Katherine Lyall’s statement

Testimony: Joint Finance Committee University of Wisconsin System Operating Budget

Katharine C. Lyall, President, University of Wisconsin System

Room 411 South, State Capitol March 19, 2001

It is a pleasure to be with you this afternoon to talk about the UW System’s proposed 2001-03 biennial budget. I want to thank President Smith for providing the context for these remarks.

In the interests of making the best use of your time here today, I sent you several background documents last week. I also brought several handouts that I will reference as I go along this afternoon.

While it is tempting for some to think about this as my budget or Regent Smith’s budget, I am mindful of our obligation to speak to you today on behalf of more than 155,000 students, 26,000 faculty and staff, 750,000 UW alumni and several million families in Wisconsin that have a connection to our university system.

As you know, I appear before this committee every two years to talk with you about the needs of the UW System and our 15 institutions. In looking back over the testimony of the past decade, I find that I have said many of the same things to you each time – that we need state dollars and positions in order to maintain our quality, remain affordable, keep up with our competition (which now includes both web-based and brick-and-mortar universities), remain accessible to Wisconsin citizens, and provide the educational services that residents of this state deserve and have come to expect.

These points are no less relevant this afternoon than they have been in the past. But I want to depart from the “usual” text today. I want to share the ways in which this budget request differs from those in past biennia. And I want to impart a sense of urgency about this budget – one shared, I think, by Regents, Chancellors and many community leaders around the state.

What we are discussing today is not so much a budget as it is an investment plan for Wisconsin — a plan to invest in Wisconsin’s future; a plan to grow our economy and to grow its skilled workforce.

This investment plan represents a revitalization of the Wisconsin Idea, putting the university to work addressing critical state needs. It also reflects an unprecedented level of collaboration among UW institutions and between our campuses and the state’s technical colleges – something that many of you have been urging.

I’d like to briefly review the Governor’s budget proposal and our economic stimulus package, and a few of the items in the budget that concern us. I also want to address our urgent need for positions, and for flexibility to manage our resources. Finally, I want to make a plea for financial aid funding.

Some of you may remember that we had a good budget in the last biennium, and we are grateful for the work that members of this committee did to help make that happen. But that 2.7 average annual GPR increase in 1999-01 capped a decade in which the state contributions to our university system did not keep pace with contributions from our students and from other sources.

The state funded portion of the university’s budget, adjusted for inflation, has been flat for a decade. In recent years, student enrollment has risen. So have some key costs, including funding to keep pace with new technologies. In 1990:

* Our buildings and facilities were ten years newer; * The Internet hadn’t been invented. People didn’t have computers on their desks and distance learning didn’t exist. * We hadn’t yet mapped the human genome (research didn’t require the sophisticated tools we need today); and * Our libraries were better able to keep pace with the explosion in knowledge.

It is also fair to say that state priorities have shifted away from higher education.

To put this in perspective, at the time of merger in 1972, the state devoted 14.4 of its overall budget to the university. A decade ago, 11.4 of the state budget went to the university. Today, the state devotes just 8.7 of the budget to UW, and that percentage would decline further with the Governor’s budget that is before you.

Over the last five-years, Wisconsin’s average annual investment in higher education of 1.9 percent has trailed Minnesota (4.4), Michigan and Iowa (5.2), and Illinois (6.1). This is illustrated in the chart and table in your handout.

Part of the reason for this goes back to the state of Wisconsin’s economy which has not enjoyed the growth of some of these neighboring states. That is why we think the New Economy budget proposal you are examining today is so urgent. It will set the course for Wisconsin’s economic performance throughout this decade.

Our original request was based on the enrollment plans for each campus and former Governor Thompson’s three key UW priorities: teacher education, economic development, and technology transfer. It focused on helping Wisconsin make the transition to the “new economy” by:

* graduating more students in high-demand fields; * converting our cutting-edge advantage in biotechnology into spin-off firms with new high-wage jobs; * increasing the transfer opportunities for students between the UW System and WTCS; * preparing more teachers; and * serving adult students better.

We sought an average annual increase of 3.7 in our base budget to accomplish this menu of outcomes for the state, including preparing 8,300 more students by 2007 in high-demand skills areas and leveraging $20 million in matching private funds for the second phase of the Madison Initiative.

As you know, toward the end of his budget planning, Governor Thompson left for Washington, D.C. and Governor McCallum had only a few weeks to put his own stamp on the budget. He set himself some very tough parameters and has made addressing the structural deficit, fiscal responsibility, and developing a cushion for possible declines in tax revenues key themes of his budget. Governor McCallum and DOA worked closely with us in the final days of budget development to provide as much funding as they could for some of our key initiatives within these very tough parameters.

