Legislature(2009 - 2010)UAF Campus

10/14/2009 09:00 AM Senate FINANCE


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09:15:05 AM Start
09:18:52 AM University of Alaska Budget Overview
04:02:55 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Location Change --
+ University of Alaska Budget Overview TELECONFERENCED
Work Session
Location: Globe Room - Elvey Building
UAF Campus, Fairbanks
Time: 9:00 am to 5:00 pm
                  SENATE FINANCE COMMITTEE                                                                                      
                      October 14, 2009                                                                                          
                         9:15 a.m.                                                                                              
                                                                                                                                
9:15:05 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stedman called the Senate  Finance Committee meeting                                                                   
to order at 9:15 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator  Gary Stevens;  Senator  Joe Paksvan;  Representative                                                                   
David    Guttenberg;    Representative    Anna    Fairclough;                                                                   
Representative   Mike  Kelly;   Representative  Jay   Ramras;                                                                   
Cynthia  Henry,  Chair,  Board   of  Regents,  University  of                                                                   
Alaska; Tim  Brady, Board of  Regents, University  of Alaska,                                                                   
Anchorage;  Fuller Cowell,  Board of  Regents, University  of                                                                   
Alaska, Anchorage;  Wendy Redman, Vice President,  University                                                                   
Relations,  University of  Alaska;  Myron Dosch,  Controller,                                                                   
University of  Alaska; Joe Trubacz, Vice  President, Finance,                                                                   
University  of Alaska; Brian  Rogers, Chancellor,  University                                                                   
of   Alaska,  Fairbanks;   Michelle   Rizk,  Associate   Vice                                                                   
President,   Budget,  University   of  Alaska;  Fran   Ulmer,                                                                   
Chancellor,  University  of  Alaska,  Anchorage;  John  Pugh,                                                                   
Chancellor, University of Alaska,  Southeast; Kit Duke, Chief                                                                   
Facilities  Officer, University  of  Alaska, Anchorage;  Mary                                                                   
Rutherford,  President,  University   Of  Alaska  Foundation;                                                                   
Bernice Joseph, Vice President,  Rural Communities and Native                                                                   
Education, University  of Alaska;  Pat Pitney, University  of                                                                   
Alaska,   Fairbanks;   Ashton    Compton,   Student   Regent,                                                                   
University of Alaska, Fairbanks                                                                                                 
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^UNIVERSITY OF ALASKA BUDGET OVERVIEW                                                                                         
                                                                                                                                
9:18:52 AM                                                                                                                    
                                                                                                                                
CYNTHIA HENRY, CHAIR, BOARD OF REGENTS, UNIVERSITY OF                                                                           
ALASKA, read from a document regarding the Board of Regents'                                                                    
fiduciary responsibilities:                                                                                                     
                                                                                                                                
     The  University of  Alaska is identified  in the  Alaska                                                                   
     Constitution   under   Article   7  which   says,   'The                                                                   
     university   is   hereby   established  as   the   state                                                                   
     university and shall be governed  by a board of regents.                                                                   
     The board  shall, in accordance with the  law, formulate                                                                   
     policy  and appoint  the president  of the  university.'                                                                   
     The  state constitution  established  the University  of                                                                   
     Alaska as  the single post-secondary system  governed by                                                                   
     a  board  of  regents  appointed  by  the  governor  and                                                                   
     confirmed  by the  legislature.   This organization  was                                                                   
     specifically     designed     to    establish     public                                                                   
     accountability    and    avoid    potential    political                                                                   
     intervention with the academic  management of the higher                                                                   
     education  institution.    The board  appointments  were                                                                   
     even established as staggered  eight-year terms to avoid                                                                   
     a  situation where  a governor  could  ever appoint  the                                                                   
     entire board.                                                                                                              
                                                                                                                                
     The single system was designed  to avoid the competition                                                                   
     for legislative  funding that  has plagued other  states                                                                   
     with separately governed  systems and institutions.  The                                                                   
     board  of   regents  submits   a  unified   request  for                                                                   
     legislative  consideration   based  on  a  comprehensive                                                                   
     budget development and review  process that is guided by                                                                   
     priorities established by the regents.                                                                                     
                                                                                                                                
     The  board of  regents is  responsible for  establishing                                                                   
     separate campus  missions that  respond to the  needs of                                                                   
     local  and regional  constituents.   Policies have  been                                                                   
     developed   that    promote   program    alignment   and                                                                   
     collaboration  between  campuses and  avoid  unnecessary                                                                   
     program  duplication.     There  are   never  sufficient                                                                   
     resources to provide all  the instruction, research, and                                                                   
     outreach Alaskans want.   As the legislature knows well,                                                                   
     priorities  are very  difficult from  region to  region.                                                                   
     Tension  between  campuses  and between  regents  is  an                                                                   
     inevitable  part  of  the university  culture,  but  the                                                                   
     board  of regents  manages  competing  interests into  a                                                                   
     statewide  mission and  strategic plan  that is  broadly                                                                   
     perceived as fair and balanced.                                                                                            
                                                                                                                                
     There  is   a  significant  degree  of   consistency  in                                                                   
     missions across  the three units: in  undergraduate, and                                                                   
     in selected  university programs,  and in the  community                                                                   
     college  mission.    This   mission  includes  providing                                                                   
     vocational and  occupational instruction, the  first two                                                                   
     years  of  undergraduate   education,  preparatory,  and                                                                   
     developmental  instruction,  and other  credit and  non-                                                                   
     credit courses,  and programs designed to  be responsive                                                                   
     to  the  needs  of  local   communities,  and  to  adult                                                                   
     learners in particular.                                                                                                    
                                                                                                                                
     Differentiation  between  the  three urban  campuses  is                                                                   
     important  and is  realized through  the designation  of                                                                   
     statewide  leadership  and   centers  of  excellence  in                                                                   
     specific  focus  areas.     The  University  of  Alaska,                                                                   
     Anchorage, (UAA) is a comprehensive  university offering                                                                   
     exceptional undergraduate  and masters' programs  in the                                                                   
     arts  and sciences,  as well  as  meeting Alaska's  most                                                                   
     pressing professional needs  for nurses, social workers,                                                                   
     engineers,  and  business leaders.    The University  of                                                                   
     Alaska,   Southeast  (UAS)   provides  a  liberal   arts                                                                   
     curriculum  for  undergraduates  and  selected  masters'                                                                   
     degrees,  including teacher  education.  The  University                                                                   
     of  Alaska,  Fairbanks,  (UAF) is  the  state's  primary                                                                   
     academic    research   institution.       It    provides                                                                   
     undergraduate  and  graduate  education,  including  the                                                                   
     doctoral  degree with  a focus  on science,  technology,                                                                   
     math, and engineering.                                                                                                     
                                                                                                                                
     The university  is subject  to a  myriad of federal  and                                                                   
     state laws and regulations  in managing its business and                                                                   
     academic enterprise.  At  the state level the university                                                                   
     is covered  by the Executive Budget Act,  the provisions                                                                   
     of the State Procurement  Code, and the Public Employees                                                                   
     Relations Act (PERA) for  all collective bargaining.  At                                                                   
     the federal level the university  complies with Standard                                                                   
     Government Accounting Principles,  including a multitude                                                                   
     of   complicated   IRS   regulations   that   apply   to                                                                   
     universities and their foundations.   These requirements                                                                   
     and reporting  responsibilities increase each  year with                                                                   
     new wrinkles,  depending on the politics.   For example,                                                                   
     the  collapse  of  several  large  corporations  in  the                                                                   
     1990's resulted in the development  of stricter auditing                                                                   
     standards.   Since 9/11  the institutional  requirements                                                                   
     governing  accepting  foreign  students  have  increased                                                                   
     dramatically.                                                                                                              
                                                                                                                                
     The  regents  are a  policy  board.   Our  policies  and                                                                   
     regulations guide the academic  and management decisions                                                                   
     of the system,  but the day to day operation  is managed                                                                   
     by   the  president   and  his   staff,  including   the                                                                   
     chancellors.                                                                                                               
                                                                                                                                
9:21:19 AM                                                                                                                    
                                                                                                                                
Ms. Henry explained that she has  been a regent for about 6.5                                                                   
years and considers  it a privilege to serve on  the Board of                                                                   
Regents.   She opined  that Alaska  has a  very high  quality                                                                   
university, and  her opinion of  the university  increased as                                                                   
she became more involved with it.                                                                                               
                                                                                                                                
Ms.  Henry  described the  eleven  regents  as serving  in  a                                                                   
voluntary capacity.   The  compensation is the  gratification                                                                   
received from participating in  the education of students who                                                                   
attend the  university.  She  described education as  a life-                                                                   
changing   experience   that    provides   job   skills   and                                                                   
professional  training and  upgrades  a person's  confidence.                                                                   
It  benefits the  students, their  families,  and the  larger                                                                   
community.                                                                                                                      
                                                                                                                                
Ms. Henry listed  the occupations of the board  members, most                                                                   
of whom are  University of Alaska graduates.   She noted that                                                                   
board  members  maximize  their expertise  by  assignment  to                                                                   
standing  committees.    The   committees  with  the  biggest                                                                   
workloads  are the  Academic and  Student Affairs  Committee,                                                                   
which  addresses new  programs,  degrees,  and policies,  the                                                                   
Facility  and Land  Management  Committee,  which deals  with                                                                   
monitoring   facilities  and   projects,   and  the   Finance                                                                   
Committee, which deals with budget issues.                                                                                      
                                                                                                                                
Ms. Henry  shared that the  regents were responsible  for all                                                                   
aspects  of   the  university   system  from  the   oversight                                                                   
perspective.    The  president's  job  is  to  implement  the                                                                   
priorities through  the board and delegate  responsibilities.                                                                   
She emphasized the seriousness of board responsibilities.                                                                       
                                                                                                                                
9:26:01 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman referred  to a problem  when the  president                                                                   
was opposed to  the board's meeting with the  co-chair of the                                                                   
House Finance  Committee.   Ms. Henry  was not familiar  with                                                                   
that incident and noted that the  Board of Regents has a very                                                                   
good  working  relationship with  the  university  president.                                                                   
Co-Chair  Hoffman  asked  if  it  was  acceptable  for  board                                                                   
members  to  meet with  individual  legislators  without  the                                                                   
president in attendance.  Ms. Henry said it was.                                                                                
                                                                                                                                
Co-Chair Stedman  asked if the  president has the  ability to                                                                   
override a request  by one of the finance committees  to meet                                                                   
with the  board.  Ms. Henry  did not think the  president had                                                                   
that ability.   She pointed out that the president  works for                                                                   
the board.   She added  that typically  the board  would want                                                                   
the president  at the  meeting because he  has a  very active                                                                   
role in the budget.                                                                                                             
                                                                                                                                
9:27:41 AM                                                                                                                    
                                                                                                                                
TIM   BRADY,  BOARD   OF  REGENTS,   UNIVERSITY  OF   ALASKA,                                                                   
ANCHORAGE, spoke of the meeting  being referred to when three                                                                   
regents  met with  Representative  Hawker and  Representative                                                                   
Fairclough.  He  noted that the meeting was  positive and led                                                                   
to better communication with the  board.  He pointed out that                                                                   
the  board  is  reconsidering   how  it  interacts  with  the                                                                   
legislature and  has set up a specific  legislative committee                                                                   
with the goal of being more accessible.                                                                                         
                                                                                                                                
