Minutes of October 30, 2002 Study Session/Arizona Board of Regents

A Special Study Session of the Arizona Board of Regents was held October 30, 2002, in Ventana C, Memorial Union, Arizona State University, Tempe, Arizona. President Jewett called the meeting to order at 10:02 a.m.

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

Also present were: President Michael Crow, Dr. Milton Glick, Dr. Mernoy Harrison, and Dr. Christine Wilkinson, Arizona State University; President John Haeger, Dr. M. J. McMahon, and Dr. Jeanette Baker, Northern Arizona University; President Peter Likins, Dr. George Davis, Dr. Elizabeth Ervin, Mr. Joel Valdez, 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. Wanda Howell, Arizona Faculties Council.

All lists, reports, summaries, background materials, and other documents referred to in these minutes can be found in the October 30, 2002, Documents File.

President Jewett expressed the Board’s sympathy for the tragic events that took place at the University of Arizona earlier in the week. President Likins said the University of Arizona was providing counseling for students, faculty, friends, and family of the three nursing professors that were shot and killed by a student during an exam. He asked everyone to stand for a moment of silence to honor the three professors.

Dr. Patti Ota, Dr. M. J. McMahon, Dr. Kathy Church, Dr. Christine Wilkinson, and Dr. Tom Wickenden joined the meeting for this discussion. President Jewett introduced the Director of Multicultural Student Affairs at the University of Arizona Dr. Lynette Cook Francis who had brought her students to the meeting to observe the discussion.

President Jewett introduced the Study Session. He thanked the work team and the university and central office staffs for bringing this discussion along to this point so quickly. He said the Board is at the beginning of a public discussion he believes will lead to changes within the universities that will have a profound impact on the university system and the State of Arizona. He said the morning session would include presentations by the three presidents and the afternoon session would include discussion by the Regents.

President Crow said ASU is in the process of making cuts throughout the university to adjust spending to the reality of the state’s revenue for FY 2003. ASU is managing to concentrate the cuts in non-academic units.

Dr. Crow said Changing Directions is already driving the budget formulation and conceptualization process for FY 2004. ASU is operating under the following assumptions: unpredictable investments from the state, unknown tuition increases, and unpredictable revenue increases in other areas of the university. The challenge will be for the Deans, Directors, and others to move into an arena where they begin thinking about new programs, new initiatives, new revenue streams, new opportunities, and investments, as well as cost savings and efficiencies. Changing Directions will also allow a significant departure from past rivalrous behavior among the universities. President Crow said he believed the university system in Arizona could have three outstanding, world-class, institutions with each in a different niche performing a different function.

Dr. Crow believes ASU can be a great metropolitan research university, deeply embedded in the cultural and economic trends of the city; one which focuses its research towards the building of the metropolitan area.

Dr. Crow said the core element of ASU’s vision would be the building of a great university through inclusion, not exclusion. On or before 2025, the population of Maricopa County will almost double its size to 6 million people; so Phoenix has the additional issue of a huge diversification wave in its demographic presence.

Dr. Crow said ASU Main has the land available for expansion to meet a growing enrollment which would be oriented towards research. ASU West has the capacity to grow to meet an enrollment of 15,000 to 20,000 students in an institution that will be different from ASU Main. ASU East has the capacity to grow, also, and could house a “Polytechnical Institute,” an enterprise focused on technically literate education in non-technical areas. ASU Downtown will evolve into a campus-like status over the years. ASU is also spread out throughout the metropolitan area in small operations like schools and store fronts.

President Crow said ASU is now engaged in discussions with faculty, staff, students, and alumni to think through how ASU can build a multi-site, comprehensive university that will be reflected of what the Phoenix area needs for its economic, cultural, and technical success.

Dr. Crow said ASU would never want to exclude anyone due to financial limitations. The university would like to advance its financial position through tuition adjustments while holding families needing tuition assistance harmless. Once financial aid goals are met, the university would like to close the gap between the salaries the faculty receive and those of their peers; improve student services by increasing the size of the faculty, thereby improving the faculty to student ratio; improve technology in the classroom; and to achieve the ability to maintain the university facilities for teaching and scientific research. President Crow explained the tuition and financial aid model ASU developed to better understand the impact of changes in tuition on student indebtedness and university income. He showed examples of various scenarios.

