2003-2005 Budget Proposal

Guy Gottschalk, Regent President

Today we begin again the process of submitting operating and capital budgets for the next biennium. This time, however, the state’s fiscal outlook presents unprecedented challenges to the fulfillment of our mission. As the ancient Chinese toast would wish us, we do indeed “live in interesting times.”

A review of the Regent Handbook reminds us that we are charged with “…plan(ning) for the future needs of the state for university education… preservation and enhancement of educational quality…sound financial management…(and) prudent stewardship of university assets.” These things we must keep in mind during our deliberations today. We are also mindful that a healthy university is vital to the state’s economic recovery, and that increasing the number of college-educated citizens – and thus their average per capita incomes – will require a renewed commitment to higher education by the state, concomitant with its commitment to K-12 education. The operating budget we will discuss today, with no new program funding is, I believe, a “bare-bones” budget that will provide necessary but minimal funding to enable the fulfillment of the university’s mission and our obligations as regents.

The unusual set of circumstances in the State Capitol today has been likened by some as the political equivalent of “The Perfect Storm.” And we are destined to sail right through the middle of it. But unlike the tragic sailors in the movie of the same name, we cannot allow our ship to turn-turtle and founder. There is simply too much at stake. Breaching the tumultuous waves on the immediate horizon will require much more than mere regent resolutions. It will require a period of unprecedented advocacy – by Chancellors, faculty and staff, students, parents, alumni, and our friends in the executive and legislative branches – if together we are to weather the storm and emerge on the other side in shipshape fashion.

So now, to describe the trim of our sails and the course we intend to chart, I turn the floor over to captain, ‘er President Lyall. Katharine…

Katharine C. Lyall, President, UW System

2003-05 Biennial Budget Request

Good morning. Although the ink is barely dry on our revised budget for this fiscal year, state statutes require that the Regents act on a proposed budget for 2003-05 so that it can be submitted to the Department of Administration and the Legislative Fiscal Bureau by September 15.

This is a difficult challenge – on the one hand, the state is experiencing a fiscal crisis and immediate prospects for a significant increase in GPR funding are dim. On the other hand, the future is impossible to predict. Two years ago, the state was expecting a budget surplus at this time and two years from now, the state’s economic circumstances could be much better.

We can be sure, however, that students will continue to seek higher education and Wisconsin will need our graduates more than ever.

A Downward Trend

I’d like to begin today’s deliberations by reminding us of the path we have traveled to reach this point and update you on our current funding and enrollment status.

We began the current biennium with a commitment – and a partnership with state government – to an economic stimulus package for Wisconsin that would enable our campuses to admit and train 2557 additional full-time students in high-demand fields to meet state workforce needs. The state budget provided about $40 million GPR for this program and a variety of individual campus-local business partnerships aimed at stimulating regional economic development.

We had just begun to take action to hire the faculty and admit the students to meet those commitments when the Governor introduced a budget repair bill and the legislature began deliberation on a scaled back budget for 2002-03. These deliberations, at times, threatened us with up to $108 million in cuts from a GPR general operating budget of about $890 million.

The extraordinary uncertainty this created and its potential effect on our students caused this board to direct a pause in admissions last March until we were assured that cuts would go no deeper than the Governor’s original proposal. The final result of the Budget Repair Bill is a $44 million budget reduction to the UW System. That loss represents state support for more than 6,000 FTE students. Each UW student this fall, as a result of this cut will have about $1,000 less in state-supported educational services available to them than their counterparts around the country.

Many other states, especially in the Midwest, had major cutbacks in state support, too, but they were able to preserve quality with offsetting tuition increases. Our state, both cut our budget and capped our tuition increases at about $150/semester. This prevented us from offsetting any portion of our cut with tuition. In essence, the state left no good way to cushion the impacts on students except through adjusting future enrollments to bring them back into balance with the budget.

With these cuts, the university and our students have contributed more than their fair share to the budget repair process.

The tobacco settlement money made up for most of the shortfall in this year’s state budget -some $830 million. And there actually was about $164 million in new spending. All told, $189 million in direct cuts to state spending were made,of which the UW System accounts for $44.2 million. In other words, the university, which is less than 9% of the state’s budget, accounted for almost one quarter of the state’s spending cuts.

Early in the process, we had committed to managing the Governor’s cuts without reducing enrollment. And, as a practical matter, by the time these cuts were ultimately decided, it would have been far too late to make adjustments. So we will meet our enrollment commitments this fall but these cuts will have a strong impact on our students.

