1. Restructuring Higher Education to Help Create the Next Great American State for Economic Opportunity and Business Investment Discussion document for Postsecondary Education Review Commission August 10, 2009

2. 1 EXECUTIVE SUMMARY Higher education plays a central role in Louisiana’s economic development efforts However, our state’s higher education system is not structured to meet the current or future workforce and economic needs of our state Compared to higher education systems in leading states like Georgia, North Carolina, and Texas, Louisiana’s higher education system currently is heavily skewed toward 4-year degree programs, yet most current and future job opportunities here and elsewhere require more education / training than high school and less than a traditional 4-year degree The result: poor fit between higher education programs and workforce needs; hampered business development efforts; lowest graduation rates in the South; and a suboptimal return on investment of taxpayer dollars A restructured system would be more affordable while ensuring a better alignment of enrollments and programs with the state’s regional workforce needs, and it would provide many benefits, including: reduced skilled labor gaps, increased graduation and completion rates, enhanced ROI for state taxpayer dollars, strengthened state business climate, and significantly increased job creation

3. 2 HIGHER EDUCATION PLAYS A CENTRAL ROLE IN STATE ECONOMIC DEVELOPMENT EFFORTS... NOT COMPREHENSIVE Providing skilled workers at all levels to meet current and future workforce demands in the private and public sectors Providing training, general education, and upward mobility opportunities for our citizens Attracting federal and corporate research grants Conducting research and catalyzing innovation of importance to the state, its people, and its industries Improving our state’s image as an attractive location for business investment and highly mobile professionals Enhancing quality of life

4. 3... AND IT DIRECTLY IMPACTS THE MOST IMPORTANT SITE-SELECTION FACTOR FOR BUSINESS DEVELOPMENT PROSPECTS: WORKFORCE *Priority of selection factors varies from project to project; however, quality and availability of workforce almost always is one of the top three considerations **Typically these factors come into play when multiple locations offer relatively comparable characteristics relative to primary site-selection criteria Source:LED analysis Primary selection factors* Quality, availability, and cost of target workforce Tax and regulatory climate Proximity to key customers and suppliers Transportation infrastructure and logistics Operating costs (electricity, insurance, workers comp, etc.) Quality-of-life factors (public education options, crime, etc.) Availability of target real-estate solution (size, cost, control, water/sewer/rail connectivity, etc.) NOT COMPREHENSIVE Secondary selection factors** Level of state-and-community support (fast-track permitting, etc.) Availability and quality of customized training Statutory financial incentives Customized incentives

5. 4 Louisiana South* LOUISIANA’S EMPLOYMENT LEVELS HAVE OUTPACED THE SOUTH SINCE THE BEGINNING OF THE NATIONAL RECESSION... Total nonfarm, seasonally-adjusted employment* (100=January 2008) *Based on aggregate of SREB states (Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia) Source:BLS; LED analysis 20082009

6. 5 Louisiana South*... HOWEVER, EMPLOYMENT GROWTH IN LOUISIANA LAGGED THAT OF THE SOUTH IN MOST OF THE LAST DECADE *Based on aggregate of SREB states (Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia) Source:BLS; LED analysis Total nonfarm employment (100=1990)

7. 6 Louisiana South* UNTIL VERY RECENTLY, LOUISIANA EXPERIENCED CONSISTENT NET OUTMIGRATION IN CONTRAST TO THE REST OF THE SOUTH Annual net migration as percentage of base population (%) *Based on total population of SREB states (Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia) Source:U.S. Census; LED analysis Katrina effect (-6.31)

8. 7 MANY OF LOUISIANA’S KEY INDUSTRY SECTORS HAVE BEEN LOSING JOBS FOR MANY YEARS... U.S. employment Louisiana employment Farming Chemical ManufacturingPaper Manufacturing Oil & Gas Source:BEA; LED analysis Thousands of jobs

9. 8... IN CONTRAST TO GROWING INDUSTRY SECTORS THAT HAVE BEEN CULTIVATED BY OTHER STATES U.S. employment (historical) Pharmaceuticals and Medicine Manufacturing Computer Systems Design and ServicesScientific Research & Design Services Software Publishers Source:BLS; LED analysis EXAMPLES 2007-16 growth forecast: 22% 2007-16 growth forecast: 8% 2007-16 growth forecast: 30% 2007-16 growth forecast: 27% U.S. employment (forecast) Thousands of jobs

