Katharine Lyall, President
University of Wisconsin System
Today, we consider the UW System’s Operating and Capital Budget requests for 2005-07. For me, this is a very nostalgic occasion; it is the last time that I will come before you as President of the UW System and it is the last university biennial budget request that I will have helped prepare.
It might strike you as odd that a last budget could make one nostalgic! But, as we all know, budgets are concrete reflections of our core values; they are the most visible way that large, complex organizations like the UW System publicly signal their purposes, their goals, their accomplishments, and their needs. It is our aspirations for our students and our state that drive this budget request and our continuing commitment to our public purpose.
It has been a privilege to work with Board members, Chancellors and the staff who share these aspirations—and who share the hard work, as well. We are all in the “life changing” business—not only in our Medical School but through the expanded lifelong opportunities and the skills students obtain through a UW education. It is wonderful to see students graduate and go on to successful lives where they are recognized as creative, nimble citizens with the ability to succeed at almost anything.
The budget request before you aims to keep Wisconsin’s public universities producing well by reinvesting in our students, our faculty and staff, and our campuses. It has five major goals [Slide]:
- To increase access to low- and moderate-income students from their current historic lows to a more representative proportion of the freshman class.
- To enhance student success by increasing retention and graduation rates
- To expand student-faculty contact, and enhance the opportunities for undergraduate research, internships, and other hands-on learning experiences that mark a quality education
- To ensure that as we lose distinguished faculty to retirement, we replace them with teachers and researchers of equal or even greater promise to serve our students and the state and
- To improve the quality of our most basic infrastructure including instructional technology (IT) and libraries.
- These goals do not come out of the air. They spring from the work of the Regents, faculty, students, staff and community participants in the year-long “Charting A New Course” study; they also reflect the broad input collected from public listening sessions conducted by the Board across the state; from the advice and perspectives of outside speakers and presenters who helped us see our challenges in the context of the national trends for higher education; and from discussions with elected leaders and our educational partners in the technical colleges, the private colleges, and DPI about the ways to meet the needs of Wisconsin
The bottom line is that we have worked very hard to maintain educational opportunities while absorbing significant reductions in the resources that support our core instructional mission. Over the current biennium, we have [Slide]:
- Sustained enrollments at 160,000 students.
- Cut $250 million in state support from our base
- Financed $26 million of financial aid from students’ own reserves.
- Eliminated more than 300 courses.
- Raised tuition so that students now provide as much of our instructional resources as the state.
- Reduced total GPR positions by more than 600 and raised non-state funds to continue many student and administrative services that would otherwise have been lost, and
- Maintained a commitment to advancing state and national economic development through projects like Northern Edg and through extended degree programming like the Platteville Engineering program at Fox Valley
Some of the consequences of these and other actions over the past ten years are [Slide]:
- Qualified applicants have been turned away from high demand programs such as nursing and teacher.
- Students now provide almost as much support for instruction as the state
- Student: faculty contact has decreased by 20%
Adjunct faculty and graduate assistants now teach nearly 40% of our student credit hours (SCH) and
State support per student is now more than $1,000 below the national average for four year institutions. [Slide]
We have worked together as a System to exploit efficiencies and reduce duplication; we remain the lowest-overhead higher education System in the country as measured by data collected by the US Department of Education.
In short, the UW System has done its share, and more, to help Wisconsin not only balance its budget but also sustain the human capital needed to grow again. We want to do more.
But, I’m worried about the future. Our constituents are telling us that cracks are appearing in the foundation. Students tell us that teaching nearly 40% of credit hours with temporary instructional staff is too much—we need to begin to move this back to a more reasonable proportion that affords all students greater faculty contact throughout their college years. This will pay off in higher retention and graduation rates—better outcomes for students and the state. The recent large decline in low- and moderate-income students is not acceptable for a public university that takes its public purpose seriously; we must update Wisconsin’s financial aid programs to match the state’s new higher-tuition philosophy. And we must attend to the basic infrastructure of a modern university—its libraries and its instructional and research technology; without these basics neither students nor faculty can perform productively in a competitive environment.