Students will have fewer faculty to teach them, larger classes, fewer course sections to choose from, less access to the majors they want, longer waits for advising and student services, less instructional technology and reduced maintenance of the buildings in which they study and live. We will press ahead with about half of our economic stimulus program; the remainder awaits the ’03-’05 budget outcome.

As we look forward to the next biennium, our operating environment has changed quite markedly.

• The state budget deficit continues and the tobacco money used to plug this year’s budget hole is gone. Further cuts in funding for state agencies appear likely. If, once again, the largest areas of state spending – some 76% of the total — remain protected from any cuts, cuts to the university will be harsher and deeper than by rights, they should be.
• Federal funding for higher education is lagging as the federal budget is under new pressure and the federal Higher Education Act is up for reauthorization next year, raising further uncertainties about the amount of financial aid and other support universities can anticipate.
• The plunge in capital markets has reduced university endowments and, equally important, the future gift giving capacity of alumni and supporters. This means our ability to ameliorate further state cuts with private funding will be greatly reduced. Our students will feel this in lower scholarship and program support. Our faculty will receive less funding for research and private contributions for building projects will be harder to come by.
• That same plunge in capital markets is causing a surge in applications to public universities from individuals who had previously planned to attend private or out-of-state institutions. So our moderate tuition for resident students in Wisconsin is driving up our applications at the very moment when state support is eroding.

Let me show you where we stand after the $44 million cut:

As you can see, over the past seven years since our last large base budget cut,

• We have become a lower priority in the state’s budget slipping from almost 11% to about 9% of the overall state operations. State dollars now provide less than one-third of our total budget. This means we are realizing from other sources, two dollars for every dollar in state support.
• Our enrollments have grown by 8600 FTE while our faculty numbers have declined by 499 FTE. The difference has been partially made up by ad hoc instructional academic staff who now teach almost 40% of student credit hours. But they often are not available to advise students, participate in shared governance or contribute directly to the long-term aspects of our campus communities. Faculty workloads have increased by 15% and we now exceed our benchmark 17:1 student:faculty ratio by a wide margin.
• Finally, as you see our students who used to have slightly more than the average state investment in their education now have $1000 less GPR available to them than their counterparts on average across the nation.

How have we compared to other Midwest public universities? This map gives us a snapshot of our situation before these latest cuts were imposed on us and on others.

A Future in Doubt

So… we have arrived at Yogi Berra’s famous “fork in the road!”

There is no doubt in my mind that the next few years will determine the future course of the University of Wisconsin System. And there is no doubt in my mind that if state funding continues on this trajectory coupled with constraints on our ability to manage the organization, we will not be able to maintain the quality of our campuses or sustain this statewide network of institutions that represents such an invaluable asset to this state and our campus communities. And that means we will be hard pressed to maintain our place as one of the most accessible university systems in the nation.

In the years ahead, our highest priority must continue to be the students served on our campuses, at a distance and in continuing education programs. We must ensure they have the tools they need to succeed. We must protect the quality of their education. Our graduates are our most important and sustained contribution to Wisconsin and they represent our greatest economic impact. Almost a million people in this state – one in five — have been educated at one of our institutions. That is a phenomenal “reach” and service to a state with just slightly more than five million people.

What will it take to meet this commitment to students?

First, I feel strongly that we have come to the end of our capacity to maintain quality with growing enrollments and declining base resources. Over the past decade, we have absorbed almost $100 million in base cuts while continuing to admit more students in response to enrollment pressures.

We have now “hit the wall.” We cannot continue this trend.

Any future base budget reductions must either be offset by tuition increases or by enrollment reductions.

I often hear, “Wouldn’t more flexibility make up for additional cuts?”

The answer is: It depends on what flexibilities you’re talking about. Technical changes in state processes increase our efficiency but do not come close to offsetting the magnitude of cuts we have experienced in recent years.

On the other hand, flexibilities that enable the board to raise more revenue or to benefit from the earnings on revenues we currently raise would help! One example would be the ability to keep the interest on the earnings of our tuition dollars – these presently flow into state general funds. Another example would be giving back to the Board of Regents the authority to set resident tuition without statutory caps.

