Board of Regents Fiscal Year 2014 Budget Hearing Joint - - PDF document

• Overview Presentation - FY14 - BOR

Friday, January 25, 2013 1:26 PM

South Dakota Board of Regents

Fiscal Year 2014 Budget Hearing Joint Appropriations Committee

January 28·29, 2013

Public Higher Education in South Dakota

South Dakota Board of Regents - 2013

• Kathryn Johnson

Hill City, President

• Dean Krogman

Brookings, Vice President

• Randy Schaefer

Madison, Secretary

• Terry Baloun, Seneca
• James Hansen, Pierre
• Harvey Jewett, Aberdeen
• Randy Morris, Spearfish
• Carole Pagones, Sioux Falls
• Patrick Weber, Montrose

Jack Warner, E

xecut ive Director and CE O jack.warner@sdbor.edu (605) 773-3455

What is our challenge?

• Delivering a Career-Ready and Job-Ready

Workforce

• Strengthening Economic Development

through Research

38o/o of Educational Costs and

21 ° /o

• f

Total Public Higher Education Budget

Supported by State Tax Dollars

Source: BOR system office

Board of Regents All Funds by Funds Source Fiscal Year 2013

Other

$805,252,501

Room & Board

$35,773,282\

5% $145,019,913_ 18% Federal Restricted $210,376,451 26%

A"ppr

$10,793,774 1%

General Funds

$167,851,167 21%

School & Public Lands

$1,918,043 0.2%

Workforce Development

Unique demographic challenges for South Dakota

100,000 80,000 60,000 40,000 20,000

• 20,000
• 40,000
• 60,000

Projected Change in SD Population by Age Group:

2000-2030

80.0%

7 1%

60.0% 40.0% 20.0%

• 36,226

0.0%

• 20.0%
• 17.6%
• 40.0%

0-18 18-24 25-44 45-64 65+

Source: U.S. Census Bureau, State Interim Population Projections, 2005

Number Percent

As a State, We are Making Progress to Enroll More Students

A record number of students are being served by SD public universities, at the same time that K-12 enrollments have declined, then leveled.

Public University Enrollment

40,000 ....-------------- 35,000 +-----------

• ,::::;;"==-

30,000 t~

;;:::::::====~~===

25,000 20.000 +-------------- 15,000 10.000 +-------------- 5,000 +--------------

Sources: BOR Fact Book FY 2013; South Dakota Deportment of Education

134,000 132,000 130,000 128,000 126,000

K-12 Enrollment

124,000 +------------~~ 122,000 -l------____::l

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Postsecondary Placement of High School Graduates in South Dakota

Technical Institutes 14% Private/For-Profit Institutions 9%

• Regental System

Technical Institutes Private/ For-Profit Institutions

• Out-of-State Institutions

Did Not Attend

Source: U.S. Department of Education, Digest of Education Statistics

System Productivity

• How are we doing?

Steady growth in student enrollment, completions

Graduate and Enrollment Growth Since FYOS

FYOS FY06 FY07 FY08 FY09 FY10 FY11 FY12 % Growth

23,534 24,089 24,144 24,512 24,926 25,468 26,625 26,720 14% 387 398 451 401 423 419 432 Graduates - Bachelor 3,235 3,329 3,463 3,604 3,794 3,656 3,824 Graduates - Total 3,622 3,727 3,914 4,005 4,217 4,075 4,256

Over this time period, the public university system averaged 111 new graduates per year.

Source: Regents' Information Systems 413

3,986 4,399 7% 23% 21%

Workforce Development

Filling the workforce pipeline: 2011-2012 Degrees from SD Public Universities

1,600 1,400 -'---,-----,___ ------------------------ 1,200 1,000 800 600 400 200 0 -~....,__-.--~....,__-.--~....,__--,.-~....,__--,.-~....,__--,.-~....,__-,-~~-,-~~-,-~~_,

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Default Rates: South Dakota Students Pay Back Their Debts

Average Loan Default Rates for Institutions in the United States

South Dakota Nation SD State Rank 6.4% 8.2% 15 5.2% 4.5% 32 12.6% 13.2% 31 4.8% 7.2% 7

