Legislature(2017 - 2018)SENATE FINANCE 532

02/13/2018 09:00 AM Senate FINANCE

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09:04:04 AM Start
09:04:26 AM SB144
09:05:31 AM Presentation: Fy19 Operating Budget Overview and Deferred Maintenance Update
10:30:43 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Presentation: FY19 Operating Budget Overview TELECONFERENCED
and Deferred Maintenance Update
Jim Johnsen, President, University of Alaska
Michelle Rizk, VP University Relations,
University of Alaska
Scott Bell, Associate Vice-Chancellor
Facilities Services UAF
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 144                                                                                                           
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  making   supplemental  appropriations;                                                                    
     making  appropriations  under   art.  IX,  sec.  17(c),                                                                    
     Constitution  of   the  State   of  Alaska,   from  the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
9:04:26 AM                                                                                                                    
^PRESENTATION: FY19  OPERATING BUDGET OVERVIEW  and DEFERRED                                                                  
MAINTENANCE UPDATE                                                                                                            
9:05:31 AM                                                                                                                    
JIM   JOHNSON,  PRESIDENT,   UNIVERSITY   OF  ALASKA,   (UA)                                                                    
discussed  the presentation,  "University of  Alaska; FY  19                                                                    
Operating  Budget and  Deferred Maintenance  Overview" (copy                                                                    
on file).  He explained  the development  of the  Land Grant                                                                    
College and  Universities in Congress under  the Morrill Act                                                                    
of 1862. The  University of Alaska is one if  the land grant                                                                    
universities created by the act.                                                                                                
9:07:19 AM                                                                                                                    
Mr. Johnson looked at Slide 2, "University Mission":                                                                            
          Delivering academic instruction, career and                                                                           
          technical training                                                                                                    
          Advancing   innovation   and   discovery   through                                                                    
          academic and scientific research                                                                                      
          Sharing knowledge to address Alaska's community                                                                       
9:08:59 AM                                                                                                                    
Mr.  Johnson highlighted  Slide  3,  "Serving All  Alaskans:                                                                    
Three  Universities  -  One Integrated  System."  The  slide                                                                    
showed a  shape of  the state,  with indicators  pointing to                                                                    
the areas where the three  universities in the UA system had                                                                    
established  campuses.  He noted  that  half  of the  system                                                                    
campuses were  not accessible by  land but were in  the main                                                                    
population  centers  of  the state,  serving  the  needs  of                                                                    
Alaska.  He   added  that   UA  facilitated   many  research                                                                    
activities   across  the   state,   as   well  as   provided                                                                    
educational  services to  people across  the state  who were                                                                    
not resident in the communities highlighted on Slide 3.                                                                         
9:10:21 AM                                                                                                                    
Mr. Johnson addressed Slide 4, "Legal Authority":                                                                               
     Alaska Constitution Article 7, 2 State University                                                                        
     University  of  Alaska  is hereby  established  as  the                                                                    
     state university  and constituted a body  corporate. It                                                                    
     shall have title to all  real and personal property now                                                                    
     or hereafter set aside for or conveyed to it.                                                                              
     Its  property shall  be  administered  and disposed  of                                                                    
     according to law.                                                                                                          
    Alaska Constitution Article 7, ? 3 Board of Regents                                                                       
     The University of  Alaska shall be governed  by a board                                                                    
     of  regents.  The regents  shall  be  appointed by  the                                                                    
     governor, subject to confirmation  by a majority of the                                                                    
     members of the legislature  in joint session. The board                                                                    
     shall,  in accordance  with law,  formulate policy  and                                                                    
     appoint the  president of the  university. He  shall be                                                                    
     the executive officer of the board.                                                                                        
     Alaska  Statutes  Title  14   Chapter  40  (14.40.10                                                                       
9:10:41 AM                                                                                                                    
Mr. Johnson  displayed Slide 5,  "Program Areas."  The areas                                                                    
were   organized  by   the  three   mission  priorities   of                                                                    
education,  research,  and  service. The  slide  showed  the                                                                    
number of  students directly served annually,  nearly 30,000                                                                    
in  2017.   He  expressed  appreciation  for   the  research                                                                    
progress made  in 2017 and  the number of people  touched by                                                                    
4-H programs and practical guidance publications.                                                                               
9:12:35 AM                                                                                                                    
Co-Chair Hoffman queried  the impact of the  two new science                                                                    
buildings (Anchorage and Fairbanks)  and their effect on the                                                                    
Mr.  Johnson  replied  that  the facilities  had  led  to  a                                                                    
significant  increase in  student enrollment;  the buildings                                                                    
are  aesthetically pleasing  and  state-of-the-art. He  said                                                                    
that the  work being done  in the facilities  had benefitted                                                                    
Alaskans throughout  the state.  He stated  that engineering                                                                    
would continue  to be an  important workforce  training area                                                                    
for UA  and noted that  collaboration within the  system, in                                                                    
regard to the discipline, was strong.                                                                                           
9:15:12 AM                                                                                                                    
Vice-Chair  Bishop   wondered  whether  the   11,000  youth,                                                                    
engaged in the  4-H programs, were tracked  to determine how                                                                    
many   graduated   from   high   school   and   enter   into                                                                    
postsecondary education.                                                                                                        
Mr. Johnson  said he  would get back  to the  committee with                                                                    
the  information. He  speculated that  that high  school and                                                                    
college graduation rates would be high among the group.                                                                         
9:15:54 AM                                                                                                                    
Vice-Chair Bishop spoke of the  direct benefits to the state                                                                    
of   encouraging   vocational  and   technical   educational                                                                    
opportunities  for students.  He  noted  that the  Northwest                                                                    
