Arizona Board of Regents-August 2005 Minutes

A meeting of the Arizona Board of Regents was held August 16 and 17, 2005, in the University of Arizona Student Union Memorial Center, Tucson, Arizona. President Palacios called the meeting to order at 1:35 p.m. on Tuesday, August 16.

PRESENT:	Regent Fred Boice Regent Robert Bulla Regent Ernest Calderón Regent Lorraine Frank Regent Benjamin Graff Regent Chris Herstam Regent Jack Jewett Regent Wes McCalley Regent Christina Palacios
ABSENT:	Regent Gary Stuart Regent Kolby Granville Governor Janet Napolitano Superintendent Tom Horne

Also present were: President Peter Likins, Dr. George Davis, Dr. Leslie Tolbert, Mr. Greg Fahey, Ms. Judith Leonard, Dr. Juan Garcia, Ms. Edith Auslander, Dr. Patti Ota, and Mr. Joel Valdez, University of Arizona; President John Haeger, Dr. Elizabeth Grobsmith, Dr. M. J. McMahon, Mr. Rich Bowen, and Dr. Carol Fox, Northern Arizona University; President Michael Crow, Dr. Milt Glick, Dr. Christine Wilkinson, Mr. Rich Stanley, and Dr. Carol Campbell, Arizona State University; Executive Director Joel Sideman, Board Counsel Paulina Vazquez-Morris, Secretary to the Board Judy Garza, Dr. Art Ashton, Ms. Cathy McGonigle, Mr. Ted Gates, Ms. Stephanie Jacobson, Dr. Mark Denke, Ms. Kathy Bedard, Mr. Dan Anderson, and Ms. Stella Galaviz, Central Office; and Dr. Robert Mitchell, Arizona Faculties Council.

All lists, reports, summaries, background materials, and other documents referred to in these minutes can be found in the August 16 and 17, 2005, Documents File.

Regent Jewett led the Pledge of Allegiance. President Palacios welcomed Dr. Robert Mitchell to his first meeting as the representative of the Arizona Faculties Council. Dr. Mitchell is a librarian on the Undergraduate Services Team at the University of Arizona.

President Palacios also welcomed Mr. Bret Whipple. Mr. Whipple was present to observe the meeting as he is the new Chair of the Nevada Board of Regents. He is also a graduate of the University of Arizona College of Law.

President Palacios introduced Bridgette Gallagher who was born in Orange, California, and grew up in Tucson. Bridgette plans to enter law school next fall, hopefully on the East Coast. She is the returning president of the University Activities Board and is heavily involved in the Arizona Students Unions Governing boards, Directors Advisory Group, and the Student Union Advisory Council. She was active with Alpha Epsilon Delta, the pre-medical honorary during her freshman and sophomore year.

Ms. Gallagher said she would like to be a lawyer that can help give justice to the people. She would like to be able to give back to the university, the state, and the programming board at the university.

Elaine Ulrich, new President of UA Graduate and Professional Schools Council, (GPSC) introduced some members of her council. She thanked the Regents for their support of graduate students at the UA and said the progress in benefits had made them competitive with their peers. She said the GPSC would remain a resource for Regents to learn the needs and concerns with graduate students as well as undergraduates and faculty as they are a large portion of the teaching staff. She asked for another graduate student to be appointed to the University of Arizona Presidential Search Committee.

Cade Bernsen, ASUA Student Body President, introduced his Mother and Sister that were visiting from Beaumont, Texas. He also introduced three UA student senators. He thanked the Board for the opportunity to serve on the UA Presidential Search Committee and said he believed he and Student Regent Graff would represent the UA students fully and appropriately. He thanked the Central Office staff for their helpfulness.

Eva Gonzales, President of the UA Staff Advisory Council and representing the Tri- University Staff Advisory Board, said they looked forward to assisting ABOR with initiatives that affect classified staff employees. She asked that Agenda Item 4, Public Awareness Plan for FY 2006-2006, Page 5, be amended to add classified staff to the section concerning Regents actively dialoguing with focus groups. She extended an invitation to all Regents to attend any Staff Advisory Council meeting.

Ms. Gonzales also said the Staff Advisory Council supported Objective 19, Faculty and Staff Salaries, in the Board’s FY 2005-2006 Action Plan, Item 6. She said the staff was pleased to see that in Agenda Item 10, Preliminary FY 2007 State Operating Budget Requests, each university had acknowledged the need for increased funding to provide true, competitive salaries.

Larry Mohrweis, NAU Professor of Accounting, said NAU salaries have been lagging in comparison to peer institutions. There has been a recent effort to deal with that issue; so he thanked the Board of Regents, President Haeger, and Provost Grobsmith for making this a top priority.

President Likins introduced Dr. Leslie Tolbert, the new UA Vice President for Research, Graduate Studies, and Economic Development. She is a distinguished member of the faculty and, a Regents Professor who has an international reputation. Her affiliations with the UA are neurobiology in the Arizona Research Center and cell biology and anatomy in the Arizona Research Laboratories and cell biology and anatomy in the College of Medicine. She has a dual appointment and has been funded by the National Institute of Health for 20 years for her research in brain development in various species.

