Legislature(1997 - 1998)
02/12/1998 03:47 PM House HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 302 - UNIVERSITY OF ALASKA OPERATING BUDGET Number 0008 CHAIRMAN BUNDE announced the committee would hear House Bill 302, "An Act relating to the University of Alaska; and providing for an effective date." Chairman Bunde, sponsor, read the following sponsor statement: "The purpose of HB 302 is to provide equitable funding for each University of Alaska campus. The University of Alaska is important to the people, the economy, and the future of our state. The debate over equitably funding each campus needs to be resolved. If it is not, the needs of our University of Alaska students will not be met adequately now or in the future. "House Bill 302 begins to address the question of equitable funding for all university campuses. The purpose of this legislation is to direct the Board of Regents to allocate funds based on enrollment at each campus. "House Bill 302 is one way to balance our limited funds and meet the needs of our growing student population. It is my intent to urge the legislature, the university officials, students and others who are interested in seeing our university prosper and grow, to join in the debate and ultimately help me resolve the issues of equity in the funding for our university." CHAIRMAN BUNDE noted he had provided for the committee's information, a study entitled, "Achieving Productivity and Accountability at UAA" which indicates some of the productivity and accountability problems in one of the university branches. He urged the other branches to consider doing a similar study. Number 0214 CHAIRMAN BUNDE directed the committee's attention to a pie chart from the Fairbanks Daily News-Miner which shows the state budget for the university and how those funds are allocated: 50 percent to the University of Alaska Fairbanks (UAF); 35.2 percent to the University of Alaska Anchorage (UAA); 6.4 percent goes to the statewide function; and 7.9 percent to the University of Alaska Southeast (UAS). The chart also indicates that 29 percent of the students are at UAF, 68.5 percent at UAA, and nearly 24 percent at UAS. He said it's overly-simplistic to think the dollars can be allocated by dividing the number of students in the total system into the total dollars going to the university system. Obviously, the cost of teaching a graduate class is considerably more than a beginning class. House Bill 302 allows for weighting by subject and by years; i.e., the first years are cheaper than upper division classes. CHAIRMAN BUNDE invited Patti Swenson to add her comments. Number 0382 PATTI SWENSON, Legislative Assistant to Representative Con Bunde, pointed out that the committee packets contained information from Dr. Mary McKeown-Moak who has completed a number of studies of postsecondary education formula funding and productivity. Number 0430 CHAIRMAN BUNDE added that Alaska is not breaking new ground with this legislation. About half the states allocate postsecondary education funding on some type of formula based on per student, per discipline. He noted that perhaps the recently completed area cost differential on public schools could be translated for the university. Number 0487 REPRESENTATIVE TOM BRICE asked how much of the total budget for UAA is general fund monies. CHAIRMAN BUNDE asked Wendy Redman to come forward. Number 0548 WENDY REDMAN, Vice-President, Statewide Programs and Services, University of Alaska, responded in the FY97 actuals for UAA, the total budget was $109 million of which about $51 million was general fund monies. She added of the $109 million, about $23 million is tuition. REPRESENTATIVE BRICE asked what the breakdown was for UAF and UAS. MS. REDMAN replied the FY 97 actuals for UAF were $184 million of which $72 million was general fund monies, and $13.5 million was tuition. At the UAF, a much smaller proportion of the total is tuition and a much higher proportion is federal receipts. She noted federal receipts for the University of Alaska Fairbanks were $31 million versus $10 million for the University of Alaska Anchorage. MS. REDMAN said the University of Alaska Southeast has a total budget of $16.8 million, and $10 million of that is general fund monies. Number 0634 REPRESENTATIVE FRED DYSON asked Ms. Redman to repeat the general fund contribution for the three university campuses. MS. REDMAN said the FY 97 actuals are as follows: $50.8 million for UAA, $72.2 million for UAF, and $10.3 for UAS. CHAIRMAN BUNDE asked for the total budget of each of the three campuses. MS. REDMAN replied $109.1 million for UAA, $184.2 million for UAF, and $16.8 million for UAS. CHAIRMAN BUNDE asked if Ms. Redman had a cost per student for each campus. MS. REDMAN commented she did not have that information with her. CHAIRMAN BUNDE recalled that it was approximately $14,000 per student at UAA, $20,000 at UAF, and $22,000 at UAS. Number 0730 MS. REDMAN commented the university does not calculate the cost per student by taking the total budget and dividing it by the number of students. She added the university is working at a formula internal to the university, which she would address later. CHAIRMAN BUNDE announced that Dr. Mary McKeown-Moak was available to testify offnet. Number 0806 DR. MARY P. MCKEOWN-MOAK, Associate Executive Director for Financial Affairs, Arizona Board of Regents, testified that in 1996, 30 of the 50 states reportedly were using a funding formula. She added funding formulas for higher education are somewhat different from formulas used for elementary and secondary education, although the goal is basically the same. Funding formulas were developed for higher education about 50 years ago, after World War II, when there was a big influx of students into higher education and states were having difficulty