November 2002 Minutes/Arizona Board of Regents

A meeting of the Arizona Board of Regents was held November 21 and 22, 2002, in the University of Arizona Health Sciences Center, Arizona Cancer Center, 1515 North Campbell Avenue, Tucson, Arizona. President Jewett called the meeting to order at 1:14 p.m. in the Peter Kiewit Auditorium.

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

Also present were: President Michael Crow, Dr. Milton Glick, Dr. Mernoy Harrison, Dr. Christine Wilkinson, and Dr. Kathleen Church, Arizona State University; President John Haeger, Dr. M. J. McMahon, Dr. David Cain, and Dr. Elizabeth Grobsmith, Northern Arizona University; President Peter Likins, Dr. George Davis, Dr. Richard Powell, Dr. Randy Groth, Dr. Saundra Taylor, Ms. Judith Leonard (Thursday Only), Dr. Elizabeth Ervin, Dr. Patti Ota, and Mr. Greg Fahey, University of Arizona; Executive Director Linda Blessing, Board Counsel Joel Sideman, Secretary to the Board Judy Garza, Dr. Thomas Wickenden, Dr. Art Ashton, Ms. Louise Houseworth, Mr. Matt Ortega, and Ms. Norma Salas, Central Office Staff; and Dr. David Camacho, Arizona Faculties Council.

All lists, reports, summaries, background materials, and other documents referred to in these minutes can be found in the November 21 and 22, 2002, Documents File.

President Jewett welcomed everyone to the Study Session on Changing Directions. He introduced Dr. David Camacho from Northern Arizona University, the representative from the Arizona Faculties Council for this meeting. Dr. Patti Ota from the University of Arizona, Dr. Christine Wilkinson and Dr. Kathy Church from Arizona State University, Dr. Tom Wickenden from the Central Office, and Dr. M. J. McMahon from Northern Arizona University joined the meeting for the Study Session. President Jewett thanked the group for all the work they have done to facilitate the Study Sessions.

President Jewett reminded the Regents the Work Group had been asked to move ahead on a number of fronts, but especially to propose specific changes to several Board policies and to develop models for assessing the level and impact of financial aid. He said three proposals for specific changes to Board policy would be considered as a first reading. If the Board is in substantial agreement with the proposals, they will be brought back in January for a second reading and a vote.

Following the policy discussions, each university will present the results of their financial aid modeling to help the Regents understand how increases in financial aid and increases in tuition revenue might be linked. The purpose is to find a way of linking tuition and aid that will provide additional revenue for the universities while actually improving affordability, at least for those students with the greatest need. The Board will then be asked to give direction to the universities to develop specific changes in financial aid policies for a discussion as a first reading in January. The study session will end with a brief update and discussion of state funding issues.

Dr. Wickenden said the Board had indicated a desire to begin creating an environment to support Changing Directions by considering changes to Board policies to geographic responsibilities, tuition, and enrollments to provide the flexibility required for each university to sharpen the focus of its mission, to differentiate its management practices, and to collaborate in meeting student and state needs.

Dr. Wickenden described the proposed changes to Board Policy 2-205A.6, "Course and Program Geographical Responsibilities for Off-Campus Credit Courses and Programs." He said the current policy had four paragraphs that spell out different geographical boundaries within which each university must confine its off-campus offerings for various kinds of programs. The proposed policy eliminates these geographical boundaries. Some of the remaining paragraphs in the policy pertain to distance delivery of courses and programs and it is intended the universities will bring back proposed changes to these policies at a later meeting.If the Board eliminates these boundaries, it is expected the presidents will be responsible for ensuring the universities coordinate in order to avoid any unnecessary duplication of programs.

Dr. Wickenden said the proposed changes to Board Policy 4-104A, "Procedure for Setting Tuition and Fees," have three separate pieces. The existing policy allows differentiation among institutions and between residents and nonresident students. The first proposed change will allow for additional differentiation between academic levels such as graduate and undergraduate, different degree programs, and different delivery methods.

The second proposal is to clarify the upper limit on undergraduate resident tuition. Existing policy simply says that undergraduate resident tuition shall not exceed the top of the bottom third of tuition in all other states without being explicit about which institutions are to be considered in the calculation. This change would make clear the comparison is to senior public institutions.

Because the Board has expressed a concern for affordability and because the level of unmet need for students at the universities is a convenient measure of affordability, the third proposal is to include unmet need in the financial aid report. Regent Bulla asked if consideration had been given to changing the portion of the policy relating to the discretion of the president to use the resident per hour charge for students taking one through seven credit hours per semester and was told this is one of the changes being considered for the next group of proposed policy changes.

Dr. Wickenden said the proposed amendment to Board Policy 2-103, "Enrollment," is to remove the existing 25% limit on full-time nonresident enrollment at each university. The Regents, at the study session last month, did indicate their receptiveness to this change if the presidents ensure resident students continue to have full access to programs and services.

Regent Bulla said he would not like to see nonresident students become the majority as these are public institutions; so he would like to see some monitoring, like a report to the Regents, on the number of nonresidents.

President Jewett said these policies would return to the Board in January for a vote.

President Jewett said the Regents had asked the universities to do some modeling of the relationship between tuition increases and increases in financial aid. The relationship is very complex and includes multiple assumptions of various scenarios of tuition increases. The tuition increase scenarios being used are $500, $750, and $1000 per year. President Jewett asked the public to be careful not to confuse these assumptions with what the presidents may recommend or what the Board may ultimately decide to adopt. The numbers were only selected as a basis for the modeling exercise. The Regents are looking for an approach that will enable them to increase tuition revenue for the universities while increasing affordability for those students who can least afford to pay higher tuition.

President Likins said the presidents had been asked to demonstrate that it is possible to increase tuition and at the same time, make the institutions more affordable for students from needy families. This presentation is an analytical exercise that explores three tuition scenarios with financial aid alternatives; it is not a proposal. For modeling purposes, the UA has attached a $250 premium on graduate education.

Dr. Likins said the value of waivers grows as tuition increases. In order to explore the impact of increases on needy families, an assumption was made that the other costs of attendance will increase by 3%. To determine what dollars will be available after financial aid obligations are met, the UA is assuming the size of the freshman class will increase by 200 students and the natural flow of continuing students causes a growth of 600 students.

