Legislature(2019 - 2020)SENATE FINANCE 532

02/05/2020 09:00 AM Senate FINANCE

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09:01:30 AM Start
09:04:19 AM University of Alaska
10:23:59 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ University of Alaska TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
         UNIVERSITY OF ALASKA SUBCOMMITTEE MEETING                                                                              
                     February 5, 2020                                                                                           
                         9:01 a.m.                                                                                              
                                                                                                                                
9:01:30 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Senator Hoffman called the Senate Finance Committee meeting                                                                     
to order at 9:01 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator David Wilson                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
James Johnson, President, University of Alaska; Senator                                                                         
Gary Stevens; Senator Cathy Giessel.                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^UNIVERSITY OF ALASKA                                                                                                         
                                                                                                                                
NOTE: THIS MEETING WAS CONSIDERED A UNIVERSITY OF ALASKA                                                                        
SUBCOMMITTEE MEETING                                                                                                            
                                                                                                                                
9:04:19 AM                                                                                                                    
                                                                                                                                
Senator  Bishop noted  the importance  of the  University of                                                                    
Alaska (UA),  and the University  of Alaska  Fairbanks (UAF)                                                                    
impact on the local economy. He  hoped that there could be a                                                                    
positive move forward in Fairbanks for the future.                                                                              
                                                                                                                                
Senator Hoffman acknowledged Senators Stevens and Giessel.                                                                      
                                                                                                                                
JAMES JOHNSON, PRESIDENT, UNIVERSITY OF ALASKA, noted the                                                                       
UA interns working in the various legislative offices. He                                                                       
thanked the committee for their work with those interns.                                                                        
                                                                                                                                
President  Johnson discussed  the presentation,  "University                                                                    
of Alaska; Legislative Update;  Senate Finance Committee and                                                                    
University  Operating Budget  Subcommittee" (copy  on file).                                                                    
He highlighted slide 3, "Introduction":                                                                                         
                                                                                                                                
     State  funding cuts  from FY  2014 to  FY 2019and   the                                                                    
     threat of a  41 percent cut in  FY 2020have  challenged                                                                    
     the  university's ability  to serve  its constitutional                                                                    
     mission for the people of Alaska.                                                                                          
                                                                                                                                
     Led by the  Board of Regents, the  University is facing                                                                    
     the  challenge,  committed  to its  mission,  to  lower                                                                    
     operating expenses,  and to  investing in  programs and                                                                    
     initiatives that  serve our students and  contribute to                                                                    
     Alaska's future by:                                                                                                        
         ? Developing and diversifying our economy                                                                              
          ? Preparing Alaskans for jobs in Alaska                                                                               
          ? Conducting research to solve real problems and                                                                      
          create new opportunities                                                                                              
          ?    Increasing   educational    success   through                                                                    
          enrollment and completion                                                                                             
                                                                                                                                
President Johnson addressed slide 5, "Three-Part Mission":                                                                      
                                                                                                                                
     ? Education                                                                                                                
          Delivering academic instruction, career and                                                                           
          technical training                                                                                                    
     ? Research                                                                                                                 
          Advancing   innovation   and   discovery   through                                                                    
          academic and scientific research                                                                                      
     ? Service                                                                                                                  
          Sharing knowledge to address Alaska's community                                                                       
          needs                                                                                                                 
                                                                                                                                
President Johnson discussed slide 6, "Serving All Alaskans;                                                                     
Three Universities - One System":                                                                                               
                                                                                                                                
     ? 1 legal and financial entity                                                                                             
     ? 3 separately accredited universities                                                                                     
     ? 13 community campuses                                                                                                    
     ? 16,700 FTE Students, 24,900 total                                                                                        
     ? 92 percent of all Alaska higher education                                                                                
       Affordable: less than $7,200 (3rd most in US)                                                                            
     ? Debt at graduation: 46 percent (2nd lowest)                                                                              
     ? Student's cost share: 28 percent (5th lowest)                                                                            
          Source: ACPE's 2020 Alaska Education Almanac                                                                          
                                                                                                                                
9:11:39 AM                                                                                                                    
                                                                                                                                
President Johnson looked at slide 7, "Strategic Goals":                                                                         
                                                                                                                                
     ? Contribute to Alaska's Economic Development                                                                              
    ? Increase STEM graduates and invention disclosures                                                                         
     ? Provide Alaska with a Skilled Workforce                                                                                  
     ?  Increase  UA's share  of  teacher  hires and  double                                                                    
     health professionals                                                                                                       
     ? Grow our World Class Research                                                                                            
     ?  Stay  number  1  in  Arctic  Research  and  increase                                                                    
     research expenditures                                                                                                      
     ? Increase Degree Attainment                                                                                               
     ? Increase enrollment and completions                                                                                      
     ? Operate More Cost Effectively                                                                                            
     ? Decrease cost per  completion and increase completion                                                                    
     rate                                                                                                                       
                                                                                                                                
President Johnson addressed slide 8, "Structure":                                                                               
                                                                                                                                
