e e e e e e e e e e
e e e e e e e e morning everyone good morning good morning morning good morning
unusual Place date and time for our meeting so thank you thank you all for join us call this meeting to order um and ask Chad if you would do the roll call for Ser Mr Allen
pres Miss C present Mr Fischer here miss flacker here Mr Garett Tony present Mr Hannah present Miss Jordan here miss kitchel
here Mr Kramer pres Miss mhen pres Mr Peterson here Mr Saunders time okay we have a quum thank you all and once again this is uh a little
unusual for us so we appreciate everybody's uh engagement and patience with doing this little last minute uh adjustment to the scheduling around this as I think Chris you had mentioned and may Seth as mentioned in at last meetings we had to adjust due to some
scheduling issues with the state budget committee so we needed to uh make sure we got this done uh in sequence if you will in preparation for the those presentations which will be coming up so uh again thank you for doing this we'll be walking through Seth and team will be
walking through uh both the uh quick review of the uh University budgets that we have reviewed and and uh we make recommendation on as well as the overall budget uh High budget going for so with that really appreciate everyone again
for their patience and I'll turn it over to Chris I don't know if you have any comments to start before perfect perfect well yes again good morning and commission members thank you whether you're here in person on the line we really appreciate if you doing this we know this was a bit of a
curveball um but you know as Dan mentioned the timing with the budget committee we thought was imperative to get in sooner than later and we also appreciate um the support from budget committee staff and budget Committee of
helping arrange this so that we could go as an agency you know sort of as a predicate to what the universities would then present that be present dra on next Tuesday the 12th 3M yes 3 pm. uh commission members you're always invited
to tune in come there Etc um yeah so so thank you I I will start this by just teeing up and let me say I'm just going to hit three slides pretty quickly all of which I think commission members the first two you're very familiar with and then the third lead into the rest of
what we're going to talk about here um then then Seth is going to be the one to take the stage to go really hard so yeah not surprised all of you smart so there we go current landscape very good Seth
thank you um you know I I think this Bears repeating this slide and the next slide really be repeating because they they set up uh what we're doing and we as we begin to do that too and before I turn it over to Step I would I would say to you all that we have been trying to
listen very closely um to input from all of you as commission members uh business prod activity committee uh members the meeting we had I think that was last week uh we had great feedback from all of you think about this think about this
um I you with the operating budget suggestions and several other things but also with our University partners and trying to you know Square this in a way that will be really advantageous for those who we serve in higher education the Big Goal we talk about this all the
time and we're going to talk about it every time we get a chance um you know we have a goal of 60% post secondary attainment by 2025 the original play on that was at Associated greason higher the latest data we have say that we are currently 39th in the nation associate breason
higher we've got it better than that you know that a lot of advancement has been made at sub associate degree level and then when you combine those things we come out at 28 Nation um you know so we're kind of skewed on both ends of those but you know there is some benefit to the state but we've got to keep the
gas pel uh and then sort of accentuating that postsecondary tment is the chart on the right the narrative there that um data we have started to use in the past six months or so show how we have kind of
stayed at the same spot for bachelor's degrees and higher said to probably most of you before what struck me when I looked at this slide for the first time was that's about when I was born where we've got Circle 196 1962 for me and it was it was really um it's kind
of a wakeup call that you know we've been stuck in that level of entainment or well basically as long as I've been R I'm I'm not young um so we can do better than that roughly 40th but then also to look at what some other states have done
we're trying to understand not only those States but other states and ways they've been able to make advancements who were roughly tied with Georgia North Carolina at time and they are respectively 23rd and 20 now in the nation of bachelor's degrees and high you know all the things that stream out from that social social and economic
impacts we talk about those things all the time so this we think serves a real credit into this this also is critically important as we think about what our universities have done what what we where we see opportunity um I'd be remiss if I didn't
remind everyone that our institutions our state institutions have done a really really good job of holding a line on to be now in the past 12 years um over a decade now sixth in the nation
and that that helps to make us competitive uh you know we talked about being ninth in the nation and attracting students from out State we're actually eighth in the nation now um again people are coming to our universities and colleges in Indiana because they offer a
great value but that places pressure by you know being so conscientious from the two human peace stand point on the operating budgets of those institutions uh 43rd in the nation regarding uh support per FTE in the nation um you
know part of what that translates into not in total dollars but it's in share uh the student then is is in a place where we are the fifth highest in the nation from the share of the cost that the student pairs again kudos to the
institutions for keeping it down um so right those are those are realities we face and we would be remissed if we did not Point those out uh new state revenue forecasts also that's that's on the funding Verizon and something about which we've got to think uh Seth has laid this out for you pretty
self-explanatory there with each 1% of state revenue um increases this is what you see in terms of real dollars so drum roll and then now I'm just going to be quiet turn the tough set
over yeah know we we again got a lot of uh feedback commission members from you our University partners and frankly others you know with whom we've been working and do work think of the folks in the partnership pendon on how we ought to be thinking about this coming
budget uh by inum so we have essentially said but let's prioritize um budget were tip we don't know how tight they'll be obviously you know something that will make this in play especially so so will be the April forast and the session
would be over by then but we don't know that today so where would we go uh operating funding you know the bottom line on that is that says this all the time that you know those dollars help to buy down the cost for students and you'll see our emphasis there and you're
going to see that we've increased our emphasis based upon feedback from budget committee members and commission M whenever that was last F the formula LLY items those are things like dual credit and RNR emphasis on those the capital
projects um set to talk much more about this but to a great degree there's a lot of emphasis in those projects around deferred mement um not expanding but then if there's an expansion in terms of scly really making sure it's a an incredibly
high priority for our state's economy and then last among those RNR and making some enhancements to those I know we've had a lot of discussions thinking about not just I but how do we think about those with our own homes and and then our businesses and things like that and place an emphasis on the maintenance of
those things so that you need to replace a rook you do that so that 10 years later you don't have to replace the foundation and you'll see that emphasis In Here Also I take any questions my guess is those will come more so when Seth starts talking but I'll I'll jump in also provide color commentary on the
way that instrumental that I could respond to so thank you commissioner I was begging to ask as much but I'll Express an appreciation first then question as small as it may
seem thank you so very much for starting the budget presentation by talking about our our education performance and it's not lost to me I'm not sure I've ever seen the correlation and so thank you for that
because that being to my question about return on investment have long past that we can always find Opportunities are to identify the correlation between what we're investing and our return of that investment so then with that the
question as we look at speaking of return on investment look at North Carolina's performance Georgia seems today the question have we studied North Carolina and Georgia
and and have their insights and lessons learn that could help us improve and that could help us improve well not just our performance but help us improve our performance in relationship to the dollar Investments that we're
making yes uh so we have started looking much more closely ands you the I'll come back to North Carolina georia second but U you know probably one of the best examples we found was now a year and a half going on
two years ago when we decided to do what we came known as pre- Admissions and that was a best practice that Idaho and put in place Minnesota was be is to be second in the nation but you they were seeing the
impact of that that's that's an example of where the investment is so n um what we think about the you know the the amount of money we'll spend on that by what we did is we reallocated
marketing build and things that Frank have you know to reach directly to students and their parents U and we don't know to what degree yet but we believe that's part of the impact of last year this year especially would be
this year so you know looking at those other states you know as we started to look at North Carolina and Georgia I think a couple of different things come to mind for us what have they done different you know Georgia has had the hope scholarhip I think longer probably
or about the same time we've had the 21st century schol program of that as I understand that scholarship was essentially more ubiquitous to a population uh that might want stay advantage of it than for a number of
