August 2002 Retreat/Arizona Board of Regents

A retreat meeting of the Arizona Board of Regents was held August 15, 2002, at the Equestrian Estates in Flagstaff. President Jewett called the meeting to order at 10:06 a.m.

PRESENT:	Regent Fred Boice Regent Robert Bulla Regent Chris Herstam Regent Jack Jewett Regent Kay McKay Regent Matthew Meaker Superintendent of Public Instruction Jaime Molera (Afternoon Only) Regent Christina Palacios Regent Danelle Peterson-Kelling Regent Gary Stuart
ABSENT:	Regent Donald Ulrich Governor Jane Dee Hull

Also present were: President John Haeger, Dr. M. J. McMahon, and Dr. Pam Eibeck, Associate Provost for Undergraduate Studies, Northern Arizona University; President Michael Crow and Dr. Milton Glick, Arizona State University; President Peter Likins, Dr. Patti Ota, and Dr. George Davis, University of Arizona; Executive Director Linda Blessing, Board Counsel Joel Sideman, Secretary to the Board Judy Garza, Dr. Thomas Wickenden, and Mr. Matt Ortega, Central Office Staff.

All lists, reports, summaries, background materials, and other documents referred to in these minutes can be found in the August 15, 2002, Documents File.

President Jewett introduced new Student Regent Danelle Peterson-Kelling and welcomed President Crow. He also introduced Mr. Dan Anderson, the new Assistant Executive Director for Institutional Analysis at the Central Office. President Likins introduced Dr. Naomi Miller, a professor of English at the UA, who is spending this year as an ACE Fellow.

CHANGING DIRECTIONS

President Jewett gave an overview of the agenda and introduced the topic of “Changing Directions: Integrating Higher Education Financial Aid and Financing Policy.”

President Jewett introduced Dr. David Longanecker, Executive Director of WICHE. Dr. Longanecker discussed the current recession in terms of the national scene and the Arizona picture. He stated Arizona has an antiquated state tax/revenue system that will continue to hurt the state revenue picture, even when the economy recovers. The Regents do not control the amount of money given to the universities through the state budget and gifts; so they must work with other entities and develop new methods to secure necessary financing to maintain quality and access.

More students than ever are going to college now as the return on investment is much higher than in the past. Dr. Longanecker believes there will be an overflow of students from Texas, California, and Nevada in the coming years. One of the problems will be how these students will be accepted versus less desirable Arizona students, such those with lower grade point averages.

Another problem facing Arizona is the minimal amount of state-funded financial aid (Arizona is 43rd in the nation). However, the universities do provide institutional aid through tuition waivers. Tuition tax credits have been a help on the national level. Dr. Longanecker stated a very able poor student is 5 times less likely than a less able wealthy student to attend college.

Issues confronting higher education are governance structures, strategic redirection, accountability, use of technology, workforce development/economic development, and homeland security. Also, Arizona has been importing people with advanced degrees. Arizona must produce its own college graduates.

Mr. Dan Anderson reported on demographic, economic and fiscal challenges in higher education. Demographic changes are slow to develop, but have far-reaching implications. Economic changes deal with both short-term events and long-run influences. Fiscal matters can be most directly impacted by policy decisions. Arizona’s population will continue to grow and minority populations will rise most rapidly. The current employment downturn is worse than during the 1991 recession. Manufacturing and tourism lead the downturn. Arizona does not lack for innovation, but its technology is mostly computer manufacturing based.

Mr. Anderson concluded that Arizona, with a growing population, will confront labor shortages in an economy that needs trained workers. Arizona’s lack of economic diversity has been a compounding factor in this recession. University funding has seen a declining share of state appropriations.

Dr. Wickenden discussed performance gaps in higher education. Gaps describe differences between Arizona and top states, or all states, or industry standards, using available data. For planning purposes, his focus was on gaps, not accomplishments. He looked at gaps in 4 areas--Access, Completion, Learning, and Innovation. He used national, state, and system reports.

Access is affected by affordability, participation, and enrollment. Completion deals with persistence and workforce preparation. Learning deals with information gaps--are students learning?--and performance gaps--are students learning what they should? Innovation raises questions as to quantity, quality, and whether innovation is broadening the high tech base.

Mr. Anderson stated reasons the Board should change directions. There are significant gaps in funding for higher education in Arizona and there are related gaps in perform-ance, access, completion, learning, and innovation. Proposition 301 suggests at least one new approach--bridging the gaps with new/modified funding sources targeted at meeting student and state needs.

There was a discussion of other stakeholders in the financial picture such as the legislature, the business community, students, parents, and the public. The possibility the new legislature will be more conservative than the current one, the belief the business community will continue to lobby for tax concessions, and the option of taking the universities’ case to the voters was raised.

President Crow suggested a need to move to a model of “enterprise”, rather than an “agency” model. The universities need to become more competitive in distance learning, initiate differential tuition, especially in graduate schools, bring a higher return on investment, capitalize on intellectual property, and set up operations in other states or nations.

The importance of engaging students, family, faculty, and staff in revenue stream issues was discussed. K-12 and community colleges should also be stakeholders. Financial aid is still considered a high priority. There should be a continuation of the state budget battle, but there should be an expansion of budget diversity. The universities are pursuing federal funding and gift dollars, but these are restricted funds.

The need to change the funding model from one of growth was discussed. California and Washington were identified as states in which the universities have developed positive relationships with stakeholder groups, including the private sector.