     ?  One  legal,  constitutional, and  financial  entity;                                                                    
     three   separately  accredited   universities  with   a                                                                    
     governing Board and system office                                                                                          
     ? Current  structure is the result  of consolidation of                                                                    
    11 separately accredited community colleges in 1987                                                                         
     ?  That 2-year  effort met  strong resistance,  spawned                                                                    
     legislation,  litigation,   arbitration  and   a  voter                                                                    
     initiative?and  it  increased integration  and  reduced                                                                    
     cost                                                                                                                       
     ?  System   office  supports  Regents,   provides  cost                                                                    
     effective   system    wide   services,    and   focuses                                                                    
     universities on Alaska's statewide priorities                                                                              
     ?  Non-duplicated system  functions include  IT, audit,                                                                    
     labor  relations,  financial/tax reporting,  government                                                                    
     relations,  debt, treasury,  payroll, risk  management,                                                                    
     general   counsel,  procurement,   and  health/benefits                                                                    
     administration                                                                                                             
     ?  University Foundation,  Land Management  Office, and                                                                    
     Education Trust of Alaska are largely self-funded                                                                          
                                                                                                                                
Co-Chair von Imhof noted the  first bullet on the slide. She                                                                    
noted  that  there  was  a question  about  UAA  losing  its                                                                    
accreditation. She  wondered whether there was  a discussion                                                                    
about  whether  all  of  the  campuses  could  use  the  one                                                                    
accreditation.                                                                                                                  
                                                                                                                                
President  Johnson replied  in  the  affirmative. He  stated                                                                    
that  the  discussion  would occur  again  in  the  upcoming                                                                    
spring.                                                                                                                         
                                                                                                                                
9:15:05 AM                                                                                                                    
                                                                                                                                
Co-Chair  von Imhof  appreciated that  the Board  of Regents                                                                    
would   be  examining   the  issue.   She  noted   that  the                                                                    
accreditation  process was  extensive and  costly. She  felt                                                                    
that  streamlining  the process  to  cover  the three  major                                                                    
university campuses  might be a significant  cost savings to                                                                    
the university.                                                                                                                 
                                                                                                                                
President  Johnson  explained  the two  different  types  of                                                                    
accreditation.  He   shared  that  there   was  "specialized                                                                    
accreditation",  which  applied  to  specific  programs.  He                                                                    
announced    that    there     was    also    "institutional                                                                    
accreditation", which accredits UAA  as an entire entity. He                                                                    
noted that those accreditations were very strong.                                                                               
                                                                                                                                
President Johnson looked at slide 9, "Accreditation":                                                                           
                                                                                                                                
     ?   UA   universities   receive   their   institutional                                                                    
     accreditation   from   the  Northwest   Commission   on                                                                    
     Colleges and Universities (NWCCU)                                                                                          
     ?  Board took  a number  of steps  in consideration  of                                                                    
     legislative intent  to move  to a  single institutional                                                                    
     accreditation                                                                                                              
     ?  Board  directed UA  president  to  develop plan  for                                                                    
     evaluating options                                                                                                         
     ? Convened group of state leaders for advice                                                                               
        Held  workshops  across   the  system  and  provided                                                                    
     opportunities for  input from faculty,  staff, students                                                                    
     and the public                                                                                                             
     ?  Conducted extensive  public  opinion  survey   3,900                                                                    
     participants                                                                                                               
     ? Even  split between  those favoring  "uniqueness" and                                                                    
     those favoring "integration"                                                                                               
     ? Established  working group to  engage NWCCU  and U.S.                                                                    
     Dept. of Education on issues and timelines                                                                                 
        On Oct  7, after  full  consideration, Board  ceased                                                                    
     consideration  of  a  single  accreditation  until  UAF                                                                    
     secures its NWCCU accreditation renewal in 2021                                                                            
     ?   All   three   universities   (including   community                                                                    
     campuses) are fully accredited                                                                                             
                                                                                                                                
President   Johnson   highlighted   slide   10,   "Statewide                                                                    
Footprint":                                                                                                                     
                                                                                                                                
     ? University is largest landlord in State Government                                                                       
     ? Are there assets that can be closed, sold or                                                                             
     eliminated? YES!                                                                                                           
                                                                                                                                
Senator  Bishop requested  a brief  update  on the  combined                                                                    
heat and power plant, and its anticipated annual savings.                                                                       
                                                                                                                                
President Johnson  replied that he had  seem emission coming                                                                    
from the plant,  so it was operational. He  noted that, with                                                                    
any very  large complex operation  may show some  delays and                                                                    
repairs. He explained  that the cost overrun  was 3 percent,                                                                    
so it was perfectly reasonable  given the length of how long                                                                    
it took to build the  facility. He agreed to provide further                                                                    
information about the cost savings related to the building.                                                                     
                                                                                                                                
9:20:16 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  thanked former  Senate President  Kelly for                                                                    
spearheading the efforts for the power plant.                                                                                   
                                                                                                                                
Co-Chair  von Imhof  wondered whether  there was  a list  of                                                                    
priorities for the backlog paydown of $50 million.                                                                              
                                                                                                                                
President Johnson replied in the affirmative.                                                                                   
                                                                                                                                
Co-Chair von Imhof wondered whether  there was an outline of                                                                    
what could be expected in the future.                                                                                           
                                                                                                                                