The Governor’s budget proposal that you are considering today increases GPR spending for the whole of state government by 3.9 and 2.9 in each of the next two fiscal years. By comparison, the UW System’s proposed GPR increase is 2.9 in the first year and minus point 3 (-.3) in the second year – for an average annual 1.6 increase in GPR/fees. This is less than the 1.9 increase that higher education averaged from 1994-95 to 1999-2000.

The Governor’s budget provides $59.6 million GPR earmarked for costs-to-continue, debt service, and utilities which is critical just to keep current operations going.

There is also $8.7 million in new GPR funding for a few new initiatives. But at the same time, the budget also calls for a $12.7 million base cut. We are grateful that percentage-wise, this is the second smallest cut among state agencies, but we are concerned that dollar-wise, it is the second largest cut, equal to state support for 1273 students. When we factor in that $12.7 million base cut, we are left with a negative four million dollars (-$4 million) to carry out new initiatives.

The handout that you have received summarizes the funding that is in the Governor’s budget. As you will note, the new initiatives are largely funded by tuition dollars. Given that, this budget would carry a tuition increase of 2 percent which compares to the 3.2 percent tuition increase requested by the Board of Regents in August.

Without those tuition dollars, we could not begin to tackle these new programs, but we need more GPR dollars to restore the proper balance of GPR and fees (2/3, 1/3) for new initiatives.

I very much appreciate the Governor’s effort to provide critical IT funding ($7.25 million) from Wisconsin Advanced Telecommunications Foundation funds for distance education through Learning Innovations, to connect all our campuses to Internet 2, and for wireless connections.

This is the only IT funding for us in the budget, and, while it is one-time funding, we urgently need this support for our distance learning efforts during 2001-03.

Please note also that the operating budget does not contain recommendations either for our compensation increases for faculty and staff or our capital budget. In the past few days, the Governor has announced some very important capital budget projects for our campuses, and we are very grateful for that support. Most of those projects entail renovating aging facilities, a high priority for our campuses.

Based on our standard peer comparisons, the Board of Regents has recommended a 4.2 increase for faculty and staff to reach market parity by 2005.

It is important that we maintain the traditional GPR/tuition split on pay plan increases to keep tuition increases in check.

As Regent Smith noted, there is much more the university could do with modest additional investment to brighten Wisconsin’s economic future. Our proposed new initiatives have gained widespread community support over the past six months. In fact, a number of state lawmakers have contacted our Chancellors with concerns that their local campus projects be included in the final state budget.

Knowing this, the Board of Regents on March 8 re-examined priorities and identified the most critical funding opportunities.

The Regents unanimously approved an economic stimulus package that would invest $20 million annually in:

* educating more high technology graduates for the workforce through the Chippewa Valley Initiative, the Fox Valley Engineering collaborative, Bioinformatics at Parkside, and MIS and Info Sciences programs throughout the other campuses (e.g., UW-Eau Claire, UW-Whitewater, UW-Stevens Point).

* completing the Madison Initiative and launching the Milwaukee Idea, ensuring that we procure the $20 million in private matching funds for UW–Madison, and provide room for enrollment growth and community engagement at UW-Milwaukee;

* establishing the “2+2” programs that will facilitate transfer of students between the UW and the Wisconsin Technical College System;

* financial aid in the AOP and Lawton programs to parallel tuition increases;

* completing the library restoration initiative begun last biennium; and

* extending study abroad and foreign language opportunities for UW students.

I mentioned earlier that this budget is different because it represents unprecedented collaboration among our institutions and between our institutions and their communities.

Let me mention four examples:

* UW-Platteville is proposing to establish an engineering degree program in the Fox Valley, partnering with UW-Fox Valley and local industries.

* UW-Parkside would offer academic programs in partnership with Abbott Labs.

* UW- Milwaukee would partner with our two-year colleges to offer collaborative four-year degree programs.

* And a number of our campuses — among them, UW-Stout, UW-Eau Claire, UW-Whitewater and UW-Rock County — would partner with local technical colleges in offering new high tech degree pathways.

These are exciting developments for us, and they represent a maturation of the university system.

In crafting our economic stimulus package, it is important to note that many other worthy projects from the Regents’ original budget were left on the cutting room floor, including our stewardship initiative — which would have helped us maintain our deteriorating, aging buildings — and our Plan 2008 funding, to help minority and disadvantaged freshmen. These items must be deferred to the next biennium.