Dr. Tolbert told the Regents about her research on the brain and discussed the cells called “glial,” meaning glue.

Regent Boice gave an update on the status of the UA Presidential Search Committee. He reported a distinguished and representative group of individuals had agreed to serve on the Committee. The Academic Search Consultation Service from Washington, D.C., had been named to assist with the search. Both Dr. Ann Hasselmo, the lead consultant, and Dr. Stan Ikenberry bring a wealth of experience and expertise to the search process. Dr. Hasselmo has already begun her outreach.

Regent Boice thanked Regents Palacios, Bulla, Calderón, Frank, and Graff for their assistance in the process that led to the selection of the search consultants. The first meeting of the Search Committee is scheduled for September 8. Regent Boice said he was placing a very high priority on leading an open search process. He is available for questions or comments at any time.

Items on the Consent Agenda, which are marked in these minutes with an *, were considered as consent maters and were adopted upon the motion of Regent Boice, seconded by Regent Jewett.

The April 28 and 29, 2005, Executive Session, the June 16, 2005, Regular Meeting, and the June 17, 2005, Retreat Meeting minutes were approved.

The Board accepted the FY 2004-2005 Action Plan Final report. The final report stated the accomplishments made on each of the six long-term Strategic Directions: Increase Student Participation in University Education; Enhance the Quality of Student Education; Increase Affordable Education for Students; Provide an Educated, Competitive Workforce; Enhance Research and Impact Economic Development; and Optimize University Resource Acquisition and work Environment.

The Board approved the License Agreement between AzTE and Cynexus Corporation to transfer technology to Cynexus Corporation in the field of anti-inflammatory therapeutic bioconjugates. AzTE will own 20% of the outstanding initial shares and will receive a royalty of 5% for the sale of any Licensed Products, as well as an upfront fee, milestone payments, and reimbursement for patent related expense. Eighty-five percent of all such consideration (after payment of expenses) will be paid to ASU pursuant to the Master Intellectual Property and License Agreement between ASU and AzTE.

The Board approved the License Agreement between AzTE and MotionEase, Inc. to transfer certain technology in the field of video based motion picture capture. AzTE will own 5% of the outstanding initial shares and will receive a royalty of 9% for the sale of any Licensed Products, as well as an upfront fee, milestone payments, and reimbursement for patent related expense. Eighty-five percent of all such consideration (after payment of expenses) will be paid to ASU pursuant to the Master Intellectual Property and License Agreement between ASU and AzTE.

The Board of Regents authorized ASU to accept an award from the Environmental Protection Agency, (#XA-83239201-0), for support of the International Institute for Sustainability, Office of Vice President for Research and Economic Affairs project to address the environmental issues of the U.S.-Mexican border region through the Southwest Center for Environmental Research and Policy. The consortium for research is comprised of ten university campuses: five from the United States and five from Mexico. The proposed amount of the award is $2,107,748 federal funding for the period June 1, 2005, through August 31, 2008.

The Board of Regents authorized ASU to accept a continuation award from the National Science Foundation Directorate for Education and Human Resources (#0337795) for support of a Center for Research on Education, Science, Math, Engineering, and Technology, Fulton School of Engineering project to increase understanding of the longitudinal cognitive and social processes related to children and adolescents learning of rational numbers in the middle grades. The incremental amount of the award is $562,074 for a new total award amount of $1,158,211 federal funding with $1,740,195 being the projects anticipated total funding. The period of the project is July 1, 2001, through June 30, 2007.

The Board of Regents authorized ASU to accept an award from the National Science Foundation, #DGE0504248, to support an International Institute for Sustainability, Office of Vice President for Research and Economic Affairs project to provide integrative graduate education, research, and training in the cross disciplinary field of urban ecology. The incremental amount of funding is $1,241,570 with a projected total amount of $3,184,586. The period of the project is June 15, 2005, through May 31, 2007.

The Board approved the proposed revision to Board Policy 6-201, “Conditions of Professional Service,” that would allow university presidents to make multiple-year appointments to academic professionals who are not eligible for continuing status, and to bring the policy into compliance with current law requiring certain procedural requirements in conducting grievance hearings for professional employees.

The Board authorized the University of Arizona to enter into a Multiple-Year Employment Contract with Tad Berkowitz under the terms summarized below. The contract will be for the period September 1, 2005, through June 30, 2008, at the base salary of $52,000 per annum, his current salary. His salary will be paid entirely from revenue generated by the Athletic Department. His salary may be increased by an amount not to exceed the percentage increase available annually for university employees who are employed subject to the Conditions of Professional service. In addition to his base salary, he may receive incentive compensation for specific athletic and academic accomplishments.

Coach Berkowitz will receive tickets for UA sporting events, use of one automobile, and will be allowed guests to post-season Men’s Tennis events. He will disclose all outside income to the Athletics Director, the University president, and the Board president annually to the extent required by NCAA and Pacific-10 Conference regulations or University policy. There are termination clauses in the contract.

The Board authorized the University of Arizona to permit Dr. Mark R. Riley, Associate Professor of Agricultural and Biosystems Engineering, to establish and maintain a substantial interest in RediRipe, LLC., while continuing his employment at the University of Arizona. RediRip, LLC, is a private entity based in Albuquerque, New Mexico, that develops, manufactures, and markets new technology to evaluate fruit ripeness. This activity may result in the licensing of university inventions an/or supply contract funding from private industry for research within the university.

