1. 1 Higher Education in Arkansas Prepared for the Joint Budget Committee February 26, 2003

2. 2 Public Higher Education Overview 10 Universities 22 two-year Colleges Major points of statewide service: UAMS with Colleges of Pharmacy, Nursing, Allied Health Professions, and Public Health; additionally seven health education centers Division of Agriculture: on seven university campuses, extension headquarters in Little Rock, twelve research/extension centers, and 75 extension offices in all counties. Archeological Survey with ten survey stations Criminal Justice Institute Fire Training and Environmental Control Academies Department of Higher Education _____________________________________________________________________ 115,000 credit students; 93,000 business and industry employee/enrollments 23,000 Faculty and Staff $569.2 million budget for 2002-03 (which has been cut this year by $49 million, or 8.6%) $3 Billion investment in plant and facilities

3. 3 Success of Arkansans in Higher Education is Improving Enrollment is increasing: up 4.7% per year or a total of 80% since 1985. College-going rate is improving: currently 59.4%, up 17.8% since 1985. Retention Rate is improving: currently 77.1% at four-year institutions, up 5.6% since 1992; 56.7% at two-year institutions, up 8.3% since 1992. More Degrees are awarded: up 30% since 1993. Baccalaureate Graduation Rate is improving: currently 42%, up 5% since 1992.

4. 4 Since the early 1990s when 14 vocational/technical schools became two-year colleges, the total enrollment in Arkansas higher education has increased by more than 33,000 students (41%). Public two-year colleges account for approximately 67% of the increased enrollment over the past 10 years. Total enrollment has increased by more than 80% since 1985. Total Enrollment At Public Institutions

5. 5 Degrees Awarded by Public Institutions Associate degrees awarded increased more than 66% over the past 10 years from 2,424 to 4,013. During the same period, the number of Bachelor’s degrees awarded increased 16% from 6,881 to 8,007. The total number of degrees awarded was 18,129 in 2002 compared to 13,996 in 1993 for an overall increase of 4,133 degrees, an increase of 30%. 40% of the university graduates in 2001 had attended a two-year college at some point during their academic career.

6. 6 Median Annual Income of Year-Round, Full-Time Workers 25 to 64 Years Old, By Level of Education Completed: 2002 Source: US Census Bureau, PINC-03, Annual Demographic Supplement, 2001 income

7. 7 Unemployment Rates of Persons 25 Years Old and Over, by Highest Level of Education, January 2003 Source: U.S. Department of Labor, Bureau of Labor Statistics, Office of Employment and Unemployment Statistics, 2003 10.5 6.1 5.2 3.2

8. 8 Return on Investment in Higher Education Employment increases Incomes increase for citizens Less poverty More jobs; better jobs Larger State tax base; adds up to $21 billion to the economy Reduced crime; reduced prison population Children of college graduates perform better in school Healthier citizens, reduces need for DHS services Life expectancy increases Smoking reduced More citizens with health insurance “Cannot make up for LOST investments”

9. 9 Financial Status of Higher Education Overall Financing of Institutions 57% State General Revenue 31% Tuition and Fees 12% Other Sources such as Grants & Contracts Research units rely on state general revenue, federal funds, grants, contracts and sales of services. Costs of Higher Education Faculty & Staff: 22,474 paid positions in 2001-02 including 11,113 faculty and research positions. Technology & Library: There are approximately 50,000 computers in the institutions and some are already two-three years behind in upgrades. Physical Plants: Arkansas has a $3 billion investment in higher education facilities. Currently, $99 million in critical maintenance needs exist. Institutions with high enrollment growth such as UACCB, NWACC and PTC are severely constrained in academic space. Joint Budget Presentation 2/26/03 Current Funding Levels In 2000-01 the amount from RSA, Trust Fund and Workforce 2000 was $571.5 million; forecasted for 2002-03 from the same sources is $569.2 million. Decreased funding for higher education together with enrollment growth and especially in two-year college development will result in restricted access and endangered program quality. Losses in anticipated funding from the RSA total $65.3 million for the 2001-03 biennium. These losses are particularly devastating for ASU-Heber Springs, UALR Cyber College, UAM Spatial program, HSU – Southwest Technology Learning Center and UAPB 1890 match for federal funds for Aquaculture research. For some institutions these losses meant no faculty/staff salary increases in 2002-03. The technical colleges have suffered losses in the Workforce 2000 Fund for five years totaling $3.7 million. These funds are part of the institution’s base committed to specific program costs (e.g., nursing at Ozarka College), faculty salary costs, and costs for accreditation issues.

