University of Alaska. Board of Regents Communication and Budget Workshop. January 19, 2018

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1 University of Alaska Board of Regents Communication and Budget Workshop January 19, 2018

2 The University of Alaska is Creating a Culture of Education in Alaska by increasing: 1. our contribution to Alaska s economic development 2. the number of skilled Alaskans for our workforce 3. our world class research 4. the degree attainment of our students 5. the university s cost effectiveness

3 Unrestricted General Funds ($ Billions) Alaska s Fiscal Situation $83/barrel FY18 breakeven oil price based on $5 Billion budget w/$760 mill for dividends $56/barrel DOR FY2018 Forecasted FY18 Annual Average Source: Legislative Finance Division 3

4 Alaska s Fiscal Situation In the last 4 years we ve spent $14 Billion from savings Statutory Budget Reserve (SBR) Constitutional Budget Reserve (CBR) Just maintaining FY18 state service levels requires a $300 Million increase Legislators enter this session facing another $2.5 Billion deficit. and just $2.4 Billion left in non-permanent Fund savings Source: Legislative Finance Division 4

5 Alaska State Budget Revenue Sources (%) Alaska s Fiscal Situation Yesterday Today Tomorrow? Permanent Fund Earnings New Taxes Savings Non-Oil & Gas Oil & Gas Conflicting policy perspectives & political philosophies Permanent Fund Earnings Reserve draw proposals could generate ~$2 Billion annually (SB 23) Broad based sales, wage or income tax Source: Alaska OMB 5

6 University Budget State UGF Budget FY19 Education (K-12) $ 1,294 Health & Social $ 1,165 University $ 317 UA is 7% of State Budget Corrections $ 289 DOTPF $ 178 Public Safety $ 163 Agency Ops $ 510 All 12 other State Agencies Retirement Payments $ 271 Debt Service $ 202 Capital Budget $ 150 Other $ 42 Total UGF $ 4,581 Revenue Projection $ 2,086 Deficit $ (2,495) Savings CBR Balance $ 2,188 SBR Balance $ 172 Remaining Deficit $ (134.9) Legislators want to support important public priorities In times of surplus, one could navigate around budget proposals, work on plus-ups and increments But, money simply isn t there; reserves depleted Solutions Permanent Fund Earnings, taxing or taking from someone else 6

7 University Budget Dollar Reduction ($ Mill) FY15 Management Plan to FY19 Gov Proposed Percent Reduction Source: Alaska OMB 7

8 University Budget UA Budget by Major Funding Source FY18 Management Plan Mental Health Trust, CIP, Inter-Agency Receipts Legislature doesn t appropriate to UA by academic programs, campuses, services, etc. Pro: Single appropriation one check Spending priorities set by Regents Con: Advocating for specific priorities difficult Inability to quantify immediate impacts of proposed reductions 8

9 Challenge Alaska s revenue and budget crisis has both financial and political dimensions we are impacted by both Structural deficit makes it difficult to address investment priorities like higher-education and work force development State s overall revenue pie, impacts the size of our slice Budgeting situation will not improve until a long-term revenue solution is achieved 9

10 Challenge Public opinion and political constituents drive the agenda Public doesn t clearly distinguish between types of government spending Legislators may support UA; their constituencies may not Budget increases may not be considered politically wise This dynamic demands an increased focus on public outreach and external advocacy 10

11 Challenge Strong and coordinated legislative engagement is always required; but a straight line approach alone isn t going to be successful Legislative support comes with the consent of the broader public the collective consciousness of Alaskans Broaden our definition of advocacy; connect with people who exercise influence shape public opinions Mobilize and build support for our mission, programs and initiatives Communicate UA s impact on the State and Alaska s support for the university 11

12 Context Alaska is a land of great wealth natural resources environment global location diverse, rich cultures adventurous people growing Alaska Native corporations and tribal organizations opportunity to create a sustainable future for generations to come There is no single organization in Alaska better poised to solve Alaska s problems and pursue its opportunities than the University of Alaska mission assets record of success public support partnerships plan commitment Our state faces very serious challenges vast geography and a small population low educational attainment health disparities critical workforce gaps narrow economic base high costs in such areas as health care, facilities, energy, and telecommunications fiscal uncertainty at state level and recent, severe budget cuts to UA (cumulative $145M, FY14-FY18) UA is a prime investment in the capabilities and the ideas to propel Alaska forward top quality courses and programs in high demand fields, including extensive offerings in the social sciences, humanities, and the arts high powered research into issues relevant to Alaska and the world inspiring and transformational role in our students lives critical role of public and community service 12

