Arizona Board of Regents-March 2004 Minutes

A meeting of the Arizona Board of Regents was held March 11 and 12, 2004, in the Catalina Room of the Student Union Memorial Center at the University of Arizona, Tucson, Arizona. President Herstam called the meeting to order at 1:25 p.m. on Thursday, March 11.

PRESENT:	Regent Fred Boice Regent Robert Bulla Regent Ernest Calderòn Regent Lorraine Frank Regent Chris Herstam Regent Jack Jewett Regent Danelle Kelling Regent Wes McCalley Regent Christina Palacios Regent Gary Stuart
ABSENT:	Superintendent Tom Horne Governor Janet Napolitano

Also present were: President Peter Likins, Dr. George Davis, Ms. Edith Auslander, Dr. Richard Powell, Dr. Ray Woosley, Mr. Dick Roberts, Ms. Janet Bingham, and Mr. Greg Fahey, University of Arizona; President Michael Crow, Dr. Milton Glick, Dr. Christine Wilkinson, Mr. Scott Cole, Dr. Kathleen Church, and Dr. Mernoy Harrison, Arizona State University; President John Haeger, Dr. M. J. McMahon, Mr. Dave Harris, Dr. David Bousquet, Dr. David Cain, and Dr. Elizabeth Grobsmith, Northern Arizona University; Executive Director Linda Blessing, Board Counsel Joel Sideman, Secretary to the Board Judy Garza, Dr. Tom Wickenden, Dr. Art Ashton, Ms. Cathy McGonigle, Ms. Kathy Bedard, Ms. Stephanie Jacobson, Ms. Gale Tebeau, and Dr. Mark Denke, Central Office Staff; and Dr. William Simmons, Arizona Faculties Council.

All lists, reports, summaries, background materials, and other documents referred to in these minutes can be found in the March 11 and 12, 2004, Documents File.

Regent Kelling led the Pledge of Allegiance. President Herstam welcomed Dr. William Simmons who was representing the Arizona Faculties Council for this meeting.

President Likins said Focused Excellence is the University of Arizona’s response to the Changing Directions initiative. He said today he intended to concentrate on excellence.

Provost Davis said four study teams were charged with examining opportunities in research, vital public outreach, and instruction. The four areas studied were cognitive and neurosciences, cultural ethnic area gender studies, life sciences, and earth and environmental programs. The whole concept of examining carefully the potential in these four areas is related to the fact that each of the four areas is marked by dozens of programs and centers and institutes that are scattered across the whole landscape of the university. The university is not trying to reorganize the university and place all these centers and departments in one location, but rather to enhance the collaborative efforts that take place among them.

Provost Davis introduced Dr. Susan Beck, Head of the Department of Geosciences and a distinguished seismologist, Dr. John Sutter, Co-Director with Dr. Beck of a United States Geological Survey program called “Earth Surface Processes Research Institute” (ESPRI), a UA/U.S. Geological Survey partnership, and Dr. Jonathan Overpeck, Director of the UA Institute for the Study of Planet Earth.

Dr. Overpeck explained ESEP, Earth Science and Environmental Programs. The large, rapidly growing population on earth is challenging the environment. Arizona’s population is expanding rapidly due to the influx of people as well as the birth rate. Arizona is in what is hoped to be the middle of a drought Drought costs the USA about $6B to $8B a year. Climate changes are likely to run into Trillions of dollars. Water and energy will be a real challenge in the future.

Dr. Overpeck said the University of Arizona is the water university of the world. They also have strengths in earth services processes. Across several colleges, they have strength in hydrometerology and climate, ecosystem dynamics and biogeochemistry. In the past, natural scientists have worked in their own environment. Today’s challenge is to connect environment and society. Now geography, social science, law, economics, and policy must work together. Environment and health is also a rapidly growing area that should play a bigger role in the economy of Arizona and the world.

The UA has faculty, staff, and graduate students in forty different units across the campus in nine different colleges that are all working in these areas. The goal is to bring everyone together to make the sum of the enterprise bigger than the sum of the simple parts.

Dr. Overpeck said a new market force in the global economy is sustainable systems. The UA, in partnership with the other state universities, hopes to take the lead in this area. The proposed ESEP Focused Excellence program is a cost effective way for the UA to be the leader in the next market economy. It builds on a proven interdisciplinary model and the Institute for the Study of Planet Earth. It strengthens the different colleges and areas while providing the interdisciplinary bridges to score in this area.

He said there will be a need to create more leadership positions in the thematic areas mentioned earlier. The program should pervade the university all the way down to undergraduates. This should not only provide environmental technology and engineering solutions for the environmental problems of tomorrow, but should also provide the knowledge base as a tool for more effective environmental decisions. Using the Cooperative Extension model, this is designed for expanding private-sector and federal partnerships.

Dr. Overpeck said the first priorities of this program are to rebuild the department of Atmospheric Sciences and to build the multi-unit Environment and Natural Resource Building. This will allow a unique opportunity to work with the U.S. Geological Survey.

Dr. John Sutter thanked the Regents for approving the planning for the Environment and Natural Resource Building as this allows the U.S. Geological Survey and the UA to move forward to plan for the new Earth Surface Processes Research Institute. He believes this will be the model for interaction between the university and federal agencies in the future. He said he looked forward to working with the other two universities on various projects.

Dr. Bill Simmons reported the Arizona Faculties Council (AFC) is still working on its analysis of faculty compensation issues and hopes to have an initial report to the Board at the August meeting. He also reported the AFC supports the proposed tuition increases as the enhanced revenue will make the universities more successful in achieving their respective missions. The AFC also supports access and the increased financial aid.

The AFC recommended expanding the Arizona Financial Aid Trust Fund, especially the State matching funds. They support increasing the financial aid set-aside from 14% to 15%. However, as President Crow has stated, tuition and state appropriations are only two of many possible funding sources for the universities. To insure that future educational cost growth is not disproportionally shared by students, the AFC believes long-term funding sources such as local corporations and gift giving should be considered.

Dr. Simmons said the AFC would like faculty to be considered a resource, not a cost. Better faculty leads to better education and more dynamic research.

Mr. James LaBar, ASASU graduate student delegate, said the undergraduate students at ASU Main reluctantly support the ASU administration’s tuition proposal in order to improve the university. The administration has agreed to fund student identified concerns, including classroom improvements, 24-hour library hours, increase in the number of DPS officers, and to hold resident Pell Grant recipients harmless. He said the graduate students at ASU Main also reluctantly support the administration’s proposal for the same reason as the administration has agreed to fund the identified graduate concerns of a sincere push towards 100% tuition remission for all graduate teaching and research assistants and more funds to be set aside for graduate student financial support mechanisms which include an increase in graduate tuition waivers for non-teaching and research graduate students. ASU West students oppose any tuition increase that is greater than inflation. The students all encourage students, faculty, administration, and ABOR to continue to heighten the awareness of how important higher education is to the future of Arizona.

Mr. J. P. Benedict, ASUA delegate, said both undergraduate and graduate students at the UA want their tuition to be more predictable so they can plan for four or five years of college. The students are proposing a $400 increase for resident students as they believe that will lighten the load on students over the administration’s proposal and will still support the vision of the university. He urged the Board to continue to support financial aid, to work to find other sources of revenue, and to continue to move the graduate teaching and research assistants tuition remission to 100%.

Ms. Janessa Bailey, ASNAU, commended President Haeger for proposing the same tuition increase for everyone at NAU. However, as NAU lost students last year and is projecting another enrollment decrease this year, the students do not want a tuition increase to contribute to more enrollment decline. The students do support the priorities outlined by the administration for use of the money raised by the tuition increase. They are willing to compromise and do support a tuition increase of $350.

Regent Palacios reminded the Board the tuition hearing was held on February 25 to provide the students a forum to voice any concerns regarding tuition and financial aid. The Regents heard from students around the state, including student leaders at each university. The hearing was televised on local cable networks and NAU’s Webcast, allowing many other students, faculty, staff, and citizens to view it. She thanked all who coordinated and participated in the hearing.

Prior to the tuition hearing, the university presidents had advanced their recommendations, calling for increases in resident and nonresident tuition and fees for undergraduate and graduate students. The presidents’ specific recommendations for regular tuition and mandatory fees were included in the Board materials.

