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Higher Education Capital Budget Work Session An overview of higher education capital finance and trends
Senate Ways & Means StaffJanuary 22, 2015
Washington’s public colleges and universities by sector
There are six public four-year universities and five extension campuses. In 2014-15 academic year, these schools served about 106,000 students (FTEs)
There are 34 community and technical colleges. In 2013-14, the CTCs served approximately 143,000 students (FTEs)
2
Both the four-year institutions and the Community and Technical Colleges (CTCs) enrollment grew about 1.6% annually from the 1990-91 academic year but the CTCs experienced much more variation
77,79384,832
94,310
106,974113,609
128,093
136,934143,292
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
1990
-91
1991
-92
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
Stat
e Fu
nded
FTE
Enr
ollm
ent
Academic Year
Community and Technical Colleges
Four-Year Institutions
State Funded Higher Education Enrollment (FTEs)
Notes1 Four-year, 2014-15 enrollment data is preliminary2. CTC, 2014-15 enrollment data is unavailable
Source: Office of Financial Management 3
In terms of dollars, costs associated with capital building facilities are in both the capital budget and the operating budget
CAPITAL BUDGET APPROPRIATIONS
Bonds………………………..$427
Building Accounts……...$209
COP……………………………$ 77
Other………………………...$ 1
TOTAL ESTIMATED……$714
OPERATING BUDGET SPENDING1
Est. Bond Debt Payments…...$569
Building Maintenance………...$373
TOTAL ESTIMATED…………….$942
2013-15 Higher Education Capital Related Spending$ in millions
1. Estimated Bond Debt Payments are principal and interest2. Building Maintenance includes General Fund-State and Tuition
4
In 1973-75, higher education and other state government appropriations in the capital budget were almost the same, but since that time higher education grew by 2.4% over inflation per biennium while other state government grew by 8.6% per biennium
$449M
$126M
$1,214M
$714M
$551M
$3,666M
$2,965M
$0M
$500M
$1,000M
$1,500M
$2,000M
$2,500M
$3,000M
$3,500M
$4,000M Capital BudgetTotal Appropriated Funds
(includes alternatively financed projects)2013-15 Constant Dollars
All other government
Higher Education
5
$0.3
$0.0
$0.7
$0.8 $0.9
$0.4
$0.2
$0.2
$0.6$0.7
$1.0
$1.9
$1.6
$0.0B
$0.5B
$1.0B
$1.5B
$2.0B
$2.5B
$3.0B
1973-75 1975-77 1977-79 1979-81 1981-83 1983-85 1985-87 1987-89 1989-91 1991-93 1993-95 1995-97 1997-99 1999-01 2001-03 2003-05 2005-07 2007-09 2009-11 2011-13 2013-15
State Debt Limit Bonds and Higher Education2013-15 Constant Dollars
dollars in billionsHi Ed All Other
56% 6% 52% 46% 21%Higher Education share of state bonds
Over that same time period, the ratio of state bonds appropriated to higher education has varied from nearly 0% to over 50%. In 2013-15, the legislature appropriated 21% of the state bonds to higher education.
6
Higher education capital budget financing is more than just bonds – it is a mix of many different revenue sources and accounts – each with varying degrees of legislative control
State Revenue Sources Accounts Institution Generated Revenue SourcesAccounts
Higher Education Capital Projects
* These accounts pay debt service first and then transfer remaining portions to the university building account(A) = Appropriated(D) = Dedicated
(Adopted from Burke & Associates Higher Education Capital Study
Private Donations
Auxiliary and Miscellaneous
University Accounts
Research Related Revenues
Rent, Contracts, Fees, Grants
?%
State General Obligation Bonds (A)
State Building Construction Account
State General Obligation Bonds (D)
Garner-Evans Higher Ed Construct Funds
Certificate of Participation (D)
Certificate of Participation
60%
11%
Borr
owin
g
Trust Land Revenue (D)
Material Sales(land, timber, gravel,
etc)
Lease Revenue
Permanent Accounts
Bond Retirement Accounts*
Interest Income
University Building Accounts
6%Cash
UW Metro Track (D)
Tuition Building Fee (D)
UW Facilities Bond Account*
24%
Cash
7
The level and source of funds for higher education capital budgets has varied over time
$256
$39
$740
$835
$427
$129$20 $24
$154 $170
$24 $53 $82 $61 $40$40M $14M $29M $90M $80M
57%
31%
85%
73%
60%
29%
16% 3%
14% 24%
5% 42%9%
5% 6%9%
11% 3% 8% 11%
$0M
$100M
$200M
$300M
$400M
$500M
$600M
$700M
$800M
$900M
1973-75 1983-85 1993-95 2003-05 2013-15
Higher Education Capital Budget Mix of Funds2013-15 Constant Dollars
dollars in millions
Debt Limit Bonds Building Accounts Trust Revenue Other
8
Similar to the operating budget, the state share of the capital budget has fallen as well
80%
58%
74%
38%
100%
78%79%
65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1993-95 1995-97 1997-99 1999-01 2001-03 2003-05 2005-07 2007-09 2009-11 2011-13 2013-15
Higher EducationState Funds Share of Operating and Capital Budget
4-Year Cap 4-Year Op CTC Cap CTC Op
Notes: Capital budget state share is debt limit bonds only 9
Selected Higher Education Capital Budget Topics:• How are capital projects selected?• What did the Governor choose to fund?• A look at growth and demand• A look at building quality• Do the costs seem reasonable?
