2020 N. Central Avenue, Suite 230 602.229.2500 AZRegents.edu Phoenix, Arizona 85004 602.229.2555 0" PUBLIC Regents EDUCATE - DISCOVER - IMPACT October 1, 2016 The Honorable Doug Ducey Governor of Arizona 1700 West Washington Phoenix, Arizona 85007 Re: FY 2018 Board of Regents Budget Submittal Dear Governor Ducey, On behalf of Arizona?s public universities, write today to convey the FY 2018 budget request and ask your most serious consideration and support to accelerate student success in Arizona. Last year, responding to your input, the Arizona Board of Regents adopted a new budget, tied to our mutual top priority? Arizona resident students. Your FY 2017 budget recommendation and the adopted budget both followed the model and laid the groundwork for our FY 2018 request. The ABOR adopted model recommends that ultimately the state should cover 50 percent of a resident student's cost, recognizing that both the individual and the public benefit from higher levels of education. Currently the state appropriation covers about 34 percent of a resident student?s cost of education. The 50 percent share, which is still far below historical funding support, balances the universities? ability to provide Arizona residents access to quality university education while still requiring students to financially participate in their own education. At current student counts, to reach the 50 percent funding level, full implementation would increase the universities' appropriation by $233.7 million. ABOR recommends the state reach the 50 percent funding goal by the end ofthis current three- year budgeting period and requests $77.9 million per year for the next three years for this purpose. Establishing a specific timeline for this funding goal allows better long-term financial planning for both the universities and our students. To provide students with financial stability, all three of our universities have established multi-year tuition strategies and made long-term tuition commitments. Those pledge programs and guarantees depend on certainty from the state for student funding. Timely implementation of the new resident student funding model REGENTS Chair Greg Patterson, Tempe Bill Ridenour, Paradise Valley Ram Krishna, Yuma - Jay Heller, Paradise Valley - LuAnn Leonard, Polacca Rick Myers, Tucson Larry Penley, Phoenix - Ron Shoopman, Tucson STUDENT REGENTS: Jared Gorshe, NA - Vianney Careaga, UA EX-OFFICIO: Governor Doug Ducey - Superintendent of Public Instruction Diane Douglas ENTERPRISE EXECUTIVE COMMITTEE Eileen I Klein, Board Presidenl - Michael Crow, ASU Presider? - Rita Cheng, NA Presiden! Ann Weaver Han, UA President Arizona Board of Regents AZRegents.edu will become one of the most meaningful ways by which we can assure opportunity in Arizona. Conversely, a longer phase?in period would make the model an aspiration rather than a concrete goal. In addition to the base funding, the FY 2018 budget request includes growth funding. Between fall of 2015 and fall 2016, resident student enrollments grew by 1,568 new students. To reach and maintain the 50 percent funding target, the state appropriation must recognize and provide for these new students. At our current state funding levels, FY 2018 growth is valued at $8.4 million. Combining base funding with growth funding, the total on-going request is $86.3 million. However, the FY 2017 state appropriation included $19 million in one-time funds. Since that appropriation does not continue in FY 2018 the net increase in the universities? appropriation will be $67.3 million. Cost Control To protect the state against the potential of unchecked increases in university costs, ABOR proposes basing the budget request on the FY 2015 cost level of $15,550 per student. Both OSPB and JLBC have reviewed and vetted this cost level. We will continue reviewing and benchmarking our per student costs and have begun a third party review of this cost structure. Once the 50 percent funding level is reached in FY 2020, ABOR will re-evaluate the cost structure and consider if a cost adjustment is appropriate. Capital In addition to student funding, ABOR requests additional one?time monies to address critical capital needs and to begin a discussion with the exchtive and legislative branches on new ways to invest in capital infrastructure to meet growing demand for educational and research space. One-Time, Critical Capital Items The university system continues to face a capital crisis with over $671 million in unmet renewal needs including high priority items such as fire alarms, roofs, and asbestos abatement. To address some of the most critical needs, ABOR requests one-time funding of $30.1 million. The specific projects related to this request are attached to this letter and are part of each university?s capital improvement plan. Long-Term Capital Infrastructure Investment With Arizona?s advancing and maturing economy, the demand for higher education will only increase. As recognized by the Achieve60AZ initiative, an ever increasing percentage of future jobs will require higher education. Anticipating and preparing for that demand as well as the research necessary to support and supplement Arizona?s economy will drive our ability to successfully meet the challenges of a changing economy. Over the last decade, the state has successfully partnered with the university system in two key capital expansion plans. Both Research Infrastructure and the SPEED bonding programs met Arizona Board of Regents AZRegents.cdu critical space needs, provided thousands ofjobs and allowed for the expansion of both university enrollment and research. Unfortunately, both of these programs are largely exhausted. In the coming months, we request the opportunity to dialogue with you, your staff, and other state leaders on the next major university capital investment and the role the state may play in that investment. Decision Packages No decision packages are requested for FY 2018. Conclusion The attached budget request is in line with the goals and priorities of your administration to support education and job creation. We look forward to working with you and your staff as you prepare the FY 2018 Executive budget request. Sincerely, I een I. Klein President Attachment: Deferred Maintenance Project List