Legislature(2003 - 2004)

02/18/2004 09:07 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                           JOINT MEETING                                                                                      
                     SENATE FINANCE COMMITTEE                                                                                 
                      HOUSE FINANCE COMMITTEE                                                                                 
                         February 18, 2004                                                                                    
                              9:07 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-04 # 13, Side A                                                                                                             
SFC 04 # 13, Side B                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened the meeting at approximately 9:07 AM.                                                             
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Representative Bill Williams                                                                                                    
Representative Mike Hawker                                                                                                      
Representative Bud Fate                                                                                                         
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Carl Moses                                                                                                       
Representative Richard Foster                                                                                                   
                                                                                                                                
Also Attending:  SENATOR TOM WAGNER; SENATOR FRENCH HOLLIS; SENATOR                                                           
RALPH SEEKINS; REPRESENTATIVE JOHN COGHILL; REPRESENTATIVE DAVID                                                                
GUTTENBERG; MARK HAMILTON, President, University of Alaska;                                                                     
                                                                                                                                
Attending via Teleconference:  There were no teleconference                                                                   
participants.                                                                                                                   
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
State of the University                                                                                                         
Presentation by President Mark Hamilton                                                                                         
                                                                                                                                
MARK HAMILTON, President, University of Alaska, introduced the                                                                  
Board of Regents members and campus chancellors present at the                                                                  
meeting.                                                                                                                        
                                                                                                                                
President Hamilton gave the following speech.                                                                                   
                                                                                                                                
     Fifty  years  ago  Alaska's Constitution   was written  on  the                                                            
     University  of  Alaska-Fairbanks  campus.  The future  was  the                                                            
     topic  and the guiding  light. Politics  were set aside  for 75                                                            
     days and  self was subordinate to service. All  eyes were fixed                                                            
     on the horizon, where  promises were kept and hope captures the                                                            
     heart,  as  no  certainty  never  has.  At the  close  of  that                                                            
     convention,  the delegates  shared a  resolution to Alaska.  It                                                            
     said,  "You're Alaska's  children. We  bequeath to you  a state                                                            
     that  will be glorious  in its achievement;  a homeland  filled                                                            
     with  opportunities for  living, a land  where you can  worship                                                            
     and pray,  a country where ambitions  will be bright  and real,                                                            
     an Alaska that will grow as you grow."                                                                                     
                                                                                                                                
     You can't  be at the University  of Alaska without focusing  on                                                            
     the future.  This fall a remarkable  and historical  event took                                                            
     place.  This fall  for the  first time  in the  history of  the                                                            
     State  or Territory of Alaska,  more than half of out  college-                                                            
     bound children  stayed home. We got 55 percent  of all students                                                            
     in  Alaska going  to college  last year. But  it's better  than                                                            
     that.  Five years ago, we only  had 40 percent of our  kids who                                                            
     even aspired  to go to college.  Today that's 50 percent.  Five                                                            
     years  ago we  got 44  percent  of that  40, now  we've got  55                                                            
     percent  of  that 50.  That adds  up  to almost  four  thousand                                                            
     students.                                                                                                                  
                                                                                                                                
     Believe  it or not,  that particular statistic  is met  in some                                                            
     places with cynicism.  "Well it's no wonder, you're paying them                                                            
     to  go there."  I assume  people are  referring  to the  Alaska                                                            
     Scholars Program,  and let's just think for a minute: if all of                                                            
     the   people  who  receive   that  scholarship   came   to  the                                                            
     University,  simply because we gave them a scholarship,  they'd                                                            
     account  for  less  than  one-quarter   of  our  increase.  But                                                            
     frankly,  in their defense, I  think it's an insult.  These are                                                            
     youngsters  who  typically have  several scholarships  and  the                                                            
     overwhelming  majority  came  to the  University  of Alaska  by                                                            
     choice, as did the other 3,000 students.                                                                                   
                                                                                                                                
     The  cynics still aren't  done: "That's  great. Now you've  got                                                            
     more people, train  'em, they can't find a job." I'm a supplier                                                            
     in  this business.  And when  you look  at it  from the  supply                                                            
     side, I promise you  there are more good jobs in Alaska begging                                                            
     to  be  filled by  Alaskans  than  I can  possibly  deliver:  a                                                            
     hundred  percent  of  my engineers,  a  hundred percent  of  my                                                            
     project  managers,  a  hundred  percent  of  allied  health,  a                                                            
     hundred  percent of  my nurses,  and every  single teacher  who                                                            
     wants  a job. Maybe not one who  wants to teach third  grade at                                                            
     that  school in Anchorage,  but a hundred  percent of  them who                                                            
     want a job get one. We're short on the supply side.                                                                        
                                                                                                                                