Specific directions for addressing funding and performance gaps were discussed. Expectations should not be raised that the Regents will simply increaes tuition without a plan that addresses other funding streams as well. There needs to be an innovative solution for financial aid. It was believed an enterprise model would resonate with all stakeholders. The serious need for building renovation money was raised.

Integrated policies and support can lead to control issues; so partnerships need to be fashioned to reconcile these issues. California and Washington have a compact between the universities and the state spelling out what can and what cannot be done with state support.

There was a consensus on the need to re-visit the 22:1 funding formula. Changing the restriction on non-resident enrollment was also raised. Additional funds are received from non-residents, but they take capacity. Variable tuition among the three universities and among undergraduate and graduate programs may be beneficial. A tuition payment plan was suggested.

The expenditure side of the budget was discussed. The need for a creative way to provide salaries for faculty was seen as important. One suggestion was to set higher salaries; pay half the salary; then set incentives for the remaining half. The universities should strive to make the faculty more aware of the relationship between the budget and salaries and between salaries and what the faculty do. A pay for performance plan for faculty salaries was suggested. The need for a larger faculty to handle growth was raised.

President Crow said it should be kept in mind the referendum is a powerful mechanism. He stated ASU needs non-residents to obtain a national reputation. ASU is an urban campus and must be different than UA. It is reasonable to have social objectives for undergraduates and higher ones for graduates. It is also reasonable to have higher tuition for graduate students. Arizona personal income level should be considered when tuition is established. The universities should not give up on the legislature supporting education; it is part of its mission. However, Dr. Crow does not believe the budget model of growth is sustainable. Perhaps the legislature should provide money for special items, such as buildings, and the universities should take care of the rest of their needs. Faculty should become partners in entrepreneurial activity. He plans to move ASU to an enterprise model and has begun efforts to accomplish this change.

Regents requested an earlier preview of how financial aid could be employed to offset a tuition increase. The Board would like to see more than one model. The question was raised as to whether tuition differential would penalize students who are place bound.

There is a need to find ways to provide what students need; but it should not be the same at each of the universities. Community colleges should be part of the equation. The problem with communicating with the community college system since the State Board of Directors of Community Colleges has been stripped of most of its functions was mentioned.

President Haeger agreed the missions of the universities should be differentiated. He said the accountability mechanisms currently relate only to undergraduate programs. He supported differences in tuition between undergraduate and graduate programs and suggested there could be some certificate programs as well as degree programs. He saw a need for the universities to bring more focus to teaching freshmen and sophomore programs.

Dr. Haeger said there should be a simpler method of developing academic programs. The issue of geography should be addressed as NAU provides access all over the state and needs the flexibility to be more entrepreneurial. There is a need to change the faculty culture to make faculty responsible for student retention. NAU will retain its research mission in specialized areas only.

President Likins said he would like to reconsider ABOR constraints such as the 25% non-resident rule. The UA is interested in controlled growth, sharpened focus, and in excellence. Students who have zero possibility of success shouldn’t be admitted to the universities; so he would like to see a change in admission standards. He would also like to see diversity in revenue streams. The universities cannot do more with less, but maybe they can do better with less. Dr. Likins would welcome the opportunity to eliminate programs.

The Regents discussed having the presidents present a vision of what they would like to see happen. Dr. Longanecker presented three possible next steps: 1. Economics of education–-how to finance the public enterprise, develop the resources, and be leaders, not followers. 2. Differentiation–the flexibility of price, mission, and concept. 3. Social equity issues–how to make it all work.

A step-by-step approach should be developed to take this to the broader community. Short term and long term steps should be outlined. The publication from the American Council on Education that deals with access and persistence might be of help. Greater flexibility should require more accountability. President Jewett said the members of the Council of Presidents, himself, and staff would draft an action plan with differentiation and flexibility. It should include social justice and a tuition proposal.

Dr. Longanecker was asked how the grant received from WICHE will help with the legislature and he said there will be discussions with various stakeholders, including legislators. President Likins said the model developed at this time for tuition would have blanks where the numbers would be filled in later.

The point was made the legislature assists the universities with money; they are not responsible for education. The Board’s focus on educational governance should be sharpened.

REVIEW OF THE ABOR DRAFT ACTION PLAN

Dr. Ray Woosley and Dr. Art Ashton joined the meeting for this discussion. Dr. Woosley explained medicine today and its needs. There is a need for a world-class medical school with clinical research capacity.

There was a discussion of a vision for an Arizona Biomedical Collaborative in Education and Research. It is exceedingly important to attract and keep valued faculty members. There is a need for a consistent message concerning how the three universities will support a collaborative. The need for collaboration among the universities and with community partners to help solve problems of increasing health care workers during a time of limited budgets was discussed. Dr. Woosley shared a document which described the current shortages of health care workers facing Arizona and the nation. All three presidents expressed their commitment to expanding the pipeline for medical students, nurses, and other health care professionals.

Regent Bulla described what he hopes to accomplish through the strategic planning process. Regent Stuart said he hoped to change the process for tuition setting to allow student stakeholders to have their say. Regent Meaker said he hoped to add the payment plan option for tuition this year. Regent Herstam reported an NCAA expert was expected at the September meeting to explain proposed NCAA rule changes. Regent Palacios asked to meet with the interim deans of the colleges of education as she believed the community colleges would be bringing pressure in the area of teacher preparation.

MINUTES

ARIZONA BOARD OF REGENTS

MINUTES OF A RETREAT MEETING

August 15, 2002

CHANGING DIRECTIONS

REVIEW OF THE ABOR DRAFT ACTION PLAN

ADJOURNMENT