Co-Chair  Stedman asked  if it  was true  that the  president                                                                   
threatened to  resign if the  board met with  the legislature                                                                   
without him.  Mr. Brady replied  that it was news to him.  He                                                                   
emphasized  that  the  board   was  free  to  meet  with  the                                                                   
legislature any  time.  He defined  the structure of  the new                                                                   
committee.                                                                                                                      
                                                                                                                                
9:31:06 AM                                                                                                                    
                                                                                                                                
Ms. Henry  spoke of Senator  Thomas's past membership  on the                                                                   
board.  She related that the regents  spend considerable time                                                                   
clarifying  the board's  priorities.   It is the  president's                                                                   
job  to implement  those  priorities.   She  denied that  the                                                                   
board  is a  "rubber  stamp" for  the  president.   There  is                                                                   
little  controversy when  the president  acts at the  board's                                                                   
recommendations.   The  board  is concerned  with  maximizing                                                                   
every public dollar.                                                                                                            
                                                                                                                                
Ms. Henry  reported on  the board's  many challenges  such as                                                                   
duplication  of programs.   There  is a  strong advocacy  for                                                                   
maintaining rural  campuses, in spite  of higher costs.   She                                                                   
spoke highly  of the  rural campuses'  abilities to  leverage                                                                   
resources  and form  partnerships.   She gave  an example  in                                                                   
Nome.                                                                                                                           
                                                                                                                                
9:33:07 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  described how  rural campuses are  left out                                                                   
of the president's  message.  Ms. Henry regretted  that.  She                                                                   
emphasized  that rural  campuses  are under  the umbrella  of                                                                   
each  Major  Administrative  Unit (MAU).    Co-Chair  Hoffman                                                                   
thought there was  room for improvement.  Ms.  Henry reported                                                                   
that the board  is in tune to needs; however,  there is never                                                                   
enough funding.                                                                                                                 
                                                                                                                                
Mr.  Brady commented  that he  has  found President  Hamilton                                                                   
supportive  of rural campuses.   Mr.  Brady said, "We  cannot                                                                   
call ourselves  the University  of Alaska  if we don't  offer                                                                   
post-secondary  educational  opportunities   to  our  fourth,                                                                   
fifth, sixth, and  seventh largest cities in our  state."  He                                                                   
maintained that the  board has been very supportive  of rural                                                                   
campuses and  proud of their staff.   He pointed out  a basic                                                                   
premise of the  board:  the board is not made  up of regional                                                                   
members and must maintain a statewide perspective.                                                                              
                                                                                                                                
9:36:29 AM                                                                                                                    
                                                                                                                                
FULLER  COWELL,  BOARD  OF  REGENTS,  UNIVERSITY  OF  ALASKA,                                                                   
ANCHORAGE, voiced concern about  providing resources to rural                                                                   
campuses in  poor economic  times.   Having a unified  budget                                                                   
makes that possible.   He maintained that the  biggest threat                                                                   
to rural  campuses was the bifurcation  of the budget  by the                                                                   
legislature  in   economically  troubled  times.     Co-Chair                                                                   
Hoffman reported that he was one  that pushed for bifurcation                                                                   
of  the budget  in  order to  determine  which campuses  were                                                                   
short-funded.   He maintained  that the  rural campuses  were                                                                   
not receiving  adequate funding.  Co-Chair  Stedman suggested                                                                   
pursuing this topic at a later time.                                                                                            
                                                                                                                                
9:39:03 AM                                                                                                                    
                                                                                                                                
Senator Olson  asked about the working relationship  with UAF                                                                   
and the  Barrow campus.   Ms.  Henry related  that the  board                                                                   
hears very little about that topic  because the Barrow campus                                                                   
is funded  by the municipality.   Senator Olson asked  if any                                                                   
money from  the university  helped to fund  the campus.   Ms.                                                                   
Henry was not aware of any.                                                                                                     
                                                                                                                                
Ms. Henry hoped  the chancellors would address  that topic at                                                                   
a later time.  The MAU's have  considerable autonomy on their                                                                   
own budgets.   She noted that the university  welcomes audits                                                                   
and  inquiries by  the  legislature.   She  mentioned SB  241                                                                   
which dealt  with teacher education  and required  a regent's                                                                   
report to the joint education  committees.  She said her goal                                                                   
is to have all needs filled within  the state.  She mentioned                                                                   
a recent  audit on  distance education.   Legislative  audits                                                                   
have  helped   the  regents.     The  regents   consider  the                                                                   
legislature as a partner.                                                                                                       
                                                                                                                                
9:42:56 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  said  that the  Senate  Finance  Committee                                                                   
would work  with the Legislative  Budget and Audit  Committee                                                                   
to ensure that  the board receives copies of the  audits in a                                                                   
timely manner.   Ms. Henry spoke of the variety  of needs the                                                                   
legislature can provide, such  as receipt authority, funding,                                                                   
or influence during outreach to private donors.                                                                                 
                                                                                                                                
9:45:01 AM                                                                                                                    
                                                                                                                                
Ms. Henry  spoke of the accreditation  process.  Each  of the                                                                   
MAU's  is separately  accredited,  as is  the Prince  William                                                                   
Sound Community College.  Many  university programs also have                                                                   
a  separate  accreditation.    Teams  of  experts  thoroughly                                                                   
review finances  and academic programs.    She  believed that                                                                   
regents  and legislators  can  take comfort  in knowing  that                                                                   
programs are being thoroughly evaluated.                                                                                        
                                                                                                                                
Ms. Henry addressed the issue  of the retirement of President                                                                   
Hamilton.  The university is a  big institution with a lot of                                                                   
diverse stakeholders;  therefore the process of  hiring a new                                                                   
president is very  important, as is the participation  of all                                                                   
stakeholders.    The board  has  done  a RFP,  has  evaluated                                                                   
companies that  do searches, and has hired  Academic Search's                                                                   
Elaine  Hairston, a senior  consultant,  who has visited  the                                                                   
campuses  and is  writing a  profile for  the new  president.                                                                   
Next,  she will  advertise in  higher education  publications                                                                   
and  state newspapers.   A  goal of  the regents  is to  have                                                                   
people with  Alaskan experience apply.   Ms. Henry  urged the                                                                   
Committee to also  submit names for consideration.   The goal                                                                   
is to have finalists by January.                                                                                                
                                                                                                                                
9:51:02 AM                                                                                                                    
                                                                                                                                
Ms. Henry  offered to discuss  the budget process at  a later                                                                   
date.   Co-Chair Hoffman wished  to hear the  presentation of                                                                   
the capital  budget  as it related  to rural  campuses.   Co-                                                                   
Chair  Stedman  noted  that  the  work  session  may  include                                                                   
discussion  of prickly  issues,  but the  goal is  to have  a                                                                   
smoother working relationship with the university.                                                                              
                                                                                                                                
AT EASE:       9:53:15 AM                                                                                                     
                                                                                                                                
RECONVENE:     10:02:13 AM                                                                                                    
                                                                                                                                
Co-Chair Stedman turned to the topic of fiscal oversight.                                                                       
                                                                                                                                
Ms.  Henry  introduced  Ms.  Redman  who  would  address  the                                                                   
subject of external and internal university audits.                                                                             
                                                                                                                                
10:03:45 AM                                                                                                                   
                                                                                                                                
WENDY   REDMAN,   VICE   PRESIDENT,   UNIVERSITY   RELATIONS,                                                                   
UNIVERSITY  OF ALASKA,  encouraged  the  legislators to  make                                                                   
requests   and  the   chancellors   to   contribute  to   the                                                                   
discussion.                                                                                                                     
                                                                                                                                
10:05:16 AM                                                                                                                   
                                                                                                                                
MYRON  DOSCH,  CONTROLLER,  UNIVERSITY  OF  ALASKA,  provided                                                                   
background on the university's  financial structure.  He said                                                                   
his presentation of financial  statements and the application                                                                   
of Generally  Accepted Accounting Principles (GAAP)  is meant                                                                   
to provide the Committee with another fiscal viewpoint.                                                                         
                                                                                                                                
Mr.   Dosch  reported   that   the  university   is   audited                                                                   
extensively.  It  has an annual external audit  of its books,                                                                   
which  resulted in  an "unqualified  or a  clean opinion"  in                                                                   
2008.  He  referred to handout 2, the  university's financial                                                                   
statement, which contains the  auditor's report.  He referred                                                                   
to pages 17 and  21, which show the balance  sheet and income                                                                   
statements  of   the  university  and  which   are  presented                                                                   
according to GAAP as one whole university system.                                                                               
                                                                                                                                
Mr.  Dosch related  the financial  concepts  embodied in  the                                                                   
financial  statements.   According to  GAAP, public  colleges                                                                   
and  universities  are  required to  report  their  financial                                                                   
statements  in  a  business-type  format.    This  format  is                                                                   
required when  a governmental entity has charges  to external                                                                   
users,  such as tuition.   The  GAAP Board  is the  standard-                                                                   
setting body.   They want university financial  statements to                                                                   
look  more  like  private  sector   statements,  to  be  more                                                                   
comparable to  other universities, and  to be more  useful to                                                                   
external  users.   He  provided history  of  the overhaul  of                                                                   
state and university financial reporting.                                                                                       
                                                                                                                                
10:09:41 AM                                                                                                                   
                                                                                                                                
Mr.  Dosch   explained  that   full  accrual  accounting   is                                                                   
required,  which  requires  the   recording  of  depreciation                                                                   
expense.  University  statements are included  in the state's                                                                   
comprehensive annual  financial report.  The  university is a                                                                   
component unit of the State of  Alaska.  Other state entities                                                                   
that  fall  into  the same  category  are:  Alaska  Aerospace                                                                   
Development  Corporation,  Alaska  Energy  Authority,  Alaska                                                                   
Housing  Finance Corporation,  Alaska Industrial  Development                                                                   
Export  Authority,  Alaska  Mental  Health  Trust  Authority,                                                                   
Municipal  Bond  Bank,  Natural  Gas  Development  Authority,                                                                   
Alaska    Railroad   Corporation,    Alaska   Student    Loan                                                                   
Corporation, and Seafood Marketing Institute.                                                                                   
                                                                                                                                
10:11:33 AM                                                                                                                   
                                                                                                                                
Mr.  Dosch  discussed  the  university's   federal  financial                                                                   
assistance audits.  He referred  to handout 3, "University of                                                                   
Alaska Audit  in Accordance with  OMB A-133" (copy  on file).                                                                   
Federal financial  assistance amounts  to about $200  million                                                                   
annually  for research  grants,  student  financial aid,  and                                                                   
non-research  assistance.   The audit  is conducted  by KPMG,                                                                   
LLP of Anchorage.  It checks for regulation compliance.                                                                         
                                                                                                                                
Mr.  Dosch described  other audits  such  as cost  accounting                                                                   
practices.                                                                                                                      
                                                                                                                                
Mr. Dosch observed  that the university is reviewed  by other                                                                   
federal entities.   There is also a statewide  internal audit                                                                   
department,  which  reports to  the  Board of  Regents  Audit                                                                   
Committee.                                                                                                                      
                                                                                                                                