The purpose of the modeling is to calculate the marginal net tuition revenue; what revenue would be available using the three tuition scenarios under various financial aid models. The only financial aid incorporated in the model is undergraduate need-based aid. There is also a necessity to provide undergraduate merit-based aid which will be approximately $4M. Also, left out of the models is response to additional need and merit based-aid at the graduate student level. These will reduce the marginal net tuition revenues shown in the models.

President Likins said each of the three scenarios had been calculated with three financial aid options: Pell Grant recipients with unmet need are unharmed (approximately 28% of the resident undergraduates and approximately 10% of the nonresident undergraduates); unmet need for all undergraduates is held constant (no growth) ( not for each individual, for the aggregated population); and unmet need for all undergraduates is reduced by $500,000 (2.5%). Dr. Likins said that his calculation of unmet need begins with calculating the price of education at each individual institution-tuition, room, board, books. This is approximately $12,000 for resident undergraduates. The universities begin with the price of education and then subtract the calculated expected family contribution, calculated according to federal methodology, to get need. The gift aid and federally guaranteed subsidized student loans, the unsubsidized students loans, and the campus work is then subtracted from the need to get unmet need. Unmet need can be defined that way, or the universities can say they do not intend for students to borrow more, either subsidized or unsubsidized, or to work more hours; and unmet need may have a more narrow definition. The UA model has assumed the more narrow definition. Also, the scenarios do not include money spent for merit aid for undergraduates and graduates, so the numbers are only part of the story.

Dr. Likins said each of the scenarios assumes a tuition price and then considers financial aid alternatives to calculate the marginal net tuition revenue. He presented three scenarios and indicated the marginal gross tuition revenue and marginal net tuition revenue if Pell grant recipients with unmet need remain unharmed, if unmet need was held constant, and if unmet need would be reduced by $500,000 for each scenario.

Scenario A assumes a $500 resident undergraduate tuition increase, a resident graduate proposed increase of $750, and a non-resident undergraduate proposed increase of $1,250. Scenario B assumes a $750 resident undergraduate tuition increase and a $1,000 resident graduate proposed increase. Scenario C assumes a $1,000 resident undergraduate tuition increase and a $1,250 resident graduate proposed increase. All three assume a non-resident graduate increase of $1500.

President Likins indicated the marginal net tuition revenue from each as well as the of marginal gross revenue to aid. He said this demonstrates it is possible to raise tuition and make the universities more affordable at the same time.

President Haeger said diversity is important and that includes not only students from different ethnic backgrounds, but also students from different socio-economic backgrounds. He agreed these models only address need-based aid, but all three universities have money allocated to merit-based aid. These models are an attempt to hold low income resident undergraduate students harmless, regardless of the level of a tuition increase. The NAU model is based on FY03 enrollment and the current resident-non-resident mix, which is approximately 86% resident students. The tuition increase is modeled on $1,000 for non-resident students and $1,200 for resident and non-resident graduate students for all three scenarios. Each of the three scenarios addresses the option of holding the resident Pell Grant recipients unharmed and addressing the increase in cost of attendance for resident Pell Grant recipients.

President Haeger presented the three scenarios and indicated the marginal net tuition revenue from each as well as the % of marginal gross revenue to aid. He said the universities make a four-year commitment to students and increasing financial aid will greatly reduce the flexibility of the institutions, but it will help more students attend and graduate from the universities.

President Crow said the logic for increasing tuition is that the institutions are struggling. Also, there are a limited number of mechanisms to deal with financial aid. Therefore, in moving forward with models to consider tuition increases, ASU focuses on maintaining the viability of the university and academic enterprise as well as providing access to the university.

Dr. Crow said ASU has three scenarios, also, with the assumptions of no enrollment growth or decline, resident undergraduate tuition increased by $500, $750, and $1000 respectively, non-resident undergraduate tuition increased by $1000 in all three scenarios, resident graduate tuition increased by $700, $950, and $1200 respectively, and non-resident graduate tuition increased by $1200 in all three scenarios. The revenue available for other institutional goals was displayed after increased financial aid was shown in all three scenarios.

President Jewett said this was the first presentation linking tuition to financial aid. The principles of affordability and accessibility allow him to understand what is at stake. He believes substantial increases in tuition mean the Board must consider even more substantial increases in financial aid and an increase in the Board's need-based set aside to 14% seems like an important number to remember. The State of Arizona really is not a participant or contributor to financial aid, so the Board needs to find a way to increase financial aid through the use of university funds.

Regent Stuart said the models showed him the variations in terms of the bottom line of the student financial aid package and the bottom line in terms of institutional use among the three institutions as well as among the various scenarios. He believes the definition of unmet need is very important and should be the same among the three universities for this issue. It may be good policy to consider different increases at different campuses based on various scenarios since the unmet need and mission is different at each campus.

President Likins said, given the differences among the universities and the fact they had proceeded independently in developing the alternative financial aid scenarios, he noticed a remarkable coincidence in that the most aggressive tuition and financial aid increase gives 40% of the gross tuition revenue back for financial aid at both UA and ASU.

Regent Meaker said he found the models helpful in assessing the impact of a tuition increase. He asked if the "financially disadvantaged resident student" in ASU's model was the same as the "unmet financial need" in the UA model. Dr. Church said the definition was a "Pell recipient with unmet need" as there are some Pell recipients with no unmet need because they have merit scholarships or tuition waivers. Unmet need was defined "As cost of attendance minus family contribution and all other available types of aid except on-campus student employment." She said the universities can all define unmet need in the same manner and explained why ASU had used its assumptions.

President Haeger said it would be important, when the policy decisions are made, to keep in mind what the university is trying to achieve. Today, the assumptions were related to the models; in the future the assumptions will need to be related to the goals of each of the universities.

Regent Boice said there will be variability among the universities within the guidelines, but he would like to see the defined terms be exactly the same. He does not believe the state should be relieved of its obligation to provide money for financial aid, and he would like to see an academic requirement added to the financial aid qualifications.

Regent Bulla said there are financial needs beyond the Pell Grant recipients and he would like to see those needs considered. He also believes there are merit issues. He would like to see more modeling with different component parts spelled out. He said the unmet need would be more dramatic if the base was today's tuition rather than the $500 model.