The Board granted permission to Northern Arizona University to enter into a nominal fee, 50-year ground lease agreement with The Arboretum at Flagstaff for land to construct a 3,500 square foot grant-funded residential facility to 1) house field researchers and students while they are working on forest, natural resource, and environmental research projects in the surrounding area, and 2) provide training seminar space. The proposed location at the western boundary of the approximately 200 acre Arboretum is adjacent to the Centennial Forest that covers 47,000 acres of forest and grassland and contains significant natural and cultural resources.

The Board ratified the University of Arizona’s request to extend the existing Sky View Apartments, 1050 East 8th Street, Tucson, lease for an additional two years at a fixed rate of $778,800 per year, in order to supplement on-campus housing for undergraduate students. The negotiated annual lease cost for the new lease term, through June 30, 2008, is a reduction of $65,000 per year. Funding is provided by Residence Life.

The Board authorized the University of Arizona to enter into a contract with The Bank of New York to provide trustee service, as needed, for University of Arizona debt issues for a period of five years. The University issued a request for proposals for trustee service to five firms and posted a notice on the Procurement and Contracting website. The firm’s selection was based upon a committee’s review and analysis of the proposals and the committee believed The Bank of New York was the most qualified.

The Board approved the proposed changes for Board policies 2-206.B, Academic Credit for Foreign Study, that deletes the requirement for recording individual courses from other institutions on the transcript; 2-208.C, “External Program Review (duplicative programs) by Outside Consultants,” that deletes the policy; 2-302, “Descriptions and Definitions of Academic Units,” that removes the time frame for reviewing the academic units defined in this policy and delegates the frequency for reviewing these units to the universities; 4-202.D, “General Rules/Tuition and Fees for Special Sessions,” that extends the scope of ABOR tuition and fee levels from Summer Sessions to Winter Session and other special sessions; 4-301, “Tuition Waivers,” that removes the policy requiring community service for nonresident students who receive nonresident tuition waivers; and 6-201.H., “Conditions of Faculty Service,” that removes language that requires community representatives and recent alumni to be involved in academic program reviews.

Regent Bulla chaired this portion of the meeting. Dr. Art Ashton joined the meeting for these discussion.

Regent Bulla said the Committee met that morning. One of the items discussed was AZUN whose operational base is now NAU with oversight from the Committee. There was a demonstration of the new AZUN web site and a report on the status of the RFP for vendors to develop the AZUN portal and various interfaces with the universities. The new logo is in place and a web site exists where students can find a catalogue of courses and interface with a chat room and ask questions of real people. Regent Bulla thanked the NAU staff for their hard work.

The Committee also reviewed the FY 2007-11 TRIF Draft Business Plans for selected IT and E-leaning projects. Committee members suggested improvements that can be added to the final plans before they come to the Board for final approval in September, ways that outcomes can be quantified.

The Committee is pleased with how centralization is moving within the universities. A review of items that had not yet been centralized was requested to see if centralization made sense from an efficiency or economic standpoint. Regent Bulla thanked all the CIO’s and staff that have been working on the various issues.

Regent Jewett said the Committee began to really understand the context from which progress has been made for the AZUN project. The marketing material is excellent and what it represents is extraordinary collaboration among the universities. He said this kind of collaboration is vital to both the state’s and universities’ interests. Regent Graff said he would like to see a guarantee to the student that courses that are listed as transferrable actually are, even if there was a typo or mistake on the website. Regent Bulla said the articulation effort was a major step forward and he thanked the universities.

There was a presentation from ASU on Document Imaging for the Vice President of Research and Economic Affairs at the IT/AZUN Committee where there was discussion about the centralization of document imaging to realize some efficiencies. Upon motion of Regent Bulla, seconded by Regent Jewett, the Board approved the purchase of the Documentum/EMC Xtender suite of products for document imaging and management for the Office of the Vice President for Research and Economic affairs at an anticipated five- year cost of $614,300.

Regent Bulla said the Committee had decided due diligence had not yet been completed for this item so it was deferred to another time.

Ms. Cathy McGonigle joined the meeting for this discussion. Regent Bulla said the Board was being asked to adopt the Board’s Public Awareness Plan for FY 2005-2006. He reminded the Regents they saw the Plan come before them in draft form at the June Board Retreat. He said it was important for the Board to strengthen its relationships with the Legislative and Executive branches of state government and all constituent groups this year. He said several Regents were planning to have policy discussions with many legislators and chairs of committees. The new reports that must be filed on tuition caps and the medical school expansion are natural segues for substantive discussions with legislators about the value of university programs and services and funding needs.

Regent Bulla said the positive stories related to community college and university partnerships must be renewed and reinforced. As the Memorandum of Understanding (MOU) between community colleges and universities is completed, the Regents should be able to demonstrate to legislators, including the rank and file, that Regents intend to work with community colleges to improve access to affordable baccalaureate degrees across the state.