Arctic  and   Bering  Strait  school  districts   had  fully                                                                    
embraced  technical education  programs  and  had seen  high                                                                    
school  graduation  rates  raise   from  68  percent  to  82                                                                    
9:16:39 AM                                                                                                                    
Mr.  Johnson  noted  the  breakdown  in  percentages  of  UA                                                                    
operating budget spending: 72  percent went to education, 20                                                                    
percent to research, and 8  percent to service. He said that                                                                    
the share  of the total  budget that came  from undesignated                                                                    
general funds was approximately  one-third general funds. He                                                                    
related  that  the  University  was  able  to  leverage  the                                                                    
state's investment in other funds for the University.                                                                           
9:17:15 AM                                                                                                                    
Mr.  Johnson highlighted  Slide 6,  "State Operating  Budget                                                                    
Trend."  The slide  contained a  bar  graph of  unrestricted                                                                    
general fund  history in millions.  He noted that  the chart                                                                    
showed  a  $61   million  reduction,  year-over-year,  which                                                                    
cumulatively  totaled   $145  million.  The   reduction  had                                                                    
resulted  in  a  significant  impact in  UA  operations.  He                                                                    
pointed out that the Board of  Regents request for FY 18 was                                                                    
$341  million   (10  percent  below  the   operating  budget                                                                    
approved in  FY 14); the  Governor's FY 18 request  was $317                                                                    
9:18:14 AM                                                                                                                    
Mr. Johnson addressed Slide 7, "Workforce Reductions FY15-                                                                      
          ? 1,183 fewer employees than three years ago.                                                                         
          ?  Largest reductions  have occurred  at Statewide                                                                    
          Administration and in  administrative and academic                                                                    
          leadership positions on campus.                                                                                       
          ?  Statewide  headcount  has been  reduced  by  36                                                                    
          percent  compared to  a 14  percent reduction  for                                                                    
          the entire UA system.                                                                                                 
          ?  UGF funding  of the  System Office  (Statewide)                                                                    
          has  been reduced  by $11  million, or  37 percent                                                                    
          compared to a 14  percent reduction for the entire                                                                    
          UA system.                                                                                                            
9:19:11 AM                                                                                                                    
Mr. Johnson looked at Slide 8, "Program Reductions FY15-                                                                        
     Over 50 academic programs suspended or eliminated                                                                        
     Academic/Job Training Programs Impacted:                                                                                 
               ? GC Clinical Social Work Practice (UAA)                                                                         
               ? PhD Clinical-Community Psychology (UAF)                                                                        
               ? BA and BBA Economics (UAF)                                                                                     
                 AAS Apprenticeship Technology (UAS)                                                                            
               ? Certificate Automotive Technology (UAS)                                                                        
               ? Associate of Business (UAS)                                                                                    
               ? MS Applied Environmental Science and Tech                                                                      
               ? MS Engineering Management (UAA)                                                                                
               ? MS Science Management (UAA)                                                                                    
               ? AAS Computer Info and Office Systems (UAA)                                                                     
               ? BA Philosophy (UAF)                                                                                            
               ? MS Resource Economics (UAF)                                                                                    
               ? BA and BS Sociology (UAF)                                                                                      
     Strategic Pathways Implementations:                                                                                      
          ? Three schools of management consolidating to                                                                        
          ?   Leveraging   purchasing    to   reduce   cost.                                                                    
          University procurement offices organized under a                                                                      
         single procurement officer's leadership.                                                                               
          ? Streamlining and automating administrative                                                                          
          processes and systems.                                                                                                
Mr. Johnson  lamented that programs  of strong  interest and                                                                    
significant   enrollment    were   being    considered   for                                                                    
discontinuation or suspension due to lack of funding.                                                                           
Mr.  Johnson addressed  Slide  9,  "Strategic Pathways."  He                                                                    
relayed that the slide showed  several examples of decisions                                                                    
that had  been taken coming  out of the process.  He related                                                                    
that three  schools of management  had been reduced  to two,                                                                    
purchasing   and   procurement    had   been   consolidated,                                                                    
administrative  processes  had  been  streamlined,  and  one                                                                    
College of  Education now existed with  faculty in Anchorage                                                                    
and Fairbanks, but one administrative structure.                                                                                
9:21:06 AM                                                                                                                    
Senator  Stevens  probed  the  changes  to  the  College  of                                                                    
Education and  the impact that  those changes would  have on                                                                    
the educating of teachers in the state.                                                                                         
Mr.  Johnson  replied  that he  would  address  the  changes                                                                    
further into the presentation.                                                                                                  
9:21:38 AM                                                                                                                    
He  noted that  the  top  section of  slide  9 outlined  the                                                                    
objective  of the  UA system,  which covered  all areas.  He                                                                    
stated  that  the  bottom represented  the  foundations.  He                                                                    
stated that  the three universities:  UAS, UA, and  UAF were                                                                    
the pillars  of the  university system.  He stated  that the                                                                    
goal was  to bring together  the benefits of one  UA system,                                                                    
and  the benefits  of three  distinctive Universities,  with                                                                    
the  support of  the  community college  mission across  the                                                                    
state. He believed that  the slide successfully communicated                                                                    
the similarities  and the specialized  area of the  parts of                                                                    
the  UA system.  He shared  that over  100 options  had been                                                                    