South Dakota Postsecondary Institution Loan Default Rates 2006-2010

Private 1.9% 4.0% 3.3% 6.2% 6.1% 4.3% Proprietary 7.2% 8.0% 9.4% 13.5% 14.9% 10.6% Technical 4.3% 3.9% 4.2% 6.9%

10.8% 6.0%

Regental 1.8% 2.2% 2.6% 4.0% 5.2% 3.2% All Types 3.0% 3.8% 4.3% 6.5% 8.5% 5.2%

Source: U.S. Department

• f

Education

Workforce Development

• Attracting and retaining a future workforce

2012 Freshmen Migration Study

South Dakota is a net importer of college fresh

• 2,288 freshmen imported from other states
• 1,458 freshmen lost to other states
• Net gain to South Dakota =

+830 students

• Import-to-export ratio has improved steadily since 2000

Gain to SD improved by nearly 46% between 2008 and 2010

• Placement Study of Public University Graduates

73% of South Dakota resident students remain in state after college to work or pursue additional education 32% of out-of-state students also stay in the state following graduation

Sources: BOR Placement Study, 2012; BOR Student Migration Analysis, 2012

Benefits of Higher Education

Benefits to t he individual

Unemployment and Earnings by Educational Attainment, 2011 (US)

2.5%- Doctoral Degree $80,927

2.4%-

Professional Degree $86,876

3.6%-

M aster's Degree $65,900

4.9%-

Bachelor's Degree $54,943 6.8% Associate's Degree $40,072 8.7% Some College, No Degree $37,516 9.4% High School Diploma $33,289 14.1%

< High School Diploma $23,532 ,--- -~- 16% 12%

8% 4% 0%

so

$25,000 $50,000 $75,000 $100,000

• Unemployment Rates, 2011
• Median Annual Earnings, 2011

Source: U.S. Bureau of Lobar Statistics, Current Population Survey

Wage Premiums:

The financial value added of higher education

South Dakota Median Income by Field of Study and Degree Level

$90,000 $80,000 570,000 $60.000 S!i0,000 $40,000 $30,000 $20,000 $10,000

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Where is the thin ice?

• Access and Affordability

Access and Affordability

• State investment in postsecondary education

Moderates tuition and fees Assists students with scholarship aid Leads to greater access to benefits for students with limited means

Undergraduate Resident- FY13 Tuition & Fees as a Part of Total Cost

18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000

a

Total C

• st

a Tuition

MT ND WY

)11::

SD l-\ ~ Source: BOR Fact Books

$30,000 $25,000 $20,000 $15,000 $10,000 $5,000

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Average Student Loan Debt South Dakota System

2011 National Average: $26,600

$24,986 $24 143 $23,052 ' $20.300 $20,775 $17,472 $15,022 1998·99 2001-02 2004-05 2007-08 2009·10 2010-11 2011·12

Limited State Support Puts Pressure

• n Tuition to Fill Funding Gaps

The connection between state funding and cost to students

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000

Appropriations Per FfE FY I 1 Public Postsecondary Education

4,631 4,818 4,884 5,221 7,345 6,290 6,492 13,945 MT SO IA MN US NO NE WY 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000

Source: SHEEO State Higher E ducation Finance (SHEF) R eport, 2011

Net Tuition Revenue Per FfE

FYI 1 Public Po stsecondary Education

4,774 5,175 3,784 6,379 7 436 6,608 6'971 1,794

I

WY NE US MT NO SO IA MN

(SHEF doto odju5ted for enrollment mix ond cost of living, so numbers will differ from BOR F

act Book}

Today's Reality

Declining state support drives up tuition and fees

... and limits

access for lower-income students

70% 65% 60%

55%

50% 45% 40% 35% 30%

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43%

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FYOl FY02 FY03 FY04 FY05 FY06 FY07 FYOS FY09 FYl O FYl l FYl 2

State support of South Dakota public higher education has dropped from 57% to 38% in 11 years.

source: BOR Foct Book FY 2013

• State Support %
• Student Support %

Funding Distribution for Higher Education Salaries

State currently funds only 36.2% of all higher education salaries

Fund Sources for Salary Policy

Tuition/ Fees 37%

Source: BOR system office

Room/ Board

2% her f 10%

General Federal Tuition/ Fees

• Other

Room/Board

Salary Package Drives Up Tuition and Fee Increases to Students

Tuition and fees must be increased to maintain base operation

Salary Increase of 3% and health insurance increase of 24.3% = $1,542 cost increase per benefit eligible employee Purchasing power - inflation of 2.95%

