Proposed State Investment Model and FY 2017 Budget Proposal
For the last decade, Arizona State policymakers have struggled to define the financial
relationship between the state and public universities. With diminished public resources the
state chose to reduce its investments and place additional emphasis on ensuring state dollars
produce maximum results. Recent efforts to link state appropriations to public university
performance have successfully produced a clear set of education performance metrics and
thoughtful long-term goals against those metrics. While those metrics and goals continue to be
updated, the state can use them to define its interest in higher education and measure the
outcomes the state receives from its investments.
In FY 2016, the state of Arizona appropriated $660.8 million to the public university system.
This appropriation funds both specific state interests and general education support for
resident students:
FY 2016 Total Appropriation
$660,845,100
UA Medical School
$68,393,500
Research Infrastructure Debt Service
$26,512,900
UA Agriculture
$20,266,500
UA Cooperative Programs
$14,507,200
AFAT
$10,041,200
WICHE Subsidies
$4,094,000
NAU TGEN
$3,000,000
Regents System Office
$2,793,200
ASU Bio Informatics
$1,931,000
UA Freedom Center
$500,000
Resident Student Support
$508,805,600
All funding not specifically allocated by the Legislature is used to offset resident student costs.
In FY 2016, with an expected 95,969 resident students, the state is on average providing $5,302
per resident student.i
The Arizona Board of Regents recommends the state’s on-going financial relationship with
the university system be based on per-resident-student funding. Other state interests in the
REGENTS
Chair Jay Heiler, Paradise Valley • Mark Killian, Mesa • Ram Krishna, Yuma • LuAnn H. Leonard, Polacca • Rick Myers, Tucson
Greg Patterson, Scottsdale • Bill Ridenour, Paradise Valley • Ron Shoopman, Tucson • STUDENT REGENTS: Mark Naufel, ASU •
Jared Gorshe, NAU EX-OFFICIO: Governor Doug Ducey • Superintendent of Public Instruction Diane Douglas
ENTERPRISE EXECUTIVE COMMITTEE
Eileen I. Klein, Board President • Michael M. Crow, ASU President • Rita Cheng, NAU President • Ann Weaver Hart, UA President
university system should be adjusted according to specific needs and justifications.
Per-resident-student Funding
On average, the annual per-student cost of education is approximately $15,550. This figure
includes costs of instruction and public service including academic programs, support services
and operations and maintenance. Research and capital expenditures are not included in this
figure.
In FY 2016, the state will provide $5,302 per resident student. Through tuition and fees,
resident students contribute an average of $6,554. Universities cover the balance of costs,
which means they are currently losing approximately $3,694 per resident student. In FY 2016,
the estimated total system-wide loss will be $355 million.
Average education cost:
State funding:
Tuition and fees:
Net loss per resident student:
($15,550)
$5,302
$6,554
($3,694)
The university system requests the FY 2017 state investment be based on a goal of the state
increasing its resident student support to 50 percent of the cost of education ($7,775). The
university system is not requesting a new statutory funding formula. The request instead asks
the state to view university performance and outcomes and align state support with its defined
benefit. The 50 percent of resident student costs is a way to define and track state investment
against university performance.
While the state cannot currently fund all students at the 50 percent level, the university system
requests the following investment to move the system toward that goal.
FY 2016 Supplemental
Reduction restoration – Increasing the state share ($24 M): The conclusion of the FY 2015
proved that some of the base budget assumptions for FY 2016 were incorrect. Most notably,
actual revenues exceeded the forecast by nearly $400 million. Increasing the university
reduction from Gov. Ducey’s original proposal of $75 million to the enacted $99 million was
unnecessary and should immediately be reversed. Restoring this $24 million would increase the
state’s per-resident-student support to $5,552.
FY 2017 Request
Reduction restoration – Increasing the state share ($33.4M): After the FY 2016 supplemental
and impacts from the Health Insurance Trust Fund (HITF) changes, the remaining cut will be
$67 million. The universities request the state restore half of this remaining reduction in FY
2017. Including the FY 2016 supplemental, this will raise the state’s per-resident-student
support to $5,900, or approximately 38 percent of the university system’s cost per resident
student and reduce university operating losses to about $3,096 per resident student.
Student growth ($10.4 M): The state should cover 50 percent of the educational costs for
anticipated student growth. To calculate this number, the universities propose using actual
growth for the year preceding the budget year, in this case FY 2016 growth over FY 2015. For
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the FY 2017 request, the system will report this number by mid-September. Currently, the
universities forecast growth of 1,339 new resident students.