generated by  the previously mentioned committees  that were                                                                    
now  in the  process of  being  implemented or  were in  the                                                                    
process of implementation.                                                                                                      
9:23:42 AM                                                                                                                    
Mr.   Johnson   emphasized    the   importance   of   common                                                                    
administrative systems  within the  UA system to  manage the                                                                    
increase  in  online  course enrollment.  He  admitted  that                                                                    
there  were  continuing  struggles  surrounding  information                                                                    
access to  rural parts  of the  state but  that improvements                                                                    
were being made.                                                                                                                
9:24:25 AM                                                                                                                    
Co-Chair  Hoffman asked  for  information  about the  Alaska                                                                    
Native Science and Engineering Program (ANSEP).                                                                                 
Mr.  Johnson responded  that the  program  was thriving  and                                                                    
innovating. He shared that the  program reached out to rural                                                                    
Alaska and  provided intense  and deep  learning experiences                                                                    
for rural  Alaskan youth, through  high school  and college.                                                                    
The   University   facilitated   significant   support   and                                                                    
internship  opportunities for  participants. He  beamed that                                                                    
the success rates were tremendous.  He noted that the budget                                                                    
proposal  included a  line  to support  the  creation of  an                                                                    
acceleration  high  school  in Anchorage  that  would  serve                                                                    
urban Alaskans.                                                                                                                 
9:25:51 AM                                                                                                                    
Co-Chair Hoffman agreed that the  program was successful. He                                                                    
wondered whether  other states  were looking at  the program                                                                    
in the state as a measurement of success.                                                                                       
Mr.  Johnson  replied  that other  states  were  looking  to                                                                    
Alaska  when crafting  similar programs.  He added  that the                                                                    
National Science  Foundation had  provided grant  support to                                                                    
the  program,  which  had  also  attracted  private  support                                                                    
because of its effectiveness.                                                                                                   
9:26:36 AM                                                                                                                    
Senator von  Imhof understood  that the  University traveled                                                                    
to communities  throughout the state to  talk to communities                                                                    
about   the   program.   She  wondered   about   discussions                                                                    
surrounding doing  a high school residential  program on the                                                                    
campus in an effort to prepare kids for the program.                                                                            
Mr. Johnson  shared that  a residential  program was  not in                                                                    
the  works,  nor a  high  school  program  per se,  but  was                                                                    
looking to support high school  kids by providing university                                                                    
course work to  those students who were  interested. He said                                                                    
that  the  University was  working  with  the Department  of                                                                    
Education  and Early  Development  on the  program and  with                                                                    
private sector support.                                                                                                         
9:28:03 AM                                                                                                                    
Senator von Imhof hoped that  more could be shared about the                                                                    
Mr.  Johnson  explained  that  there  would  be  a  specific                                                                    
location  near  the UA  campus  where  high school  students                                                                    
would go  to attend  classes though the  day. He  offered to                                                                    
provide the committee with a summary of the program.                                                                            
9:29:11 AM                                                                                                                    
Mr.  Johnson  discussed Slide  10,  "Building  a Culture  of                                                                    
     Alaska is a land of great wealth                                                                                         
          ? natural resources                                                                                                   
          ? environment                                                                                                         
          ? global location                                                                                                     
          ? diverse, rich cultures                                                                                              
          ? adventurous people                                                                                                  
          ? growing Alaska Native corporations and tribal                                                                       
          ? opportunity to create a sustainable future for                                                                      
          generations to come                                                                                                   
Mr. Johnson  opined the tremendous  challenges faced  by the                                                                    
state in the realm  of education, particularly the challenge                                                                    
of education attainment. He lamented  that the state has low                                                                    
high school  graduation rates  (47th in  the country)  and a                                                                    
low college going rate (50th in the country).                                                                                   
9:30:28 AM                                                                                                                    
Co-Chair Hoffman asked whether the low college rate                                                                             
included in-state and out-of-state college students.                                                                            
Mr. Johnson replied that the statistics included both                                                                           
9:30:30 AM                                                                                                                    
Mr. Johnson continued to discuss Slide 10:                                                                                      
     There is no single organization in Alaska better                                                                         
     poised to solve Alaska's problems and pursue its                                                                         
     opportunities than the University of Alaska                                                                              
          ? mission                                                                                                             
          ? assets                                                                                                              
          ? record of success                                                                                                   
          ? public support                                                                                                      
          ? partnerships                                                                                                        
          ? plan                                                                                                                
          ? commitment                                                                                                          
     Our state faces very serious challenges                                                                                  
          ? vast geography and a small population                                                                               
          ? low educational attainment                                                                                          
          ? health disparities                                                                                                  
          ? critical workforce gaps                                                                                             
