October 30, 2006

Board to Vote on FY 08 Budget

For Immediate Release
Monday, Oct. 30, 2006
The University of Alaska Board of Regents meets in Anchorage Wednesday, Nov. 1, to debate and act on a spending blueprint for the 15-campus system for the next fiscal year.  Once regents agree on a budget, university officials forward it to the governor for consideration and then ultimately the Alaska Legislature.
The regents' day-long meeting starts at 8 a.m. in Room 107 of the UAA Commons, off Sharon Gagnon Lane. Public testimony is at approximately 10 a.m.
The UA administration is proposing a $315 million operating request from the state for day-to-day expenses, not including increases necessary to cover the latest substantial rate increase for retirement in the state-run Teachers Retirement Program, TRS, and the Public Employee Retirement Program, PERS.
The total UA operating budget, with the retirement funding plus federal, private and university generated revenue, would be $879 million under the plan.
In addition, the administration is seeking $332 million in state funding for capital needs in the coming fiscal year.  The No. 1 priority, under the proposal, would be $44 million for facility and equipment renewal, renovation and code compliance statewide.  No. 2 on the list would be the new Biosciences Facility and West Ridge heating capacity expansion at UAF, at $105 million. The third priority in the capital budget would be $67 million toward deferred maintenance, renewal and renovation across the system.
"No doubt about it, we recognize these requests look large-they are large," said UA President Mark Hamilton. "But we have 30,000 students to educate, and 6 million square feet of buildings and facilities to maintain. We simply must invest in our students, programs and campuses if we're to continue moving Alaska forward."
UA's budget proposal includes a 5 percent program expansion, allowing for continuation of allied health offerings statewide, a dental hygiene program in Fairbanks, a doubling of enrollment in the first year medical school partnership program (WWAMI),  continuation of the popular industry partnered engineering program in Anchorage, and an investment in UA's competitive research.
Every $1 in state money invested in UA research leverages nearly $7 in external sources.  UA's unique arctic location provides an optimal setting for research on climate impact, transportation, energy and health policy. The budget also provides for increases in fixed costs such as fuel, health insurance and salaries.
Last year, UA requested nearly $300 million from state coffers and received $282.5 million for a total budget, including non-state sources and university generated revenue, of $774 million.  On the capital side, UA requested $250 million from the state and received $106 million.

University officials have proposed that state budget writers fund the increase in the state-run Teachers Retirement System directly to the TRS program, rather than funnel it through the university's budget first.  The extremely steep increase in the employer participation rate for TRS, at 54 percent for FY 08, was set by the Alaska Retirement Management Board in August.  The ARM board set the steep rate to cover a shortfall in the retirement program due to contributions and investment earnings not keeping pace with rising costs and other factors.

However, including the full actuarial amount in the university's budget directly would create unintended and negative consequences, university officials say.
"What we'll see here at the University of Alaska is a staff benefit ratio that is very much out-of-balance compared to what peer universities provide," said Pat Pitney, associate vice president for planning and budget development at the university's statewide office. "This will seriously threaten our competitiveness for a majority of our federal and private research grants, which represent more than 20 percent of UA revenue."
Including the full actuarial rate in UA's budget artificially pumps up the operating budget bottom line to nearly $352 million in state general funds. The proposed level of state funding minus the extraordinary jump in retirement due to the ARM board's August action would be $315 million, an amount that still includes nearly $23 million in previous year retirement increases. That amount alone represents a doubling of UA's retirement costs from FY 04 levels.
UA officials intend to talk to school districts and municipalities statewide about the direct state payment proposal.  "We hope the next governor and legislature seriously consider this proposal, which can also have benefits to K-12 school districts and municipalities," Pitney said.

For a complete look at the Board of Regents' agenda, go to www.alaska.edu/bor.
For more information, call Kate Ripley at 907/450-8102.