Another important pressure on the university has been the sharp increase in costs shifted to the university by the state and other entities. To meet national standards and to stay competitive in the national market for faculty and staff, we are having to cover costs through reallocation that were previously provided from GPR. A few examples.

• The state funded only 1% of our pay plan this year, forcing us to reallocate $29 million to keep our faculty and staff pay competitive. This is funding that in prior years would have come from the GPR.
• We also have reallocated $2 million to pay for length-of-service payments, market factor adjustments and other commitments agreed to by the Department of Employment Relations for our classified staff but not funded by the state.
• Our unionized classified staff have had no pay plan adjustments in this biennium and we anticipate that when an agreement is reached, we will be required to fund some of the catch-up pay from reallocation, as well.
• As cuts to other agencies grow deeper, some of those cuts are being passed along to the university. We are subject to a growing number of chargebacks and we are seeing some agencies discontinue support that we have had for decades. For example, the Division of Vocational Rehabilitation has decided to eliminate funding for services for our disabled students. That will cost the university about $162,000 this year but next year the costs will jump to $812,000.

Another sort of erosion has been the lack of state support for basic needs such as instructional technology. Over the last few years, state has invested more than $300 million in instructional technology for K-12 education, but almost no state operating funds have been available to meet our campus’ IT needs. The same is true for inflation on other vital services including library funding, supplies and equipment and building maintenance.

As you can see, just these large items total almost $60 million per year in required reallocations on top of the $44 million cut. Those reallocations move dollars around but do nothing to narrow that $1000 gap in state support per student.

This is why we cannot simply continue to reallocate more to meet further cuts. Instead, we must be prepared to scale our enrollments and programs to meet the level of our resources. Like the state, we must live within our means even if it means a smaller university system.

What about becoming more efficient? We must and we will continue our commitment to efficiency but there are limits there, too. We lead the nation with the lowest administrative costs (5.8%) of any public university system. As a consequence, we are able to educate about 20,000 more students than our peers for the same money.

But we are perilously close to the situation of the farmer who decided to make his cow more efficient by cutting its rations in half every day. The cow became leaner and much more efficient until it also stopped giving milk and it died. The moral?

We have to address how much we can reasonably accomplish with the state funding we have. We understand that the state must manage a very difficult financial situation and that we are part of that. We must be realistic about the future and plan and manage accordingly. We must consider how many students a slimmer university can accommodate and we must communicate our enrollment policies clearly and publicly so there are no surprises. Our legislators also must be realistic and cannot continue to expect rising enrollments without matching state resources.

Third, we must continue, in the tradition of the Wisconsin Idea, to offer solutions to the state’s most pressing problems. We must help provide the intellectual firepower to help solve state problems, we must be the forum for debate on alternative policies and approaches, and we must press forward our research and public service work. This has been a tradition that not only has served the state well, but has also served to distinguish the University of Wisconsin from all other public universities across the nation.

In this spirit, we are offering our third statewide Economic Summit in October. And in this spirit, the budget proposal you have before you this morning offers programs to address pressing state needs in nursing, teacher training and economic development. It is very important to note that these programs are being developed as collaborations – with the Wisconsin Technical College System, with DPI and with local and regional businesses and communities.

In accordance with DOA instructions, these proposals will not be formally submitted to the Governor at this time, but they are an integral part of our budget package and match many of the themes Governor McCallum has articulated for the coming biennium.

I would like now to ask Senior Vice President, Cora Marrett, to briefly describe these “service” initiatives.

Cora Marrett, Senior Vice President, UW System

Meeting State Needs

Higher education in Wisconsin “has been a doorway to advancement,” “the key to improved professional services,” the foundation of economic prosperity.” It continues to be a force for advancement; witness the range of economic development activities now underway throughout the University of Wisconsin System. The University of Wisconsin System can accelerate its contributions to the citizenry of this state, through investments in areas of high priority. We have listened to the citizens and we’ve heard their concerns about the economy, health care, teacher education and the quality overall of the workforce. We can address these concerns – with additional funding from the state. Let me review briefly these areas of potential investments by and for the people of Wisconsin.

Economic development. Last summer at this time, state legislators and the Governor approved an ambitious program of initiatives that our institutions had designed to help the economy of the state. Unfortunately, the state’s budget problems necessitated the scaling back of the economic stimulus program – by about $17 million dollars. We conclude that the reinstatement of these funds would provide clear returns to the economy. We base this conclusion in no small part on the projects already launched. The promise and achievements of those projects have spawned an equally auspicious set of new proposals centered on regional economic development. These proposals have attracted partners — from businesses, technical colleges, local governments. Funding for the projects matters greatly, to more than the institutions within the University of Wisconsin System.