President  Johnson  clarified   the  question.  He  wondered                                                                    
whether  there  was an  element  of  statute that  could  be                                                                    
changed to enable action.                                                                                                       
                                                                                                                                
Co-Chair  von  Imhof  restated her  question.  She  wondered                                                                    
whether  there was  a  list of  assets  that showed  whether                                                                    
university-owned  buildings  would  be leased  or  sold  for                                                                    
other non-university  use. She specifically wondered  if the                                                                    
DMV operations in a university  building, were the result of                                                                    
the building being sold.                                                                                                        
                                                                                                                                
President Johnson replied that it  was a lease agreement. He                                                                    
shared  that there  were current  conversations about  state                                                                    
co-uses of some buildings. He remarked that it was a value                                                                      
across the state. He stressed that there was a constant                                                                         
examination for ways to monetize the university assets.                                                                         
                                                                                                                                
President   Johnson   discussed   slide   11,   "Significant                                                                    
Activity":                                                                                                                      
                                                                                                                                
     ? FY20 Legislature includes  budget intent language for                                                                    
     Board to consider single accreditation                                                                                     
     ?  Aug  13  Board   of  Regents  signs  3-year  Compact                                                                    
     Agreement with Governor                                                                                                    
     ? Aug 20 Board terminates Exigency Declaration                                                                             
     ? Sep  26 NWCCU  expresses concern over  governance and                                                                    
     accreditation                                                                                                              
     ?   Oct  7   Board  ceases   consideration  of   single                                                                    
     accreditation and statewide  expedited academic program                                                                    
     reviews                                                                                                                    
     ?  Oct 18  Universities  begin  campus level  expedited                                                                    
     academic program reviews                                                                                                   
     ? Oct 30 Board responds to NWCCU concerns                                                                                  
     ?  Nov  1   NWCCU  confirms  UA  on   "right  path"  on                                                                    
     governance and accreditation                                                                                               
     ?  Nov 22  Board  responds to  FY20 legislative  intent                                                                    
     regarding single accreditation                                                                                             
     ?  Dec  3  Board   transmits  report  to  Governor  and                                                                    
     Legislature per Compact Agreement                                                                                          
     ? Dec  9 Board initiates policy  audit clarifying roles                                                                    
     and responsibilities                                                                                                       
     ?  Jan 17  Board  approves 2020  work  plan, 5  percent                                                                    
     tuition   increase  for   2020,   including  $1.5M   of                                                                    
     increased financial aid                                                                                                    
     ? Feb 20 Board review  of strategic goals and status of                                                                    
     policy review                                                                                                              
                                                                                                                                
Senator Hoffman acknowledged former Bethel senator and                                                                          
former chairman of the Senate Finance Committee, Senator                                                                        
John Binkley                                                                                                                    
                                                                                                                                
9:24:55 AM                                                                                                                    
                                                                                                                                
President Johnson addressed slide 13, "2020 Legislative                                                                         
Priorities":                                                                                                                    
                                                                                                                                
       Operating Budget                                                                                                         
          ? Year 2 compact funding - $277M                                                                                      
          ? Single appropriation structure                                                                                      
     ? Capital Budget                                                                                                           
          ? $50M Deferred Maintenance (backlog exceeds                                                                          
          $1.2B)                                                                                                                
          ? $2.5M Alaska Earthquake Center (USArray)                                                                            
     ? Debt Service Relief                                                                                                      
          ? Significant fixed operating cost - $28M                                                                             
          annually ($22.5 UGF)                                                                                                  
          ? Principal outstanding - $297M                                                                                       
                                                                                                                                
President  Johnson  discussed  slide 14,  "2020  Legislative                                                                    
Priorities":                                                                                                                    
                                                                                                                                
     ? Technical Vocational Education Program (TVEP)                                                                            
          ? Program expires this year (June 2020)                                                                               
          ? Funded through payroll deductions $12.4M in                                                                         
          FY20                                                                                                                  
          ? Funds high-demand career and technical training                                                                     
          ? UA receives 45 percent of program dollars $5.6M                                                                     
          in FY20                                                                                                               
       Dual Enrollment                                                                                                          
          ? Expansion of High School/College enrollment                                                                         
     ? Alaska Higher Education Investment Fund                                                                                  
          ? Alaska Performance Scholarship (APS) Program:                                                                       
          $12M                                                                                                                  
          ? Alaska Education Grant (AEG): $6M                                                                                   
          ? WWAMI Medical School Program: $3M                                                                                   
                                                                                                                                
Senator   Hoffman  requested   the   effectiveness  of   the                                                                    
Technical Vocational Education Program (TVEP).                                                                                  
                                                                                                                                
President  Johnson replied  that the  program was  extremely                                                                    
effective because  it was strongly  tied to  workforce needs                                                                    
and  the  Workforce  Investment Board.  He  stated  that  it                                                                    
allowed for  the ability to  be very nimble,  and responsive                                                                    
to changing workforce needs.                                                                                                    
                                                                                                                                
9:30:05 AM                                                                                                                    
                                                                                                                                
President  Johnson  looked  at   slide  16,  "3-Year  Budget                                                                    
Compact":                                                                                                                       
                                                                                                                                