          ? narrow economic base                                                                                                
          ? high costs in such areas as health care,                                                                            
          facilities, energy, and telecommunications                                                                            
          ? fiscal uncertainty at state level and recent,                                                                       
          severe budget cuts to UA (cumulative $145M, FY14-                                                                     
     UA is a prime investment in the capabilities and the                                                                     
     ideas to propel Alaska forward                                                                                           
          ? top quality courses and programs in high demand                                                                     
          fields, including extensive offerings in the                                                                          
         social sciences, humanities, and the arts                                                                              
          ? high powered research into issues relevant to                                                                       
          Alaska and the world                                                                                                  
          ? inspiring and transformational role in our                                                                          
          students' lives                                                                                                       
          ? critical role of public and community service                                                                       
Mr.   Johnson   asserted   that  by   increasing   education                                                                    
attainment would  bend the cost  curve on  healthcare costs,                                                                    
public safety,  and many other  aspects of Alaskan  life. He                                                                    
believed that  the University  had demonstrated  the ability                                                                    
to make tough choices and  were tying themselves directly to                                                                    
the needs of the state.                                                                                                         
9:31:52 AM                                                                                                                    
Mr. Johnson highlighted Slide 11, "Strategic Objectives":                                                                       
       Drive Economic Development                                                                                               
     ? Provide a Skilled Alaskan Workforce                                                                                      
     ? Grow UA's World Class Research                                                                                           
     ? Increase Degree Attainment                                                                                               
     ? Operate More Cost Effectively                                                                                            
9:32:18 AM                                                                                                                    
Mr. Johnson  looked at Slide  12, "Goals and  Measures 2018-                                                                    
2025."  The slide  defined the  two ways  in which  progress                                                                    
would  be  tracked  toward   each  strategic  objective.  He                                                                    
believed that the goals were  ambitious, yet achievable, and                                                                    
would  move  the  University  in  the  right  direction.  He                                                                    
relayed that part of the  strategy was Alaska Native Science                                                                    
and Engineering  Program (ANSEP),  which was  a key  part of                                                                    
the  system's  proposed  increase  in  Science,  Technology,                                                                    
Engineering, and  Math (STEM)graduates. He related  that the                                                                    
increase  in  the  number of  invention  disclosures  was  a                                                                    
predicate to creation  of new companies that  would be based                                                                    
on intellectual  property developed  by UA  faculty students                                                                    
and staff.                                                                                                                      
9:33:42 AM                                                                                                                    
Co-Chair Hoffman  queried the benefit  to the state  of past                                                                    
invention disclosure.                                                                                                           
Mr.  Johnson referred  to the  antioxidant  quality of  wild                                                                    
Alaskan blueberries,  which was  much higher  than standard,                                                                    
commercial blueberries.  He provided the example  that there                                                                    
had  been a  company formed  by  a faculty  member that  was                                                                    
focusing on  concentration of the high  oxidant values found                                                                    
in Alaskan blueberries.  He said that the list  was long and                                                                    
included pavement technologies.                                                                                                 
9:34:44 AM                                                                                                                    
Mr. Johnson  continued to discuss  Slide 12. He  stated that                                                                    
the University  would continue to  prepare the  workforce in                                                                    
many areas of the state. He  relayed that over 60 percent of                                                                    
the  University's graduates  were in  high demand  workforce                                                                    
areas. He  explained that the  system was looking  to triple                                                                    
the  percentage of  the teachers  trained and  hired in  the                                                                    
state, as  well as double  the number of  healthcare program                                                                    
completions. He  said that improvements were  being made and                                                                    
that  positions were  increasing in  healthcare programs  at                                                                    
UAA, which was the systems  lead campus for health programs.                                                                    
He  said   that  the  University  would   work  with  school                                                                    
districts across the state in  the effort to lessen turnover                                                                    
rates  and bring  down the  number of  positions that  would                                                                    
ultimately  need   to  be  filled.   He  related   that  the                                                                    
University's  focus would  strongly be  in postbaccalaureate                                                                    
preparation  programs,   master's  degree   and  certificate                                                                    
programs,  geared toward  people  that  already possessed  a                                                                    
baccalaureate degree.  He stated that  a key focus  would be                                                                    
an increase in  the preparation of rural  and Alaskan Native                                                                    
residents for  the programs in  an effort to bring  down the                                                                    
turnover rate.                                                                                                                  
9:37:32 AM                                                                                                                    
Senator Stevens  believed that  decreasing outside  hire for                                                                    
teachers  form 70  percent  to 10  percent  would result  in                                                                    
enormous savings for school districts  and would benefit all                                                                    
of Alaska.                                                                                                                      
Mr. Johnson replied that the  recent estimate of $20 million                                                                    
was what school  districts across the state  spent yearly on                                                                    
recruiting costs  for new teachers, alone.  He asserted that                                                                    
bringing in mora Alaska teachers  would decrease that figure                                                                    
and would increase continuity of teachers in classrooms.                                                                        
9:38:35 AM                                                                                                                    
Senator Olson  queried the figure  of what schools  paid out                                                                    
for recruitment efforts.                                                                                                        
Mr. Johnson responded that a  recent Institute of Social and                                                                    