Health care and teacher preparation. Few workforce needs are more acute than those in health care. Wisconsin faces a noticeable shortage in nursing that retirement patterns threaten to exacerbate. Almost half of the state nursing force will reach retirement age in the next 15 years while jobs for nurses will grow by 25 percent.

We propose to collaborate with the Wisconsin Technical College System to address the shortage of nurses. Both the Technical College System and the University of Wisconsin System have waiting lists for nursing degree programs, a sign of the need for expansion. But a growth in numbers of students requires an increase in nursing instructors. With funding from the state and in concert with the Technical College System, we can in fact prepare more nurses and nurse educators.

Shortages exist, too, in selected areas within the teaching profession. The areas include special education, mathematics, science, and reading. If we received additional resources we could augment the work force in these fields. In addition, our institutions could meet the requirements of new state teacher education rules, requirements that make higher education pivotal in the professional development of new teachers. The University of Wisconsin System occupies a critical place in teacher preparation, having granted degrees to about 60 percent of the teachers in this state. Our institutions can maintain their leadership in teacher education if state resources are made available to meet the pressing demands.

Enriching the student experience. The University of Wisconsin System contributes to the state, primarily through the human capital, through the people it develops. That development hinges on the quality of the educational environment students encounter. Two important features of that environment are: the libraries, and instructional technology.

Our libraries are central to our institutions and to the communities of the state. For our students, faculty, staff, the libraries are laboratories of the mind. And like any laboratory, they must be equipped with the latest tools if new discoveries are to be made. For businesses, the libraries of the University of Wisconsin System are repositories of special data. For the schoolchildren in the state – as well as their teachers, parents, and other family members – our libraries are places of exploration. Sadly, our state budget does not accommodate inflationary increases for the libraries, even though the costs of journal subscriptions and books climb every year.

In the recent ranking of research libraries, the University of Wisconsin-Madison stood as the 14th largest in the nation. More troubling is this statistic: Madison ranked 29th in volumes added. An institution cannot remain near the top when its collections continue to fall below those held elsewhere. Nor can our libraries offer the first-rate services that our students and citizens merit, when the costs of materials greatly outstrip budgets.

Technology can help. Our institutions share their collections electronically. Unfortunately the funding for technology has lagged the need. We had hoped to get $6.75 million in the last biennial budget from the Wisconsin Advanced Telecommunication Foundation. Those dollars went instead to the state general fund. The consequence? We have had no new state funding for technology since July of 2000.

This has hampered our efforts to expand access to courses offered on-line and through the world wide web. We cannot extend further the services that Learning Innovations can provide. Our campuses reallocate millions of dollars to meet technology needs but we cannot accommodate all our technology needs in this way.

The University of Wisconsin System has made a commitment to enhance retention and graduation rates. With more state funding, our institutions could undertake several activities known to affect retention and graduation. We could strengthen advising and counseling services, expand learning communities, augment the network of first-year seminars, and increase research and internship opportunities for undergraduates.

Our students must be prepared for the world beyond our own borders. The tragedy of September 11 underscored the importance of global perspectives and of facility in more than one language. Support for our Collaborative Language Program can provide students the skills they will need to enlarge their international experiences.

Summary We treasure the role University of Wisconsin System institutions have played in enlightening individuals, cultivating ideas and landscapes, and – above all, enriching our state. The future of our success on these fronts depends heavily on the resources we acquire. Without sustained funding for libraries, technology and undergraduate student services, and for initiatives on state priorities, we cannot fulfill adequately our obligations to the people of Wisconsin.

Now, I turn to Acting Associate Vice President Freda Harris who will give greater detail on the operating budget we propose.

Freda Harris, Acting Associate Vice President

2003-05 Biennial Budget Request

Good morning. I’d like to take a few minutes to discuss the 2003-05 Operating Budget Request. The Operating Budget consists of five elements: Costs-to-Continue, New Initiatives, Program Revenue, Statutory Language, and Performance Indicators. All five of these elements are included in the budget request before you, although in a rather unconventional format.

First, let’s talk about the obvious, there are no dollars in the operating budget portion of this request. You are being asked to approve an operating budget increase that falls below a maximum amount, rather than approving a budget that asks for a specified amount of money. I’m sure you’re wondering why that is the case.