     ? Agreement between Board and Governor Dunleavy                                                                            
     August 13                                                                                                                  
     ? $70M (22 percent) reduction over 3-Yrs versus                                                                            
     single-year cut of $134M (41 percent)                                                                                      
          ? FY20 $302M (Down $25M or 7.6 percent from FY19)                                                                     
          ? FY21 $277M (Down $25M or 8.3 percent from FY20)                                                                     
     ? FY22 $257M (Down $20M or 7.2 percent from FY21)                                                                          
     ? Best negotiated option for the University of Alaska                                                                      
     ? Reduces cumulative 2020-2022 cut from $405M to $145M                                                                     
     ? Requires a tremendous internal effort to meet                                                                            
     reduced funding levels                                                                                                     
     ? Secured  Governor's support for  single appropriation                                                                    
     and   other   important   priorities:   AEG   and   APS                                                                    
     scholarship,   WWAMI  medical   school  funding,   dual                                                                    
     enrollment and land grant initiative                                                                                       
     ? UA agreed to cost savings and revenue enhancement                                                                        
     initiatives                                                                                                                
                                                                                                                                
Senator Hoffman  noted that the  Compact was  signed between                                                                    
the  Board of  Regents and  the Office  of the  Governor. He                                                                    
explained that  the legislature was the  appropriating body,                                                                    
and  determined  the  level of  funding  for  all  agencies,                                                                    
including the university.                                                                                                       
                                                                                                                                
Senator   Wielechowski  queried   the  impacts   to  student                                                                    
enrollment and faculty from the previous year's "debacle."                                                                      
                                                                                                                                
President  Johnson   replied  that  the   budget  reductions                                                                    
starting  in FY  16  had a  negative  impact on  enrollment,                                                                    
employment, morale,  and numbers. He stated  that the number                                                                    
would  be presented  in  the slides.  He  remarked that  the                                                                    
impacted number of those on the payroll was 1,727 people.                                                                       
                                                                                                                                
Co-Chair Stedman  felt that it  was important  to understand                                                                    
the number of checks through  payroll that were submitted to                                                                    
individuals. He  stressed that it showed  the information as                                                                    
related to the employee count.                                                                                                  
                                                                                                                                
President Johnson pointed to slide  17, "Funding History and                                                                    
Projection." He stated that the  slide reflected the compact                                                                    
agreement.  He  understood  that  the  legislature  had  the                                                                    
appropriating power,  but the slide showed  that the Compact                                                                    
agreement  was in  effect.  He noted  the  red portion  that                                                                    
showed  the  reductions.  He   remarked  that  it  reflected                                                                    
enrollment declines,  morale declines, and the  challenge in                                                                    
investing  in  new  programs and  initiatives  to  meet  the                                                                    
changing needs.  He stressed that the  most important aspect                                                                    
of  the slide  was the  cumulative impact  of the  desire to                                                                    
invest and change strategies.                                                                                                   
                                                                                                                                
9:35:41 AM                                                                                                                    
                                                                                                                                
President Johnson  looked at slide 18,  "Funding History and                                                                    
Projection by  MAU." He remarked  that the slide  showed the                                                                    
funding  history and  projections by  each academic  unit of                                                                    
the University. He  noted that UAA had been  reduced by 31.4                                                                    
percent; UAF had  been reduced by 30.5 percent;  UAS by 27.4                                                                    
percent; and  the statewide administration by  47.7 percent.                                                                    
He shared  the percentages  of each  academic unit  with the                                                                    
UGF: UAA  was 36 percent;  UAF was  49 percent; UAS  was 8.5                                                                    
percent;  and  statewide was  6  percent.  He stressed  that                                                                    
while  the  three  universities  were  very  different,  UAF                                                                    
received support for research,  for debt, rural mission, and                                                                    
higher  utility  cost.  He  remarked  that  UAA's  community                                                                    
campuses received support from local governments.                                                                               
                                                                                                                                
President  Johnson  highlighted   slide  19,  "3-Yr  Compact                                                                    
Budget  Plan."  He  pointed  out that  in  addition  to  the                                                                    
reductions,  there  were  also  significant  investments  in                                                                    
strategic initiatives  and compensation.  He shared  that in                                                                    
FY 20,  the faculty  and staff received  modest compensation                                                                    
increases based  on the national averages.  He stressed that                                                                    
it was  not at  an aspirational level,  but was  a phased-in                                                                    
approach.  He  remarked that  he  also  wanted a  1  percent                                                                    
compensation  adjustment   to  meet   the  cost   of  living                                                                    
standard. He felt that the  universities needed to invest in                                                                    
the  economic  drivers  such as  workforce  development  and                                                                    
research.                                                                                                                       
                                                                                                                                
Senator Hoffman recalled that the  governor had expressed an                                                                    
attempt  to  educate  the children.  He  noted  the  current                                                                    
legislation  referred  to  at "The  Alaska  Reads  Act."  He                                                                    
queried the university's attempt  to train Alaska's teachers                                                                    
to be  prepared to look at  the Alaska Reads Act  to improve                                                                    
education among the young children.                                                                                             
                                                                                                                                