President Likins said he was recommending an increase of $490 for both undergraduate and graduate resident students which would take the tuition for resident undergraduates to $3,988 and for resident graduate students to $4,248. He recommended an increase of $700 for nonresidents which would take the tuition for nonresident undergraduates to $12,978 and nonresident graduate students to $13,228. The proposed increases would not move the UA to the top of the bottom third in relation to the other public universities in the U.S. but would probably move the UA to 41st next year in resident rankings. The UA is currently 30th among the public universities for nonresidents and he expects the $700 increase will keep the university close to that same level. He also asked the Board to change its policy that requires 14% of the increase to be set aside for financial aid to require 15% of the increase to be set aside. The UA held resident Pell Grant students harmless from the last tuition increase and intends to do the same this year.

President Crow said the most important agenda item as ASU advances is to build quality within the university and to build access to the university. Unfortunately, it requires resources to do both of those things. Low cost has not provided for access. Investment must come from all sources--State of Arizona, families that send their children to the universities, students, private donors, and a range of other sources of revenue–to move the universities forward in quality and build greater access.

Dr. Crow said ASU is committed to financial aid being part of the building of the institution. All funding requests seek resources to expand financial aid. ASU is also committed to the needs of the students and listens to what students believe are the most important investments. The tuition increase will be focused on undergraduate education.

Regent Palacios commented on the student referendum at ASU concerning a fee for the Memorial Union and the Student Recreation Center. She reminded the students the Regents had stated concern about a designated fee limiting ASU’s ability to secure funds for higher priority issues. She expressed a concern that ASU’s proposed tuition increase had been limited by the possibility of the student referendum passing and that fee being added this year along with a health fee. She asked how the additional $130 would be used if the Board was to add that amount to the ASU tuition request. President Crow said the ASU commitment would be to invest the dollars on the core objective which is quality, both in academics and in student life issues, and access.

President Haeger said the NAU tuition recommendation of $475 for all students--resident and nonresident undergraduate and graduate–is an effort to balance access across the entire student body. The tuition increase is an absolute necessity for NAU to continue to offer high-quality programming. To deliver undergraduate education at its best, NAU’s contract with students includes small classes, full-time senior faculty in those classrooms, a residential learning environment second to none, and access to first-rate facilities. A primarily undergraduate institution is more expensive to operate than a graduate university. The university is smaller in size and has less flexibility.

Dr. Haeger said NAU had tried to be very conscious of student, faculty, and staff requests when the budget was developed. It includes guaranteed faculty raises, improvements in student programming and student services, and maintenance of the health center. In addition to a tuition increase, NAU is committed to using existing resources as carefully as possible.

Regent Palacios moved the Board increase the 2004-2005 resident tuition for undergraduate and graduate students at the University of Arizona by $490, for a total tuition of $3,998 for resident undergraduate students and $4,248 for resident graduate students; and that nonresident tuition increase by $700, for a total tuition of $12,978 for nonresident undergraduate students and $13,228 for nonresident graduate students; and that the University of Arizona establish a $25 application fee beginning Fall 2004, for resident undergraduate students. Nonresident undergraduate and all graduate students already pay this one-time application fee. The motion was seconded by Regent Jewett.

Regent Calderón said he believed it was imprudent to raise tuition 40% in year A and another 10% in year B. He made a substitute motion to increase the University of Arizona resident undergraduate and graduate tuition $400 each and to raise nonresident undergraduate and graduate tuition $650 each. The motion failed for lack of a second.

Regent Bulla said he was troubled about the differential tuition requests among the three universities as he was unable to find a sound business reason for the difference. He also said he believes the UA request is too high in relation to the other institutions and he is troubled by charging an application fee only for the University of Arizona.

Regent Stuart said he was surprised there was not more differential among the three universities’ tuition requests as the universities have different cost models. He said he also supports the application fee and assumes the other two universities will ask for this fee next year. President Likins said the request for student health fee at ASU was one reason for the different tuition requests. He also said he believed the Arizona universities are the only ones in the nation that do not charge an application fee to its residents.

Regent Boice said he would like to dispel the idea the Board seems to be racing to raise tuition to the top of the bottom third of all public universities, no matter what. He said the Regents are compelled to provide funds so the universities can provide a quality education to students. The universities have various sources of funds, such as state operating money management of intellectual property, private donors, research, and tuition. He would like to keep tuition in context with the other income streams. The universities do not operate on tuition alone.

Regent Kelling said she used to believe a low tuition was the best financial aid, but over the years she has seen this does not work. She thanked the students for their professional approach to the tuition process. She said she supported their goals of accessibility, predictability, and financial aid. She believes these principles are adequately addressed in President Likins’ proposal.

President Haeger said he believed there would be more differentiation in tuition over the next several years. It will be both where the tuition dollars go and where other revenues come from. He believes low tuition over the years has produced low state appropriations and low financial aid.

The motion to set UA tuition passed with Regents Boice, Bulla, Frank, Jewett, Palacios, Kelling, Stuart, and Herstam voting yes and Regent Calderón voting no.

Regent Palacios said she believed ASU needed additional resources for quality and to provide for the growing student population. Regent Palacios moved the Board increase the 2004-2005 resident undergraduate tuition at Arizona State University by $465 for a total tuition of $3,973, nonresident undergraduate tuition by $800 for a total tuition of $12,828, and graduate tuition for both resident and nonresident students by $1,330 for a total of $5,038 for resident graduate students and $13,558 for nonresident graduate students. The motion was seconded by Regent Jewett.

Regent Calderón moved a substitute motion that Arizona State University resident tuition for undergraduates be increased by $400, nonresident undergraduate tuition be increased by $650, and resident and nonresident graduate tuition be increased by $1,000. The motion failed for lack of a second.

Regent Bulla said he concurred with rolling the earlier proposed student fees into the tuition increase. He was still concerned with the tuition differentiation between ASU and NAU. He wasn’t convinced the graduate increase should be so large. President Crow said the objective of the graduate student tuition recommendation is to lay a foundation within the institution for sufficient resources to be competitive within the graduate student arena and to expand graduate financial aid. Currently, ASU does not have any graduate program that is ranked superior by any national body.

Regent Kelling asked how melding the proposed student fees into the tuition increase would change or impact the ASU commitment to student priorities and financial aid. President Crow said it enhances financial aid as the tuition set-aside will be larger. Regent Stuart said he supported the fees being part of tuition as it allows more flexibility in the use of the dollars.

Regent Frank said she did not believe lowering the tuition increase by a few dollars would make much difference. However, she hoped there was a plan that would not require another large increase next year after the two large increases the last two years. She said the Regents really need to find some other source of funding besides tuition and would like to see tuition be more predictable. President Herstam said the Board had stated last year there would be two large increases to move Arizona closer to the top of the lower third in relation to the other public universities.

The motion to set ASU tuition passed with Regents Boice, Bulla, Frank, Jewett, Palacios, Kelling, Stuart, and Herstam voting yes and Regent Calderón voting no.

Regent Palacios moved that the Board increase the 2004-2005 resident and nonresident undergraduate and graduate tuition at Northern Arizona University by $475, for a total resident undergraduate tuition of $3,983, a total nonresident undergraduate tuition of $12,503, a total resident graduate tuition of $4,183, and a total nonresident graduate tuition of $12,703. The motion was seconded by Regent Boice.

Regent Calderón moved a substitute motion that the dollar increases in graduate resident and nonresident tuition be reduced to $400 and the full revenue from this specific increase be devoted solely to faculty and staff salary increases, specifically non-cabinet level staff. The motion failed for lack of a second. Regent Kelling said she supported Regent Calderón’s priorities for use of the increase.

Regent Calderón moved a substitute motion to support the dollar increase recommended by President Haeger, but to direct that all the increased revenues be directed to faculty and staff salaries, not including cabinet level staff, and student financial aid exclusively. The motion was seconded by Regent Frank. President Haeger said this would be disastrous for NAU as the staff increases would cost considerably more than the increase would provide. He said the university was already committed to financial aid. Regent McCalley said he would support the substitute motion if he were a voting Regent. He believed NAU needs to support its people in a dramatic way. Regent Stuart said he supported Regent Calderón’s philosophical view, but believed the universities also needed to utilize tuition revenues for debt support.

The substitute motion failed with Regents Boice, Bulla, Frank, Jewett, Palacios, Kelling, Stuart, and Herstam voting no and Regent Calderón voting yes. The motion, offered by Regent Palacios, to set NAU tuition passed with Regents Boice, Bulla, Frank, Jewett, Palacios, Kelling, Stuart, and Herstam voting yes and Regent Calderón voting no.