10. 9 LOUISIANA HAS BEGUN AN AGGRESSIVE EFFORT TO CULTIVATE NEW GROWTH INDUSTRIES Source:LED analysis Nuclear energy manufacturing Example project winSignificance Shaw Modular Solutions will manufacture modules for nuclear power plants in L.C. After manufacturing and assembly, modules will be shipped globally Electronic Arts (EA) has launched global quality assurance center in Baton Rouge Partnership between EA, Louisiana Economic Development, and LSU V-Vehicle announced plans to build a high-quality, fuel-efficient car in Monroe Plans to expand existing facility formerly owned by Guide Corp. ConAgra Foods will construct world’s first large-scale, LEED-certified sweet-potato processing facility near Delhi Opportunity for Louisiana to participate in global nuclear power renaissance with exponential growth potential Industry manufacturing jobs average $50- 90k; design jobs average ~$200k Opportunity to establish competitive advantage in rapidly growing market Industry jobs average $60-80k Opportunity to participate in next generation of the U.S. auto industry Opportunity to build relationships with top-tier venture capital firms, including Kleiner Perkins and Google Ventures Opportunity to add value to Louisiana- grown crops right here at home Opportunity to establish credibility with other Fortune 500 agribusiness firms Average wage is 44 percent higher than per-capita average in Richland Parish Digital interactive media Advanced manufacturing Value-added agribusiness EXAMPLES – NOT COMPREHENSIVE

11. 10 LOUISIANA’S WORKFORCE PIPELINE IS DRAMATICALLY OUT OF LINE WITH MARKET DEMANDS 100% *Based on Louisiana high school class of 2004 **Based on 2014 projections from Bureau of Labor Statistics Source:Louisiana Workforce Commission; LED analysis Profile of jobs in LA (2014) ** Enter 4-yr public or private universities Enter 2-yr colleges, etc. Directly enter job market after graduation Drop out or leave the state before graduation Profile of jobs in LA (2004) High school matriculation * 100% 37 20 26 24 8 58 55 35 16 21 Supply trendDemand trend Require 4-yr college degree or higher Require 2-yr degree, certificate, or adv. training Require high school diploma or less w/ no specific training

12. 11 LOUISIANA’S FTE ENROLLMENT MIX IS HEAVILY SKEWED TOWARD 4-YEAR INSTITUTIONS COMPARED TO THE REST OF THE SOUTH North Carolina *2007-2008 FTE enrollments are calculated by taking total credit-hours and dividing them by the corresponding number of hours for full-time students ** 2-year institutions include both community and technical colleges Source:SREB; LED analysis Florida Texas Mississippi Maryland South Carolina Oklahoma Southern average Georgia Arkansas Virginia Tennessee Alabama Kentucky Delaware Louisiana West Virginia 2-year institutions** 4-year institutions FTE enrollments (%)*

13. 12 UNLIKE LOUISIANA, TOP PERFORMING STATES MAINTAIN AN ENROLLMENT MIX THAT IS BALANCED WITH WORKFORCE NEEDS Louisiana Top-performing states** FTE enrollments by type of institution (%) Workforce needs by required education* (%) 2-year institutions 4-year+ institutions *PRELIMINARY ROUGH ESTIMATES based on 2006-2016 projections; total workforce needs include only jobs that require at least some postsecondary vocational training/education **Top-performing states include Georgia, North Carolina, and Texas Source:Louisiana Occupational Outlook; BLS; SREB; LED analysis

14. 13 CURRENTLY, LOUISIANA GENERATES A SURPLUS OF 4-YEAR (OR HIGHER) DEGREES COMPARED TO RELATED JOB OPENINGS 4-year+ degrees granted (2006-07)* Annual job openings requiring 4-year+ degree** *Includes both public and private institutions; public institutions alone grant ~23K degrees per year **Includes net growth and replacements from job attrition based on 2006 to 2016 Louisiana occupational projections Source:Louisiana Occupational Outlook; SREB; LED analysis Workforce supply measure Workforce demand measure Gap of ~17,000 per year = out-migration pipeline