President Crow said ASU would like to see consideration of a change in the definition of a qualified student. They would like to see an admission standard for the state university system that would be set based on a “to-be-determined” academic indexing. He would like to see differential admissions for different individual programs such as the engineering school. He explained how each campus might serve a particular student need.

Regent Herstam asked how to answer someone who says ASU will become more like a community college on the west and east campuses. Dr. Crow said each of those campuses already has developed a program with a mark of distinction. Students would not be applying to those campuses because they are under prepared for college; they would be applying because of the programs available on those campuses.

President Haeger described NAU’s approach as “A Tradition of Excellence and a Culture of Innovation.” He stated NAU is different from ASU and UA and should continue to celebrate its differences. NAU should be a national leader in undergraduate residential education and that should drive everything else NAU does. NAU can be an entrepreneurial distributed learning network providing educational programs throughout the state and western region. Within “Changing Directions,” NAU should move in the direction that will build on existing strengths of the institution.

Dr. Haeger said outcomes are becoming more important and universities may be judged by the federal government and others on how well-prepared students are when they leave a university. Society now demands a college education for a successful career. He described the ingredients of a nationally recognized institution for residential undergraduate education: student interaction with senior faculty, small classes, high retention and graduation rates, and enhanced educational experiences.

President Haeger said diversity in curriculum and student body, graduates who perform well on professional program entrance exams, and demonstrated student learning outcomes are critical in undergraduate education today. The difference between NAU and a research university is the difference in degrees awarded; NAU specializes in masters degrees, not doctoral degrees.

NAU’s research is fundamentally related to undergraduate education; its areas of expertise are environmental science, bio-science, education, and Native American studies. Research at NAU has grown 260% over the last six years and is one way of getting additional money into an institution to link undergraduate and graduate education. Ranked against similar institutions, NAU leads in National Science Foundation funding. NAU must continue to balance research with the undergraduate mission, but it is expected there will be continued growth in securing research dollars with a national leadership in environmental fields.

President Haeger discussed NAU’s mission in distributed learning; it offers courses in 110 different locations, 23 IITV sites, and has satellite capability reaching 1 million homes. This allows NAU to have accessibility few institutions can match and allows a range of programs to meet state and regional needs. The distributed learning programs are entrepreneurial and market-oriented, and it is hoped they will become more self-funded in the future so they can move more quickly to meet workforce and market demands. NAU has currently approximately 5600 students off the main campus.

President Haeger said distributed learning in the future will change graduate education. There are, of course, issues related to quality and cost. The universities must be able to serve the graduate students who are willing to pay extra for certain programs or the universities will be left teaching only the non-revenue programs while the private market teaches the revenue-producing programs. Dr. Haeger listed some of the NAU programs already taught on-line.

Dr. Haeger said the future brings many opportunities for cooperation with the other universities and the community colleges. He believes there is a need for a new funding model in higher education as state funding is declining. He also believes there is a need for higher tuition to help the institutions maintain their high quality. He believes an investment in higher education is not an investment in cost; it is an investment in the state’s and the student’s future. Charts were presented to show the relative ranking of NAU compared to its peers if a tuition hike was adopted.

President Haeger said he would like to see differential tuition for graduate programs, where appropriate. He would also like to see tuition or fees for electronically delivered courses. He said here needs to be a conversation with the legislature about increasing state financial aid. In the meantime, the current university financial aid structure can be changed to deal with the issues of need and unmet need as well as the issues of merit financial aid.

Under this proposed model, NAU would begin strategic reinvestment of its resources. There is a need to invest in salaries, student services, capital infrastructure, (especially on the Mountain Campus), programs for workforce demands, and for an accountability and assessment of programs. In summary, President Haeger said he believed Northern Arizona University’s role would be to provide the liberal arts and sciences residential undergraduate education that is the best in the country. Secondly, NAU will continue to offer graduate education and research at the highest level for this type of school. And finally, the entrepreneurial arm of the university will help with revenue balances and will provide accessibility of programs.

Regent Herstam asked about use of money for “chase for merit” versus the unmet need for financial aid. President Haeger said the problem was on a national scale and had the unintended consequence of lowering the money available for financial aid. However, the money set-aside by the Arizona universities is used for need-based financial aid instead of merit-based aid. Institutional resources have been used to back merit money. He suggested a higher tuition increase could include a portion of the increase to be dedicated to financial aid money, perhaps 11% or higher.