years the 21st century scholar program was um I I wish I could tell you we thought about that a lot more before we made the decisions to along with others to push for automtic R 20% that would a much better story uh but I'm going to be
honest and tell we weren't thinking that way we just thought it didn't seem very right to not have a college education because we somehow didn't get signed up um but been relative to that you know
Denis I think one of the best examples of the way book and returnal investment was specifically for 20% um and I I'm convinced stth and I talk about these things all the time we can uh as we all of you on the
commission are going to see next week the first look at the new state of higher education dashboard you know we've done away with with the reports that set on the shelf and have all lagging data in them but tools like that are going to allow us to
do better job of looking at things like return of investment back to 21st century Scholars I I think especially our Senior Team could remember that when we started talking about the potential of that I'll be
close but my first question to the team was someone said to me Chris going to be a fiscal I well of course if we sign us one more child there going to be a fiscal too B however we need to think about
dynamically sing legislation like that in other words what the r can do and for commission members and others who are with us today I don't know if you would recall but we went and did that analysis and said based on the history at that
point of 32 years of 21st century scholar what what's the likelihood more Le will go or of those who will succeed and what types of jobs might you believe they go into based on two or three degree mix that we didn't see some part
we decid to be very conservative with the estim since we didn't want to V promise and under delivered and a long story short was for the addition of that cohort now the class of 20 27 the estimate was
conservative this state's investment would be at 10x for the wages alone between what those students if they had missed 21st century Scholars like the graduated from high school and what they were expected didn't go for them and X just in the
wage to Delta and then we took to The Next Step something said I was keenly interested said was he so others and said what will that mean could we project in terms of tax receipts so we only looked at state and
federal sry state and local we didn't want to think about Federal also took into consideration that for example our income tax has been notching down a little bit at a time not expecting anything dramatically different from the sort of a policy wi something
dramatically up or down that and and to make the long story short with that first ad Delta on the wages was something to CAU our attention La about thousands of folks that substantially more in the work wide time that would be good but then also
from a tax receipt standpoint the increase over that worker's lifetime would be Beyond just the tax receipts for state and local taxes would be Beyond basket um that I think was an example
Denis the kind of that we've got to do bring something forward like that you all all do you ought to ask us legislators Governor public to say okay this looks like a good idea um so what kind of impact would you
expect and you know to be able to look folks straight in the eye and say we really really conservatively believe the what we spend on we'll get that back in tax receipts then benefit really beyond that being those wage increases for those
currently young people and then all of those other factors that we talk about every practically session with other lower unemployment higher participation wages net well ulation lower in mortality higher life
expectances lower benal utilization and the last thing I'd say on that is um I don't going to get there but uh some folks on Seth's team and I saw was fa we should be able to get to the point
too where we also calculate those things right because it's one thing just to calculate my wages as a student is a current 14-year-old we going forward tax I'll pay but I'm not using public assistance as much or at all or right all those
things that my health is better he doesn't have better health there living plac doesn't have food Des doesn't have exercis all those things you know I went far too long ago but but that's what we're trying to move toward and you know I firmly that as we roll out this the
State education dashboard with gu all the lagging data out the leading data too but then as we begin to make stantial proposals we should be able to go back and say Here's the impact um we
haven't Quantified all of this yet but I would tell you when I first saw the numbers on the right the slide on the right after airing on our team sent those to me on Saturday um I started looking at some other things and said where Georgia and North Carolina on some
other Factory we've not done a downrown analysis on them but I would tell you they they all caught my attention population growth like what has changed in grossness problem I went far as to long so those
are those are where we're trying to get to as we changed for example from just a pure research business intelligence um and being able to answer to all you ask public and others what what will
be the benefits of the kind of policies I thank you for indulging me because number one speaks to me about context this is what this is all about versus has talked about bows in the ab but then also perhaps even more
importantly from the standpoint of the theu here our responsibilities to your point I you can actually start talking in terms of how you're stewarding taxpayers money and what type of return we're getting and I think that goes a
the way in terms of teaching us how to Steward and it goes along the way in teaching us how to make the best investments that they great returns in terms of performance and all the outcomes about thank you and thank you
sorry Mr chairman for the monologue there but you got a lot in got a lot say I I said appreciate because that is the way we're trying to think about this and whether it's at the macroeconomy level or whether it's at the individual level
um but we firmly know that lives will improve as as we see an increase in educational attainment State what happens and we've got we dat we show those things but savings on this
side you know booting is open here so that's that's all to say that's the way I supposed to think about and that should be part of the expectation you have me Dennis I would I would only add to the commissioner and point out that
North Carolina and Georgia around 20 23rd in educational ranking of Bachelors uh and above and that's very close to where their state support for FTE is as well they're ranged in the lower lower to mid 20s for State money per FTE so we're ranked 40th in bachelor's
attainment above ranked 43rd in in funding and North Carolina Georgia are in the low 20s uh in both and so while I can't claim there's causality there it seems interesting to say the very least that there's supp to be a relationship about between the amount of State
funding uh that our public institutions receive and educational attainment of the city thank you that seems like as information institutions could be looking up actually show that dat and see if there
is causation I think Seth just to I'm a researcher here so I'll take the plunge and say the research literature is very clear you get what you pay and it's a strong correlation
between education investment education main I'm sorry to my porn voice this morning and so I'm sure that's ever been said at a committee that's but the
uh the the literature is very clear on correlation between and the results K12 second the other thing very clear is that BR reinvestment education
decrease things that actually went up costing government and so the chart actually speaks to common sense question is do we have the courage to communicate well I charge to be animated and exciting for the rest of the
presentation so I will do my very best uh thank you than yeah I'll see what I can do uh but thank you everyone for joining our University colleagues commission members uh just want to stress again how much we appreciate and understand uh the challenge in scheduling this has been so thank you
very much I do want to offer my appreciation also for the budget committee staff uh and working with us on the order of scheduling to make sure that we keep everything sequential as it needs to be and also give uh the commissioner and I the opportunity to kind of set the stage for higher education next week before the the St
short budget hearing so we appreciate that and I know that there is no more interesting news today than this I also appreciate the mass quantities of of uh journalists uh so we'll go ahead and jump into into the most interesting and the most engaging
part of the budget recommendation and that is Commission operating budget and State financial aid we'll get to the institutions here momentarily so what I want to start with financial aid there's only one program uh that the commission manages that needs immediate financial additional
financial aid and that is the CBO program this is a program for the spouses and children of a wide number uh of public servants including veterans uh Public Safety officials Etc and this is a commitment and promise state provides
to those students that they will receive uh tuition full tuition remission at a public institution I think it's $5,000 at participating private institution and what we have seen is our institutions have done a really really good job of helping students identify their eligibility for this program this is an
application based program we can't just automatically apply it so students do need to identify so the institutions have been doing a better job of that this orange line here on the screen is our expenditure increases since fiscal 22 and I think this highlights that in 2023 the reason we didn't anticipate any
additional State dollars is uh we were managing a pretty healthy uh fund balance and expenditures uh were still Landing within the appropriation or very close uh but as you can see it has spiked dramatically we depleted the fund in fiscal year 2024 and actually had
transfering additional dollars to make uh institution's whole for this commitment and because of that uh when again it's just under $4 million ex uh over the budget uh but because of that we're needing to request additional State dollars uh in both the current
fiscal year which is a little odd that is not something that we traditionally do uh but the budget Bill does that with some regularity for a variety of reasons so you're seeking additional dollars to make that fund PLL this fiscal year and maintaining that commitment over the next two fiscal years and one thing I