Facility maintenance and operations ($19.2 M): In addition to operating costs, Arizona’s public
universities have significant capital costs. In FY 2014, the university system spent $159 million
on capital renewal projects. The universities request the state include $200 per resident
student on an ongoing basis to help offset resident student’s impacts on university capital.
One-time capital request ($75 million): The university system is facing a capital crisis with over
$652 million in unmet renewal needs including high priority items such as fire alarms, roofs,
and asbestos abatement. Further, student growth continues to create needs for additional
square footage. The university system will provide a specific project list as part of this request
and will provide matching dollars to further leverage the state funding.
Decision Packages
The University of Arizona is requesting $8 M to fund the Veterinary Medicine program at Oro
Valley initiative. The request is for temporary capital funds that will enable 60 high paying jobs,
establish a $24 million program in Oro Valley and develop well trained and much needed
veterinarians for the state. They anticipate additional capital requests in FY 2018 and FY 2019.
In total, the renovations are estimated to cost about $15 million over three years.
Summary
FY 2016
Operating Funds
FY 2016
Supplemental Appropriation
FY 2017
Base Adjustment*
Resident Student Growth
Resident Student Facility Maintenance
Subtotal FY 2017
FY 2017
$24.0
Capital Outlay Funds
FY 2017
One-Time Matching Monies**
UA Veterinary Medicine Renovations
$33.4
$10.4
$19.2
$63.0
$75.0
$8.0
* Base adjustment represents a partial restoration of the
FY15 budget cut directed at increasing state support of
Arizona resident students to desired level of state support.
** One-time state funding of $75M would be matched dollar-for-dollar
with university funds to address the most critical capital projects.
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Performance
While the universities will no longer pursue state funding directly based on performance, the
system does intend to monitor and report on key university performance metrics. These
metrics include qualitative, quantitative, and efficiency metrics. All university investors
including students, the state, donors and other parties should have clear data on university
performance and student outcomes. The universities fully understand that future state
investment is contingent on university performance meeting and exceeding the state’s
expectations. The board is currently in the process of reviewing university performance metrics
and anticipates updating those metrics at its September Board meeting. New Long-term goals
will be set after the metrics are in place.
Statutory Formulas
In addition to the Arizona Board of Regents budget request, the budget request will report the
results of two preexisting funding formulas.
Building Renewal: A.R.S. §41-793.01 requires the JLBC to establish a building renewal funding
formula for the state building systems, including the ABOR building system. That formula is
based on age, replacement value and expected useful building life. For FY 2017, the formula
calculation equates to $129.9 million
Arizona Financial Aid Trust: A.R.S. §15-1642 established the AFAT fund consisting of student
fees and state appropriated funds. This trust fund is used to: (1) provide aid to students with
verifiable financial needs, including students who are underrepresented in the population of
the university; (2) assist students who, by virtue of their special circumstances, present a
unique need for financial aid; and (3) create an endowment for future financial aid. The
surcharge fee applies to all university regular, summer, and off-campus courses offered for
credit regardless of whether the course is taken for credit or not-for-credit (audit) purposes.
The established formula calls for the state to provide a two-to-one match of the collected
student fees. For FY 2017, the calculated state matching funds is based on actual student fees
collected during FY 2015.
ASU
NAU
UA
Total
FY 2015 student fees
$8,131,900
$1,902,800
$3,806,300
$13,841,000
FY 2017 AFAT GF calculation
$16,263,800 $3,805,600
$7,612,600
$27,682,000
FY 2016 appropriation
$10,041,200
Other Budget Elements
The state also provides funding for the following ABOR programs. The current budget proposal
does not include additional resources for these programs.
WICHE student subsidies (current appropriation is $4,094,000): The Western Interstate
Commission for Higher Education (WICHE) provides partial financial support and preferential
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access for Arizona residents who choose careers in certain health professions, which are not
available at Arizona’s three public universities. The current appropriation level supports 171
students. At its peak (FY 2008), the program supported 203 students.
Arizona Transfer Articulation Program (current appropriation is $213,700): Established by A.R.S.
§15-1824, ATASS is a joint initiative among public community colleges and universities to
facilitate the efficient transfer of course credits.
Arizona Teachers Incentive Program (current appropriation is $90,000): The Arizona Teachers
Incentive Program (ATIP) is a forgivable student-loan program for students of deaf and blind
education. Students may earn forgiveness by teaching in an Arizona deaf and blind program
post-graduation. In FY 2014, ATIP distributed loans to 10 students and provided program
support to UA College of Education.
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*Support per Resident Student and the numbers in the Per Resident Student Funding section are based on
estimated FTE counts and an allocation of resources between cost centers. Once final fall 15 FTE counts are in the
calculated per resident FTE costs and support levels will change.
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