     These  students, the most in  our history, taking work  courses                                                            
     and  earning more  degrees  than ever  before  in our  history:                                                            
     together  they comprise  a dividend to  the State of Alaska.  A                                                            
     dividend.  It's a dividend  that frees  our employers  from the                                                            
     unseen  but powerfully  felt  import tax  that's imposed  every                                                            
     single time  they try to recruit somebody, transport  them from                                                            
     the Lower 48.                                                                                                              
                                                                                                                                
AT EASE 9:15 AM / 9:15 AM                                                                                                       
                                                                                                                                
     But  it's  better than  just  protecting  the people  from  the                                                            
     import tax.  We're importing them for you. We  have tripled the                                                            
     number of  students who began their education  in the Lower 48,                                                            
     who have now come home to go to school.                                                                                    
                                                                                                                                
     Many of  the stories indicate  that Alaskan students  are tired                                                            
     of going  to a college where  their freshman biology  class has                                                            
     more people  in it than their  hometown. It actually  happens -                                                            
     350,  400 people in  a "G.E.R." class  is not remarkable.  It's                                                            
     been a consistent story for many years now.                                                                                
                                                                                                                                
     These  numbers, these students  have come for investments  made                                                            
     by this group  five years ago, four years ago,  and three years                                                            
     ago. That  55 percent belongs to those courageous  decisions to                                                            
     invest in the University.  We said that we could stop the brain                                                            
     drain.  We said that employers  would contribute as  soon as we                                                            
     have enough  money to teach the courses they're  interested in.                                                            
     We said that  research would respond to your  priming the pump.                                                            
     I asked you  for dollars to support "Epscore"  about four years                                                            
     ago. You gave me a  million dollars. Epscore today is operating                                                            
     on a budget  of more than ten  million dollars a year  for five                                                            
     years  on a federal  grant. That  about follows  the flow.  You                                                            
     give in a dollar and  out comes five or six on the other end in                                                            
     research.                                                                                                                  
                                                                                                                                
     We  told you that  earned income  would rise.  And the  numbers                                                            
     here  aren't  as  important  as the  magnitude.  This  is  what                                                            
     happened  with your  investment  over five years.  You wish  it                                                            
     would  happen  to your  401k. Tuition  revenue  up 84  percent.                                                            
     Federal receipts up  137 percent. Indirect cost recovery up 199                                                            
     percent.  University receipts  are up  300 percent. Land  grant                                                            
     trust fund  up 188 percent. Where else? Where  else do you have                                                            
     that kind of return?  Tangible results, bottom line: State used                                                            
     to pay  60 cents on  every dollar  of postsecondary  education.                                                            
     State now pays 40 cents on every dollar.                                                                                   
                                                                                                                                
     We  said that  citizens would  respond  as soon  as we build  a                                                            
     University  they could  be proud of.  Private donations  are up                                                            
     168  percent. Six  years ago we  had no endowed  chairs  at the                                                            
     University  of  Alaska. By  the end  of this  year, we'll  have                                                            
     four.                                                                                                                      
                                                                                                                                
     I  told you that  I would be  accountable.  In addition  to the                                                            
     scrutiny endured by  any public institution, I spend a total of                                                            
     eight  days,  two  full  days  at statewide  and  each  of  the                                                            
     "m.a.u.s"  twice a year,  to sit down  and go over, with  their                                                            
     management  and finance executives.  A series of very  detailed                                                            
     questions  that take hundreds of man hours to  produce, because                                                            
     I want  to know where the dollars'  going, where they're  being                                                            
     redistributed and what are we getting for it.                                                                              
                                                                                                                                
     I've been asked by  this committee in the past to highlight the                                                            
     college of rural Alaska  campuses. In short, they have followed                                                            
     the trend of the University  as a whole. They've led the way in                                                            
     enrollment  growth   with  the Rural   College  increasing  116                                                            
     percent in the last  four years: Kuskokwim campus by 88 percent                                                            
     in the last four years.                                                                                                    
                                                                                                                                
     Student credit  hours is even more impressive:  five-year gains                                                            
     as high  as 93 percent  at Kuskokwim  and 144 percent  at Rural                                                            
     College.  Now because of Title 3 grants, expenditures  at these                                                            
     campuses  - it isn't necessarily  State dollars going  in - but                                                            
     the amount  that they are able  to expend using federal  money,                                                            
     has far  outpaced the University  as a whole. In the  last four                                                            
     years,  Bristol Bay has increased  expenditures by 88  percent,                                                            
     Rural  College by 85 percent,  Kuskokwim by 40 percent.  Bottom                                                            
     line of all  that is that general fund support  per credit hour                                                            
     has been reduced by  almost one-quarter, almost 25 percent over                                                            
     the  last five years.  They are becoming  more efficient  as we                                                            
     become more efficient at the University.                                                                                   
                                                                                                                                
     Terribly  important part  of our asset,  because it's  a little                                                            
     known  fact: almost half of our  graduates, almost half  of our                                                            
     graduates,  had  spent at  least one  semester  at a  community                                                            
     campus. For Alaska Natives, that percentage is 70 percent.                                                                 
                                                                                                                                