will note we've been monitoring Financial expenditures very very closely on a weekly basis uh the leadership receives updates from our financial aid team on where expenditures are at so we'll keep watching this uh the one thing I would note and we'll of course keep you updated is by the time we get
to March and April we'll have a much better idea uh where maybe that new demand Alles we think 4.2 million uh is probably right in that sweet spot or built in a very small amount of cushion uh but in case that it is in sufficient uh we will be sure to communicate the
proper amount to the general assembly uh next and even more riveting uh and I've shared some of this uh with you at our budget presentation uh at the commission spend plan presentation a few months ago and that is that we are in the middle of a uh very competitive RFP
process for a agency-wide IT contract um we had nine vendors submit eight of them are being scored the scoring team met almost all of last week um it has been an extensive process I want to give uh our chief technology officer regender a
huge shout out for the work that she has done in this area she's kind of lived and breathed this work for the last year um and we continue to move forward but something that we know uh and after looking at some of the cost proposals I can now affirm additional funds will be needed and so we need to seek a half a million dollar year operating
appropriation increase to support uh the continued uh Systems Operations of scholar track which is our financial aid system hundreds of thousands of fers are in that system every year as well as Chads our data collection system that does the type of analysis that the
commissioner was just speaking about uh as well as uh additional systems uh some smaller some larger uh one of the big priorities over the next couple of years is integrating the CTE system enters better into uh what the commission has so that we have a better ability to
report um on the outcomes for our CTE students not just through that system but maybe combining it with what the department has available what the commission already collects and so half a million dollars a year we believe will provide that and additionally uh we are seeking right around $50,000 each year
to support benefit cost increases uh this is based upon guidance that the budget agency provides to agencies my my estimation is that either all agencies will receive this or none will um but that is what we are seeking there and then uh something happens about once a decade in Indiana thanks to the
interesting nature of calendar and that is that there are actually 27 pay periods that will hit State FAL year 2027 which is substantial I want to say I heard up to at around $45 million Statewide is what that cost will be in the second year of the budget uh our
share of that cost is about our general fund share is about $220,000 U which is not something that we can um quote if you will uh in that year so we will be seeking the state to maintain that payroll commitment fiscal 2027 that means the Corporation will
come down in FAL 2028 there'll be a little bit of bup there and again this happens about once every 10 years it's the second time that I have seen it any questions on University budgets well one other thing I would note um I shared the fund balanc status of 2% C Scholars
frankco bandan Grant in those major programs a few months ago I will only add uh that the commission will be hearing I believe next week uh on the Frankl Bing Grant and schedule of awards so I won't spoil any of that today other than to say we are not seeking additional State appropriation for
either of those programs this by in sure go ahead question I know we're unveiling a new dashboard coming up will the support and maintenance or enhancement work it contract support great question actually no uh that's all done inhouse
with with with staff uh through I think tau is where a lot of that is done I will say that ched the system the system behind the data behind the platform will be supported through this contract but the actual dashboards themselves are all all done inhouse um there is what we
have seen over the last several years is there is basically there is some number of annual changes the general assembly makes to state law regarding financial aid if we don't go a session without a change and that requires a fairly high lift in the scholar track system to make modifications as I assume it also does
on the institution side if with all of that so there is some care and feeding costs uh that have over time and then additionally there is a I you know Michelle Josh could say better NeverEnding backlog of system improvements that we need to make or would like to make both for the
institution's benefit for ours and for hoers uh who engage with the system and so there's also this estimate includes an expectation of some amount of improvements every year outside of just the care maintenance this is more of the minua are you looking at of the contractors
offshoring or is it going to be all US based yeah I think we had three Indiana Indiana based companies uh bid if I recall correctly but they're all US based that's just a quick follow up on that same topic that 500,000
budget not a huge number by any means but on the clip side it's tight budget year and lots of confirmation there are you you have any heart burn over the kind of the overall message and story around the need to increase our capabilities as well as the increase
that comes alone just because of all the new as an example CTE and all the other responsibilities that have come to the commission um is that story solid and you feel good about yes and great question and I would
say really this request in particular that request in particular and well to some degree operating is too you know we are requesting these things in lie of Shifting cost to financial aid programs or other programs um generally speaking when Indiana code creates anything uh
it'll create a fund for it and part of the fund language has something to the effect of the cost of administering this program or administering this fund maybe paid out of the fund so several years ago during uh the micro recession we had in the pandemic uh the commission shifted a fair amount of costs to
various programmatic funds and financial aid funds in 2023 one of our major requests of the general assembly was to pull that out which required State funding because you may recall uh there was a around 7 to 10 15% funding reduction for for state agency in
programs uh that year so that was granted so we are in great operating shape um but to your point uh the combination of maintaining what we've already been given uh like things like great question about CTE currently cte's system is funded entirely out of well
not entirely almost entirely out of federal funds uh and the reality is uh we will need to utilize that share of money as part of this but it is if you're spending $200 $300,000 a year to maintain something it is substantially more expensive to recreate it or even to
Port it over to a new system or technology so the short answer is I think our message into the general assembly is we do not want to erode the programs I think the commission that's Phenom per the commission ises a really good job of not paying for
administrative cost out of our programmatic funds um but at the end of the day we have to maintain scholar track we need to maintain sheds and interest and things like that if the state is not able to provide additional funding eventually we will need to seek uh shifting of that expenditure across
the different cost centers does that help perfect thank you so Seth the increase isn't because the contracts are behind it's not new cost it's because of the new capacity that's needed it's new work right a little above a little above the commission had uh for SE early on
when we developed these systems had in-house uh IT staff uh and we no longer do and I can share with you the state cannot compete for those staff uh even if the commissioner and I made it a priority to do so I can say with some confidence the state would not allow us
to for compression purposes um we work really really closely with the Indiana office of Technology uh who does house a number of developers and and it professionals um so some of this is an increased cost over time those folks are
at an all-time high in demand and you'll notice we're not asking to build a new system today uh we were actually able to roll out Chads 2 uh which you know for all its purposes it's Chads for the for the reason you need to know uh but for our University Partners there was a huge
lift uh and we were able to fund that off of some old programmatic carry forward for several years and was kind of a slow burn so we're not looking to build anything new with the half a million dollars it really is to maintain what we have but part of that maintenance component is this new part
of the commission CTE that had its own system that when we passed the 23 budget we did not anticipate meeing funds to integrate those it systems so there's always a little bit of new in this space but generally speaking the half a million dollar increase is the Delta between what we had allocated for staff
several years ago versus what we anticipate this new contract uh that we're currently scoring to come in at and I think I would add set that that's been building Josh probably number I heard one of that in the last decade or so or last X number of years the
additional program responsibilities that have come to the to the commission I thought you had I'm pulling it up we work too closely thinking like since 2015 we've had 51 new legislative requirements ad mention a significant number of them are data request
requirements which require this system to do things that we had had not when it was built however long ago anticipated that do uh all of the new financial aid programs cost and have care and maintenance that have to be done so yeah this is necessary for us to do what the
general sing wants us and and please no thanks Josh I knew it was a big number bigger than I I was thinking you know our Point has been not lying about I mean it's just right point it out
every that's right exactly public both of these SK tracks and sheds are they proprietaries they yeah they are custom built software applications okay they've already been built though okay at a later time I'd be
curious to hear what is the long-term sustainability on that have to discuss it now but anytime I hear proprietary it dollar dollar sign start showing up I will say that's a conversation regender has on a regular basis and with inters
