The Joint Subcommittee on Higher Education/Capital Improvements of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman William J. Raggio, at 8:55 a.m., on Tuesday, March 23, 1999, in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator William J. Raggio, Chairman

Raymond (Ray) D. Rawson

Senator Bob Coffin

Senator Bernice Mathews

Mr. Morse Arberry Jr., Chairman

Mr. Joseph (Joe) E. Dini, Jr.

Mr. Richard (Rick) D. Perkins

Mr. David R. Parks

Ms. Barbara K. Cegavske

STAFF MEMBERS PRESENT:

Patricia Hampton, Committee Secretary

OTHERS PRESENT:

Senator Raggio commented it was his understanding the Board of Regents has authorized an equity study and a company has been retained to conduct the study. He said the subcommittee would be interested in receiving a report on the guidelines and parameters of the study authorized by the Board of Regents. He mentioned the subcommittee understands the study will be a vital component of what will eventually be considered in finalizing the budget, and noted the Legislature has mandated a study of the funding formula for the University and Community College System of Nevada (UCCSN) and there will be a report in May. Senator Raggio asked for a description of the proposed content of the study and an outline of the parameters.

Richard Jarvis, Chancellor, University and Community College System of Nevada, affirmed the Board of Regents has authorized a study and formed a committee, and a company has been hired.

Tom Anderes, Vice Chancellor, Finance and Administration, University and Community College System of Nevada, provided the committee with a document titled "Discussion Materials for Funding Equity Study Committee" (Exhibit C). Senator Raggio inquired about the company hired to perform the study. Dr. Anderes answered the company is MGT of America, a national company involved in higher education consulting for approximately 25 years with offices in several locations throughout the nation.

Dr. Anderes referred to questions on page 4 of Exhibit C. He said these are questions the consultants will be seeking answers to. He stated the company will examine the way in which state funds are distributed among the University of Nevada, Reno (UNR), the University of Nevada, Las Vegas (UNLV), and the community colleges, and what the funding pattern has been over the past several years. He said the factors which appear to contribute in a material way to per-student funding differences will be reviewed.

Dr. Anderes stated the funding differences which remain, after factoring out reasonable explanations, and the strategies which can be employed to address these inequities will be studied. He said a number of factors that contribute to differences in per-student funding within state systems are shown on page 3 of Exhibit C.

Dr. Anderes said the concern on the part of all institutions and the consultant is that where there are differences in cost per student, the differences be understandable. He stated the desire is to understand what the differences are. Some areas may be considered inequitable and a strategy may be needed to fund the inequities. Dr. Anderes told the committee the indicated factors will provide the information.

Dr. Anderes explained some of the factors affecting a difference in per-student funding shown in Exhibit C. He pointed out it can be more costly to operate some instructional areas than others and an institution can face increased operating costs in connection with the mission of the institution. He said some institutions might have special or unique program areas requiring additional operating costs. He stated various faculty-related factors, such as rank of faculty, tenure status, and full-time/part-time faculty mix, can contribute to differences in cost.

Dr. Anderes said the smaller-size institutions often have higher unit instructional and support costs due to the inability to achieve economies of scale. He stated what is sought from the consultant is a further definition of "economies of scale." He pointed out institutions with higher proportions of disadvantaged and at-risk students may experience higher costs due to the additional instruction and support service necessary for these students, and full-time traditional students have different support needs than do part-time, nontraditional students.

Dr. Anderes stated the instructional workload and productivity expectations will often have higher unit costs, and rapidly growing institutions will lose per-student funding per student when funding does not keep pace with enrollment. He said MGT of America will be looking at both the trends, in terms of dollars, and the impact of growth and enrollment over a 10-year period.

The maintenance costs can vary depending on the size, age, and type of facilities and on the intensity of use, Dr. Anderes stated. He also noted funding policies and mechanisms that are applied in an inequitable or arbitrary fashion among institutions will exacerbate existing funding inequities over time. He said it will be necessary to review Board of Regent policies and the funding formulas and to try to make some general judgments about whether or not there are inequities built in that would have a disproportionate effect on one institution versus another.