Economic Research  (ISER) study estimated that  $20 million,                                                                    
per year,  was spent  by the 54  school districts  in Alaska                                                                    
for teacher recruitment costs.                                                                                                  
9:39:12 AM                                                                                                                    
Vice-Chair Bishop  pointed out  to the committee  that there                                                                    
was currently an advertisement for  teachers in rural Alaska                                                                    
in Alaska Airlines Magazine.                                                                                                    
9:39:25 AM                                                                                                                    
Mr. Johnson  continued to discuss  slide 12.  He appreciated                                                                    
the committee's  interest in the preparation  of teachers in                                                                    
the  state. He  segued  into  number 3  on  Slide 12,  which                                                                    
highlighted  that  Alaska  was  a  world  leader  in  Arctic                                                                    
related  research.  He  explained   that  the  research  was                                                                    
measured by publications in  academic journals and citations                                                                    
in academic  papers. He  shared that  growth in  world class                                                                    
research had  multiple benefits: the ability  to recruit and                                                                    
retain   top-notch   faculty,  researchers,   and   graduate                                                                    
students  from across  the world  and Alaska;  the financial                                                                    
benefit of between  $4 and $6 for every $1  of invested UGF;                                                                    
the  enhancement of  quality  in  classroom instruction  and                                                                    
increased  undergraduate  research opportunities  with  top-                                                                    
notch  faculties.  He  stressed   that  the  work  done  was                                                                    
directly  tied   to  the  issues  that   were  important  to                                                                    
Alaskans. He said that  research expenditures were projected                                                                    
to increase  at the rate of  5 percent, per year.  He stated                                                                    
that the University  was being strategic about  its areas of                                                                    
emphasis  as  it  looked  to   the  federal  government  for                                                                    
research support, in the health sector in particular.                                                                           
Mr.  Johnson  spoke  to  number 4  on  slide  12,  "Increase                                                                    
Education Attainment."  He said that  this was the  heart of                                                                    
the plan adopted  by the Board of Regents.  The two elements                                                                    
of  the plan  were to  increase enrollment  and the  rate of                                                                    
graduation.  He  admitted  that   the  50  percent  increase                                                                    
reflected  on  the  line  was  ambitious  but  that  it  had                                                                    
happened  in  other states,  and  in  1975, 6.3  percent  of                                                                    
Alaskans were students  at UA. He asserted  that using those                                                                    
comparative and longitudinal  benchmarks made the enrollment                                                                    
goal of  45,000 by  2025, achievable.  He admitted  that the                                                                    
goal would require funding.                                                                                                     
9:44:00 AM                                                                                                                    
Vice-Chair  Bishop asked  whether  the target  of 45,000  by                                                                    
2025 could be done with existing brick and mortar capacity.                                                                     
Mr. Johnson  replied that the  brick and mortar  capacity of                                                                    
UA  could  withstand growth  for  a  few years,  but  online                                                                    
learning   would  play   a  part   in  servicing   increased                                                                    
enrollment.  He   understood  the  importance   of  hands-on                                                                    
learning but  believed that majority of  the enrollees would                                                                    
be  taking  online  courses. He  spoke  to  hybrid  courses;                                                                    
hybrid courses  involved students  learning in  a classroom,                                                                    
while  other  students  dialed in  online  from  across  the                                                                    
state.  He  hoped  that   broadband  connectivity  to  rural                                                                    
communities continued to expand  and that completions within                                                                    
the system continued to increase.                                                                                               
9:46:22 AM                                                                                                                    
Senator  Stevens believed  the University  was on  the right                                                                    
track for  completions. He concurred  that many  people were                                                                    
taking classes online from out-of-state.                                                                                        
Mr.  Johnson  replied  that  400  non-Alaskans  were  taking                                                                    
online  programs at  UA, 6,000  Alaskans were  taking online                                                                    
classes, he  added that the  University had  benefitted from                                                                    
private funding  to increase the  marketing of  its programs                                                                    
but believed that the campaign should be increased.                                                                             
9:47:32 AM                                                                                                                    
Senator von Imhof mentioned  the federal government program,                                                                    
E-Rate, which offered eligible schools  and libraries in the                                                                    
United  States  affordable telecommunications  and  internet                                                                    
access.  She  believed that  match  was  7  to 1  to  expand                                                                    
broadband into  smaller communities.  She asked  whether the                                                                    
University  would be  willing to  contribute to  the state's                                                                    
portion of the E-Rate match.                                                                                                    
Mr.  Johnson  responded  that  the  University  was  already                                                                    
paying for  connectivity to campuses  and that  the payments                                                                    
being  made were  going to  commercial bandwidth  providers,                                                                    
which  he   believed  were   benefitting  from   the  E-Rate                                                                    
subsidies. He offered  to provide further detail  at a later                                                                    
9:49:17 AM                                                                                                                    
Mr. Johnson continued to discuss  slide 12. He admitted that                                                                    
the  goals   listed  under  number  5   were  ambitious  but                                                                    
represented the hopeful outcome  of the increased enrollment                                                                    
and increased revenue generated  by research. He stated that                                                                    
the administration was working  closely with all campuses to                                                                    
ensure  that all  of the  numbers align.  He said  that each                                                                    
campus  was  expected  to  take  on  the  responsibility  of                                                                    
meeting the numbers in their particular field of expertise.                                                                     
9:51:00 AM                                                                                                                    
Co-Chair Hoffman appreciated that  the goals provided in the                                                                    
presentation were ambitious.                                                                                                    
