Legislature(1999 - 2000)
04/24/1999 10:09 AM House HES
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* first hearing in first committee of referral
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+ teleconferenced
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HB 115 - USE OF UNIVERSITY OF ALASKA APPROPRIATION Number 1578 CO-CHAIRMAN COGHILL announced the next order of business as House Bill No. 115, "An Act relating to the University of Alaska; and providing for an effective date." Number 1621 REPRESENTATIVE CON BUNDE, Alaska State Legislature, sponsor, came forward to present HB 115. He indicated that the essence of SB 36, which was passed last year on the foundation formula for funding public schools, is that they need to allocate the educational resources effectively and fairly. He believes that once the monies are allocated fairly, that will beget more money. It is unlikely that there would be additional funds put into a system that was unfair in the view of the majority of the residents of the state. House Bill 115 asks that the state investment in the university system be distributed equitably, and that it be distributed based, much like SB 36, on student population. Many other states do this. House Bill 115 also provides for additional funding for the university on page 2, section 2 (1) allocate for each campus 2 percent inflation factor. The university has been concerned for a number of years that they have not been adequately funded based on an inflation factor. He used a chart of student-teacher ratios to show why he believes the funds are not fairly allocated: Faculty Full Time Equivalent Head Count (FTE) University of Alaska Anchorage 321 7,127 13,559 Teacher/Student Ratio: 22 to 1 42 to 1 University of Alaska Fairbanks 376 3,181 5,110 Teacher/Student Ratio: 8 to 1 13 to 1 University of Alaska Southeast 54 1,037 2,604 Teacher/Student Ratio: 19 to 1 48 to Number 1844 REPRESENTATIVE BUNDE said this bill encourages the allocation of the university's investment on a per student basis. He believes this will encourage greater funding for the university because people are more supportive when they feel their monies are being used fairly and equitably. He would like to see the university have the opportunity to grow in total funds and have increases for inflation. CO-CHAIRMAN DYSON commented that most inflation provisions are tied into something like the wholesale price index. He asked what was Representative Bunde's thinking on making it a flat 2 percent as opposed to tied to some national standard on inflation. Number 2064 REPRESENTATIVE BUNDE commented that the normal growth of government is 1.5 to 2 percent so that is why he factored it in there. The other is the safety valve. It may not be possible for the state to inflation-proof the university at 10 or 12 percent. This anticipates the growth in other state services and the philosophy that something is better than nothing. Number 2113 REPRESENTATIVE BRICE clarified that HB 115 has very little to do with SB 36, in that SB 36 was a funding formula, and HB 115 is an allocation formula. The 2 percent on page 2, lines 13-15 does not mean there will be a 2 percent increase in the university's budget. There is nothing in HB 115 that requires the legislature, or even suggests to the legislature, that the allocation that they make to the university increase which is unlike a foundation formula that generates an expected funding level. This does not generate an expected funding level. It creates a division table that divides the appropriation the legislature makes to the university, and then tells the university how to make that allocation. They are not talking about incorporating a 2 percent increase in the university budget. They would be requiring 2 percent in the allocation which would become null and void if the legislature has to cut the university's budget. REPRESENTATIVE BUNDE said that the university could certainly use this, if HB 115 became law, to say they must fund them because they have asked that they provide this increase. None of this funding is sacrosanct; they could all be changed by a future legislature if that were necessary. Number 2254 WENDY REDMAN, Vice President, Statewide University Relations, University of Alaska, came forward to testify. She supports the spirit that has initiated this legislation. It has been borne of some deep frustration on the part of Representative Bunde about a difficult funding situation, particularly in Anchorage. The decade of the 90s should have belonged to UAA [University of Alaska Anchorage]. It is a booming campus, their enrollments have been going up, and they have not gotten any kind of increases except a $2 million increase in 1993. The UAA has been flat during a time of incredible growth. It has been extremely frustrating. However, the answer is not to try to take money from other campuses to enhance Anchorage; they need new money for Anchorage, and they have enough data to support that. MS. REDMAN referred to an article in their packet on formulas by Mary McKeown which concludes that states are abandoning the use of formulas at this time. Ms. McKeown says formulas will never solve the resource allocation problems in higher education. Formulas cannot recognize the full range of objective and subjective differences among institutions, nor can they anticipate changes in the missions of institutions, such as those changes that will come about with the advent of virtual universities. Ms. Redman said formulas have played an important role in many states in building up the base budgets, particularly in those states where the individual campuses are not part of a system. TAPE 99-44, SIDE B Number 2359 MS. REDMAN continued saying that formulas in many