President Crow said he had heard people from groups interested in the tuition issue say they understand the Regents are concerned about financial aid, but what will happen if future Boards are not as interested in financial aid. He said he knew future Boards could not be bound by this Board's actions; he just wanted to let the Regents know this is a community concern. Also, this is a multiple-year problem and he would like to know from the Regents their thoughts on future years' tuition before making this year's recommendation.

President Jewett said future Boards can always change policy, but he believed a thoughtful, well-done change would have a lasting effect in establishing and reaffirming fundamental principles. He believed more direction could be given to staff at the January meeting at which time he would like to see more data and a focused discussion on financial aid policy. He asked for more comments from Regents on their thoughts about the magnitude of tuition increases so the presidents would have more information on which to base their recommendations.

Regent Ulrich said he believed the Board could decide what needs to be done now; however, would like to see some work on what might be expected in future years. Regent McKay said this tuition decision would not be popular with many people and most people would not understand the financial aid aspect, so she believed the Regents should be ready to support the presidents' recommendations, whatever they are. She said she could support a substantial increase. Regent Bulla said he would support a substantial increase as he believes this is a way to increase financial aid to make the universities more affordable and to provide qualified instructors, a safe environment, and other necessary things to students.

Regent Herstam said he believed the discussion coming from the Study Session had suggested the Regents were interested in moving as quickly as possible to the top of the 1/3 of the senior public universities and then maintaining that position. That would be a dramatic increase from 49th to 34th. Regent Stuart said he believed the idea of increasing financial aid with a higher tuition to make the universities more affordable to those who need it most and to hold harmless those who now receive aid would last a long time and he believed it would take several years to achieve the tuition level. He believes the Board should consider the issue again next year and he believes it will stay in place a long time.

President Jewett said he was sensing substantial increases in tuition, accompanied by aggressive and substantial increases in financial aid, is the approach the Board will continue. He believes the Board will be looking at Board policies on financial aid in January. In ensuing months, the Regents will take action on financial aid and set tuition. He believes a minimum of a 14% Regents' set aside for need based financial aid should accompany a substantial tuition increase. President Likins said the Board could adopt a policy similar to the medical college wherein they calculate the tuition necessary to reach the 1/3 level of their peer institutions for the current year. Then the yearly discussion at the Board would be on affordability and financial aid. Regent Boice said he did not want to see financial aid take the entire tuition increase as the presidents need money to run the institutions.

Regent Meaker said he would like to see the presidents and the Regents make an extra effort to communicate with the university community, especially the students, as this discussion moves forward. President Jewett gave his continued commitment to working with Regents Meaker and Petterson-Kelling in keeping students informed.

President Likins said the biggest discussion concerning tuition is always the resident undergraduate tuition. This issue can be discussed on the campuses and a recommendation can be made to the Board whenever the Regents desire. The other issues, such as graduate tuition increases can then be made from that decision. President Jewett said he would like to see tuition bifurcated from fees and President Likins agreed.

President Haeger said the makeup of an institution and its financial structure determines what needs to be done at the graduate level to make the undergraduate level affordable. Affordability frequently means balancing what is done at the graduate and undergraduate level. He also agreed he would like to see fees decided at a different time.

President Likins said increasing tuition substantially means the question of market elasticity needs to be considered. Also, increasing tuition substantially means redefining the population of needy students and the universities do not have the data to know what will be required to deal with that expanded population. These items need to be considered when there is a commitment to decreasing unmet need. President Crow said ASU was already engaged in discussions with students, elements of the community outside the university, and legislators. He said he could present recommendations at either the January or March meeting.
President Jewett said he would like to see a vote on clarifying financial aid policy and resident undergraduate tuition in March and a vote in April on fees and associated pricing. This would mean presidential recommendations and a hearing would be held in January or February.

President Jewett said the October Study Session established four groups of issues that are important in terms of communicating with the State of Arizona. The first was promoting state financial aid. There has been considerable discussion on that issue, recognizing institutional financial aid cannot bring the universities to the desired level of affordability and accessibility.

Protecting tuition revenue was the second issue. Although recognizing the state will be struggling with monumental budget deficits, it is important the tuition go for its intended purpose. The third issue is revising the state budget mechanisms. The universities have agreed to do their share of budget cutting over the next few years. Changes need to be promoted in the budget process that fund enrollment growth, new and enhanced programs, buildings, salaries, and ensure state support for core educational responsibilities. The fourth issue is strengthening state revenue streams. As part of Changing Directions and community outreach, the presidents and Regents have been meeting with business leaders and will be meeting with other community groups to promote a partnership for strengthening the state revenue stream so education is protected.

President Jewett said he had asked the Government Affairs group to work on a plan to move these issues forward. President Ulrich said most Regents are asked to speak to various groups and he believed it would be very helpful to have a white paper on the salient points of what the budget cuts do to the universities. President Crow said the list, in rank order, of cash contributions made by entities of the Arizona state government to the budget shortfall of the state, ranks ASU first and UA second, both contributing more than any other institution of state government of any type.

President Jewett called the regular ABOR meeting to order at 3:30 p.m. Regent' Ulrich led the pledge of allegiance. President Jewett expressed regrets on behalf of the Regents for the deplorable attack in the nursing department last month. He asked everyone to stand for a moment of silence to show support and concern for the friends, families, and loved ones of those killed.

Doug Hartz, UA Student Body President, said he understood the universities' needs to look for new types of financial revenues to maintain the quality of the institutions. He believed the development of financial aid packages would be critical for student success. In order for the students to have time to prepare proposals for the Board to consider, they will need time to work with the administration and the student community. He asked for discussion with Regents and the administration to continue and asked that tuition hearings not be held in January.

Wes McCallev, NAU Student Body President, mirrored the prior comments. He especially asked that the tuition hearings not be held in January so the students would have time to study the issues and bring forward a proposal. He said he appreciated the positive aspects of Changing Directions.

Mike Leingang, ASU Student Body President, said the student association had been working diligently to engage students in the tuition and financial aid dialogue through forums and meetings with campus student leaders. He introduced Michael Comenda, the new Vice President for ASASU.

