Chancellor's Report, April 19, 2006
Chancellor Erroll B. Davis Jr.
Board of Regents Meeting
Thank you, Mr. Chairman. The past ten weeks have been productive for the University System. In terms of this Board, we are attempting to change the way these meetings are conducted in order to meet your needs and to focus our attention on policy issues. We have welcomed new Regents who are already providing new perspectives and energy to the Board. For the System, I see some continuing, yet significant changes. The way in which we finance our facilities is evolving to become more efficient. Getting them approved remains a challenge, however.
We have enjoyed a very successful legislative session, securing over $120 million in new funds. With your actions yesterday, we have charted a new course in tuition, focusing on more predictability for parents and better asset utilization for the System. And we are using our budget and allocation process to implement Board policy in a more focused manner.
And speaking of focus, over-arching all of this activity is a new focus – a focus on our customers, and related to this, a focus on accountability. I am pleased with the direction in which we are moving. I am gratified by the responsiveness and flexibility I see in this Board, our presidents, and staff to the opportunities present to strengthen this System.
In my report today, I primarily want to cover the following items that are the focus of this recent activity: the legislative session, the budget, and tuition. I will cover some other items as well, but these will be my main focus.
Let me turn to the legislative session. I'll make a few points about the appropriations later in my report. We had success with specific legislation that I want to highlight. Four bills, which we supported, were adopted by the General Assembly; all benefit the University System. All were passed overwhelmingly, which is a tribute to the confidence that the General Assembly has in the Board of Regents. Two bills, while important, reflect some needed "housekeeping." House Bill ("HB") 1305 is a technical amendment that will make the existing seed capital fund more competitive, and Senate Bill ("SB") 506 allows eligible Georgia Gwinnett College ("GGC") students to receive HOPE funds for mandatory fees. As you know, the law had frozen fees at the level set on January 1, 2005, before GGC was created.
The two other bills will have a much broader impact on the System and on policy. HB 1294 extends our ability to carry forward funds in specified areas of our operations from one fiscal year to the next for another two years. This puts our operations in a more business-oriented posture. We will need to pursue making this a permanent feature. In terms of policy, HB 1294 will strengthen our intentions to focus on our back-office operations and to make them more efficient. We can take savings to the bottom line to reallocate versus seeing the funds lapse. And finally, SB 562 will have a major policy impact, as it gives us a new and important third option in financing facilities needs. Before, we had two options: general obligation ("G.O.") bonds and local bonds for revenue-producing facilities. The new Georgia Higher Education Facilities Authority ("GHEFA") will assist the System and the Department of Technical and Adult Education ("DTAE") with financing for revenue-generating projects, such as dormitories, recreation centers, and parking decks. This marks the first time the Board of Regents will have the ability to combine projects around the System into a single bond package. This will reduce costs to bring these projects forward.
Let me take a moment to acknowledge our legislative allies and supporters of these bills: Representatives Amos Amerson, Bill Hembree, Donna Sheldon, and Bob Smith in the House and Senators Don Balfour, Ronnie Chance, Seth Harp, and Daniel J. Weber in the Senate. We appreciate all of the hard work these elected members conducted on our behalf. If you have not done so, I would ask that all Regents thank their local legislators. And I want to take a moment to thank the Senior Vice Chancellor for External Activities and Facilities, Thomas E. Daniel, and his legislative team for their hard work during the session. We had a small staff lunch last week to thank Tom, and at that time, I noted how much I appreciated his leadership and the manner in which he involved me in the process, allowing me to not only learn, but participate, albeit with careful safeguards! But I did note that I didn't appreciate the eight pounds I gained over the past two months attending legislative receptions and eating at what seemed to be every barbeque bistro in the area. I noted that while I've taken a bullet for the team before, I don't appreciate taking the fat! Seriously, after watching Tom in action, I'm ready to pass on my mantle as "the hardest working guy in show business." Thank you, Tom, for your dedicated efforts. The results this year in terms of our appropriations reflect your leadership.
Let me turn to the budget. As I noted in my introduction yesterday to the budget and tuition strategy presentation, we are very appreciative of the support of the Governor and General Assembly. Our state appropriation of $1.93 billion is the largest in the University System's history. It is a 6.6% increase over fiscal year 2006. That is an additional $120 million. The University System moved from 11% to 11.5% of the state budget. During the 2006 session, the System received $310 million in bonds for facilities. This represents 27.5% of bonds issued for all of state government. Looking past the numbers, your actions on the fiscal year 2007 budget represent a commitment to make allocations based on System-wide priorities and the compelling needs of this board in key policy areas. Specifically, strategic allocations for fiscal year 2007 reflect three key priority areas:
- $4.9 million to address nursing shortages in the state with programs to add an additional 410 nursing graduates to our existing production.