10:14:51 AM                                                                                                                   
                                                                                                                                
Mr.  Dosch  reviewed  revenue   sources.    Co-Chair  Stedman                                                                   
referred to chart handout 5, "Operating  Budget Revenue Trend                                                                   
by Fund Source" (copy on file).   Mr. Dosch observed that the                                                                   
University  receives   general  fund  and   non-general  fund                                                                   
revenue.   General  fund are  revenues  received through  the                                                                   
appropriation process and are  known and fixed amounts.  Non-                                                                   
general fund  are all other  funds such as tuition,  indirect                                                                   
cost recovery, or federal research grants, and are varied.                                                                      
                                                                                                                                
Mr. Dosch  discussed the  concept of  receipt authority,  the                                                                   
budget amount the legislative  approves from non-general fund                                                                   
sources.  He termed  it the "not to exceed" amount.   He gave                                                                   
tuition as an example.                                                                                                          
                                                                                                                                
10:18:22 AM                                                                                                                   
                                                                                                                                
Mr. Dosch reviewed the various  revenue sources.   University                                                                   
receipts include tuition and fee  revenue, investment income,                                                                   
indirect cost  recovery, auxiliary  receipts, and  university                                                                   
receipts.  He detailed each type of receipt.                                                                                    
                                                                                                                                
Co-Chair Hoffman asked what percentage  rates were used.  Mr.                                                                   
Dosch  replied that  nine different  rates were  used at  the                                                                   
federal  level.  The  most common  rate is  the UAF  research                                                                   
rate,  which is 45.1  percent.   There is  also a  memorandum                                                                   
with the state that has reduced  indirect rates of 12 percent                                                                   
for non-research  grant  awards and 25  percent for  research                                                                   
grant awards.                                                                                                                   
                                                                                                                                
Co-Chair Stedman  requested a status report  on the endowment                                                                   
and its potential revenue generation.                                                                                           
                                                                                                                                
10:22:20 AM                                                                                                                   
                                                                                                                                
Mr. Dosch listed the following  receipts: auxiliary, program,                                                                   
federal,  state  interagency,  UA Intra-Agency,  and  capital                                                                   
improvement project (CIP).                                                                                                      
                                                                                                                                
Ms.  Redman  introduced  Joe Trubacz  and  Brian  Rodgers  to                                                                   
clarify the banner system.                                                                                                      
                                                                                                                                
10:24:21 AM                                                                                                                   
                                                                                                                                
JOE TRUBACZ,  VICE PRESIDENT, FINANCE, UNIVERSITY  OF ALASKA,                                                                   
requested that  Chancellor Rogers provide the  history of the                                                                   
banner system.                                                                                                                  
                                                                                                                                
BRIAN ROGERS,  CHANCELLOR, UNIVERSITY  OF ALASKA,  FAIRBANKS,                                                                   
defined  the banner  system  as the  university's  integrated                                                                   
financial, human resources, and  student records system.  The                                                                   
system  conversion to  banner began  in the  late 1980's  for                                                                   
several reasons.   One reason was  due to the GASB  34 change                                                                   
in  financial  standards, and  another  was because  the  old                                                                   
financial  accounting  system   did  not  produce  real  time                                                                   
reports  - they  were  monthly.   It  was very  difficult  to                                                                   
answer specific  legislative queries.   The advantage  of the                                                                   
banner system  is the integration  of accounting  system with                                                                   
the student  record system  and the  human resources  system.                                                                   
It allows the  university to provide the required  reports to                                                                   
the  state  and  to the  federal  government  to  meet  audit                                                                   
requirements.     It   also  provides   internal   management                                                                   
information in real time.                                                                                                       
                                                                                                                                
Mr.  Trubacz  related  that  there   are  approximately  1600                                                                   
college systems  that use the  banner system today.   Over 80                                                                   
percent  of  the  research  universities  use  it.    Another                                                                   
advantage  of  the system  is  the  reporting aspect.    Four                                                                   
different  pieces of  software are used  to produce  reports.                                                                   
He offered to provide examples.                                                                                                 
                                                                                                                                
Mr. Trubacz  described the  banner system  as a live  system,                                                                   
which can be accessed at any time for information.                                                                              
                                                                                                                                
10:29:10 AM                                                                                                                   
                                                                                                                                
Mr. Trubacz explained the Q Menu  report, a web-based product                                                                   
that allows  an individual  to check  on a specific  project.                                                                   
The Q Ad  Hoc allows the  viewer to look at  various portions                                                                   
to arrive at a query.  He gave examples.                                                                                        
                                                                                                                                
Co-Chair Hoffman  asked who  has access to  the Q Menu.   Mr.                                                                   
Trubacz replied  that anyone who  has a password  has access.                                                                   
Co-Chair Hoffman asked if the  finance staff could access it.                                                                   
Mr. Trubacz said they could.                                                                                                    
                                                                                                                                
10:31:00 AM                                                                                                                   
                                                                                                                                
Mr.  Trubacz described  the second  system,  the Vista  Plus,                                                                   
which allows  for printing reports  at a specific time.   The                                                                   
third  system, the  Data  Browser, allows  a  person to  view                                                                   
various tables at once to generate a report.                                                                                    
                                                                                                                                
Co-Chair Hoffman  asked if it  was set up to  monitor whether                                                                   
BRU's are  being expended as approved.   Mr. Dosch  said that                                                                   
was possible.                                                                                                                   
                                                                                                                                
Chancellor  Rogers  added  that  part  of  the  role  of  the                                                                   
financial  system is  to ensure  that money  cannot be  spent                                                                   
outside of the way the legislature has appropriated it.                                                                         
                                                                                                                                
Co-Chair  Stedman  wondered how  that  might  be breached  or                                                                   
modified.    Chancellor  Rogers  did not  know.    Mr.  Dosch                                                                   
described safeguards in the system.                                                                                             
                                                                                                                                
Co-Chair Stedman  asked if Mr. Dosch, as the  Controller, had                                                                   
the ability  to modify the system.   Mr. Dosch  reported that                                                                   
he has no access  to the system.  Co-Chair  Stedman asked who                                                                   
did have  access.  Ms. Redman  thought the legislature  could                                                                   
change the  appropriation.  Co-Chair  Stedman noted  that the                                                                   
question  relates  to  the accounting  system.    Ms.  Redman                                                                   
explained that the  accounting system is set up  based on the                                                                   
appropriation and the university cannot breach the system.                                                                      
                                                                                                                                
Senator Thomas asked  if it was possible to add  to or delete                                                                   
the expenditure.  He wondered  if a record is kept of who has                                                                   
access when the  money is moved in any fashion.   Mr. Trubacz                                                                   
explained  that  when  there   is  an  attempt  at  an  over-                                                                   
expenditure of an  account, the banner system  does not allow                                                                   
it.   With the proper authorization,  a budget  authority can                                                                   
increase the  amount.  The  exception is the  personnel line,                                                                   
which is reviewed on a regular basis.                                                                                           
                                                                                                                                
10:37:32 AM                                                                                                                   
                                                                                                                                
Mr.  Trubacz  offered  to  provide  training  in  the  Banner                                                                   
System.   He emphasized that  management decisions  are data-                                                                   
driven.                                                                                                                         
                                                                                                                                
Co-Chair  Stedman requested  that  Mr. Trubacz  differentiate                                                                   
between the state system and the  Banner System.  Mr. Trubacz                                                                   
reiterated  that  the  Banner  System  integrates  the  three                                                                   
programs  into one  comprehensive  system,  unlike the  state                                                                   
system.                                                                                                                         
                                                                                                                                
10:39:33 AM                                                                                                                   
                                                                                                                                
Mr. Dosch addressed  debt capacity, authority,  and oversight                                                                   
from a credit rating agency point  of view.  He reported that                                                                   
Alaska  Statute 14.40.040  provides the  university with  the                                                                   
authority to  borrow money  and issue debt  in its  own name.                                                                   
As of  June 30, 2009, the  university had approximately  $128                                                                   
million  in debt  outstanding, which  consisted primarily  of                                                                   
revenue bonds.   The regents' policy says the  maximum annual                                                                   
debt service may not exceed 5  percent of operating revenues.                                                                   
On June 30,  2009, the university had a maximum  debt service                                                                   
of 1.7 percent  of the operating revenues.   Mr. Dosch termed                                                                   
that amount conservative.                                                                                                       
                                                                                                                                
Mr. Dosch  explained that  the university  has established  a                                                                   
bond  indenture which  allows  access to  the capital  market                                                                   
through  the   issuance  of  general  revenue   bonds.    The                                                                   
university  pledges  the  following sources  of  revenue  for                                                                   
those  bonds:  tuition  and  fees,  indirect  cost  recovery,                                                                   
auxiliary   receipts,   and    other   university   receipts.                                                                   
Currently,  the university  is planning  on a bond  refunding                                                                   
given current low interest rates.   The university has issued                                                                   
fourteen general revenue bonds since 1990.                                                                                      
                                                                                                                                
Mr. Dosch  related that the  university is considered  an AA-                                                                   
rated entity; AA3  from Moody's, AA- from Standard  & Poor's.                                                                   
The  university  was  recently  upgraded  two  years  ago  by                                                                   
Moody's for the first time.  The  rating agencies look at the                                                                   
university  on an  annual basis.   Their interest  is from  a                                                                   
business   perspective  and   focuses   on  student   demand,                                                                   
competitiveness,   and  market   share,  reserve,   endowment                                                                   
performance,  research  competitiveness,  management  of  the                                                                   
institution,  state  support,  gifts and  contributions,  and                                                                   
financial ratios.                                                                                                               
                                                                                                                                
Mr.  Dosch referred  to  HB 184  introduced  last year  which                                                                   
would have allowed for a debt/cap  authorization.  Currently,                                                                   
statutes  provide that  any time the  university issues  debt                                                                   
where  the  debt  service  would exceed  $1  million,  it  is                                                                   
required to get special approval  from the legislature.  This                                                                   
provision  has  been  in  place since  1990.    The  proposed                                                                   
legislation  would increase  the  cap to  $2.5  million.   It                                                                   
would  essentially adjust  for  inflation at  that level  and                                                                   
reduce some  of the administrative  burden for the  state and                                                                   
the university.                                                                                                                 
                                                                                                                                
Co-Chair  Stedman  asked for  an  explanation  about why  the                                                                   
university received  credit rating upgrades and  how it might                                                                   
receive future upgrades.                                                                                                        
                                                                                                                                
Mr. Dosch  responded that  the rating  agencies were  looking                                                                   
mainly  at  state  support relative  to  other  colleges  and                                                                   
universities, and  found consistent state support  in Alaska.                                                                   
They view  the state as  being invested in higher  education.                                                                   
The agencies also look at the  management of the institution.                                                                   
The university has grown over  the recent years in enrollment                                                                   
and in research.                                                                                                                
                                                                                                                                
Mr. Dosch suggested  that a significant amount  of debt could                                                                   
cause a decreased rating.                                                                                                       
                                                                                                                                
10:46:24 AM                                                                                                                   
                                                                                                                                
Mr. Dosch stated that it is not  realistic to assume that the                                                                   
university, given its size and  relative comparisons to other                                                                   
institutions in the AA category, would be upgraded.                                                                             
                                                                                                                                
Chancellor Rogers  added that only none-state  appropriations                                                                   
can be  pledged in terms  of debt service.   In order  to pay                                                                   
debt service those appropriations need to be generated.                                                                         
                                                                                                                                