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

The Board approved the August 15 and 16, 2002, Executive Session, and the September 26 and 27, 2002, Regular Meeting minutes.

The Board received a written report on the Academic Performance of Arizona's 20002001 High School Graduates Enrolled in the universities in 2001-2002 (High School Report Card). This report has been required by statute since 1986. Both the community colleges and the universities inform high schools of the performance of their graduates who enter higher education.

In Fall 2001 there were 391 more Arizona high school graduates from 2000-01 enrolled at the universities than there were graduates from 1999-2000, an increase of 4.6%. This year 25% of the total 2000-01 Arizona high school graduates enrolled in the universities were from a racial/ethnic minority group, a 1 % decrease from the previous year. Females represented 57% of the total graduates enrolled, also a 1 % decrease from the previous year.

In Fall 2001, 77% of the 2000-01 high school graduates were admitted to the university without academic deficiencies. There were increases from last year in all three categories of students enrolled in the Fall and continuing in the Spring. Total high school graduates increased to 93% from 91 %; those who enrolled with no deficiencies increased to 94%; and those who enrolled with deficiencies increased to 91 %. The average first-semester GPA of the students admitted without deficiencies was 2.9, up from 2.8 last year. The average GPA of the students admitted with deficiencies remained the same as last year at 2.4.

The Board was provided with a written report of Fall headcount and full-time equivalent enrollments for the Arizona university system. Overall, Arizona university system headcount enrollments increased 4.1%, from 109,375 in Fall 2001, to 113,869 in Fall 2002. Undergraduate headcount enrollments increased 4.4%, from 82,551 in Fall 2001 to 86,218 in Fall 2002. Graduate headcount enrollments increased 3.1 % from 26,824 in Fall 2001 to 27,651 in Fall 2002. All universities reported increases in total headcount enrollment.

Overall, FTE increased 3.8%, from 96,603 in Fall 2001 to 100,258 in Fall 2002. Undergraduate FTE increased 3.9% while graduate FTE increased 3.2%. Increases in FTE were reported by all universities.

Headcount for the Fall 2002 was 47,359 at ASU Main, 6,630 at ASU West, 3,126 at ASU East, 19,907 at NAU, and 36,847 at UA including 587 from UA South. FTE for the Fall 2002 was 42,951 at ASU Main, 5,053 at ASU West, 1,976 at ASU East, 17,189 at NAU, and 33,089 at UA, including 358 at UA South.

The Board was provided the annual Progress Report on Articulation and Transfer for Arizona Public Postsecondary Education - 2002. The report includes highlights, background information on the groups involved, and a detailed report on two processes: (1) articulating postsecondary academic programs and courses, and (2) jointly identifying and meeting the state's postsecondary needs. The cooperative process for identifying and meeting postsecondary needs has been successful, resulting in an absence of issues regarding unmet needs.

The Board approved the 2002 Progress Report on Articulation and Transfer for Arizona Public Postsecondary Education for transmittal to the Joint Legislative Budget Committee and the State Board of Directors for Community Colleges of Arizona.

The Board adopted, as presented, revisions to Board Policy 6-902, "Qualified Tuition Reduction Policy," that expand the class of eligible employees for the qualified tuition reduction program to include those employees (and dependents of employees) with at least five years continuous service who must terminate their employment due to a permanent disability.

The Board was asked to review and accept nine audit reports submitted by the Central Office's internal audit staff and accepted by the Audit Committee at its October 15, 2002, meeting.

The Fall 2001 Enrollment Audit at NAU and UA resulted in two recommendations to NAU and one Finding Reportable to the Board for UA. The UA non-resident headcount enrollment ratio of 31.3% continues to exceed the Board-imposed cap of 25%. The ratio has exceeded 25% since at least 1986.

Audit follow-up for the UA for the fiscal year ended June 30, 2002, showed the implementation of two recommendations concerning infrastructure deferred maintenance backlog had been deferred due to budget constraints. UA is in process of implementing two recommendations: The university, in conjunction with the other state universities and the Central Office, should establish a work group to propose revisions to the space utilization guidelines and the Intercollegiate Athletics Department should use a custom reporting feature of its ticketing system to provide a report for receipt reconciliation. All other previous audit recommendations subject to follow-up have been implemented.

An audit of Building Renewal Expenditures at ASU concluded that building renewal expenditures complied with Arizona Revised Statute §41-790. The Capital Projects Audit at NAU resulted in four recommendations.

At the request of the three universities, ABOR Audit Services performed an NCAA Financial Audit at each university intercollegiate athletic program. Because the NCAA financial audit requirements do not constitute an audit under generally accepted auditing standards, Audit Services does not issue an opinion regarding the Statement of Revenues and Expenditures which they forward to each university president with the audit report. Based on the NCAA financial Audit at UA, three recommendations for improvements in internal control were made to and accepted by its Intercollegiate Athletics Department.

The Board accepted the nine audit reports completed by the Central Office's Internal Audit staff.

President Likins asked Provost Davis to introduce Professor Chris Impey, a University Distinguished Professor in the Department of Astronomy and Steward Observatory. Among the many accolades Dr. Impey has earned was his recent receipt of the National Science Foundation Director's Award which recognizes individuals with distinguished records of educating undergraduates while also contributing significantly to the scholarship of a science, math, engineering technology discipline and to teaching of disciplinary majors and graduate students. Dr. Impey teaches Astronomy 100 with 165 students each semester.

Dr. Impey said teaching and research reinforce each other and cannot be separated. Astronomy is our 2500-year intellectual heritage, a journey that started with the ancient Greek philosophers to understand our place in the vast universe. The National Science Foundation polls science literacy among adults in the United States and finds that one in four adults is unaware the earth spins once a day on its axis. One of four American adults is unaware there is a real distinction between astrology and other sciences. Therefore, the mission of people who teach science and astronomy at a university like the UA is not to educate and train new professional astronomers; that is done in the graduate program. In general education, the goal is to create an awareness of the universe and to give the tools of science literacy and critical thinking that our population will absolutely need to make important decisions concerning the future, such as genetic research.

Dr. Impey described the classes for undergraduates. Students are taken out at night for "star parties" to observe the night sky; they go to the telescopes in addition to class work. In one freshman course, Natural Sciences 102, a question such as, "is the universe infinite?" might be asked. In general education courses the students are challenged to ask large questions, to get out into the university at large and ask questions even scientists can't answer to engage students in the act of discovery.