Regent Bulla said he would like to see a consistency in the application fee, so he moved that there be a consistent $25 application fee at NAU and ASU as well as at the UA. The motion was seconded by Regent Boice. Presidents Crow and Haeger said this fee would help support the cost of processing applications. Dr. Simmons asked if this fee should have gone through the hearing process. Legal Counsel said the Board could pass the fee at this time and President Crow pointed out this fee would not be applicable to present students, only those who apply in the future. The motion passed with Regents Boice, Bulla, Calderón, Frank, Jewett, Palacios, Kelling, and Stuart voting yes and President Herstam voting no.

Ms. Gale Tebeau and Dr. Milt Glick joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting approval to charge tuition at one and one-half times the resident tuition rate for courses and programs that are electronically delivered to students residing outside the State of Arizona. In the past, ASU charged nonresident tuition rates for these electronically delivered courses, so this would be a reduction to the current fee structure. This is the same fee structure that was approved by the Board for Northern Arizona University in April 2000.

As stated in the Executive Summary, these programs are to be at least self-sustaining and the enrollments are not to be included with enrollments for the state funding (22:1) formula.

Regent Palacios moved approval of a nonresident tuition for electronically delivered courses at ASU at the rate of one and one-half times resident tuition. The motion was seconded by Regent Kelling. Regent Stuart asked how the implementation of the fee this July would impact the students who had already registered and had a financial aid package in place to pay this fee. Dr. Glick said most students don’t enroll in advance for these courses. For the few students who have already enrolled, the lower fee will be charged and that will be reflected at that lower rate if they have financial aid. Dr. Glick said students who take courses electronically place a smaller burden on the university and this should be reflected in the cost so the university can compete in the market place.

The motion to reduce nonresident tuition for electronically delivered courses passed with Regents Boice, Bulla, Frank, Jewett, Palacios, Kelling, Stuart, and Herstam voting yes.

Dr. Milt Glick and Ms. Gale Tebeau joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting approval to increase summer and winter session tuition for nonresident students, including students at the College of Law, to one and one-half times their resident tuition rate beginning Summer Session 2004. Currently, the universities, including ASU, charge nonresident students taking summer and winter session classes resident tuition rates.

Dr. Glick said ASU is trying to balance fairness to the taxpayers of Arizona and market forces, and recognizes the fact that while there is no direct enrollment growth funding for the summer, clearly there is a cost. ASU believes it is fair that nonresidents pay more than residents for Summer Session. However, ASU also believes the reduced attractiveness of the summer in Phoenix and the fact that people make plans in advance probably would lead to a substantial drop in enrollment if full nonresident tuition would be charged. So this request is a compromise.

Dr. Glick said there were some students who may have had their financial aid package based upon paying resident tuition. ASU will set aside some funds on an individual basis to adjust the financial aid packages to the new cost.

Regent Stuart asked how many students, outside of the College of Law, would pay the increased fee this summer and not be able to pay it out of the existing financial aid package. Dr. Glick said approximately 4800 summer students are nonresident and ASU will try to set aside enough money to address this problem for any student on financial aid. He said probably 2/3 of the 4800 are not eligible for financial aid. Regent Stuart asked how much a nonresident would have to pay for a summer course and was told a student would currently pay $500 and this would be an additional $250.

Regent Kelling said she was in favor of this fee, but was not comfortable with charging it this summer since summer registration did begin in February. However, she did note the web site mentioned the proposed fee, so students could have known the fee was coming.

Regent Palacios asked what the monetary loss would be if this fee was not put into place until winter and was told approximately $1M to $2M. In fact, ASU does not know the impact of the higher tuition on enrollment. President Crow said ASU does intend to hold harmless those on financial aid.

Regent Palacios moved that the Board approve nonresident tuition for summer and winter sessions at ASU at the rate of one and one-half times resident tuition, beginning with Summer Session 2004, and approve the proposed Summer 2004 tuition rates for nonresident College of Law students. The motion was seconded by Regent Boice and passed with Regents Boice, Bulla, Calderòn, Frank, Jewett, Palacios, Stuart, and Herstam voting yes and Regent Kelling voting no.

Dr. George Davis and Ms. Gale Tebeau joined the meeting for this discussion. Regent Palacios said the College of Medicine maintains the practice of setting tuition no higher than the top of the lower one-third of rates set by all other state-supported colleges of medicine. This practice provides a good illustration as to how the ABOR process for setting resident undergraduate tuition works. The University of Arizona recommended the 2004-2005 tuition at the University of Arizona College of Medicine be set at $12,745, an increase of $1,262, or 11%, excluding mandatory fees.

Dr. George Davis and Ms. Gale Tebeau joined the meeting for this discussion. Regent Palacios moved that the Board approve the 2004-2005 tuition at the University of Arizona College of Medicine in the amount of $12,745. The motion was seconded by Regent Boice and passed with Regents Boice, Bulla, Frank, Jewett, Palacios, Kelling, Stuart, and Herstam voting yes.

Dr. Mark Denke, Dr. Juan Gonzales, Dr. David Bousquet, and Dr. Jim Van Arsdel joined the meeting for this discussion. Dr. Denke said the proposed rate increases would provide funding to address increased cost and service repairs and general operations. He said ASU was requesting a 6% weighted average increase of $206, NAU was requesting a 3.54% weighted average increase of $101 for single student housing and 3.43% increase of $19 per month for family apartments , and UA was requesting a 7% weighted average increase of $255 per year. The Resident Hall Associations at all three universities supported the proposed rate increases.

Regent Stuart asked if the increases varied because of varied cost and was told yes. He was told debt service enters into the equation. Regent Boice asked if market was taken into consideration in setting the rates and was told yes.

Regent Palacios moved that the Board approve the 2004-2005 residence hall, leased apartments, and family housing apartment rates requested by Arizona State University, Northern Arizona University, and the University of Arizona. The motion was seconded by Regent Bulla and passed by voice vote.

The meeting recessed at 3:56 p.m. and reconvened at 8:54 a.m. on Friday, March 12.

John Kromko, said he believed the Regents were pricing thousands of Arizona taxpayers out of an education by the past two years tuition increases. He believed the Regents were not providing necessary oversight to the universities.

Greg Czeky, representing Rincon Heights Neighborhood Association, reported on the problem the neighborhood was having with the lighting in the Sixth Street Parking Garage. He asked for President Likins to meet with the group to help resolve the problem.

President Herstam said State Representative Phil Lopes had been present to speak in support of retaining the School of Planning, but he had to leave for another meeting.

William Kammann, Housing Authority of Cochise County, outlined the benefits accruing from the School of Planning. He described the collaboration between the School of Planning and the Housing Authority of Cochise County.

Ann Rasor, National Park Service, described the help given to her by the UA School of Planning.

Andy Gunning, Pima Association of Governments, reported on some planning projects he had worked on with the UA School of Planning.

Jean Wiener, Chairperson of the Governor’s Council on Aging and Chairperson of Council of Senior Citizen Organizations of Pima County, said the UA School of Planning was where the majority of Southern Arizona planners are educated. She urged the Regents to keep the School of Planning at the UA.

Joan Ashcraft, Director of Instructional Services for Tucson Unified School District, spoke on behalf of the Fine Arts credit for admission to the Arizona universities. She said there was a potential for devastation of the fine arts programs as the technical programs receive federal funding so schools might chose to pick those over fine arts unless required to have fine arts. She outlined the benefits of having students take fine arts programs and requested the Regents continued support for the fine arts admission requirement.

Carolyn Kemmeries, Coordinator of the Opening Minds through the Arts Project for Tucson Unified School District, urged the Regents to keep the fine arts admission requirement. She said the arts need the requirement to keep the playing field in existence as the vocational and technical arts receive funding from other sources that is not available to the fine arts.

Mary Trammel, representing the Bioindustry Association of Southern Arizona, said the local bio companies need 4-year trained medical technologists and the industry cannot grow in Southern Arizona without them. She urged support of the UA School of Medical Technology.

Ron Schifman, Chief of Diagnostics and Acting Chief of Research of the Southern Arizona Veteran’s Administration Healthcare System, and also on the faculty of the UA Medical College, said the quality of the medical technologists from the UA is far superior to those hired from other schools. He outlined where medical technologists were needed.

Leonard Kitmanson, President of the Pima County Medical Society and an internist and gereactrition, explained the importance of the UA School of Medical Technology and asked for it to be continued until it could be made a part of some other organization.

Mary Bielski, University Medical Center Department of Pathology, explained the current problems because of the shortage of medical technologists. She asked the Board to reconsider and keep the UA School of Medical Technology.