President  Johnson  replied  that  the head  of  the  Alaska                                                                    
College   of  Education   was  working   closely  with   the                                                                    
commissioner  of  the  Department  of  Education  and  Early                                                                    
Development  (DEED)   to  contribute  through   the  teacher                                                                    
education programs and the  continuing education programs of                                                                    
those teachers. He did not  believe that there was a current                                                                    
curriculum or  an analysis  of the  financial impact  on the                                                                    
university system.                                                                                                              
                                                                                                                                
Senator Hoffman remarked that the  committee would receive a                                                                    
fiscal note on that bill in the upcoming days.                                                                                  
                                                                                                                                
9:40:14 AM                                                                                                                    
                                                                                                                                
Senator  Bishop  remarked  that most  people  only  saw  the                                                                    
surface  reductions,  but  there  were  major  conversations                                                                    
about the  importance of several programs.  He stressed that                                                                    
the  Compact was  not prioritized  by  the legislature,  and                                                                    
that the legislature would have its say in the process.                                                                         
                                                                                                                                
Senator  Wielechowski  wanted  to  know the  impact  to  the                                                                    
state's  economy  and   business  communities.  He  wondered                                                                    
whether  the funding  cuts to  the  university would  create                                                                    
more jobs in the private sector.                                                                                                
                                                                                                                                
President   Johnson  replied   that   there  was   anecdotal                                                                    
information about  the negative effect of  the reductions on                                                                    
the economy,  particularly among the highly  skilled faculty                                                                    
and  staff.  He  stressed  that  there  was  not  comparable                                                                    
employment in  Alaska for those  individuals, so  they would                                                                    
probably leave the  state. He remarked that he  had met with                                                                    
many  people   who  showed   significant  concern   about  a                                                                    
reduction in purchasing and consumption,  as a result of the                                                                    
funding cuts to the university.                                                                                                 
                                                                                                                                
President Johnson discussed slide 20, "Budget Impacts":                                                                         
                                                                                                                                
     ? Student support and administrative services have                                                                         
     borne large share of $76M reduction over last 6 years                                                                      
          ?   HR    and   procurement    restructuring   and                                                                    
          integration                                                                                                           
             Headcount reductions due to attrition and                                                                          
          terminations                                                                                                          
          ? KUAC Radio/TV Base Funding Reduction                                                                                
          ? Fairbanks Administrative Services Building Sale                                                                     
          ? Chugach Eagle River Building Lease Non-Renewal                                                                      
          ? Kenai Peninsula College Residential Housing                                                                         
          Paused                                                                                                                
     ? $45M additional reduction over FY21-22 will                                                                              
     necessitate significant impacts to academic programs                                                                       
     ? Universities aggressively working to achieve FY20                                                                        
     cuts while conducting academic and administrative                                                                          
     program reviews                                                                                                            
                                                                                                                                
President  Johnson  displayed  slide 21,  "Academic  Program                                                                    
Reviews":                                                                                                                       
                                                                                                                                
     ? Board directed UA president to have universities                                                                         
     conduct academic program reviews                                                                                           
     ? University reviews are underway                                                                                          
     ?   In    March   2020,   chancellors    will   provide                                                                    
     recommendations to the president regarding reduction,                                                                      
     consolidation or discontinuation of any programs                                                                           
     ? Board must approve any program changes and is                                                                            
     expected to consider recommendations in June 2020                                                                          
     ? Teach out obligations and faculty notice periods may                                                                     
    mean financial savings are not achieved until FY22                                                                          
                                                                                                                                
9:45:33 AM                                                                                                                    
                                                                                                                                
Co-Chair von Imhof noted the  conversations about the number                                                                    
of academic  concentrations offered  by the university  as a                                                                    
whole.  She wondered  whether the  university  would show  a                                                                    
core streamlining,  to focus  on the  big industries  in the                                                                    
state versus  some of the  humanities. She  wondered whether                                                                    
the  university  could  work more  closely  with  other  job                                                                    
training centers to take over some of the job training.                                                                         
                                                                                                                                
President Johnson  replied in the affirmative.  He explained                                                                    
that the  Board of  Regents had set  up criteria  to address                                                                    
downsizing. He explained that, in  addition to the goals and                                                                    
standard practices,  there was  a focus  on the  demand from                                                                    
students and employers. He remarked  that there was analysis                                                                    
of workforce  data and  the needs in  the industries  in the                                                                    
state. That data was part  of what went into determining the                                                                    
continuation of certain programs.  He stressed that the same                                                                    
criteria applied to those who  were studying the humanities.                                                                    
he explained that there were  many history majors who worked                                                                    
for  corporations.  He  also stated  that  there  were  many                                                                    
English  majors  who were  doing  important  things for  the                                                                    
economy.                                                                                                                        
                                                                                                                                
9:50:13 AM                                                                                                                    
                                                                                                                                
Senator  Bishop  stressed that  the  state  had a  connected                                                                    
career  and technical  education plan  that the  university,                                                                    
DEED, and the Department  of Labor and Workforce Development                                                                    
(DLWD) were each  a signatory. He felt that  they should all                                                                    
be working in tandem to  execute the goals. He remarked that                                                                    
there should be a target  of the high impact legacy industry                                                                    
jobs  because  they were  the  workforce.  He stressed  that                                                                    
there should  be workforce development initiatives  in those                                                                    
targeted  industries  for  the  legislature's  approval  for                                                                    
expenditure funds.                                                                                                              
                                                                                                                                
