Legislature(2019 - 2020)ADAMS ROOM 519

03/14/2019 09:00 AM FINANCE

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Audio Topic
09:04:50 AM Start
09:05:54 AM Fy 20 Department Budget Overview: University of Alaska
10:49:45 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
-- Continued from 3/13/19 --
+ FY20 Department Overviews: TELECONFERENCED
University of Alaska
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 14, 2019                                                                                            
                         9:04 a.m.                                                                                              
9:04:50 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster called the House Finance Committee meeting                                                                      
to order at 9:04 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Mike Barnhill, Policy Director, Office of Management and                                                                        
Budget; Representative Tiffany Zulkosky.                                                                                        
PRESENT VIA TELECONFERENCE                                                                                                    
FY 20 DEPARTMENT BUDGET OVERVIEW: UNIVERSITY OF ALASKA                                                                          
Co-Chair Foster reviewed the agenda for the meeting. He                                                                         
invited the testifiers to the table.                                                                                            
^FY 20 DEPARTMENT BUDGET OVERVIEW: UNIVERSITY OF ALASKA                                                                       
9:05:54 AM                                                                                                                    
MIKE  BARNHILL, POLICY  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET,  introduced himself  and  announced  that as  policy                                                                    
director of  the Office  of Management  and Budget  (OMB) he                                                                    
confined  his role  to policy  regarding budget  development                                                                    
and did not  provide policy directives to  the University of                                                                    
Alaska (UA). He began with  the University of Alaska portion                                                                    
of  the  OMB  PowerPoint  presentation:  "FY2020  Governor's                                                                    
Amended  Budget." He  appreciated  President James  Johnsen,                                                                    
[President,  University  of Alaska]and  his  professionalism                                                                    
throughout the discussion.                                                                                                      
Mr.  Barnhill started  with slide  8 titled  "FY2020 Budget:                                                                    
University   of   Alaska"    that   contained   bar   charts                                                                    
illustrating  the revenue  sources for  the university.  The                                                                    
bar  charts showed  the combined  Unrestricted General  Fund                                                                    
(UGF)  and Designated  General Fund  (DGF). The  other chart                                                                    
provided a breakdown  of the budget and UGF  and DGF funding                                                                    
sources. He reported  that in the FY 19  management plan the                                                                    
legislature appropriated a total  of $888.547.8 million, the                                                                    
majority was comprised  of UGF and DGF. He  offered that the                                                                    
FY 20 budget  increased slightly to $901.4  million with the                                                                    
budgeted positions remaining at 3,993 for both years.                                                                           
9:08:16 AM                                                                                                                    
Mr.  Barnhill   continued  to   slide  9:   "FY2020  Budget:                                                                    
University  of Alaska:  Funding Comparison."  The bar  chart                                                                    
illustrated a decrease  of $134 million UGF  coupled with an                                                                    
increase  of  $154  million  in  DGF.  The  purpose  of  the                                                                    
increase was  simply to allow  the university to  seek other                                                                    
fund  sources  and  to  help offset  the  decrease  of  $134                                                                    
million.  The administration  did not  offer the  university                                                                    
policy  directives  or  expectations. He  relayed  President                                                                    
Johnsens   statement  that the  cut  was  the equivalent  to                                                                    
doubling tuition.                                                                                                               
Co-Chair Wilson asked  what the administration's expectation                                                                    
of  how  the cut  could  be  offset  was. She  thought  that                                                                    
doubling tuition  would be   devastating  for  students. She                                                                    
wondered what  alternative funding  OMB had  identified that                                                                    
the  university had  not taken  advantage  of. Mr.  Barnhill                                                                    
responded that  all universities  had a  variety  of funding                                                                    
sources available  to them.  He  discerned that it  would be                                                                    
difficult  for the  university to  make up  for the  lack of                                                                    
funding  with other  revenue sources  in  short  order.  The                                                                    
cut  could  be  addressed  in   a  variety  of  ways;  i.e.,                                                                    
increasing tuition,  additional revenue from  other sources,                                                                    
and  implementing  reductions.  Co-Chair Wilson  asked  what                                                                    
other  resources   were  available  other  than   a  tuition                                                                    
increase. She  thought that the administration  was aware of                                                                    
other funding  the university could  tap into.  Mr. Barnhill                                                                    
was  not  aware  of  any  specific  additional  funding.  He                                                                    
elaborated  that universities  typically employed  a variety                                                                    
of  funding  sources  that  included  alumni  contributions,                                                                    
leveraging federal funding,  private sector fundraising, and                                                                    
tuition. He  added that UA  could also  employ consolidation                                                                    
and cost reductions.                                                                                                            
9:11:21 AM                                                                                                                    
Co-Chair  Wilson maintained  that additional  cuts could  be                                                                    
made. She relayed that President  Johnsen had brought up the                                                                    
notion of  leveraging funds. She asked  whether the proposed                                                                    
cut would  make it more  difficult to leverage  other funds.                                                                    
Mr.  Barnhill was  not familiar  with the  types of  federal                                                                    
funding UA  leveraged. He offered that  universities matched                                                                    
funds  differently than  Medicaid  that typically  had a  50                                                                    
percent  match.  He  reported   that  UA  leveraged  federal                                                                    
funding on a  6 to 1 ratio and the  University of Michigans                                                                     
research  program   matched  on   a  29   to  1   ratio.  He                                                                    
acknowledged that  leveraging other federal funds  would not                                                                    
happen  quickly. Co-Chair  Wilson wished  that Mr.  Barnhill                                                                    
could   identify  the   other   funds   accessible  to   the                                                                    
Vice-Chair  Ortiz understood  that  Mr.  Barnhill could  not                                                                    
direct UA  policy. He  wondered whether it  was fair  to say                                                                    
that  the administration  no longer  valued continued  state                                                                    
support of the UA System.                                                                                                       
Mr. Barnhill  replied in the negative.  He communicated that                                                                    
the  administrations   position   regarding  the  university                                                                    
recognized   its  importance   in  the   state.  The   state                                                                    
demonstrated   its  support   in  the   current  budget   by                                                                    
appropriating $190 million. He  stated that  publicly funded                                                                    
universities  not   only  survived  but  thrive   with  less                                                                    
funding.   The administration  believed that  UA could  grow                                                                    
and  achieve a  high quality  of education  on the  proposed                                                                    