Students use computers and other tools. Dr. Impey demonstrated how balloons with stars and galaxies on them are used to take measurements of the universe to discover many scientific laws. He told the Regents about various teaching projects and money received by the university for some of these projects.

Dr. Impey described a sophomore class, Astronomy 202 - Life in the Universe, which asks the question of "Are we alone?" He said humans share 50% of the DNA of yeast. Students are taught to think of ways the universe might be, not as life on our planet exists; and he described ways students use technology in the class.

Dr. Impey said the Astronomy Department teaches more than of 2400 students a year in the general education classes. Steward Observatory generates over $5 for every $1 of state funding through grants; but $5 from indirect costs and other sources is spent towards general education for every $1 the state spends. That is an unsustainable model. If a fraction of the faculty who generate these monies were lost, the impact on grants and revenue would be substantial. He said he would like to impress on the Regents that the presence of astronomy and other highly leveraged research activities in the university is a fragile enterprise.

Provost George Davis joined the meeting for this discussion. He introduced the UA
of Education degree with a major in Educational Leadership. He explained these were planning authorizations, each was consistent with the institution's fundamental values and priorities, and gave a description of each program and why it was needed.

Upon motion of Regent Palacios, seconded by Regent Bulla, the Board authorized two program requests for the University of Arizona as presented: planning authorization for the B.A. in Africana Studies and M.Ed. In Educational Leadership.

Provost Milt Glick joined the meeting for this discussion. He introduced the request to establish a new School of Life Sciences at Arizona State University. He explained the importance of combining the Life Sciences faculty at ASU and the intent to create a very strong research intensive community of life scientists who will be collaborating with TGen, the UA, and NAU to build a strong life sciences effort in the Valley. President Crow said this is an exemplar of what will begin to happen at ASU on a number of different fronts-- a faculty-led design to fuse disciplines together, focus energy on scholarship and teaching together, and concentrate energy and focus to build a pathway to higher levels of academic success.

Regent Stuart said he appreciated the fact this is just a reshaping and does not require new faculty and expenditures. Dr. Glick said the formation of this school does not have any cost associated with it. However, ASU intends to invest in the life sciences as a high priority. Forming the school will not cause the investment; the priority will. Upon motion of Regent Palacios, seconded by Regent McKay, the Board authorized the establishment of the School of Life Sciences at Arizona State University.

Mr. Sideman joined the meeting for this discussion. The Board considered proposed revisions to the existing policy on "Conditions of Faculty Service" in order to conform the policy to a decision of the State Supreme Court of Arizona. The key changes are to enable a faculty member to have full legal representation at the university's administrative hearing and to provide the hearing panel with the subpoena power. Faculty representatives at all three universities have been consulted and are in agreement with the changes. The policy will be brought to the Board for adoption at its next meeting.

Regent Ulrich reported on a meeting of the Input Group of Health Care and Hospital CEO's composed of eleven CEO's from major hospital facilities in the state, the three university presidents, Dr. Ray Woosley, a representative of the community colleges, and a representative of the American Hospital Association. There were two items on the agenda. The first was how to organize collaboration between the industry, higher education, and TGen, and the second was how to attack the growing shortage of nurses and other health care workers in Arizona.

The university presidents asked Dr. Woosley from the Health Sciences Center at the UA to work with his colleagues to draft a charter for the Arizona BioMedical Collaborative, a collaborative among the universities, TGen, and the health care field. The charter will indicate how all the pieces of biomedical education and research, including the universities' 301 initiatives, TGen, the community colleges, and the health care industry will fit together to meet the biomedical education and research needs of the state.

The group also made significant progress on the issue of nursing shortages. Items discussed were the cost to expand nursing programs at different levels, the portion of those costs that can be reflected in differential tuition, and the resources that are available at the hospitals to pay the tuition for the different programs. Dr. Woosley described a collaborative program for asthma that is in the development stage.

President Likins publicly recognized Dr. Woosley and Nursing Dean Marjorie Isenberg for their heroic work in pulling together the students, staff, and faculty in the face of the tragedy in the nursing department. Regent Ulrich thanked Dr. Wickenden for his help in putting together the meeting.

Regent Ulrich also reported on the meeting of the Business Advisory Team, composed of private sector people who are primarily in the hi tech area, to help the universities better understand business plans. The universities were asked to build a business plan for each one of their initiatives for the Proposition 301 money. The BAT critiqued the plans and suggested improvements. The universities were asked to analyze all of the initiatives to see if they are viable, have produced what they were supposed to produce, if there are early successes, are the initiatives linked together correctly, and are they focused on the right areas. The Council of Presidents was asked to come back at some time to report on the results of the analysis.

Regent Palacios asked if the terms for this group were indefinite and was told the terms were for one year. The members were told they would be convened for one more discussion when the universities decided where they wanted to move.

President Jewett reminded the Regents they had been invited to tour the Integrated Learning Center before the evening social. There will be transportation at the front lobby of the Marriott. The meeting recessed at 4:40 p.m. and reconvened at 9:04 a.m. on Friday, November 22.

Dr. Art Ashton joined the meeting for this discussion. Regent Bulla said the new planning process began in June. There has been an attempt to simplify the process and redirect it as part of Changing Directions. He said he believed it would take another year to refine the process, but the Five-Year Strategic Plans are being presented for the first time under the new system for the review and approval of the Board. They are due to the Governor's Office of Strategic Planning and Budgeting December 1. They present missions, strategic issues, goals, strategies, performance measures, and dollars. The format is not yet perfect, so a matrix has also been presented. An addendum was distributed as the UA had omitted new facilities from its initial package.

President Likins said these plans were submitted under the current circumstances with some mention of possible changes that may occur with Changing Directions. Dr. Likins said he was to highlight one issue from the plan and he chose UA Issue 4, Managing Enrollment Growth. This involves having recruitment, admissions, retention, tuition, and financial aid plans, He believes these ideas should be expanded in the plans, but they are not because the university does not control many of these issues-they are controlled by the Board. Therefore, he believes the Changing Directions initiative will give the universities an enormous strength for planning. He said the plans next year will contain strategies for the issues he raised.