Senator  Thomas   asked  for   the  criteria  regarding   the                                                                   
comparison of institutions.                                                                                                     
                                                                                                                                
Mr. Dosch answered that it is mostly size.                                                                                      
                                                                                                                                
Co-Chair Stedman  stated that the  next item after  the break                                                                   
would be the university budget development.                                                                                     
                                                                                                                                
10:47:20 AM    AT EASE                                                                                                        
                                                                                                                                
11:03:40 AM    RECONVENED                                                                                                     
                                                                                                                                
Co-Chair Stedman shared the plan for the afternoon session.                                                                     
                                                                                                                                
Co-Chair Hoffman  recalled that it  was 20 years ago  when he                                                                   
was  chair  of  the House  Finance  Committee  that  he  made                                                                   
changes   to  address   major  maintenance   issues  at   the                                                                   
university.    It was  in  1990 as  a  member of  the  Senate                                                                   
Finance Committee  that he requested the chairs  to visit the                                                                   
Fairbanks  campus.   This  is  only  the  third time  that  a                                                                   
finance  committee  has come  to  the university  to  discuss                                                                   
issues.   He suggested  meeting more  frequently in  order to                                                                   
keep the lines of communication open.                                                                                           
                                                                                                                                
Co-Chair Stedman  stated that  the next  items are  UA budget                                                                   
development, regents' budget directions,  and campus process.                                                                   
                                                                                                                                
Ms. Henry stated that university's  budget process begins and                                                                   
ends with the regents.  It begins  early in the year when the                                                                   
regents  set  priorities,  which   are  often  based  on  the                                                                   
strategic  plan.   The goals  are ongoing,  but are  adjusted                                                                   
based  on  needs.    For  example,   the  regents  considered                                                                   
Alaska's work force needs and  have dramatically expanded the                                                                   
shorter term certificate  programs, where, in a  year or two,                                                                   
a person can become skilled in a particular area.                                                                               
                                                                                                                                
Ms. Henry  described the rigorous  process which  takes place                                                                   
at  the  MAU's where  the  wish  lists  are evaluated.    The                                                                   
regents  are  not  involved  in  that  process.    Then,  the                                                                   
president and  his or her staff  review the budget  before it                                                                   
returns to  the regents.  Adjustments  are made and  then the                                                                   
regents'  budget is  presented  to the  legislature based  on                                                                   
priorities after a thorough evaluation.                                                                                         
                                                                                                                                
11:07:38 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  wanted  to  discuss the  budget  from  the                                                                   
perspective  of the  regents'  "Red Book  budget" versus  the                                                                   
legislature's "Governor's budget".                                                                                              
                                                                                                                                
MICHELLE RIZK,  ASSOCIATE VICE PRESIDENT,  BUDGET, UNIVERSITY                                                                   
OF ALASKA,  presented  a brief overview  of the  university's                                                                   
budget  process,  which  is a  year-round  cycle  with  three                                                                   
active years  at any given  time.  Currently,  it encompasses                                                                   
FY  09  -  for  accountability   and  review,  FY  10  -  for                                                                   
operation, and  FY 11 -  the planning requests  for strategic                                                                   
and  budget development.   The  Board  of Regent's  Strategic                                                                   
Plan  (handout   1)  is  what   guides  the  overall   budget                                                                   
development process.                                                                                                            
                                                                                                                                
Ms. Rizk explained that the Board  of Regents begins with the                                                                   
strategic  plan  and  then  the   budget  request  guidelines                                                                   
(handouts  13  and  14)  are  approved  at  the  April  board                                                                   
meeting.    Next,   the  budget  request  review   occurs  in                                                                   
September.  Another  opportunity to review the  budget occurs                                                                   
in October when the budget is  approved.  At the June meeting                                                                   
the board  approves the  distribution of  the funds  that are                                                                   
received from the legislature.                                                                                                  
                                                                                                                                
Ms. Rizk  reviewed the  budget process for  the FY  11 budget                                                                   
request that the  Senate Finance Committee will  be presented                                                                   
in January  of 2010.   The process  begins at the  department                                                                   
level  the previous  January when  priorities are  discussed.                                                                   
There is also  a cross-MAU meeting with  representatives from                                                                   
all areas.  She mentioned the  additional meetings addressing                                                                   
priorities and the expansion of guidelines.                                                                                     
                                                                                                                                
11:11:33 AM                                                                                                                   
                                                                                                                                
Ms.  Rizk  discussed  the  formation  of  statewide  planning                                                                   
groups  who   present  their   priorities  to  the   MAU  for                                                                   
incorporation.    The  overarching   goal  of  the  Board  of                                                                   
Regents'  guidelines  is  to align  the  university's  budget                                                                   
requests with  existing resources  to maximize the  strategic                                                                   
goals   while   maintaining    administrative   and   program                                                                   
efficiencies.   There  is a  program request  level range  of                                                                   
three  to four  percent program  growth included  for FY  11.                                                                   
The overarching goal  of the capital budget  guidelines is to                                                                   
ensure    the   necessary    facilities,    equipment,    and                                                                   
infrastructure are in place for  continued growth, refinement                                                                   
and  improvement  of the  university.   Similar  to  previous                                                                   
years,  the   highest  priority   is  to  maintain   existing                                                                   
facilities.                                                                                                                     
                                                                                                                                
Ms. Rizk  noted that main  campus needs and community  campus                                                                   
needs  are   kept  separate  in   the  budget   to  eliminate                                                                   
competition.                                                                                                                    
                                                                                                                                
Ms.  Rizk reported  on  a July  meeting  with  the Office  of                                                                   
Budget  and  Management  and   with  Legislative  Finance  to                                                                   
discuss the direction the university  is going and to receive                                                                   
feedback  on  state priorities.    In  August all  MAU's  met                                                                   
together in Fairbanks for a budget  request meeting, followed                                                                   
by a board meeting where highlights were discussed.                                                                             
                                                                                                                                
11:14:46 AM                                                                                                                   
                                                                                                                                
Ms. Rizk  related that at a  September 24 meeting,  the board                                                                   
had  its  first  budget  review followed  by  an  October  30                                                                   
meeting when  the budget  was approved.   Ms. Rizk  explained                                                                   
that the  chancellors were going  through a parallel  process                                                                   
in budget development.                                                                                                          
                                                                                                                                
Senator Ellis  asked whether the  regents hear  directly from                                                                   
the  chancellors   or  if  the  administration   reports  the                                                                   
chancellors' wishes.  Ms. Rizk  answered that the chancellors                                                                   
do  not  meet  with  the  regents;   the  president  provides                                                                   
feedback to the  regents.  Senator Ellis summarized  that the                                                                   
president and  the administration  hear from the  chancellors                                                                   
and  then  decide  what  to  pass on  to  the  regents.    He                                                                   
suggested  that some  information  is received,  some is  not                                                                   
received, and some may be packaged.                                                                                             
                                                                                                                                
Ms.  Rizk said  that was  correct.   She compared  it to  the                                                                   
budget  requests  submitted by  the  MAU's to  the  statewide                                                                   
office  where  some  priorities  and  requests  are  omitted.                                                                   
Senator Ellis explained  that he was trying  to determine how                                                                   
much  filter  and  unfiltered  information makes  it  to  the                                                                   
regents for their budget priorities to be set.                                                                                  
                                                                                                                                
11:17:14 AM                                                                                                                   
                                                                                                                                
Ms. Rizk clarified that during  the regents' meeting there is                                                                   
communication as  to what is  not recommended to  be included                                                                   
in the budget.  Senator Ellis  asked what determines what the                                                                   
president and the administration passes on to the regents.                                                                      
                                                                                                                                
Senator  Ellis  restated the  question  to ask  what  factors                                                                   
determine  what  the  president  and  administration  use  to                                                                   
prioritize  information.    Ms. Rizk  stated  that  operating                                                                   
budget  request guidelines  derived from  the strategic  plan                                                                   
are  the  guiding  principles.     For  the  capital  budget,                                                                   
deferred maintenance is the highest priority.                                                                                   
                                                                                                                                
Mr. Brady stated  that the university system  is blessed with                                                                   
three  outstanding chancellors  who  are  advocates of  their                                                                   
MAU's  and who  are not  afraid  to share  opinions with  the                                                                   
board.  The board is aware of  the chancellor's priorities in                                                                   
operations and in capital improvements.                                                                                         
                                                                                                                                
11:20:15 AM                                                                                                                   
                                                                                                                                
FRAN  ULMER,  CHANCELLOR, UNIVERSITY  OF  ALASKA,  ANCHORAGE,                                                                   
stated that  in order  to explain the  budget process  from a                                                                   
MAU perspective, a  one page diagram has been  provided.  She                                                                   
wanted  all of  the members  to have  a copy  of the  complex                                                                   
document entitled, "UAA Planning,  Budgeting, and Reporting -                                                                   
October 2009"  (copy on file).   She related that  all campus                                                                   
needs  are  weighed   and  the  chancellors   listen  to  the                                                                   
community, to advisors,  and pay attention to  the market, as                                                                   
well  as student  enrollment patterns.   In  addition to  the                                                                   
focusing on the university's strategic  plan, the chancellors                                                                   
take  into  consideration  UAA's  strategic  plan,  which  is                                                                   
called UAA 2017.   At the same time, requests  from the deans                                                                   
and directors and program managers  are being reviewed, while                                                                   
keeping  in mind  the performance  measuring  system.   Every                                                                   
fall  a report  to  the statewide  office  is  required.   It                                                                   
summarizes how goals are being achieved.                                                                                        
                                                                                                                                
Chancellor  Ulmer stressed  that  the budget  calculation  is                                                                   
complex.   At UAA  there is  a Planning  and Budget  Advisory                                                                   
Committee (PBAC)  which determines  budget priorities.   From                                                                   
all of  the community campuses  and programs there was  a $20                                                                   
million request, which was eventually  reduced to $7 million.                                                                   
After  looking   at  all  of  the  various   indicators,  the                                                                   
challenge  is to  be responsive  to  the communities  served.                                                                   
The  process  results  in  a request  that  is  submitted  to                                                                   
"Statewide",   both  for   fixed   costs   and  for   program                                                                   
increments.   Statewide must combine  what is heard  from all                                                                   
campuses and make recommendations  to the president, who then                                                                   
reports to the regents.  She admitted  that disappointment is                                                                   
inevitable.                                                                                                                     
                                                                                                                                
Co-Chair  Hoffman asked  if President  Hamilton was  aware of                                                                   
the diagram and adheres to it.                                                                                                  
                                                                                                                                
11:25:23 AM                                                                                                                   
                                                                                                                                
Chancellor Ulmer stated that he  is not aware of the diagram,                                                                   
but he  is aware  of the general  process used  at UAA.   She                                                                   
noted  that  each  of the  MAU's  use  a  slightly  different                                                                   
approach to get to the UA Statewide step.                                                                                       
                                                                                                                                
Co-Chair  Hoffman  summarized  that  communication  with  the                                                                   
president about  the chart  does not exist.   He  wondered if                                                                   
the Board of Regents was aware of the diagram.                                                                                  
                                                                                                                                