of those states have been helpful in bringing an equity to the base of those budgets. However, formulas are not very helpful when the budgets are flat or declining. Most states are beginning to move off of the formulas that are derived from the numbers of students and moving to more accountability and productivity types of formulas. That is the direction the University of Alaska is looking at internally. The formula that is included in Representative Bunde's bill is actually a formula similar to one in use in Idaho, which is a valid formula. Representative Bunde and his staff have worked hard to try to accommodate the concerns that they have expressed over the years about the differences in discipline which are very real. This formula does not work in Alaska because of the very different types of institutions and the location of institutions. For example, UAA's annual physical plant expenditure is about $6 million per year, and UAF's annual physical plant expenditure is about $19 million per year. It is not just in the square footage, although there is more square footage in Fairbanks, but the weather makes a tremendous difference in how those campuses are run and how much it costs to do things. The cost differential in Fairbanks is significant. MS. REDMAN explained it is important to look at the type and mission of the institution. At UAF, 50 percent of their faculty are research faculty who do not teach classes; they do have academic rank so they show up in the data as faculty, but they are not funded with general funds. They are not hired to teach; they are hired to do research and generate money. If you look at UAF, which is designated as a research 1 institution, about 65 percent of their faculty are full time. Anchorage is designated as a comprehensive master's institution, an urban institution, and their full-time faculty right now are about 35 percent. They would like to get them up to 45 percent which would be more appropriate for their type of institution. As they do that, the costs are going to rise. More full-time faculty, the higher that cost per student. Right now UAA's cost per student are artificially low because of the high number of adjunct faculty there, but that is not the best situation for the student. MS. REDMAN indicated that because of the differences in the types of institutions, about 70 percent of UAF's students are full-time, and in the FY 1998 academic year, close to 50 percent of their credits were at the upper division level. About 35 percent of UAA's students are full time, and about 30 percent of their credits are the upper division level. They have different profiles. Anchorage is changing more than Fairbanks; Fairbanks has been very stable over time. Anchorage is moving from the community college model and is beginning to add many more full-time students to their institution, and that is the largest growing element in Anchorage. Those numbers begin to shift as they turn out more baccalaureate majors, and they want to encourage that. It is important to understand that it is not as simple as taking the total budget, or even the total instructional budget, and dividing it by the number of students. Representative Bunde's bill makes a stab at trying to differentiate between that based on the disciplines. MS. REDMAN suggested that it doesn't really get into the other two elements which are the type of institution and the level of enrollment. Those are two important things to look at in a formula. Anchorage is able to generate large classes because of their large population. The whole issue of the impact of the size also comes into play when they look at instructional models. Number 2159 MS. REDMAN mentioned that last year the university formed a committee that was chaired by the Anchorage chancellor Gorsuch, and they worked all last summer on looking at formulas for the allocation of the instructional resources. They spent many hours going over detailed data trying to find where the differences are, and if there are major differences between the campuses once they strip away the things that are unique. For instance, UAF has a huge public service responsibility because of the Cooperative Extension Service, the Marine Advisory Program, things that UAA does not have. The University of Alaska Anchorage is not the land-grant institution, and it doesn't have those responsibilities. Anchorage has other responsibilities that UAF doesn't have. It has a much greater part-time and adult population; a much larger traditional community college type population that brings a lot of other issues. They tried to separate the differences out and the committee found that there are some differences in some key program areas. They were very small compared to what people were expecting to see, but they were significant in some areas. MS. REDMAN noted that those are the areas they are attempting to address now. The areas where they saw the big differences were in programs that are in the core curriculum: English, speech and history where they saw that UAF had many more faculty FTE per student than they had in Anchorage. They then compared them with the national averages. It is not that Fairbanks is over where they should be; but that Anchorage is so far under where they need to be. It is not in anybody's best interest to now make UAF under where they should be to increase Anchorage. They are trying to shift the resources as they become available so as UAF and UAA have faculty vacancies, they are trying to gather those in a way that they can allocate them out. Unfortunately, they haven't been able to hire back many of the faculty vacancies, so they are trying to focus the hiring on the areas that are the most underserved. MS. REDMAN said this bill follows the