level of funding.                                                                                                               
9:14:52 AM                                                                                                                    
Representative Josephson  noted that he had  listened to the                                                                    
university hearings held  in the other body  on February 19,                                                                    
2019.  He referenced  a question  directed to  the president                                                                    
about  the  effects  of  a  40  percent  UGF  reduction.  He                                                                    
interpreted  President Johnsens   answer  to  mean that  the                                                                    
amount  of  DGF  was  insufficient to  sustain  the  federal                                                                    
grants  and other  sources of  revenue. He  believed in  the                                                                    
Presidents  credibility and  related that the administration                                                                    
did not  offer any  evidence to  support their  proposal. He                                                                    
wondered  why he  should doubt  the presidents   conclusions                                                                    
that the loss in UGF meant the  collapse  of other funding.                                                                     
Mr.  Barnhill replied  that the  answer lied  in the   path                                                                     
that the  state chose  going forward.  He admitted  that the                                                                    
cut  would be   disruptive to  the university.   He conveyed                                                                    
that  the question  was how   to  implement the  cut in  the                                                                    
least destructive way.  He believed  there was a way forward                                                                    
for  UA because   other universities  travelled this  path.                                                                     
Representative Josephson  wanted to  hear about  where there                                                                    
was a 41  percent cut to another university  and its success                                                                    
9:17:22 AM                                                                                                                    
Mr.  Barnhill advanced  to the  chart on  slide 10:  "FY2020                                                                    
Budget: University of Alaska Snapshot ($ Thousands)"                                                                            
      Reduce the State Contribution for University of                                                                           
      Alaska System-wide Campuses (-$154,339.1 UGF)                                                                             
      Increase State Contribution for University of Alaska                                                                      
      Community Campuses (+$20,410.6 UGF)                                                                                       
Mr.  Barnhill  explained  that previously  UA  had  multiple                                                                    
appropriation  lines and  several  years  prior requested  a                                                                    
single line appropriation. The proposal  by the governor was                                                                    
to divide the university  appropriation into two components:                                                                    
the   university   component   and  the   community   campus                                                                    
component.  The  slide showed  that  the  result was  a  net                                                                    
reduction of $134 million.                                                                                                      
Mr.  Barnhill   continued  to  slide  11:   "FY2020  Budget:                                                                    
University of Alaska Snapshot."                                                                                                 
      Budget Development                                                                                                        
    Compare revenues and expenditures of the University                                                                         
      of Alaska                                                                                                                 
      With other publicly funded universities                                                                                   
      With other land grant universities                                                                                        
      Amongst the various UA campuses                                                                                           
Vice-Chair Ortiz referenced slide  10. He asked Mr. Barnhill                                                                    
to   define  a   community  campus.   He  wondered   whether                                                                    
University  of  Alaska  Southeast Ketchikan  campus  was  an                                                                    
example.  Mr.  Barnhill  responded in  the  affirmative.  He                                                                    
identified 13 community campuses  that were listed on slides                                                                    
13,  14, and  15.  Vice-Chair Ortiz  asked whether  specific                                                                    
communication had  occurred with  the university  to request                                                                    
the  shift  in  funding.   Mr.  Barnhill  responded  in  the                                                                    
negative. The reduction was proposed  by OMB born out of the                                                                    
budget  analysis.   He  relayed  that   President  Johnsens                                                                     
testimony contained several comments  supporting the idea of                                                                    
providing  additional resources  to the  community campuses.                                                                    
Vice-Chair Ortiz  thought it  was safe  to say  that lacking                                                                    
communication  between   UA  and  the   administration,  the                                                                    
administration  was directing  the shift  in UA  policy. Mr.                                                                    
Barnhill responded  in the affirmative with  the caveat that                                                                    
the action was a proposal and  he had the  burden of proof.                                                                     
He believed in the merit of the proposal.                                                                                       
9:22:40 AM                                                                                                                    
Mr.  Barnhill  moved  to slide  12  titled  "FY2020  Budget:                                                                    
Compare  University  of  Alaska  to  other  publicly  funded                                                                    
universities."  He indicated  that  the universitys   campus                                                                    
college  system was  UAs  most  cost-effective system,  even                                                                    
though the community  campuses did not bear  its full costs.                                                                    
He  relayed  a  concern  stated by  President  Johnsen  that                                                                    
Alaska  had  the  lowest percentage  (67  percent)  of  high                                                                    
school students that undertook  higher education. He offered                                                                    
that the community campus was  a solution; hence, the reason                                                                    
for  increasing  the  budget  for  the  community  campuses.                                                                    
Decreased  tuition  would act  as  a  further incentive  for                                                                    
students  to  pursue  higher  education.  President  Johnsen                                                                    
mentioned that the community campuses  had a high percentage                                                                    
of  students  attending  part-time. He  indicated  that  the                                                                    
standard  measure  of  university  success  was  a  six-year                                                                    
graduation rate. The university  had a  relatively low  six-                                                                    
year  graduation  rate; 39  percent  for  the University  of                                                                    
Alaska Fairbanks (UAF), 24 percent  for University of Alaska                                                                    
Anchorage  (UAA),  and  19 percent  for  the  University  of                                                                    
Alaska Southeast  (UAS). Over  time, the  8, 9,  and 10-year                                                                    
graduation rates increased. He  suggested that students were                                                                    
better  served by  the community  campus model.  He reported                                                                    
that a  high percentage of  high school graduates  were less                                                                    
prepared  and  needed  remedial instruction.  The  community                                                                    
campus  offered a  cost-effective  way  to deliver  remedial                                                                    
education rather  than a high cost  4-year campus structure.                                                                    
He suggested  initially channeling  the students in  need of                                                                    
remedial instruction  into the  community campus for  a year                                                                    
or two.  President Johnsen spoke  about the  opportunity for                                                                    
career and  technical training within the  community college                                                                    
system. He  hoped that he effectively  communicated that the                                                                    
two-component system was appealing and worth consideration.                                                                     