9:51:23 AM                                                                                                                    
Mr. Johnson  addressed slide 13,  "FY 19  Operating Budget."                                                                    
The  slide provided  a breakdown  in spending  of the  FY 18                                                                    
Operating  Budget. He  said that  no compensation  increases                                                                    
had  been  proposed for  FY  19.  He noted  that  University                                                                    
employees did  not enjoy salary step  increases. He lamented                                                                    
that staff was  being "poached" by other  states. Fixed Cost                                                                    
Increased totaled $9.7 million  and Strategic Investments by                                                                    
Objective totaled $14.7 million.                                                                                                
9:53:41 AM                                                                                                                    
Co-Chair  Hoffman queried  how  the  new facility  providing                                                                    
energy for the Fairbanks campus effected utility costs.                                                                         
Mr. Johnson replied that the  utility costs reflected on the                                                                    
slide  were primarily  focused on  the Anchorage  campus. He                                                                    
said that the  new facility at Fairbanks  would provide heat                                                                    
and power.                                                                                                                      
9:54:21 AM                                                                                                                    
Mr. Johnson  continued to  discuss Slide  13. He  noted that                                                                    
the largest  component in funding strategic  investments was                                                                    
in the area of increased educational and degree attainment.                                                                     
9:55:43 AM                                                                                                                    
Co-Chair Hoffman  queried whether the  strategic investments                                                                    
were listed in priority order.                                                                                                  
Mr.  Johnson replied  that they  were all  top priority.  He                                                                    
added that  increased enrollment and completion  were at the                                                                    
heart of the investments.                                                                                                       
9:56:28 AM                                                                                                                    
Mr.   Johnson  discussed   Slide   14,  "Budget   Structural                                                                    
    K-12 Outreach and Mining and Petroleum Training                                                                          
     Service (MAPTS) moved from Statewide to campuses;                                                                          
    student facing functions belong at the campus level                                                                         
    University of Alaska Foundation  secures and stewards                                                                  
     philanthropic support  to separate allocation                                                                              
      $3.9 Mill 25 PFT/1 PPT                                                                                                 
    Education Trust   manages Alaska College Savings                                                                       
     Program  to separate allocation                                                                                            
      $1.5 Mill 7 PFT                                                                                                        
9:58:18 AM                                                                                                                    
Senator Stevens mentioned that  many universities around the                                                                    
world  were   facing  concerns   over  changes   income  tax                                                                    
reporting. He  wondered whether the changes  would impact UA                                                                    
Mr.  Johnson replied  that the  major impact  on the  larger                                                                    
endowments  was that  they would  be taxed  per student.  He                                                                    
said that  UA did not enjoy  the benefit of a  big endowment                                                                    
and would not  be subject to the per student  tax. He shared                                                                    
that the  increase in the  standard deduction could  have an                                                                    
impact on charitable donations.                                                                                                 
9:59:42 AM                                                                                                                    
Mr.   Johnson  displayed   Slide   15,   "FY19  Fixed   Cost                                                                    
     ? $3.7 Mill  Facilities Maintenance                                                                                        
          Annual upkeep necessary to slow accumulation of                                                                       
          deferred maintenance backlog; reduce risk of                                                                          
          localized mission failure                                                                                             
     ? $3.1 Mill  Utility Costs                                                                                                 
          Electricity, natural gas rate increases; coal                                                                         
          transport and ash disposal                                                                                            
     ? $2.1 Mill  UAF Engineering Building                                                                                      
          Incremental operational costs necessary to bring                                                                      
          the new engineering building online                                                                                   
     ? $0.9 Mill  Electronic Library Resources                                                                                  
          Licensing renewals, subscriptions for online                                                                          
          scientific, academic, and other education and                                                                         
          research data                                                                                                         
10:00:17 AM                                                                                                                   
Mr. Johnson highlighted Slide 16, "Healthcare Management":                                                                      
     ? University shares plan costs with employees                                                                              
          UA covers 82 percent of "net plan costs",                                                                             
          employees cover 18 percent                                                                                            
           FY17 UA had favorable experience on large claims                                                                     
          (over $100k) which are typically plan cost                                                                            
     ? Healthy Roads  3rd party Wellness Program                                                                                
          Outcomes and incentives based program                                                                                 
          Biometric screenings; early detection; life-style                                                                     
          challenges; nutrition and diet programs                                                                               
10:01:16 AM                                                                                                                   
Mr.  Johnson looked  at Slide  17, "Healthcare  Management."                                                                    
The slide depicted a line  graph that illustrated the annual                                                                    
health  insurance employer  contribution rates  per employee                                                                    
through FY 25.                                                                                                                  
10:02:02 AM                                                                                                                   
Mr. Johnson addressed slide  18, "Healthcare Management." He                                                                    
relayed  that the  University attempted  to keep  healthcare                                                                    
costs  down   by  responsibly  managing   costs,  conducting                                                                    
research into health, and training  an Alaskan workforce for                                                                    
high demand healthcare jobs in  the state. He noted that the                                                                    
employee  cost had  been increasing  due  to general  health                                                                    
care inflation  and from spreading  the cost out  over fewer                                                                    
10:02:41 AM                                                                                                                   