determining an equitable distribution of the available resources to fund higher education. The states looked to a funding formula that would give an objective method of distributing funding adequately. She remarked that formulas, of course, have pluses and minuses. Number 0881 DR. MCKEOWN-MOAK said there are basically three ways of calculating formula amounts: 1) the rate per base factor, which would be a dollar per credit hour or a dollar per student; 2) the percentage of base factor is, for example, where you would take the instructional support component of the budget and take 5 percent or 10 percent of the instructional costs and allocate that amount to each institution based on the formula; and 3) rate per base factor where a salary range is based on a predetermined optimum ratio between a base ratio and a number of personnel; for example, ratios such as student/faculty and credit hours per faculty member are used. This is a very complex method to calculate a funding formula. The advantages of the productivity method of calculating are that it does bring productivity factors into the formula, a differentiation can be made between the levels of students, and it can be done by discipline. The advantage of looking at a variety of factors is that every institution in the United States is very different, so in order to distribute resources equitably to the institutions, the differences and uniqueness of each university campus must be taken into consideration. Number 1029 DR. MCKEOWN-MOAK said of the number of states that have used funding formulas, a great deal of difference exists between what is funded by formula and what isn't funded by formula. Universities typically have budget programs, and technically all report their expenditures and revenues by programs, which are defined as instruction, research, public service, academic support and institutional support to the National Center for Education Statistics in the United States Department of Education. She noted that throughout the United States there is quite a bit of (indisc.) using formulas for all components of a university's budget or just parts of a university's budget. Number 1084 DR. MCKEOWN-MOAK indicated during the last two years since she last looked at funding formulas across the United States, there has been a very significant shift. There are states that have used funding formulas for 40 years that have gone to productivity or performance funding. South Carolina is the most extreme example of a state which went from a very well-developed, and very complex funding formula that had 14 separate formulas to calculate all the different components of a university's funding to 100 percent of the funding for the universities being based on productivity factors or performance funding. They experienced some difficulty in defining those productivity factors and determining how much will be distributed based on productivity factors. Arkansas abandoned formula funding in 1996 and went to performance funding, but went back to the formula funding last year because performance funding or productivity funding wasn't working for the state of Arkansas. The legislature contended the formula wasn't distributing the money in a way that adequately addressed the goals set by the legislature for the Arkansas university system. DR. MCKEOWN-MOAK said that productivity or performance funding is not new. The state of Tennessee started using performance funding or productivity funding prior to 1980. The state of Tennessee distributes only a small part, 5 percent, of the university's funding based on achievement of certain productivity goals and if the university doesn't reach these goals, then the university does not recceive 1 percent of its funding level that would be calculated by subject formula. DR. MCKEOWN-MOAK remarked there are many different "bells and whistles" that can be put on a formula to meet the specific needs of Alaska. She recommended that Alaska examine the performance funding or productivity funding of other states should Alaska decide to go this way. She noted that in her research over the last 25 years, Alaska has been a funding formula state off and on, at least that's what has been reported to her. She commented there are a number of very good methods available, so Alaska wouldn't have to reinvent the wheel. Number 1243 CHAIRMAN BUNDE recalled that productivity could be made a part of a formula and asked if Dr. McKeown-Moak was aware of any state that had experienced problems with developing a usable productivity formula, to go with or without additional funding formulas, that addresses the high level of remedial classes students seem to be requiring upon entering college. DR. MCKEOWN-MOAK responded there is at least one state, either Colorado or Florida, that had a productivity factor for remedial education. Number 1300 CHAIRMAN BUNDE asked Dr. McKeown-Moak to comment on the theory of the simpler the formula, the more support or long lasting the formula would be. DR. MCKEOWN-MOAK said one of the factors looked at in evaluating whether a formula is a "good funding formula" is simplicity. On the one hand, a formula should be easily understood by the public, the legislature and the administration, but if the formula is too simple, it indicates that important differences which exist in the cost of providing goods and services at the different campuses haven't been considered. It's important to balance simplicity with the need to recognize the differences. Number 1355 CHAIRMAN BUNDE asked, based on Dr. McKeown-Moak's experience, has there been any correlation between states that have moved a funding formula and the amount of state financial support for postsecondary education in that state? DR. MCKEOWN-MOAK replied, "Well, there is a significant difference - there's 30 states