last five years.

The governor’s office did not immediately provide more details about what Sununu’s proposed new funding model would look like.

USNH has asked for an additional $4 million for its block grant over the next two years. It was not included in Sununu’s budget but the House and Senate must still weigh in.

“Our appropriations request includes a marginal increase that fulfills statutory requirements, such as free tuition for National Guard students, and will directly be used to lower tuition rates for thousands of New Hampshire families,” Leach said in a statement responding to the governor’s call for a different funding model.

During an interview on Thursday in USNH’s Concord offices, Leach and Provencher said they were proud of their efforts to keep tuition at the system’s six campuses low in the face of disappearing state aid.

Over the past five years, in-state tuition and fees at New Hampshire’s public four-year universities has increased by 4 percent, according to College Board. That’s below the national average of 7 percent and even further below the 10 percent increase at Vermont’s institutions.

In 2009 and 2010, the university system received $100 million each year from the state. But in the wake of the recession, then-Gov. John Lynch and the Legislature cut the system’s budget by nearly 50 percent for 2011 and 2012. It hasn’t achieved pre-recession financial support since.

As a result of those cuts, a perception spread throughout New Hampshire that the quality of state schools would severely decline, Leach said.

“Raising the tuition and having the perception out there that ‘I don’t know if I want to send students here because (state appropriation) was cut in half.’ … I don’t know if we’ve ever fully recovered from that,” he said Thursday.

Meanwhile the number of public high school graduates in New Hampshire declined 11 percent between 2008 and 2017 and that demographic trend is expected to continue for several years, suggesting there will be an even smaller pool of students upon which the heavily tuition-dependent university system relies.

“I think there is a challenge here. We have squeezed our margins to the point where it’s harder and harder to put dollars into strategic initiatives we want to make,” Leach said. “We’ve really done our part to try to keep these costs down, but if we’re going to meet the needs of the workforce, there’s some strategic investments that — because we’ve squeezed our margins down — we’re going to need the state’s help with.”

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