Chancellor  Ulmer  responded that  the  Board  of Regents  is                                                                   
aware of  UAA's process in general  terms.  She  thought that                                                                   
the regents did  not need to get into the details  about each                                                                   
of chancellor's  budget processes.   She did not know  how it                                                                   
worked before her tenure.                                                                                                       
                                                                                                                                
Co-Chair  Hoffman   emphasized  that  the  university   is  a                                                                   
statewide  system.   He  suggested that  all  corners of  the                                                                   
state need to be listened to.   He requested a revisit of the                                                                   
diagram later.                                                                                                                  
                                                                                                                                
11:26:53 AM                                                                                                                   
                                                                                                                                
Chancellor Rogers  stated that the  budget process at  UAF is                                                                   
analogous  to that  of UAA's  process  in terms  of having  a                                                                   
committee led by the provost who  works through the requests.                                                                   
The cabinet then works together  to craft a request that goes                                                                   
forward  to  the president.    It  is  a balancing  act  with                                                                   
competing interests  and multiple  sources of direction.   He                                                                   
stated that  that the  budget process  changes over  time and                                                                   
priorities  shift.    He  provided  an  example  of  how  UAF                                                                   
successfully advocated for its  own interests regarding needs                                                                   
at  rural  campuses.   A  balance  needs  to be  met  between                                                                   
meeting the board's priorities  and following the president's                                                                   
guidelines.  It must also be politically realistic.                                                                             
                                                                                                                                
11:29:48 AM                                                                                                                   
                                                                                                                                
JOHN  PUGH,  CHANCELLOR,  UNIVERSITY  OF  ALASKA,  SOUTHEAST,                                                                   
stated that UAS's budget process  is probably the best it has                                                                   
ever been.   It  is similar to  that of  UAF's process.   The                                                                   
provost council,  which is led  by the academic  side, starts                                                                   
the  budget  process  and  comes up  with  priorities.    The                                                                   
administration is  also looking at  its needs, as well  as at                                                                   
facility needs.   The  ideas are then  vetted through  to the                                                                   
top leadership and moved forward.                                                                                               
                                                                                                                                
Chancellor  Pugh noted  that  several years  ago  a step  was                                                                   
added  whereby planning  groups for  special programs  became                                                                   
involved  with   the  budget   process.    The   nursing  and                                                                   
engineering  programs are  examples.   Not  all programs  are                                                                   
covered by  planning groups.   This  year a faculty  position                                                                   
for the Alaska Native Language  Restoration did not fit under                                                                   
the  planning groups.   It  is a  give and  take between  the                                                                   
planning  group's priorities  and campus  priorities.   Final                                                                   
decisions are then made by the president's cabinet.                                                                             
                                                                                                                                
Chancellor Pugh  thought that  the current process  is better                                                                   
than in years past, but there  is room for improvement.  Core                                                                   
services should also be looked at through planning groups.                                                                      
                                                                                                                                
11:34:04 AM    AT EASE                                                                                                        
                                                                                                                                
11:34:16 AM    RECONVENED                                                                                                     
                                                                                                                                
Co-Chair Stedman  mentioned the diagram previously  presented                                                                   
by Chancellor  Ulmer. He opined  that during the  legislative                                                                   
budget process  there is disregard for the  governor's budget                                                                   
request and the  focus is on the university's  Redbook.  This                                                                   
leads  to  complications  in  the  relationship  between  the                                                                   
university and the legislature  and within the budget process                                                                   
when determining  exact amounts.   He expressed  curiosity as                                                                   
to  the direction  the  Board  of Regents  has  given to  its                                                                   
employees.                                                                                                                      
                                                                                                                                
Ms. Henry  admitted that  the issue has  not been  brought to                                                                   
her attention.   Her understanding  was that in the  past the                                                                   
university's budget was presented  by the governor as written                                                                   
in  the  Redbook.    She  thought  the  controversy  recently                                                                   
occurred  under the Palin  administration.   She stated  that                                                                   
the university uses the Redbook  as its working document, but                                                                   
she  had   not  made   the  connection   about  how   it  was                                                                   
communicated  to the  legislators.   She stated  that it  was                                                                   
important for  the legislature to know what  the university's                                                                   
original request was.                                                                                                           
                                                                                                                                
11:38:37 AM                                                                                                                   
                                                                                                                                
Mr.  Cowell  stated that  he  had  discussed this  change  in                                                                   
procedure with the governor who  stated that she did not have                                                                   
a problem with  the mode of communication the  university was                                                                   
proposing.  He  was hopeful to return to the  old method with                                                                   
the new governor.                                                                                                               
                                                                                                                                
Co-Chair Hoffman stated  that he did not have  a problem with                                                                   
the university  advocating for  something different  than the                                                                   
governor's budget.   He stated that the legislature  is often                                                                   
accused of short  funding the university's budget  because it                                                                   
is  being   compared  to  what   the  Board  of   Regents  is                                                                   
requesting.   He wanted  a level  playing field  in order  to                                                                   
compare the  university's request to the  governor's request.                                                                   
He believed in dealing with all departments equally.                                                                            
                                                                                                                                
11:41:52 AM                                                                                                                   
                                                                                                                                
Mr. Brady wanted  to improve the lines of  communication with                                                                   
the Finance  Committee.   He stressed  that "the buck  stops"                                                                   
with the  Board of  Regents.  Student  advocacy groups  are a                                                                   
part of the  request process and are encouraged,  but they do                                                                   
not always mirror  the requests of the Board of  Regents.  He                                                                   
realized that mixed messages are given.                                                                                         
                                                                                                                                
Co-Chair  Stedman  summarized  what he  thought  Mr.  Brady's                                                                   
position was.   The  UA statewide action  is followed  by the                                                                   
Board  of  Regents'   requests,  and  the   governor  becomes                                                                   
irrelevant  and  should  accept  the  regent's  budget.    He                                                                   
wondered if that was correct.                                                                                                   
                                                                                                                                
Mr.  Brady  answered that  before  the  Redbook goes  to  the                                                                   
governor there is  a great deal of communication  between the                                                                   
governor's office and university  personnel in the hopes that                                                                   
both budgets would be aligned.                                                                                                  
                                                                                                                                
Ms. Redman announced that there  are two formal meetings with                                                                   
the  governor's  office  and  OMB  prior  to  finalizing  the                                                                   
budget.                                                                                                                         
                                                                                                                                
Co-Chair  Stedman stated  that they are  discussions  and not                                                                   
developing of  expenditure lines.  Ms. Redman  commented that                                                                   
the governor's  office and OMB  are not shy about  laying out                                                                   
numbers.   They share  expectations about  the amounts  to be                                                                   
funded in the operating and capital budgets.                                                                                    
                                                                                                                                
Co-Chair Hoffman  stressed that  the starting point  needs to                                                                   
be  rectified.   When the  legislature  approves last  year's                                                                   
budget, and compares it to the  governor's budget, there is a                                                                   
question  about  the  starting point  and  modifications  the                                                                   
committees make.                                                                                                                
                                                                                                                                
11:46:09 AM                                                                                                                   
                                                                                                                                
Ms.  Redman  agreed  to  continue  working  with  Legislative                                                                   
Finance  to make  it  easier for  the  Committee  to see  the                                                                   
differences in funding sources.                                                                                                 
                                                                                                                                
Co-Chair  Stedman  described  the process  of  analyzing  the                                                                   
budget  and stated  grave  concerns about  arbitrary  numbers                                                                   
claiming to  be budgetary cuts.   He believed it  put elected                                                                   
officials  in an  awkward position  with their  constituency.                                                                   
He took  issue with President  Hamilton's comments  after the                                                                   
budget was done.  He was concerned  about the regents' budget                                                                   
being  presented  to  the legislature  without  the  governor                                                                   
having an opportunity to make changes.                                                                                          
                                                                                                                                
11:51:43 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman cautioned that  all entities must be treated                                                                   
equally  and  the university  should  be  considered  another                                                                   
department.   He stressed  that all  departments have  always                                                                   
had to defend  their budget requests.  He proposed  to modify                                                                   
or do away with the Redbook.                                                                                                    
                                                                                                                                
Mr. Cowell  spoke from his  perspective and not  the board's.                                                                   
He contended  that the  Board of  Regents and the  University                                                                   
are  unique   in  that   they  are   mentioned  in   Alaska's                                                                   
constitution  and  have a  board  that  is appointed  by  the                                                                   
governor  and certified  by the legislature.   He  maintained                                                                   
that  the legislature  should not  consider the  university's                                                                   
budget the same way they consider a department's budget.                                                                        
                                                                                                                                
11:56:32 AM                                                                                                                   
                                                                                                                                
Chancellor  Rogers  observed  that the  Redbook  process  has                                                                   
existed  for  at least  thirty  years  and  was, in  part,  a                                                                   
response  to an  issue raised  by  the legislature.   In  the                                                                   
past, the legislature wanted to  know what the university has                                                                   
asked  for that the  governor  has not funded.   The  Redbook                                                                   
also serves as  a cap on university requests.   He understood                                                                   
Co-Chair  Stedman's  point  on  the  difference  between  the                                                                   
university's budget and the governor's budget.                                                                                  
                                                                                                                                
Co-Chair Hoffman  did not have a problem with  the university                                                                   
advocating  for  their budget.    He  took issue  with  being                                                                   
accused of not fully funding the  budget.  He maintained that                                                                   
"fully funding"  means fully funding the  governor's request,                                                                   
not the Redbook.                                                                                                                
                                                                                                                                
Ms.  Rizk noted  that  an appendix  included  in the  Redbook                                                                   
traces  the board's  prior  year distribution  decisions  and                                                                   
compares the  board's, the governor's,  and House  and Senate                                                                   
Finance  Committees' requests.   The  board's budget  ends up                                                                   
being the  starting point and  the Conference  Committee, the                                                                   
ending point.   Co-Chair Hoffman reiterated  his reservations                                                                   
about that process.                                                                                                             
                                                                                                                                
Co-Chair  Stedman  stated  his experience  in  many  meetings                                                                   
regarding the  university budget where the comment  "but it's                                                                   
not the Redbook" was heard.                                                                                                     
                                                                                                                                
Co-Chair  Hoffman  emphasized   that  the  governor's  budget                                                                   
request is the document that the legislature works with.                                                                        
                                                                                                                                
11:59:39 AM    AT EASE                                                                                                        
                                                                                                                                
1:35:58 PM     RECONVENED                                                                                                     
                                                                                                                                
Co-Chair Stedman  turned to  the subject  of fixed  costs and                                                                   
hoped  to  come  to  an agreement  on  the  definition.    He                                                                   
requested comments.                                                                                                             
                                                                                                                                
Ms.  Henry   appreciated  Co-Chair  Stedman's   and  Co-Chair                                                                   
Hoffman's candor  during the  discussion, which  she believed                                                                   
was beneficial.                                                                                                                 
                                                                                                                                
Ms.  Rizk   stated  that  the   state  defines   fixed  costs                                                                   
differently than  the university,  which calls them  adjusted                                                                   
base requirements.   Costs  related to compensation  requests                                                                   
are based on  negotiated contracts for union  employees and a                                                                   
step staff  compensation recommendation  based on  comparable                                                                   
wages, cost of  living, and environmental issues.   The MAU's                                                                   
budget requests  contain adjusted  base fixed costs.   System                                                                   
wide requests for building facility  needs are also a part of                                                                   
adjusted base requirements.                                                                                                     
                                                                                                                                