9:27:02 AM                                                                                                                    
Representative  Merrick  referred   to  President  Johnsen's                                                                    
testimony that  the cost savings from  closing the community                                                                    
campuses  was $38  million. She  asked  if the  net loss  to                                                                    
community  campuses was  $18 million  after the  $20 million                                                                    
increase.  Mr.  Barnhill   interpreted  President  Johnsens                                                                     
answer  to imply  that closing  all  the community  campuses                                                                    
would result in a savings of only $38 million.                                                                                  
Mr.  Barnhill  jumped to  slide  17  titled "FY2020  Budget:                                                                    
Compare  University   of  Alaska  amongst  the   various  UA                                                                    
campuses."  He highlighted  the spreadsheet  authored by  UA                                                                    
that illustrated  the relative costs between  the university                                                                    
and  community campuses.  The spreadsheet  was divided  into                                                                    
three  parts:  UAA,  UAF,  and UAS  main  campuses  and  the                                                                    
community campuses  associated with them. He  pointed to the                                                                    
bottom of the  spreadsheet that contained the  totals of the                                                                    
main campus  and the community  campuses. The total  for the                                                                    
community  campuses  was  approximately $37  million,  which                                                                    
illustrated  President  Johnsens   point. He  asserted  that                                                                    
community  campuses  were  a   solution  that  had  a  cost-                                                                    
effective  structure and  provided  low  cost, high  quality                                                                    
education  to  a  higher  percentage  of  younger  Alaskans.                                                                    
Representative Merrick  asked whether  the total  budget for                                                                    
community campuses  was $58 million. Mr.  Barnhill responded                                                                    
in the affirmative.                                                                                                             
9:30:10 AM                                                                                                                    
Representative  Sullivan-Leonard asked  to  return to  slide                                                                    
11. She  pointed to  the land  grant universities  and asked                                                                    
for  further clarification.  She  shared  a discussion  with                                                                    
President  Johnsen regarding  the issues  UA had  in selling                                                                    
land.  Mr. Barnhill  provided a  brief history  of the  land                                                                    
grant universities.  He related  that the  universities were                                                                    
established  by  congress in  the  1860s   to enable  higher                                                                    
education   to  be   self-supporting.  The   university  was                                                                    
established   when    Alaska   became   a    territory   and                                                                    
approximately 100  million acres  were targeted for  UA. The                                                                    
Alaskan constitution prohibited dedicated  funds and when UA                                                                    
attempted  land selection  the governor  at the  time barred                                                                    
the university  due to the  dedicated fund  prohibition. The                                                                    
issue  existed  since statehood  and  the  most recent  case                                                                    
before the Alaska Supreme Court  regarding the issue in 2009                                                                    
upheld the  dedicated fund  prohibition. He  understood that                                                                    
UA was  working with the  federal delegation to  deliver the                                                                    
land grant  through a  change in federal  law. The  issue of                                                                    
land grants  had been  with the  state since  statehood. The                                                                    
percentage   of  revenue   that  other   land  grant   state                                                                    
universities derived  from investments was  relatively small                                                                    
in the amount of 1 percent  to 3 percent. The revenue mix of                                                                    
any  university tuition  included  tuition, state,  federal,                                                                    
and private sources.                                                                                                            
9:34:14 AM                                                                                                                    
Representative Josephson referred to  slide 12 and slide 17.                                                                    
He  referenced  Mr.  Barnhills  remark  that  the  community                                                                    
campuses  did  not bear  the  full  cost of  their  expenses                                                                    
without  further elaboration  yet concluded  that they  were                                                                    
the  most cost-effective  campuses in  the system.  He asked                                                                    
how  Mr.  Barnhills   claim   was  supported.  Mr.  Barnhill                                                                    
elaborated  that varying  levels  of subsidization  occurred                                                                    
within the  university system  and pointed  to slide  17. He                                                                    
reiterated that  the community campuses had  the lowest cost                                                                    
per student.  The administrative  costs were located  on the                                                                    
bottom right of the  spreadsheet showing roughly $53 million                                                                    
in  costs  through   statewide  expenditures  that  included                                                                    
administration. He  continued that  the $53 million  was not                                                                    
allocated among  the various campuses but  was roughly $1000                                                                    
per student. He commented that  if he appeared dismissive it                                                                    
was because  the allocation of  the administrative costs did                                                                    
not impact  materially the cost  drivers illustrated  in the                                                                    
spreadsheet.   Representative  Josephson reported  that  the                                                                    
president had  commented in subcommittee that  the community                                                                    
campus  tuition was   overcharged  relative  to the  typical                                                                    
norm  and the regents were  exploring a tuition reduction of                                                                    
25  percent.    He  wondered if  the  administration  wanted                                                                    
students  to move  to  rural Alaska  to  attend a  community                                                                    
campus  rather  than  a recent  high  school  graduate  from                                                                    
Anchorage attending UAA. Mr. Barnhill  responded that one of                                                                    
the  difficulties of  the spreadsheet  was that  it combined                                                                    
all colleges associated with its  main campus. He noted that                                                                    
the  UAA main  campus line  included the  UAA Community  and                                                                    
Technical College  that had 1,147  students. He  voiced that                                                                    
the Anchorage student  was not required to move  to attend a                                                                    
community campus.                                                                                                               
9:40:24 AM                                                                                                                    
Mr.  Barnhill   returned  to  slide  12   which  provided  a                                                                    
comparison.   He   acknowledged    that   comparing   Alaska                                                                    
institutions  to other  states  was not  a fair  comparison.                                                                    
However,   he  believed   that   the  comparisons   provided                                                                    
 context.   The  graphs were  created  by  the State  Higher                                                                    
Education  Officers   Association  and  was  posted  on  its                                                                    
website.   The   two    charts   compared   all   government                                                                    
appropriations for publicly  funded colleges nationwide. The                                                                    
chart on the right portrayed  Alaska. He noted that the blue                                                                    
bars  reflected  government  appropriations, the  green  bar                                                                    
reflected tuition and the red  line depicted enrollment. The                                                                    
numbers reflected  inflation adjusted for 2017  dollars. The                                                                    
