Higher ed budget request prioritizes affordability, facilities preservation

November 05, 2021

The Council approved the 2022-2024 biennial budget request for public colleges and universities at its meeting earlier this month at Transylvania University.

The budget proposal includes a 10% increase in operating funds for performance funding and pension relief for six institutions, and a $700 million capital investment request for the repair and maintenance of state-owned campus buildings.

The Council is also seeking a $23 million special appropriation in the current year for Kentucky State University (KSU), $60 million for Bucks for Brains, which supports research at the public universities, and $6.7 million in total over the biennium for the Competitive Workforce Initiative at the Kentucky Community and Technical College System (KCTCS).

For performance funding, the Council is requesting $67.5 million in 2022-2023 and $90 million in 2023-2024 to maintain affordability, improve student success outcomes and accelerate progress toward the state’s goal of having 60% of working-age Kentuckians with a college-level certificate or degree by 2030.

Council President Aaron Thompson said the performance funding model is working as intended.

"The performance funding model has proven to be an effective way to help close achievement gaps for underrepresented minorities, increase STEM+H degrees and accelerate progress toward the state’s 60x2030 goal,” said Thompson. “Performance funding is an investment in the solutions that are essential to improving career outcomes of our graduates and meeting employers’ needs for a highly trained and skilled workforce.”

Between 2016 and 2020, undergraduate degrees and credentials grew by 3.5% per year, exceeding the 1.7% annual growth rate needed to achieve the 60x2030 goal.

For pension relief, the operating fund request includes $2.2 million in 2022-2023 and $4.4 million in 2023-2024 to maintain Kentucky Employment Retirement System (KERS) pension subsidies at 2021-2022 levels for participating institutions. Starting in 2022-2023, pension subsidies at five Kentucky comprehensive universities and KCTCS are set to be reduced 10% each year for five years, which is equivalent to a budget cut as high as 7% at two institutions.

The pension relief funds would counteract these cuts, reduce stress on campus budgets and help the institutions remain affordable for Kentucky students. The University of Kentucky, University of Louisville and Northern Kentucky University do not participate in KERS.

Rounding out the operating request is an appropriation of $671,500 in each year of the biennium and in the current year to meet the federal matching requirement for KSU’s land-grant program. The grants from the United States Department of Agriculture require a dollar-for-dollar match by the state to ensure that KSU will continue to receive its full allotment of federal funds.

Capital investment

Based on a 2013 study, facility consultants projected that unless sizable investments in asset preservation were made in coming biennia, renovation and renewal needs of campus facilities would exceed $7 billion by 2021. Since 2008, the state has invested $281 million in postsecondary institution asset preservation projects, or about 3.8% of the total projected need.

The recommendation calls for $700 million, or $350 million in each year of the biennium, to maintain and make repairs and upgrades to state-owned education and general (E&G) facilities on campuses, which excludes athletic and auxiliary buildings.

The Council also recommends that the institutions contribute 50 cents for every state dollar spent on asset preservation, with flexibility to meet the match over three biennia. The combination of state funds and campus match will address about 15% of the projected total needed to preserve campus facilities.

Thompson said the “Whac-A-Mole” approach to maintaining deteriorating buildings costs more money over time than sustained investment.

“The urgent need for the renovation and repair of our existing facilities has built up over time to a magnitude that will require a long-term commitment from the state and campuses to adequately address,” said Thompson. “Protecting these valuable state-owned assets is the fiscally responsible thing to do and the right thing to do for Kentucky students since modern facilities and systems reduce operating costs and better serve students.”

Trust funds

For the trust funds, the Council approved a $60 million request for a fifth round of Bucks for Brains funding, an endowment program that matches the state’s investment dollar-for-dollar with private donations.

If the requested funds are authorized, it could add $120 million to university endowments.

The program encourages private giving to support research faculty, staff, and infrastructure at the University of Kentucky and the University of Louisville, and strengthens essential programs at the comprehensive universities.

The Council also is requesting $2.2 million in 2022-2023 and $4.5 million in 2023-2024 for a new Competitive Workforce Initiative at KCTCS designed to address workforce shortages in targeted industry sectors, facilitate recruitment and retention of business and industry, bolster regional and state economies, and help maintain affordability for students.

Special appropriation request

After hearing a financial assessment report from staff, CPE approved a request for a $23 million financial stabilization fund in 2021-2022 and recurring appropriations of $1 million in each year of the 2022-2024 biennium for strategic operating funds for Kentucky State University. The funds will help stabilize KSU’s budget and support targeted strategic initiatives.

The stabilization fund is necessary to address a current-year structural deficit and allow the university to pay vendors, reduce debt, and achieve financial stability. The request for strategic operating funds will support the expansion of teacher education and public administration programs at KSU, which is well aligned with the state’s student success goals.

As part of the special appropriation request, the Council also authorized funding be placed in a newly created funding program, requiring Council approval for funds to be spent.

“Kentucky State University is vitally important to the landscape of higher education in Kentucky, and to our students, our workforce and our economy. This appropriation request supports the Council’s commitment and our work that it not only survives, but thrives,” added Thompson.