Prepared Remarks
Arthur K. Smith
Chancellor, University of Houston System, and
President, University of Houston
House Appropriations Subcommittee on Education
State Capitol
February 19, 2003
Thank you very much, Regent O'Connor.
Chairman Pitts, members of the Subcommittee, I am Arthur K. Smith. I appear to you today in two capacities. I am Chancellor of the University of Houston and President of the University of Houston main campus.
Two of the three presidents of the System's other three universities are here with us today: President William Staples of UH-Clear Lake; President Max Castillo of UH-Downtown; and UH-Victoria is represented by its provost, Dr. Don Smith.
Let me begin by saying that all of us within the UH System appreciate the difficult task ahead for your committee and for the entire 78th Texas Legislature. You can count on our support and our determination to do what is necessary to achieve a balanced budget while at the same time maintain the resources needed to provide the teaching, research, and community service expected and, indeed, demanded of us.
I want to underscore what Regent O'Connor said a moment ago, that the UH System and our four universities are committed to concentrating our educational resources on the needs of the people of Texas and of our diverse communities.
When I came to the Legislature two years ago for hearings on our proposed budget for what is the current biennium, I talked about the importance of additional funding for faculty, classrooms, financial aid and scholarships, student advising, support staff, and technology if we were to achieve increases in enrollments, improve our retention and graduation rates, and degrees awarded. I also explained how State investments allowed UH System universities to improve support for students, to enhance our academic and research programs, and to make vital contributions to the community and to industry.
The necessity of additional funding for these areas has not changed during this biennium. In fact, their significance has increased along with the needs of our students and our communities. The reality, however, is that crucial funds for additional state investments may not exist right now.
Texas's budget crisis comes at a time when University of Houston System institutions continue to achieve the state's key higher education goals, thanks in large part to the strong support and increased funding from the Legislature over the past few biennia. I want to take just a moment to highlight those achievements.
The State of Texas asked us to increase access, and we did. Enrollment at UH System universities increased 14 percent since the fall semester of 1997. UH-Victoria's enrollment increased more than 45 percent, and UH-Downtown enjoyed an increase of 29 percent. The fall 2002 semester enrollment for the UH System was a record, as was the fall semester enrollment for the University of Houston.
The State of Texas asked us to increase student success, and we did. The number of degrees awarded by UHS universities rose 13 percent over the past five years. Degree awards increased 45 percent at UH-Victoria, 60 percent at UH-Clear Lake, and 10 percent at UH-Downtown. Since 1997, the freshman retention rate at the University of Houston rose from 75 percent to 79 percent.
The State of Texas asked us to increase diversity, and we did. The minority student population at the UH System grew by 30 percent over the past six years, and now represents more than half of our enrollment, which means there is no single ethnic group in the majority. The University of Houston is the most ethnically diverse research university in the United States, and UH-Downtown is the most ethnically diverse liberal arts university in the country.
The State of Texas asked us to increase research, and we did. Research awards at the University of Houston rose by 50 percent during the past five years, with vital federal research awards increasing 57 percent. Our total research awards just in the most recent fiscal year rose from $53 million to a record $72 million.
The momentum achieved during the past several years is the result of our responsible administration of the crucial investments you made on behalf of the people of Texas for their future quality of life and our state's economic development. An example of our administrative stewardship is the consolidated UH System administration, which provides the four component universities more autonomy while allowing the System Administration to play a vital role in coordinating initiatives that require a system-wide approach. We provide certain centralized services best administered at the System level, and we coordinate system-wide educational initiatives, such as the two multi-institution teaching centers in Fort Bend County that Regent O'Connor mentioned a few minutes ago.
Continued funding for the UH System Administration is critical if we are to serve effectively our various constituencies, and maintain our momentum.
University of Houston
Texas is fortunate to have a Legislature that not only understands the importance of education, but also appreciates the fact that knowledge fuels our new economy. The key to success in the Information Age is not "muscle and blood" or "skin and bones," but rather it is a strong mind developed by a high-quality college education.
Maintaining our momentum requires additional funding for faculty, classrooms, financial aid and scholarships, and support staff, among others.
Let me provide a straightforward example of what I mean.
The January 30 Legislative Budget Board's Initial General Revenue directive for the FY04-05 biennium is about $33 million below our General Revenue base for the current biennium, or about a 12.5 percent reduction.
The University's educational and research missions will be drastically affected if we have to sustain a reduction of $33 million. Administrative services would be the first to sustain cuts, of course; but, a reduction of this magnitude requires us to look at proportional cuts to instructional services.