something we're talking about right now with the CTE team is is there an opportunity for an off-the-shelf solution uh you know I learned just last week that almost every state has a custom buil solution for interns as well uh even though it's a I don't know how many decades that that Federal program
has been around so Point well taken I think it'd be good a good opportunity to bring regender board and kind of talk through at very high level all of our systems and have that conversation so we can absolutely plan for that I would like that because you know I want to anticipate down the road what are we looking at and the state in general at a
very high level has been uh very focused on reducing duplication consolidating where possible uh so that's constant conversation between our business intelligence team and our Enterprise solution team um and so I I think that Mak for a great conversation foras that
thanks okay now for the really exciting stuff uh now that the universities have heard what we're asking for for our agency budget uh any anyways we'll move forward with a university budget requests um something I want to highlight here very quickly I should have done it earlier is
when we speak about new money or percent of new money we're always comparing to for this Bia fiscal 2025 the current state fiscal year that we're in so we always compare the two New Years against the last year of the ending the soon to be ending by so again we're comparing to
the current state fiscal years become good this conversation as the commissioner mentioned our number one priority is operating funding for our instit tions uh it directly bues down the costs for students there's a reason there's a resident and non-resident tuition rate um probably more than just this but
we'll take a lot of credit for it uh and so with that in mind our first recommendation is a base adjustment uh this is an inflationary increase for our public institutions of 1% in the first year and 2% in the second year another way of saying that is one and then an additional one uh with a cost of a
little over 13 million in the first year and $27 million in the second year uh we did request a base increase Last by India and it was granted I think that was the first base increase our institutions had received in well over a decade uh and so the general assembly has shown an appetite for this uh and
again you know we think it's very important to have this mix of funding sources uh but with that in mind we're also recommending uh additional dollars for outcomes based performance funding and that would be 2% in the first year followed by 3% in the
second year uh or $27 million a year one and Ando approximately $41 million in year to again uh We've made incredible progress uh the budget committee reviewed uh our funding formula just a few weeks ago had a really good
discussion during that meeting uh as you can imagine there are always uh you know the finder points to debate over uh there are always a variety of ways to wait things but generally speaking uh I think I believe uh the general assembly is satisfied with the progress that we've made in performance study and so
we believe it's important to maintain our own commitment and our own recognition of the importance of funding dollars for institutions through a performance model and so we would recommend that the majority of these new funds be appropriated through an OP space performance funding
formula uh often forgotten of there's several uh entities within higher education uh that are operating nature that we have long pulled out of performance funding for a number of very good reasons uh the two most obvious examples of this are the IU School medicine dentistry and the me School in
purdom uh and so we would recommend that any the combined New State dollars uh that would be put forward in operating funding would be provided at a base adjustment level for those two institutions I think it's worth noting one of the main reasons those two groups as who schools are omitted from
performance funding is because they aren't really growth model right we talk a lot about our model is a growth model while there's only so much growth you're going to do with the school of medicine only so much growth you're going to do with the best school they're already extremely high performing they're at both at near 100% on time completion
rate so the reality is they are high performing entities uh but they're also professional colleges schol and so it doesn't make sense to put them through the same model that we're putting Bachelor and Associate degrees to this performance funding model so we would recommend to continue the commissions and the states commitment to those
entities by again increasing their base operative support by that combined 3 and 5% Seth what just for reference say what were the recommendations last bium and what were last couple I get the next slide I'm sorry you're you're thinking ahead of me
I got the next slide J there in just a second okay and looked ahead sorry yeah and also for others who are not on the commission who joined us I know you're all taking notes photographs and all that I think there's some extra copies of this on the back table if you're
interested and by the way AR you're I but in total what this what this recommendation means is for operating Appropriations to the institutions this is you know the greenest of green dollars uh it buys down that cost to to boost your students
uh it's three and 5% which is about $46 million in the first year followed by $76 million in the second year you know I do think it's worth noting this um I I had a conversation with some folks last week following a budg of productivity committee and I may mention that the committee but I do want to be very clear
the $41 million in year two of the bayum um and the 27 ion uh in year one of the BM are likely not entirely to be earned you know we we awarded right around 74% of the dollars that were made available in the uh second year of the current Bia
and so we I do want to also recognize that 45.5 million and 75.8 million likely will not be appropriated through these will not be released through these dollars to the institutions now we believe uh we have done a sufficient job making challenging and attainable goals that most of those dollars will be
released but I do want to note that realistically you know we we won't expect to see a 100% of these incentive dollars earned each year that is kind of a core component of the model something we've talked a lot about though is finding ways in which the general
assembly could buy into keeping those dollars within the higher education pool and so we'll continue to have those conversations with them they made very clear uh last buing it that a nonreverting fund wasn't something of interest and frankly the general assembly has taken a Keen Eye towards
our critical eye towards noning funds generally and broadly but I only want to note that we will continue to advocate for any dollars uh that are unearned uh being maintained for some sort of Student Success purpose uh within higher education and so we we'll continue to
work with legislators on that um you know we've heard from a number of legislators specifically about opportunities uh to enhance Student Success with things like the 21st century Scholars Program uh who already complete at a much higher rate than their low years so there's probably
opportunities for more wraparound Services um you know General Assembly invested two years ago in University of Southern Indiana uh bridge program uh and so it's clear that they're willing to invest in students theyve provided $25 million a year to the commission for Student Success uh program or College
Success program which we used to fund to the coaches uh at our Pro public and private institution this year so I want to note that we will continue to seek opportunities to keep those dollars in higher education but they are all new dollars still reallocation as part of this recommendation
sorry Nancy just has a question whenever you're ready Nancy yeah thank you and I just um I want to apologize that I am GNA have to drop at 9:30 so if we don't get to the vote I would I would vote for this um but I I guess I would like maybe
this is something the bpc can do um as a side project but thinking about the earlier conversation and Dr lock Miller's research brain that lets us know that there is you know truly correlation and likely cause of spending
and attainment that I mean if Indiana is serious about reaching our 2020 goal this money won't get us there and I know we have a lot of wonderful programs and and things that are going to help but I would be interested in
understanding how much money would it take if there really is that correlation for us to reach our goal and you know up our ranking similar to what North Carolina and Georgia did and in that case I would say that this is a very
responsible budget especially looking at what's expected for the state revenues um but it's not aspirational so Chris pleased but not satisfied love that Nancy thank you we we we will absolutely dig into that
those are exactly the kind of questions we need to be asking yeah and Nancy I just add to and I know you know this but for the members who weren't able to join us for the budget and productivity committee meeting last week the initial the uh introduced and initial staff recommendation was 2 and 3% operating
and we heard very clearly from commission members that that wasn't aspirational enough so we did increase it to 3 and 5% um something I would I would note and the maybe The Balancing Act if you want and Nancy I just want to stress how much I appreciate that comment uh because we we heard that loud and clear last week but I will say you
know part of my responsibility I think to this commission is is also making sure that we can put the Commission in a place uh as best place as possible to be successful uh come this session with the general assembly and something I would note and the reason we started the presentation today by saying here's what
1% of new state revenue looks like which is about $210 million is by the end of this presentation we are asking for a much larger share of any new Revenue uh than the share of the total funding P we have today so I would say our message to
the General assmbly is we need to G the higher education needs to gain ground in funding um as a share of the state budget P your point about what it would take for us to really move the needle um hundreds and hundreds of millions of
dollars and just to be frank uh we looked you know at a very high level uh I know I'm a little early here in the side eye but it it would take a substantial increase in funding uh in order to move us up you know to the middle of the pack if you will of of State funding and part of the reason is