Suzanne Swetnam, Director of Lab Services at Carondolet Health Network and a medical technologist, said she has an average of 20 openings a year for medical technologists. She asked the Regents not to close the program as 45% of her staff comes from the UA program. She suggested partnerships with hospitals be developed for the program.

Rick Rolfe, Arizona Hospital and Healthcare Association Campaign for Caring, has concerns about closing the UA School of Medical Technology. He is employed by Sun Health in Northwest Phoenix and explained how hard it was to find medical technologists.

Kim Frederlem, a premedical technology student at Pima Community College, said she is now forced to move to Phoenix to finish her education. This means moving away from her family and finding a new job as she is paying her own way through school.

Janie Holyoak, Mt. Graham Regional Medical Center, explained the recruiting problem faced at the hospital and how the area has grown and needs more services.

Brian Marks, graduate student in the Geography and Regional Development Department, said 100% tuition and fee remission is an important need for graduate teaching and research assistants. He also said canceling the planning department would cause problems in the geography department.

Sung Ohm, member of the English Graduate Union, explained the importance of tuition and fee remissions to graduate students. He said 75% of peer institutions offer better pay packages, including insurance, work load reduction, etc., than the Arizona universities.

Thomas Kinney, Graduate and Professional Student Council, presented a petition for 100% tuition and fee waivers for graduate teaching and research assistants. He said TA’s teach over 25% of the courses at the UA, do a lot of the research, and all but three of their institutional peers already do give 100% waivers.

Items on the Consent Agenda, which are marked in these minutes with an *, were considered as consent matters and were adopted upon the motion of Regent Jewett which was seconded by Regent Boice. There was no discussion of these items.

The Board approved the minutes of the November 20, 2003, Executive Session and the January 22 and 23, 2004, Regular Meeting.

The Board authorized the following requests for ASU Main as presented: planning authorization for the Bachelor of Science and minor in Asian Pacific American Studies, planning authorization for the Master of Music in Music Therapy, and implementation of the Master of Advanced Study in Geographic Information Systems (MAS-GIS) using the expedited one-step process.

The Board also received a summary of the program changes approved by the Executive Director. ASU was authorized to offer its Main Campus Curriculum and Instruction/Con-centration in English as Second Language (M.Ed) at ASU East. ASU was authorized to change the name of Health Services Administration (Masters) to Health Sector Administration (Masters) and Master of Science in Computational Bioscience to Professional Science Masters (PSM) in Computational Biosciences. The UA was authorized to change the name of Renewable Natural Resources (MS and Ph.D) to Natural Resources (MS and Ph.D). The UA was authorized to transfer the Genetic Counseling (MS) program form the Graduate Interdisciplinary Programs, Graduate College, to the Department of Obst. And Gyn., College of Medicine. The UA was authorized to change the name of the Department of Speech and Hearing Sciences to the Department of Speech, Language and Hearing Sciences and the School of Renewable and Natural Resources to the School of Natural Resources.

Northern Arizona University was authorized to promote Dr. Raymond J. Michalowski, an internationally recognized scholar and Professor of Criminal Justice, and Dr. Lee C. Drickamer, a prolific and influential researcher and Professor of Biological Sciences, to the rank of Regents Professor, effective July 1, 2004, and to award the $5,000 salary increase that customarily accompanies these appointments.

The Board granted Project Approval to the University of Arizona for the Highland Avenue Parking Structure at an estimated cost of $18M. This multi-story parking structure will provide approximately 1,500 spaces to service the northeast campus district and the Arizona Health Sciences Center. Certificates of Participation will fund $13M of the project and $5M will be funded by Parking Replacement Reserves. This Project received Project Implementation Approval at the January 2004 Board meeting and there had been no material or significant changes to the project since that approval.

The Board authorized the University of Arizona to enter into contracts with the following firms to provide underwriting services to the university: Citigroup; A.G. Edwards & Sons, Inc.; Lehman Brothers; U.B.S. Financial Services; J.P. Morgan; Peacock, Hislop, Staley and Givern, Inc.; Stone and Youngberg, LLC; and Prager, Sealey, and Company.

The Board granted approval to Arizona State University Main Campus for the Bio Safety/Lab Security (Phase I) Project. This project will construct critical security systems in laboratories across the campus at an estimated cost of $1.3M. It is a sub-project of Instructional/Research Laboratory Renovations Phase I and focuses on those areas presenting the highest threats based upon risk assessments of individual laboratories. The project will be funded through the sale of System Revenue Bonds, and the debt service will be funded from Tuition, Indirect Cost Recovery, and Other Local Funds.

The Board granted Project Approval to Arizona State University for the Bateman Physical Sciences Center F Wing Basement Research Lab Renovation. This will create multidisciplinary laboratory spaces supporting Keck Environmental, Geological Sciences, Physics & Astronomy, and Chemistry departments at an estimated cost of $3.65M. This 8,500sf project is a sub-project of the Instructional/Research Laboratory Renovations Phase I project which received Project Implementation approval in September 2003 with an estimated cost of $10M. The project will be funded through the sale of System Revenue Bonds, and the debt service will be funded from Tuition, Indirect Cost Recovery, and Other Local Funds.

The Board approved the appointment of David Young as Vice President and Dean, College of Liberal Arts and Sciences, effective April 1, 2004. Dr. Young will receive a salary of $210,000 per year.

The Board approved the revision of Board Policy 3-701, “Authority and Responsibility”, which updates the central office internal auditors’ access to records, property, personnel, and the Audit Committee.

The Board approved the recommendation of the 2004 Regents Award Selection Committee that APS/Pinnacle West, Don Budinger, and Louise Solheim be presented with the 2004 Regents Award.

APS/Pinnacle West consistently ranks education as a high priority. Officers of APS and Pinnacle West serve on various boards and committees for the universities. APS provides scholarships to ASU, ASU West, and the community colleges, and they fund National Merit Scholarships. They donate surplus computers and provide printing services, volunteers for special events, and other help for educational institutions. Since 1990, APS and the APS Foundation have donated more than $5M to ASU, UA, and NAU.

Don Budinger, through the Rodel Community Scholars Program that he founded at ASU’s College of Business, involves Business Honors College students in community issues as a part of their undergraduate business experience. He is Chairman of the Arizona Center for Public Policy, and a member of several boards, including the American Graduate School of International Management, University of Arizona Foundation, and the Social Entrepreneurial Initiative at the UA. Mr. Budinger’s goal is to make sure Arizona has nothing less than the nation’s leading K-12 education system by 2020.

Ms. Louise Solheim and Karsten Manufacturing have generously provided golfing equipment, sponsored instructional clinics, donated golfing facilities, and offered financial support to golf programs at ASU, the UA, and many other colleges and universities around the country. The Solheim family donated $2M to fund construction of the Karsten Golf Course and provides scholarship funds for student athletes. They have also given significant support to the Professional Golf Management program at ASU East as well as the Walter Cronkite School of Journalism, and they fund a professorship in telecommunication.

President Herstam welcomed the Director of the Arizona Department of Commerce, Mr. Gilbert Jimenez, who introduced the Battelle report. Although the Regents made a small contribution towards the completion of two of these studies, they were commissioned and funded for the most part by the Department of Commerce and the Flinn Foundation. Two representatives from the Battelle Institute, Dr. Walter Plosila and Dr. Adrian Roberts were present to explain the recommendations in the report. Dr. Carl Fox from NAU, Dr. Richard Powell from UA, and Dr. Tom Wickenden from the central office were present to help answer questions.

Mr. Jimenez reminded the Board of the context within which the work was undertaken. The core competency work released last Spring focused on the research and development strengths of the university system. This work indicated advanced innovation opportunities in the three primary areas of bio, advanced communications and IT, and sustainable systems. The Flinn Foundation has taken the lead on advancing the bio sciences and the report being presented today takes the next step on the advanced communications and the IT and sustainable systems. When the reports of all the Governor’s task forces and councils are finished, the elements will be integrated into one cohesive statewide plan. Then various regional economies will be encouraged to incorporate the findings into their local planning efforts.

Dr. Plosila summarized the report. The objective was to summarize the three efforts that represent taking advantage of real opportunities for the future economy of Arizona. He talked about the progress being made in the biosciences in implementation and the biosciences road map in regards to advanced communications and sustainable systems. One of the challenges is to position Arizona to be the “go to” state for the knowledge based economy. It will require catching the three technology waves that will shape future markets, delivering the “whole product solution,” and catalyzing Arizona’s university system.