Regent Herstam asked if he could draw a conclusion that President Haeger would like to put more dollars into need-based aid with the understanding there would be fewer dollars chasing merit and was told yes. Dr. Haeger said he did not believe quality should be defined only on how a student performed in high school; he believed it should reflect how the student performs in the freshman and sophomore year in college.

Regent Herstam asked if it would be important for NAU to have the flexibility to accomplish this, or would it be more important for a Regent-level policy mandating all three universities to do the same thing. Dr. Haeger said he believes this is where differentiation among the universities would come into play; he believes the need for financial aid might be greater on a campus like NAU where most of the students are residential. He would like to see a flexible policy that would allow each institution to accomplish what would be best for that school.

Regent Molera asked about financing for distributed learning. President Haeger said NAU is currently working with a consultant so revenue streams for off-campus courses are more identifiable, so their contribution to the overall budget is better understood.

President Likins said the University of Arizona hopes to become a world class, student- centered, research university. He said the three Arizona universities work together, but are quite different. Due to budget constraints, the UA needs to become more focused to maintain excellence as it will not experience expansive growth that may characterize the other two universities. He explained how the UA is becoming a player on the national scene.

Dr. Likins said the UA has sound academic foundations, but it is necessary for it to attain academic distinction in key fields. It will remain a comprehensive university and continue its membership in the AAU. There must be an environment supportive of diverse constituencies and a superb execution of essential responsibilities as a public, land grant university in the American Southwest.

In order to focus excellence, President Likins said the UA had the following goals: learner-centered undergraduate education of nationally recognized distinction, preeminence in advanced teaching, research, and transfer of culture and technology in fields critical to Arizona’s future, and preparation of outstanding undergraduate, graduate and professional students for leadership roles in Arizona and beyond.

However, focusing excellence will require focusing investments which will require eliminating, merging, and repositioning academic programs. He intends for the process to be open and consultative, but ultimately not democratic. Enrollment must be managed to achieve focused objectives in size, diversity, and academic goals and this will require more freedom in managing the admissions process than has historically been available.

Dr. Likins said the UA has physical and financial constraints as well as sociopolitical, legal and procedural constraints. However, he believes the university is limited ultimately only by its courage and imagination.

President Likins explained the history and sources of revenue for the university. He explained how restricted dollars are limited in how they can be used and said an increase in tuition must be accompanied by an increase in financial aid.

Dr. Likins explained the best available predictor of freshman grades at the UA has been a weighted combination of high school GPA in academic courses, test score (SAT or ACT), and number of academic courses (with premium for advanced placement and community college concurrently enrolled courses). Importing undergraduates is strategic as about 20% of nonresidents remain in Arizona after graduation which helps economic and cultural development in Arizona; therefore, restricting Arizona nonresidents from the UA with a 25% enrollment cap is nonproductive for the state.

President Likins said the UA is now evaluating the principles that will guide in determining investment priorities in academic programs. Then the determination will be made as to where investments will be made and where programs will be contracted. Programs will be evaluated for possible elimination, merging, or repositioning for coherence enhancement by testing against the following criteria; educational excellence, research and creative excellence, student demand, public impact, revenue generation, and interdisciplinary need.

At the current time, it is expected the restructuring proposals will be submitted to the Provost before December 15, 2002. The restructuring proposals will be released by the Provost and President before January 15, 2003, and submitted to ABOR for decision by June 19, 2003.

Regent Molera asked if budget models would be provided to the Regents and was told the university is proceeding on two parallel paths--one is what the university might accomplish if given more discretion by the Regents and the second is what the university might accomplish if the state is persuaded to make policy changes. This is not a realistic time to expect budget help from the state; but over the years ahead, depending on the legislature’s philosophy is toward higher education, Dr. Likins hopes a set of commitments can be shaped in the legislature, such as increased financial aid.

President Jewett reintroduced Dr. David Longanecker, Executive Director of WICHE, who represents the Lumina Grant which the Board received to help the Changing Directions initiative. Dr. Longanecker helped facilitate the meeting.