     Retention  rates of  all of  our students  have increased,  but                                                            
     specific  efforts  to address  our Alaska  Native students  are                                                            
     finally paying off.  We measure this at the "continued onto the                                                            
     second  year" measure point.  Five years ago, Native  retention                                                            
     was  only about two-thirds  that of  their white counterparts.                                                             
     Today,  nearly 60  percent of  our Natives  stayed that  second                                                            
     year  and  70  percent  for  out  white   students.  Both  have                                                            
     increased   and  the  gap  is  closing.  Alaska   Natives  have                                                            
     overlapped  both retention  rates  for Afro  Americans and  for                                                            
     Hispanics.  Of course  for me that  means I  now have two  more                                                            
     areas to be concerned about.                                                                                               
                                                                                                                                
     I got a letter  from a young girl that I will  only identify as                                                            
     Allison  [spelling not verified],  in case she didn't  want you                                                            
     to know  where she was  from. Here's what  it says [as  read by                                                            
     President Hamilton].                                                                                                       
                                                                                                                                
          My  name is  Allison. I'm  an Alaskan  Native, the  second                                                            
          youngest  of  seven  children  from  a small  village.  My                                                            
          mother  was widowed  in 1991 after  my father passed  away                                                            
          from  a stroke. [The] passing [of] my father encouraged me                                                            
          to  further my  education  in the health  field, and  I've                                                            
          dreamed  of becoming a nurse  since I was a small  girl. I                                                            
          graduated  valedictorian, went to a program  called "RAHI"                                                            
          Rural  Alaska  Honors Institute  at Fairbanks,  one  month                                                            
          after  graduation. In '99 I enrolled in  classes at Bethel                                                            
          at Kuskokwim  campus, received my AA degree in May 2002. I                                                            
          got  my personal  care attendant  certificate in  December                                                            
          2002   and   I   also   completed   basic   life   support                                                            
          certification   from the  American  Heart  Association  in                                                            
          November of 2002.                                                                                                     
                                                                                                                                
          My career  goal is to become a Registered Nurse and secure                                                            
          a  position at the YK Delta  Regional Hospital  in Bethel.                                                            
          I'm  convinced that is important  to the local  population                                                            
          to have  dedicated health care workers who are lifelong YK                                                            
          Delta residents and Native Alaskans.                                                                                  
                                                                                                                                
          I  may not solve the nursing  shortage, yet I am  positive                                                            
          I'll  make  a difference  in  many Native  people's  lives                                                            
          because  I'll be  able to provide  culturally appropriate                                                             
          care  and support  for the  patients  and their  families.                                                            
          Nurses  are  the ones  who are  at the  bedside  providing                                                            
          invaluable  expertise, as well as essential caring support                                                            
          and  education  to those in  need, their  needs and  other                                                            
          caregivers.  Nurses  do mean the  difference between  life                                                            
          and  death, comfort and pain, knowledge  and fear, freedom                                                            
          and  dependence. That  will be a  powerful and  gratifying                                                            
          feeling.  I  dream of  experiencing that  sensation  every                                                            
          day.                                                                                                                  
                                                                                                                                
     First  thought, do you think  she's having trouble passing  the                                                            
     exit exam?                                                                                                                 
                                                                                                                                
     You  know what, two  years ago, I would  have written  her back                                                            
     and  said, "Allison,  don't you  worry. Your  dreams will  come                                                            
     true." Today, I'm not so sure.                                                                                             
                                                                                                                                
     We may be accountable.  Well your accountant would tell you the                                                            
     trends that  I've just proudly related to you  cannot continue.                                                            
     The last  two years, the University's had to  eat $7.5 million,                                                            
     while  educating  2,000  additional  students.  Now  we're  not                                                            
     formula  funded,  don't  wanna  be.  It's  too  complicated  to                                                            
     compare  PhD with a  GED, other states  have tried it.  This is                                                            
     not  a pitch for formula  funding. But  the basic principle  is                                                            
     right:  you have more  students - 2,000  of them you need  more                                                            
     money. This  is not a business. This is not a  private college.                                                            
     It's a state university.                                                                                                   
                                                                                                                                
     You  need  more  money  especially  to train  the  skills  that                                                            
     employers  want. The skills that  we have aimed for  over these                                                            
     last five years. It  costs more money to train an engineer than                                                            
     an English major.  It costs more money to train a nurse than an                                                            
     anthropologist,   more  money  for  a  welder   rather  than  a                                                            
     historian.  It  takes more  money to  teach  diesel repair.  We                                                            
     don't  have  to  guess  where this  will  go  without  adequate                                                            
     funding. We were there six years ago.                                                                                      
                                                                                                                                