The Charting Study sought different mechanisms for [Slide] providing additional revenue, looked for ways to develop new partnerships with the state, with businesses and with other education sectors; identified possible new efficiencies; studied our research and public service mission and asked what was needed to maintain quality. It set priorities and identified some issues as immediate, short-term needs and others to be worked on over more than the two years of the coming biennium. It identified certain self-help measures the System must undertake, some steps the university can take only in partnership with others, and more basic reinvestment in students and the future that only the state can undertake.
In the coming biennium, we must increase financial aid to maintain access for our lowest income students, ensure that we can attract and retain quality faculty; update our library collections and instructional technology, improve our research and public service capability; and remove barriers to the system’s ability to adapt quickly to a changing environment. These priorities are reflected in the budget request before you.
This budget request is about what students need to become successful human beings and contributors to Wisconsin and about what Wisconsin needs to regain its momentum, its economic vitality, and its leadership in the generation of better ideas.
Our new president, Kevin Reilly, has some things he would like to say about all this, but before he does that, we’ve agreed that Associate Vice President Freda Harris and Assistant Vice President David Miller should lay out the specifics of the request so that we all understand what’s on the table.
Following that, some students, faculty and staff have some testimony on specific items in the request and will be happy to take your questions on how these items would impact them and their work in the classroom and labs, where the real business of learning occurs. President-elect Reilly will wind up with a few words before lunch.
Associate Vice President Harris, would please you outline the Operating Budget Request?
Thank you, President Lyall. As you know we have been developing the biennial budget request you see today throughout this year. We started the budget process by hearing from the students on their priorities. United Council reminded us of the importance of the UW System to the state by highlighting the value the state receives from higher education. I can’t say it any better than they did, this budget seeks to “Build the Wisconsin Ideal: $9 at a Time.” The $9 is the return on investment that the state receives for each dollar invested in the UW System.
The students “understand the fiscal environment is not favorable for higher education right now… When developing their priorities, students kept this in mind and focused on re-investing in existing programs, initiatives, and services rather than requesting money for new programs.”
So, this budget focuses on student needs, student success, and our state’s future. What is the UW System request and what outcomes does it offer/seek?
First, we ask the state to fully fund financial aid to maintain access. This goal was overwhelmingly supported by “Charting a New Course”; and financial aid is a top priority for students. Funding financial aid for the next biennium is essential to meeting the Governor’s goals for access for all students of all incomes and backgrounds.
The mix of financial aid nationally has shifted from grants to loans.[Slide] Today, more than 40 percent of aid is in the form of grants and 54 percent is loans. An investment in state grants would begin to rebalance this mix for low-income families.
[Slide] We have also noted that the percentage of family income needed for tuition at public four year institutions has increased for students at all income levels with the most dramatic shift occurring in the lowest income group. In 1980, students from the lowest income families had to spend 13 percent of household income to pay for tuition at public 4-year institutions. By 2002, tuition took 33 percent of income for these lowest income families. Not surprisingly, this has affected the college participation of low income students.
[Slide] Our next slide shows that 76 percent of all minority students enrolled in 2002-03 received financial aid. However, the vast majority of all financial aid recipients are White (89 percent). Financial aid affects everyone but as a group minority students are more dependent upon financial aid to attend the UW System.
[Slide] The percentage of new freshmen in the UW System coming from families in our lowest income quintile has decreased from 14.7% in 1992 to 11% in 2002. The lowest income quintile is redefined each year; For 2002, it represents a family income of $30,000 or less.
To reverse this trend of limited access for low income students, we are proposing to match tuition increases dollar-for-dollar with grant aid for our lowest-income students. This program is designed to prevent further erosion in access and increase retention by holding the amount that low-income students pay steady at the 2004-05 level. In effect, it would hold low-income students harmless for future tuition increases once they have enrolled.
This program would require an average increase in state funding of $4.9 million each year. These grants will ensure continued access to students with family incomes of less than $30,000 per year. If the program were extended to families with incomes of less than $46,000 per year, the funding needed each year would increase to $9 million. Financial Aid has traditionally been paid for with state dollars.