because it's there's such a compounding nature to it states who continue to prioritize higher education that builds over time and it adds up very quickly um excuse me so we'll keep that in my n moving more I do just want to stress my appreciation for your content yeah and I
I appreciate that and I also recognize too there's many competing priorities on this money and you know there's also I think some some support potentially of you know what do do investments in early childhood education do what do investments in K through 12
do you know I do think that there are there synergies here if we work across the educational platforms and look at the funding at at every level um but just wanted to to get that out there but thank you this is good work I think what Nancy raised Seth just is you know we're
we're zeroing in on North Carolina and Georgia and I think the concept of benchmarking to higher performing higher funded States is a brilliant move what that allows us to do from a research and analytic perspective is begin asking adequacy questions about
funding which has been done significant states of the very rarely education and that's primarily I think the argument that needs to happen policy bank which is they need to understand what you just said that hundred million y been our
aspiration in terms of that reversionary element of the performance-based funding um why wouldn't we go ahead and begin that process of letting them know should we include that in our in our presentation recommendation I mean or are you planning to kind of do that
kind of between the SCS I mean formalize that great question I think it would make a lot of sense to include that as a formal recommendation as part of the budget that we identify best path for the general assembly um I I think the the the Nuance the reason it's not
necessar on the slide is because there's so many ways to do it and most of those ways are really by uh changing statute so it's not just you know most of the presentation you're seeing today is what number to put in the budget bill and the reality is this issue because it is a
statutory issue funds revert at as a default uh it would take statutory changes in order to make that movement which means one or more legislators need to carry that issue and prioritize that issue different avenue but yeah M but say I would very much welcome you know as part of the commission's former
oration commissioner uh that we include because I do have one other little component at the end similar vein regarding the capital review threshold uh that I would love we would love to be able to go even as early as next week and say as part of the commission's uh recommendation because we are statut
obligated to make uh really broadly legislative recommendations to the general assembly governor's office I think it's perfectly within our realm to say additionally not just a monetary request we would request any monies unspent be utilized in this way and I I
really think my perspective the real value here in talking with the institutions is you know highlighting those dollars are uh utilized for some sort of Student Success efforts so to Mike's comment and appreciate that the
think you said in 25 we were at about 75% of the performance funding goals were met and therefore dollars allocated when we made the change to the formula I think there was an expectation that it
would be a learning curve to some degree on that you would get to a a place that in a sense that settles out is 75% the expectation that that will kind of be where things settle out and if so is there how do you think about that I
that's a pretty pretty good siiz Delta that's a great question and the range was by was about 65% all the way to I think almost 90% with the the campus by campus range so there were significant variance there right uh this gets back to commissioner member Bland's comment I
think about a year ago not quite a year ago and asked similar question of how do I feel or how should we feel about 74% funding distributed um you know at the end of the day we want every single dollar to be we want every dollar the general assembly appropriates in higher education to stay in higher education I
think the counterbalance that is if these dollars are going to be based off performance there has to an expectation that you aren't going to earn it every single year if you do I don't think it's a performance funding formula or at least a performance Improvement model um many institutions have put forward a
number of different ways in which we could measure performance U but it wouldn't be a performance Improvement model if every single dollar appropriated was distributed because of that under the current model I think somewhere around 80% is probably a logical point to say institutions are
performing they are growing the states uh goals are being moved toward but at the same time there is still Improvement there there's still opportunity to do a little bit more I think the bonus piece that we put in the model uh will help a little bit here in recognizing exceptional performance in one and more metrics providing a little bit of
additional dollars uh for fiscal 25 that would have awarded about 1.4 million additional dollars so it would have gotten us almost to 80% funding distributed from 74% um I don't know if that answered your question perfectly I know that's I think especially for new members uh
understanding kind of how this works is important yeah and hearing it multiple times way the way I remember things uh anymore so thank you and and by I agree think more we talk about whe whether the slid beginning right our attaining
weight so more we talk about the better uh you know but also just to serve sort of as a reminder for some some of us who've now been doing this together for a couple years but also for benef members thinking about form a side of this we tried to look very seriously looking a
couple of years ago that not just what has been done historically or what's being been done in other states but what's done in other sectors like the private sector and that in the private sector as one example you know a a
performance bonus whether it's short-term ensive compensation whether it's a operating companies benefit that they receive as they go into a new fiscal year and so forth that just can't separate accountability
incentive and I think to me that's what you were saying said there's have to be inextricably tie and that um yeah you know we sort of end up in that not quite this as I think of sort of that par range 820 um when you get in that range
you're probably getting something pretty well things are stretch you're actually making improvements like to your has increased after 12 years deployment or the completion rates
we'll tell you more efficiently probably next week with for for Ty for 10 so those right but you have to keep those things in mind as as Seth said you I think all of us would love to see every doll go to the institutions on behalf
the students but yet we wouldn't if those things didn't improve right back to our and back to our sh responsibility how how can we find that t and by the way we all know this right will not be with
um heard some economists the other day on a podcast over the weekend they were they were laughing about something that I thought couch my I thought it was the only person found humor in that that you know you talk about equilibrium in economics it doesn't really exist you it's something to which you always strive that get
something that's pretty close and call it good which is also been continue to try to on the on that piece of the fund it isn't perfect and better be taking something each each year to see how M yeah other thing I would add
here is during the budget committee uh discussion we did receive a question from a legislator basically asking is the bonus just a giving you know not so many words and that's where I had to reiterate you know it's through perform you're only going to be awarded those dollars if you exceed a goal that the commission sets in one of those metrics
so I think that's part of that natural tension um and the only other thing and this is again for the benefit of our newer members who may not be as aware and I promised myself wasn't going to talk too much about the Legacy model but I think it is important for that perspective component that you know the Legacy model there was certainty every
institution knew exactly how much dat appropriation they were going to see but almost every single year one of our institutions received less than they had the year before they had certainty but they're certainty was a 1% funding cut not a 3% funding growth and so I think there you know this idea of certainty
Cuts both ways and so we traded off a little bit of that funding certainty by saying you won't be cut it's all Base building but that means you aren't necessarily always going to earn every dollar appropriated and so I think to make sure that operating funding does its kind of one of its three goals uh
which is to you know get funds of dollars to offset that cost to students I think there's opportunities for us to enhance Student Success priorities across the campus we've learned a lot in the college success program uh about what works and doesn't work uh commissioner as we've gone through different committee or commission
meetings at campuses we've heard from Student Success coaches 25 scholar students there are still gaps uh that can be filled from a from a supports and services side uh that will drive the economic uh you know benefit of these students completing scholarship program
by graduating uh I would note on the screen to your question Dan a comparison so we recommended six uh in the 23 budget uh the final budget was 4 and 6% this new
recommendation is three and five so we are asking for slightly less than was appropriated in 2023 um I you know I would argue uh I will be frankly ecstatic if we get three and 5% uh because I think realistically we're going to be looking at a 2 to 3% new
funding in the budget we'll know we won't know that for sure until December when we get the December revenue for uh and we'll provide that update to the members in January uh with those monthly updates as we go along um but we do believe that you know 3 and 5% in this
economic condition is frankly more impressive than 4 and 6% was in 2023 based off of you know literal billions of dollars of new state revenue I think we spent four billion dollars or more this each year this by than we did last
bym so the number two priority uh are those formula line items because in reality these are operation funds uh they they they are more specific and that they have to be used in certain ways generally speaking um but we do believe that we need to maintain our commitment to this funding component of