The Legislative Affairs Work Group will be meeting again to provide guidance to the Government Affairs Group as the legislative session gets underway. He said President Palacios and he had discussed how critical it is for the Board, the presidents, and the Government Affairs Group to have a clear and consistent message when meeting with legislators, the Governor, and staff members of both the legislative and executive branches.

The same is true in all public information efforts. With the help of the universities, there needs to be further engagement of community groups in the dialogue about University System accomplishments, initiatives, and resource needs. Regent Bulla asked for input throughout the year from Regents on ways the Board can enhance its communications and outreach. He also said input should be received form all constituent groups.

Upon motion of Regent Bulla, seconded by Regent Boice, the Board approved the Public Awareness Plan for FY 2005-2006.

President Palacios reminded the Board legislation was passed last Spring that required the Board to report on its operational and capital plans for the Phoenix Medical Campus of the University of Arizona.

Regent Bulla said he was sorry Regent Stuart, who was the driving force on this expansion, was in St. Petersburg, Russia, so could not be present. He said Dr. Joiner, the Dean of the UA College of Medicine, has been the point person on this effort. He introduced Dr. David Young, Vice President and Dean of the College of Liberal Arts and Sciences, Mr. Fred Karnes, Governor Napolitano’s Policy Advisor on Urban Development and Community Affairs, Mr. Jaime Molera, Molera Alvarez Group, the Board’s consultant for the development of this campus, and Ms. Kathy Bedard from the Board’s staff. He thanked everyone and recognized the work they had done on this project.

Dean Joiner and Dean Young highlighted the responses in the draft Report and presented a status report on the progress being made towards expansion of the University of Arizona’s College of Medicine in Phoenix. Dr. Joiner said this was viewed as an opportunity, not to just provide responses to the questions, but to have an opportunity to explain in some detail what it is hoped will be accomplished. He said the response emphasizes the economies of scale and scope of this collaborative venture.

It is also important to accelerate the move to Level 2, a larger class size, and stay within the budget guidelines of the legislative briefing book for Level 1. Many of those involved are eager to move to Level 2. The responses focus on the questions raised in Senate Bill 1517.

Dr. Joiner gave the Board an overview of the proposal. He said the Bill asked for five and twenty year budgets. It was concluded the state budget would grow substantially in the early stages; then would grow more slowly in the later phases as opposed to the total budget which expands twenty-four fold over the next eighteen years. This project will be an economic driver.

Dr. Joiner said the Board was also asked to comment on student and staffing levels, and the numbers are presented in the Report. Because the initial class, Level 1, will be twenty-four students per year; there can be no additional students until there is a new facility. It has been proposed that a new facility that would allow expansion of class size be constructed so the progressive increase in class size could be started in 2010 and progressively expand the class to 150. The expansion and the economic multiplier are directly linked.

An organizational chart of all the partners is provided in the Report. The UA realized the administrative structure for the Phoenix program needed to be reorganized. The organizational chart, showing a Vice Dean in Phoenix with an Associate Dean for Academic Affairs, an Associate Dean for Research, and an Associate Dean for Clinical Affairs reporting to that Dean is in the Report. It is anticipated the best way to form a faculty is to create a Department of Medical Sciences as there will be a small number of faculty in each discipline at the beginning. Dr. Joiner described other staff positions.

Dr. Joiner said the time line shows the progression of the activities as it will be a challenge to get this done in a very short time. He explained the time line, capital needs, faculty needs, and financing needs. He thanked Ms. Bedard for her work on this project.

Dr. Young emphasized how strongly committed ASU is to making this happen in Phoenix. He directed the Board’s attention to the implementation plan for the development of the Department of Biomedical Informatics. There has been a lot of work done by various task forces associated with the Governor’s Commission and a design team came forward with an outline of the theme for a draft curriculum on the Phoenix campus. This is an opportunity for a new bold vision for a medical curriculum for training physicians for the 21st Century. The design team recommended the Phoenix curriculum focus on personalized medicine. ASU sees the development of the Department of Biomedicine as being central to the development of the Phoenix track.

Dr. Young presented a summary of the timeline. The goal is to have the Biomedical Informatics Department officially open in July of 2006. It is hoped ASU will come to ABOR for approval of the Department this fall and a search has been launched for a new chair. Advisory boards are being developed and faculty are being recruited. The curriculum needs to be developed for the Department. ABC 1 on the Phoenix Biomedical Campus will be home for the Department and ASU is committed to building ABC 1 in its current configuration and then building it out.

Mr. Karnas said this is a good plan to use to start answering questions that are still being asked. This plan will be changed and added to as it progresses. Mr. Molera explained the legislative approach. President Likins said this will be an economic boon to the state for years to come. He thanked Ms. Bedard for her work in compiling the document. President Crow said this is an opportunity for the State of Arizona to move ahead of other states with its two different medical curriculums.

Regent Bulla thanked everyone for all their hard work on the Report. He said this is a wonderful opportunity to work together to meet the medical needs of the future. He thanked the staffs in the Governor’s office, the Central Office, and the universities for the job they did in putting together this Draft Report.