One option before you today is to decide whether to extend this financial aid program to students in the second-lowest income quintile. We are also asking you to decide whether this funding should be requested solely from the state or whether students should be asked to shoulder a share of this program with tuition dollars.
It is our understanding that at its next meeting, the Higher Educational Aids Board will also be requesting increases for the Wisconsin Higher Education Grant (WHEG) to fund the statutory link with tuition and to replace the one-time auxiliary funding that expires in 2005.
The second initiative, Student Success for Economic Development, is comprised of 4 segments:
- First, increasing student retention and graduation rates by improving student contact with faculty. This would enable UW institutions to graduate 1,000 additional students each year, adding $17.5 million in additional annual income to Wisconsin. This impact is cumulative over time, and at the end of six years, this investment will have added more than $105 million to Wisconsin’s personal income base, more than the investment required to fund these initiatives.
- Second, we must secure funding to enable faculty and staff to expand research and public service activities during the summer. Instructional pressures are now so great that summer support is essential to allow faculty and staff to assist regions and communities, to compete more effectively for federal funding, and to help achieve the Governor’s goal of bringing more federal funds back to the state of Wisconsin.
- Third, it is important that the System continue to attract and retain quality faculty and staff. This is essential as we lose faculty to retirement and competitive offers from other states. This request would close the 5.5% salary gap between UW System faculty and staff and their peers through 2003-04. [Slide] Without such action, this gap is projected to grow into double digits by the end of 06-07, a nearly “unfixable” level. We cannot allow the gap between UW salaries and that of our peers to reach this point. It is already difficult for departments to recruit new faculty and staff and retain those whose skills make them very valuable on the national market. Among those nationally recruited faculty who will not be returning to Wisconsin this fall are UW Hospital Cardiology Chief, Pamela Douglas; UW Madison Professor Don Kettl, an active participant in our four economic summits and the state’s leading expert on local government management, and half of each year’s teaching award winners at UW-Oshkosh.
- The fourth piece of the Student Success request would provide access for more adult and nontraditional students by funding opportunities for citizens to earn bachelor’s degrees. The Committee on Baccalaureate Expansion (COBE), a joint committee with the Wisconsin Technical College System, is considering a variety of possible programs similar to the proposed Center for Adult Access and the UW-Stout portal for adult students. The final recommendations from COBE will not emerge until October, but this Board has indicated an interest supporting COBE’s recommendations. The initiative also includes funding for the Platteville/Rock County Engineering program and funding for regional collaborations as well.
The four parts of the Student Success initiative altogether would require an average annual increase in funding of $42.5 million.
The final funding request that we are asking you to consider is to update our library collections and instructional technology. These are the basic infrastructure of a first-rate university without which we cannot do our work. This includes a request for an average annual increase of $2 million to support increased paper and electronic library collections, online delivery of materials, enhanced digital collections and expansion of interlibrary loan services.
This request also includes $1.7 million to support faculty/staff use of the state’s new converged IT network; which will provide access to Internet 2. This access is critical to sustaining and expanding online instruction and to faculty and staff’s ability to compete successfully for federal research funds. The new statewide converged network is being designed and acquired through a new RFP that will be issued by the Department of Administration.
The total cost of all these recommendations- financial aid, student success and infrastructure- is an average annual increase of $51 million, representing a 2.8% increase to the UW System’s GPR/Fee base each year.
The third major part of the Operating request are the Standard Budget Adjustments. The Standard Budget Adjustments are defined by DOA and are larger than they would normally be, averaging an increase of $50 million each year. The main drivers are a utilities increase of $17.9 million a year and fringe benefits increases averaging $18.4 million each year. I should note that the fringe benefits increases are negotiated by Office of State Employment Relations (OSER), not the UW, while the utilities request reflects this Board’s instructions to avoid continuing utility shortfalls by reflecting more realistic estimates in the budget. The standard budget adjustments are listed on page B-9. Also included are requests to replace the auxiliaries funding used for financial aid in 2005-07 with ongoing funding and to maintain the statutory link between tuition increases and increases in financial aid programs and a new request for Operation and Maintenance of new facilities that come on line in 2005-07. In addition, there is a request to maintain services for our students with disabilities by replacing funding lost through the discontinuation of support from the Division of Vocational Rehabilitation.