the higher end funding um budget so the first would be to accredit maintaining to $50 per credit hour that's only for Technical and high priority uh dual credit programs which is somewhere around half of dual credits uh that are uh offered every year uh this equates to a little over a $6 million year increase
over the current uh buying most of that's being driven actually by I Tech who's going to see almost a 31% increase but that's because the production of credit hours has dramatically increased so the way we do this is we base thatat appropriation number off of the fiscal
23 or the Academic Year 2223 data uh that's what we have uh in place when we're putting this all together and so the reality is uh that funding increase is entirely driven by the increase in dual credit credit hours uh our high school students are are taking some
institutions declined a little bit not substantially there's a variation year toe um and then some institutions IU vincens others saw significant increases as well uh everything pales compared to the growth that I Tech is seen in high priority and Technical dual
credit and then for the RNR funding formula uh the commission has maintained this funding formula for over a decade it's based off of a inflation adjusted um um recognition of the cost of all the facil the academic administrative facilities on
campuses in addition to infrastructure so if you have a building and three4 of that building are classroom space or instructor space uh then of that building goes into the funding model essentially uh this is largely being
driven by inflationary cost increases in building materials uh that's a huge component of this um but on average uh campuses are receiving around 10% increase and then Statewide in total it's a 12% increase or $5.7 million a year and these are dollars that are
intentionally uh utilized for RNR ones or preventative maintenance right so these are not dollars that are going to build a new building or got a building build a new building but these are dollars that may do you know uh may replace an air handler or may replace a
roof over here um and the institutions submit those uh expenditure to the budget agency and receive reimbursement throughout here uh and then you know other line items institutions uh requested substantial uh a substantial volume of new line items total new requests were
$13 million each year uh and increased request for existing line items was 11.6 million in the first year and 10 million in the second year uh so again when you compare that to the operating uh request of 40 and 75 this is substantial you know these lineup items are the
significant way in which the institutions can receive operating support uh for enhanced uh opportunities on their campuses uh but because of the uh prioritization we've been speaking about our recommendation is that uh we
ahead uh that we do not include as recommendation any new line items or substantial or increases to existing line items uh but the flip side of that coin at the same time is that we would also recommend we not actively get in the way of these uh I'll talk about that more just one moment what we are
recommending with line items that we've been working with the institutions towards is consolidating several of these what I'm calling operating adjacent line items into their operating appropriation uh I think that's important for a lot of reasons many many many of these line items have been around for a decade or more and at the
end of the day they have they have been uh so institutionalized at the campus that it's just part of the operations at the campus there isn't this unique little business unit over here responsible for its own revenues and expenditures and this is a substantial component of that these are operating functions of the campuses and so there
eight of them have been requested by the institutions uh I would actively support the consolidation of all eight of these it's just under $17 million in total uh it's important also to note in addition to just consolidating and removing some amount of confusion about what is this
thing every two years uh this is also a way we can grow the University's base operating budget because the way in which we would apply this is we would consolidate that line item before before we run the calculation of new funding so when we apply 3 and 5% it'll be to the S
$16.6 million slightly larger number than otherwise would be and so we again think this is prudent uh we think this just recognizes the reality of campuses there are many many many line items that would not be Consolidated under this approach uh and for the most part those
are Lems that are so new uh that the institutions would prefer to maintain them there because of specific in interest Intrigue advocacy by members of the general assembly um some of them however are completely Standalone units um and it doesn't make sense to
consolidate them with the institution in many instances because the institution is subsidizing those units already and would like to maintain the ability to tell the general assembly of that substation that's going on um but also because they're completely different things historic New Harmony is a great example uh the state uh you know
requested USI to support historic New Harmony I know you know a lot about this uh and while the institution does utilize the space for some academic purposes it is a stand alarn entity in and of itself it is not USI if you will uh they're the caretaker uh but they
also spend about twice what is appropriated to it every year to maintain those facilities and so we would not want to consolidate those that really aren't just operating in Json in nature I would just say also at the uh at the the budget committee discussion
you know we talked in in pretty pretty extensively about line items and what and our feelings about line items and and we would just emphasize that legislators should should SC should scrutinize line items and really I mean do it in a in a in a very intense
fashion as to whether these really need to occur and also when they do approve them that perhaps they uh set a sunrise or say you know we're going to approve this but we want we want to review it at a future point in time to to ensure that it achieved what they was promised it
was going to achieve that it shouldn't be a perennial uh line item going forward and we would much rather have these programs as we're consolidating these into the operating uh budgets incorporated into the operating budget if indeed they achiev
what they supposedly achieved what they were poorly going to achieve that's just a philosophical approach that we want to encourage legislators to to take and my thanks for saying that the thing that I was going to add again you know that we I know bpc members have talked a lot
about others on the commission and things those who aren't necessar PR we just have a fundamental opportunity to look at things like this you know from I believe perhaps a business
lens and better governance lens if you think about initial Investments like Seth just describing it at some point in time in an Enterprise you determine do we no longer do this because well
or is it something that we're going to declare as a standal on okay in the Enterprise it's got to get so much attention it's going to be standing there on its own or be incorporated now you might spend out too there's always that ining possibility some of those be
SP out um for another day um or generally speaking you end up incorporating it into the Enterprise and it's part of the budget right so this is to me that first chance to really say yeah we can think about this a little
and you know Al also just thinking of an Enterprise we're starting to talk more by way we're not going to stop about Horizons even for the agency and what we do there's some things on Horizon 3 we we think we should go Frid this and you ought expect from time to time we're come back and go hey by the way that
didn't work the way with thought and we're planning to shut it down whatever that might be so anyway I appreciate you adding that in because we're we're trying to um you know after that kind of mindset too so that they don't end
up things that are sort of outside of you know the way we might want to think about this big ecosystem Enterprise by and not to belabor that just similar but a different way additional way of
looking at that and I realize all line items are not created equal historically or in the future but quite often what what you're doing I think in using the legislature using this tool and us whether we endorse it or not that the way what it's doing is helping to drive
some Innovation right uh and drisking some of that investment in innovation in a sense by the state coming on board to help see if this might be an improvement to ex whatever it is but you don't just
do that to the point and just logically leave it out there forever yeah the other thing I would add and thank you Mike very much we did have that conversation you know I think one of the the challenges I have when I when I'm reading through these lineups right
of you know there's there's there's infinite opportunity to to make a nitpick or to improve upon or add to them Etc um but I think at the end of the day the the historical reality is very rarely do these line items take away from something the commission is pushing for they're almost always
additive and it's because of that that you know we talked a lot about the need for additional investment and higher education you know if the legislator feels very strongly that this line item right this programmatic thing they want this institution to do um is important and they're able to Champion that I
think there's a really there should be high barrier to opposing it outside of it coming at the cost of other commission priorities so great you know again great example here is you know as we've said we're and I'm hearing again very clearly today we will continue to Champion oper Champion operating
increases if we get to a point where the general assembly is not champing operating but they are pushing for these other LS think there's an opportunity for the commissioner then to be more intentional about no we we really need you to fund op base operating growth over here over these things over here
and I think that's part of the prioritization component to this that we think is really important seems like when I look at the eight that you requested be Consolidated the overarching argument was that selecting things in Al line with the Hope agenda and that you're saying that
if those perennial priorities align with the Hope agenda they should be part of the institutions operating budget rment so the narrative actually speaks to coherence between work's agenda and a funding request and to Mike's Point and