15. 14 MANY OF LOUISIANA’S TOP GROWTH OCCUPATIONS REQUIRE EDUCATION BEYOND HIGH SCHOOL BUT LESS THAN A 4-YEAR DEGREE Annual openings projected by occupation* *Number of job openings based on employment projections for 2006-2016; analysis limited to occupations that require some postsecondary education Source:Louisiana Occupational Outlook; LED analysis Registered nurses Customer service representatives General and operations managers Elementary school teachers Bookkeeping / accounting clerks Licensed practical / vocational nurses Mfg. and wholesale sales representatives Truck drivers Secretaries (excl. legal, medical and exec.) Welders, cutters, solderers, and brazers Executive secretaries Accountants and auditors Restaurant cooks Institution and cafeteria cooks Correctional officers and jailers Education / training required Vocational / 2-year 4-year 1,990 1,530 1,250 1,060 1,010 900 840 830 740 570 540 520 500 Due to net growth Due to attrition loss TOP 15 GROWTH OCCUPATIONS*

16. 15 ALIGNING LOUISIANA’S HIGHER EDUCATION SYSTEM WITH WORKFORCE NEEDS WOULD GENERATE SIGNIFICANT SAVINGS Scenario Est. savings* ($MM/year) 2007-08 (recent baseline) 50% towards SREB average SREB average Top-performing states’ avg.** Aligned w/ workforce needs*** -- 20-40 50-75 80-110 100-130 2-yr FTEs (%) 4-yr FTEs (%) 26 33 40 48 53 74 67 60 52 47 *Equals the difference between FY08 funding scenario and the required state funding calculated for each scenario **Assumes that Louisiana meets 2-year / 4-year FTE enrollment mix of GA, NC, and TX *** Louisiana achieves a 2-year / 4-year FTE enrollment mix that is equal to estimated workforce needs Source:SREB; LED analysis Additional savings can be generated via other system-wide efficiency mechanisms (e.g., reduced duplication of programs and facilities, classification shifts, and performance-based funding) ROUGH ESTIMATES FOR ILLUSTRATIVE PURPOSES

17. 16 LOUISIANA STEADILY INCREASED TOTAL STATE FUNDING EFFORTS FOR HIGHER EDUCATION AND SURPASSED THE SOUTHERN AVERAGE... Total state funding as a percentage of personal income (%) *Louisiana funding levels do not include TOPS funding **Average is not weighted based on state population Source:SREB; U.S. Census; LED analysis Louisiana* Total state funding per capita ($ per resident) Southern average** Louisiana* Percent of southern average (%) 898896105108109107110120 9996103112116134107108116 Southern average** Percent of southern average (%)

18. 17... AND TOTAL STATE HIGHER EDUCATION FUNDING LEVELS HERE RECENTLY WERE ABOVE THOSE IN MANY LEADING STATES (FY08) Total state funding as a percentage of personal income* (%) *Funding levels based on 2007-08 state appropriations and 2008 personal income **For comparison purposes, Louisiana funding levels do not include TOPS funding; TOPS funding for 2007-2008 adds $26 on a per capita basis and 0.07% on a percentage of personal income basis Source:SREB; U.S. Census; Bureau of Economic Analysis; LED analysis North Carolina Alabama Louisiana** Delaware Mississippi Arkansas Oklahoma Southern average Georgia Kentucky Maryland Virginia Florida Texas Tennessee West Virginia South Carolina North Carolina Alabama Mississippi Arkansas Louisiana** Kentucky Delaware Georgia Southern average Oklahoma West Virginia Tennessee Florida South Carolina Texas Virginia Maryland Total state funding per capita* ($ per resident)

19. 18 LA’S HIGHER EDUCATION FUNDING FROM STATE SOURCES RECENTLY WAS FOURTH-HIGHEST IN THE SOUTH ON A PER-FTE BASIS (FY08)... Total state-provided higher education funding per FTE* ($000s) *Funding level based on 2007-08 state appropriations; FTE enrollments are calculated by taking total credit-hours and dividing them by the corresponding number of hours for full-time students **Louisiana funding levels do not include TOPS funding Source:SREB; LED analysis Alabama Delaware North Carolina Louisiana** Georgia Maryland Arkansas Florida Kentucky Southern average Mississippi Oklahoma Tennessee Virginia Texas South Carolina West Virginia