national   average  state   appropriation  was   $7,642  per                                                                    
student. Alaska's  figure was more  than twice  the national                                                                    
average at $16,391.                                                                                                             
Representative  Josephson wondered  how  the comparison  was                                                                    
helpful. He referenced a document  written by Susan Hendrix,                                                                    
a former UA provost [not  distributed] that pointed out that                                                                    
the   comparison   was   flawed,   although   mathematically                                                                    
accurate. He  emphasized that the  state lacked  a community                                                                    
college  system  and  lacked   local  contributions  to  the                                                                    
college system. He relayed that  the president reported that                                                                    
an estimated $50  million was the equivalent  amount of what                                                                    
Alaska  would  receive  with  such   a  system.  The  report                                                                    
indicated that money and fees  raised from residential halls                                                                    
and  other  similar  elements were  lacking  in  Alaska.  In                                                                    
addition, he  mentioned the cost of  living differential and                                                                    
geographic  spread. Mr.  Barnhill  relayed that  comparisons                                                                    
were   never   perfect  and   merely  provided  context.  He                                                                    
informed  the  committee that  he  was  given Ms.  Hendrixs                                                                     
report.  He took  the per  student state  support number  of                                                                    
$7,642 and  supplied a  multiplier of  40 percent.  He noted                                                                    
that  Ms. Hendrix  recommended a  30 percent  multiplier. He                                                                    
maintained  that the  state appropriated  twice  as much  as                                                                    
other states.                                                                                                                   
9:45:44 AM                                                                                                                    
Mr.  Barnhill  discussed  slide 13  titled  "FY2020  Budget:                                                                    
Compare   University  of   Alaska   to   other  land   grant                                                                    
universities: Five  universities with highest  percentage of                                                                    
revenues from state":                                                                                                           
    State University of Puerto Rico-Mayaguez     70.8%                                                                          
    University of the District of Columbia       48.7%                                                                          
     Fond du Lac Tribal and Community College     44.0%                                                                         
    Kentucky State University                    43.4%                                                                          
    University of Alaska Fairbanks               43.0%                                                                          
          Source: National Center for Education Statistics,                                                                     
          IPEDS database                                                                                                        
Mr. Barnhill  cited the sources  website  that provided data                                                                    
and  welcomed anyone  to  make  comparisons. He  highlighted                                                                    
that  the  data  only  included  the  University  of  Alaska                                                                    
Fairbanks and  did not included  UAA or UAS. He  was unclear                                                                    
for the  reason of  the exclusion. He  cited a  UA statistic                                                                    
that state support  totaled 36 percent in FY  19. He thought                                                                    
that the percentage was relatively high.                                                                                        
9:48:32 AM                                                                                                                    
Mr.  Barnhill reviewed  slide  14:  "FY2020 Budget:  Compare                                                                    
University  of Alaska  with other  land grant  universities:                                                                    
Possible to thrive with lower state support":                                                                                   
     Oregon State University            18.0%                                                                                   
     University of California-Berkeley  17.7%                                                                                   
     Clemson University                 17.6%                                                                                   
     Purdue University-Main Campus      15.9%                                                                                   
     University of Rhode Island         15.6%                                                                                   
     University of Wisconsin-Madison    14.5%                                                                                   
     University of Arizona              13.8%                                                                                   
     University of California-Davis     12.0%                                                                                   
     University of Kentucky             11.9%                                                                                   
     Leech Lake Tribal College          10.2%                                                                                   
     University of Missouri-Columbia    10.1%                                                                                   
     Michigan State University          9.8%                                                                                    
     University of New Hampshire-Main Campus      9.7%                                                                          
     Colorado State University-Fort Collins       9.4%                                                                          
     Ohio State University-Main Campus            7.8%                                                                          
     University of Illinois at Urbana-Champaign   7.4%                                                                          
     University of Vermont                        6.2%                                                                        
Mr.  Barnhill  noted  that  the   slide  listed  land  grant                                                                    
universities on  the lower  end of  state support.  He urged                                                                    
the committee  to recognize the possibility  that land-grant                                                                    
universities could  exist with lower state  support. He felt                                                                    
that UA had  its  own unique features  that  would enable it                                                                    
to survive with decreased state revenue.                                                                                        
9:49:52 AM                                                                                                                    
Vice-Chair  Johnston loved  looking  at  data. She  wondered                                                                    
what  points Mr.  Barnhill was  attempting  to suggest.  She                                                                    
referred to  slide 14  and commented that  the list  did not                                                                    
include community  college systems or  differentials related                                                                    
to  locations. She  noted  that she  was  familiar with  the                                                                    
University of Vermont  system. She noted that  Vermont had a                                                                    
smaller  population than  Alaska, was  primarily rural,  and                                                                    
had a  small economy.  The state had  a community  system, a                                                                    
state system, and a university  system. The in-state tuition                                                                    
at  Vermont  state  colleges was  roughly  $11,000  and  its                                                                    
universities   in-state tuition  was $17,000  versus out-of-                                                                    
state at  $40,000. She  reiterated that  Vermont had  a very                                                                    
small economy  or no economic base.  However, the university                                                                    
was able to market its  schools to neighboring states  large                                                                    
metro  areas. She  did not  think  that UA  could market  to                                                                    
other  states  at  the  same  level.  She  highlighted  that                                                                    
California  had a  robust university,  state, and  community                                                                    
college system  that feed into  each other.  She illuminated                                                                    
that in Oregon,  students from other states  could enroll in                                                                    
the  community  college  system   to  qualify  for  in-state                                                                    
tuition at  the universities.  She believed that  each state                                                                    
had its  own  story  and  that OMB had  pushed  the boarders                                                                    
of  your stories.   She  deduced that  OMBs   point was  the                                                                    
state had a community  college system and university system.                                                                    