1:39:29 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  requested  Ms. Rizk's  perception  on  the                                                                   
upcoming budget  process.   Ms. Rizk requested  clarification                                                                   
of the question.                                                                                                                
                                                                                                                                
Co-Chair Stedman  asked if there  would be agreement  between                                                                   
Legislative Finance and the university  about budget numbers.                                                                   
Ms.  Rizk  answered   that  there  is  need   for  additional                                                                   
discussions because no agreement has been determined.                                                                           
                                                                                                                                
Co-Chair  Stedman   asked  for   details  on  areas   needing                                                                   
additional discussion.  Ms. Rizk  thought there were no areas                                                                   
of agreement yet, but that would  happen before the budget is                                                                   
presented to the legislature in January.                                                                                        
                                                                                                                                
Co-Chair Stedman summarized the  discussion.  Ms. Rizk agreed                                                                   
there would be clarification.                                                                                                   
                                                                                                                                
Co-Chair  Stedman  stated  that  the fixed  cost  issue  will                                                                   
require work  in order to make  the budget process  as smooth                                                                   
as possible.                                                                                                                    
                                                                                                                                
1:42:24 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman remarked that  Ms. Henry could choose how to                                                                   
deal with  the subject of  the determination of  the regents'                                                                   
operating  and  capital  priorities.   Ms.  Henry  wished  to                                                                   
discuss  expectations related  to  the capital  budget.   She                                                                   
said today's  discussion is tentative  because the  board has                                                                   
not yet  finalized the budget.   She noted that Mr.  Brady is                                                                   
the chair  of the facilities  committee and will  discuss the                                                                   
capital budget.                                                                                                                 
                                                                                                                                
Mr. Brady  personally questioned  the current "laundry  list"                                                                   
process of presenting the capital  budget, when it is obvious                                                                   
that  not  everything  will  be   funded.    There  has  been                                                                   
considerable discussion  on modifying that presentation.   He                                                                   
informed  the  Committee  that   deferred  maintenance  would                                                                   
continue  to  be a  board  priority.    The new  budget  will                                                                   
probably contain  requests for "one project to  build and one                                                                   
project  to plan."    There  will also  be  a request  for  a                                                                   
feasibility study for community  campuses, which will include                                                                   
community input.                                                                                                                
                                                                                                                                
Co-Chair Stedman  recalled that deferred  maintenance totaled                                                                   
about $50  million per  year.  There  was disagreement  as to                                                                   
how  that number  was  determined.   He  gave  an example  of                                                                   
comparing deferred  maintenance needs of a new  building with                                                                   
those of an old  building.  There was also  discussion of the                                                                   
absorption rate.   He questioned how much of  the $50 million                                                                   
the university  can absorb each year.   He spoke of  the last                                                                   
governor  and some  of her  decisions  regarding the  capital                                                                   
budget.   He reminded the Committee  of all of  the competing                                                                   
demands.  All  communities on the list must  prioritize their                                                                   
requests.   He  spoke  of the  expense  of some  communities'                                                                   
number  one  priorities,  such  as the  $400  million  bridge                                                                   
project  in  Ketchikan.   He  thought  some goals  were  more                                                                   
obtainable than  others.  He  understood limiting  the budget                                                                   
request  to one  project,  but pointed  out  that expense  is                                                                   
still an  issue.  He suggested  that the university  consider                                                                   
less expensive projects as well.                                                                                                
                                                                                                                                
1:49:02 PM                                                                                                                    
                                                                                                                                
Mr. Brady appreciated that there  are competing demands as it                                                                   
is a reality  faced within the  university as well as  in the                                                                   
state.  He emphasized that the  list has been pared down.  He                                                                   
wished  that he  could  control  the cost  of  projects.   He                                                                   
appreciated  the comments on  deferred maintenance;  however,                                                                   
he believed  that  $50 million  was a realistic  number.   He                                                                   
defended the  request and spoke  of maintenance needs  on the                                                                   
Fairbanks campus  where, over the last ten  years, an average                                                                   
of  $16  million  was spent  on  deferred  maintenance.    He                                                                   
stressed that  new facilities  must be developed,  especially                                                                   
research facilities.                                                                                                            
                                                                                                                                
1:51:55 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  contended that the Board of  Regents should                                                                   
consider the  state's entire budget  when they  develop their                                                                   
own budget.   He spoke of  the operating budget's  dependence                                                                   
on the price of  oil.  He stated that a large  capital budget                                                                   
means  taking a  substantial amount  from the  reserves.   He                                                                   
expected to  live within  the state's means.   The  amount of                                                                   
funding is  finite and  the legislature  must be prudent  and                                                                   
practical.                                                                                                                      
                                                                                                                                
Mr.  Brady  viewed  the  university  as  an  investment,  not                                                                   
expenditure, in  the state and  high on the state's  priority                                                                   
list.                                                                                                                           
                                                                                                                                
Co-Chair Stedman  commented that  after the governor  submits                                                                   
the  budget  it  is  not  reasonable  to  expect  an  elected                                                                   
official  to add  expensive projects  to  the budget  because                                                                   
it  takes broad  support  to move  such  legislation off  the                                                                   
table.  It puts elected officials in an awkward position.                                                                       
                                                                                                                                
1:55:22 PM                                                                                                                    
                                                                                                                                
Mr.  Cowell  sympathized  with the  legislature's  having  to                                                                   
prioritize projects.   He acknowledged that  his only concern                                                                   
was with the Board of Regents'  budget.  He stated a concern,                                                                   
as a  fiscal conservative,  that because  of the  legislative                                                                   
process, the university winds  up with sporadic funding which                                                                   
is  sometimes difficult  to  absorb  in a  short  time.   The                                                                   
fluctuation   creates   difficult   incremental   costs.   He                                                                   
requested that the legislature  attempt to stabilize the flow                                                                   
of  project  funds.   He  emphasized  that  the  $50  million                                                                   
capital  request   is  based   on  engineering   studies  and                                                                   
generally accepted  practices across the United  States based                                                                   
on facility  size.   The deferred  maintenance projects  have                                                                   
not been  addressed for  years.  He  also suggested  that the                                                                   
legislature  seriously   view  the  board's   priorities  and                                                                   
possibly fund them over a longer period.                                                                                        
                                                                                                                                
Co-Chair  Stedman stated  that the  Committee's challenge  is                                                                   
being able to predict the revenue  stream.  For example, last                                                                   
year  when oil  prices decreased,  the legislature  responded                                                                   
faster than the  governor's office did and  made a collective                                                                   
decision  not   to  add  projects  to  the   capital  budget.                                                                   
Additionally,  a  lot  of  time was  spent  on  the  pipeline                                                                   
project.   He  expressed concern  about lag  time related  to                                                                   
construction projects.                                                                                                          
                                                                                                                                
1:59:41 PM                                                                                                                    
                                                                                                                                
Chancellor  Ulmer  asked  Co-Chair Stedman  to  describe  the                                                                   
current process  of developing the capital budget,  which she                                                                   
thought  might  be different  than  when  she served  in  the                                                                   
legislature.  She explained that  the board is also trying to                                                                   
serve  the whole  state  while balancing  different  regional                                                                   
needs.  She asked  for a breakdown on how the  capital budget                                                                   
is constructed.                                                                                                                 
                                                                                                                                
2:02:05 PM                                                                                                                    
                                                                                                                                
Senator Ellis  asked why requesting only one  capital project                                                                   
would  be a  good  idea.   He  thought  asking  for only  one                                                                   
project made no sense.  He supported  funding the top capital                                                                   
priorities  and  deferred  maintenance  requests  at  several                                                                   
campuses.                                                                                                                       
                                                                                                                                
Co-Chair Hoffman  brought up the ten-year-old  Kasayulie Case                                                                   
which states  that the state  must spend more  money building                                                                   
rural schools.   No governor has requested a  rural school to                                                                   
be constructed, which poses a problem for the legislature.                                                                      
                                                                                                                                
2:04:12 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman gave  an overview  of the  creation of  the                                                                   
capital budget.   Upon receipt of the governor's  budget, the                                                                   
Senate  Finance  Committee looks  at  the broad  numbers  and                                                                   
revenue projections.   Capital  budget projects  are examined                                                                   
for  equal   distribution  around  the  state   and  regional                                                                   
balance,  and  then  fund  sources  are  considered:  federal                                                                   
monies,  general fund,  and other  state funds.   He  related                                                                   
that he individually meets with  each senator regarding their                                                                   
issues  and gathers  information.   He  stated that  regional                                                                   
balance is the goal in order to ensure fairness.                                                                                
                                                                                                                                
2:09:20 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman noted conversations  with the administration                                                                   
regarding the  capital budget.   The revenue stream  dictates                                                                   
much of the expenditures.  He  listed projects he expected to                                                                   
come  forward:   Dalton  Mine,  port  development,   railroad                                                                   
expansion,  gas  line project,  university  projects,  Seward                                                                   
Highway.                                                                                                                        
                                                                                                                                
Co-Chair Hoffman added, "Energy projects."                                                                                      
                                                                                                                                
Co-Chair Stedman  admitted that  the revenue stream  dictates                                                                   
the number  of projects.   He stated that local  governments'                                                                   
opinions are also key to the decision-making process.                                                                           
                                                                                                                                
2:12:48 PM                                                                                                                    
                                                                                                                                
Mr. Brady reported  that the university's list  will be drawn                                                                   
down  dramatically, but  will be  significant in  size.   Co-                                                                   
Chair    Stedman   suggested    working    hard   with    the                                                                   
administration.                                                                                                                 
                                                                                                                                
Ms. Henry  appreciated the  explanation regarding  the budget                                                                   
and the legislature's  responsibility to  their constituents.                                                                   
She stated that  the Board of Regents does  not represent the                                                                   
region  in  which they  live,  but  the  entire state.    She                                                                   
appreciated the board's statewide  perspective.  She stressed                                                                   
the  difference  between her  role  and  that of  an  elected                                                                   
official.                                                                                                                       
                                                                                                                                
Ms. Henry  mentioned the  lone, large  capital request  which                                                                   
would  be in the  budget again  this year,  the Life  Science                                                                   
Building project, which has been  requested for six years and                                                                   
has not  been funded,  regardless of  attempts to lessen  the                                                                   
cost.  She expected  the board to approve the  shortened list                                                                   
because  of this  number  one priority.    She explained  the                                                                   
rationale for the request.                                                                                                      
                                                                                                                                
2:17:07 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  clarified that elected  officials represent                                                                   
an  area  because  they  are most  familiar  with  their  own                                                                   
regional issues.                                                                                                                
                                                                                                                                
Senator  Thomas noted  that if stabilization  could  occur it                                                                   
would have in 2008.  He made suggestions  to the board on how                                                                   
to  find success  with their  funding requests.   He  thought                                                                   
difficulty  might ensue  during  local meetings.   He  agreed                                                                   
that  if  the money  came  in  a  steady  flow, it  would  be                                                                   
advantageous.  He commented about  the capital budget and the                                                                   
fact that  some cities  are not  in line  for projects  which                                                                   
causes problems for the legislature.                                                                                            
                                                                                                                                
2:21:19 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman used  the Alaska  Crime Lab  funding as  an                                                                   
example of a high priority request.                                                                                             
                                                                                                                                