Wisconsin statutes require agencies under the direction and supervision of a board to meet no later than August 31 of each even-numbered year to consider and approve a proposed biennial budget and to submit these requests to the Department of Administration and the Legislative Fiscal Bureau by September 15 of even numbered years.

In a normal year, this would not be problematic. This has been anything but a normal year. The state budget reform process delayed the normal timeline for developing base level funding amounts for agencies and DOA’s ability to issue instructions until the beginning of this month. This budget is still very much a work in progress but the statutory timeline remains. The UW System biennial budget request must still be approved by August 31 and submitted to DOA by September 15.

At this point, the information needed to determine which costs would be accepted by the Department of Administration as standard budget adjustments and the base level upon which to calculate certain of those costs is not yet available. This pertains to Program Revenue funding levels as well. Section II of the budget document includes a list of the items that are normally included in either the biennial base for the UW System or requested as increases to standard budget adjustments and program revenue. Resolution II.5.a requests that you approve standard budget adjustments up to an average annual increase of no more than $20 million per year, funded through a combination of GPR and Fees.

The items that are included as Standard Budget Adjustments are controlled by the Department of Administration. They include funding for pay plan increases that were authorized by the Joint Committee on Employment Relations (JCOER) for the 01-03 biennium and adjustments for known fringe benefit costs.

For Program Revenue increases, we seek your approval of up to a $150 million average annual increase. Let me remind you that Program Revenue funds are not taxpayer dollars. This category includes Gift and Trust Funds, segregated funding, federal grants and contracts, auxiliary operations, and adjustments to tuition and fee appropriations. Most of the funding requested in Section II, pages B-4 through B-5 is for continuing appropriations, for which the UW System has the authority to spend funding as it is received. However, the System is required to provide its best estimate of the amount of funds that it expects to budget and expend in any fiscal year.

You might find it interesting to note that in the biennial budget request, the maximum $20 million average annual increase in Standard Adjustments, funded from GPR and Fees, would be leveraged by up to a $150 million average annual increase in non-GPR funds. That’s a 7.5 to 1 ratio. This funding provides a much needed boost to the Wisconsin Economy.

A report will be provided to the Board in September of the actual amounts designated by DOA for both Standard Budget Adjustments and Program Revenue.

There are a few items that are not normally included as Standard Budget Adjustments or Program Revenue on this list. One item increases funding for Minority and Disadvantaged Financial Aid Programs. As part of the Budget Reform Bill, a link was established between UW System tuition increases and the Lawton Undergraduate Minority Retention Grant. This initiative requests funding to increase the Lawton appropriation in 2003-05 based on tuition increases approved this year. This item also seeks increased funding for the Advanced Opportunity Program.

Maintaining Services for Students with Disabilities is another non-standard item. This request would provide funding to maintain services that were previously paid for by the Division of Vocational Rehabilitation. The funding for those services is being phased out and additional resources are needed to support those services for our students with disabilities.

Smith-Lever Pay plan requests would allow UW Extension to fully support pay plan increases of employees who are split funded by the state, the county and the federal government when federal funding is insufficient to cover the federal share of pay plan for these employees. Funding for this request is allowed by statute.

Finally, increased funding is being requested to support the operation of the UW System Acquaculture Facility after construction is completed. Funding for the Aquaculture Facility was included in the 1999-01 biennial budget but only a portion of the operating costs were built into the 01-03 operating budget. This request seeks funding to fully staff and support the operation of the facility. Tribal Gaming funds would be the source of the operating revenue.

The 03-05 Operating Budget Request does not include a formal request for funding for new programming, commonly known as New Initiatives. It does, however, include a request for the Board to approve a list of infrastructure and quality initiatives for UW System staff to continue to develop for consideration by the Governor and the Department of Administration. These initiatives were described by Senior Vice President Cora Marrett and can be found in Section IV. Resolution II.5.a would limit the dollar amount of initiatives that are being developed to no more than an average annual increase of $40 million. President Lyall will report to the Board in November on the final form of these initiatives and the amount recommended. These initiatives would be designed to be compatible with the Governor’s initiatives for Building Wisconsin.