The Flinn Foundation entirely funded the Arizona Biosciences Roadmap and is actively supporting the implementation with the universities. The whole effort is to position Arizona in select research areas and core competencies to be outstanding centers that build industry base in the future. It includes research and testing, medical devices, drugs and pharmaceuticals, agriculture, biotech, and other areas. One of the challenges is to encourage investment in the Arizona public research universities and the money to build research buildings that has been granted has been critical. He said there were a range of efforts underway in the three universities to encourage entrepreneurship and technology commercialization.

Dr. Plosila said advanced communications and information technology is a very large part of the Arizona employment base today. The challenge in the development of new products is creating more start-up firms and the universities can be an important part of that solution. The future of Arizona in information technology and advanced communications is going to be in high-value added components. The recommended vision has four strategies: 1) Foster improved communication, coordination, and knowledge sharing among Arizona’s AC-IT stakeholders in order to facilitate the growth, development, and economic future of Arizona’s AC-IT industry; 2) Enhance and focus the AC-IT research and commercializaton functions of Arizona’s universities to better reflect and engage existing industry strengths; 3) Fully leverage the existing Arizona-based assets and current opportunities offered by the U.S. Department of Defense and the U.S. Department of Homeland Security to develop, grow, and expand the AC-IT industry in the state of Arizona; and 4) Address the critical challenges faced by Arizona’s AC-IT entrepreneurs.

Dr. Roberts presented Arizona’s Sustainable Systems Prospectus. The concept of sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. A sustainable enterprise is a company that anticipates and meets the needs of present and future generations of customers and stakeholders, encompassing economic prosperity and continuity for the business and its stakeholders, social well-being and equity for both employees and affected communities, and environmental protection and resource conservation, both local and global.

In order to implement Arizona’s sustainable systems vision, seven strategies were developed: 1) Make Arizona the water management capital of the world; 2) Harness the sun for power, fuel, food, and medicine; 3) Make Arizona a sustainable manufacturing Center of Excellence; 4) Establish a national and international image for Arizona as the arid lands livability state; 5) Enhance the business infrastructure for a sustainable systems industry to flourish; 6) Sustain and grow R&D capacity for sustainable systems in universities and industry; and 7) Develop the workforce talent pool to support the sustainable systems industry.

The report states it is critical for the success of all three technology areas that the recommendations put forth by the Governor’s Council for Innovation and Technology be fully implemented.

Dr. Tom Wickenden, Dr. Kathy Church, Dr. M.J. McMahon, Ms. Edith Auslander, and Dr. Pat Haeuser joined the meeting for this discussion. President Herstam reminded the Regents that a series of study sessions on the topic of funding mechanisms was begun last month. As part of Changing Directions, the Board has already dealt with some funding issues, including student tuition levels, institutional financial aid, and state funding for research infrastructure. However, there are other state funding mechanisms that also need review. The purpose of this session is to discuss possible alternatives to some of these other mechanisms, to see how they might impact each university’s budget request, and to give the presidents some feedback as to which approaches the Regents would like to study in more detail at their next meeting.

Dr. Tom Wickenden gave a brief overview of existing state funding mechanisms. President Likins presented the University of Arizona proposal for alternative university system funding mechanisms that balance the needs of the universities, state government, and students, parents, and citizens. There are seven recommendations in the proposal.

Financial Aid Formulas The Arizona Financial Aid Trust (AFAT) should be modified with a contribution of 2% (not 1%) of resident rate tuition actually paid by all resident and nonresident students (graduate and undergraduate), a contribution of a triple match (not a single match) from the State General Fund, and an increase in the share of the contributed funds available for current support of needy students to three-quarters, with one quarter deposited in the trust. The recurring budget footnote that precludes the use of State funds other than AFAT for financial aid should be eliminated. While retaining the 14% minimum tuition set-aside for needy students’ financial aid as a University System requirement, adopt for the University of Arizona a 15% minimum set-aside for this purpose, without limitation to residents or nonresidents, graduate students or undergraduates.

Performance Formula Funding To motivate and reward improvement in undergraduate graduation rates, the State should pay an annual premium (say $500,000) to any public university exceeding a 60% six year graduation rate for freshmen (scaled proportionately for transfer students). This annual performance bonus should double for each 5% improvement in graduation rate. To motivate and reward degree production, the State should pay a fixed sum for every degree awarded above the number awarded in academic year 2003-2004 at the following rates: $1,000 for bachelor’s degrees, $1,500 for master’s degrees, and $2,000 for doctoral degrees with the incremental degree count doubled for teachers, nurses, physicians, pharmacists, and engineers.

Incentives to Secure Alternative Revenues The State should avoid all taxation or threat of future taxation of revenues generated by the universities apart from General Fund allocations, including tuition revenues.

Enrollment Growth Formula Funding The credit hour weightings used to define FTE enrollments for the 22:1 formula should be changed as follows: Lower Division Undergraduate ASU-15, NAU-12, UA-16; Upper Division Undergraduate ASU-12, NAU-12, UA-12; Graduate Programs ASU-10, NAU-10, UA-9, High Cost Programs all three universities-10. Recent history should be reconstructed using these weightings so they reward (differentially) only positive changes from recent experience.

Physical Plant Funding The State should incorporate in all annual budgets the funds indicated by the Building Renewal Formula. The State should provide funds to meet Operation and Maintenance costs of new public university buildings, however their construction was financed. The State should continue to entertain proposals to backfill with General Fund revenues the debt service requirements committed by the universities as Academic Revenue Bonds financed by tuition payment obligations.

Decision Packages The State should continue to accept as a creative element of the budget process proposals for new initiatives in the form of decision packages for the consideration of the Governor and the State Legislature.

Legal Authority The preceding recommendations should be selectively embedded in statute, prioritized as follows: 1) Guarantee the State’s matching contribution to the Arizona Financial Aid Trust (AFAT). 2) Guarantee rewards for meeting long-term performance objectives (such as six-year graduation percentages and degree awards).

Regent Boice asked how much more the UA would have received this year with the proposed reward system and was told only additional AFAT money. The university would receive more if performance was improved in the future. Regent Boice said it seemed like the source of revenue was being changed, not the amount.

Regent Bulla said he would like to see the dollars in the different areas to see what priorities are important.

President Haeger presented NAU’s funding formula history and the importance of the funding formula to NAU’s mission. He said the current enrollment growth funding formula has placed NAU in a difficult position. The current formula perpetuates historical inequities in funding, provides inadequate recognition of institutional role and mission, and does not supply sufficient mechanisms for funding a campus managing steady state enrollment. NAU aspires to approach the support per student level (SEAPS) of the other two institutions.

Dr. Haeger proposed the following methods to provide additional support. Four of the suggestions would pertain to all three universities and, if implemented, would provide marginal additional resources for enrollment increases in high cost programs such as health care and engineering, add an annual inflation adjustment, offset funding reductions due to enrollment declines against recent budget reductions (removing a double penalty), and provide performance incentive funding. The remaining modification would address NAU’s funding dilemma and allow the university to continue to carry out its current mission to provide an undergraduate learning environment on the mountain campus and afford access to place-bound students statewide.

The first change would affect only NAU and was developed to better recognize mission differences in instructional method and costs, student body composition, readiness for college success, geographical location, and residential infrastructure. The current 22:1 formula divides student credit hours (SCH) by a weighted factor. This proposal would reduce NAU’s lower division (LDUG) weight from 15 to 12 to fund NAU to teach similar sized classes at both the lower division and upper division levels. As a generalization, the change would help NAU teach freshman and sophomore classes of 30 students, which is equivalent to the support now given for classes at the junior and senior upper division level (UDUG). This change, combined with the differential funding for high cost programs proposed below, would provide NAU substantial benefits.

To recognize the requirements of selected academic programs for small classes, clinical instruction, and the cost of equipment and specialized faculty, the formula might weight student credit hours differentially in defined high cost undergraduate disciplines.

To recognize the normal but continual increase in the cost of running an institution, the formula should incorporate an inflation factor. In proposing this change, the universities would be adapting a device used for the K-12 educational system in Arizona which regularly uses an inflation factor. The inflation factor would be applied to all previously funded FTE. This change would ensure funding for operating costs of campuses experiencing stable enrollments as well as assisting growing campuses.

The formula for inflation could be as simple as multiplying the Funded FTE level against the previous current year system average SEAP, and then multiplying that against the current CPI. This inflation factor would be in addition to the current 22:1 and the two numbers together would represent the demographic and continuation portion of the budget request.