Mr.   Pugh  noted   that   the  deferred   maintenance   list                                                                   
encompasses all regions.  He stressed  the importance of that                                                                   
piece.                                                                                                                          
                                                                                                                                
Senator  Ellis  agreed  with Chancellor  Pugh  that  deferred                                                                   
maintenance requests are long  overdue.  He suggested looking                                                                   
at past deferred  maintenance lists to see where  the funding                                                                   
went.   He expected that  the funds of  the past went  to the                                                                   
buildings  most in  need.   He  supported  the Life  Sciences                                                                   
Building  and  Senator  Thomas's  efforts  to fund  it.    He                                                                   
cautioned  about bullying  tactics or  a "hostage  situation"                                                                   
for  the  Life  Sciences  Building.    He  hoped  for  better                                                                   
communication  with   the  university.    He   mentioned  the                                                                   
importance of the project to the state.                                                                                         
                                                                                                                                
2:26:54 PM                                                                                                                    
                                                                                                                                
Senator Ellis continued to describe  the collaboration behind                                                                   
the funding  of the  Health Sciences  Building and  suggested                                                                   
that  the same  be  done for  the  Life Sciences  Building  -                                                                   
consider it a statewide need.                                                                                                   
                                                                                                                                
2:28:22 PM  AT EASE                                                                                                           
                                                                                                                                
2:45:04 PM  RECONVENED                                                                                                        
                                                                                                                                
Co-Chair   Stedman   addressed    the   issue   of   deferred                                                                   
maintenance.                                                                                                                    
                                                                                                                                
2:46:17 PM                                                                                                                    
                                                                                                                                
Senator  Thomas   described  his  preference   for  examining                                                                   
deferred maintenance  items.  He  explained that he  used the                                                                   
previous year's  Redbook and took  the top project  from each                                                                   
campus for consideration.  The  projects on the list would be                                                                   
considered in order  until the money runs out.   Within three                                                                   
years, all  of the  big projects would  be completed  and the                                                                   
remaining projects more affordable.                                                                                             
                                                                                                                                
Co-Chair Stedman agreed that such  a process was smoother and                                                                   
more equitable.                                                                                                                 
                                                                                                                                
Co-Chair Stedman  reiterated that with oil at  $70 the budget                                                                   
is at "break even".   By June of 2010 there  may be a surplus                                                                   
of  $1  billion,  but  it  probably   would  be  consumed  by                                                                   
education funding.   For the next budget cycle,  based on the                                                                   
current oil price, a robust capital budget is not expected.                                                                     
                                                                                                                                
2:50:45 PM                                                                                                                    
                                                                                                                                
Senator Ellis thought  he heard the university  say that they                                                                   
could  bond  for  up  to  $100   million  without  negatively                                                                   
affecting  the state's  credit  rating.   He  asked how  much                                                                   
unutilized  bonding capacity  the  university  has, what  the                                                                   
regents' plan for  that is, and whether the  regents have met                                                                   
with AHFC's  Dan Fauske regarding  state bonding  for student                                                                   
housing.                                                                                                                        
                                                                                                                                
Mr. Dosch  reported that the  university is currently  at 1.7                                                                   
percent of a 5 percent debt limit.   There is some additional                                                                   
debt capacity.                                                                                                                  
                                                                                                                                
2:53:28 PM                                                                                                                    
                                                                                                                                
Ms. Redman noted  that there have been many  discussions with                                                                   
AHFC and  more were pending.   Financing for  student housing                                                                   
in Anchorage and Fairbanks was  assisted by AHFC.  Ms. Redman                                                                   
stressed that for bonding, the  revenue must be attached to a                                                                   
facility.    Research revenues  cannot  pay  off a  bond  for                                                                   
housing.                                                                                                                        
                                                                                                                                
Co-Chair Stedman turned to performance measures.                                                                                
                                                                                                                                
2:55:41 PM                                                                                                                    
                                                                                                                                
Ms. Rizk spoke of a challenge  regarding securing funding for                                                                   
operating costs  for new facilities.   She looked  forward to                                                                   
working with the legislature on this issue.                                                                                     
                                                                                                                                
Ms. Rizk addressed  the performance evaluation  process which                                                                   
has  been  in  place  since  FY 2004.    The  purpose  is  to                                                                   
communicate, drive,  and measure resource alignment  and make                                                                   
progress toward  the Board  of Regents'  goals stated  in the                                                                   
strategic plan.  There are six  performance measures and they                                                                   
are  updated   yearly.    They   are  a  consideration   when                                                                   
developing the budget.                                                                                                          
                                                                                                                                
2:57:47 PM                                                                                                                    
                                                                                                                                
Senator  Ellis  suggested  that  the  university  remind  the                                                                   
governor during the  budget process that they  have "kept the                                                                   
flame  alive" regarding  missions  and performance  measures.                                                                   
He recalled that  when Governor Parnell was  a legislator, he                                                                   
was a leader in establishing missions and measures.                                                                             
                                                                                                                                
Ms.  Rizk   related  the   emphasis  needed  on   performance                                                                   
measures.    Senator  Ellis suggested  using  them  to  their                                                                   
advantage.                                                                                                                      
                                                                                                                                
Co-Chair Stedman  requested information  on credit  hours and                                                                   
head  count.   Ms. Rizk  referred to  handout 15,  "September                                                                   
2009 Performance  Report to OMB/Legislature" (copy  on file).                                                                   
It provides the university's performance  status in September                                                                   
and  hasn't  been  updated.   The  Redbook  will  show  these                                                                   
statistics.                                                                                                                     
                                                                                                                                
3:00:49 PM                                                                                                                    
                                                                                                                                
Chancellor  Ulmer  commented that  the  reviews  are done  in                                                                   
great detail.   She compared them to taking a  final exam and                                                                   
an oral  exam.  The reviews  show continuity over time.   She                                                                   
urged Committee  members  to look at  the performance  review                                                                   
books.   She thought  the university  could  do a better  job                                                                   
communicating the high standards  and results of the reviews.                                                                   
                                                                                                                                
Co-Chair  Stedman   believed  that   the  head  count   at  a                                                                   
university  increases  during  a poor  economy.    Chancellor                                                                   
Ulmer   agreed.     Co-Chair   Stedman   asked  for   current                                                                   
statistics.  Chancellor  Ulmer reported a 3  percent increase                                                                   
in enrollment  at UAA.   For  first-time, full-time  freshman                                                                   
enrollment is up by 15 percent.                                                                                                 
                                                                                                                                
3:04:27 PM                                                                                                                    
                                                                                                                                
Chancellor  Pugh  observed  that  there was  a  29.5  percent                                                                   
increase in  new students, especially  freshmen, at UAS.   He                                                                   
also reported increases in workforce programs.                                                                                  
                                                                                                                                
Ms.  Henry  related  that  the  board  is  very  involved  in                                                                   
construction projects.   She deferred to Kit  Duke to address                                                                   
facilities.                                                                                                                     
                                                                                                                                
3:06:11 PM                                                                                                                    
                                                                                                                                
KIT  DUKE, CHIEF  FACILITIES OFFICER,  UNIVERSITY OF  ALASKA,                                                                   
ANCHORAGE,  shared statistics  related  to  facilities.   She                                                                   
spoke about the  significance of having older  facilities and                                                                   
the need  for maintenance expenses.   The asset value  of the                                                                   
buildings is about  $1.9 billion, with the  replacement value                                                                   
much  higher.    About  30  percent   of  the  operating  and                                                                   
maintenance  budget  goes  to   utilities,  which  leads  the                                                                   
university  to focus on  conservation efforts.   The  cost of                                                                   
energy has  doubled.   She stated  that the university  looks                                                                   
for  ways   to  save  money.     She  noted  that   there  is                                                                   
accountability   in   the   facilities   area   with   annual                                                                   
assessments.     There  is  a   high  priority   for  capital                                                                   
reinvestment in facilities.                                                                                                     
                                                                                                                                
3:09:28 PM                                                                                                                    
                                                                                                                                
Ms.  Duke   stated  that   the  university  has   significant                                                                   
estimated  deferred maintenance  and  renewal  needs of  over                                                                   
$900  million.   She hoped  to receive  adequate funding  for                                                                   
those  needs  and  voiced  appreciation  for  the  money  the                                                                   
university has  already received for  that purpose.  It  is a                                                                   
better investment  to maintain, rather than  reconstruct, the                                                                   
buildings.     Individual  campuses  must   meet  maintenance                                                                   
targets set  each year and  evaluate if the maintenance  work                                                                   
being  done meets  the desired  objectives.   The  university                                                                   
uses maintenance management software,  which lessens the need                                                                   
for emergency  repairs.  She  spoke of prioritizing  work and                                                                   
the benefits of accountability in her department.                                                                               
                                                                                                                                
3:12:48 PM                                                                                                                    
                                                                                                                                
Ms.  Redman  pointed out  that  handouts  10 and  11  include                                                                   
performance review documents.                                                                                                   
                                                                                                                                
3:14:24 PM                                                                                                                    
                                                                                                                                
MARY RUTHERFORD, PRESIDENT, UNIVERSITY  OF ALASKA FOUNDATION,                                                                   
reported on the  amounts in the consolidated  endowment fund,                                                                   
which contains  the university's  Land  Grant Trust Fund,  as                                                                   
well as  the privately  donated funds to  benefit any  of the                                                                   
campuses  or programs  within the university.   She  informed                                                                   
the Committee that  the fund had a loss of  around 24 percent                                                                   
in  FY 2009.   Previously,  the consolidated  fund had  about                                                                   
$258 million  in it;  about $143  million in  the Land  Grant                                                                   
Trust Fund, and approximately  $116 million in the foundation                                                                   
endowment fund.   By June  30, FY 2009,  the total  was about                                                                   
$202 million; $109 million in  the Land Grant Trust Fund, and                                                                   
about $93  million in  the foundation fund.   She  provided a                                                                   
historic  perspective of  the  fund, which  has performed  at                                                                   
around 8 percent  over 21 years.  The Land  Grant Trust Funds                                                                   
are  used to  fund  the AU  Scholars  Program.   The  private                                                                   
endowment portion represents over  600 individual endowments.                                                                   
Over 90 percent are designated for specific purposes.                                                                           
                                                                                                                                
3:17:05 PM                                                                                                                    
                                                                                                                                
Ms.  Rutherford  stated  that  when the  market  declined  an                                                                   
appeal was made  to endowment creators asking  for additional                                                                   
contributions.   In FY 2009 over  $13 million was  donated to                                                                   
the endowments.  Only two endowments  were unable to make the                                                                   
payouts.                                                                                                                        
                                                                                                                                
Co-Chair Stedman  asked about  the impact of lower  endowment                                                                   
payouts on the state budget.                                                                                                    
                                                                                                                                
3:19:46 PM                                                                                                                    
                                                                                                                                
Mr.  Dosch  spoke  about two  money  sources,  the  endowment                                                                   
investments  and  non-endowment  investments, which  are  the                                                                   
operating  investments.   The endowment  investments, or  the                                                                   
Land  Grant Trust  Fund,  suffered  a loss  last  year.   The                                                                   
primary spending  distribution from  that Trust Fund  goes to                                                                   
benefit  the  UA  Scholars  program,  as  well  as  the  land                                                                   
management operations that generate  dollars from land sales.                                                                   
Endowment  losses have  not  had an  impact  on the  Scholars                                                                   
program or the  land management operations, nor  is an impact                                                                   
expected.                                                                                                                       
                                                                                                                                