     But  it's worse than  that. Businesses  will not contribute  if                                                            
     the State  doesn't. Citizens  will not contribute if  the State                                                            
     doesn't.  Students won't  stay if they  think you changed  your                                                            
     mind about having  a great University, about having an economy,                                                            
     about  a future  where ambitions  will be bright  and real  and                                                            
     Alaska that will grow as you grow.                                                                                         
                                                                                                                                
     And  this time  they'll  feel  tricked. You  said  yes at  nine                                                            
     dollar  a barrel  oil. Don't  say no  at 33. We  don't have  to                                                            
     guess  where this will end up.  We know too well. Fourteen  out                                                            
     of the last  19 years, the University has been  funded at below                                                            
     inflation  as measured by higher education price  index (HEPI).                                                            
     Inflation  counts.  The  University  today has  two-thirds  the                                                            
     purchasing  power that  they had in 1986.  Every time  you fund                                                            
     below  inflation,  there has to  be redistribution  and we  are                                                            
     sadly, unbelievably good at it.                                                                                            
                                                                                                                                
     You know  that somebody suggests,  "You know, you ought  to try                                                            
     outsourcing." Well,  I never get angry at somebody who's trying                                                            
     to help.  But there was a little  voice in the back  of my head                                                            
     that  says,   "Gosh,  I  wish  we'd  have  thought   of  that."                                                            
     Residential  dining, vending, laundry, pest control,  generator                                                            
     testing,  has - 173,  173 separate  outsourcing contracts  from                                                            
     the University.  Others might use that as a reference  book. So                                                            
     another friend will  say, "Wow, I guess you're going to have to                                                            
     do  some consolidation."  Listen,  we  have the  mother of  all                                                            
     consolidation.  We sucked up all the community  colleges. Saved                                                            
     us $6 million and  just on my watch we got us about $12 million                                                            
     worth of grief, but we did it.                                                                                             
                                                                                                                                
     We also consolidated  reasonable and sensible things, like land                                                            
     management,  risk management,  h.r. [human  resources],  labor,                                                            
     payroll.  And sometimes  it's not consolidation,  it's  exactly                                                            
     opposite:  it's  distribution  that helps  you get  by. We  now                                                            
     handle  almost $30  million of  procurement on  what we  call a                                                            
     "pro-card", which  in essence says, "let's use the less formal,                                                            
     although  audited, methodology of a credit card,  as opposed to                                                            
     a formal  system to  handle some of the  more simple pieces  of                                                            
     our procurement business."                                                                                                 
                                                                                                                                
     We've also done some  things that nobody has suggested and that                                                            
     I believe  to be essentially  unique. Now I'm going  to compare                                                            
     here because  we need comparisons sometimes to  understand with                                                            
     the State - there's  nothing [illegible word: fajorative] about                                                            
     the  State -  and the  University is  a huge  advantage that  a                                                            
     bunch of  smart people who tend to stay there  for a very, very                                                            
     long time. They don't  reorganize every time somebody has a new                                                            
     idea. So we have an advantage.                                                                                             
                                                                                                                                
     I want you  to think about this. We have offered  now, for more                                                            
     than a decade, the  optional retirement plan. This is a defined                                                            
     contribution  plan and as opposed  to a defined benefit.  We've                                                            
     greatly  mitigated  our  long-term  risks  because  there's  no                                                            
     medical  in  the future.  It's  essentially  a 401K.  I've  750                                                            
     people on this plan.  All of my executives and about half of my                                                            
     faculty and it gains  every day, more and more and more people.                                                            
     It's  sort of the moral  equivalent of  Tier IV, which  is just                                                            
     now  being mentioned  around  this particular  building.  We've                                                            
     been doing it for  more than a decade. Nobody told us to do it.                                                            
                                                                                                                                
     We have frozen what  the State calls the SBS - the Supplemental                                                            
     Benefits  System.  We  froze this  almost  two decades  ago  at                                                            
     3,300. As you know,  the State continues to go up with COLA and                                                            
     now has a theoretical limit of about 5,300.                                                                                
                                                                                                                                
     We put together  a program we call UA Health  Plan 2000. All of                                                            
     my  executives,   all  my  nonrepresentative   staff  and  this                                                            
     particular  program  to  date  calls  for  a  defined  employer                                                            
     contribution  of about $500 a  month per person. This  compares                                                            
     with the  State's current one,  which is over $700.  Now, truth                                                            
     in  advertising: over  the next  several years,  we are  moving                                                            
     this  up more  nearly  toward that  statewide  number  because,                                                            
     frankly  we compete  for  some of  the same  people and  they'd                                                            
     notice.                                                                                                                    
                                                                                                                                