to Dan's point about Innovation the idea of pitching an entrepreneurial spin to the legislature to say we want to try this for three to five years and other states do that well and it creates some really novel things and there to
do number three capital uh we received 19 Capital project requests from the institutions uh and I do want to we had this conversation at the budget productivity committee and I do want to stress while I have no doubt that every institution would like for all those capital
projects to be supported and appropriated um I just want to stress that we had no institution submit only one Capital project and I think that speaks volume towards the intentionality with which this body is made clear to them uh that a number of things one uh
we don't want to be backed into only sub one project right there needs to be a really healthy review I can say with a high level of confidence we have reviewed these things to death I think I've read through them four times each uh I've got 15 different spreadsheets on them but I do appreciate that they
provided more than one project each so part of the increase in number from what we've seen in the past is because of they're trying to be uh you know supportive of this review process this more scrutinized review process I would also say that uh the institutions know they're not going to get we're not going
to fund a billion dollars uh of capital uh from the commission's request based on his history at least uh that being said I'm sure you will have some number of Institutions who would like to see us recommend more than we but we'll get to that just a moment so the the total uh
cost the number one priority of reach institution is 464 million which comes to a little less than $40 million of be replacement number two priority almost $300 million total uh which is about $25 million in fee replacement and all in again over a billion dollars in capital
requests which would take almost $90 million a year in fee replacement to support se you might explain what fee replacement mean absolutely thank you y thank you so uh essentially the state commits to fund The Debt Service of these projects when they are financed in
that way uh in 2023 the general assembly appropriated $650 is million in cash to fund capital projects and actually we've seen uh construction uh starting at those projects in the last few months uh and the commission has reviewed those
projects in the last year as they've come back through so that is not the most common way Capital gets funded uh for the you know majority of higher ed period at least the majority of the last couple of De the general assembly has chosen to fund
Capital through Debt Service and we call it fee replacement because essentially the state is replacing the the cost it would take student fees to cover if the state didn't provide for it and also noted statute limits the ways in which institutions can take out debt and one
of them I'm get the nameing wrong but essentially is student fee replac or student fee debt supported debt and so this replaces that so when I talk about fee replacement it's just the state issuing or the state paying the debt on the instit utions behalf for longer than
returns and so the 40 to 25 to $87 million that's the annual estimated annual Debt Service cost for 20 years so this is all in a 20e Time Horizon this one so is Debt Service Clos of Interest yes right yes so that'd be principal
interest and I know it's an estimate um because we do not control the terms the parameters any of that stuff um but do you work with any of the Finance Authority and the state budget agency every two years years uh to come up with an estimate our current placeholder number for those that are interested is
5.75% that is going to be high for some institutions um some institutions based on bond ratings can do better than that uh but that is the number that the budget agency and the Finance Authority recommended to me when we put this together uh and we always want to be somewhat conservative to make sure that
there's never any shortfall and then any unneeded dollars do rever back to the state they are just left out there we do have 15 minutes left just letting you know okay I will start moving uh so one thing I want to know is
as this is the state's Debt Service the state's commitment to funding the St Service uh over time as old capital projects are completed the debt falls off the books and so we're looking at in the second year the bingum almost $1 million less of State appropriation based off of projects uh supported 20
years ago that are now rolling off the books but interestingly if you go back to 2021 fiscal 21 we're actually going be about $51 million a year below where the state appropriation was was for Capital debt at that time part of that is because of the cash funding of
capital in 23 part of that is because the state provided no Capital funding in 2021 2019 was the last budget bill when there was fee replace or debt uh financed Capital Pro drives I'll try and move a little
faster okay here's some high level analysis uh I won't go too in depth on here as you have it in front of you but I'll just note that there's only one true new new building request as far as brand new square footage and that's produce uh life sciences facility which
is largely the research facility uh I will also note that because it is the only brand new net new square footage uh for its entire project it's also 45% funded with gift Fones and so it's $150 million building they're bringing $70 million to the table and asking State
for the Delta uh so we do want to highlight that ivch ter hope campus restructure is a new facility it also includes renovation but they're demolishing more space than they would be building so it's a net reduction in square footage but they will end with a new building at the end of it then s
similarly uh there is about a 40,000 foot remodel there's a 25,000 foot addition uh and so there is some new square footage there but the majority of that project is a renovation project uh as far as speaking of Renovations uh I'll I'll leave this here
these projects are entirely with in their existing square footage these are tackling deferred maintenance and Renovations uh on the on those campuses at those locations uh and I will know IU is a little unique because this is you may recall from our recent visit in
Bloomington uh the biology building uh which Tom pointed out to us on our tour is the building that would be renovated they renovated their labs in that building uh using uh institutional resources I think specifically using uh Federal uh research dollar uh capture
but uh they are also so the other half of this is the the classroom space which is about $ 45ish million dollars of the project the other half of the project the larger portion of the project is the installation upgrade uh at their power plant so they'd be adding a new power
system and updating all the lines to a number of their science bills so it is a little bit unique and I note that because on this slide when we talk about the cost per square footage it does not include the power plant as that cost for square footage uh it is for a lot of reasons a very dense
space with an extremely expensive mechanical equipment so this is only looking at the academic component of it uh but I do think it's worth noting that cost for square footage and you'll knowe most of those Renovations fall within that $4 to $500 um cost per General Grow
square foot uh eight of these 19 projects were requested in 2023 I think that's really important to show the continuity the institutions in their cital planning uh there is not a lot of surprises if you will so again we do appreciate them continuing to uh request or provide more
information on those projects coming down the pipeline but something that won't surprise you is cost is increase uh these projects do not cost what they would have cost if weely two years ago and so finally that brings us to our Capital recommendation and we are recommending
to fund the number one Capital priority at each institution I want to spend a little bit of time talking about how we land into this decision you know first I want to note that the overwhelming majority of these projects are tackling deferred maintenance and renovation of existing facilities something that's really important to know is when I say
renovation I think it's easy to think about knocking a building down to its studs and essentially building it and building in its place what renovation really means is about half of a lot of these projects are tackling things like electrical you know 65y old electrical duct work Plumbing HVAC Etc and that's
half the project cost but if you're going to be tackling electrical and plumbing you're going to be tearing the wall into the walls and the floors to begin with and so the reality is if the institutions were to just tackle the Deferred maintenance component of this half the 2third of the project cost would be absorbed there anyway you'd be
left with no different you know facade or anything at the end of it and so there really is a cost benefit to the institution's tackling the renovation component of this um a piece where you know you walk in you're like oh this is a nice facility uh when they're going to be tackling the things that no one gets
to see that's behind those walls floors and ceiling tiles or on the RO so I hope that makes sense again I already mentioned that produ project which is the only new brand new square footage being requested is almost half funded uh with philanthropic dollars uh I Tech is
looking to reduce their square footage by over 12,000 square feet similar to their request in 23 that reduced it by some much larger I can't remember the number it was enor this uh in 23 uh as they were looking to consolidate facilities similar the project uh another example though of renovation you
know one of their academic buildings doesn't have a Sprint F system as an example uh and so ivtech actually looked at the cost of renovating the two the two facilities again with an existing footprint uh and it would cost similar if not more than demolition slight
renovation and the building of new facility that same square footage the same side and then finally across all of these projects there are significant utility savings by tackling a lot of that divers maintenance inefficient systems Coster campus extraordinary uh and so there will be
opportunity for institutions and this gets back into operating right that supports the operating budgets of the institutions which defers cost for students uh if you're if those tuition dollars aren't being spent on heating uh water or air uh they can be spent on providing for services for students or