This mechanism would offset any negative calculation of 22:1 against any lump sum reduction that has been imposed within the last 5 years (Or any other time period that is deemed reasonable). While the mechanism for adjusting funding associated with declining enrollments is fair, combining it with lump sum state imposed budget reductions related to the economy or other factors threatens the ability of a university to maintain its infrastructure or to deploy effective strategies for reversing the enrollment decline.

Many states have initiated performance incentive funding to promote policy goals. Typically the amount of resources linked to this funding is small in relation to core funding, but provides incentives to achieve agreed upon goals. The goals often vary depending on university mission and should reflect factors over which the university has some control. Capitation payments (dollars for each instance) or increments based on level of successful performance could be provided for measures such as: degrees awarded in relation to numbers of students enrolled, student type, or for selected fields; enrollments/degree completions for students from underrepresented groups; or meeting class size and/or senior faculty in lower division course goals.

Regent Calderon asked what these proposals would do for remedial construction needs and was told it would keep the university from getting in this situation again. He suggested the universities develop a pool of resources, on a limited basis, to fix NAU building problems.

President Crow said he would set out five principles for formula funding: 1) The relationship between the State of Arizona and the universities is a partnership, not an ownership. That means the State invests in the universities and the universities seek resources from a range of other partners as well. 2) That it be investment driven; there will be investments made and returns from those investments will be measured. 3) It be incentive based to incentivize the universities to behave at their highest operating levels. 4) It be stable and predictable. 5) It should be simple.

Dr. Crow presented a conceptual proposal that the legislature provide funds for the core functions of the university by increasing the General Fund operating budget by an amount equal to the % enrollment growth plus the % growth in the state’s domestic product (GDP).

Beyond this, Dr. Crow said the universities would set specific goals to garner funds for other mission specific activities such as research, service, and economic development. The state and the legislature would be held to the agreements in the partnership.

In addition to core funding, the legislature would appropriate or set aside annually 1% of its total appropriations to the universities to establish the Legislative Incentive Fund (LIF) as a mechanism to reward performance as measured by student outcomes. This would be set aside to help with issues such as doubling nursing production, increasing graduation rates, reducing time to degree, increasing teacher production, etc. At the end of five years and if goals are reached, the funds would be moved to the base budgets of the universities.

Regent Stuart said this puts predictability into an unpredictable system and provides a reliable mechanism which both sides ought to accept. President Herstam said the problem with this proposal is it is contingent on the legislature not needing its funds elsewhere for public priorities. He wondered if it would be politically feasible to lock in this kind of new formula in the statute. Dr. Crow said he believed the universities’ contributions to the GDP would be looked on favorably by the legislature and this would make the legislature and the universities partners.

President Herstam said he believed what Dr. Likins presented would be feasible and could be taken to the legislature with tremendous benefits to the university system. He was not sure about the feasibility in regard to the other two presidents’ proposals. He would like the presidents to come up with a specific proposal for the next study session that could be taken to the Governor and the legislature as a means of reforming the funding formulas.

Regent Palacios said she would like pro forma numbers from President Likins’ proposal so the Regents could compare the proposals to see what they would like to recommend. Regent Bulla said he would appreciate the numbers as well. Secondly, he said the predictability over time is impressive, but he noticed sustained increases in tuition and fees are also assumed at 9%.

President Crow said the current model, the 22:1 model, has not been effectively implemented since 1958. ASU is underfunded by $200M per year. His proposed model overcomes that failure. It does make a number of assumptions; the assumption on the tuition number is a “guesstimate” of the relative increase of public tuition in the United States over the next several years to keep the Arizona universities at the top of the bottom 1/3. He said this is also a process to even out the budget process so people know how much can be expected.

President Haeger said he would like to run the numbers for President Crow’s proposal in both the good and the bad years to see the impact as he believes this proposal has a simplicity that is good. However, he does not believe it overwhelmingly improves the system. He believes Dr. Likins’ suggestion for financial aid might be feasible and that it would make a major impact on the system.

President Likins said he believed the other presidents would agree that reforming the financial aid system is a high priority. In regard to Dr. Crow’s proposal, Dr. Likins said the legislature is already locked into much of its budget; he did not believe they would want to lock in more funding for the universities’ budgets. Unless the legislature has reserves, they will not have any place to get additional funds when they run into a year like 2002-2003. President Crow said his proposal makes university funding more predictable for the legislature over the years and makes the increase in funding smaller over a period of years. President Likins said he believed there would have to be another piece to this proposal that would allow the state to balance its budget year by year.

President Likins said he thought it would be good for the Regents to carefully test these proposals with the Governor and the legislature to see if either could support any of these proposals. President Haeger said he would be worried about a model that was rigidly structured as the unpredictability of the GDP could put the universities in great stress in some years.

President Herstam said he had asked the three presidents to bring specifics they thought would better their universities and the system for the Regents to consider submitting to the Governor and the legislature for reforming the funding formulas. He had always intended to take the specifics to the OSPB and the JLBC for feedback. He believes that feedback will help determine what is feasible and he would like to see that happen before the April meeting.

Regent Jewett said the current funding has not worked in years. He believes the concepts presented today were exciting and positive. He agrees the state should get its arms around financial aid. He believes the business community is rallying around the universities. The concepts of incentive-based rewards is interesting.

President Herstam asked the presidents and the Changing Directions Work Group to put these proposals in a form that can be taken to the OSPB and the JLBC to get their input so the Board can hear a report on the external input. Regent Boice said a fundamental question that needs to be addressed is whether the changes need to be statutorily imbedded.

Dr. Ray Woosley and Dr. Tom Wickenden joined the meeting for this discussion. Regent Boice announced that Regent Calderón was the new Board liaison to the Health Sciences Input Group.

Dr. Wickenden reported the HSIG met on February 5, 2004, and reviewed the Nursing Expansion Plan, requested that it be updated with FY04 data, and asked that a funding plan be developed for FY05. This group will no longer be known as the Health Sciences Input Group; its new title will be the Healthcare Partners CEO Advisory Group, providing advice to the Regents and Presidents under the auspices of the Arizona Biomedical Collaborative.

Dr. Woosley said the group has been focusing on nursing, but they now believe there are other critical healthcare needs and intends to focus more broadly on the healthcare field.

Dr. Tom Wickenden, Dr. Jim Rund, Dr. Pamela Eibeck, Dr. Jerry Hogle, and Ms. Cathy McGonigle from the Chief Academic Officers’ Admissions Workgroup joined the meeting for this discussion. Dr. Wickenden said this discussion was in response to the communications received by Board members and possible legislative action to modify the Board’s admission requirements by allowing practical or fine arts to count as an admission requirement. He said the Workgroup recommends that a high school credit in Fine or Practical Arts could be considered by the universities as part of the Delegated Admission process and he explained the reasoning behind this recommendation.

Dr. Wickenden said it was suggested there be a list of Technical Arts classes that would qualify for this requirement as there is a list for the Fine Arts requirement. This recommendation has not been accepted by the Technical Arts supporters, but is also not something the universities would have chosen to do. That is why it is put forth as a compromise.

Dr. Wickenden said another admissions issue is also currently being explored. Last year the National Collegiate Athletic Association (NCAA) changed its bylaws to require that all student athletes, beginning in 2008, take 16 academic credits in high school to qualify for intercollegiate athletics. Even though the Fine Arts are included in the federal definition of what constitutes core academic subjects, the NCAA does not include fine or practical arts in their definition of academic subjects. Therefore, the presidents have asked the Workgroup to examine the possible implications of this bylaw change with respect to the Board’s admission requirements.

Regent Boice said he sensed the Board accepted the presidents’ proposal that the universities address practical arts as part of the responsibilities that have been delegated to them. He asked the presidents to bring suggested policy changes that incorporate this proposal back to the Board for a first reading at a future meeting. He said he also believed it would be prudent for the presidents to study and report back to the Board about the possible impact of the NCAA bylaw change on admission requirements.

Dr. David Lorenz joined the meeting for this discussion. Regent Palacios said Northern Arizona University was requesting Project Implementation Approval for the Applied Research and Development Facility at a total estimated cost of $20.5M. Dr. Lorenz said the Applied Research and Development Facility at NAU will be the West Campus main entrance. Regent Bulla asked if this building was more expensive because it is a “green building” and was told yes; the energy savings would result in money saved by approximately the 16th year.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board granted Northern Arizona University Project Implementation Approval for the Applied Research and Development Facility.