President  Johnson   looked  at   slide  22,   "FY20  Budget                                                                    
Allocation."  He   remarked  that   the  slide   showed  the                                                                    
breakdown of allocations for the  FY 20 budget. He noted the                                                                    
reduction of $25 million, and  how it was distributed across                                                                    
the three  universities. He noted  that UAS was  not reduced                                                                    
in UGF,  because of  the double-appropriation  structure. He                                                                    
pointed  to  the  $2.3  million, which  was  a  shared  cost                                                                    
allocation. He explained that all  three of the universities                                                                    
did not bear  all of their costs. He remarked  that the $2.3                                                                    
million paid for the legal,  financial, and IT costs at UAS.                                                                    
He stated that  the reductions were allocated  on a prorated                                                                    
basis,   and  then   there  was   an   explanation  of   the                                                                    
investments. He  explained that the compensation  market was                                                                    
distributed  according to  the  need at  each university  in                                                                    
order  to fill  the gap  at  each institution.  The Title  9                                                                    
funding was  intended to  "step up"  the capacity  to comply                                                                    
with federal requirements.                                                                                                      
                                                                                                                                
President  Johnson   pointed  to  slide  23,   "FY21  Budget                                                                    
Proposed."   He   remarked   that  it   assumed   a   single                                                                    
appropriation.  He  explained each  line  in  the slide  and                                                                    
stressed  that the  investments were  still up  for approval                                                                    
from the Board.                                                                                                                 
                                                                                                                                
President Johnson discussed slide  25, "Operating Revenue by                                                                    
Type and Source."  He noted that in FY 19  showed a total of                                                                    
$818  million of  sources revenues,  which was  a two  and a                                                                    
half times  multiplier in the  state's university.  He noted                                                                    
that there was a  substantial restricted amount. He remarked                                                                    
that  the   freedoms  for  spending  were   limited  to  the                                                                    
restricted  programs.  He  noted the  example  of  research,                                                                    
which had limited and restricted amounts.                                                                                       
                                                                                                                                
9:55:44 AM                                                                                                                    
                                                                                                                                
Senator Bishop  felt that  the slide  could show  the direct                                                                    
and indirect economic benefit to the state on all funds.                                                                        
                                                                                                                                
Senator Hoffman  asked that the  information be  provided to                                                                    
the committee.                                                                                                                  
                                                                                                                                
President Johnson agreed to provide that information.                                                                           
                                                                                                                                
President   Johnson   highlighted   slide   26,   "Operating                                                                    
Expenditures by  Category." The  largest revenue  source was                                                                    
student tuition  and fees.  He noted  the core  elements and                                                                    
detail of the expenditures.                                                                                                     
                                                                                                                                
President   Johnson   discussed   slide   27,   "Key   Data:                                                                    
Enrollment."   He  felt   that   Senator  Wielechowski   was                                                                    
anticipating the slide. He noted  the slope down since 2010,                                                                    
and noted the peak budget year of FY 11.                                                                                        
                                                                                                                                
10:00:06 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  looked  at  the  current  enrollment  and                                                                    
wondered whether  there was an acceleration  on the downside                                                                    
of the headcount.                                                                                                               
                                                                                                                                
President  Johnson  responded that  there  will  be a  steep                                                                    
slope in  the upcoming year,  because of the effects  of the                                                                    
year prior.                                                                                                                     
                                                                                                                                
Co-Chair  Stedman  felt  that,  looking  back  a  couple  of                                                                    
slides, there  was an allocation  dealing with  the proposed                                                                    
reduction to  split the  $25 million.  He remarked  that the                                                                    
percentage  of enrollment  matched the  percentage split  on                                                                    
the dollars. He  wondered how the allocations  were split on                                                                    
the components,  and whether it  was a coincidence  that the                                                                    
number lined up with the headcount.                                                                                             
                                                                                                                                
President   Johnson   replied   that   the   UGF   reduction                                                                    
distribution was  based solely  on the UGF  portion received                                                                    
by that  institution. He explained  that if a  unit received                                                                    
25 percent of the system's UGF  than it would bear that same                                                                    
percentage of  reduction. He  noted that  further reductions                                                                    
and investment decisions were not done pro rata.                                                                                
                                                                                                                                
Co-Chair Stedman noted that  the downturn acceleration might                                                                    
suppose  that  all  the  components   would  decrease  at  a                                                                    
significant rate.                                                                                                               
                                                                                                                                
President Johnson  replied that  it was  a real  concern. He                                                                    
remarked  that  there  was  a   focus  on  how  to  allocate                                                                    
different  resources more  strategically across  the system,                                                                    
and how the universities would stem that decline.                                                                               
                                                                                                                                
10:05:40 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman  remarked that he wanted  the university to                                                                    
explain  the  geographic component,  which  was  out of  the                                                                    
legislature's  control. He  understood that  there were  new                                                                    
budget  realities, but  felt that  the geographic  component                                                                    
would help to give a "soft landing" to the university.                                                                          
                                                                                                                                