Upon motion of Regent Bulla, seconded by Regent Boice, the Board approved the August 12, 2005, draft response to Senate Bill 1517 as to concept and content; and requested staff, working with the Governor’s Office, the University of Arizona, Arizona State University, and other parties as appropriate, finalize this response and submit it to the Joint Legislative Budget Committee on September 1, 2005, as required by SB 1517. Regent Herstam did not vote or participate in the discussion of this item due to a conflict of interest.

Regent Calderón chaired this portion of the meeting. Dr. Art Ashton joined this portion of the meeting.

Regent Calderón said the Board had discussed the 2005-2006 Action Plan at its June Retreat. The Action Plan is a key document that identifies the Board’s long-term and strategic directions and objectives that are designed to carry out its vision and mission. Currently, there are six strategic directions and twenty-six objectives in the Plan. The Board can add objectives at any time, and each January and August reports are presented to the Board on progress toward meeting the Action Plan objectives.

Based on the discussion at the June Retreat, a number of objectives were refined. A new objective number five, related to the Joint Conference Committee’s work involving the universities and community colleges, has been added.

Upon motion of Regent Calderón, seconded by Regent Bulla, the Board adopted the FY 2005-2006 Action Plan.

Ms. Darcy Renfro, from the Governor’s office, and Mr. Fred DuVal, a CEDC Commissioner, joined the meeting for this presentation. Regent Calderón said the Legislature assigned the task of developing Arizona’s new ten-year economic strategy to the Commerce and Economic Development Commission (CEDC), the strategic research and initiative arm of the Arizona Department of Commerce. The Board received a status report regarding progress on the initiative from Ms. Renfro. She said the Report will describe new initiatives, what is already going on, and what has been accomplished. They want to build on areas in which Arizona can become national leaders, such as water. They would also like to insure the expected growth can be sustained. She said the universities would be a central part of the future of the State of Arizona. Mr. DuVal talked about the process and how the Report would move forward.

President Palacios reminded the Board there had been a discussion with community college representatives at the June Retreat and there are current discussions with the community colleges underway. Regent Calderón said the JCC had done good work for many years; but its successes are often overlooked, especially in the recent legislative session. Based on the legislative session, the JCC, which is co-chaired by Regent Calderón and Mr. Jan Guy, a trustee from Cochise Community College, has decided on a goal of providing three to five concrete steps in order to achieve greater assessability to a baccalaureate degree. These steps may require the universities and the community colleges to think “outside the box” and to move away from traditional norms and ideas. The JCC hopes to provides these goals in a report to the Regents and the community college presidents around October 1.

President Haeger is the university president representative to the JCC. He said the universities and the community colleges must come to agreements about how operations take place that are fundamentally different from the current operations, or the legislature will make policies that may not be acceptable to either group. For example, he said articulation today is done program by program, institution by institution, and that does not make sense in the current environment. There are also funding issues for both entities. It is a short time to come up with solutions for such heavy issues, but the group is working hard.

President Palacios reminded the Regents they had agreed at the Retreat to develop a Memorandum of Understanding with the community colleges and a Value Proposition relating to the state investment in the local production of college degrees.

President Likins took the lead on developing the Memorandum of Understanding (MOU) with Pima Community College Chancellor Roy Flores. They have worked together to draft an overarching set of principles that could be agreed on with signatures of all the community college presidents, the university presidents, and the appropriate board members. The MOU would define the principle foundation on which agreements could be based. Dr. Likins listed the ten principles listed in the MOU.

Dr. Likins said President Crow had suggested a modification to Principle 2. The suggested principle would read, “Specifically, every Arizona resident should have access to the opportunity to earn both an associates degree and a baccalaureate degree that are affordable, flexible, geographically proximate, and of high quality.” This modification has not yet been vetted with Chancellor Flores. Dr. Crow also suggested the word “quality” be inserted before the word “pathways” in Principle 3.

President Likins said it is hoped the collaboration between the community colleges and the universities will be able to work things out without waiting for some externally motivated solution to challenges.

President Crow reported the assignment from the Retreat was to try to deal with the question of economic value and economic return for enhancing baccalaureate degree production. ASU Professor Dennis Hoffman is in the process of a study titled, “The State Investment in the Local Production of College Degrees: A Value Proposition.” It is hoped there will be a draft of the study by September 1st and a final report by October 1.

The meeting recessed at 4:02 p.m. and reconvened at 9:20 a.m. on Wednesday, August 17.

Ms. Gale Tebeau and Mr. Dick Roberts joined the meeting for this discussion. Regent Boice said the Board was being asked to review and approve the FY 2006 initial All Funds Operating Budget for the universities and the Central Office.

Ms. Tebeau said the All Funds Budget combines the State Operating Budget and the universities’ local funds budget into one report that projects revenues, expenditures, and year-end balances. Included in this initial All Funds Budget is investment income, indirect cost recovery, gifts, grants, contracts, plant fund projects. The Initial All Funds Operating Budget reflects changes since the mid-year update presented to the Board in January and any accounts with projected year-end deficits of $100,000 or more.

The fiscal 2006 initial All Funds Budget represents an $84.5M increase over the mid-year update. State funds are $68.1M with $2.9M unrestricted local funds and $13.5M in restricted gifts, grants, and contracts. Total revenue from tuition and program fee collections is estimated at $668.9M, an increase of $70.6M or about 11.8%. Approximately 43% of that revenue is retained locally at the universities for student related programs, financial aid, plant funds, and debt service.