Preliminary Estimates Salary Policy and Health Insurance Tuition Fees Subtotal 2.95% Inflation on OE Tuition Fees General Funds Subtotal Total Cost to Students Source: BOR system office Cost $3,433,164 $1,691,312 $5,124,476 $277,226 $867,128 $491,697 $1,636,051 $6,760,527 Tuition & Fee Increase 3.6% 5.0%

Meeting our Goal to Produce More Graduates: BOR Policy Changes

• Reduced credit hour requirements for most

bachelor and associate degrees

From 128 to 120 for bachelor degrees From 64 to 60 for associate degrees Student savings to degree of $2,000

• Redesign of remedial coursework

Engagement with Complete College America Expansion of co-requisite developmental courses Bridge programs offered prior to first semester of attendance

Other BOR Initiatives to Graduate More Students, Increase Affordability

• New degree for 'ready adults'
• 166 Students currently pursuing major
• 83 Graduates in FY12
• Beefed-up articulation agreements with technical institutes

260 Transfer Students in Fall 2012

• Common General Education curriculum
• College-readiness initiatives with DOE
• Target students during senior year of high school
• Provide assessment and intervention

Potential $867 savings on each remedial course

• UC-Foundations program in Sioux Falls

A

Track Record of System Efficiencies

Recent examples:

• Established and implemented process to annually review

program productivity

Terminated 58 academic programs and 140 specializations within academic majors due to a pattern of low enrollments

Implemented '7-10 rule' to ensure that lower-enrolled courses have enough critical mass to be offered successfully Created an integrated enterprise system and common business practices, with no new state resources

• Centralized IT and student enrollment services through the

Regents' Information Systems and Enrollment Services Center, avoiding unnecessary duplication on each campus

• Created 9 new Ph.D. programs to grow research in SD through

$5 million internal reallocation of funds

What can the Legislature do?

• Consider a Funding Formula

for Public Universities

BOR History:

Formula Budget Requests

• 1970s to late1990s: enrollment-driven formula

Enrollment measured by state-support credit hours Formula estimated resources needed to teach these credit hours e.g., level of instruction, discipline, class size, faculty workload The formula generated budget requests for instructional resources only BOR submitted a separate budget request to cover non-instructional needs Policymaker concerns with formula: Too complex Difficult to explain to constituents

Failed to reward efforts to address state priorities

BOR History:

Targeted Budget Requests

Late 1990s to present: Base budget appropriations with

targeted requests

BOR consulted with policymakers to frame the new approach: State would maintain the value of the FY98 base instructional budget

BOR would provide for a small performance funding allocation Each year, BOR would request resources targeted to specific policy goals

• Examples:
• Technology Fellows program
• New PhD, DSc programs
• Program expansions (e.g., nursing, MDs, PAs)

BO R

History: Funding Method Outcomes

All growth in enrollments since FY98 have been covered by tuition

• There is no state tax support for distance education
• Salaries would lag region by 36.3% if not for student tuition

increases used to fund salary competitiveness program

• Virtually all facility costs are paid for with student dollars
• SD lags national average appropriations per student by $1,640

per FTE

Tuition is higher than national average by $1,603

• State currently funds only 36.2% of all higher education

salaries

LRC Summer Study:

Recommended Legislation

Senate Bill 5 creates a Council on Higher Education Policy Goals, Performance, and Accountability

• Calls for a funding model that includes, subject to state

revenue availability:

Performance

Growth in graduates Growth in research

Enrollment Growth

Total credits Earned credits

Inflation

The Research Agenda

• Improving South Dakota's

Economy Through Research

Research is Economic Development

$160,000,000 $120,000,000 $80,000,000 $40,000,000

so

Research Awards and Expenditures: FYOO-FY12

$33,800,000 $33,187,272 $111,666,015 $98,968,151

• Awards
• Expenditures

Source: BOR system office

Research Creates Jobs in SD

Research-related job creation* Faculty research efforts (FTE) - 720 M.S. research assistants - 269 Ph.D. research assistants - 219 Institutional-level grant activity

