KU loses some funding, faces a looming $50 million maintenance bill; Girod tells Regents plan is ‘irrational’

photo by: Associated Press

University of Kansas Chancellor Douglas Girod testifies during a Senate Commerce subcommittee hearing on Capitol Hill in Washington, Tuesday, Feb. 11, 2020.

It was a day of lost funding and future budget threats for the University of Kansas, so much so that KU’s chancellor at one point told the Kansas Board of Regents it was acting irrationally.

KU got unwelcome budget news on both the short-term and long-range levels at Thursday’s Kansas Board of Regents meeting. For the next school year, KU unexpectedly lost $325,000 in state funding that it once appeared almost certain to receive.

But that amount was trivial compared with the dollars KU leaders may have to find for increased building maintenance beginning in 2023 — more than $50 million a year. The Regents approved a policy that would give KU and the other five Regents universities six years to accumulate unprecedented amounts for deferred building maintenance, but that was little comfort to KU Chancellor Douglas Girod, who spoke forcefully against the proposal.

“To try to fix a 100-year problem in four to five years with no money to do it is just irrational,” Girod told the Regents, who oversee the state’s public universities and are the chancellor’s boss. “We need to do this, but we need to have a rational way to do it.”

Girod noted that the unprecedented plan to increase building maintenance came at a time when the state cut KU’s base funding by 2.5% and as the university was implementing about $50 million in budget cuts.

“To put a plan in place with no concept in place of how we are going to fund it is completely irrational,” Girod said.

A majority of Regents, however, disagreed. Regents supporting the plan said the universities have to start doing more to protect their long-term assets — buildings that house classrooms, laboratories and other facilities critical to their mission.

Regent Shellaine Kiblinger said the current practice of underfunding the maintenance and replacement costs for critical campus buildings wasn’t responsible. She said the costs of an aging building — often called depreciation — are real, regardless of whether universities are writing checks to cover those costs.

“We are letting our universities live off the depreciation of an investment made 30 or 40 years ago,” Kiblinger, a public school superintendent, said. “If you don’t think we are losing enrollment because of facility conditions, you are deluding yourself.”

Girod was far from alone in opposing the deferred maintenance policy. The five presidents of the other Regents universities — K-State, Wichita State, Emporia State, Fort Hays State and Pittsburg State — all expressed concerns about the proposal.

Like Girod, they all acknowledged that deferred maintenance of university buildings was a serious problem that needed to be addressed. But they emphasized that it was just one of many serious problems facing universities currently.

“There is no question this is a huge issue for us, but I would say equally important is paying our people appropriately,” Emporia State President Allison Garrett told the board. “I know we all are in the situation of losing people because neighboring states are paying $20,000, $30,000 more for the same positions.”

Some Regents agreed. The board approved the policy on a split vote, with several members saying they were concerned the new deferred maintenance policy would take too much money out of the universities’ operating budgets, resulting either in reduced services or requests for higher tuition.

Even Regents who supported the proposal acknowledged there were risks. But they said the universities have to show they are serious about the issue if they ever hope to get state legislators to start providing more funding for higher education.

“As I see it, we are playing a game of chicken with the state right now,” Regent Jon Rolph said. “One of us is going to have to pay for this (deferred maintenance,) and we are hoping it is going to be the state … But we are putting a stake in the ground and saying these are our facilities and we are going to address this.”

It is an open question whether the new policy will require immediate changes in previously announced budget plans for KU. The university has announced it will need to make about $26 million in budget cuts in fiscal year 2022, which begins July 1. However, the university has said it was hopeful it would not have to make any budget cuts in fiscal year 2023, which begins in July 2022. But with this new policy, that may change.

Part of it will depend on how much KU is on the hook for under the new policy. The policy requires the universities to annually set aside 2% of the replacement costs of all mission-critical buildings on campus. However, at the beginning of the policy, the board is providing the universities six years to set aside that 2% amount rather than doing it all in one year.

That’s key because setting aside the money in one year would be a tremendous lift for KU. Based on a past Regents study, it appears 2% of the replacement costs of mission-critical buildings on the Lawrence campus would total $38 million, although KU has not yet confirmed that number. It appears the total for the KU Medical Center campus would be $17.8 million.

While KU wouldn’t have to come up with that money all in one year, KU’s chief financial officer, Jeff DeWitt, told the Regents he was unsure how KU would fund some multiyear scenarios.

“I have no idea how we would do a four- or five-year plan,” DeWitt said when the Regents were considering a four-year plan before settling on a six-year plan. “We could cut programs, and I really mean cutting programs because, remember, we already are doing $50 million in budget reductions.”

State funding loss

KU’s other loss of the day is smaller but likely will sting because of how it came about. As reported, the Legislature approved $10 million in scholarship and student recruitment money to be shared among the six Regents universities and Washburn University in Topeka.

KU’s main campus was recommended by Regents staff to receive $2.4 million, while the KU Medical Center was slated to receive $100,000. That was significantly less than KU medical school leaders had expected. Based on a past formula used to divvy up state funding, the medical school was expecting closer to $1.8 million.

At Wednesday’s Board of Regents meeting, KU leaders objected to proposed allocations. The board agreed to study the issue more and consider alternative funding splits at Thursday’s meeting.

That indeed happened but did not end up with a result KU leaders wanted. The board agreed to a new funding formula that increased the KU medical school’s funding amount to $380,000. However, funding for the main KU campus fell to $1.795 million. Combined, the two KU entities are receiving $2.175 million in scholarship and student recruitment money, compared with $2.5 million in the original proposal that KU leaders objected to.

In other action, the Board of Regents:

— Agreed to provide pay raises to some university presidents and CEOs, but not all of them. Tisa Mason, president of Fort Hays State, and Garrett, the Emporia State president, received $10,000 raises from the board for the upcoming school year. The other four CEOs did not receive a raise. However, Richard Myers, president of Kansas State University, is retiring at the end of the calendar year. Wichita State President Richard Muma was hired just last month. That left Girod and Pittsburg State President Steven Scott as the longtime CEOs who did not receive a raise.

• Approved $15 million in bonds for Wichita State University to construct a new sciences building that will house the National Institute for Research and Digital Transformation. The center will conduct research on cloud computing, cybersecurity and high-speed broadband services.

• Approved an agreement between Pittsburg State and the Kansas National Education Association, a union that represents faculty at Pittsburg State. The agreement will provide a $1,000 bonus to Pitt State faculty members.

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