reducing necessary revenues just to provide the same supports that are existing today here's a list of those capital projects one thing I want to note is that there is almost $1 million of expiring debt and so even though there's a 30 $9 million annual ask
associated with this and again we'd be requesting fee replacement or debt in the second year of the Bia uh with that $11 million falling off we're actually only asking for compared to fiscal 2025 a $28.8 million funding increase to provide for the 20-year debt on these
seven facilities questions about Capital see none uh last but but not least um I want to stress that I'll get to the last slide here in a minute um we
had a great conversation at the budget productivity committee about deferred maintenance about our uh there is most institutions are providing more in institution dollars for RNR than the state is when we put together the funding formula for RNR over a decade
ago the idea was uh to fund a percent over the Bia on both sides of the equation the institution and the and the State Side the has been maintaining its commitment at about half that level at half a percent over the Bayan uh for for several years and again we still
recommend that at an absolute minimum we maintain that commitment but we do believe and the committee had a great discussion about the need for more focus on tackling deferred bance through some of these larger RNR projects several of the requests that the that the commission received for Capital were
really just groupings of deferred maintenance across multiple buildings campuses and Etc right not a sexy project but extremely important because if you need a roof you need a roof if you need an air handler you need an air people and students are not going to be in a building in August when there's no
air conditioning and so it is important to maintain our commitment and so you know as the fourth priority again in ensuring and and continuing to push forward with the the order of operations there first operating SE those formula bline items third Capital but fourth uh
we do believe that the general assembly should seriously look into increasing uh the state support for the funding formula by growing it from that half the perc of bance to what was initially put forward at 1% all those years ago uh that has a nearly $53 million fiscal impact uh and I think
it's worth noting it's almost double uh what the capital annual cost would be at that debt financing level uh and so at the end of the day uh we recognize this is expensive but we need to do a better job of supporting the state's previous investment in these facilities and so uh
that these dollars again uh there is a Formula it is very thoughtful this is not uh you know it's based off of the campus as it exists today it's based off when those buildings were built uh and I can tell you after going through the formula there are a lot of facilities at our institutions that aren't necessarily
large enough to come forward as an individual Capital project uh because maybe it's $5 million but a significant enhancement to the RNR funding formula to tackle that you know it'll reduce our back logage refer maintenance it'll provide uh funding discretion to campus leadership specifically as it relates to
um how they utilize and prioritize those smaller dollar pieces okay last but not least um Capital planning we spent a lot of time in the last year working on And discussing the need for the commission to modernize its capital review process most recently we heard from uh
colleagues in Tennessee we've also heard from colleagues in Oregon and we spent time last winter hearing from our own institutions on their Capital planning processes uh I just want to notes that we will be providing a draft Capital scoring rubric uh later this year and we will plan to finalize that by June 30th
of next year and provide that to institutions so they will have that rubric a over a year in advance of when they must next submit capital projects to the commission with the thought being of providing them the test providing them that rubric before they put their plans together and submit so they know
how they're going to be scored uh this would be a forc ranking system and so if there were 19 projects we' rank them one through 19 as an example uh each Capital crust will stand on its own uh each Capital crust reviewed by a committee it will not just be set scoring these things I would not want that uh and
finally uh I think this is maybe a little more P at the last thing I think there's a lot of uh thoughtfulness to including all of those projects that meet the minimum requirements at least in that fourth ranking system because at the end of the day as we've discussed here that you know we don't control the pur strings we don't know exactly how
much State investment the general assembly is going to be willing to make have delivery by India and I think providing them a very clear ranking of every Capital project uh gives them an opportunity to uh move as the revenue forecast determines in April last but not least uh also we've talked a lot
about raising the capital review threshold uh for the commission and I would love the commission's support in advocating a doubling of the capital review threshold from $2 million projects to $4 million projects uh I hope many of you recognize the number of
projects we get that are2 or3 million and you probably ask yourself why are we reviewing this um the one that sticks out in my brain was like a $2.2 million tuck point in concrete enhancement project dat a parking garage um they are required to go through us because we are the commission for education and they
were being done by in uh public uh universities and colleges uh but I do believe that it would be a better use of the commissions time that use of our institutional Partners time there's a real cost to these reviews to increase that uh that Capital review foral of $4
million that Che how long has it been a two million we set that in 2014 what was it prior I I don't want to guess it it was over a million prior so it wasn't quite doubling um I'm not entirely certain off
that questions this is just a a nice summary so what I mentioned earlier uh we're asking for about 40 and 75 million of new operating support but if you total everything that we're recommending the second year of the budget we'd be asking for $121 million above Uh current funding levels for higher education
which is substantial in but that happy to answer any questions that just to make sure I know we've covered a lot here what we're talking about the mock rating is three and 5% respected years those line items
those with pay so we will credit CH that's our budget this agency's operation talking mostly a financial aid component mostly a financial aid component uh for children to sa yeah and then the capital said that
constitutes a recommendation to you again I would I would add we would really try to all of you we really try to listen to and partner with our partners not just in high but certainly very high priority
there but also our other partners as we look at appreciate comments around what we get done through our Str plan agenda U also recognizing what looks to be the fiscal condition of the state as we had
legislative session um so with that this is our recommendation to you all of you we by taking questions comments so tell you what let's do this I ENT a motion to approve uh as presented very aily
by move second thank you and thank you now are there any specific or general comments or questions clarifications Etc that anyone just a a clarification the 59 and 121 overall but
what what does that represent as far as a percent increase of current funding more than three and five I caniz yeah it'll be it'll be more than three and five but yeah somewhere around yeah I won't
guess but it's a little more than probably four and six four and a half six and a half something like that and we can provide that likeing addition comments from I just commend you know Seth and Chris and the entire staff and also working with
each of the institutions as well as the budget committee I mean there's been a lot of work put into this and I really compliment the outstanding efforts and the great Outreach uh that has occurred and so I think this truly is a a collaborative effort that we've come
forth with uh again I think it is uh aggressive in light of the budget scenario we're looking at but by no means aspirational and I think it's still something that uh deserves serious consideration by uh our elected officials and and I hope that we are
able to achieve full funding i' say it's still not adequate but it's a step in the right direction so thanks to Seth Chris the whole team that's that's come forth here but I hardly uh endorse uh the recommendation here thanks for your leadership that's of the committee as
well as so any other comments concerns before we call the vote I just want to thank Seth for his leadership on this M for your leadership on this the MERS for supporting our education I know the numbers from a
faculty standpoint can seem ambiguous sometimes but this actually represents a pretty significant investment in my education and so in some regards it was very I realiz not a commission courts I'll defer my time to
you Seth gets lots of credit that he would never be the one to tell you so I will that I'm the one to drives him crazy on holidays on Sunday evenings Saturday evenings Saturday mornings with questions ideas consider this what about
that get that all time but also with regard to the budget so they do a lot of heavy m so they stud I just want to public acknowledge especially
set I think long way thinking about the Investments that needed half of our state us to realize so
public that thank you and not to belabor it but I'm sure I'm not the only commissioner that hears from part University Partners how respect and how much these are not always easy
conversations so Kudos okay hearing no other questions I would uh call for the vote uh all in favor of this budget uh proposal and or request and proposal uh as described
please say I I I any opposed any extensions for the good of the order okay approved thank you thanks everybody very much I think that's all on our agenda for today so unless anybody has
any burning New or Old business just a reminder that the budget presentation is uh on the 12th at 3:00 and any commission members are welcome to attend if you you'd like to I mean they'll be makeing
presentation you're welcome have support well we'll send information out thank you all nice work everyone thank you and then um commission members if you haven't gotten your parking
validation yet um the third floor get your ticket