Dr. Tom Wickenden presented policy issues that the Board might chose to address to create a supportive environment for the Changing Directions initiative The issues were to differentiate university missions, increase affordability, enhance tuition revenue, improve chances for student success, strengthen statewide program delivery, and partner with K-12 and community colleges.

Dr. Wickenden said there are four issues that transcend Board policy and prerogatives. They are issues in which the Board and the universities are stake holders but can ultimately only be addressed with the active involvement and support of other educational sectors, the business community, the Governor, and leaders in state government. These issues are to enhance state financial aid, to leverage and supplement state resources through a university enterprise model, to insure state support for core academic functions through existing and modified budget mechanisms, and to stabilize state support for higher education.

To provide greater access for lower income students, the universities are proposing a common approach or definition using the concept of unmet need. If the cost of attendance is greater than the sum of family investment and the available financial aid, the remainder is unmet need. Unmet need in the public universities was estimated at about $55M last spring. The proposed goal is to reduce unmet need without increasing indebtedness since Arizona students are already above the national average in indebtedness.

Two options of meeting the goal with Board policy are proposed. The first would be to approve requests to set aside additional tuition revenue for need-based aid and approve university plans for awarding that and other financial aid revenue to students with the greatest need. The second option is to change existing policy to increase the percentage of tuition revenue that is set aside for need-based aid and designate a means tested mechanism to determine the amount of these funds that will be awarded to students with the greatest need. The advantage of the first option is there is no need to change Board policy, but the disadvantage is that the amount of financial aid needed to reduce unmet need cannot be determined until tuition is established each year as this would determine the amount of unmet need. The advantage of the second option, although it requires a change in Board policy, is that as tuition is increased, there would automatically be a corresponding increase in financial aid to meet that need.

Regents Bulla and Jewett expressed their support for option two, but said they would not be able to reach the goal of providing all the unmet need unless there is further state support. President Jewett asked for an index of the set-aside to see how the numbers interrelate because as tuition rises, so will unmet need. Regent Palacios asked what was meant by “approved common means tested mechanisms.” Dr. Wickenden said the current policy provides for setting tuition revenues for need-based aid, but there is no means tested mechanisms as part of the policy. Any student who has any level of need is counted as a student who gets this financial assistance. A means tested mechanism would be one that would establish a correlation between the amount of aid that is provided and the amount of need.

Regent Palacios asked if the higher the need the higher the priority of getting the aid and was told yes. President Likins asked the Board not to formulaize the award but to follow federal methodology for the analysis of the need. He asked the Board to allow the institutions, having guaranteed the Regents they will reduce the total unmet need for any population or group of identified students, to allow each individual case to be managed on a set of criteria other than just financial need. Regent Palacios said her concern was that the proposal sounded like a formula that might not have the same effectiveness as consideration on an individual basis.

Regent Boice said he thought it would be in the Regents’ best interest to let the universities come back to the Board with a proposal for allocating additional funds.

Regent Herstam said he could support increased tuition with an increased set-aside for financial aid. Regent McKay said she supported option two. Regent Stuart said option two seems to focus on the amount of tuition revenue to be set aside within the university structure. Financial aid is bigger than that and the discussion should be broader than this little piece. President Jewett said that will be part of the discussion with those who are in a position to help with financial aid at the state level. President Haeger said financial aid is so complicated, he believed there would probably be a different plan from each university as to how they intended to meet the need. It would involve scholarship dollars, grants, and endowments, and the universities have differing amounts of those dollars available.

Regent Bulla said differentiating missions should encompass differentiating all dimensions and that goes to other issues like financial aid, tuition, and admissions. Regent McKay agreed, saying she believed the Regents should allow the presidents the flexibility to determine the need of their own institutions.

President Jewett said the request to change the proposed wording from “award” to “calculate” and stating the unmet need would slowly, over time, reduce unmet need made him nervous because a significant increase in tuition would do immediate harm in that circumstance. President Likins said he was proposing that presidents submit to the Regents, as part of the budgeting process that establishes the tuition rate, budgets that insure the reduction in unmet need to the degree the Regents have determined in advance. He said it would be unlikely the unmet need could ever be brought to zero in Arizona, but the focus should be on reducing unmet need every year at a rate established by the Regents.