     While this  has gone on, we've never forgotten  to look for our                                                            
     future.  Our own  Jim Lynch  [spelling not  verified],  working                                                            
     with  this Legislature  in the year 2000,  helped craft  a bill                                                            
     that has allowed a  - just an exceptional college savings plan.                                                            
     This is  a Section 529 plan,  Internal Revenue code.  With that                                                            
     enabling  legislation, we got  together with T. Rowe  Price and                                                            
     crafted  a plan that  went on the market  in April of  2001. To                                                            
     date  the plan  has attracted  more than a  billion dollars  of                                                            
     investments  all for  tuition. Sixty  million of those  dollars                                                            
     are  Alaskan  citizens'  assets.  Morning  Star last  week,  or                                                            
     within the  last two weeks, just rated that particular  fund as                                                            
     one of the  top five in the country. By the way,  T. Rowe Price                                                            
     has  funded $3 million  worth of national  advertising  for the                                                            
     product.  The  product is  called  The Alaska  College  Savings                                                            
     Program.                                                                                                                   
                                                                                                                                
     We all  have to be  outsourced and  after you've consolidated,                                                             
     and after you've centralized,  you cut. Over the years, we have                                                            
     done  things  that simply  hurt:  cancel  the 800  number  that                                                            
     allows  distance   education  students  to  access   University                                                            
     education  with a local phone  call; canceled music  and sports                                                            
     as UAS;  shut the Adult  Learning Center  in Anchorage.  And we                                                            
     still  only teach  about  two thirds  of the  courses that  are                                                            
     offered  by  North Dakota,  South  Dakota, Wyoming.  We're  not                                                            
     chasing  down  Stanford  here, we're  trying  to  get to  other                                                            
     states with  less than a million population and  offer the same                                                            
     kind of things to their citizen.                                                                                           
                                                                                                                                
     I know  the fiscal  circumstances of  this University.  And I'm                                                            
     telling   you,  we  need  these  dollars.  We   are  no  longer                                                            
     tightening  belts;  we're  tightening  a  noose.  We  need  the                                                            
     minimum amount  asked for. It is higher education  price index,                                                            
     collective  bargaining contracts, plus some nursing  expansion,                                                            
     practical  nurse  education  and allied  health  - fields  into                                                            
     which private industry has already put millions of dollars.                                                                
                                                                                                                                
     As well, the University  needs to be included in legislation to                                                            
     relieve  the PERS/TRS [Public  Employees Retirement  System and                                                            
     Teachers   Retirement  System]   bill  that  is  killing   K-12                                                            
     University and some municipalities.                                                                                        
                                                                                                                                
     I am very proud to  be in the last frontier. Tell you something                                                            
     I learned  only recently that  I think is remarkable:  the word                                                            
     "frontier"   in  every  other   Indo-European  language   means                                                            
     "barrier"  or "obstacle". Only  in English does the  concept of                                                            
     frontier  evoke limitless opportunities, countless  restarts. I                                                            
     used  to  tell  people  "that's  all you  need  to  know  about                                                            
     America."                                                                                                                  
                                                                                                                                
     Allison  understands  frontiers. She  understands that  they're                                                            
     the fields  that dream. Well  we argue about means versus  end.                                                            
     Educating  Allison  so she  can get a  job in  her community  -                                                            
     that's  the answer. You  have the means.  You know the  end you                                                            
     want. Six years ago,  the courage of this committee changed the                                                            
     State. The  decision is no harder today. Fund  your University.                                                            
                                                                                                                                
Senator Bunde appreciated  Allison's letter and President Hamilton's                                                            
ascertain that  she likely passed  the high school exit examination                                                             
without difficulty.  Senator Bunde asked the status  of the need for                                                            
remedial instruction at the University.                                                                                         
                                                                                                                                
President  Hamilton was  unsure of  the fiscal  impact, He  reported                                                            
that  approximately  40 percent  of  all students  entering  college                                                            
require  remedial  education; however,  he  noted that  students  in                                                            
Alaska  require up  to one  year of  full time  classes, while  most                                                            
students only  need to take one or  two courses.  He emphasized  the                                                            
need to  provide remedial  education,  noting the  need first  arose                                                            
during the civil  rights movement. He characterized  the practice as                                                            
inclusion. He added that  the University of Alaska should retain its                                                            
open  enrollment policy  to  allow attendance  of  any Alaskans  who                                                            
chose to become college students.                                                                                               
                                                                                                                                
Co-Chair Wilken  asked about the Board of Regents  actions regarding                                                            
tuition increases in the past and future.                                                                                       
                                                                                                                                
President  Hamilton  reminded  that  several  years  ago,  with  the                                                            
increased funding provided  by the Legislature, the Board determined                                                            
to announce  tuition raises  in advance of  implementation  to allow                                                            
students  to make  financial plans.  He expressed  that the  Regents                                                            
have accepted  the need for  tuition increases  and three years  ago                                                            
planned  for a ten  percent increase  each year  for four years.  At                                                            
that time  he noted,  the University  of Alaska  tuition rates  were                                                            
approximately  30 percent less than  that charged by other  schools.                                                            
He stated that although  the tuition increases have been implemented                                                            
for three years,  other schools have  increased their tuition  rates                                                            
as well and  subsequently the University  of Alaska tuition  remains                                                            
30 percent below average.                                                                                                       
                                                                                                                                