10. 10 Fiscal Impact on Local Economy: Direct, positive impact on the local and statewide economy by higher education. Research Investment Expenditures by Universities The Universities expended $160.3 million for research activities in 2001-02; $110.4 million of that generated from external sources. A 2:1 match of external funding to state funding exists. UA-Division of Agriculture Agriculture is the leading industry in Arkansas (22% of Gross State Product). The research and development engine for agriculture is the UA Division of Agriculture touching all Arkansas citizens through 12 research/extension centers in Arkansas and county agent offices in every county. The Division of Agriculture expended $51 million in 2001-02, which included $22 million in funding from external sources. This research was in the areas of plant, seed, and animal production; nutrition and food safety; and soil, water, and wildlife conservation management. Public Service Investment Arkansas colleges and universities expended $68 million in 2001-02 providing public service to Arkansas communities and their citizens. Within this total, $29 million (43%) was funded by state general revenue. Some examples of public service activities: Business and Industry training Small business incubators Public school partnerships Community and municipal support projects Cultural events University of Arkansas Medical Sciences Area Health Education Centers Rural hospital programs Kids First (daycare for special needs children ages 1-3) Arkansas Aging Initiative Indigent and uninsured care, including trauma care and organ transplants Joint Budget Presentation 2/26/03

11. 11 Impact of Declining Budgets on Higher Education Tuition and Fee Increases Increases are projected to be as much as 23% to meet basic requirements including substantial increases in tuition at the Colleges of Medicine, Nursing, Pharmacy, Public Health and Health Related Professions. Reduced Access During a time of increased tuition costs, financial assistance in the form of state financial aid such as the Governor’s Scholars and Academic Challenge is in decline. Institutions are less able to provide institutional financial aid due to losses in endowment income. Affordability will have a direct impact on access to higher education, particularly in the economically depressed areas of the Delta. No Progress on Equity Funding Issues Outdated Equipment and Library Holdings Technology replacement cost is paramount to the institutions as they attempt to improve library holdings and purchase new technologies in order to prepare the workforce that industry needs. Loss of Ability to Attract External Funding Inability to Recruit & Retain Faculty/Staff Institutions will be forced to rely more heavily on adjunct/part-time faculty. For rural areas, attracting adjunct faculty is difficult. Also, existing faculty may be assigned more classes and students. This negatively affects faculty morale when workloads are increased with no corresponding financial incentives. For example, the ability of UAMS to recruit top-quality physicians and health care professionals to UAMS to teach the healthcare professionals of tomorrow could be compromised. The quality of UAMS today will shape the future health and health care of Arkansas. Further Deterioration of Facilities The current calculated need of $99 million in deferred critical maintenance will increase. Worst Case Scenarios: Enrollment caps at institutions, loss of accreditation for some programs and no new programs which will result in lost jobs. Program Eliminations and Service Constraints: See following page. Joint Budget Presentation 2/26/03

12. 12 Median Annual Tuition and Fees as Percentage of Median Household Income, Public Four-Year Colleges and Universities Source: SREB-State Data Exchange, 2001 Arkansas Arkansas is the highest in the SREB. Most institutions have increased tuition since this study was performed.

13. 13 Program Eliminations and Service Constraints General Statewide Impact Critical Need Areas and Programs Nursing and Allied Health, a critical need area in our state, also contains some of the most expensive programs. Teacher Education, another critical need area in Arkansas, is the foundation for improving public education through preparing and producing the teachers, counselors, administrators, librarians, school nurses, and other professionals in local school districts. As costs increase and funding decreases, programs will be closed. Workforce and Industry Training The challenge will be to maintain quality in current programs, and it will be impossible to develop new workforce training responding to Business and Industry needs without substantially increasing costs. Division of Agriculture and other Entities The Division of Agriculture will be forced to close one or more research stations and reduce the number of county offices by combining across county lines reducing services to farmers, families and communities all over Arkansas. Joint Budget Presentation 2/26/03 PTC Equity; Cyber College; UAMS Nursing & Pharmacy Expansion UAM Spatial Information Program Specific Program Impact ASUN & UACCB Equity; Delta region access; ASUJ Allied Health, Education & Business programs HSU Technology Learning Center, Economic Development Center, and Small Business Development Center NWACC & ASUMH Equity; UAF Arkansas Research & Technology Park and the Walton gift implementation ATU & UACCM Equity; Health & Technical programs SEARK Equity; UAPB Aquaculture Program

14. 14 Additional Funding Requirements to Maintain Current Service Levels Executive Recommendations Total New Money Recommended: $36,893,007 in 2003-04 and an additional $10,315,189 in 2004-05. Joint Budget Presentation 2/26/03 AHECB Recommendations Total New Money Requested: $44,528,743 in 2003-04 and an additional $18,563,221 in 2004-05. Base Recommendation: This additional funding was based on a 2002-03 budget in the RSA of $523,714,677. Continuing Projects: $10.9 million of the $44.5 million recommended is for continuation of 82 nd and 83rd session projects such as UALR-Cyber College, HSU-Southwest Technology Learning Center, ASU-Heber Springs Center, UAF- research match, ASU-MH equity adjustment, and UAPB-1890 research match. Restoration of WF2000 Funds: For the two-year colleges $2.6 million is requested for partial restoration.