Dr. Longanecker said he was hearing the Regents would be comfortable with moving to option two with the addition of tying unmet need to tuition and understanding there is a state responsibility to help with financial aid. Regent Boice said he would like to see some academic requirement for average performance or better attached to financial aid for needy students. Dr. Longanecker said receiving any type of federal aid requires maintaining satisfactory progress.

Dr. Wickenden said enhancing tuition revenue could be accomplished by the Board loosening the upper limit on undergraduate resident tuition, raising nonresident tuition to at least the full-cost of education (operating costs plus costs of capital), beginning tuition discussions earlier than in the past, and reforming the rate structure and payment options.

Regent Herstam said he would not support changing the Board policy that says tuition needs to be in the lower third as he believes it already allows flexibility. He asked for Mr. Sideman’s opinion as to whether changing that requirement would still maintain the constitutional requirement for the Board to set tuition “as nearly free as possible.” Mr. Sideman said one of the indicators the Attorney General’s Opinion from 1999 relied on was that the Board of Regents has a framework in place that sets an upper limit on resident tuition. This is a defense of the tuition setting framework that is currently in place. He said this did not mean changing the policy would be unconstitutional; however, he believes a court could use the current upper limit as a positive factor in determining whether a particular tuition level passes constitutional standards. Regent Herstam said the dollar amount would continue to rise as the other universities would also continue to raise their tuition. He would not like to see the existing policy changed as he believes there is enough flexibility in the current policy.

Regent Bulla said he agreed as there is enough room to move to a higher tuition. However, he does not want to continue to see Arizona at the bottom of the list. In regard to nonresident tuition, he would like to have a better handle on the cost of education, including such things as capital costs. He suggested the tuition-setting process be separated into parts as differential tuition might take more discussion. He agreed with offering a payment option but wanted to make sure the universities get credit for enrollment on a certain date.

Regent Palacios agreed with the flexibility offered by the current policy, but she would like to see the tuition higher than the bottom of the list. Regent Stuart said he saw no magic in the bottom 1/3 as he believed it was a Board decision from the past that could be changed. He believes Arizona should be in the bottom half or bottom 40% as he believes the lack of state support has led to a greater need for higher tuition and financial aid. He suggested the Board could ask for a new Attorney General’s opinion based on existing precedent as he does not believe there is anything written anywhere that says “nearly free as possible” means remaining in the bottom 1/3. He would like to see the Board really change directions.

Regent Herstam said some of the Regents believe the spirit of the State Constitution sends the message the universities should be funded by the legislature and the general fund. He believes they should be held to that duty and does not want to change the policy to put the burden on the students.

Regent McKay said years of trying to get more funding from the legislature has not worked and the universities are suffering. She agreed with Regent Stuart it is time to rethink the tuition process.

President Likins said the universities are currently 50th out of 50 universities. The three presidents are urging the Regents to allow the Arizona universities to move to the 1/3 point among the nation’s senior public institutions for base tuition. He asked the Regents to change the policy to say, “the tuition and fees shall not accede the amount required to maintain a position within the lower 1/3 of rates set by other states senior public universities for undergraduate resident fees.” The policy currently states by all other states for undergraduate resident fees. He hoped the Regent’s policy would apply to the base tuition and allow additional program fees for special majors such as engineering.

President Crow said in focusing on financial aid so no one is kept from attending the university for financial reasons, free becomes a relative term. He said he resists the notion of putting into place use of the term “the full cost of education” for nonresident students as this is a term that is extremely difficult to pin down. He would prefer a concept for nonresident tuition to be more related to market–cost plus market.

Regent Peterson-Kelling said she was surprised to not see anything related to graduate and professional tuition in the discussion since she believed it was a recurring theme in the position papers. President Crow said the ASU model includes an adjustment in tuition for both graduate and professional students.

President Haeger said the move to higher tuition will be difficult if percentages are used. He believed is should be put in the perspective of how much the dollar increase will be for each semester. Regent Jewett said he is worried about the students who hear about the cost of tuition and do not know about financial aid; therefore, do not believe they can attend a university due to money constraints.

Dr. Longanecker summarized the discussion by saying there is general agreement with the suggested tuition rate structure and payment options and the tuition-setting process. There was no discussion about differential tuition. There was some disagreement over whether the 1/3 should stay in policy or not; but it seems there were more in favor of keeping it than changing it, perhaps with the modification suggested by President Likins. There was discussion of how to establish the full cost of education. However, the tuition increase under consideration is substantial and it is necessary to tell that story.

