K-16 Building Need and Utilization Study Committee S.C. House Ways & Means Committee

1. K-16 Building Need and Utilization Study Committee S.C. House Ways & Means Committee The Hon. Brian White, Chairman, and Members The Hon. Roland Smith, The Hon. Gilda Cobb-Hunter, The Hon. Harry B. Chip Limehouse, The Hon. Kenny Bingham, The Hon. James H. “Jimmy” Merrill, and The Hon. Jackie Hayes Facilities Need and utilization in SC public colleges & universitiesRichard c. sutton, executive directorsc commission on higher education16 january 2014

2. Some Key Financial Issues in SC Public Higher Education • Declining state recurring appropriations • Over-reliance on non-recurring funding and high tuition/high scholarship model • Rising tuition/fees • Substantial increase in institutional debt loads • Substantial increase in student debt loads • Insufficient incentives for timely degree completion & improved affordability • Bottom Line: Unsustainable funding model

3. Declining appropriations…

4. …even with state-supported student aid…

5. …have changed the business model.

6. Purpose of Today’s Hearing • Not to solve all of the problems facing public higher education • Not to solve all of the challenges facing SC in a highly competitive global economy Rather, to focus on facilities capital (what one 19th-century economist called the means of production) to determine whether they are reasonable, efficient, and necessary to the education of SC’s intellectual capital—its people, its workforce, its future.

7. Outline of Today’s Presentation • How many buildings do SC colleges own? • What are they for? • How big are they? • How old are they? • Once we build them, how do we maintain them? • Does facilities construction have any relationship to student enrollment? • Does facilities construction have any relationship to overall revenues/expenditures?

8. Data Assumptions & Qualifications • Focus on high-level, aggregate data • Includes all 33 public institutions • Excludes leased/borrowed/donated space • Concentrates on E&G (educational and general operating) facilities • Data drawn from multiple sources • Not always completely aligned, but comparable and consistent • Not cherry-picked or skewed to favor any side • Accurate, balanced, and on-point, as best we can

9. How Many Buildings Do SC’s Public Colleges and Universities Own? 1,495 total buildings at 33 institutions currently in operation • 842(56%) of those are for Educational & General (E&G) purposes (classrooms, libraries, labs, offices, infrastructure, etc.) • 653(44%) of those are for athletics, residential facilities, dining halls, bookstores, and other auxiliary student services

10. New Construction Since FY2000-01 168new construction projects (~11% of total inventory) have been completed or are in process Average of slightly more than 12projects per year across 33 institutions Of those 168new projects: 101 (60%) were for E&G purposes (classrooms, libraries, offices, etc.) 32 (19%) were for athletics (both intercollegiate & intramural) 12 ( 7%) were for residential facilities 23 (14%) were for dining halls, bookstores, and other auxiliary student services and infrastructure

11. Old Construction • 69%of our buildings are old ( > 25 years old) • 34%of our buildings are really old (> 50 years old)

12. Buildings require maintenance • Three basic categories: • Routine annual maintenance cleaning, servicing, etc. • Routine periodic maintenance roof replacements, HVAC, etc. • Extraordinary/emergency maintenance safety issues, catastrophic failures

13. Deferred Maintenance • When any of these is not performed as scheduled, it then becomes “deferred” maintenance • Deferred maintenance is typically more expensive and potentially more complicated depending on nature and severity of service deferred/required • Many valid reasons for deferring maintenance (part of a more comprehensive project, institutional priorities, lack of appropriate funding)

14. Maintenance Needs • CHE Formula – Based on life-cycle analysis of systems in E&G buildings and E&G infrastructure • Includes system renewal/replacement and annual maintenance needs • Totals $1.2B OVER 20 YEARS (~$64M per year)

15. Capital costs measured against growth in student enrollment 53,504 more students enrolled in SC public higher education since FY 2000-01 – a 34% increase

16. 53,504 students is the equivalent of creating…. Another Clemson + Another USC

17. Or the equivalent of adding… an entirely new comprehensive 4-yr sector

18. Building for growth • From FY2000-01 to FY2011-12 • 34% increase in headcount enrollment • 34% increase in E&G square footage

19. E&G Sq. Ft. per Student

20. Are we using our facilities efficiently? Average weekly classroom hours of credit instruction: 2003: 23.94 hrs/wk 2012: 24.84 hrs/wk Varies by Sector (2012): RU: 33.35 hrs/wk Comp: 23.80 hrs/wk USC 2-Yr: 23.27 hrs/wk Tech: 22.59 hrs/wk Does not include non-credit classroom use, special events, clubs, study groups, etc.

21. Total Operating ExpendituresFY2008-09 to FY2011-12 12% increase over FY09 to FY12 Source: Annual Financial Audits

22. As a percent of total, expenditures by category have remained similar South Carolina Public Colleges & Universities Operating Expenses by Function, % of Total

23. So if our institutions have been able to spend this much money, where are the dollars coming from? $4,267 $4,174 $4,049 $3,881 $3,638 $3,673 Source: Appropriations Acts. Beginning Year Appropriations for Public Colleges and Universities (including 33 state institutions), mid-year reductions not reflected. Does not include state pay & health plan increases appropriated through B&CB.) Bars represent Total Authorization. General Funds are represented in blue. Annual state-supported financial aid (light green) is annual disbursement of student awards.

24. 160% Increase in Tuition/Fee/Student Aid Revenues, FY02—FY11 Source: IPEDS Finance Survey Tuition and Fee Revenues net of discounts and allowances. CHE Annual Disbursement Reports for State Scholarship and Grant Awards (Palmetto Fellow, LIFE, HOPE, LTA and Need-Based)

25. Operating Revenues by Category* Source: IPEDS Peer Analysis Tool, Finance Survey. Operating revenues and state, federal and local appropriations. For Clemson and SC State, PSA is included. Capital and non-operating revenues except appropriations are not included.

26. Concluding Thought #1: Facilities and Enrollment are Inter-related • New E&G facilities construction is actually well aligned with enrollment growth over past decade • Expansion on existing campuses far more reasonable and cost-effective to accommodate growth • Well-designed construction projects are good for the state, prepare for future, create jobs

27. Concluding Thought #2: Re-Design the HE Business Model • Debt loads are growing and need to be monitored closely in funding decisions • Tuition/fees will continue to increase unless recurring state appropriations are restored • State scholarship funding needs to be re-designed • Planned integration is preferable to forced consolidation

28. Concluding Thought #3: Build a New Compact among All Stakeholders • All parties—not just state government & universities—must share responsibility for mutual success. • If SC doesn’t re-value higher education upwards, it will lose the long-term global economic game. The consequences for the state will be debilitating. • If SC doesn’t find better ways to educate its citizens beyond bricks-&-mortar modalities, we will sacrifice generations of learners (both young and old) • If SC doesn’t design a better process to support higher education, this conversation will not have contributed to a broader purpose

29. Some Suggestions for Improvement • Support sustainable funding models for both operations and facilities that eliminate earmarks and reward institutional performance • Incorporate any new accountability requirements into institutional audited annual financial reports • Focus on actual expenditures and revenues • Re-establish a statewide capital planning process and support that process with a bond bill • Observe SC Code of Laws §59-103-35

30. Thanks for your attention Comments & Questions?