national formula which is applied to new money. It is not that the legislature is attempting to go in and re-allocate the existing base but trying to direct the appropriation of new monies into the priority areas. She likes the fact that there is real money attached to this bill. On the other hand, she believes that it really is the Board of Regents responsibility to try to make these decisions. There is no way that this particular formula can cover the kinds of issues they need to cover. This formula only measures where they are today; it doesn't provide any model to aspire to which is part of what the legislature is trying to do with new monies: to help a campus build toward something that it can be. The legislature will see in this year's budget request new program initiatives in Anchorage because they are building the new logistics program and the new health care programs. Those are things that they couldn't calculate into a formula like this because there is nothing there now. She understands the motive, and appreciates the frustration that led to this, but she believes that the Board of Regents are in a better position to try to determine where new resources should go in the university. They are the only ones who have the time and the responsibility to be looking at the needs of the whole state within the higher education system context. Number 1920 CO-CHAIRMAN DYSON agreed that the argument of the UAF faculty devoted to research is a valid one. He wondered how close do they come to paying for themselves. MS. REDMAN said the faculty that they hire to do research must pay for all of themselves. There are research faculty, who must cover their own salary, and instructional faculty. Instructional faculty can buy out of some instruction by bringing in research money so they can get let off of a teaching load to do research. Number 1877 CO-CHAIRMAN DYSON asked if non-teaching staff and facilities are included in the research budget at UAF. MS. REDMAN replied yes plus: They spend about $12 million a year in state money that is supportive of research, which about three quarters of that is in Fairbanks, and about one quarter is in Anchorage. The state return is $4.50 for every dollar that goes in. Research is generating, not only the full cost of the research, but they get research overhead in direct cost recovery, which is calculated by the federal government, and that provides additional income to heat the buildings and do the accounting and so on. CO-CHAIRMAN DYSON inferred that the research programs in Fairbanks are actually subsidizing the educational program. Number 1816 MS. REDMAN answered it is about a quarter out of every four dollars that they calculated to be a subsidy. It is a good deal, and it is why they are trying to push more research in Anchorage. Research does provide a subsidy on the facilities side. CO-CHAIRMAN DYSON commented that she may have suggested that if there is no new money, there is going to be no addressing of the inequities of the present allocations of the university's financial resources. Number 1750 MS. REDMAN denied that was her intent. Even with no new resources, they are attempting to deal with that issue. They just make smaller steps when they are dealing with reductions instead of increases. The ability to make changes is much less. CO-CHAIRMAN COGHILL asked if the properties throughout the state that the university is managing for income is worked through the UAF campus or is it done in the different campuses. Number 1711 MS. REDMAN said that is done centrally, but it doesn't show up in the UAF budget; it shows up in a statewide administration budget. They do not use any general fund money to manage their land; it is all income from the lands themselves. CO-CHAIRMAN DYSON mentioned that U.S. Senator Murkowski is trying to get unallocated federal lands allocated to the university. He asked Ms. Redman if they thought it likely to happen, if it did, will it be easy and practical for the university to convert those lands to income producing property or some kind of investment account, and how quickly it could happen. Number 1648 MS. REDMAN indicated that she gives it about a fifty-fifty chance of getting through Congress. She believes that they could make money, and there are some possibilities that actually have some potential money. It would be well into the future. Land is just not going to solve a problem in this decade. It could take 10 to 20 years at best. CO-CHAIRMAN COGHILL asked if there is a problem in the formula trying to make an even distribution given that certain schools are going to have different pieces of that. Number 1545 MS. REDMAN said the difficulty is not necessarily a problem; it is only half the picture. They need to add to the formula the whole issue of the type of institution it is, the size of the institution and the mission. If they took the community colleges and put them up one-on-one against the university, the community colleges would get all the money. They are extremely efficient because they operate primarily with adjunct faculty, offer only lower division classes and have huge classes that generate a lot of income. That is why they just can't look at them that way. This formula attempts to get at part of that, but it doesn't get at the mission issue, which is the more subjective analysis that they have to go through. The Committee took an at-ease from 12:50 p.m. to 12:59 p.m. Number 1445 REPRESENTATIVE BUNDE commented that in his 25 years working there, there has never been year when the university had enough money or too much money. He began there when there wasn't a campus in Anchorage, and they couldn't get one because the legislature gave the money to the regents, and the regents in their wisdom