Ms. Tebeau said after four years in deficit, ASU’s Intercollegiate Athletic (ICA) accounts deficit has been eliminated. ASU Stadium Management is still reporting a deficit of nearly $775,000 and is projecting the deficit to continue through 2006. The ASU investment income account deficit is expected to significantly decrease in 2006. The UA Presents is still reporting a deficit, but is hoping to see some slight decreases by the end of 2006.

Regent Boice asked how the new arrangement at Sun Devil Stadium with the Cardinals leaving would impact the ICA budget. President Crow said the deficit in Stadium Management was the direct result of providing the stadium to the Cardinals. The Cardinals’ poor attendance and poor economic performance has cost the university resources over an 18-year period. When the contract ends in two years and they move to Glendale, that loss will stop; but some of the revenue ASU has been receiving for stadium rent will also stop. ASU has decided to separate the relationship between the stadium and the ICA to make the stadium a separate cost center within the university and to allow it to be used for multiple functions. All the cost arrangements have not yet been decided.

Dr. Crow said there will be other future financial issues with ICA as a result of historical decisions made to build facilities prior to the completion of fund raising, leaving a debt balance on those facilities. ICA currently requires millions of dollars of fund raising to break even as they have a very small endowment and a number of complex operating issues. All of this is being reworked. He will be asking the Sun Angel Foundation to step up their support. Great success in athletic programs brings in revenue; but great success waxes and wanes; so a program cannot be built on that proposition. ASU is in the process of reconfiguring the entire model for ICA. President Palacios said she would like to see the reconfiguration, but said ASU should at least go over the details with Regent Boice. Dr. Crow said Mr. Rich Stanley will be in charge of this reconfiguration and will be assisted by Dr. Carol Campbell.

Regent Herstam asked if this would in any way delay stadium improvements such as additional restrooms. Dr. Crow said he hoped not; but the stadium was aging and repairs need to be made for it to be certified from an engineering standpoint. Under a new stadium management configuration, perhaps with other partners such as the City of Tempe or private corporations, a new model for that stadium will emerge and those things will be addressed.

Regent Boice asked President Haeger about the decrease in gifts and cash from 2005 to 2006. President Haeger said cash gifts fluctuate from year to year. He said the university has finished its capital campaign and would probably start another one in one or two years.

Regent Boice said the UA uses the terms “transfer in” and “transfer out” while the other two institutions do not use those terms. He asked for the terminology to be uniform in the future.

Regent Boice said he was disturbed by the UA overall earnings rate of 2.3% on investments. Mr. Roberts said these cash dollars were invested in very short term instruments. None of these investments are for a period longer than six months and some are for 24 hours.

Regent Boice said it was noted the UA Presents deficit continues to escalate, but he was impressed at the attempt to raise money and to reschedule events to bring this deficit down. Regent Bulla said he would like to make his annual comment about the tuition that goes back to the state for a period to time. He would like to see a display of how the dollars flow to the state and back. President Likins said he agreed with Regent Bulla. However, the UA manages its internal budget by making a distinction between general fund allocation and net tuition revenue.

Regent Boice asked the presidents if the proposed budgets were reasonable in light of the state having additional money this year. President Haeger said the university always takes a hard look at what may happen in the year ahead. It is a budget projection of what the world might look like. That is a conservative number that is carried until the 21- day count is established and the second part of the budget, tuition, arrives. He said the universities really do not know what their budget will be for the current year until after spring enrollment numbers, but they try to budget for their needs.

President Crow said ASU’s budget was based on need; they are not able to budget for wants. They will put something together so the Regents can see needs, wants, and wishes. President Likins said the universities were, for the FY06 budget, putting together a financial strategy, given the known constraints on resources and recognizing some unknown constraints, to keep the universities in business. There is not a lot of opportunity for creative thinking now. However, for FY07, the universities will try to be more creative as there appears there will be money available. They will be asking the state to make investments that will allow the universities to be successful in the national arena.

Upon motion of Regent Boice, seconded by Regent Frank, the Board approved the FY 2006 Initial All Funds Operating Budget, as presented in the Executive Summary.

Ms. Gale Tebeau and Mr. Dick Roberts joined the meeting for this discussion. Regent Boice said the universities and Central Office were presenting their preliminary FY 2007 State Operating Budget Requests for review by and guidance from the Board. Ms. Tebeau said the system requests total $143.4M, an increase of 11.6% over all and a 17% general fund increase. As a comparison, last year at this time the preliminary request was for $135.4M, 11.9% overall, and 17.2% general fund request. However, last year the final requests were scaled back from the preliminary requests. Of the $143.4M, $37.7M is for the continuation budget requests with the largest components being health insurance. Of the $11.4M, $3.8M is for the annualization of current year appropriations for health insurance. In addition, ASU requests $3.2M for unfunded or underfunded health insurance costs for the current year and the UA is requesting $4.4M in anticipation of further increases in FY 2007.

