In March 1996 the effect of decreased graduate enrollment and of a survey conducted as part of the performance funding initiative soliciting the opinions of recent graduates resulted in Tennessee Higher Education Commission recommending a cut of $4.1 million in its state appropriation.
Governor Sundquist reduced THEC’s recommendation to $3.2 million. In addition, the governor’s budget included a 3 percent increase in pay but funded only 2 percent of it. UT Chancellor William Snyder called for each vice chancellor to plan for a budget reduction of 10 percent, and Vice Chancellor for Academic Affairs John Peters required each dean to develop a budget decreased by 3 to 5 percent. Students in the fine arts staged a march and demonstration to protest the cuts. In September each college was asked to reserve 3 percent of the college budget in case additional budget cuts, made necessary by low collections of sales taxes, required the state to impose further cuts.
UT attempted to rebound from the budget cuts in the the following year by adding new programs and instructional equipment.