However, Alaska  was lacking the  element that  other states                                                                    
had;  a  community college  system  that  fed into  a  state                                                                    
college  system  that  fed into  a  university  system.  Mr.                                                                    
Barnhill replied that first, he  was setting the context for                                                                    
public  funding for  UA.  He thought  the  stories spoke  to                                                                    
possibilities  for ways  state universities  leverage things                                                                    
unique to them in order  to diversify their funding sources.                                                                    
There  were  examples  and  lessons  learned  from  all  the                                                                    
universities listed on  the slide that could  be tapped into                                                                    
to  develop a  path forward  for  Alaska. He  was trying  to                                                                    
provide a  context on slide  14 for the revenue  and expense                                                                    
numbers on slide 17. Vice-Chair  Johnston inquired about the                                                                    
inclusion  of  Kentucky State  University  on  slide 13  and                                                                    
University  of Kentucky  on slide  14  and asked  if he  was                                                                    
trying to make  a specific point. Mr.  Barnhill responded in                                                                    
the negative. He added that  Kentucky University happened to                                                                    
be  on  the   slide.  He  offered  to   provide  the  entire                                                                    
spreadsheets from all the slides.                                                                                               
9:56:48 AM                                                                                                                    
Co-Chair  Foster recognized  Representative Zulkosky  was in                                                                    
the audience.                                                                                                                   
Co-Chair  Wilson  inquired  whether he  examined  statistics                                                                    
comparing the  land granted to  each land  grant university.                                                                    
Mr. Barnhill  replied in the  negative. He assumed  that the                                                                    
revenue information  included revenue from  land investments                                                                    
for  the land  grant  universities. He  reiterated that  the                                                                    
land investments  typically accounted for a  small amount of                                                                    
revenue.  Co-Chair Wilson  asked  about  the additional  $20                                                                    
million appropriated  to additional community  campuses. She                                                                    
wondered how he thought the  funding would be allocated. Mr.                                                                    
Barnhill  emphasized  that  OMB  wanted  to  illuminate  the                                                                    
tremendous  opportunities in  the  community campus  system.                                                                    
How  UA   implemented  the  funding  was   the  university's                                                                    
discretion.  He  emphasized   the  opportunities  and  cost-                                                                    
effective structure in the community campus system.                                                                             
10:00:57 AM                                                                                                                   
Co-Chair  Wilson  declared  that  she  was  not   picking  a                                                                    
fight.  She  thought a behavior change  was ultimately being                                                                    
discussed. However,  the state  had some  responsibility for                                                                    
the  size  of  the  universitys  budget  by  granting  large                                                                    
appropriations  to  the  university  in the  past.  She  was                                                                    
trying to  figure out what  was really being  suggested with                                                                    
the  dual  appropriation.  Mr.  Barnhill  did  not  perceive                                                                    
anything she was saying a  picking a fight. He described the                                                                    
appropriation as a nudge.                                                                                                       
Representative Josephson  wanted to hear more  about current                                                                    
unmet  needs  as  related to  the  community  campuses.  Mr.                                                                    
Barnhill replied  that roughly  only 30 percent  of Alaska's                                                                    
high  school   students  go  on  to   higher  education.  He                                                                    
associated  the  percentage  of students  who  do  not  seek                                                                    
higher education as the unmet  need. He thought that a large                                                                    
subset  of  the students  would  attend  a community  campus                                                                    
program if  it was   tailored to  their needs.   He reported                                                                    
that  one of  the largest  challenges  the UAF  faced was  a                                                                    
 shocking  reduction in  enrollment;  a  loss of  20 percent                                                                    
since 2012.                                                                                                                     
10:05:05 AM                                                                                                                   
Representative Josephson referred to  slide 13. He suggested                                                                    
that if  UGF was  considered as a  percentage of  UAs  total                                                                    
$881  million  state  support  was  under  37  percent.  The                                                                    
University  of Alaska  would probably  be found  on the  top                                                                    
third  of  the list  but  not  in  the  top 5  schools.  Mr.                                                                    
Barnhill was unsure  and would provide the  entire chart. He                                                                    
referred to  university budget data  that provided  the same                                                                    
percentage as  slide 13; 43 percent.  He relayed percentages                                                                    
since 2014 that varied from 42  to 47 percent. His point was                                                                    
that  the  number   was  accurate  and  on   the  high  end.                                                                    
Representative  Josephson remarked  that he  was looking  at                                                                    
OMBs   FY  19  management  plan data  and  calculated  state                                                                    
support at 37  percent. Mr. Barnhill responded  that it made                                                                    
a difference on how things were counted.                                                                                        
10:08:09 AM                                                                                                                   
Vice-Chair  Ortiz spoke  about land  grant universities.  He                                                                    
understood  that UA  had  only received  25  percent of  its                                                                    
allotted  land and  was still  owed 360  thousand acres.  He                                                                    
wondered if  the administration had investigated  the issue.                                                                    
Mr. Barnhill  responded that  the data  base showed  that in                                                                    
terms of  overall revenue investment  income for  land grant                                                                    
universities  was  relatively  low. Vice-Chair  Ortiz  asked                                                                    
whether  the land  grant status  of the  universities listed                                                                    
was compared to  UA. He guessed that the  comparison was not                                                                    
made.  Mr.  Barnhill answered  that  he  included the  total                                                                    
revenue data from all the land grant universities.                                                                              
Co-Chair Wilson  interjected that  the bottom line  was that                                                                    
UA could not make money on  land it was not granted, and the                                                                    
issue was not reflected in the data.                                                                                            
10:10:28 AM                                                                                                                   
Representative Sullivan-Leonard  favored the $20  million in                                                                    
community campuses.  She believed that it  would benefit the                                                                    
state  in  the  areas  of nursing  assistants,  health  care                                                                    
aides, dental assistants, etc.                                                                                                  
Co-Chair  Wilson recognized  the  arrival of  Representative                                                                    
10:11:45 AM                                                                                                                   
Mr.  Barnhill scrolled  to slide  15 titled  "FY2020 Budget:                                                                    