Senator Bishop  commented that there  were many  things that                                                                    
were not  seen, which helped double  the engineer graduates.                                                                    
He  felt that  it  would  be interesting  to  see the  trend                                                                    
broken down by discipline.                                                                                                      
                                                                                                                                
President Johnson recalled that, if  there was data prior to                                                                    
2010, there would be positive  slopes for UGF appropriations                                                                    
and enrollment.                                                                                                                 
                                                                                                                                
Co-Chair Stedman  was struggling  with the alarming  drop of                                                                    
37 percent for UAS in 2011,  versus almost 28 percent in the                                                                    
other two campuses. He requested  a broader breakdown of the                                                                    
numbers in the rural campuses.                                                                                                  
                                                                                                                                
Senator  Hoffman noted  the request.  He  stressed that  the                                                                    
legislature was the appropriating body.                                                                                         
                                                                                                                                
Senator Wielechowski felt  that it would be  helpful to have                                                                    
percentages   of   students   were  enrolling   in   outside                                                                    
universities and  colleges. He  wanted to know  why students                                                                    
were not enrolling in the university.                                                                                           
                                                                                                                                
President Johnson  replied that,  in general,  students were                                                                    
not  enrolling anywhere.  He stated  that  he would  provide                                                                    
more  information. He  felt that  the  biggest challenge  in                                                                    
Alaska  was  not those  that  were  leaving the  state,  but                                                                    
rather  was  Alaska was  not  perusing  any form  of  higher                                                                    
education.                                                                                                                      
                                                                                                                                
10:11:12 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman remarked  that  the numbers  needed to  be                                                                    
rechecked,  because he  had concluded  different numbers  in                                                                    
his calculations.                                                                                                               
                                                                                                                                
President Johnson  looked at slide 28,  "Key Data: Tuition."                                                                    
He stated that tuition rates  were broken out by resident to                                                                    
non-resident,  and undergraduate  and  graduate tuition.  He                                                                    
explained that the tuition was  competitive with the western                                                                    
states. He  noted that, even  with the tuition  increase, it                                                                    
was still below the average of the 15 comparable states.                                                                        
                                                                                                                                
President  Johnson discussed  slide 29,  "Key Data:  Tuition                                                                    
and Fees."  He remarked that  the tuition for  the community                                                                    
colleges was substantially higher  than the other comparable                                                                    
states.  The Board  had been  tasked to  examine those  high                                                                    
tuition rates.                                                                                                                  
                                                                                                                                
President   Johnson   addressed   slide   30,   "Key   Data:                                                                    
Workforce":                                                                                                                     
                                                                                                                                
     ?UA has 1,727 fewer employees than five years ago                                                                          
     ?  Since  FY15  total  workforce has  been  reduced  21                                                                    
     percent                                                                                                                    
     ?MAPTS  and  K-12  Outreach  moved  from  statewide  to                                                                    
     campus                                                                                                                     
     ?  Regular employees  (leadership,  faculty and  staff)                                                                    
     are down  18 percent and temporary  employees (adjunct,                                                                    
     student and temp staff) down 24 percent                                                                                    
     ? Reductions  have been achieved through  a combination                                                                    
     of  attrition, retirement,  ending term  contracts, and                                                                    
     eliminating or leaving positions vacant                                                                                    
                                                                                                                                
President Johnson looked at slide 31, "Key Data: Turnover":                                                                     
                                                                                                                                
     ?  Overall Average  Turnover Rate  at UA  from FY15  to                                                                    
     FY20 was 14.1 percent                                                                                                      
     ? According  to the  Bureau of Labor  Statistics (2019)                                                                    
     annual turnover  rate across all  industries in  the US                                                                    
     ranges between 15 percent and 19 percent                                                                                   
     ? FY20  to date, we  have exceeded FY19 in  turnover of                                                                    
     administrators  and are  nearing  the  FY19 totals  for                                                                    
     staff and faculty                                                                                                          
                                                                                                                                
President Johnson discussed slide 32, "Key Data: Voluntary                                                                      
Turnover":                                                                                                                      
                                                                                                                                
     ? Voluntary  turnover includes  retirements, departures                                                                    
     for other  opportunities, and other categories  such as                                                                    
     medical necessity                                                                                                          
     ? The  overall average voluntary turnover  rate for all                                                                    
     employees in the University of  Alaska System from FY15                                                                    
     to FY19 was 11.1 percent                                                                                                   
       Comparable  Peer Institutions: 7 percent  Weber State                                                                    
     Univ and 9 percent West Florida Univ                                                                                       
                                                                                                                                
10:15:20 AM                                                                                                                   
                                                                                                                                
President Johnson looked at slide 34, "Debt Profile and                                                                         
Context":                                                                                                                       
                                                                                                                                
     ? Annual Debt Service = $28 million (UGF component is                                                                      
     $22.5 million)                                                                                                             
     ? Principal Outstanding = $297 million                                                                                     
     ? Debt service is 5 percent of UA's unrestricted                                                                           
     revenues, and has increased as revenue (UGF and                                                                            
     Tuition) decline                                                                                                           
     ? Fixed costs reduce management's capacity to make                                                                         
     strategic reductions as revenues decline                                                                                   
     ? Examples of debt-financed projects: UAF Power Plant,                                                                     
     UAF Engineering Building, Deferred Maintenance                                                                             
                                                                                                                                