3:21:40 PM                                                                                                                    
                                                                                                                                
Mr.  Dosch   discussed  the  non-endowment  funds   which  do                                                                   
generate investment  income.   Those investment  earnings are                                                                   
largely   kept  as   a  funding   source   for  the   budget.                                                                   
Historically,  there have  been  positive earnings;  however,                                                                   
not much  is expected  in the near  future and reductions  in                                                                   
positions and expenses have been  made.  In the last year the                                                                   
portfolio was rebalanced.                                                                                                       
                                                                                                                                
3:23:24 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman assumed  there was  a movement toward  more                                                                   
liquid asset classes.  He inquired  what the payout rate was.                                                                   
Mr. Dosch  answered that the payout  rate for the  Land Grant                                                                   
Trust  Fund  is 4.5  percent  of  a five-year,  December  31,                                                                   
moving average.  The board reduced that rate in April.                                                                          
                                                                                                                                
Ms. Redman underlined the point  that the university has made                                                                   
a conscious  choice to maintain  the interest  income revenue                                                                   
supporting  statewide  administration  so that  the  campuses                                                                   
were protected from the market drop.                                                                                            
                                                                                                                                
3:25:43 PM                                                                                                                    
                                                                                                                                
Mr.  Trubacz  turned  to  accountability   initiatives.    He                                                                   
explained that  accountability is the cornerstone  of finance                                                                   
and administration  statewide.  There  are many audits.   One                                                                   
is  done  by a  Japanese  agency.   He  spoke  of  management                                                                   
reviews  done  in October  and  in  March.   He  referred  to                                                                   
handouts 10 and 11 which show  trends and accountability from                                                                   
the MAU's  position.   Statewide also  goes through  the same                                                                   
process.                                                                                                                        
                                                                                                                                
Mr. Trubacz related  that in 2007, President  Hamilton wanted                                                                   
a  better  look  as  to  how   statewide  administration  was                                                                   
performing.   Handout  12,  "MacTaggart/Rogers  Review of  SW                                                                   
Administration"    contains   that    study.      There    is                                                                   
accountability by statewide to  the MAU's and by the MAU's to                                                                   
statewide.   In 2004  an Ad Hoc  Committee on  Accountability                                                                   
and  Sustainability  was  formed,   which  resulted  in  many                                                                   
efficiencies and successful strategies.                                                                                         
                                                                                                                                
3:30:16 PM                                                                                                                    
                                                                                                                                
Mr. Trubacz concluded  that there was also  accountability at                                                                   
the academic  level.   Each MAU  is accredited  using an  on-                                                                   
going process.   Many of the departments also  have their own                                                                   
accreditation process.                                                                                                          
                                                                                                                                
Co-Chair Stedman  stated that the  topic of the  economics of                                                                   
research would be taken up after a break.                                                                                       
                                                                                                                                
3:32:40 PM          AT EASE                                                                                                   
                                                                                                                                
3:42:36 PM          RECONVENED                                                                                                
                                                                                                                                
Chancellor  Rogers stated  that the University  of Alaska  in                                                                   
Fairbanks is up about 5 to 6 percent  in student credit hours                                                                   
over  last  year  with  the  largest   growth  in  the  rural                                                                   
campuses.   The College  of Engineering  and  Mines is  up 20                                                                   
percent  in student  credit hours.   Rural  campus growth  is                                                                   
largely due  to the  expansion of  distance delivery.   There                                                                   
are five rural campuses: Nome,  Chukchi, Kotzebue, Kuskokwim,                                                                   
Bristol Bay, and Interior-Aleutians.   The successes in rural                                                                   
campuses  are   due  largely  to  the  partnerships   at  the                                                                   
community  level.  He  shared examples  of Nome and  Kotzebue                                                                   
partnerships.   He  mentioned  a contract  with the  McDowell                                                                   
Group to review rural campuses.                                                                                                 
                                                                                                                                
3:46:51 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman asked how the  rural program in Fairbanks is                                                                   
going.    He  suggested  that   Bernice  Joseph  address  the                                                                   
question.   He commented  that  there are a  wide variety  of                                                                   
rural programs.                                                                                                                 
                                                                                                                                
3:47:19 PM                                                                                                                    
                                                                                                                                
BERNICE JOSEPH, VICE PRESIDENT,  RURAL COMMUNITIES AND NATIVE                                                                   
EDUCATION, UNIVERSITY OF ALASKA,  informed the Committee that                                                                   
the Rural Services Program at  UAF is doing very well.  It is                                                                   
fully staffed and there are a  record number of students this                                                                   
year.   The Rural Alaska Honors  Institute (RAHI) also  has a                                                                   
record number  of participants.   A study  done by NSF  a few                                                                   
years ago  showed that students  who participate in  RAHI are                                                                   
twice as likely to graduate with a BA.                                                                                          
                                                                                                                                
Co-Chair Hoffman  suggested that  the program be  represented                                                                   
highly to the administration.  Ms. Joseph agreed.                                                                               
                                                                                                                                
Co-Chair Stedman pointed out that  the Committee was aware of                                                                   
the University's revenue impact.                                                                                                
                                                                                                                                
3:49:34 PM                                                                                                                    
                                                                                                                                
PAT PITNEY, UNIVERSITY OF ALASKA,  FAIRBANKS, spoke about the                                                                   
economics  of  research,  which  she termed  as  an  industry                                                                   
heavily funded  by the federal  government.  She  referred to                                                                   
handout  9, "Research  as an  Economic  Enterprise" (copy  on                                                                   
file).    In 2004  $43  billion  was  the amount  of  revenue                                                                   
generated from  research done  at universities.   She pointed                                                                   
out  that   research   is  a  competitive   industry.     The                                                                   
opportunities  research  provides students  are  significant.                                                                   
The faculty is what makes an institution competitive.                                                                           
                                                                                                                                
3:51:19 PM                                                                                                                    
                                                                                                                                
Ms.  Pitney  related  that research  is  prioritized  by  the                                                                   
regents'  strategic   plan  and  the  state's   research  and                                                                   
development  plan required  by  SJR 44.    The University  of                                                                   
Alaska, Fairbanks'  core strengths also help  set priorities.                                                                   
The areas  of core  strength are  the Geophysical  Institute,                                                                   
School  of   Ocean  Science,   and  Engineering,   which  are                                                                   
nationally competitive for research money.                                                                                      
                                                                                                                                
3:53:14 PM                                                                                                                    
                                                                                                                                
Ms. Pitney  addressed  earmarks, which  account for about  $5                                                                   
million a year.  An attempt was  made to reduce dependence on                                                                   
earmarks.                                                                                                                       
                                                                                                                                
Ms. Pitney  related that  in additional  to federal  funding,                                                                   
there are  stimulus funds available,  which account  for less                                                                   
than 10  percent.  That  will increase  to 20 percent  by the                                                                   
end of  the year.   Ms. Pitney  explained that the  principle                                                                   
investigators -  the faculty that attract research  dollars -                                                                   
build  the programs.   For  every research  faculty, five  to                                                                   
eight  employees  are  funded.    This  makes  for  a  stable                                                                   
workforce of 2,300 research employees throughout the state.                                                                     
                                                                                                                                
3:56:07 PM                                                                                                                    
                                                                                                                                
Ms. Pitney  emphasized the  quality of  the jobs.   It  is an                                                                   
industry  worth  over  $100  million.     She  described  the                                                                   
industry  as a  "money  machine"  that requires  tending  to.                                                                   
Research provides potential for  other businesses, especially                                                                   
in  the  biological  research   area.    She  requested  that                                                                   
Chancellor  Rogers speak  about  the next  level of  research                                                                   
activity.                                                                                                                       
                                                                                                                                
Chancellor  Rogers  spoke  about  the  university's  role  of                                                                   
translating  basic research into  other economic  development                                                                   
opportunities.   There  are several promising  areas  such as                                                                   
sudden infant death syndrome,  traumatic brain injuries, cell                                                                   
manufacturing,   and   antioxidant   properties   of   Alaska                                                                   
blueberries.                                                                                                                    
                                                                                                                                
3:59:27 PM                                                                                                                    
                                                                                                                                
Chancellor Rogers discussed unmanned  aerial vehicles and how                                                                   
they can  be used to monitor  forest fires, offshore  fishing                                                                   
violations, and  homeland security  operations.  He  spoke of                                                                   
the software  security and energy  research.   The university                                                                   
is trying to  find ways to apply the industry's  products and                                                                   
services and improve Alaska's economy as a whole.                                                                               
                                                                                                                                
4:01:04 PM                                                                                                                    
                                                                                                                                
Senator  Ellis  asked if  any  professor at  any  institution                                                                   
could apply for research grant  funding.  Ms. Pittney replied                                                                   
that  that  was  accurate and  it  was  happening  statewide.                                                                   
Senator  Ellis   asked  if  the   three  city   campuses  are                                                                   
designated  as  research centers,  as  opposed  to the  rural                                                                   
campuses.   Chancellor  Rogers  replied  that rural  campuses                                                                   
focus  on  teaching  and  public service  and  much  less  on                                                                   
research.    A  rural  faculty  can  apply  for  grant-funded                                                                   
research.  The  University of Alaska, Fairbanks  generates 90                                                                   
percent  of competitively  funded  research proposals  system                                                                   
wide.                                                                                                                           
                                                                                                                                
4:02:55 PM                                                                                                                    
                                                                                                                                
ASHTON  COMPTON,   STUDENT  REGENT,  UNIVERSITY   OF  ALASKA,                                                                   
FAIRBANKS, said she was learning a lot from the experience.                                                                     
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:04 PM.                                                                                           

Document Name Date/Time Subjects
#1 UA Strategic Plan.doc SFIN 10/14/2009 9:00:00 AM
University Work Session
#10 Spring Mgmt Report Operating Review.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#2 FY08 Financial Statements-1 (2).pdf SFIN 10/14/2009 9:00:00 AM
University Work Session
#3 FINAL FY08 A-133 (2).pdf SFIN 10/14/2009 9:00:00 AM
University Work Session
#5 Operating Budget Rev by Source (Chart 3).pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
#6 Operating Budget Trend by NCHEMS-Percent Rev by Source (Chart 4).pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#11 Fall 09 Financial and Performance Final.doc SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#12 UA Research Economics.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#13 FY11 Operating Guidelines.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#14 Approved FY11 Capital Development Guidelines-1.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#15 September 2009 BOR Performance Report.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#4 Appendix A-NCHEMS RevenueDescriptions.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#7 Operating Pie Charts Rev and Exp by Source (Chart 2).pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#8 Auth and Act FY86-11est without % SA (Chart 1).pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
#9 MacTaggart Administrative Review.pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
Attachment Description.docx SFIN 10/14/2009 9:00:00 AM
University Work Session
Attachment Description.doc SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University work session
Banner System Handout.pdf SFIN 10/14/2009 9:00:00 AM
University Work Session
SB241 REPORT FINAL-PRINT (2).pdf SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
SFC Agenda 10.14-15.doc SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University Work Session
Ulmer handout.jpg SFIN 10/14/2009 9:00:00 AM
SFIN 10/15/2009 9:00:00 AM
University work session