President Crow said he believed Changing Directions offers the universities a planning, design, and redirection opportunity never before experienced. He said the mid-year budget reduction of 2003 creates low morale, fear in the organization, and lack of confidence in the leadership, the government, and in the Regents. The 2004 budget process will be a reconceptualization for ASU that begins to move toward a more entrepreneurial approach. Changing Directions and the 2004 budget uncertainty are other forces on everyone's mind.

Dr. Crow focused on ASU's Item 4, How to Enhance and Improve Social Embeddedness. He said he would like to increase the university's engagement with the local community. He described two examples. He would like to improve the quality of life through scholarships and research. He would like to enhance vibrancy and diversity. ASU intends to move from a downtown Center to a downtown campus to make that part of central Phoenix have a residential and educational presence. He said ASU intends to become the leading center for intellectual discourse on matters relating to American Indian culture and its implications on American culture. ASU wants to focus on high school graduation rates. The College of Business wants to be a part of the local business enterprises and have an added international dimension. This will permeate ASU thinking-local involvement with a global dimension.

President Haeger chose to talk about NAU's Item 1, Increase Academic Excellence and the Quality of the Residential Living and Learning Environment to Become a Premiere Undergraduate Learning Community. He said one consideration for planning is where undergraduate education will be headed as everything else at NAU is linked to undergraduate education. Most of the measures now used have an impact on what students learn-tenure and tenure track faculty in the classroom with freshman and sophomores, class size, student services, advisers, capital infrastructure, etc. People are beginning to ask what students learn in college beyond the basic classes. Do they learn to function in a diverse world; do they understand how to deal with ethical issues; do they have critical thinking issues; are students prepared to live in a democratic society; and are students prepared for leadership?

Dr. Haeger said colleges can no longer be enclaves that set themselves apart; they will be a part of the community. Universities today have large capital structures for 18 to 21 year olds and they are now the smallest segment of the people involved in higher education today. People over 21 are the largest population in colleges today. Future planning will need to take into consideration people who are finishing their degrees in a manner offered by Phoenix College. The only certainty is the future will not look like the past.

Regent Ulrich asked the presidents to let the Regents know how their organizations will change as they develop strategies of change. Especially in the administrative structure. President Likins said it is true the percentage of older students is growing, but the numbers of 17 to 21 year olds is still large and they must continue to be served also. There was a discussion of economic development and the people necessary to make this successful at the universities.

Upon motion of Regent Bulla, seconded by Regent Palacios, the Board approved the Five-Year Strategic Plans of the major budget units of NAU, ASU-Main, ASU-East, ASU-West, UA-Main, the Arizona Health Science Center, and the Central Office.

Mr. Dave Harris, Dr. David Cain, Mr. David Duffy, and Dr. Mernoy Harrison joined the meeting for this discussion. Regent Bulla reminded the Regents President Haeger had reported at the June meeting that NAU was in the process of completing engineering assessments on 40 academic buildings on campus and there are also ongoing efforts at ASU and UA in building assessments. This presentation is an attempt to demonstrate the condition of the physical plants at the universities.

Dr. Cain presented NAU's assessment for the Regents and the five categories used to described the assessment. The highest functional code is blue on the campus maps and is defined as optimal. It fully supports the academic mission and is generally considered a newly constructed or renovated facility less than ten years old. The second category is green and is defined as suitable. It can continue to be used with routine maintenance and is usually older than ten years. The middle category is yellow and is defined as caution. It needs limited renovation to support the academic mission. The buildings are nearing the end of their life. The color orange is defined as requiring major renovation to support the established academic mission; it significantly inhibits adequate program delivery in most cases. The last category, red, is deemed unsatisfactory and is defined as insufficient for existing use and may not be a candidate for renovation.

Dr. Cain went through each category, describing the buildings included. NAU had a high percentage of buildings in the red, the orange, and the yellow.

Mr. Duffy said UA had embarked on a program 6 years ago to reduce its deferred maintenance. The overall deferred maintenance backlog of $87M, using local funds, reallocated funds, and other sources, has been reduced to its current state of $36M for items within the campus boundary. He reported over 90% of the buildings were in the highly functional or satisfactory categories.

Dr. Harrison said ASU had also put some money into renovation and maintenance. They have spent $4.5M per year for the last ten years in addition to the money received for building renewal. Thirteen of their buildings are rated highly functional and a good portion of the buildings are satisfactory; this is probably a function of the fact ASU has not built new facilities in over ten years.

ASU East has inherited a number of buildings from the Air Force that were in a state of disrepair. Many of those buildings will be demolished. They have been spending all of their building renewal money, as well as the money received for building renovations from Proposition 301. ASU West is a new campus, so its buildings are fine.

Mr. Dave Harris, Mr. David Duffy, and Mr. Dick Roberts joined the meeting for this discussion. Regent Bulla said the University of Arizona and Arizona State University, at the September 2002 Board meeting, had requested the inclusion of general fund appropriations in the respective operating budgets for debt service for various capital projects. At that time, it was determined that such requests should be submitted to the State through a revised capital improvement plan from each university.

The University of Arizona has submitted a revised Capital Improvement Plan for FY 2004 - FY 2006 that adds three research projects, which were previously approved in this year's FY 2003 Capital Development Plan, and requests a funding shift from a variety of sources. These include Proposition 301 Funds, tuition, indirect cost recovery, grants, and gifts to a General Fund Appropriation for annual debt service. They have also added a new $17.2M project that would fund the relocation of the Arizona Health Sciences Program in Phoenix, with debt service again being funded with General Fund appropriations.

Mr. Duffy said the UA request contained not only a building renewal request for $27.5M, but also a request for general fund appropriations of $18.2M for debt service on five projects and funds to complete the academic and technology buildings (the Biomedical Sciences and BioTechnology Building), a medical research building, the Chemistry Expansion, Arizona State Museum project, and the Arizona Health Sciences Campus in Phoenix.

Mr. Duffy said this would have significant implications for debt service. Regent Bulla said the university would now be at 9.29% debt ratio and the ABOR policy limit is 10%. He asked how the universities would manage something if a crisis occurred. Mr. Duffy said debt service for some buildings is being retired every year. President Likins said some of the buildings have revenue creating capacity which grows the denominator and that drives the ratio down. Research buildings have become the number one priority at the UA.