Senator Raggio asked whether these factors were suggestions of the consultant as being appropriate for a study of funding within state systems for universities and community colleges. Dr. Anderes replied yes. Senator Raggio inquired whether the factors have been accepted by the Board of Regents as appropriate for consideration in the study. Dr. Anderes answered yes.

Senator Raggio stated:

Dr. Anderes explained that using these factors, MGT of America would be trying to make some judgments and reasonable explanations for funding differences. He said there may be justification and reasons why there is a differential; conversely, there may not be good reasons. Ultimately, what is being expected from the consultant is a listing of findings and recommendations that would suggest, upon examining the cost per student, there are certain areas that are justified and some that are not, and a cost per student can be attached to the findings. Dr. Anderes stated that after the Board of Regents has been able to create a strategy which would try to link what has happened with the equity study to the budget request, a report would be made to the Legislature. He said there would be an effort to weave justified differences or inequities into the current requested budget.

Senator Raggio asked for comments on the overview of the work plan and study methodology shown on page 6 of Exhibit C. He inquired whether May 3 is still the date the final report is to be submitted to the Board of Regents. Dr. Anderes answered yes. He said the plan is to have a preliminary meeting with the consultant, members of the board, the committee, and anyone interested, to review the preliminary findings. The meeting will be held in about the third week of April. Dr. Anderes stated there will be a full discussion with the board at the April 28-29 meeting, at which time there will be a presentation of findings and recommendations. Then the board will give directions to the consultant. Dr. Anderes predicted these actions would lead to an early May completion.

Senator Raggio commended the Board of Regents for authorizing such a study and asked the cost. Dr. Anderes responded there is a "not to exceed" cost of $65,000.

Jill Talbot Derby, Carson City, Chairman, Board of Regents, University and Community College System of Nevada, maintained the study holds a great deal of importance for the board. She said the past months have been difficult because of perceived inequities. She stated there needs to be a "comfort level" that in fact the way the monies are being distributed is fair. She said the growth in the southern part of the state has created a new "landscape" in which the current formulas are not working as well as they need to.

Ms. Derby pointed out the current state financial circumstances has provided less money than had been hoped to support the growth and to correct the inequities caused by growth. She said that in supporting this study, the board has recognized the most important question is to determine what kind of a funding cap or other inequities there might be among institutions. She stated a committee is working on the issue and there is a "good feeling" about the group that has been contracted with to do the study. She stressed that the study to identify whatever the inequity is, and to address it, is a top priority. Ms. Derby maintained it is the only way the board can continue as a unified board. She said there is great support among board members for the manner in which the study is proceeding.

Senator Raggio commended the board for the way this issue is being dealt with rather than in a divisive fashion, which he said has occurred in the past. He pointed out the Senate Committee on Finance has introduced a measure for a more comprehensive study of the entire issue of the funding formula for the UCCSN and hopefully this will be approved by the Legislature. He emphasized that everyone’s concern is the funding formula must be fair, must not be divisive, must not be sectional, and must not be partisan. He stressed it must be objective and have full credibility. He said a goal that everyone can support will be reached the more objective the studies are and the less rhetoric there is.

Ms. Derby said the concept of this study is in no way meant to impinge on the follow-up study that will address the funding formulas. She stressed that fairness is absolutely critical. She said divisiveness has been fueled by not having the real facts and figures. Senator Raggio interjected he thinks it has also been fueled by accepting, at face value, some arbitrary numbers that could not be supported. He maintained the studies will do away with the lack of credibility.

Mr. Perkins asked whether there was consensus within the university system on the questions for the study. Dr. Anderes answered yes. Mr. Perkins inquired whether there was any discussion about space equity. Dr. Anderes replied one area currently being studied is space and space utilization and making some judgments as to how that relates to operation and maintenance. He said the consultant will be provided with 10 years of actual square footage figures in seven or eight categories, for each of the institutions, and this will be included as part of the analysis.

Senator Raggio stated that until there are some findings from the study there is no point in discussing enrollment and some of the other issues. He asked for discussion on flexibility proposals. He indicated the invitation to discuss this proposal does not necessarily mean the committee agrees with the concepts. He said the committee would like to provide an opportunity to discuss how the proposal would best serve the process, while preserving the ability of the Legislature to determine appropriate levels of funding and the utilization of taxpayer funds.