Dr. Wickenden said there are three main options suggested to change admissions policies. They are to loosen the limit on out-of-state students, revise standards for guaranteed admission of first-year resident students, and consider allowing the universities some discretion in selecting from among a pool of resident students who are admissible, but do not meet the requirements for guaranteed admission.

Dr. Wickenden said another proposal would be to increase the use of additional admission standards for colleges and other academic units. Since this is allowable under existing Board policy, it has not been listed. In addition to the policy changes, it is important to note the continuation of existing standards for the admission of transfer students and the continuation of existing agreements with the community colleges for the articulation of programs. Finally, the Board may wish to continue its partnership with the community colleges and K-12 on the preparation of teachers and students.

Regent Bulla said he believed the universities should have flexibility in the percentage of nonresidents they are allowed to accept and he would be comfortable eliminating the 25% restriction. However, he would like to make sure that a qualified Arizona resident will have a place in one of the Arizona universities. President Haeger suggested the policy requiring nonresident scholarship students to maintain a 3.5 GPA and perform 20 hours of community service be revisited.

President Crow said he generally concurred, but wanted to make certain qualified Arizona residents are always advantaged by whatever process is in place for the allocation of seats and resources. This will require a self-imposed rule so the higher paying nonresidents are not accepted simply because there will be more revenue received from those students than from Arizona students.

Regent Stuart agreed with President Crow. Regent Palacios said the market may limit how many nonresidents apply, especially if nonresident tuition is raised; or it is possible demand from nonresidents will be higher in specific programs. Dr. Longanecker said four of the ten states Arizona draws students from will have the largest growth of demand for higher education of any state in the country--California, Texas, Nevada, and Colorado. He believes there will still be a substantial market at a higher price.

Regent Boice proposed “target” be substituted for “cap” and then let the market regulate the number of students.

Dr. Longanecker said there were three proposals for differentiated admissions. The first was to review and revise the minimum academic standards, perhaps using an index, the second is to revise existing conditional requirements for admission of first-year students to any of the universities so that students who fall below the standard for guaranteed admission may still be admitted at the discretion of the institutions, and the third is to modify existing policies to allow each university to adopt additional requirements for admission to Colleges or other academic units within the university.

Regent Stuart said many things, such as graduation rates or GPA’s, relate to the preparation of the student. He said he believed the three options would allow more flexibility, with option three offering the most. He is not certain even option three offers as much flexibility as the administrators need. He would like to give the presidents as much flexibility as possible as long as accountability is included.

Regent Molera said the graduation requirements for the Arizona K-12 students need to be examined in relationship to how they help students succeed in higher education, but this will be a long-term project.

Regent Bulla said he believes there is good transfer articulation between the universities and the community colleges, but he is not certain how good the articulation is among the universities themselves. He believes this may be a problem with distance learning and differentiated admissions.

Dr. Wickenden said these issues relate to the statewide delivery of academic programs. The options proposed are to develop a new policy on the delivery of programs to serve statewide needs and markets, to encourage the universities to be more collaborative in the development and delivery of programs, both campus based and on-line, and to provide more management flexibility for the distance delivery of academic programs. Policies involving the definition of academic credits, calendar, the accounting of students credit hours, and several others may need to be reviewed and revised.

Regent McKay said she would like the Regents to look at the possibility of eliminating the policies relating to statewide delivery of academic programs to provide the flexibility to the presidents to develop a collaborative protocol or guidelines among themselves for distance learning. President Haeger said each institution should have as much flexibility as possible because of the change in delivery of academic programs, especially distance learning.

President Crow suggested collaboration be the policy and other policies would be unnecessary. Regent Bulla said he would support that approach with the caveat of perhaps having pilots and setting up some methodology of tracking the results of the changes.

Regent Stuart said he was in favor of scrapping the policy of Geographical Responsi-bilities for Off-Campus Credit Courses and Programs. Regent Herstam said he agreed with scrapping the policy, but wanted language inserted to say the Regents want the three presidents to collaborate. President Jewett said he agreed with Regent Herstam’s statement.