he budget includes some requested changes to Wisconsin statutes. These changes are grouped into 3 categories:
- Changes recommended by the Charting a New Course study. These changes were designed to be self-help measures that would enable the UW System to maintain some enrollments and services without additional state dollars and/or reduce costs, allowing more funding to flow to the university’s core functions of instruction, research, and public service. Some examples of these efficient opportunities include streamlining the Capital Budget process; giving the UW System procurement authority to use Higher Education Purchasing Consortia to reduce the cost of university goods and services; permitting the UW System to maintain, manage and invest its program revenue balances and employ longer-term and/or more diversified investments for higher yields; retaining, for university need, the proceeds of the sale of buildings and land purchased with Program Revenue funds or originally gifted to the University; to create non-GPR positions to serve clients promptly, and to allow the Board of Regents to set Undergraduate Tuition and Related Fees. These are requests for authority that most other public universities currently have. They offer opportunities for more efficient operations, and cost savings currently precluded.
- The budget contains a set of statutory changes that were requested in 2003-05 but not granted, including authority to submit unclassified pay plan recommendations directly to the Joint Committee on Employment Relations, changing two appropriations from annual to continuing, and 5 other minor changes that can be found on pages B-16 and B-17.
- The last set of requested changes would include the UW Colleges in the scholarship programs funded by specialty license plate fees and would increase fees for UW System specialty plates along with other specialty plate fees increases; they would eliminate inactive appropriations and remove individual caps on tuition remission categories while maintaining the overall caps and funding limits, allowing the Board to award remissions to the neediest students within the same total authority.
Now, I’ll turn to Assistant Vice President David Miller to walk you through the Capital Budget Request. David…
Capital Budget
View the 2005-07 Capital budget recommendations presentation and accompanying remarks [pdf].
Now, I’ll turn back to President Lyall who will move us through the Performance Measures.
Performance Measures
As in the last biennium, DOA instructions again ask us to specify several “performance measures” for the UW System.
For the current biennium 03-05, we established four measures with specific goals.
- Enrollment. With the goal of meeting the Enrollment Management targets set by the Board.
- Retention. With the goal of reaching 82% by 2005-06.
- Graduation Rate. With the goal of reaching 64% by 2010-11
- Contributions to Wisconsin income. With the goal of increasing income generated for the Wisconsin economy by UW graduates by at least $300 million/year.
On pages E-2 through E-6, you will see that we achieved or exceeded our performance goals in 2002-03 and 2003-04. Despite budget reductions and forced reallocations of more than $150 million, we actually served 32% of Wisconsin high school grads. We enrolled more than our targeted enrollments, improved second-year persistence from 78.8% to 80.3%, improved graduation rates from 60.5% to 62.1%, and added $401 million to the Wisconsin economy through our new graduates.
We will, of course, also continue to issue our public annual Accountability Report that measures our performance on 20 different indicators, reflecting a broader range of university operations.
Capital Budget
What decisions is the Board asked to make?
The budget document before you has been drafted on your instructions to provide a “menu” of decisions for the Board to consider. Page B-2 lays out those choices:
- First, does the Board want any financial aid request to cover just the lowest income quintile of needy students or the lowest two quintiles?
- Second, within section I or II—depending on your decision on the quintiles above—do you wish to request the entire package or to reduce it by removing the library and IT request?
- Third, within A or B—whichever package you have chosen—how do you wish to recommend that the request be funded?
Options 1, 2, and 3 display three funding “splits:’
- –funding the entire package on the traditional GPR/Fee split
- –funding 100% of financial aid with GPR and the remaining items with tuition
- –funding all items except Standard Budget Adjustments with tuition; and funding the Standard Budget Adjustments with the traditional split
Other combinations are also possible, of course. Also, bear in mind that this request will pass through many more steps before the final results for GPR and tuition are known, so in choosing a recommended split you are expressing a preference but not making a final determination of what tuition will be in 0507!