Compare  University   of  Alaska   with  other   land  grant                                                                    
universities:  University  of   Alaska  Fairbanks  (UAF)  is                                                                    
relatively expensive  per full  time equivalent  (FTE)." The                                                                    
slide  listed 14  universities   total  expenses, number  of                                                                    
full-time equivalent  students, and  cost per FTE.  He noted                                                                    
that data  was based on  total expenses times the  number of                                                                    
students.  He   highlighted  that   the  expenses   for  the                                                                    
University of  Alaska Fairbanks research group  was combined                                                                    
in the  number but  typically, UA did  not include  it their                                                                    
data because it was different  from the three core services:                                                                    
education, research,  and public service. He  concurred with                                                                    
the   universitys   practice   of  excluding   the  research                                                                    
expenses.  He  reported  that if  you  pulled  the  research                                                                    
number  out  of data  the  FTE  cost was  approximately  $59                                                                    
thousand and corresponded to UAs   data. He believed that it                                                                    
was still on the higher end.                                                                                                    
10:13:07 AM                                                                                                                   
Mr. Barnhill  continued to slide  16 titled  "FY2020 Budget:                                                                    
Compare  University   of  Alaska   with  other   land  grant                                                                    
universities:  96  land   grant  universities;  per  student                                                                    
            25 are $50k and higher per student                                                                                  
            61 are between $25k and $50k                                                                                        
            10 are less than $25k                                                                                               
Mr. Barnhill noted that the  slide reflected the median per-                                                                    
student cost. He  turned to slide 17  titled "FY2020 Budget:                                                                    
Compare  University   of  Alaska  amongst  the   various  UA                                                                    
campuses."  He noted  that the  spreadsheet was  supplied by                                                                    
the university and solely reflected  the cost to provide the                                                                    
core  service of  education. The  statistic did  not include                                                                    
revenue and expenses related to  research ($37 million UGF),                                                                    
public service  ($30 million  UGF), and  auxiliary services.                                                                    
He  furthered  that  each  of  the  main  campuses  and  the                                                                    
community  campuses  were  listed.   He  listed  the  column                                                                    
designations. He  relayed that  the community  campuses were                                                                    
combined in the main  university numbers. The university had                                                                    
other spreadsheets  that pulled  the community  campuses out                                                                    
displaying them  separately [not distributed].  Mr. Barnhill                                                                    
drew  attention to  the numbers  highlighted  in yellow.  He                                                                    
commented  that the  prior slides  had  created context.  He                                                                    
suggested  that slide  16  seemed  to  suggest  that  median                                                                    
costs  at lower  48 land  grant universities  ranged between                                                                    
$24 thousand  to $50 thousand.  He noted that UAAs   FTE was                                                                    
$24,007  [highlighted number].  He contended  that over  the                                                                    
previous hour,  the committee had  discussed the   apples to                                                                    
oranges   comparisons  with the  lower  48  schools and  how                                                                    
Alaska  was  a more  expensive  state.  However, UAAs   cost                                                                    
structure was  competitive with the lower  48. He considered                                                                    
the  cost  structure  a  success. The  FTE  number  for  the                                                                    
University  of Alaska  Fairbanks  was  much higher  [$59,341                                                                    
highlighted   number]  than   UAA  and   other  land   grant                                                                    
universities.  He  elucidated  that   the  high  number  was                                                                    
attributed  not to  higher costs  but fewer  students, which                                                                    
was  reflective of  declining enrollment.  He suggested  UAF                                                                    
had  a  scale  problem  that  informed the  administrations                                                                     
budget   reduction   and   call   for   consolidation.   The                                                                    
administration thought  there was an opportunity  to correct                                                                    
the  scale. He  believed that  the numbers  showed that  the                                                                    
community campus  system was providing education  in a cost-                                                                    
effective way  in most  locations and  could be  achieved in                                                                    
any location. Consolidation was  important not only for cost                                                                    
efficiency, it  was also important for  quality purposes. He                                                                    
thought  the  same  program  offered  at  multiple  campuses                                                                    
 blurred   the  focus   on  quality    and  multiplied   its                                                                    
facilities cost.  He viewed  it as  an opportunity  to scale                                                                    
through  consolidation into  cost structures  that currently                                                                    
10:20:42 AM                                                                                                                   
Co-Chair Wilson  remarked that  the statewide  programs were                                                                    
included in the UAF numbers that made them appear higher.                                                                       
Representative Sullivan-Leonard  asked if the  Mat-Su campus                                                                    
received  federal funding.  Mr.  Barnhill did  not know  the                                                                    
Co-Chair  Wilson commented  that  the  frustration from  the                                                                    
committee was  not knowing where  the numbers came  from and                                                                    
choosing  comparisons that  helped  illustrate a  particular                                                                    
point of view.  Mr. Barnhill related that  he was attempting                                                                    
to  make  his  thinking   and  analysis  as  transparent  as                                                                    
Mr.  Barnhill  explained  slide 18  titled  "FY2020  Budget:                                                                    
Compare  University   of  Alaska  amongst  the   various  UA                                                                    
campuses (continued)." He pointed to  the last column on the                                                                    
right  that  contained  his  calculation  regarding  GF  per                                                                    
student (GF/FTE) for  each of the main  campuses. He relayed                                                                    
the  numbers for  the university  main campuses  was $10,883                                                                    
for UAA, $31,894  for UAF, and $21,137 for  UAS. He reported                                                                    
that  the   community  campus  total  was   $8,434  and  the                                                                    
university campus total was $17,374.  He understood that the                                                                    
administrative  costs  were  separate and  included  at  the                                                                    
bottom  of the  spreadsheet [$1,031  GF/FTE]. Including  the                                                                    
administrative costs would increase  the other totals by the                                                                    
same amount. He emphasized  that the community campus number                                                                    
was   half   of   the  university   number   without   local                                                                    
contributions. He maintained that  community campuses were a                                                                    
cost-effective  structure that  could  be used  to meet  the                                                                    
unmet needs of younger Alaskans.                                                                                                
10:24:49 AM                                                                                                                   
Mr.  Barnhill  turned to  slide  19  titled "FY2020  Budget:                                                                    