- $2.2 million to improve retention, progression, and graduation rates for the System with a more focused approach. We are targeting five institutions with programs in faculty advising, freshmen learning communities, sophomore connection plans, and supplemental instruction for courses with high failure and withdrawal rates (Kennesaw State University, Georgia Southern University, Georgia State University, University of West Georgia, and Valdosta State University).
- $1.5 million to enhance productivity and efficiency through technology in our student information and human resource systems and our data warehouse.
Allocations to an institution in these areas are designed to "move the needle," which means that investments are aimed at those areas that present the greatest opportunity for making a difference. With these allocations, we are making an important shift in how we look at our budget. We are sending a signal that in the future, our allocations will be driven by our policy objectives. Our highest priorities should receive our first dollars and not the last. And our allocations will be tracked, evaluated, and assessed for effective and timely implementation. Accountability becomes a key responsibility of each institution, as it is for this Board at the System level. It is critical that our policy drive our budget decisions.
Of course, the most striking example of our focus on using the budget to implement policy is our new direction on tuition. Our guaranteed tuition strategy provides value for the dollars the state appropriates to the System. If students earn degrees more quickly, we become more efficient in our throughput. We free up resources to accommodate more students and thus more fully utilize our facilities. In summary, we are fully utilizing our assets and providing a better return on the state's investment. And on the student side of the ledger, the guaranteed tuition is a tremendous benefit. Parents and students can plot out the tuition-related financial costs of college certain of a fixed price for four years. And by moving students to a higher tuition beginning in year five, we send an important price signal to students and parents that we hope will drive behavior.
As I stated at the outset of this report, one of the overarching themes of recent activity is accountability. As we work to make the System more effective and efficient – and more responsive to its customers – it is imperative that accountability underpin all of our policy actions. Accountability will be in place at every level of this organization. And to ensure this becomes an even more integral part of our culture, it is important to set the leadership example. That's why I've instituted our monthly tracking letter to the Chairman. This letter outlines ongoing issues and expectations from this Board for which I have direct responsibility and accountability. Looking at the March tracking letter, there were five items for follow-up:
- Board meeting schedule: I have outlined for the Executive and Compensation Committee some alternatives to our current format. Our work will be further refined for the May meeting.
- Our legislative relationships: Now that the session is over, I have committed to presenting at the June meeting some alternative approaches for your discussion and reflection.
- University System of Georgia Foundation, Inc. (the "Foundation"): At this meeting, we will hear a briefing on the Foundation from its Executive Director, Jan Kettlewell.
- The role and responsibilities of a Regent: The Associate Vice Chancellor for Internal Audit, Ronald B. Stark, has been tasked with this responsibility. He is working to identify a process that will help each of you in your role as a Regent.
- The process for selection of architectural firms: Regent Jenkins raised this question, and a response has been given to him.
On one outstanding item from February, you will hear today a presentation by the Associate Vice Chancellor for Media and Publications, Arlethia Perry-Johnson, on the constituent survey. This survey will provide us with the necessary data to inform our decisions around our communications plans and efforts. Again, this will provide information to help shape policy as well as accountability measures around this effort. And, though it may not appear so, even the new Board meeting feedback form is a means to gain information that in turn will provide some accountability measures.
Let me close this report with note of several areas of recognition to our institutions. The Georgia Department of Natural Resources ("DNR") presented four of its five State Stewardship Awards, including the Governor's Award for Excellence in Historic Preservation, to the University System of Georgia. The top award, the Governor's Award for Excellence in Historic Preservation, went to Dr. Dorothy Leland, President of Georgia College & State University ("GCSU"). Also recognized for their leadership in historic preservation were Dr. Harry Keim, Vice President for Business and Finance at GCSU; Dr. Michael L. Hanes, President of Georgia Southwestern State University; and Scott Messer, preservation planner in the Office of University Architects at the University of Georgia.
The Georgia Merit System recognized nine University System of Georgia institutions and units with awards for employee participation in the state's annual State Charitable Contributions Program. Cited for top performance in the program were Armstrong Atlantic State University, Atlanta Metropolitan College, East Georgia College, Georgia College & State University, Georgia Highlands College, Georgia Institute of Technology, Georgia State University, Skidaway Institute of Oceanography, and the University of Georgia. University System employees contributed $1.2 million to designated charities during the 2005-2006 state agencies' campaign. Please join me in expressing our congratulations to these individuals and institutions. These are powerful examples of good stewardship.
To date, I have visited 16 of our 35 institutions. The pace will pick up now that the legislative session is over. As I learn more of this state and the University System, I am energized by the opportunities that are present to strengthen our efforts toward "creating a more educated Georgia." The vitality and staying power of the System in a state with a history of strong support for public higher education will make our work that much more powerful on the System's impact on Georgians. We are sending the right messages to our customers – we will be focused, we will be responsive, we will use state funds wisely to drive our key priorities, and we will be accountable at every level of the organization. Thank you.