that are using funding formulas, and they move off and on. I'd have to look at in terms of a percentage, and I think it varies from state to state. But typically if you're going to start a new formula, it needs new money because if you're merely redistributing the old money, somebody's (indisc.). Number 1394 CHAIRMAN BUNDE said, "And so, it would be your experience that for formulas to work, you end up with a higher level of funding for the university system when you institute a formula." DR. MCKEOWN-MOAK replied there are notable cases where funding formulas have been instituted because there is a very significant reduction in the amount of state support. About 10-15 years ago, the state of Ohio significantly reduced state funding for higher education and came up with a new funding formula system to redistribute that money. Number 1449 REPRESENTATIVE JOE GREEN asked, via teleconference, if states which have a funding formula generally follow some sort of an (indisc.) and are the percentages allocated somewnat uniformly or does it vary widely. DR. MCKEOWN-MOAK responded it varies widely because every state is different and the public policy goals for higher education are different. REPRESENTATIVE GREEN commented that Alaska is essentially a "brain drain" state in that many of the young people go outside Alaska to seek their fortune. He asked if that would be a relatively high or relatively insignificant factor in determining how a funding formula would be (indisc.) DR. MCKEOWN-MOAK said, "If the goal is to keep students in the state, I'm not sure you would address that goal by the formula funding unless you put students' financial aid in as a component of your formula to make it more attractive for students to stay in the state." Number 1526 CHAIRMAN BUNDE indicated there were no further questions of Dr. McKeown-Moak at this time but asked her to stay on line. He asked Ms. Redman for her comments. Number 1554 MS. REDMAN began, "I'd like to, I think, acknowledge, I hope what I believe is Representative Bunde's good intentions with this piece of legislation in generating and supporting a discussion that has been going on within the university and between the university and the legislature for the last year. We believe quite strongly that this piece of legislation is not the correct direction that we should be going at this time, but I think as a vehicle for discussion, I support it, and I think that it, in fact, is supportive of what has been happening within the university." During the course of the summer, the Board of Regents established three major review committees which have been working on various aspects of reviewing and relooking at the university. First, is an administrative restructuring and reorganizing for which a target has been set to reallocate $6 million to $10 million over the next three years from administration back into instruction. The second committee, chaired by Chancellor Gorsuch, is looking at the allocation of existing resources between campuses. The third committee, chaired by Marshall Lind, is reviewing the organizational structure of the extended campuses. The reports will be forwarded to the Board of Regents over the next several months. Number 1629 MS. REDMAN noted that David Creamer, Vice President for Finance and Planning, was available to discuss work of the committee chaired by Chancellor Gorsuch, which has been looking at a formula internal to the university, using much of Dr. McKeown's work. The University of Alaska system is very complex in terms of the diversity of the institutions; from a category II research institution at UAF to baccalaureate-level institutions in community colleges and vocational institutions. It is the broadest possible complex of postsecondary education, so trying to find a formula that will address that complexity of need is indeed difficult, as Dr. McKeown-Moak pointed out. Number 1665 MS. REDMAN conveyed the university is eager to work in a partnership with the state. She is hopeful the meetings held this summer will continue so the process continues jointly in order to avoid the legislature mandating how the university should allocate its resources. She worked at the university when it was done that way, and said that's part of the reason for the current inequity of funding at the campuses. In her opinion, it is crucial the Board of Regents be allowed to deal with the allocation of resources, and even though it is frustrating at times, it is better than throwing it open to a political process. She noted that formulas can be positive, and the university is on that road of developing a formula for funding within the university, as well as looking at performance measures. The public, as well as the legislature, is expecting much higher levels of accountability from postsecondary education, than in the past. She said that much of this has come from the K-12 movement, and she is confident it will have a positive outcome on higher education. However, it's a new world for the university to have to answer many of those questions. Things like graduation rates, how many people get jobs, and employer satisfaction with the quality of education students are receiving are very hot topics all over the country. As Dr. McKeown-Moak pointed out, some states are beginning to work those issues into the funding formulas. Number 1801 CHAIRMAN BUNDE asked Ms. Redman to furnish the committee with information on the number of tri-part faculty, bi-part faculty, and non-teaching faculty for each of the three campuses. Number 1816 REPRESENTATIVE DYSON inquired what mechanisms were available to the Board of Regents for changing the way the university does business and if the Board of Regents decisions had the force of law. MS. REDMAN commented it's always difficult to change large institutions, but