The Biennial Budget Request includes requests to change the Wisconsin statutes to allow the UW System to use resources more efficiently, streamline procedures, eliminate costly duplication, change policy and make technical corrections. Pages B6-10 contain the detail regarding these requests. There are six changes that would increase our management efficiency, four changes that would streamline daily operations, and six changes that would eliminate the duplication of reporting efforts, delete obsolete provision and clarify intent and one request that would change policy by removing a statutory cap on Medical school class size.

President Lyall…

Performance Measures

Thank you, Freda.

As they did for the last biennium, DOA instructions again call for us to specify several “performance measures” for the UW System.

For the current biennium 01-03, we established four measures with specific goals.

• Access. With the goal of serving 32% of Wisconsin high school graduates
• 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 available to the Wisconsin economy 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 2000-01 and 2001-02. Despite budget reductions and forced reallocations of more than $50 million, we actually served 32.6% of Wisconsin high school grads. We enrolled 2400 more than our targeted enrollments, improved second-year persistence from 78.6% to 78.8%, improved graduation rates from 59.3% to 60.5%, and added $456 million to the Wisconsin economy through our new graduates.

In light of our reduced base budget and large anticipated required reallocations for 2003-05, we are proposing one change for the next biennium in the first measure from “access for 32% of Wisconsin high school graduates” to “enrollment at the Board-established enrollment targets.”

This change would recognize the Board’s prerogative to adjust enrollments as base resources change and incorporates the Board’s commitment to maintaining educational quality. Our EM-21 enrollment targets, and actual enrollments, appear on page E-3. As you’ll note, we ended this last year 2400 FTE over target and will need to hold at this level through 2005 to digest these extra students and meet our EM21 goals.

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

I’d now like to turn to a discussion on our recommendations for the 2003-05 Capital Budget. The Board is fully aware that facilities have a wide-reaching impact on the quality of teaching, learning and research, and the quality of student life on campus The majority of our facilities, however, are more than 30 years old and must be adapted to provide the type of spaces needed for the 21st century. Steps must be taken to extend the useful life of our 1600 buildings, and to protect this $6 billion state investment.

In developing a capital budget for the next biennium, we are following the Board’s directive that we concentrate on the renovation and renewal of existing facilities.

This chart demonstrates that in the 1980’s, capital funding for major projects went primarily toward new facilities, while in the 1990’s, it has gone toward renewal. This request is in keeping with that more recent trend.

This shows that only 10% of the GPR funds requested for major projects would be used to build additional space. As a result of the strong focus on existing space, these projects will have minimal impact on the University System’s future operating budget — a net increase of about $190,000/year for custodial, preventive maintenance and utilities.

The projects recommended for construction are the top institutional priorities that flow from the individual campus’ long-range facilities plans. It is significant to note that the projects currently identified in the 6-year plans total approximately $1.5 billion in GPR bonding. These programmatic needs, like our maintenance needs, will not go away. But in light of anticipated fiscal constraints, both for debt service and future operations, only about 10% of those requests are recommended for construction during 2003-05.

Projects have been prioritized using criteria, developed by the Board of Regents, that focus on making the best possible use of existing space through renovation and maintenance, their academic significance, and their benefit to students. Students are becoming increasingly involved in our planning for all types of facilities. And you may have already received letters of support from student governments on a couple of these projects.

Assistant Vice President Nancy Ives will take you through the capital budget proposal in more detail.

Nancy Ives, Assistant Vice President, UW System

2003-05 Biennial Budget Request
Capital Budget

Thank you, President Lyall. By statute, each project for remodeling or new space costing over $500,000 must be specifically enumerated in the budget bill, regardless of funding source. Most of the funding for the building program comes from bonding, supported by either GPR for academic facilities, or by program revenues for facilities that generate user fees. A list of all the major projects we are recommending begins on page C-11 of your materials.

Approximately $346 million is recommended for construction of major projects, including $143 million GPR and $203 million (58%) Program Revenue and Gifts/Grants. This is approximately $80 million less than the amount of GPR bonding requested for major projects in 2001-03. Also, it is a much higher percentage of non-GPR funding, which typically is about one-third of our request.

There are three categories of construction projects.