Upon motion of Regent Bulla, seconded by Regent Boice, the Regents granted approval for the revised FY 2004-2006 Capital Improvement Plan.

Dr. Mernoy Harrison and Mr. Dave Harris joined the meeting for this discussion. Regent Bulla said Arizona State University was also requesting approval of a revised FY 2004 - FY 2006 Capital Improvement Plan. The revisions requested would transfer four projects from the FY 2003 Capital Development Plan, with a shift in funding from various sources, including Proposition 301 Funds, tuition, indirect cost recovery, grants and gifts, to a request for a General Fund appropriation to service the proposed debt on these projects. Two new projects, the $53M New Life Sciences Building and the $7M Extended Campus Infrastructure Upgrades, have also been added to the request. The debt service for these two new projects would also be funded through General Fund appropriations.

President Crow said ASU was proposing to accelerate a process for new buildings coming on line in the research arena which normally takes six to ten years. In ASU's case, they have built no new research buildings in the last ten years, so they are not in a competitive position with regard to expanding federal and industrial resources to support research. They would like the buildings to come on line in the next 36 months. That requires having resources in hand to pay for the buildings when the projects are launched.

Dr. Harrison explained the requests. Regent Boice asked what the significant profit would be from the investment and President Crow said he believed every dollar spent on the facilities would generate $10 of return of two types. One is $5 for the research being done in the facility and one is $5 additional economic benefit to the community. He also believes these buildings will help expand the university's research competitive position.

Upon motion of Regent Bulla, seconded by Regent Meaker, the Board granted approval for the revised Capital Improvement Plan (CIP) for FY 2004-2006 and its Building Renewal Request.

Ms. Louise Houseworth, Ms. Gale Tebeau, Mr. Dick Roberts, and Dr. Milt Glick joined the meeting for this discussion. Ms. Houseworth said the material presented does not include any mid-year reductions for FY 2003. Actual general fund reductions passed by the Legislature and approved by the Governor will be reported in the Spring Update. The universities and the Central Office do have processes in place to manage those reductions and the Governor's Office of Strategic Planning and Budgeting has requested monthly status reports on budget reductions.

Each of the presidents presented a written report that summarized the way they had allocated responsibility for budget cuts, assuming a 5% recission. All the presidents are trying to protect the academic core, but the academic units also pay a price when student services are cut.

Executive Director Blessing said 3/4 of the Board of Regents Central Office budget is student financial aid programs, with the biggest being WICHE and the Arizona Financial Aid Trust Fund. The Governor has asked for a 2% budget cut with the financial aid programs being protected. That means the administration portion of the budget takes a 6.8% cut. Vacancies have been held, belt tightening exercises are in place, staff travel has been curtailed, and policy analyst positions have been eliminated. There will also be a 2% reduction in the funding to support the transfer articulation system.

Regent McKay asked for the amount of budget cuts going back to April 2001 for the universities and the Central Office. President Likins said all the entities should operate from the same starting point and the number could be easily calculated. Upon motion of Regent Stuart, seconded by Regent McKay, the Board approved the Fall Update of the FY 2003 All Funds Operating Budget.

Dr. Mernoy Harrison and Mr. Dave Harris joined the meeting for this discussion. Regent Stuart said Arizona State University is requesting the authority to enter into a trust agreement with the Arizona State University Foundation to transfer ASU endowment funds to the ASU Foundation (Foundation) for management and accounting purposes.

Dr. Harrison said ASU is looking at this as a way to generate additional income because the Foundation has a more active management approach than the ASU business office. This will provide a better reporting system and the duplication of workload will be eliminated. The ASU Associate Vice President and Treasurer and two faculty members are on the Foundation Finance Committee, so ASU believes it will not have control issues. Also, the agreement can be terminated at any time and the President of ASU must approve all plans, strategies, expenditures, and staffing.

Regent Bulla asked where the investment return stayed in the Foundation and was told most of it went where the donors had requested the money be spent for the university, some is allocated for operational Foundation expenses, and the rest goes to the university. He asked if the Regents see an audit or information on the return and was told you can see it on the Foundation statement and on the university statement. President Crow said the university could report the financial returns of the Foundation on its own financial statement.

Upon motion of Regent Stuart, seconded by Regent McKay, the Board authorized Arizona State University to enter into a trust agreement with the Arizona State University Foundation to manage the assets of present and future ASU endowments as stated in a trust agreement, subject to the approval of all documents by the ASU Office of General Counsel.

Dr. Mernoy Harrison and Mr. Dave Harris joined the meeting for this discussion. Regent Stuart said ASU was requesting Project Implementation Approval for the construction of the 170,000 square-foot Arizona Biodesign Institute at an estimated cost of $69M. ASU also requests authority to exceed the 3% ($500,000) limit on design expenditures by $1.5M. The project was approved as part of ASU's Capital Development Plan in August of 2002 with an estimated cost of $60M. The additional costs are associated with utility extensions, site development, and parking. The project will be funded with System Revenue Bonds with debt service from multiple sources (Proposition 301, tuition, indirect cost recovery, and grants).

Regent Boice asked why the building was needed and was told it is the first phase of the AZ Biodesign Institute. One of the factors limiting ASU's ability to grow research and create economic development for the State of Arizona is lack of facilities. Also, most of the design of this project has been funded by the Federal government.

President Crow said this is the first facility of an 800,000 square foot complex that will project ASU into the competitive arena on a national basis for bioscience and bioengineering related activities.

Upon motion of Regent Stuart, seconded by Regent Bulla, the Board granted Project Implementation Approval to ASU Main Campus for the AZ Biodesign Institute- Phase I Project and approved the expenditure of up to $2M for architectural and engineering services and Construction Management at Risk costs.

Dr. Mernoy Harrison and Mr. Dave Harris joined the meeting for this discussion. Regent Stuart reminded the Regents they had approved the exchange of this property with the City of Mesa in August 2002. Mesa used this land as a stadium site in its submittal to the Tourism and Sports Authority. Subsequently, the TSA chose a site in Glendale and this property is not required for other uses by the university.