President  Hamilton  continued  that  as  a result  of  the  tuition                                                            
increases  implemented  at  the University,   as well  as  increased                                                            
enrollment,  the  University  generates  $74  million  annually.  He                                                            
cautioned that  this increase does not cover the cost  of education,                                                            
reminding  that the University  is not a business  and is not  self-                                                            
sustained by tuition.  He remarked that operations  have become more                                                            
efficient  and that  a smaller  percentage of  the total  University                                                            
budget  is  derived   from  State  funding.  He  characterized   the                                                            
willingness  of  students  to pay  the increased  tuition  costs  to                                                            
attend the University of  Alaska as an endorsement of the quality of                                                            
education received. He  stated that if not satisfied, students would                                                            
"vote with  their feet" and chose  to not attend the University.  He                                                            
cited the decreased  enrollment that occurred during  the 1990s when                                                            
funding was inadequate,  stressing that receipt of  a permanent fund                                                            
dividend is not sufficient  incentive for students to retain Alaskan                                                            
residency.                                                                                                                      
                                                                                                                                
SENATOR RALPH SEEKINS informed  that all four of his children, their                                                            
spouses  and his  nieces  and  nephews attended  the  University  of                                                            
Alaska. He  remarked that his family  was staying in Alaska  because                                                            
they are members  of the community, received their  education in the                                                            
State, and because their spouses are Alaskans.                                                                                  
                                                                                                                                
President Hamilton  commented on the economic advantages  of Alaskan                                                            
students remaining in the  State after receiving their education. He                                                            
exampled  the field of  radiation technologies;  informing  that the                                                            
cost of employing  a radiation technologist in Bethel  costs $11,200                                                            
per month if  that employee is not  a local resident and  $4,400 per                                                            
month to employ  a Bethel resident. He attributed  the difference to                                                            
recruiting,  travel,  housing,  per  diem  and  bonus  expenses.  He                                                            
stressed that  it is "good for business"  for Alaskans to  remain in                                                            
the State. He  suggested the cost of compensating  Alaskan employers                                                            
to be on par with  other business would be considerable  higher than                                                            
the amount needed to fund the University.                                                                                       
                                                                                                                                
President Hamilton  continued speaking to the benefits  of providing                                                            
education  for students  in the  location they  reside. He  remarked                                                            
that nursing  students from  Fairbanks sent  to Anchorage for  their                                                            
education  could  not  be  expected  to  return  to  Fairbanks  upon                                                            
graduation. He  explained this is due to the "comfort"  in remaining                                                            
in  the hospital  workplaces  where  they  trained and  have  become                                                            
accustomed  to.  He  stated that  13  of  the 15  graduates  of  the                                                            
Fairbanks program of the previous class remained in Fairbanks.                                                                  
                                                                                                                                
President  Hamilton reported  that 81 percent  of the University  of                                                            
Alaska graduates  remain in  the State, regardless  of whether  they                                                            
were  raised   here.  He   stated  this   commitment  "changes   the                                                            
relationship"  between the University, students and  businesses, and                                                            
is "clearly the right way to go."                                                                                               
                                                                                                                                
Senator  Hoffman  told of  the  momentum  of the  Yuut Elitnaurviat                                                             
Learning  Center project and  asked the witness'  impression  of the                                                            
project.                                                                                                                        
                                                                                                                                
President   Hamilton  remarked  this   project  is  an  "absolutely                                                             
wonderful  opportunity  to do  something"  that has  been  attempted                                                            
elsewhere.  He  indicated   that  attempts  to  provide   vocational                                                            
education  to students at  the Kotzebue Technical  Center have  been                                                            
less successful, despite  dedicated staff. He noted the advantage of                                                            
residential   "opportunities"   in  Bethel.   He  stated  that   the                                                            
University  has provided more of its  discretionary funding  to this                                                            
project  during  the previous  five  years  than  to any  other.  He                                                            
qualified  that the  amount  of discretionary  funds  is  "pitifully                                                            
small."                                                                                                                         
                                                                                                                                
Representative   Fate  asked  whether   the  University   was  still                                                            
challenged with recruitment and retention of qualified teachers.                                                                
                                                                                                                                