Let me turn for a moment to the non-budgetary items in the Governor’s proposal.

One is language that would give us flexibility to create GPR positions once a year with DOA approval, but in a way that would mortgage our future.

Under this provision, we would be required to absorb all future compensation costs for new GPR positions from our base, thus creating two classes of state-funded employees: those with full state funding and those without. No other state agency has been asked to do this.

We currently have this arrangement for program revenue positions, because there is a separate source of funding for these positions. However, to create subgroups of GPR positions strikes me as unwise public policy.

Either the state should provide the GPR positions necessary to deliver services to the 825 additional FTE enrollments, and other initiatives anticipated in the Governor’s budget, or exempt the UW System from the position counts — so that we can operate and be fiscally accountable on the same basis as all other Big Ten universities.

Over the past five years, we have lost 550 faculty and staff positions. We cannot deliver additional services or enroll more students without positions!

As you will see from our handout, the ranks of other state agencies have grown dramatically while ours — particularly our faculty ranks — are shrinking. This seems ironic, considering that many of our faculty members actually generate new dollars for the state by bringing in outside funds for research. In a sense, each of our faculty represents an investment for Wisconsin.

Specifically, we need 181 positions just to fulfill the programs funded in the Governor’s budget proposal. Two GPR positions were allocated to us. We would need another 390 positions to carry out the economic stimulus package I’ve described.

This is not a question of the state not being able to create new positions. It is a question of the state’s priorities concerning which positions to create, as the table we’ve provided shows.

Finally, there are several statutory language items in the Governor’s proposal that would be very difficult for us to work with as they stand:

* The budget would create a state department of e-government. The language would give the head of this unit the authority to transfer IT positions and funding from us at any time. We cannot do business and meet our operating obligations in that environment. It would be very difficult to plan and effectively run university distance education, train faculty to use IT in their classrooms, and maintain that equipment for them with our IT staff and funding always in doubt. UW System and DoIT work regularly with DOA technology staff to collaborate on administrative systems as appropriate; we need to continue this collaboration through professional association, not the threat of a mandated merger.

* The budget also contains language that would remove the broadcast licenses for WHA and other university-run television and radio stations. It would place these licenses in a separate “corporation,” but without funding for digital conversion or other needs. We continue to feel strongly that the Regents should hold our broadcasting licenses, both to ensure the long historical connection to the university’s knowledge resources that enrich programming and to ensure editorial independence. As you know, WHA regularly produces nationally acclaimed, Emmy Award-winning programming. The state should not jeopardize this.

* The budget institutes several “charge backs” for services that we currently provide for ourselves, including a proposed charge back for purchasing. Our university purchasing is currently done partly through DOA’s blanket contracts and partly by our staff for research and instructional materials specific to higher education. Currently, we are eligible for some deep educational discounts on computing and other purchases-we would not want to sacrifice these benefits by a requirement to purchase through another state agency.

I hope that we can modify or exempt the UW System from these and other proposals that would impede our ability to serve our students well. We have listed these and other concerns in the handout we’ve given you this afternoon.

One important question is what impact these proposals will have on tuition. We are very sensitive to the need to maintain affordability. Taken together, funding the initiatives in the Governor’s budget and our economic stimulus package would require a two percent increase in resident undergraduate tuition, excluding any pay plan effects. At a comprehensive campus, this would amount to a $53 average academic year increase. As you can see from the handout our tuition would remain extremely affordable compared to our neighboring states.

An important part of this “affordability” is financial aid. The Governor’s budget contains no increase in financial aid. We urge you to give that a very high priority.

In order to maintain affordability and access, the state should provide increases in WHEG, Lawton, and AOP grants that parallel anticipated tuition increases. We are making gains on our goal of providing more access to the UW System. Without this assistance, low-income students and many students of color will find their college aspirations unattainable.

In closing, let me acknowledge that we know state funding promises to be very tight, and that you will be making painful decisions over the coming months. But even the most recent projections suggest the state will have well over $1.5 billion in additional revenue in the coming biennium. Each decision you make is a choice to seize or forgo opportunities that will determine Wisconsin’s future.

The economic stimulus package outlines investments of one half of one percent (.5) of the anticipated state budget. In return, the state would provide access for many more new students, more graduates in high-demand fields, and a package of very specific “brain gain” initiatives to spark growth in our regional and local economies.

We advocate a thoughtful and careful investment in people – young people who will shape Wisconsin’s evolution and support its growth. As you make these difficult choices, please consider both what making, and what not making, each investment can mean for Wisconsin’s future. ###