10
Higher Education capital projects are selected and prioritized for legislative consideration according to defined processes
Community & Technical College System Research & Regional College & Universities
Statutory Requirement RCW 28B.77.070 RCW 28B.77.070; 43.88D.010
What is being selected for review and prioritization? Projects > $2 million Projects > $2 million
How are the proposed projects scored and ranked?
Projects are scored by project category:• Matching funds (non-state funds)• Replacement projects• Renovation• Major enrollment growth
Projects are scored by project category:• Major enrollment growth• Replacement projects• Renovation• Stand-Alone Infrastructure• Research• Land acquisition• Pre-Design
How are proposed projects evaluated?
Varies by project category. Generally includes:• Contribution to statewide goals• Enrollment projections, utilization efficiency• Age & condition• Program & capacity needs• Reasonableness of proposed costs
Same.
The Governor can and has inserted projects that were not part of the institutional submissions (and therefore not scored)
Who scores the projects? Panels of college presidents, business officers, facility managers, instructional and student services staff. OFM
Who decides on the final list submitted to the legislature? SBCTC OFM creates the single prioritized list
What is the role of the legislature? The legislature has mostly followed the prioritized list to whatever funding level has been established.
The legislature has followed the list to varying extents based on the funding level established.
11
In 2015-17, the Governor is requesting approximately $247M over 2013-15 enacted budget levels while the colleges and universities requested about $685M over enacted levels. The Governor is also putting about 27% more funding for new buildings & additions over renovation & remodels
$258
$0$20
$365
$73
$0
$440
$19
$74
$508
$361
$0
$290
$14 $28
$347
$272
$12$0
$100
$200
$300
$400
$500
$600
Minor Works &Intermediate
Acquisition Infrastructure New Facilities &Additions
Renovation &Remodels
Special Programs
Higher Education Project Budgets By TypeFrom Enacted to Agency Request to Governor
dollars in millions
2013-15 Enacted 2015-17 Agency 2015-17 Governor
12
While the state has been and is projected to increase its population, the forecasted number of 18 to 24 year old persons is expected to drop by 5,400 over the next three biennia
595,667
609,678
625,143
634,550
648,763
657,439
662,738 664,928
650,053 650,429 652,061 654,857
658,499 659,012 658,860 657,188 655,236 654,732 653,323 653,609
560,000
580,000
600,000
620,000
640,000
660,000
680,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Actual and Forecasted Washington Population Ages 18 to 24*
|-------------------------- Forecasted ------------------------|
*Between 2007-08 and 2013-14, 18 to 24 year olds made up 82-83% of the undergraduate four-year public institution enrollmentSource: Office of Financial Management
13
The four-year schools added almost equal amounts of resident and non-resident FTE students from 2007-08 to 2013-14 but the non-resident share of growth has been increasing more.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14Non-Resident 10,151 10,896 11,305 12,171 13,854 14,854 15,873Resident 84,994 86,990 88,891 89,787 90,926 90,944 90,952Total 95,145 97,886 100,196 101,958 104,780 105,798 106,825% Resident 89% 89% 89% 88% 87% 86% 85%% Non-Res 11% 11% 11% 12% 13% 14% 15%
84,994 86,990 88,891 89,787 90,926 90,944 90,952
10,151 10,896
11,305 12,171 13,854 14,854 15,873 95,145
97,886 100,196
101,958 104,780 105,798 106,825
60,000
65,000
70,000
75,000
80,000
85,000
90,000
95,000
100,000
105,000
110,000Four-Year FTE Enrollments By Resident Status
Source: ERDC 14
The CTCs have experienced 3 consecutive years of declining state supported enrollments. Without an official forecast, it is difficult to approximate their needs in the out years.