President Hamilton answered  yes. He qualified that the variances in                                                            
comparable  salaries was "asymmetrical"  in that professors  in some                                                            
fields earned  higher wages at the  University of Alaska  than their                                                            
colleges in other  schools, while professors in other  fields earned                                                            
less than their counterparts.  He emphasized that some University of                                                            
Alaska  staff  are  substantially   underpaid.  He  also  noted  the                                                            
variances  exist between  different  campuses in  the University  of                                                            
Alaska  system. He  assured the  problem is  not "overwhelming"  but                                                            
must be addressed. He stated  that recruitment efforts improved when                                                            
the  Legislature began  increasing  the amount  of  funding for  the                                                            
University.  He also  remarked on  the commitment  of professors  to                                                            
their jobs. He  shared that during the 1990s when  salaries were not                                                            
increased,  faculty chose  to replace vacant  positions rather  than                                                            
distributing   the  funding  from   those  positions  to   remaining                                                            
employees.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  commented on the Legislature's concerns  about K-12                                                            
education  and   the  need  for  "prime  teachers".   He  noted  the                                                            
University  currently "supplies"  one  of every  three new  teachers                                                            
hired  in Alaska  and that  efforts were  underway  to increase  the                                                            
number  of  qualified teachers  graduated  from  the  University  of                                                            
Alaska.  He compared  the  number of  teachers graduating  from  the                                                            
University  to the numbers  graduated from  other states of  similar                                                            
populations.  He  listed: 262  graduates  of  elementary  education,                                                            
secondary education,  education leadership  and principals  from the                                                            
University  of  Wyoming   in  2003;  298  graduates  of   elementary                                                            
education,  secondary  education,  principals,  superintendents  and                                                            
special  education   majors  from  the  University   of  Idaho;  432                                                            
elementary teachers, secondary  teachers, principals, principals and                                                            
superintendents  from the  University  of Montana;  compared to  192                                                            
graduates from  the University of Alaska. He was unsure  whether the                                                            
needs  were same  as  the other  states,  but surmised  that  Alaska                                                            
should  closer match that  of the  state of Montana.  He asked  what                                                            
actions the  University of Alaska  is taking to increase  the number                                                            
of teachers.                                                                                                                    
                                                                                                                                
Co-Chair Wilken  also noted the review undertaken  by the University                                                            
in  October  2003 relating  to  the  University  teachers  education                                                            
programs  and  "interface  with  the K-12  community",  as  well  as                                                            
efforts  with the  National  Council  on Accreditation  and  Teacher                                                            
Education.                                                                                                                      
                                                                                                                                
President  Hamilton  told of  a outreach  program  conducted at  the                                                            
Tanana Valley  Campus (TVC) that gathers Fairbanks  area high school                                                            
students and provides courses  intended to "relieve the fear of test                                                            
taking" to  increase the  chances that all  students would  pass the                                                            
high school graduation examination.                                                                                             
                                                                                                                                
                                                                                                                                
SFC 04 # 13, Side B 09:55 AM                                                                                                    
                                                                                                                                
                                                                                                                                
President Hamilton stated  that the University is addressing meeting                                                            
the needs of the federal  No Child Left Behind Act. He informed that                                                            
University  campuses   have  begun  math  and  reading  endorsement                                                             
programs.                                                                                                                       
                                                                                                                                
President  Hamilton  reported  that  enrollment  in  the  School  of                                                            
Education has increased  18 percent to approximately 220 students in                                                            
each  graduating  class. He  was  unsure  whether the  number  would                                                            
increase  significantly higher  than this.  He expressed  skepticism                                                            
with data from "outside",  thus questioning the figures cited by Co-                                                            
Chair  Wilken. Despite  this,  President  Hamilton  pointed out  the                                                            
uneven  demand  for  teachers   in Alaska.   He  stated  that  three                                                            
University graduates  were hired as teachers last  year in Fairbanks                                                            
and one in Anchorage.  However, he stressed that many  graduates are                                                            
unwilling to locate in communities needing teachers.                                                                            
                                                                                                                                
President Hamilton continued  that the University would graduate its                                                            
first class in its special  education endorsement program. He stated                                                            
that  the  School  of  Education  would   continue  its  efforts  in                                                            
preparation  for rural teachers  and indigenous  teachers,  which he                                                            
pointed out, are separate programs.                                                                                             
                                                                                                                                
President  Hamilton told  of the  requirement  that early  childhood                                                            
education teachers  and teacher aids  must complete 48 credit  hours                                                            
by 2006.  He expressed that  it is a difficult  outreach program  to                                                            
operate because  participants are  employed and the program  must be                                                            
delivered to their communities.                                                                                                 
                                                                                                                                
President  Hamilton expressed  "comfort" with  the "direction",  but                                                            
not  the "status"  of  the University's   Schools of  Education.  He                                                            
characterized  the programs as "picked  on" and "jerked around",  in                                                            
the  constant   revision  of  curriculum   and  qualifications.   He                                                            
remarked,  "We absolutely  want  to know  from people  'how are  our                                                            
products  doing?'"  He  relayed  that  the  reports  about  teachers                                                            
educated   at  the  University   is  "overwhelmingly,   though   not                                                            
unanimously positive."                                                                                                          
                                                                                                                                
Senator  Olson  stressed   the  increasing  need  for   health  care                                                            
professionals  as the mean age of  Alaskans increases. He  asked the                                                            
impact that inadequate  funding to the University  would have on the                                                            
Washington,  Wyoming,  Alaska,  Montana,   Idaho  Medical  Education                                                            
Program [WWAMI] and nursing education programs.                                                                                 
                                                                                                                                