Mr. Johnson highlighted Slide 19, "Travel Management":                                                                          
     ? Travel costs reduced by 28 percent ($6.3 mill) FY14-                                                                     
     ? New travel management system being implemented                                                                           
     live in early FY19                                                                                                         
        Concur, a leading travel technology provider                                                                          
     selected through RFP process                                                                                               
     ? Major overhaul  streamlined regulations, process                                                                         
     efficiencies, new booking tool, automated expense                                                                          
    reporting, better user and administrator experience                                                                         
     ? Working closely with State to implement similar                                                                          
     programs, leverage negotiated discounts, and to                                                                            
     implement Leg Audit travel recommendations                                                                                 
     ? Using Corporate Travel Management (CTM) booking                                                                          
     tool, the same as the State of Alaska                                                                                      
10:03:34 AM                                                                                                                   
Mr.  Johnson  discussed  Slide  20,  "Labor  Contracts."  He                                                                    
related  that UA  had 6  employee groups,  5 represented  by                                                                    
collective bargaining,  and 1  unrepresented. He  noted that                                                                    
each unit  was described on  the slide next to  the contract                                                                    
terms and number of employees.  He noted that for many years                                                                    
discussions had been  ongoing with two of  the faculty units                                                                    
of which recent resolution had been accomplished.                                                                               
10:04:56 AM                                                                                                                   
Co-Chair  Hoffman   asked  how   the  service   provided  in                                                                    
Fairbanks by the Fairbanks  Firefighters Union differed from                                                                    
the service provided for coverage in Anchorage.                                                                                 
Mr. Johnson responded that the  Fairbanks fire station was a                                                                    
University operated station;  UAA did not have  its own fire                                                                    
service and depended on the  municipality for service in the                                                                    
event of a fire.                                                                                                                
10:05:53 AM                                                                                                                   
Mr.  Johnson   highlighted  Slide  21,   "Other  Legislative                                                                    
     ? Extend Education Tax Credit                                                                                              
          o Expires December 2018                                                                                               
         o UA receives 40 percent of contributions                                                                              
          o Represents  $4-$5 Mill in annual revenue to UA                                                                      
          o Simple concept  complicated statute                                                                                 
     ? Protecting Higher Education Fund                                                                                         
          o less than $18 Million Annual Draw                                                                                   
               .notdef Alaska Performance Scholarship (less than                                                                
               .notdef Alaska Education Grant (less than $6M)                                                                   
          o Non-designated appropriations depleting fund                                                                        
10:08:33 AM                                                                                                                   
Co-Chair  Hoffman queried  the drop-out  rate of  the Alaska                                                                    
Performance Scholarship Program recipients.                                                                                     
Mr. Johnson  agreed to provide  that information at  a later                                                                    
10:08:57 AM                                                                                                                   
Senator  Stevens requested  the drop-out  rate for  students                                                                    
that received needs-based scholarships.                                                                                         
Mr. Johnson  agreed to provide  that information at  a later                                                                    
10:09:14 AM                                                                                                                   
Mr. Johnson looked at Slide 22, "Land Grant Deficit":                                                                           
     Only Delaware received a smaller public land grant                                                                         
     than Alaska                                                                                                                
          ? UA received approx. 110,000 acres                                                                                   
        ? UA land deficit is approx. 360,000 acres                                                                              
          ? Working with Congressional Delegation and DNR                                                                       
          on federal legislative solution                                                                                       
Mr.  Johnson  noted  that  the   University  was  active  in                                                                    
developing  its lands  and working  with  state and  federal                                                                    
agencies to  increase activity. He  said that  proceeds from                                                                    
land  activity  and  development  went to  fund  the  Alaska                                                                    
Scholars program.                                                                                                               
10:11:04 AM                                                                                                                   
Co-Chair Hoffman  queried what consideration had  been given                                                                    
to changing  the State Constitution  to allow for  more land                                                                    
to be granted to the University.                                                                                                
Mr. Johnson replied  that nothing much had been  done on the                                                                    
10:11:52 AM                                                                                                                   
MICHELLE RIZK, VICE PRESIDENT, UNIVERSITY RELATIONS,                                                                            
UNIVERSITY OF ALASKA, addressed slide 24, "UA Facilities                                                                        
     ? University currently spends $35-$45 million annually                                                                     
     to maintain its facilities                                                                                                 
     ? The  Board of Regents  has set a long-term  target of                                                                    
     $60   million  for   annual  maintenance,   the  amount                                                                    
     necessary  to  keep  the deferred  maintenance  backlog                                                                    
     from growing.                                                                                                              
10:14:12 AM                                                                                                                   
Ms. Rizk highlighted Slide 25, "State GF Received for DM."                                                                      
10:14:59 AM                                                                                                                   
Ms. Rizk looked at Slide 26, "Facilities Funding":                                                                              
     Operating Budget funds:                                                                                                    
          Operations (utilities, custodial, insurance,                                                                          
          Preventive maintenance                                                                                                
          Reactive maintenance (Repair)                                                                                         
          Small scale renewals, and repurposing                                                                                 
     Capital Budget funds:                                                                                                      
          Major capital investment                                                                                              