Dr. Jarvis stated there are two elements to consider when flexibility is discussed. He said the first is the idea of a lump-sum appropriation. He pointed out there will not be enough state general funds available in this biennium for the university system to meet the kinds of enrollment projections which can be met, based on the demographics of the state. Therefore, there will continue to be systemwide over-enrollment beyond the budgeted enrollment. Dr. Jarvis maintained priority of access for citizens of the State of Nevada is an important contribution the system makes toward meeting public policy.

Dr. Jarvis stated if the colleges and universities were able to receive the appropriation in a lump-sum form, it would permit the campuses to make reallocations of funds. Each campus could put the funds in the most useful place to maximize the campus enrollment. He stressed the reallocations would have to be documented, justified, presented to the Board of Regents for approval, and presented to the Legislature in accountability reports. He said there would be a full process of proposal and review. He pointed out that if the ability existed to maximize the flexibility of funds within each campus, each campus could use the funds in the most useful place to maximize enrollment. Dr. Jarvis the system is most anxious to get as close as possible to the projected systemwide 6 percent enrollment increases. He stated each campus wishes to maximize its opportunity to regenerate the enrollment targets.

Senator Raggio asked whether the proposal, for instance at UNLV, would include not only the main budget within the lump-sum allocation, but also all of the other budgets, and whether the campus presidents would have the flexibility to move funds between campuses and formula segments. Dr. Jarvis indicated it would. Senator Raggio asked how the reallocation of funds outside of where they were originally placed would be reflected in the next budget request. He asked how budgets would be constructed and whether this proposal might not emasculate the formula-funding process.

Dr. Jarvis maintained the formulas that generate and estimate needs are only targets for funding. He stated the Legislature appropriates against the targets and some targets are not met. He said the campuses are asking to move money within their budget and to provide a full accountability trail. He emphasized that in the following biennium the campuses would expect to be held accountable to the performance measures established for each budget, and for enrollment targets, productivity, and so forth.

Senator Raggio asked what the request would be for the next biennium in those budgets where funds were taken from one budget and transferred to another. Dr. Anderes explained that at the beginning of the year the campuses would identify where the dollars appropriated by the Legislature would be expended. The budgets would still be defined and during the year, if the decision were made to move funds from one budget to another, the transfer would be specifically identified. The Board of Regents would review the transfer and it would be made very clear whether or not the transfer was to be permanent or temporary. Dr. Anderes noted this would then become part of the way in which the adjusted base budget would be developed.

Senator Raggio stated the problem would be if the transfer becomes a permanent fixture in the next 2-year budget cycle and the funding formula becomes distorted. Dr. Anderes maintained that if such a decision were made, the campuses would have to be held accountable for ensuring the money transferred was less important in the budget from which the funds were transferred than it is to the budget receiving the transferred funds. He stressed the request in the next biennial budget would be less by the amount transferred out and more in the budget that received the transferred funds. Senator Raggio stated that in the past some campus presidents have come back to the Legislature and pointed out shortages in their budgets, which were caused by the transfers, and the accountability "is done away with."

Senator Raggio said he does not believe the Legislature should micromanage the university budgets, an opinion he said is probably shared by most legislators, but ultimately the Legislature is responsible for the final funding for the university system. He stressed he was seeking a way the committee could be assured that if the university system had free authority, there would be some manner of accountability. He indicated this seems elusive, judging by the explanation provided. Dr. Anderes said he can guarantee accountability. He pointed out that up until recently there were no accountability reports, but now those reports make it difficult for a campus president, some years later, to maintain that previous budgets were not under his or her tenure so they do not know what happened.

Dr. Anderes said there would be a very specific record. He explained if there is a permanent transfer it could be dealt with as an enhancement, rather than as part of the base budget, and in a policy so it is very clear and visible that one budget is going to be reduced in favor of another. He maintained the accountability reports and the process of following and tracking the dollars would be detailed enough to hold the university system accountable.

Mr. Arberry agreed with Senator Raggio in regard to the concerns he had expressed. He pointed out those at the system level may feel there is sufficient accountability, but the Legislature will not really know. He said he was leery about this issue and could not support it at this time.