Compare  University   of  Alaska  amongst  the   various  UA                                                                    
campuses(continued)."  He pointed  to the  second column  he                                                                    
had added  on the right  side of the spreadsheet  titled  GF                                                                    
Savings.   The  numbers  reflected a  hypothetical  scenario                                                                    
that  assumed  the  two  other  main  campuses  had  a  cost                                                                    
structure like UAA  that demonstrated a savings  of over $91                                                                    
Representative Josephson  suggested that  one of  the things                                                                    
that had not  been evaluated was the  extra costs associated                                                                    
with UAF. When  he toured the campus, he  was impressed with                                                                    
the sophistication  of the programs  that were  not mirrored                                                                    
at UAA. He  recognized the effective cost  structure at UAA.                                                                    
He  elaborated  that  in  general,  it  was  cheaper  to  do                                                                    
business  in  Anchorage. He  thought  that   there was  more                                                                    
going  on  than  meets  the   eye   with  regards  to  OMBs                                                                     
analysis.  He  wondered  why  UAF  was  more  expensive.  He                                                                    
perceived that the same economic  model could not be applied                                                                    
to both  UAA and UAF.  Mr. Barnhill believed that  the issue                                                                    
was scale.  The reason  costs were high  at UAF  was because                                                                    
the  scale was  down. He  suggested  that the  scale at  the                                                                    
community  campus level  was high  because  it included  the                                                                    
campuses  where the   scale  was  centrally located,   which                                                                    
drove  that  aggregate average  cost  down.  The decline  in                                                                    
enrollment at  UAF contributed to  the high cost.  The issue                                                                    
was not cost but scaling.                                                                                                       
10:29:19 AM                                                                                                                   
Co-Chair Wilson  acknowledged that  Representative Carpenter                                                                    
joined the committee.                                                                                                           
10:29:28 AM                                                                                                                   
Mr. Barnhill moved to slide 20 titled "FY2020 Budget:                                                                           
University of Alaska Budget Development:                                                                                        
      University does an excellent job of managing costs at                                                                     
      UAA and in the Community Campus system                                                                                    
      UAA expenses/student: approx. $25k. Very competitive                                                                      
      Community campus expenses/student: approx. $18k                                                                           
      UGF contribution: $11k or less (~40% higher than the                                                                      
      national average)                                                                                                         
 Mr. Barnhill highlighted slide 21 titled "FY2020 Budget:                                                                       
University of Alaska Budget Development [Con't]":                                                                               
      Tuition is equalized between campuses                                                                                     
      University campus tuition is lower than national                                                                          
      Community campus tuition is higher than national                                                                          
    The University may be deterring access to low cost                                                                          
      community campuses while subsidizing higher cost                                                                          
      campuses, particularly UAF.                                                                                               
      Attendance at UAF is declining                                                                                            
    Overall UA attendance has declined 19% since FY2012                                                                         
Mr. Barnhill reviewed slide 22 titled "FY2020 Budget:                                                                           
University of Alaska Core Services":                                                                                            
      Focus on cost-effective delivery of high quality                                                                          
      University is succeeding with costs at UAA and                                                                            
      Community Campuses                                                                                                        
    Too many similar programs in multiple locations may                                                                         
      be impairing quality                                                                                                      
      University is doing a good job of leveraging external                                                                     
      fund sources, in particular federal dollars; 6:1 is a                                                                     
      good start                                                                                                                
      Opportunities exist.    Example: Michigan State                                                                           
      University has approx. 29:1 ratio of external to                                                                          
      state fund sources for its research program                                                                               
      Public Service                                                                                                            
      Focus on becoming self-supporting                                                                                         
      $30mm in UGF to distribute 190,000 publications and                                                                       
     provide service to small business seems like high                                                                          
10:32:32 AM                                                                                                                   
Mr. Barnhill explained slide  23: "FY2020 Budget: University                                                                    
of Alaska Budget Calculations:"                                                                                                 
      Average state contribution to higher education:                                                                           
      Multiplier: 44%                                                                                                           
      $7,642 * 1.44 = $11,000                                                                                                   
      Current UAA GF/FTE: approx. $11,000                                                                                       
      Community Campus Component                                                                                                
      5,611 students * $11,000 = $61.721million                                                                                 
      University Component                                                                                                      
      11,944 students * $11,000 = $131.384million                                                                               
      Total UGF appropriation                                                                                                   
      17,555 * $11,000 = $193.105mm                                                                                             
Mr. Barnhill explained that OMB  calculated that $11,000 FTE                                                                    
was an achievable university wide target.                                                                                       
Representative  Sullivan-Leonard asked  about the  total UGF                                                                    
appropriation.   She   wondered    if   the   administration                                                                    
considered the  PFD contribution as a  resource for students                                                                    
to help  support their statistics. Mr.  Barnhill answered in                                                                    
the negative.  He explained that  the PFD was  factored into                                                                    
each students   personal resources that  contributed towards                                                                    
10:35:21 AM                                                                                                                   
Mr. Barnhill  moved to slide 24:  "FY2020 Budget: University                                                                    
of  Alaska  Summary: Over-reliance  on  state  funding is  a                                                                    
concern." He elucidated  that the universitys  over-reliance                                                                    
on  state funding  had been  a concern.  The university  had                                                                    
been  downgraded  twice  since  2015 by  Moody's  for  over-                                                                    
reliance on  state funding.  He pointed  out that  the state                                                                    
constitution  lacked  language   requiring  funding  UA,  so                                                                    
funding was not constitutionally  driven. The university was                                                                    
identified as a core function,  but the constitution did not                                                                    