Ms. Tebeau said the other major component of the continuation request is the 22 to 1 enrollment growth formula at $13.9M for ASU. The UA is requesting a slight decrease of $725,000, while NAU offsets that with a slight increase of $772,000. Each university also will be requesting performance funding which includes the number of degrees awarded, number of high-need degrees, and the number of degrees awarded to needy Arizona students. Although the Governor’s FY 2006 budget recommendation was supportive of performance funding in general, the Governor’s recommendation suggested that further study be given, particularly related to how long it takes students to earn undergraduate degrees. Also included is funding to provide for operating costs for new facilities planning to open in FY 2006 and FY 2007.

Ms. Tebeau said the Central Office request includes $5.6M for the Arizona Financial Aid Trust Fund (AFAT) which represents the 2 to 1 match of student fees as was proposed in last year’s budget request. Unfortunately, for the last four years State appropriations have not kept up with the 1 to 1 match. State appropriations of $2.1M have remained flat since FY 2003 and this year the state match was about 1 to .62. The Central Office also is requesting additional funding for the WICHE program. Like AFAT, the WICHE funding has not kept pace with the associated programs costs and the number of students interested in the program. This request brings the number of students supported to 183 from the 149 currently supported. Before the budget cuts of FY 2002 and FY 2003, the legislature approved student support at 201 students.

The request also asks for $105.7M for decision packages, including $36M across all three universities to support faculty and staff retention and competitiveness. Building renewal is not part of the operating budget request, but is included in the separate capital request. The issue of whether to request building renewal for prior years in which no funding was received was raised. The universities’ personnel report, not part of the operating budget request, will be finalized for review and approval at the September meeting.

President Likins said this FY 2007 budget year will be the first year since he has been in Arizona that the state will have money. President Likins described the UA budget request and how the request fits with the UA mission. He described initiatives the UA will pursue if they are funded.

President Haeger agreed with President Likins that the budgets were critical for the universities and the state. His budget proposal ties directly to the plans that were outlined in the Arizona Redesign. He said NAU expects modest enrollment growth composed of several different pieces. Retention is expected to improve between the freshman and sophomore years. The Flagstaff campus will remain essentially where it is now with perhaps a slight increase; the enrollment growth is expected to come from serving the statewide population. He explained how the budget would be used to meet NAU’s needs and how it would be used to increase graduation rates. He described what initiatives NAU would accomplish if they were funded.

President Crow said Arizona had a high need for both educational and discovery services. He believes the need for those services exceed the ability of the universities to supply them. Secondly, the universities are struggling to meet their missions such as economic development, research, statewide education, life-long learning, etc. He described the elements of the ASU budget.

Regent Palacios said she believes building renewal money is very important; however, she had a problem with asking for funds that were not funded in prior years; even though the need is there. Regent Bulla said he believed the universities should have a game plan for demonstrating the need for building renewal that is more than just the amount of money needed. He also does not believe prior funding should be requested; but the needs of today should be presented. He said the same thing should be done with the compensation need. It should be broken down by levels. He would like single sheets with how we are going to get where we want to go that could be handed out for information purposes.

Executive Director Sideman said one option would be to submit a request for unfunded building renewal money from prior years as a critical issue. There was a discussion of the fact the universities need to continue to serve students regardless of what part of the budget request is funded and how hard it is to make plans what you don’t know what the funding will be.

Ms. Kathy Bedard, Dr. Leslie Tolbert, Dr. Carl Fox, and Dr. Paul Johnson joined the meeting for this discussion. Regent Boice said the Board was being asked to approve the TRIF Annual Report for the year ended June 30, 2005, along with a Revised FY 2006 TRIF Budget. The Board was also being asked to review a prototype brochure to be developed by the universities for each of their TRIF projects.

Ms. Bedard said the universities are required to submit the Annual TRIF Report to the Speaker of the House, the President of the Senate , and the Governor by September 1. When finished, it will be put on the web site. She said the total TRIF revenues exceeded the revenue projections for FY 2005 by about $4.6M, about 9% excess revenue, resulting in total new revenue in FY 2005 of just under $57M. For the four year period in which TRIF revenues have been received, $195M has been received. Total TRIF expenditures in FY 2005 were $53.5M, representing about 75% of the total revenues for the period, including the carry forward amounts. By Board policy, the universities have until December 31, 2005, to spend all the carry forward amounts.

Dr. Fox described the revised FY 2006 budget for NAU. He said NAU was requesting a budget revision that would include two new projects totaling $3.7M, the Applied Research and Development Building and a Conference Center to be located on the NAU campus. Dr. Tolbert explained the UA FY 2006 revised budget. She said the budget revisions involved use of some of the over-realization of funds to complete the commitment to Bio5, increase of debt financing to cover the chemistry building financing, and to start the new Venture Fund one year prior to planned implementation in FY 2007.

President Crow introduced Dr. Paul Johnson, Associate Vice President for Research and a distinguished professor in the engineering school.

Regent Boice reminded the Board that Regent Bulla had requested a one or two page summary of each TRIF project for use as a management decision-making tool and for public relations purposes. Ms. Bedard described the draft four-page brochure that had been produced. It will be tweaked and additional information will be added before it is brought back to Regents Boice and Bulla. Regent Bulla thanked the staff for all their work on this project. Regent Boice said, assuming the Board agrees, each university will be asked to use this prototype to prepare a brochure for each of the FY 2006 TRIF projects and to present the brochures at the September meeting.