• First, six carryover projects advanced by the Regents during 2001-03 or earlier are ready for construction during 2003-05, totaling approximately $71.3 million ($50.9 M GPR and $20.4 M [30%] Gifts, Grants and Program Revenue). These projects serve a variety of academic programs including the sciences, fine arts, library, and student services. Four of the requests are for final phases/full funding of projects begun in previous biennia, and the funds are needed to meet the initial intent of overall project goals.
• Second, fourteen new major projects funded in whole or in part by GPR are recommended for design and construction during 2003-05. These projects total approximately $124 million including 25% from Gifts/Grant and Program Revenues. Each project is supported by detailed long-range facilities plans as well as institutional academic plans. Construction during 2003-05 will provide facilities needed to improve the learning environment and make the most effective use of existing space. This category includes $15 million for continuation of the systemwide program to improve the learning environment in our classrooms across the state. Funds are also sought to equip construction projects to be undertaken by the municipalities serving seven of the UW Colleges , and for equipment for digital production for WHA-TV. Significant funding is needed to improve utilities at seven institutions. Less than $2 million GPR in this category will be used for small amounts of additional space in two projects, and the GPR will be offset by more than $21 million in program revenues.

In the third category, eighteen non-GPR major projects totaling approximately $151 million will be funded entirely by Gifts, Grants and Program Revenue.

These projects address facilities needs for self-supporting activities such as student unions, food service, student housing, parking, recreation, and various other programs. Where appropriate, approval by student government will be secured prior to project implementation.

GPR Planning and Design Recommendations

We are also recommending that eight projects be planned and designed during 2003-05, and considered for construction in the next biennium.

Whereas construction is funded through bonding, design is funded through the State Building Trust Fund, which is a revolving cash account administered by the State Building Commission. All of the projects recommended for design during 2003-05 were also requested by the Board of Regents in 2001-03, but were not approved by the State Building Commission. They remain very high priority for the affected institutions.

As can be determined from the list, most of these projects are relatively costly, and will involve the construction of new space that will likely carry operating budget impacts. Our comprehensive facilities planning process has determined that many programmatic and facility issues need to be resolved through the construction of additional and/or replacement space. In fact, each of our institutions will require new space over the next several years. This is the product of the evolution of teaching and learning, as well as the age and condition of existing facilities. The planning and design process, which typically takes at least a full biennium, is important for several reasons: (first) it will help determine whether it is possible to phase the work and thus spread the costs over more than one biennium; (second) it will help determine ongoing maintenance and operating costs; and (third) the existence of preliminary drawings will facilitate fundraising to offset GPR costs in some cases.

The final piece of our capital request is for the All Agency funds administered by the State Building Commission. These funds are used for repair and renovation of all state-owned facilities and utilities, and for issues related to health, safety and the environment. In 2000, the Board of Regents adopted a long-range plan to address our deferred and cyclical maintenance needs.

This concept was also endorsed by the Department of Administration and Building Commission. In fact, the legislature put an additional $30 million in place effective July 2003 as a down payment on our 2003-05 needs.

The GPR major projects we are recommending include $54 million in maintenance. An additional $170 million will be needed to stay even with cyclical needs during the biennium. The funding received will be applied to maintenance and renovation needs based on relative priority, logical sequence in relation to major projects, and overall project impact. Projects will be developed to address the categories you see here, as well as minor programmatic remodeling.

We are also asking that the Building Commission re-establish an all agency account for the land acquisition. Several institutions have identified important parcels of land within campus boundaries and either surrounded by or contiguous to University property. If funding is not available when these parcels are offered for sale, opportunities will be lost to address campus needs. President Lyall, that concludes my presentation.

President Lyall

Thank you, Nancy.

You may be interested that this building proposal would have a direct impact on the economy by supporting more than 4,400 jobs in the construction industry and returning $16 million to the state through income taxes. Even in tough fiscal times, our facilities are a good investment!
We have given you a lot to absorb in this budget presentation. Let me take a moment to recap the request before you.

First, we are asking you to approve and we will forward to DOA at this time, a 2003-05 budget proposal that level funds the university system operating budget for the next two years.

In addition, we are asking you to approve the continued development of several budget proposals that address critical needs in our core infrastructure, economic development, and nursing and teacher shortages. These we would bring back to the board for review later this fall.

We are asking you to approve the 2003-05 capital budget. And, finally, we are asking your approval of a series of proposed statutory language changes and four performance measures for the UW System in the coming biennium.

I want to stress once more that we are nearing the end of our capacity to “make do” and maintain our services with fewer base resources. This is a watershed moment for the state of Wisconsin. In the months ahead, our leaders will, in their words and actions, set forth the priorities that will govern this state’s future – it is vitally important that public higher education be among them.