the Board of Regents' policy is "law" within the university. It is, in most cases, incorporated into the collective bargaining agreements, so the university is bound by Board of Regents' policy. Number 1871 REPRESENTATIVE DYSON said he has heard from regents that "they can't make the monster move." MS. REDMAN said the frustration is that it is always difficult to move large institutions because they are subject to political pressures as well, but the fact is, the Board of Regents can make the determination; the Board of Regents is constitutionally charged with the responsibility for the University of Alaska. Number 1893 REPRESENTATIVE DYSON asked what happens when university administration doesn't comply with what the Board of Regents wants; do they go to jail? MS. REDMAN commented the individual wouldn't go to jail unless the law was broken, but the individual would certainly be fired. She recalled a time when the university had five presidents in a period of approximately three years. She reiterated her earlier comments about the importance of working in partnership with the legislature, which as the representative body of the whole state, has an important perspective from the constituent viewpoint that is valuable. She added, "What undergirds any kind of a formula or funding allocation approach is what we all agree to in terms of what is the mission of higher education in Alaska. We have a very small state; we only have a half million people in this state. We have 3 major universities and 12 extended campuses. The geography has dictated, or we have allowed it to dictate, a structure that is in fact a very expensive structure in order to ensure access in this state. But there are a lot of important public policy questions about higher education that really require a discussion; it can't be done alone." Number 1978 CHAIRMAN BUNDE announced the committee would begin taking testimony via teleconference from Fairbanks. Number 2094 LAURA BURLESON, Student, University of Alaska Fairbanks, testified via teleconference from Fairbanks, that she doesn't support HB 302. As a student of the university for a fairly long time, she can appreciate the need for full and equitable funding for the University of Alaska, but HB 302 in its current form, isn't the way to accomplish that. She said that funding the university by a head count system is going to be detrimental to UAF and UAS. She remarked the University of Alaska is somewhat of a unique situation; there are more part-time students, more returning students, and students who are taking different paths in their education. Conducting a head count to assess the population of students at the different campuses, doesn't fully represent what the university is trying to do and the mission of the university. For example, a student taking a one credit aerobics class would count the same as a student taking 13 credits toward a degree. The university grants doctoral and masters degrees and accepts federal grants. Federal funding is largely based on the amount of state funding. She maintained that allocating funds in this manner will erode the quality of degrees received from the university system, especially in the smaller schools like UAF and UAS, not to mention the rural campuses. She said the Board of Regents needs a suitable amount of autonomy to make changes, cut the budget and shape the University of Alaska to meet the needs of the state. Alaska doesn't need a "brain drain" but needs to keep the best and most qualified people within the state. She indicated that changing to this kind of funding formula now would be incredibly detrimental. She urged the committee not to pass HB 302. CHAIRMAN BUNDE thanked Ms. Burleson for testifying and noted the formula would involve weighting for type of class and level of class. For example, an introductory survey English class would not be expected to be funded like a masters engineering program. Chairman Bunde asked Patrick Casey for his testimony. Number 2246 PATRICK CASEY testified via teleconference from Fairbanks and reiterated the comments of Ms. Burleson. He urged the committee not the pass HB 302. Number 2307 MARY JANE FATE noted she is a member of the Board of Regents of the University of Alaska, but was testifying on her own behalf in opposition to HB 302. She said there are many complexities and reasons why she opposes this legislation. She noted the Board of Regents are experienced and very dedicated to the students, the graduation of students, and the outcome in terms of placement in jobs. TAPE 98-8, SIDE B Number 0001 MS. FATE said, "I think that we should really be aware of the complexity of the higher education, not only of the University of Alaska, but our competitors who are delivering higher education in the state presently and have been in the past years. And this is not only private, charter; it could be military, as well as our own proposed university as a tribal university, and so forth." MS. FATE reassured the committee that the Board of Regents is working diligently on behalf of the students and on behalf of the state of Alaska and will continue to do so. She invited all legislators to attend a meeting with the Board of Regents on February 19 at 7:00 a.m. at the Baranof Hotel in Juneau. CHAIRMAN BUNDE thanked Ms. Fate for her comments and asked Dan Ogg from Kodiak to present his testimony. Number 0099 DAN OGG, Vice President, Board of Regents, University of Alaska, testified from Kodiak via teleconference. He found the discussion on HB 302 interesting and Dr. McKeown-Moak's comments substantiated that Alaska's situation is different from other states. He referred to her remarks that formulas tend to vary widely and that each state is different, and he sensed that Alaska wouldn't be able to quickly come up with a formula that would fit Alaska. He