Upon motion of Regent Boice, seconded by Regent Bulla, the Board approved the FY 2005 TRIF Annual Report, including the revised FY 2006 TRIF budgets and requested staff to finalize the Report for submission to the Governor and the legislature to meet the September 1, 2005, due date. The Board accepted the prototype for the TRIF projects and asked the universities to return in September with final brochures for all projects.

Regent Boice chaired this portion of the agenda. Mr Ted Gates joined the meeting for this portion of the agenda. Regent Boice said the items found behind the Capital Committee Appendix tab had been approved by the Capital Committee and would not come to the Board, but had been provided to the Regents for their information.

Ms. Carol Campbell joined the meeting for this discussion. Regent Boice said ASU was requesting Project Implementation Approval for the Instructional/Research Laboratory Renovations: Phase II project. Ms. Campbell said the projects were to improve instructional laboratories through renovation. The project will impact approximately 66,000 sq. ft. of science and engineering labs. There are 19 projects within this project and they have been revised many times. Regent Boice suggested, if this was approved by the Board, on a quarterly basis ASU submit to the Capital Committee the project deletion or inclusion of other items in this, but staying within the $20M. Regent Calderón said he thought the Capital Committee had agreed ASU would stay within the $18.4M they had requested at this Capital Committee. Regents agreed with Regent Calderón and the $18.4M cap was the amount set. President Crow explained why this project changes so often.

Upon motion of Regent Boice, seconded by Regent Calderón, the Board granted Project Implementation Approval to ASU for the Instructional/Research Laboratory Renovations: Phase II project as presented in the Executive Summary with the limit set at $18.4M

Mr. Rich Bowen joined the meeting for this discussion. Regent Boice said NAU was asking Project Implementation Approval with a Budget Increase and Project Approval for the New Parking Structure project. Mr. Bowen said a business plan had been added to the Executive Summary material. He said NAU was seeking combined Project Implementation and Project Approval so construction could begin in September before the winter season because they have been able to accelerate the design. The budget increase was due to a change in the configuration due to the use of Riordan Road.

Regent Calderón said it was his understanding that once the parking structure was built, there would be a retirement of some of the large parking lots and was told he was correct. Upon motion of Regent Boice, seconded by Regent Bulla, the Board granted NAU Project Implementation Approval with a Budget Increase and Project Approval for the New Parking Structure project, as presented in the Executive Summary.

Ms. Stephanie Jacobson, Dr. Elizabeth Grobsmith, and Dr. Milt Glick joined the meeting for this discussion. Provost Glick presented the twelve proposals requested by ASU. He said the reason there were so many proposals was projects had been placed on hold until the Redesign process and ASU’s internal process were completed and ASU has growing campuses that must have programs for the increase in the number of students.

Upon motion of Regent Frank, seconded by Regent Jewett, the Board approved ASU’s requests to plan for the BS degree in Nonprofit Leadership and Management, the MS degree in Nonprofit Studies, the Master of Public Policy degree, and the BA degree in Urban Studies at the Downtown Campus; to implement the BS degree with majors in Operations Management Technology, in Environmental Technology Management, and in Graphic Information technology, using the one-step expedited process, and to disestablish the BS degree in Industrial Technology, at the Polytechnic Campus; to implement a BA degree in Film, and to disestablish the MA and BA majors in Interdisciplinary Humanities at the Tempe Campus; and to implement a BA degree in Ethnicity, Race and First Nations Studies, using the one-step expedited process, and to establish the Department of Mathematical Sciences and Applied Computing in the New College of Interdisciplinary Arts and Sciences at the West campus.

Provost Grobsmith presented the NAU requests. She said the requests were in the nature of housekeeping. There were two programs that NAU believed had been disestablished by the Executive Director but were never removed from their inventory. The programs were changed three years ago. Upon motion of Regent Frank, seconded by Regent Boice, the Board approved NAU’s request to disestablish the majors in Botany and Zoology in the BS degree.

Dr. Robert Mitchell said he and the AFC appreciate his appointment to the Tuition Studies Work Group. The AFC has been discussing the concept of shared governance, using the UA’s recent Shared Governance Memorandum of Understanding as a launching pad for that discussion.

Upon motion of Regent Palacios, seconded by Regent Jewett, the Board adopted the FY 2006-2007 and FY 2007-2008 Meeting Schedule as proposed:

FY 2006-2007
August 10 and 11, 2006 ASU
September 27 and 28, 2006 NAU
November 30 and December 1, 2006 UA
January 25 and 26, 2007 ASU
March 8 and 9, 2007 UA
April 26 and 27, 2007 ASU
June 21 and 22, 2007 NAU

FY 2007-2008
August 23 and 24, 2007 UA
September 27 and 28, 2007 NAU
December 6 and 7, 2007 ASU
January 24 and 25, 2008 UA
March 6 and 7, 2008 ASU
April 24 and 25, 2008 UA
June 19 and 20, 2008 NAU

President Likins and his staff were thanked for their hospitality. Appreciation was expressed for the progress of AZUN. The importance of continued cooperation between the UA and ASU, especially for the medical school in Phoenix, was expressed.

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