20. 19... HOWEVER, LA’S TOTAL PER-FTE HIGHER ED FUNDING FROM ALL SOURCES RECENTLY WAS BELOW THE SOUTHERN AVERAGE (FY08)... Total higher education funding per FTE* ($000s) *Funding level based on 2007-08 state appropriations and tuition and fees; FTE enrollments are calculated by taking total credit-hours and dividing them by the corresponding number of hours for full-time students **Louisiana funding levels do not include TOPS funding Source:SREB; LED analysis Delaware Maryland Kentucky Alabama South Carolina Southern average Virginia Arkansas Oklahoma Tennessee Mississippi Georgia Louisiana** West Virginia Texas North Carolina Florida

21. 20... BECAUSE LA’S HIGHER EDUCATION SYSTEM GENERATES LESS FUNDING FROM TUITION AND FEES THAN THE REST OF THE SOUTH Total self-generated higher education funding per FTE* ($000s) *Funding level based on 2007-08 tuition and fee revenue; FTE enrollments are calculated by taking total credit-hours and dividing them by the corresponding number of hours for full-time students Source:SREB; LED analysis Delaware South Carolina Maryland Kentucky Virginia West Virginia Southern average Alabama Tennessee Oklahoma Texas Mississippi Arkansas Georgia Louisiana Florida North Carolina

22. 21 LOUISIANA’S HIGHER EDUCATION GRADUATION RATE IS LAST AMONG THE SOUTHERN STATES FOR FOUR-YEAR INSTITUTIONS Six-year graduation rates* at four-year institutions (%) *Six-year graduation rate based on first-time, full-time students seeking bachelor’s degrees that enrolled in public four-year institutions in 2001 Source:SREB; U.S. Census; LED analysis Delaware Virginia Maryland South Carolina North Carolina Florida Southern average Georgia Texas Mississippi Kentucky Oklahoma Alabama West Virginia Tennessee Arkansas Louisiana

23. 22 LSU’S OPERATIONAL FUNDING LAGS TOP PUBLIC RESEARCH UNIVERSITIES Operational funding per FTE student 1 ($ thousands) 1Operational funding estimates for universities in SREB states are calculated from 2005-06 SREB state general purpose, state educational purpose, and operating tuition & fees excluding university medical schools; U. of Michigan tuition & fee estimates derived from IPEDS estimates minus UM-reported medical school-related tuition & fees, UM state appropriations derived from IPEDS assuming 40 percent of total campus appropriations dedicated to medical school; University of California – Berkeley data extracted from IPEDS data system; figures may not sum exactly due to rounding 2Endowment income estimates based on The Center for Measuring University Performance’s 2005 estimates in all cases except LSU, which was reported by the LSU Foundation; all income estimates assume that four percent of endowment asset market value is applied to operations each year 3LSU A&M, LSU AgCenter, and LSU Law Center Source: SREB; IPEDS; University of Michigan; The Center for Measuring University Performance; BRAC analysis Texas A&M Georgia Tech U. of Texas at Austin U. of Cal. - Berkeley U. of Florida U. of Maryland State appropriations Tuition and fees 15.3 2.2 10.8 10.5 7.1 U. of Michigan U. of Virginia U. of Georgia 7.14.7 8.5 Top peer avg. 2.5 UNC - Chapel Hill 8.3 6.1 8.4 4.9 LSU (2007) 3 6.3 3.7 Endowment income 2 5.8 2.6 5.7 U.S. News “Best Colleges” ranking (out of 130) 26 64 21 53 N/A 23 30 58 47 35 130 49 COST NUMBERS BASED ON 2005/2006 DATA

24. 23 KEY ELEMENTS FOR ALIGNING LOUISIANA’S HIGHER EDUCATION SYSTEM WITH ITS WORKFORCE NEEDS Key elementsBenefits Source:LED analysis Implications LSU with national-caliber operations and facilities Attraction, cultivation, and retention of world-class talent Nationally-competitive R&D (e.g., federal/corporate research grants) Improved state image and PR Need for a credible 10-15 year strategy to achieve national prominence Funding and enrollment model to achieve strategic plan Regional universities with focus on student success and regional workforce needs Dramatically increased completion rates and student success Greater alignment with current and future regional workforce needs Increased admissions standards Optimized enrollments and programs, incl. graduate level Reduced duplication of programs and institutions LCTCS with appropriate enrollments, adequate facilities, and regional integration Strong alignment with current and future workforce needs Clear career pathways with high completion and placement rates Economies of scale at the regional level (e.g., class size) Improved business climate for many industry sectors Funding increases for rapid LCTCS enrollment growth Targeted investments in facilities, especially technical colleges Mechanisms to add/delete programs based on regional workforce needs Marketing / guidance counseling Strong system-wide efficiency and accountability mechanisms Increased responsiveness to market needs Improved collaboration/articulation between 2-yr and 4-yr institutions Increased emphasis on performance-based funding Funding follows the student (i.e., less emphasis on “base” funding) Potential facility sharing among 2- yr and 4-yr regional institutions NOT COMPREHENSIVE