recommended that more time be spent working on this, especially in terms of policy. He thanked the committee for this opportunity to participate in the discussion. Number 0134 CHAIRMAN BUNDE said that concluded the teleconference testimony and invited David Creamer to come forward and present his remarks. Number 0157 DAVID CREAMER, Vice President for Finance and Planning, University of Alaska, said he is a member of the committee assigned to review resource allocation for the university system. The committee has been in place since November and has been taking into consideration a number of the issues that Dr. McKeown-Moak mentioned earlier, as well as exploring some of the points that have been raised in this meeting. The models that are being examined are trying to look at the complete scope of the university mission, extending beyond just instruction into other areas of public service and research to ensure that the funding formulas would adequately consider those areas. In developing the funding formulas, areas being looked at are discipline, level of program the student would be taking, and the associated cost. In developing costs, the committee is looking at existing costs and standard costs outside the system, examining costs of other universities to see how the University of Alaska's costs match those and how that would potentially influence the funding formula that would be developed. Number 0209 MR. CREAMER stated currently, the formula process is about midstream. The committee is beginning to bring the data together and it is expected that by the end of this month or early next month some calculations will have been done. He explained that multiple calculations will be used so the reasonableness of each outcome can be determined, and also determine whether there are factors that potentially exist in the university system that may be unique to the formula so those factors can be incorporated into the formula. At this time, the committee expects to complete a report by late March and distribute it to the Board of Regents in April. Number 0238 CHAIRMAN BUNDE remarked that the committee would be interested in receiving a briefing on that report. MR. CREAMER responded that would be possible. Number 0248 CHAIRMAN BUNDE said that one of the ongoing concerns about the university system is the high administrative costs. He referred to Ms. Redman's remarks regarding the committee's review of an administrative restructuring and reorganizing to reallocate $6 million to $10 million and asked if that would bring the University of Alaska in line with other university systems. MR. CREAMER responded the Board of Regents have mandated at this point in time that the $10 million goal be achieved. If that is indeed accomplished, the university's administrative costs would be very much in line with other states. Number 0291 REPRESENTATIVE AL VEZEY referred to the pie chart from the Fairbanks Daily News-Miner and asked if the numbers in that chart added up to the total general fund dollars appropriated to the university. MR. CREAMER said it was just the general fund appropriation. REPRESENTATIVE VEZEY commented that the chart indicates that $11.4 million was allocated to the statewide program with 11,000 full time students. He asked which campus administered the statewide program. MR. CREAMER said it was primarily out of Fairbanks. REPRESENTATIVE VEZEY questioned how much of UAF's allocation was going to statewide programs. MS. REDMAN commented there were multiple problems with the chart and suggested the committee ignore it. One of the difficulties which is never pointed out regarding the cost of the statewide administration, is that functions are centralized and 50 percent of what is being carried in statewide administration is the computing function of the entire university system. Much of the administrative costs for the campuses are hidden because it's included in statewide administration. She referred to the "student credit hours" under the statewide administration on the graph and said that could possibly be some of the distance delivered courses. Number 0392 REPRESENTATIVE VEZEY asked what the total budget was for the University of Alaska. MR. CREAMER replied, "The authorized budget is about $440 million. We actually spend of that somewhere in the area of about $370 million." REPRESENTATIVE VEZEY asked how that was allocated among campuses. MR. CREAMER recalled the predominent share would be at the Fairbanks campus; somewhere in the neighborhood of $220 million. REPRESENTATIVE VEZEY asked Mr. Creamer to explain the different funding sources. MR. CREAMER said the sources of funding are federal, instructional tuition funds from students, and state appropriation dollars are the primary areas of funding. REPRESENTATIVE VEZEY inquired if state appropriation funds were included in the $220 million. MR. CREAMER corrected his previous statement. The Fairbanks campus allocation was $184 million, and the total Fairbanks unit, including rural colleges assigned to the Fairbanks campus, was slightly over $200 million. REPRESENTATIVE VEZEY inquired if that was $200 million of non- general fund monies. Number 0480 CHAIRMAN BUNDE said, "Isn't that $200 million of total funds. The GF is only $72 million." Number 0507 REPRESENTATIVE BRICE asked if receipts from extra-curricular activities, such as sporting events, were included in the figures. MR. CREAMER responded it included all sources of funds. REPRESENTATIVE BRICE asked if the committee could get a breakdown of the research grants and the academic background of the faculty for each of the campuses. Number 0575 CHAIRMAN BUNDE thanked everyone for their testimony and announced that HB 302 would be held in committee and heard again at a later date.
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