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K-16 Building Need and Utilization Study Committee S.C. House Ways & Means Committee The Hon. Brian White, Chairman, and Members The Hon. Roland Smith,

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Presentation on theme: "K-16 Building Need and Utilization Study Committee S.C. House Ways & Means Committee The Hon. Brian White, Chairman, and Members The Hon. Roland Smith,"— Presentation transcript:

1 K-16 Building Need and Utilization Study Committee S.C. House Ways & Means Committee The Hon. Brian White, Chairman, and Members The Hon. Roland Smith, The Hon. Gilda Cobb-Hunter, The Hon. Harry B. Chip Limehouse, The Hon. Kenny Bingham, The Hon. James H. “Jimmy” Merrill, and The Hon. Jackie Hayes

2 Some Key Financial Issues in SC Public Higher Education  Declining state recurring appropriations  Over-reliance on non-recurring funding and high tuition/high scholarship model  Rising tuition/fees  Substantial increase in institutional debt loads  Substantial increase in student debt loads  Insufficient incentives for timely degree completion & improved affordability  Bottom Line: Unsustainable funding model

3 Declining appropriations…

4 …even with state-supported student aid…

5 …have changed the business model.

6 Purpose of Today’s Hearing  Not to solve all of the problems facing public higher education  Not to solve all of the challenges facing SC in a highly competitive global economy Rather, to focus on facilities capital (what one 19 th - century economist called the means of production) to determine whether they are reasonable, efficient, and necessary to the education of SC’s intellectual capital—its people, its workforce, its future.

7 Outline of Today’s Presentation  How many buildings do SC colleges own?  What are they for?  How big are they?  How old are they?  Once we build them, how do we maintain them?  Does facilities construction have any relationship to student enrollment?  Does facilities construction have any relationship to overall revenues/expenditures?

8 Data Assumptions & Qualifications  Focus on high-level, aggregate data  Includes all 33 public institutions  Excludes leased/borrowed/donated space  Concentrates on E&G (educational and general operating) facilities  Data drawn from multiple sources  Not always completely aligned, but comparable and consistent  Not cherry-picked or skewed to favor any side  Accurate, balanced, and on-point, as best we can

9 How Many Buildings Do SC’s Public Colleges and Universities Own? 1,495 total buildings at 33 institutions currently in operation ○ 842 (56%) of those are for Educational & General (E&G) purposes (classrooms, libraries, labs, offices, infrastructure, etc.) ○ 653 (44%) of those are for athletics, residential facilities, dining halls, bookstores, and other auxiliary student services

10 New Construction Since FY2000-01 168 new construction projects (~11% of total inventory) have been completed or are in process Average of slightly more than 12 projects per year across 33 institutions Of those 168 new projects: 101 (60%) were for E&G purposes (classrooms, libraries, offices, etc.) 32 (19%) were for athletics (both intercollegiate & intramural) 12 ( 7%) were for residential facilities 23 (14%) were for dining halls, bookstores, and other auxiliary student services and infrastructure

11 Old Construction  69% of our buildings are old ( > 25 years old)  34% of our buildings are really old (> 50 years old)

12 Buildings require maintenance  Three basic categories: Routine annual maintenance cleaning, servicing, etc. Routine periodic maintenance roof replacements, HVAC, etc. Extraordinary/emergency maintenance safety issues, catastrophic failures

13 Deferred Maintenance  When any of these is not performed as scheduled, it then becomes “deferred” maintenance  Deferred maintenance is typically more expensive and potentially more complicated depending on nature and severity of service deferred/required  Many valid reasons for deferring maintenance (part of a more comprehensive project, institutional priorities, lack of appropriate funding)

14 Maintenance Needs  CHE Formula – Based on life-cycle analysis of systems in E&G buildings and E&G infrastructure  Includes system renewal/replacement and annual maintenance needs  Totals $1.2B OVER 20 YEARS (~$64M per year)