chose not to build a campus in Anchorage, knowing full well when they did, there was going to be a demand for funds there, and Fairbanks would have competition. For years the state put money into the regent's hands, and Anchorage said it is only fair, give us our turn. As Ms. Redman said, the 90s was UAA's decade, and they didn't get it, because the current system allocates money in part on political considerations. The notion that they would put more money into a system that distributed the money in what some people might think an unfair fashion is a little bit politically naive. The majority in the legislature is from Anchorage. He asks that the university ask themselves if they expect the legislature to support the university, they would work diligently to assure them, that the money would be distributed in a fair and equitable fashion. The university has been promised those things before, and they haven't occurred. Maybe there is hope for the future, and behavior will change. Number 1282 CO-CHAIRMAN DYSON made a motion to move HB 115 out of committee with individual recommendations and attached fiscal note. Number 1261 REPRESENTATIVE BRICE objected. Number 1256 REPRESENTATIVE WHITAKER commented that his commitment is not to UAF but rather to excellence. "If the resources are simply not there to provide for excellence throughout the system, then let's focus and provide excellence where we can, and then try to raise the level throughout to a level of excellence. By lowering the level throughout, I think we do not serve ourselves well. The other major concern that I have with regard to this legislation is that we are now putting ourselves in the position of dictating to the regents how to spend the money that we allocate. I think that is problematic. It alludes to micro-management, and that is not our charge. Our charge is to set policy. Our policy should be to demand excellence throughout, and then be willing to fund at a level that will allow for the achievement of that excellence. For those reasons, and not for the notion that this is UAF as opposed to UAA, I simply cannot vote for this." Number 1160 REPRESENTATIVE BRICE echoed that his commitment is to excellence as well. "My blood oath is to the UA system, not to UAF. During my tenure in this body, I have voted consistently for Anchorage dormitories and other programs that helped UAA. I think that UAA is a very important part just as is UAF and UAS [University of Alaska Southeast] is a very important part. I think that is my problem with [HB] 115, it is a step towards what I would like to see which would be a foundation formula approach to funding the university." He would like the legislature to show the university the same commitment and faith shown to public K-12 education in establishing a funding level and fund it as the needs grow. He would love to see a foundation formula for the funding, not necessarily the allocation. They need to address the needs of a certain area of the state. He believes they need to look at how they do that, and the foundation formula is a way to doing that, not an allocation formula. REPRESENTATIVE GREEN commented that if they continued with that line of reasoning then they would still be in Sitka rather than in Juneau. Through the wisdom of the people in that age, they moved from that area to this area and of course there are a lot of people who think it should move again. He pointed out that they have the university on one end and the capital on the other end, but the growth of this state has been in southcentral. If they are saying that that is a fine situation, but they want to keep the institutions on the extremities and let the people in the middle to what they want, he believes that works against the entire premise that they are trying to do what they can for the best of the majority of the people of the state. To reject this is not in the best interest of all the people in the state. It may be to maintain an excellent university in one part of the state, but does it adequately serve the majority of the people in another part of the state. "I have to do what I think is the best for the majority of the people so I have to support the recommendation to move it." Number 952 REPRESENTATIVE WHITAKER said if they are to serve the majority of the people, for them to "parochialize" that is a disservice to maintain excellence in a geographic area is really irrelevant to the access to that excellence. It is there for all. Now if they want to create an excellent community college in Anchorage, he will stand on the table and clap his hands. He agrees that Anchorage should have the finest community college in the state of Alaska. Number 0905 CO-CHAIRMAN COGHILL commented that he is resistant to the idea of formulating without being able to get an understanding of the mission beyond the core curriculum that was lined out in the last part of this. He is a little torn because he likes the concept of equity, but he also understands in the university system that they have built in Alaska has created diversity that defies a formula at this point. He is going to have to think on how that can fit into this particular concept. Number 0817 A roll call vote was taken. Representatives Green and Dyson voted in favor of moving the bill. Representatives Whitaker, Morgan, Brice and Coghill voted against it. Representative Kemplen was absent. Therefore, HB 115 failed to move from the House Health, Education and Social Services Standing Committee by a vote of 4-2. Number 0831 CO-CHAIRMAN COGHILL recommended that they bring it up for reconsideration. He is open to any thoughts the sponsor might have on the recommendations for the diversity of the university.
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