President Hamilton assured  he would not threaten the elimination of                                                            
any programs if the Legislature  failed to appropriate the requested                                                            
amount  of funds to  the University.  He agreed  these programs  are                                                            
important and that efforts  would be made to continue them. However,                                                            
he pointed out  that the increased costs of PERS and  TERS could not                                                            
be  absorbed and  that  programs subsequently  would  be  negatively                                                            
impacted.  He stated  that the Board  of Regents  would make  actual                                                            
determinations as to how reductions would be implemented.                                                                       
                                                                                                                                
President Hamilton did  caution that over the long term, if adequate                                                            
funding  were  not  provided  the  size   of the  University   would                                                            
"shrink". He stressed that  the workforce development programs would                                                            
be reduced first,  primarily because fewer students  are enrolled in                                                            
those programs.  He compared the cost of providing  a welding course                                                            
for eight students to the  cost of an English class for 30 students,                                                            
and advised that  the welding course would likely  be eliminated. He                                                            
explained  the   need  for  core  programs,  such   as  English  and                                                            
Humanities  would  because   they  are required   for  every  degree                                                            
program.                                                                                                                        
                                                                                                                                
Senator Bunde  asked about  the land grants  and the ability  of the                                                            
University to generate revenue from these sources.                                                                              
                                                                                                                                
President Hamilton recalled  the efforts undertaken in the past four                                                            
years in developing the  land held by the University. He reported 78                                                            
million  feet of  lumber has  been marketed,  8,000  acres sold  and                                                            
development  has begun on 18 different  subdivisions. He  calculated                                                            
the revenue  generated from these  activities at $42 million.  While                                                            
he praised  the land grant system,  he cautioned that the  remaining                                                            
quarter  of a  million  acres  of land  held  by the  University  is                                                            
"picked  over" and of  a lesser  value. He stated  that most  recent                                                            
estimates anticipate that  if the land were "properly developed", in                                                            
20  years the  endowment  would  generate  $6 million  annually.  He                                                            
appreciated  attempts to address the  University's budget  with land                                                            
grants, but  expressed concern that  assumptions would be  made that                                                            
this process could be substituted for other funding.                                                                            
                                                                                                                                
Senator Seekins  shared that  several years  ago, when his  daughter                                                            
was a senior  in the School  of Education  program at University  of                                                            
Alaska, Fairbanks, she  participated in a program that sent students                                                            
to remote communities  for student teaching. He understood  this was                                                            
an expensive program  to operate and asked whether  it continues and                                                            
would continue.                                                                                                                 
                                                                                                                                
President Hamilton  agreed the program is expensive,  explaining the                                                            
need  for supervision.  He  informed  of  plans to  regionalize  the                                                            
program to  allow supervisors to visit  students stationed  in rural                                                            
communities  on a "circuit rider"  system, rather than traveling  to                                                            
and  from  Fairbanks  for  every visit.  He  stated  this  would  be                                                            
undertaken utilizing federal funding.                                                                                           
                                                                                                                                
Senator Seekins  commented that this experience was  an "eye opener"                                                            
in  exposing  his   daughter  to  life  in  rural  communities.   He                                                            
recognized  a  "tremendous  value"  in showing  young  people  these                                                            
opportunities  for teaching, as well as the realization  to students                                                            
that life is not as "bad" as they may have imagined.                                                                            
                                                                                                                                
Senator  Bunde  noted that  some  federal  financial  aide  programs                                                            
provide  incentives for  recipients  to enter  fields where  trained                                                            
workers  were needed,  such  as special  education.  He suggested  a                                                            
similar approach could  be considered in encouraging participants of                                                            
the Alaskan Scholars Program  to pursue careers in rural teaching or                                                            
nursing.                                                                                                                        
                                                                                                                                
President   Hamilton   assured   he  would   give   the   suggestion                                                            
consideration.                                                                                                                  
                                                                                                                                
Representative Moses asserted  that President Hamilton has given the                                                            
Finance  Committees  many  reasons  why  it should  take  action  in                                                            
assisting the University.                                                                                                       
                                                                                                                                
Co-Chair  Wilken  recognized  the contributions  of  Marshall  Lind,                                                            
Chancellor  of  the University  of  Alaska,  Fairbanks,  and  former                                                            
Chancellor of the University  of Alaska, Southeast, and educator for                                                            
many years, who would be retiring this year.                                                                                    
                                                                                                                                
Co-Chair   Wilken  commented   that   he  "suffered   through"   two                                                            
presentations  to  the  Senate  Finance   Committee  by  the  former                                                            
University   president.   Co-Chair  Wilken   appreciated   President                                                            
Hamilton's leadership  in "pulling the team together"  and improving                                                            
the University system.                                                                                                          
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 10:11 AM                                                                          

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