136,934
148,000
160,778 162,328
153,395147,433
143,292
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
FTE
Enro
llmen
ts
Community and Technical CollegesState Supported FTE Enrollments (excludes Running Start)
Source: LEAP 15
These 40 colleges and universities account for 66M or 67% of all state-owned space
CTC CTC CTC CTC WSU WSU CWU
UW UW UW CTC CTC CTC CTC WSU WSU CWU
UW UW UW CTC CTC CTC CTC WSU WSU CWU
UW UW UW UW CTC CTC WSU WSU WWU EWU
UW UW UW UW CTC CTC WSU WSU WWU EWU
UW UW UW UW CTC CTC WSU WSU WWU EWU
UW UW UW UW CTC CTC WSU WSU TESC TESC
1 square = 1% of state
owned space
In 2014, the state owned a total of 98M square feet All other state government owned space
= Higher Education= All other state
government
Source: 2014 OFM Building Inventory Report 16
Higher education has added approximately 4.5 million state owned square feet from 2011 to 2014 but the percentage of superior to adequate square feet fell in the last year
58%38.1M
62%39.8M
62%38.9M
58%35.9M
28%18.6M
28%18.3M
26%16.1M
26%16.0M
9%6.1M
9%5.7M
8%4.9M
11%7.0M
5%
1%
5%
4%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2014
2013
2012
2011
Higher Education Building Condition Summary Over Four YearsOFM Building Inventory Report
Superior to Adequate Fair Limited to Emergent Not Assessed
66.0M
Total Sq. Feet
64.5M
62.7M
61.5M
These are all buildings and not necessarily for core academic operations 17
Are costs reasonable? In December 2008, OFM through BERK & Associates published a financing study for higher education capital facilities. The report provided an upper and lower bound for sq. ft. costs for different types of buildings
Note: +1.5% adds an additional 1.5 percentage points to GCI for escalation costs starting in the first quarter of 2011
Facility Type Low Mid Upper GCI (3.08%) +1.5% EscClassrooms $339 $420 $501 $627 $683Science Labs $344 $437 $530 $663 $723Research Facilities $536 $623 $710 $888 $969Libraries $251 $336 $420 $525 $573Admin Buildings $258 $309 $360 $450 $491Comm Buildings $281 $378 $474 $593 $647Day Care Facilities $249 $283 $316 $395 $431
Total Project Sq. Ft. Costs(2008 Dollars)
Total Project Sq. Ft. Costs Upper Range
Dec 2016
Expected Cost Ranges By Facility Type
18
The majority of the building are within the Berk report upper range for total square foot costs but about 10 exceeded this range and more analysis is needed to understand why
$200
$300
$400
$500
$600
$700
$800
$900
Tota
l Pro
ject
Sq.
Ft.
Cost
sClassroom Facilities Based on Governor’s 10-Year Plan
New Construction and Renovation Projects Over $200 Per/Sq. Ft.Total Project Costs Per Sq. FtDollars Adjusted For Inflation
Berk’s lower bound inflated using
OFM/Global Insight Construction inflation
Berk’s upper bound using OFM/Global
Insight inflation
+1.5% escalation on top of Berk’supper bound
19
Two projects labeled “science labs” are estimated to be higher than Berk’s upper bound
-2
-1
0
1
2
3
WSU Pullman - Troy HallR
Center for AdvancedMater
Clark College: Health an Green River: NewAuburn C
Computer Science &Engine
Dairy Research &Teaching
Nutrition Science Science BuildingRenovati
Whatcom CommunityCollege
Other Berk Range Facilities Based on Governor’s 10-Year Plan New Construction and Renovation Projects Over $200 Per/Sq. Ft.
Ratio of Project Variance Normalized For Project TypesDollars Adjusted For Inflation
Research Facilities Science Labs (Teaching) Libraries
Berk’s Normalized Lower Bound
Berk’s Normalized Upper Bound
20
Questions?
21