$160.0 $140.0 $120.0 $100.0

$80.0 $60.0

$40.0 $20.0 $0.0 BHSU

2.3 $1.4

DSU NSU SDSM&T

/in mi/1/ons of dollars}

• Submitted

Awarded

* National Science Foundation

SDSU USO

Source: BOR system office

Commercializing Research Efforts

• Research Innovations - FY07-FY11

Invention disclosures - 200 Patent and IP protection signed - 78 Patents/licenses issued - 44

• R&D Leading to Economic Development in South Dakota

Nano-Cold Spray Applications - SDSM& T Aquaculture Feedstock - SDSU Germanium Crystal Growth - USO Enhanced Ballistic Panels - SDSM& T Drop-in BioFuels for U.S. Green Fleet Initiative - SDSU Photo-Active Nanoscale Systems - USO and SDSM& T

Source: BOR system office

Return on State Investments

South Dakota Experimental Program to Stimulate Competitive Research (EPSCoR) programs

$600,000 state match

SD receives EPSCoR funding from 4-5 federal agencies

Historical 25:1 return on state investment Renewed in FYlS -Stronger emphasis on economic development and state-level industry partnerships

• Governor Research Centers

Eleven centers established since 2004 $25 million state investment to date $179 million return on state investment $335 million total economic impact New centers emphasize workforce development

Source: BOR system office; Governor's Office of Economic Developmenc

Research Considerations

Sanford Underground Research Facility at Homestake

New Ph.D. degree in physics recommended by Gov. Daugaard -

$1,878,466 requested

South Dakota one of only two states without a doctoral-level academic program in physics

• Agricultural Experiment Station

Focused research in three areas: animal health and nutrition, biofuels, and grasslands profitability - $998,592 requested

• More researchers needed to conduct more research

Campuses lack 'bench strength' in research ranks, maxing out on ability to initiate additional research projects

• Emphasis on technology transfer and intellectual property

development

Overview of FYl 4 Budget Request

FYl 4: Salaries Top Budget Concern

• Top priority: salary policy for

all state employees

Regents support Gov. Daugaard's plan:

3% salary policy 3.5% movement to mid-point

Public universities must compete in national market for their talent.

• $1,878,466 for new Ph.D.

degree in physics

• Creates degree program at USO and

SDSM&T Doctoral students will be full participants in Sanford Underground research

• $1,729,824 for an additional

HEFF M&R match

Match will be implemented over 4- year period

• Helps bring HEFF M&R up to 2% of

academic buildings' replacement value

• $998,592 for additional

research at Agricultura l Experiment Station

• Focused research

Animal health and nutrition Biofuels Profitability and sustainability of grasslands

• $455,440 to pay

physician assistant preceptors

Expands access to clinical education

• pportunities

Governor's Recommended One-Time Investments

• This year, Gov. Daugaard recommends one-time

funds for the public university system:

$600,000- Public universities and technical schools

may apply to the Department of Veterans Affairs for dollars to support campus-based veterans' services programs on a one-time basis

$500,000- Public universities may apply to the

Governor's Office of Economic Development for funds to support 'proof of concept' projects

BOR Requests for One-Time Funds:

Health Insurance Shortfall & Research

$3,483,403 in general funds to cover increased employee health insurance costs in the current fiscal year (FY13)

Timing of this increase comes mid year after tuition/fees are already set for current academic year Students should not be expected to shoulder higher costs associated with unexpected employee health insurance charges

$4 million in general funds for competitive research grants

FY13: One-Time Investments

Last year, the Legislature appropriated $5.9 million in one- time funds for the Board of Regents Strategic investments directed to workforce development, research initiatives, and ensuring student success

$3 million - Matched universities' contribution to a Performance Fund pool; awarded universities for performance exceeding system- wide goals $2 million - Competitive projects to grow research, i.e. specialized lab equipment, start-up packages to attract new research talent $805,932 - Student success projects to improve advising, degree completion, and to lower remediation $116,226 - Advanced Placement course delivery at NSU's Center for Statewide E

• Learning

PlIBLIC UNIVERSITIES & SPECIAL SCHOOLS

www.sdbor.edu