Dr. Carl Fox and Dr. Gene Sander joined the meeting for this discussion. Regent Palacios said the Board was being asked to support, by resolution, the conveyance of the Centennial Forest and Santa Rita experimental range lands out of the state land trust to the Board of Regents on behalf of Northern Arizona University and the University of Arizona, respectively, for use as research and education reserves.

Regent Boice asked why NAU was receiving “checkerboard” lands instead of concentrating its holdings. Dr. Fox said the problem was that the other lands were federal or national forest lands. The long-term objective is to try to consolidate the land into one contiguous property, but that will require a land exchange kind of provision with the federal government. President Haeger said it is NAU’s plan to attempt to achieve this, but it is a five to seven year process.

Regent Bulla asked if the university had had time to think how it would manage these lands and was told NAU has been partners with the State Land Department on the Centennial Forest since 1958. The Centennial Forest was actually created by an agreement with the State Land Department in 1989 and over 8,000 students participate in courses and experiments on this land.

Regent Bulla also asked about liability and was told the attorneys had said the Board was under the same system as the State Land Department, State Risk Management, so there should be no problem. Dr. Sander said the UA proposal for the Santa Rita Range was a mirror proposal to the NAU proposal for the Centennial Forest except the Santa Rita Experimental Range is one large 55,000 acre parcel. The UA has had access since 1902 and used the property all along until 1988 when UA became the manager of the Range on behalf of the State Land Department.

Upon the motion of Regent Palacios, seconded by Regent Bulla, the Board supported, by resolution, the inclusion in a proposed Arizona constitutional amendment relating to the management and disposition of state trust lands, a provision that would authorize the release of the Centennial Forest and Santa Rita Experimental Range lands out of the state land trust, to the Arizona Board of Regents, for management and use as research and education reserves in perpetuity, and that notice of this formal action be conveyed to the State Land Commissioner.

Mr. Tim Pickrell, Mr. Dick Davis, Mr. Charles Ingram, and Mr. Ted Gates joined the meeting for this discussion. Regent Palacios said the University of Arizona was requesting authority to sell Certificates of Participation in an amount not to exceed $66.6M for the acquisition and construction of the Chemistry Building Expansion Project, Highland Avenue Parking Garage, and Residence Life Building Renewal Phase I. In addition, the UA requests authority to sell System Revenue Bonds in an amount not to exceed $17.5M for the acquisition and construction of the Drachman Hall Project.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board authorized the University of Arizona to sell one or more series of Certificates of Participation (COPs) to produce sufficient proceeds to finance not exceeding $66.6M for the acquisition and construction of the Chemistry Building Expansion Project and, contingent upon a favorable review by JCCR, the Highland Avenue Parking Garage Project and the Residence Life Building Renewal Phase I Project, plus costs of issuance and capitalized interest on a portion of the COPs until fiscal year 2007-08, to take related actions, to enter into necessary agreements, and to execute documents, as provided in a resolution approved by Board counsel and staff.

It was further resolved that the University of Arizona be authorized to sell one or more series of SRBs to produce sufficient proceeds to finance not exceeding $17.5M for the acquisition and construction of the Drachman Hall Project, plus costs of issuance, to take related actions, to enter into necessary agreements, and to execute documents, as provided in a resolution approved by Board counsel and staff.

Mr. Ted Gates, Mr. Scott Cole, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting Project Implementation Approval for Infrastructure Improvements Phase III at a total estimated cost of $7.4M. This project includes extensive infrastructure upgrades to current utilities and to support new building projects currently in design or planning. ASU is also requesting Project Approval for the McAllister Corridor Utility Delivery systems. This is the first sub-project of the Infrastructure Improvements Phase III. This project includes the extension of utilities to the Arizona Biodesign Institute and to future and present facilities on Lots 40, 42, and 44 at an estimated cost of $4.5M.

Regent Boice asked how the university knew what tuition dollars would be available for debt service. Dr. Harrison said a projection of debt service and debt service ratios for the next twenty years is done every time a capital improvement plan is prepared. In that plan estimates of tuition, auxiliary revenues, and projections are made based on average increases. These projections have been made on increases that average about 5% per year. There is also an estimate of expenditures as part of the debt service ratio.

Upon motion of Regent Palacios, seconded by Regent Boice, the Board granted Project Implementation Approval to Arizona State University for the Infrastructure Phase III Project. Upon motion of Regent Palacios, seconded by Regent Boice, the Board granted Project Approval to Arizona State University for the South Portion of McAllister Corridor Utility Delivery Systems Project.

Mr. Ted Gates, Mr. Scott Cole, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting Project Implementation Approval for the Interdisciplinary Science and Technology Building I at an estimated cost of $74M. Upon motion of Regent Palacios, seconded by Regent Boice, the Board granted Project Implementation Approval to Arizona State University Main for the Interdisciplinary Science and Technology Building I Project. This project was formerly known as the Interdisciplinary Life Sciences and Technology Building.

Mr. Ted Gates, Mr. Scott Cole, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting Combined Project Implementation and Project Approval for the Interdisciplinary Science and Technology Building II at an estimated cost of $18M. Mr. Cole said the projects were being combined and being fast-tracked in order to complete the project prior to the Fall Semester 2005. This is a smaller building. ASU has the guaranteed maximum price from the contractor and the design is almost complete.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board granted Project Implementation and Project Approval to Arizona State University Main for the Interdisciplinary Science and Technology Building II.

Mr. Ted Gates, Mr. Scott Cole, Dr. Juan Gonzales, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting approval to enter into a lease agreement for 111 apartment units with SHP-Commons on Apache LLC. These apartments will provide housing for upper-class students who are being displaced by the need to house freshmen on campus. The initial term of the lease is one year, with a one-year renewal option.

Regent Bulla said this seems to be an efficient way to provide housing and he asked if ASU had any plans to continue this process for additional housing needs. Dr. Harrison said ASU had worked this out as a temporary mechanism for a current housing need until they can begin the development of the South Campus. Dr. Juan Gonzales said the McAllister Village is on the drawing board and ASU hopes to bring it to the Regents in April. This will allow ASU to take care of some of the needs of the upper-classmen who wish to live on campus.

ASU will lease 111 apartment units (444 beds) at a minimum annual rental payment of $1,659,527, plus $973 for each resident over the base number of 336 residents. The annual lease payment will be reduced by the amount of any services currently being provided by American Campus Communities (ACC) that will not be needed by ASU, such as security. The initial term of the Lease is August 1, 2004 - July 31, 2005, with a one-year renewal option to July 31, 2006. ACC will continue to provide property management and maintenance for the apartment community, and will cooperate with ASU to provide residential life oversight and student development programs. Utilities are included, along with live internet access and standard cable television. ACC will continue to manage the parking at the community and students will arrange for parking directly with ACC. ASU students will have full use of all common area spaces and amenities and ASU Residential Life will provide bedroom furniture for the unfurnished bedrooms and ASU will retain such furniture and relocate it to campus at the end of the lease.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board authorized the President, the Executive Vice President for Administration and Finance, the Associate Vice President for Administration, or their designees, to take all appropriate actions to complete negotiations, sign and enter into a lease agreement with SHP-Commons on Apache LLC for 111 units in the property known as The Commons on Apache on substantially the terms described in the Executive Summary.

Mr. Ted Gates, Mr. Scott Cole, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was seeking approval of the actions required to complete the acquisition of the Motorola Flat Panel Display facility in the ASU Research Park. This facility will be used for research and development of nanoelectronic technologies, including research in connection with the $43M Army grant recently awarded to ASU.

President Crow said the Army Flexible Display Center will occupy about 1/3 of the facility, 1/3 of the facility will go to ASU expanded research programs out of the College of Engineering and the College of Liberal Arts and Sciences, and 1/3 will be available for rent to the commercial partners who want to agglomerate around the initiatives.

Regent Bulla asked why ASU needed the LLC instead of purchasing the facility directly. Dr. Harrison said Motorola requires the sale not be made to an entity that could accept private donations because of the IRS might consider any difference between the appraised value of the building and the purchase price as a charitable donation. Dr. Harrison said this does not in any way diminish the oversight by ASU.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board approved the formation of NTR, its issuance of variable rate revenue bonds in an amount sufficient to purchase and equip the Motorola FPD facility and pay related financing costs, including capitalized interest, for sublease to ASU, subject to the assignment to ASU of NTR’s interest in the FPD facility upon final payment of the bonds. The Board also authorized the President of the University, the Executive Vice President of the University for Administration and Finance, the Associate Vice President of the University for Administration and Business Services, and the Associate Vice President of the University for Finance and Treasurer to take all appropriate actions to negotiate, sign, and enter into a sublease of the Motorola FPD facility from Nanotechnology Research, LLC on substantially the terms described in the Executive Summary material, and to execute certificates and documents as may be necessary and proper in conjunction with the NTR financing.