15 Capital costs measured against growth in student enrollment 53,504 more students enrolled in SC public higher education since FY 2000-01 – a 34% increase

16 53,504 students is the equivalent of creating…. Another Clemson + Another USC

17 Or the equivalent of adding… an entirely new comprehensive 4-yr sector

18 Building for growth  From FY2000-01 to FY2011-12 34% increase in headcount enrollment 34% increase in E&G square footage

19 Total Square Footage of all E&G Buildings divided by Total Student Headcount: 2000-012012-13 All Institutions 134 sq ft per student 134 sq ft per student Varies By Sector of Institution 2000-012012-13 Research190207 Comprehensive Teaching147171 USC 2-Yr Regionals170129 Technical Colleges8573 E&G Sq. Ft. per Student

20 Are we using our facilities efficiently? Average weekly classroom hours of credit instruction: 2003: 23.94 hrs/wk 2012: 24.84 hrs/wk Varies by Sector (2012): RU:33.35 hrs/wk Comp:23.80 hrs/wk USC 2-Yr:23.27 hrs/wk Tech:22.59 hrs/wk Does not include non-credit classroom use, special events, clubs, study groups, etc.

21 Total Operating Expenditures FY2008-09 to FY2011-12 Source: Annual Financial Audits 12% increase over FY09 to FY12

22 As a percent of total, expenditures by category have remained similar South Carolina Public Colleges & Universities Operating Expenses by Function, % of Total

23 So if our institutions have been able to spend this much money, where are the dollars coming from? Source: Appropriations Acts. Beginning Year Appropriations for Public Colleges and Universities (including 33 state institutions), mid-year reductions not reflected. Does not include state pay & health plan increases appropriated through B&CB.) Bars represent Total Authorization. General Funds are represented in blue. Annual state-supported financial aid (light green) is annual disbursement of student awards. $3,638$3,673 $3,881 $4,049 $4,174 $4,267

24 Source: IPEDS Finance Survey Tuition and Fee Revenues net of discounts and allowances. CHE Annual Disbursement Reports for State Scholarship and Grant Awards (Palmetto Fellow, LIFE, HOPE, LTA and Need-Based) 160% Increase in Tuition/Fee/Student Aid Revenues, FY02—FY11

25 Operating Revenues by Category* Source: IPEDS Peer Analysis Tool, Finance Survey. Operating revenues and state, federal and local appropriations. For Clemson and SC State, PSA is included. Capital and non-operating revenues except appropriations are not included.

26 Concluding Thought #1: Facilities and Enrollment are Inter-related  New E&G facilities construction is actually well aligned with enrollment growth over past decade  Expansion on existing campuses far more reasonable and cost-effective to accommodate growth  Well-designed construction projects are good for the state, prepare for future, create jobs

27 Concluding Thought #2: Re- Design the HE Business Model  Debt loads are growing and need to be monitored closely in funding decisions  Tuition/fees will continue to increase unless recurring state appropriations are restored  State scholarship funding needs to be re-designed  Planned integration is preferable to forced consolidation

28 Concluding Thought #3: Build a New Compact among All Stakeholders  All parties—not just state government & universities—must share responsibility for mutual success.  If SC doesn’t re-value higher education upwards, it will lose the long-term global economic game. The consequences for the state will be debilitating.  If SC doesn’t find better ways to educate its citizens beyond bricks-&-mortar modalities, we will sacrifice generations of learners (both young and old)  If SC doesn’t design a better process to support higher education, this conversation will not have contributed to a broader purpose

29 Some Suggestions for Improvement  Support sustainable funding models for both operations and facilities that eliminate earmarks and reward institutional performance  Incorporate any new accountability requirements into institutional audited annual financial reports  Focus on actual expenditures and revenues  Re-establish a statewide capital planning process and support that process with a bond bill  Observe SC Code of Laws § 59-103-35

30 Thanks for your attention Comments & Questions?

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