President  Johnson discussed  slide  35,  "Debt Profile  and                                                                    
Context":                                                                                                                       
                                                                                                                                
     ? Credit rating downgrades in Fall 2019, due to large                                                                      
     UGF cuts and negative enrollment trends                                                                                    
     ? Moody's rating: Baa1 with Negative Outlook                                                                               
     ? Standard and Poor's rating: A+ with Stable Outlook                                                                       
     ? Lower credit ratings make new debt more expensive                                                                        
     and refinancing less viable                                                                                                
     ? Continued financial headwinds: UGF and Tuition                                                                           
     ? All of the above limit UA's debt capacity                                                                                
                                                                                                                                
President  Johnson  highlighted  slide 36,  "Debt  by  Major                                                                    
Administrative Unit." He noted  the annual debt service, the                                                                    
outstanding principal,  the remaining debt service,  and the                                                                    
maturity dates of each project.                                                                                                 
                                                                                                                                
Senator Hoffman queried the interest rate on each debt.                                                                         
                                                                                                                                
President Johnson agreed to provide that information.                                                                           
                                                                                                                                
Senator  Bishop noted  the  conversations  with the  ratings                                                                    
agencies, and asked whether there  was an indication of what                                                                    
could enhance the university's rating.                                                                                          
                                                                                                                                
President Johnson  replied in the affirmative  and explained                                                                    
that the  biggest factor in  increasing the rating  would be                                                                    
time.                                                                                                                           
                                                                                                                                
President  Johnson discussed  slide 38,  "Total Annual  Debt                                                                    
Service." The debts were broken out by each university.                                                                         
                                                                                                                                
10:20:10 AM                                                                                                                   
                                                                                                                                
President  Johnson  pointed  to  slide 39,  "Total  UA  Debt                                                                    
Outstanding." He  remarked that the  slide showed out  to FY                                                                    
45, and the summary of the outstanding debt.                                                                                    
                                                                                                                                
President   Johnson   displayed   slide   40,   "Debt:   Key                                                                    
Takeaways":                                                                                                                     
                                                                                                                                
     ? UA's debt service is  a significant fixed cost: $28m,                                                                    
     or                                                                                                                         
     5 percent of unrestricted revenues                                                                                         
     ?  Fixed costs  reduce  management's  capacity to  make                                                                    
     strategic reductions as revenues decline                                                                                   
     ? UA's has limited capacity for new debt                                                                                   
     ? Debt relief, in the  form of principal payoff or debt                                                                    
    service reimbursement, is a prudent financial move                                                                          
     ?   Debt  relief   would   strengthen  UA's   financial                                                                    
     position,  and  increase  its capacity  to  respond  to                                                                    
     current and future revenue pressures                                                                                       
                                                                                                                                
President Johnson highlighted slide 42, "Conclusion":                                                                           
                                                                                                                                
     The University  of Alaska  appreciates your  support as                                                                    
     we move  forward, committed to serving  our mission, to                                                                    
     lower  operating   expenses,  and  to  invest   in  the                                                                    
     programs  and  initiatives that  provide  opportunities                                                                    
     for our students and contribute to Alaska's future by:                                                                     
                                                                                                                                
         ? Developing and diversifying our economy                                                                              
          ? Preparing Alaskans for jobs in Alaska                                                                               
            Conducting research to solve real problems and                                                                      
          create new opportunities                                                                                              
               Increasing   educational    success   through                                                                    
          enrollment and completion                                                                                             
                                                                                                                                
Senator   Bishop   thanked   President   Johnson   for   the                                                                    
presentation.  He remarked  that he  was looking  forward to                                                                    
the  future of  the university.  He  hoped to  build upon  a                                                                    
proactive data set and research,  and instruments to improve                                                                    
the university. He  wanted to work together  to decrease the                                                                    
turmoil.  He remarked  that it  was a  painful process,  but                                                                    
hoped to commit to the lessons learned moving forward.                                                                          
                                                                                                                                
Senator Hoffman felt  that the finance committee  had been a                                                                    
friend of the university, and  tried to get adequate funding                                                                    
to best meet  the needs of Alaska. He looked  forward to the                                                                    
additional meetings on the subject.                                                                                             
                                                                                                                                
Senator Hoffman discussed the following day's agenda.                                                                           
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:23:59 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:23 a.m.                                                                                         

Document Name Date/Time Subjects
2019 08 13 UA-SOA-Compact.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2019 09 26 NWCCU Letter.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2019 09 13 Gov Dunleavy AK Delegation Land Grand Ltr.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2019 10 30 UA BOR Chair Davies Response to NWCCU wChancellors Reports.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2019 11 01 NWCCU Response to UA BOR Chancellors.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2019 11 22 Buretta to Ms. Sanders Response to the Legislative Intent Language.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2019 12 03 Buretta to Gov Dunleavy_FY20 Compact Report.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
2020 02 05 UA Senate Finance Committee Final.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
Legislative Finance UA Allocation summary.pdf SFIN 2/5/2020 9:00:00 AM
SB 152
FY2021 Capital -DM-RR.pdf SFIN 2/5/2020 9:00:00 AM
SB 153