Mr. Dini said it seems to him that in trying to provide flexibility, some inflexibility might be built in "down the road." He pointed out if one school has an increased enrollment far beyond projections, then money is shifted within the university system budget and a disparity is built as far as equal funding for the students is concerned. He said this would seem to be "biting off more than we can chew" by trying to provide absolute flexibility.

Senator Raggio asked for comment on another flexibility issue, the proposed 2 percent solution. Dr. Jarvis said the 2 percent involved is a number that would limit the extent of any transfer of funds and has nothing to do with any proposed growth rates. He said the idea behind the proposal is to allow for some control of reallocation between campuses where there is a difference in performance. He explained the 2 percent only applies if a campus misses its enrollment target, which was approved by the Board of Regents and budgeted by the Legislature. He said it seems unfair in the short term for a campus to retain the funds in this circumstance when, by contrast, other campuses may have overenrolled. He elaborated that overenrollment is good public policy to provide additional access over and beyond the funds available through the budget process.

Dr. Jarvis pointed out those campuses are having to absorb additional students without additional funds. He said if a campus were to fall short of budgeted enrollment, the campus would be asked to move up to 2 percent of instructionally related funds into a pool to become available for distribution to campuses that are overenrolled. He stated unlimited enrollment is not encouraged because stress would be placed on the ability of the campuses to deliver quality services to student.

Senator Raggio asked whether this proposal would transfer funds from one campus to any other campus within the system. Dr. Jarvis replied the original proposal, as adopted by the board, was not specific as to type of institution. He suggested it would be more straightforward to separate the universities as one group, and the community colleges as another. Senator Raggio inquired whether this would mean that if UNR were below the targeted enrollment, up to 2 percent of instructional funds could then be transferred to UNLV—but only if UNLV had exceeded its projected enrollment. Dr. Jarvis answered yes.

Senator Raggio wondered whether, under this proposal, the transferred funds would be used only for instructional costs. He said this would seem to be the intended use of the funds. He maintained if it is being suggested the funds be used "free flow," it does not seem to prove the point of needing additional funding for instruction at an overenrolled institution. Dr. Jarvis responded the hope would be the campus receiving the transfer would have the opportunity to use, as needed, whatever additional funds it was able to acquire. Senator Raggio asked why the use of the funds should not be limited to instructional costs, if instruction is what the transfer is all about. Dr. Jarvis acknowledged that would be preferable to no transfer at all. He said his concern, in a conceptual sense, would be that when a campus takes additional students, those students generate costs, needs, and services, across an entire range of activities such as counseling, health services, operations and maintenance, grounds, parking and so forth. He stressed that when a campus carrying the burden of additional students, it should have the flexibility to move funds into another service area to address a particularly critical need.

Dr, Jarvis maintained the campus would be handling the instructional part by having admitted the students and becoming overenrolled. Senator Raggio stated it would seem the funds would be needed in instructional costs. Dr. Jarvis agreed a substantial amount of the funds would be needed for instruction. Senator Raggio asked whether the point is being made that the desire is to have no limitation on the ability to use the funds for other purposes. Dr. Jarvis replied yes, subject to the accountability process that would have to dictate where the funds would be used.

Senator Coffin asked whether any thought has been given to abandoning the funding formula and requesting the money needed with the flexibility to spend it at the discretion of the Board of Regents. Dr. Jarvis answered no. He said the formulas have served well, but after 12 years some adjustments and revisions are needed. Senator Coffin pointed out it would be very difficult to monitor the effect of transferring funds on the total equation every time one factor is changed. Dr. Jarvis suggested the legislative study could consider the possibility of a nonformula or highly modified formula-based approach.

In further questioning Senator Coffin asked whether any thought has been given to requesting the outside consultant to review whether or not formula-driven budgets work. Dr. Jarvis answered the funding-equity study will not look at the formula topic, but the question of formulas might come up during another study to be performed. Senator Coffin said he would appreciate hearing from the Board of Regents and campus presidents on the subject.