13 UA Guiding Principles Leverage Strengthen partnerships with key stakeholders Diversify funding sources Build on unique strengths of each university Exploit the collective power of the system Weigh return on investment Productivity Commit to faculty and staff development Build competitive capacity Foster innovation and creativity Invest in lean process improvement and automation Reallocate excess capacity into investment and growth Goals Focus on meeting the state s needs Set ambitious goals and tie strategies and resource requirements to them Goals should exceed projections Modify goals as progress is made or as resources are constrained Commit to continuous improvement Accountability Be clear (who, what, when, where) Measure and report out on progress Encourage trust Consult governance groups in decision making 13

14 Continue strategic investments Investment Area Budget Context FY17 Regents FY19 operating budget request ($341 million) FY18* (year 1 of 3) Governor s FY19 operating budget request ($317 million) FY19 Ongoing (year 2 of 3) FY19 Increment Request Economic & Workforce Development $0.0 $1.0 $1.0 $3.8 Research $1.0 $1.8 $1.8 $3.7 Enrollment & Degree Attainment $3.0 $2.1 $2.1 $7.2 Process Automation $1.1 $1.1 Compliance $0.5 Facilities Maintenance & Operations $13.0 Total Strategic Investments $17.5 $6.0 $6.0 $14.7 * FY18 investments may be part of the FY19 investments. 14

15 1. Contribute to Alaska s economic development UA Goals and Measures 2017 (baseline) A. Increase STEM graduates 1,636 1,720 1,810 1,905 2,005 2,110 2,221 2,337 2,460 B. Increase the number of invention disclosures Provide Alaska s skilled workforce A. Increase % of educators hired 30% 35% 40% 45% 50% 60% 70% 80% 90% B. Double number of health program completers ,002 1,100 1,209 1,328 1,459 1,602 1, Grow our world class research A. Continue leading the world in Arctic research B. Increase research expenditures $159m $167m $175m $184m $193m $203m $213m $224m $235m 4. Increase degree attainment A. Increasing enrollment 29,171 29,171* 31,000 33,000 35,000 37,500 40,000 42,500 45,000 B. Increasing completions 4,594 4,800 5,200 5,800 6,600 7,500 8,400 9,400 10, Operate more cost effectively A. Decrease total cost of education (indirect and direct) per completer $107.3 $102.5 $94.7 $87.5 $80.9 $74.8 $69.1 $63.8 $59.0 B. Increase annual completions per FTE 23/100 24/100 25/100 27/100 28/100 30/100 31/100 33/100 35/100 *FY18 projected enrollment is 27,683 15

16 FY19 State Operating Budget Proposal (UGF in millions of $) Operating FY2018 Base Budget $317.0 Compensation $0.0 Fixed Costs & Budget Adjustments $9.7 Facilities Maintenance $3.7 Utilities $3.1 UAF Engineering Building Operating Costs $2.1 Academic & Research Subscriptions $0.9 Mental Health Trust Adjustment -$0.1 Strategic Investments $14.7 Contribute to Alaska s Economic Development $1.6 Provide Alaska s Skilled Workforce $2.1 Grow Our World Class Research $3.7 Increase Degree Attainment $7.3 FY2019 Budget Request $ BOR Gov

17 FY19 State Capital Budget Proposal (UGF in millions of $) UA Deferred Maintenance and Renewal & Repurposing (DM/R&R) backlog exceeds $1 billion $50.0 FY2019 DM/R&R BOR budget request $70.0 FY2019 DM/R&R Governor's Alaska Economic Recovery plan (proposed capital budget contingent on tax) 17

18 Priorities Other Legislative Priorities and Issues Education Tax Credit Higher Education Fund Alaska Performance Scholarship (APS) Alaska Education Grant (AEG) University of Alaska Land Grant Issues Proposal to add a faculty regent to Board of Regents 18

19 Next Steps Discuss with Board of Regents Legislative Process Advocacy Continued analysis and consideration of options Preparation for March Board of Regents meeting 19

20 Looking Forward Focus on our goals Put students first Maintain quality in academic programs Leverage collaboration Value our people 20

21 Looking forward No additional tuition rate increase beyond the 5% approved by the Board of Regents in November Maintain the OEC/Certificate discount Maintain current funding level in strategic investment areas and consider additional investment Maintain investment in faculty innovation / collaboration Increase student to faculty ratios where capacity exists Identify additional Strategic Pathways related administrative savings (including selected senior level positions) Consider impact of $70 million included in Governor s budget for DM&RR on overall facility maintenance funding targets 21