25. 24 THERE ARE MANY BENEFITS OF IMPLEMENTING A BETTER ALIGNED HIGHER EDUCATION SYSTEM Source:LED analysis NOT COMPREHENSIVE Reduced skilled labor gaps (top business concern) Increased graduation and completion rates Improved in-state job placement rates Enhanced ROI for taxpayer dollars Strengthened state business climate Improved industry/university innovation and collaboration Enhanced state image Reduced brain drain Significantly increased job-creation success Stable or improved funding per FTE at most institutions

26. 25 SELECTED QUESTIONS PERC MAY WANT TO CONSIDER Source:LED analysis EXAMPLES – NOT COMPREHENSIVE Given current/future workforce needs and the State’s fiscal situation, what is the appropriate enrollment mix between two-year and four-year institutions? Are undergraduate program enrollments at two-year and four-year institutions in each region well aligned with current and future workforce needs in the region? Do programs overlap? Would the current funding formula enable a rapid shift to an alternative enrollment mix if necessary? If not, which mechanisms should be implemented to optimize enrollment mix? Are admissions standards at four-year universities comparable with their SREB peers? If not, which mechanisms should be used to set appropriate admissions standards? Are current facilities adequate to support high quality services, optimal enrollment mix, and necessary growth? If not, how should we modify use of existing facilities and/or fund new ones? Does the current funding formula sufficiently emphasize key performance metrics (e.g., completion rates, workforce placement, sponsored research)? What are the plausible state budget scenarios for the next 2-5 years and how should our higher education system be structured to respond to each of them?

27. 26 ADDITIONAL CHARTS

28. 27 LOUISIANA’S HIGHER EDUCATION SYSTEM SHOULD PROMOTE: Source:LED analysis KEY OBJECTIVES - NOT COMPREHENSIVE Student success in school (e.g., completion) and life (e.g., employment) Quality programs and facilities at all levels Alignment with current and future workforce needs Attraction, retention, and cultivation of world-class talent & R&D capacity Access for economically-disadvantaged students Efficient use of financial resources within State fiscal means

29. 28 CURRENTLY, LOUISIANA’S HIGHER EDUCATION SYSTEM FALLS SHORT ON SEVERAL KEY OBJECTIVES Source:LED analysis ObjectivePreliminary evaluation Student success in school (e.g., completion) and life (e.g., employment) Quality programs and facilities at all levels Alignment with current and future workforce needs Attraction, retention, and cultivation of world- class talent & R&D capacity Access for economically-disadvantaged students Efficient use of financial resources within State fiscal means College/university graduation rates are last in South Many graduates finish in programs that are not well aligned with current or future workforce needs General improvement opportunities exist in most areas Some technical college programs, equipment, and facilities lag significantly Enrollments are significantly out of line with current and future workforce needs in Louisiana and rest of South LSU has momentum but significantly lags top public research universities Other campuses (e.g., La Tech) have niche strengths TOPS and overall enrollments suggest Louisiana performs relatively well Funding mechanisms provide insufficient incentives and accountability Institutions are not well integrated at regional level INCOMPLETE DRAFT

30. 29 ADJUSTING FOR OLDER STATE RESIDENTS, LOUISIANA’S PER-CAPITA FUNDING LEVEL RANKING IS RELATIVELY STABLE Total state funding per resident under age 65* ($ per resident) *Funding level based on 2007-08 state appropriations **Louisiana funding levels do not include TOPS funding Source:SREB; U.S. Census; LED analysis North Carolina Alabama Delaware Louisiana** Arkansas Mississippi Oklahoma Southern average Georgia Kentucky Florida Maryland Virginia Tennessee Texas West Virginia South Carolina North Carolina Alabama Louisiana** Delaware Mississippi Arkansas Oklahoma Southern average Georgia Kentucky Maryland Virginia Florida Texas Tennessee West Virginia South Carolina Total state funding per capita* ($ per resident)