Mr. Ted Gates, Mr. Scott Cole, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting Revised Project Approval for the Arizona Biodesign Institute Phase I, from an approved $69M to a new total cost of $72.8M. President Crow said particular researchers being acquired from other universities are being moved into these facilities and they require modifications to the generic original design.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board granted Arizona State University Main Revised Project Approval with a Scope and Budget Increase for the AZ Biodesign Institute-Phase I Project.

Mr. Ted Gates, Mr. Scott Cole, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Palacios said Arizona State University was requesting approval to enter into a master lease of the Brickyard on Mill, with ASU as the tenant and the ASU Foundation as the landlord. Regent Boice said he had not realized the project included condominiums and that part of the project belongs to the City of Tempe. President Crow said the project includes commercial space, academic space, office space, and the parts of the project that ASU does not own are condos owned by the City of Tempe and condos owned by individual owners. Regent Bulla asked if the fact we do not own all the building will create a legal problem for ASU and was told no as the other tenants have responsibility for their own entities.

Regent Bulla said he would be uncomfortable with waiving Board policy to give the university the authority to enter into sub-leases without coming back to the Board. Regent Stuart said perhaps a waiver of policy could be granted if a subset of the Board could regularly engage in tenant or lease issues and they could make sure the entire Board is aware of the leases. Regent Boice said he would be satisfied if the university came back to the Board for ratification of the sub-leases so the Regents would remain informed.

Upon motion of Regent Palacios, seconded by Regent Boice, the Board authorized the President of the University, the Executive Vice President of the University for Administration and Finance, the Associate Vice President of the University for Administration and Business Services and the Associate Vice President of the University for Finance and Treasurer, and each of them acting alone, to take all appropriate actiions to negotiate, execute, and deliver a Master Lease of the Property with ASU as tenant and the ASU Foundation as landlord on substantially the terms described in the Executive Summary, with such modifications in such terms and with such additional terms as the President or such Executive Vice President or either of such Associate Vice Presidents determines to be necessary or desirable and appropriate and proper.

Also, the Board authorized the same administrators of the university to take all other actions and to execute and deliver such other certificates, agreements, and other documents as the President or such Executive Vice President or either of such Associate Vice Presidents may determine to be necessary or desirable and appropriate and proper in connection with the Master Lease and in connection with the acquisition of the Property by the ASU Foundation and in connection with the financing of the Property by the ASU foundation.

Also, the Board authorized the same administrators of the university and any other officers of the university hereafter succeeding to the real estate responsibilities currently held by such Executive Vice President or such Associate Vice President to enter into tenant leases in the property and amendments to such tenant leases on such terms as any of them acting alone determines to be necessary or desirable and appropriate and proper without having to obtain Arizona Board of Regents approval under ABOR Policy as in effect from time to time (including, without limitation, currently existing ABOR Policy Section 7-207.A.1.), provided that each lease is at a rental rate that is reasonable and determined by any one of them to be at or above the then fair market rental value.

Mr. Greg Fahey and Ms. Cathy McGonigle joined the meeting for this discussion. Regent Stuart said there are 4 bills in the Senate that will help the university system, there are 3 bills in the House that are potentially detrimental to the university system, and there are 13 bills scheduled that need additional study. These are described in the Executive Summary. He said the Government Affairs group meets every Friday and he participates in the meetings. He reported the process has improved; there is a new and efficient structure.

Regent Stuart said one new bill that is not in the Executive Summary material is HB 2064, a strike-all amendment that would provide a 6-year pilot program to permit community colleges to offer 4-year degrees in four different disciplines–law enforcement, fire science, nursing, and teaching. This clearly has significant implications for the university and community college system. He said Arizona has the best articulation system in the country between the community colleges and the universities. The Joint Conference Committee met recently and discussed emerging issues, but this was not mentioned and the universities were not aware of the amendment being proposed.

Regent Boice asked where the bill came from and was told it appeared Representative Russell Pearce introduced the legislation when there was talk of capping university enrollment. At that point, he thought community colleges could take up the slack.

Regent Stuart reported the Joint Conference Committee was re-formed, with the enthusiastic support of the community colleges, after the dissolution of the State Board of Directors for Community Colleges. The JCC is now composed of 4 Board of Regents’ representatives and 4 college presidents or trustees. At the last meeting, a draft was accepted but not yet approved of a new mission statement that will deal with all the issues such as alliances and emerging issues. However, the bill for community colleges to offer 4-year degrees was not mentioned. This will tear the articulation agreements apart. The next meeting will be in May and it is expected the mission statement will be approved.

Dr. Art Ashton and Dr. Jeremy Rowe joined the meeting for this discussion. Regent Bulla said the ARU/IT Subcommittee met the day before and most of the time was spent on IT matters. The Tri-University Business Recovery Plan and time frames were discussed and the Subcommittee was pleased with the progress on this item. A great deal of time was also spent on the IT Architectural Blue Print. This is the main planning effort to design, implement, maintain, and explain how the IT organization gets from where it is to where
it wants to go. He explained the next steps in the process.

Regent Bulla said the Subcommittee approved several projects from ASU, reviewed the COSMOS Project, and the Business Continuation and Disaster Plan. Some time was spent on the brand marketing of ARU and the enrollment campaigns for the Master of Engineering Program and the status of the RFP for a consultant to look at ARU as to where it is going, what the product needs to look like, and what services are needed.

Regent Boice thanked Regent Bulla for his work with the ARU/IT Subcommittee. Regent Bulla said the Chief Information Officers and their staffs are working well together and very hard.

Dr. Art Ashton and Dr. Jeremy Rowe joined the meeting for this discussion. Regent Bulla said Arizona State University was requesting approval to identify a vendor to provide services and supplies for telephone services. Equipment and services purchased from this contract will be considered reimbursable, and costs are passed as direct charges to customers or projects. Total cost for possible annual extensions, not to exceed 5 years, is $1,044,750.

Upon motion of Regent Bulla, seconded by Regent Kelling, the Board granted Project Approval for the ASU Telephone Services and Supplies Support Project.

Dr. Art Ashton and Dr. Jeremy Rowe joined the meeting for this discussion. Regent Bulla said Arizona State University was seeking to implement a full life cycle chemical material management system that can be widely utilized by the research community, provide increased control over laboratory materials, aid investigators in their research efforts, and comply with Federal and State mandates on chemical and biological safety as part of the ASU Lab Safety and Security Initiative. The cost over 4 years is not to exceed $1,841,000. The UA is also using this particular software to manage their materials.

Upon motion of Regent Bulla, seconded by Regent Jewett, the Board approved the SciQuest Chemical Material Management Project.

President Herstam reminded the Board that Executive Director Linda Blessing had informed the Board at its January meeting of her intent to retire from her position, effective June 30, 2004. Dr. Blessing has served in that capacity since July 1, 1999. He said he appointed a search and screening committee composed of himself and Regents Jewett, Palacios, and Stuart. Following the recommendation of the committee, the Board conducted an interview yesterday with Joel Sideman who currently serves in the capacity of Deputy Executive Director and Legal Counsel.

Upon motion of Regent Herstam, seconded by Regent Jewett, the Board authorized the appointment of Joel Sideman as Executive Director of the Arizona Board of Regents, effective July 1, 2004, in accordance with a multiple-year employment contract that incorporates the terms and conditions summarized below.

Mr. Sideman’s appointment period will be July 1, 2004, through June 30, 2007 at a base annual salary of $160,000. He will receive employer paid contributions to a cash balance defined benefit pension plan at an annual rate of 18% of base salary and the same fringe benefits available to all central office and university administrators, including but not limited to medical benefits, sick leave, vacation leave, and retirement options.

President Herstam thanked Dr. Simmons for sitting in for Dr. Camacho at this meeting. Dr. Simmons said the AFC would like to thank the Regents and presidents for working with them on areas of common concern such as additional revenue for the universities. He thanked the ABOR staff and the UA for facilitating the meetings the past week.

President Likins received thanks for the UA’s gracious hospitality and the work of his staff. Mr. Sideman was welcomed and thanks were expressed to Director Blessing for her service to the Board. The two new Regents were welcomed to their first meeting. The central office staff was thanked for their professional work. It was suggested that time be spent on trying to secure additional financial aid.

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