mandate funding.                                                                                                                
Representative   Josephson   stressed  that   constitutional                                                                    
mandates to  provide funding was  not the proper  purview of                                                                    
Co-Chair Wilson wanted to avoid a constitutional debate.                                                                        
10:37:35 AM                                                                                                                   
Mr.  Barnhill   continued  to  slide  25:   "FY2020  Budget:                                                                    
University of Alaska Summary:  State universities are rising                                                                    
to the challenge:"                                                                                                              
    Other state universities are scenario planning for                                                                          
      elimination of all state funding. Example: University                                                                     
      of Pittsburgh                                                                                                             
Mr. Barnhill  reported that the  slide provided  examples of                                                                    
other  universities   that  had  funding   difficulties.  He                                                                    
provided an  example from the  University of  Pittsburgh. He                                                                    
did not know about  other universities experiencing the same                                                                    
level of proposed  reduction in a single year.  He had tried                                                                    
to do  some research regarding  the cut in state  support in                                                                    
Pennsylvania. He pointed to the  bar chart on the slide that                                                                    
showed  the  gradual  decrease  in  state  funding  for  the                                                                    
University of  Pittsburgh from  1985 at  24.3 percent  to 15                                                                    
percent  in  2015. He  noted  that  the schools   chancellor                                                                    
engaged  in  proactive  thinking  to  find  a  solution.  He                                                                    
invited UA  to be  forward thinking.  He pointed  to Moodys                                                                     
bond downgrade  for UA.  He thought  there was  a legitimate                                                                    
concern regarding policy.                                                                                                       
10:40:13 AM                                                                                                                   
Representative   Josephson   indicated    that   the   three                                                                    
universities that  were provided as examples  in the slides;                                                                    
University of  California   Berkeley, University  of Oregon,                                                                    
and Clemson were all  crying   for additional state funding.                                                                    
In  addition,  he  believed that  there  was  a  correlation                                                                    
between  the  states   bond downgrade  by  Moodys   and  the                                                                    
universitys   downgrade.  Mr.  Barnhill stated  that   there                                                                    
just isnt   funds  and that all   stakeholders  were seeking                                                                    
revenues. He  indicated that the states   bond downgrade was                                                                    
due  to overreliance  on oil  revenue  and the  university's                                                                    
downgrade  was   due  to  overreliance  on   state  funding.                                                                    
Representative  Josephson  stated   that  the  entire  state                                                                    
budget relied on oil funding.                                                                                                   
Co-Chair Wilson  interjected that  she appreciated  slide 22                                                                    
and slide 26. She thought  what the governor was emphasizing                                                                    
the need to for UA to be more competitive.                                                                                      
10:43:14 AM                                                                                                                   
Mr.   Barnhill   advanced  to   the   last   slide  in   the                                                                    
presentation,  slide  26:   "FY2020  Budget:  University  of                                                                    
Alaska Summary: Path forward for University."                                                                                   
      Path forward for University                                                                                               
      State funding for higher education has declined                                                                           
      In response universities have:                                                                                            
      sharpened their focus on their core educational                                                                           
      aggressively competed for tuition dollars                                                                                 
      sought fundraising dollars from the entire spectrum                                                                       
      of funding sources                                                                                                        
      Private, corporate, alumni, federal                                                                                       
      Focus on strengths                                                                                                        
      community campus/UAA cost structure                                                                                       
      enhance leverage for research dollars                                                                                     
Mr. Barnhill concluded that UA  had  strengths  by operating                                                                    
mostly in  a cost-effective structure and  stated that  they                                                                    
had  the  model that  just  needed  to be  implemented.   He                                                                    
believed that the  budget cut was difficult  but thought the                                                                    
UA  could   operate  a  world-class  university   with  less                                                                    
Representative  Carpenter asked  if the  university had  the                                                                    
right  talent in  the right  place  from  an entrepreneurial                                                                    
focus   to   adjust  its  course.  Mr.   Barnhill  responded                                                                    
10:46:32 AM                                                                                                                   
Representative LeBon  commented on the  declining enrollment                                                                    
at  UAF.  He deduced  that  the  challenge was  to  increase                                                                    
enrollment.  He referred  to slide  25 that  illustrated the                                                                    
reduction in  state support  over a period  of 30  years. He                                                                    
characterized it as  a  soft landing  versus  the  crash and                                                                    
burn  approach proposed by the  administration. He asked how                                                                    
enrollment  played  out  at  the  University  of  Pittsburgh                                                                    
during the  30-year period. Mr. Barnhill  would provide more                                                                    
information  regarding  the  University  of  Pittsburgh.  He                                                                    
reiterated that  cut was  drastic but  believed that  a path                                                                    
forward existed for UA.                                                                                                         
10:48:16 AM                                                                                                                   
Representative  LeBon   stated  that  his  point   was  that                                                                    
Pennsylvania began a program of  reducing state support with                                                                    
a  plan   to  retain   and  attract  students   and  growing                                                                    
enrollment. He  suspected UA's approach  was done in  such a                                                                    
way  as to  maintain enrollment.  He expressed  concern with                                                                    
 chasing off  students.  He believed  a cut of  the proposed                                                                    
magnitude would lead to a decline in enrollment.                                                                                
Co-Chair Wilson suggested that  the subcommittee examine why                                                                    
UAF enrollment declined.                                                                                                        
Co-Chair Wilson reviewed the agenda for the afternoon.                                                                          
10:49:45 AM                                                                                                                   
The meeting was adjourned at 10:49 a.m.                                                                                         

Document Name Date/Time Subjects
FY2020 Gov Amend Budget to HFC 3.13.19 DMVA UA.pdf HFIN 3/14/2019 9:00:00 AM
HFIN Budget Overview UA
Land Grant All Revenue Sources.xlsx HFIN 3/14/2019 9:00:00 AM
Responses to Q's UA Overview
SHEF_State_by_State_Wave_Charts_FY17.pdf HFIN 3/14/2019 9:00:00 AM
Responses to Q's UA Overview
Univ Ranked by Exp FTE.pdf HFIN 3/14/2019 9:00:00 AM
Responses to Q's UA Overview
University Alaska Data.pdf HFIN 3/14/2019 9:00:00 AM
Responses to Q's UA Overview