          Deferred maintenance and large scale renewals and                                                                     
Ms. Rizk discussed Slide 27, "Facilities Stewardship":                                                                          
     ? Maintenance  preventive maintenance and repair to                                                                        
     keep a facility in its current condition                                                                                   
     ? Renewal - scheduled replacement or restoration of                                                                        
     components that have exceeded their service life                                                                           
     ? Repair - restoration of facility components to                                                                           
     operational conditions                                                                                                     
     ? Repurposing  renovating space to meet current needs                                                                      
     ? Deferred  facilities stewardship activities not                                                                          
     performed when scheduled, thus delayed to a future                                                                         
10:16:16 AM                                                                                                                   
Ms. Rizk looked at Slide 28, "Prioritization":                                                                                  
     Facilities Councils Focused on:                                                                                            
          ? Operating Cost Reductions                                                                                           
          ? Preventive Maintenance                                                                                              
          ? Reducing Deferred Maintenance, Renewal and                                                                          
          Repurposing Backlog                                                                                                   
          ? Reducing Off-Campus Leases                                                                                          
               Net lease space reduced by 23 percent                                                                            
               (166,700 gsf)                                                                                                    
          ? Space Utilization Efficiencies                                                                                      
               Owned facilities reduced by 148,000 gsf                                                                          
10:17:00 AM                                                                                                                   
Senator von Imhof // Ms. Rizk //                                                                                                
10:17:27 AM                                                                                                                   
Mr. Johnson furthered that //                                                                                                   
10:17:46 AM                                                                                                                   
Senator von Imhof // Ms. Rizk replied that it depended the                                                                      
10:18:33 AM                                                                                                                   
Senator von Imhof // Ms. Rizk stated that //                                                                                    
10:19:31 AM                                                                                                                   
Ms. Rizk looked at Slide 29, "Prioritization":                                                                                  
     ? Facilities stewardship is prioritized by the                                                                             
     following criteria:                                                                                                        
         Safety, regulatory and code requirements                                                                               
          Programmatic mission requirements                                                                                     
          Energy   and   other    operating   cost   savings                                                                    
          System or component reliability and remaining                                                                         
          operational life                                                                                                      
     ? UA continues to explore ways to reduce facilities                                                                        
     footprint and long-term operating costs                                                                                    
10:20:26 AM                                                                                                                   
Ms. Rizk looked at Slide 30, "UAF Heat and Power Plant":                                                                        
     ? Replaces 54-year old Atkinson coal plant                                                                                 
     ? Project on track; testing likely in March                                                                                
     ? Planned operational in November                                                                                          
     ? Cost $248 Mill:                                                                                                          
          o $90.5 Mill state funding                                                                                            
          o $87.5 Mill Municipal Bond Bank loan to UA                                                                           
          o $70.0 Mill UA revenue bonds                                                                                         
     ? $7 Mill DM still remain on remaining facility and                                                                        
     $14 Mill in DM on heat/power distribution system                                                                           
10:21:21 AM                                                                                                                   
Senator von Imhof remarked that // Mr. Johnson replied that                                                                     
10:22:36 AM                                                                                                                   
SCOTT BELL, ASSOCIATE VICE-CHANCELLOR, FACILITIES SERVICES,                                                                     
UNIVERSITY OF ALASKA FAIRBANKS (via teleconference),                                                                            
10:23:12 AM                                                                                                                   
Senator von Imhof // Mr. Bell replied that //                                                                                   
10:23:45 AM                                                                                                                   
Senator Stevens // Mr. Bell replied that //                                                                                     
10:24:29 AM                                                                                                                   
Vice-Chair Bishop // Mr. Johnson replied //                                                                                     
10:25:16 AM                                                                                                                   
Ms. Rizk furthered //                                                                                                           
10:26:05 AM                                                                                                                   
Vice-Chair Bishop //                                                                                                            
10:26:23 AM                                                                                                                   
Co-Chair Hoffman queried closing comments.                                                                                      
10:26:29 AM                                                                                                                   
Mr. Johnson stated that //                                                                                                      
10:27:04 AM                                                                                                                   
Co-Chair Hoffman //                                                                                                             
10:27:18 AM                                                                                                                   
Vice-Chair Bishop looked at page 13, and increasing of the                                                                      
workforce. He stated that //                                                                                                    
10:29:02 AM                                                                                                                   
Senator Stevens // Mr. Johnson replied that //                                                                                  
10:29:59 AM                                                                                                                   
Senator Stevens //                                                                                                              
10:30:18 AM                                                                                                                   
Co-Chair Hoffman discussed housekeeping.                                                                                        
SB 144 was HEARD and HELD in committee for further                                                                              

Document Name Date/Time Subjects
021318 FY18 UA Captal Budget Distribution Plan.pdf SFIN 2/13/2018 9:00:00 AM
SB 140
021318 FY19 UA Capital Budget Request.pdf SFIN 2/13/2018 9:00:00 AM
SB 140
021318 FY18 Budget Reduction Impacts Summary.pdf SFIN 2/13/2018 9:00:00 AM
SB 144
021318 UA Property for Sale Report.pdf SFIN 2/13/2018 9:00:00 AM
SB 144
021318 UAF Combined Heat Power Update.pdf SFIN 2/13/2018 9:00:00 AM
SB 144
021318 UA FY19 SFC Overview Final.pdf SFIN 2/13/2018 9:00:00 AM
SB 144