Mr. Arberry inquired about the funding for the radio stations at UNR and UNLV. He said the UNLV station is the only station he listens to because he likes jazz. Carol Harter, President, UNLV, stated there has been discussion about the UNLV radio station for several months. She said the station has had a history of mixed funding. Student government has provided total funding at times in the past and has shared funding with the university at other times. Currently, the university is funding the station with additional funds from private sources. Dr. Harter said Mr. Arberry’s love of jazz is shared by a small but very strong constituency that has helped raise money for the station to continue to operate the jazz format. She stated students came before the Board of Regents in June 1998, asking for more involvement in the operation of the station. The Board of Regents reminded the student group the board holds the Federal Communications Commission (FCC) license. She said the license cannot be misused or underused or the license will be revoked.

Dr. Harter noted the Board of Regents decided to hold the license and delegate the responsibility of operating the station to the UNLV president. She created a committee that includes a regent, students, and faculty members at the university to make recommendations on the future operation of the radio station. She said there were recommendations to create an ongoing advisory board that would include community members, to continue the high quality of performance, and to be fiscally responsible.

Dr. Harter stated the advisory board will be appointed soon. She said the College of Urban Affairs, which has a radio/television program to train students in broadcasting, is the best place for the station to be located. She maintained the station is best served as part of the academic program rather than as an ancillary activity of the university. Dr. Harter said Martha Watson, Dean, College of Urban Affairs, will oversee the radio station, through provost to the UNLV president.

Dr. Harter stated many students will be learning the radio broadcasting business through internships. She said she is hopeful the advisory board will recommend that jazz be continued as the predominant format with occasional diversity on weekends, but the final decision has not been made.

Joseph Crowley, President, UNR, testified the radio station at UNR has been the Public Broadcasting Service (PBS) for almost 20 years, which means part of the funding for the station is supplied by the federal government. He pointed out a significant part of the funding is supplied by private contributions. He said programming is the largest challenge, as it is with any radio station. He maintained the largest mistake the UNR station ever made was to cancel broadcasting of Saturday afternoon opera from the Metropolitan Opera in New York. He said the program did not have a large audience but had an audience that "was prepared to practice forms of physical violence on the president of the institution," so the opera program was restored to the schedule.

Richard Moore, President, Community College of Southern Nevada (UCCSN), said the college has a PBS station but does not own it. Land is provided by the college and the station is entirely supported by private funding and used as a teaching facility and a place for individuals in southern Nevada to express their views.

Ms. Cegavske pointed out that students in the broadcasting class at Bonanza High School in Las Vegas are able to access the radio station and enjoy it very much, thanks to Clark County School District and CCSN.

Dr. Moore spoke on the issue of funding flexibility. He stated the Legislature recognizes five ways to fund the state colleges and universities. He said one way is instruction and the other ways relate to support services. He maintained it is not unusual for the instructional formula to be the only one funded. Dr. Moore stated that sometimes the increased student enrollment can be carried with the increased funding. He said that in other cases it would be preferable to raise class size and shift funds to the student services area to hire a counselor or an admission and records clerk, or to provide service to a blind student. He stressed the ability to transfer funds to the support area would be very helpful in sustaining quality.

Senator Raggio pointed out there has never been full funding for support services. Dr. Moore stated the Governor’s recommendation provides some instructional funds for CCSN, but no support formulas. He said that in a year when there are no funding increases for students services, it would be helpful if the campuses could move some of the instructional funds to the support services area. He emphasized there would not be an attempt to mislead the Legislature. He said that any time there was no funding for support services he would be back before the committee asking for help, whether or not he had been given the flexibility in the past to use the funds.

Senator Raggio commented the committee is trying to assess whether or not the Legislature’s responsibility would still be intact if the flexibility plan were to be approved.

Dr. Harter stated UNLV is dealing with support service concerns. She referred to the new library being constructed and said more staff will be required to run the building. She called attention to 27 new positions requested in the support formula. She said that with zero funding, none of those positions are approved. Dr. Harter explained some positions could be moved from the instructional area if there were flexibility in moving the funds. She maintained the library is central to the instructional purposes of the university.

The meeting was adjourned at 9:55 a.m.

RESPECTFULLY SUBMITTED:

Patricia Hampton,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

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