The Regents were asked to consider the issue of redundancy of programs. Would the delivery of a program be restricted to a particular campus if the policy were to be revised? The question was asked what would happen if an issue could not be settled through collaboration and President Jewett said he believed that could be handled without having an enforcement policy. He believed the universities, in practice, would work out the problem.

Dr. Wickenden said these are potential initiatives that cannot be controlled through changes in Board policy. There are four general areas to be considered. They are to enhance state financial aid for developing a knowledge workforce, to leverage and supplement state resources for higher education, to ensure state support through current or modified budget mechanisms for core academic functions, and to stabilize state support for higher education.

Dr. Wickenden said it is clear that enhancing affordability will depend upon a mixture of institutional and state funded financial aid. The Governor’s Task Force on Higher Education laid out a reasonable model for such an aid program called Arizona College Education or ACE grants, that provided a series of incentives for students participating to perform well. While a source of funding is not now evident, states that use general fund revenues for these programs find they are among the first to be cut when the business cycle turns downward, so a dedicated revenue stream would be more dependable.

A major change in direction that is being proposed is from the agency model of major dependency on state subsidies to an enterprise model in which university resources would be utilized to leverage and supplement state resources. Some of these strategies, such as enhanced tuition revenues, need to be seen by the state as part of an enterprise strategy to meet critical needs and not to be undermined by corresponding cuts in state appropriations. Other enterprise strategies are new, such as targeting investments in areas of high return through research and innovation, serving new markets, capitalizing intellectual property, and rewarding entrepreneurial activity.

At the same time the universities change direction, Dr. Wickenden said it is important to shore up state budget mechanisms in support of core academic functions. These would include the enrollment growth funding, program development and quality enhancement for emerging and mature campuses, maintenance of buildings and capital infrastructure, and competitive salaries.

Finally, it is difficult to build for the future at the same time you are cutting budgets to get through the latest downturn in the state economy. It appears the causes of fiscal instability include the lack of diverse state funding sources and dedicated funding streams. The Board may wish to work with other state leaders to increase the stability of funding for public higher education in Arizona.

Dr. Longanecker said he did not believe the Board discussion on these issues could be as in depth as on the issues that are more clearly within the Board’s jurisdiction, but he believed it would be helpful to the staff to get a sense of whether this is the appropriate road may of issues to be working on with the state. He said the earlier financial aid discussion did include the importance of having the state as a partner. He said he had heard a willingness to work with the state, but not to be held captive to the state’s willingness or capability in that regard. He asked if there were any radical omissions to the proposed strategies.

President Likins said he believed there would be merit in the state providing financial awards in response to degrees awarded, not just students enrolled. They could be weighted for workforce development needs. President Crow said there should be a way to separate out research or creativity infrastructure investments as a separately definable category for investment in the institution. He suggested such investments be built around a set measurable returns with incentives and other mechanisms for enhanced success that might come from outstanding management of investments and the returns from the efforts of the faculty and staff to be creative. This would view the universities as an investment rather than as an expense.

Regent Molera said the Regents have to come up with a strategy to deal with the next round of budget cuts. As part of this discussion, there should be a strategy for the universities accepting a certain amount of budget reductions and receiving some of the proposals in return, such as a dedicated revenue stream.

Regent Boice said he believed the universities would need to get a dedicated revenue stream through the ballot box and he believed the Regents should seriously consider how that would be done.

President Jewett thanked Dr. Longanecker for his assistance in guiding the discussions. He stated he believed the issues the Board had moved forward today were to delete the geographic boundaries policy, to delete the 25% cap on the nonresident population, to keep the policy requiring tuition to remain within the bottom third, the understanding tuition increases will be indexed with financial aid and will attempt to narrow the unmet need, to keep a general uniform admission standard with a differential admission standard for specific programs, the commitment to maintain the community college transfer articulation program and to continue to work with K-12. He believed the underlying bedrock of all this is differential missions for the three universities. After the election and the state leaders are decided, he believes the state issues can be more specifically be addressed.

President Jewett said he believed the policy changes and the new approach of return on investments will make a strong argument to the legislature for commitments once the budget outlook is better. He expects some policy changes to be brought forward in November for first reading.

Regent Boice said he hoped the discussion today would be helpful to the presidents so they can come back to the Board with requests for policy changes. Regents and presidents expressed their appreciation to President Jewett for initiating Changing Directions.

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