1. HIGHER EDUCATION FUND (HEF) HIGHER EDUCATION COORDINATING BOARD

2. HEF – HOW MUCH Fiscal YearAmount 1985$100M 1996$175M 2008$262.5M

3. HEF – PERMISSIBLE USES Improved or unimproved Land Construct and Purchase Buildings (and Equipment) Repair and Rehabilitation Capital Equipment Library Books and Materials Other Permanent Improvements Bonds and Notes Pledge up to 50% Not more than 10 Years … to the extent of their use for educational and general activities.

4. HEF – WHO IS ELIGIBLE Institutions created that are not part of The University of Texas System Or, Texas A&M University System Institutions not entitled to participate in funding from bonds or notes payable from the Available University Fund (AUF).

5. HEF – WHO IS ELIGIBLE UT-Pan American* UT-Brownsville* TAMU-Corpus Christi TAMU-Kingsville TAM International University West TAMU TAMU-Commerce ( East Texas State University ) TAMU-Texarkana ( University at Texarkana ) UH System Administration UH UH-Victoria UH-Clear Lake UH-Downtown Midwestern State University UNT UNT at Dallas UNTHSC at Fort Worth ( Texas College of Osteopathic Medicine ) Stephen F. Austin Texas Southern TTU Angelo State TTUHSC TTUHSC at El Paso Texas Woman's Texas State System Administration Lamar Lamar Institute of Technology Lamar-Orange Lamar-Port Arthur Sam Houston Texas State ( Southwest Texas State University ) Sul Ross ( including Uvalde Study Center ) Sul Ross-Rio Grande College Texas State Technical College System *UT-Pan American and UT Brownsville remain in the constitution as eligible HEF institutions, but as of FY 2016 will be combined as a new institution and no longer be eligible.

6. HEF ALLOCATION - REVIEW Every 10 years beginning in 1985 And every 5 years Compare Deferred Maintenance (DM) needs to HEF DM expenditures. Evaluate allocation effectiveness concerning DM needs

7. TSTC Set- Aside Space Deficit Facilities Condition Complexity HEF ALLOCATION – COMPONENTS

8. HEF ALLOCATION – SET-ASIDE TSTC set aside First 2.2 percent or less TSTC is excluded from the allocation of the remaining 97.8 percent of the annual distribution.

9. HEF ALLOCATION – ELEMENTS 50% to Complexity Split remaining 50% between Space Deficit and Facilities Condition Elements by monetary value

10. HEF ALLOCATION - COMPLEXITY Allocate on Formula Funding:  Educational and General Space Support General Academic Institutions  Operations Support (including Teaching Experience Supplement) Health Related Institutions  Medical, Nursing, and Pharmacy Education  Allied Health Professions and Biomedical Sciences Training  Graduate Training in Public Health  Physicians Assistant Program  Research Enhancement Convert Appropriations to Allocation Divide 50% of remaining allocation By total formula appropriations for all institutions Times institution formula appropriations For example Allocation Factor = 50% X Remaining Allocation / Total Appropriations = $128M / $2.355B = $0.054 Institution Complexity = Institution Appropriation X Allocation Factor = $112M X $0.054 = $6M

11. HEF ALLOCATION – SPACE DEFICIT Unadjusted space surplus = Zero Space Model (Unadjusted) Deficit Monetize $30 per square foot Multiply by 1.5 to convert to Gross Square Feet (GSF) Divide by 10 (the number of years in the allocation) Multiply by $200 (cost of one gross square foot of Classroom Space in 2008) For example Space Projection Model Deficit = 329K Net Assignable Square Feet Space Deficit = 329K X 1.5 ÷ 10 X $200 = $9.9M

12. HEF ALLOCATION – FACILITIES CONDITION Campus Condition Index Value Formerly Replacement Value Monetize Multiply by 2% - an acceptable portion of building value to carry in deferred maintenance For example Campus Condition Index Value = $455M Monetized Facilities Condition = $455M X 0.02 = $9.1M

13. HEF ALLOCATION – MONETARY VALUES TO ALLOCATION Allocation Factor Divide 50% of Remaining Annual Allocation by The Sum of Monetized Space Deficit and Facilities Condition elements For example Allocation Factor = 50% X Remaining Annual Allocation / (Space Deficit + Facilities Condition) = $128M / ($183M + $210M) = $0.33 Multiply the Each institution’s Monetized Value by the Allocation Factor For example Monetized Space Deficit = $9.9M Space Deficit Allocation = $9.9 X $0.33 = $3.2M Monetized Facilities Condition = $9.1M Facilities Condition Allocation = $9.1M X $0.33 = $3.0M Institution Allocation = Complexity + Space Deficit + Facilities Condition = $6M + $3.2M + $3.0M = $12.2M

14. HEF ALLOCATION – STUDY OBJECTIVES 1. Study and make recommendations on the amount of total annual allocation of HEF Consider the change in value of the facilities from 2008 to 2014 Consider the reported maintenance needs of the institution and the cost increases between 2008 and 2014 2. Study the effect of HEF allocation on the amount of reported deferred maintenance. Identified needs, 10 year review Maintenance performed using HEF funds 3. Review the current allocation formula Fairness of the calculations Components of the calculations reflect the intent of the statute, 62.021 (a)

15. HEF ALLOCATION – PARTICIPATION OF ALL INSTITUTIONS Assist with the collection of data from the institutions. Review data collected from the institutions for reasonable accuracy. Provide written feedback on current allocation formula. Review feedback from other participants and assist with constructive suggestions. Participate in discussions of recommendations for modifications to formula allocations. Provide written feedback on draft reports prepared for submission to THECB agenda.

16. TIMELINE 8/5 Phone Conference Overview and Q&A 8/18 Phone Conference Review Data and Consider Feedback 9/2 Phone Conference Comment on Draft Report 9/9 Phone Conference Finalize Report