Upon motion of Regent Stuart, seconded by Regent Bulla, the Board authorized ASU to sell at public auction the ASU land situated southeast of the Loop 101/202 Freeways in Tempe, Arizona, to the highest responsive and responsible bidder at such price and upon such terms (including, without limitation, lump sum payment at closing or payment over time) as the university deems appropriate and commercially reasonable, but in no event below appraised value.

Dr. Mernoy Harrison and Mr. David Harris joined the meeting for this discussion. Regent Stuart said ASU East was requesting Project Approval for the renovation of Wanner Hall and Sutton Hall at a cost of $5.7M, with a $3.2M budget increase. They are in ASU East's Capital Development Plan. Upon motion of Regent Stuart, seconded by Regent McKay, the Board granted Project Approval to renovate Buildings 632 (Wanner Hall) and 640 (Sutton Hall).

Dr. Mernoy Harrison and Mr. Dave Harris joined the meeting for this discussion. Regent Stuart said this is to enter into a 40-year lease with a yet-to-be-formed nonprofit South Campus Group Housing, L.L.C that will issue $25M in student housing revenue bonds in order to construct a two-phase student housing project. Phase I is the development of a 308-bed replacement housing unit for the fraternities located on south campus who will be displaced by campus redevelopment. Phase II will provide an additional 226 beds for upper division students wishing to reside on campus.
Upon motion of Regent Stuart, seconded by Regent McKay, the Board approved the formation of the South Campus Group Housing L.L.C.; the lease of the project site to the L.L.C. pursuant to a Ground lease for a term not exceeding 40 years; and the issuance of bonds not exceeding $15M in principal amount for Phase I and not exceeding $10M in principal amount for Phase II for the purpose of financing the design, land acquisition, construction, furnishing, and equipping of a south campus small group housing project (with approximately 308 beds in Phase I and approximately 226 beds for Phase II) on the ASU Main campus; and authorized the President, the Executive Vice President for Administration and Finance, the Associate Vice President for Finance and Treasurer of ASU, or their designees, to negotiate, sign, and deliver said ground lease agreement on substantially the terms described in the Executive Summary and any other necessary or appropriate documents in connection with the transaction and related financing, and to take all necessary and appropriate actions in this connection.

Mr. Dick Davis, Mr. Bob Smith, and Mr. Dave Harris joined the meeting for this discussion. Regent Stuart said the University of Arizona was requesting Revised Project Approval with a $1.3M budget increase for the renovation and expansion of the Park Student Union. The project received Project Approval with a $47M budget in January 2002.
He said the bids received in June 2002 substantially exceeded the project budget. The terms and conditions of the project were revised, and the project was re-bid in October 2002 resulting in a low bid of $6M. Though the project is still over budget, the university has requested authority to proceed. The project will be funded with Certificates of Participation with debt service being provided from auxiliary enterprise funds.

Regent Boice asked if this was really a high priority item. President Likins pointed out this project would be paid for from auxiliary enterprise funds which cannot be used to fund research or pay faculty. Within the auxiliary enterprises, Dr. Saundra Taylor said this particular area would be increased by over 1,000 students in the next two years as there is such a high demand for housing from freshmen and sophomores. The Park Student Union will be necessary to provide dining services for the students as the university does not have dining halls in the residential system.

Upon motion of Regent Stuart, seconded by Regent McKay, the Board granted Revised Project Approval and a Budget Increase of $1.3M to the University of Arizona for the Park Student Union Renovation and Expansion Project.

Mr. Matt Ortega joined the meeting for this discussion. The Board was provided with a written update on the recently elected membership of the 46th Legislature and the status of prospective legislation. Regent Herstam announced the Senate Appropriations Chairman will be Senator Bob Burns and the House Appropriations Chairman will be Representative Russell Pearce. Representative Linda Gray will continue to be the Education Chairman in the House and Senator Toni Hellon will be Education Chairman in the Senate.

The Board was provided with a written quarterly update on activities implemented to carry out its 2002-2003 Public Awareness Plan. Regent Herstam said, in keeping with the Board's 6th strategic direction to "Strengthen Relationships with Governmental, Educational and Constituent Groups," the Board adopts a Public Awareness Plan each year. This update reports events that have occurred this fall or are planned for the future. It is a working document that changes as needs occur.

Dr. David Camacho read from part of a letter that raised concerns regarding selfinsurance for state employees. The AFC requested the Regents support the request to delay self-insurance for another year so university employee concerns can be addressed.

Dr. Blessing said Ms. Cathy McGonigle had been the Regents' liaison on this project with the Department of Administration and had helped organize and coordinate the triuniversity task force on this issue. The task force has been quite frustrated. A memo was sent to the Department of Administration staff outlining some of the key problems, including insufficient data to make recommendations. Dr. Blessing said she expected to talk to Mr. Hibbs about the problem and President Jewett has been briefed on the problems.

Dr. Camacho said the AFC would like to thank the three university presidents for making faculty an integral, central part of Changing Directions. He also thanked the Board for its courage in pursuing Changing Directions.

Regent Stuart outlined the problems of having only one staff member to support the SBDCC, a seventeen member board of community leaders that still has the responsibility to facilitate transfer articulation. An annual report to the legislature outlining tuition and fees is required, but all authority to approve tuition waivers or deal with tuition in any direct way has been withdrawn. The SBDCC is required to coordinate an exchange program with the Arizona-Mexico Commission. They are required to prepare an annual report to the legislature regarding FTSE counts, but no one is required to report FTSTE to the SBDCC.

President Crow said the complexity of dealing with community colleges has increased dramatically since it is now necessary to deal with each individual college district and the college districts do not agree with each other.

President Jewett said Board Policy 3-702 was established as a guide for the Central Office auditors to use in preparing and presenting periodic reports of their audit results to the Board. Since the Board delegated this activity to the Audit Committee, which is now meeting with and receiving reports from the auditors, the policy is no longer needed. The Audit Committee will report periodically to the Board, and will highlight audit issues to the Board, when appropriate. However, copies of the auditors' reports will be made available to the Regents upon request.

Regents, members of the Council of Presidents, and Dr. Camacho thanked President Likins for his hospitality and all the staff for their cooperation and work to prepare for the meeting. President Jewett was also complemented for his work on Changing Directions.

MINUTES