None of this takes into account our enrollment growth, however. If we compare the LBB's Current Services document, which includes enrollment increases, then we are looking at even larger dollar amounts. The Current Services estimate for FY04-05 is almost $287 million, which is $54 million greater than the IGR.
Again, a reduction of this magnitude could not be carried out without deep cuts in both our administrative support and our instructional services.
Our enrollment growth reflects the fact that the people of Texas understand the relationship between jobs and a highly skilled and educated workforce. That is why we fully expect continued enrollment growth as Texans seek to improve their skills and their minds, and as greater numbers of Texas students graduate from high schools and enroll in our UH System universities and in the state's other public universities and community colleges.
The Legislature during the past three biennia gave the University of Houston significant increases in Operations Support, E & G Space Support, Teaching Experience, and Capital Equity & Excellence, which we invested in areas that align with our goal of becoming a Tier I research university.
The LBB's Initial General Revenue directive, however, will reverse our momentum in these areas. Faculty hiring will stop and staff reductions will begin. Next year's students will find fewer course sections and larger classes. Marked reductions in retention and graduation rates will come as early as the second year of the biennium. Research productivity will decline significantly within two to three years.
The amount of funds available to provide financial assistance to our academically deserving and financially needy students will drop. Providing such assistance has been a high priority for us. We invested more than $1.8 million of our own increased state funding over the past two biennia in base funding for undergraduate scholarships.
Nearly 60 percent of our students receive some form of financial aid, totaling about $134 million. Scholarships account for almost $15.7 million of this total.
Because of the amount of financial assistance we offer, and because we work closely with our students to find the best packages available, high school guidance counselors across the country named the University of Houston as one of the top two universities in the nation in terms of responsiveness to student financial aid needs.
Special Items
We have heard considerable discussion this past week about Special Item funding. Special Items are vitally important to institutions like the University of Houston. These items meet specific needs not addressed through the higher education funding formula, and they are critical to our research and community service missions.
We do not have a source of excellence funding comparable in the size and scope of the Permanent University Fund. In place of PUF money, we rely on Special Item funding to build research programs of national and international excellence, which allow us to attract outstanding research faculty who then effectively compete for federal research awards.
These include the Texas Center for Superconductivity at the University of Houston, or TCSUH; the Texas Learning and Computation Center, or TLC2; the Center for Commercial Development of Space; and the Houston Partnership for Space Exploration.
These programs, which align with industries critical to the economic futures of Houston and of Texas, leverage vital federal and corporate research funding, discover new knowledge, commercialize new technologies, spin off companies that create jobs, and provide valuable resources to educate thousands of students. Funding levels that meet the LBB's IGR mean reductions in the number of research faculty, support staff, and graduate students.
It is fair to say some faculty will leave and take their research and their external funding to another university -- probably in another state, while other projects and, perhaps, even programs will simply cease to exist in Texas. In both cases, the region and the state will suffer substantial long-term loss of economic development. The University of Houston, in turn, will suffer a loss in research and development momentum that will take years to build back to current levels.
Other Special Item programs enhance the academic success of our diverse student body and serve the needs of the Houston community.
The Center for Mexican-American Studies and the African-American Studies Program emphasize teaching, research, recruitment, and retention of students from those communities. Dramatic reductions in their funding translate into decreases in access and success among our minority student population.
Another program is the highly successful University Eye Institute, through which the state's only College of Optometry provides eye care to about 37,000 indigent Houstonians every year.
In short, meeting the Initial General Revenue target requires a comparable reduction in UH staffing and in the opportunities and services we provide to the people who rely on us.
Public Service Special Items include many forms of Community Service, an inseparable part of our mission at the University of Houston. This funding allows UH to take our considerable intellectual resources into the ethnically and economically diverse communities of the greater Houston metropolitan area, as well as across Texas.
Programs funded through the Partnership to Support Public Schools help teachers improve classroom management and reduce disruption, improve the English reading skills of Spanish-speaking students, and educate middle school students about the importance of a college education.
The Health Law & Policy Institute at the University of Houston Law Center provides the Texas Legislature with policy research and analysis regarding the state's heathcare issues, which sit toward the top of everyone's priority lists. It is a vital service provided by the nation's Number One health law program, according to rankings by U.S. News & World Report.
The Center for Public Policy provides analysis, forums, and polling for the City of Houston and the State of Texas.
Overall, the funding revisions for our Public Service Special Items mean cuts in staff and services that will have significant adverse effects beyond our campus, into the classrooms of our public schools and into the chambers of our local and state legislative bodies.
The Small Business Development Center, and its nearly $6.3 million in funding, moves into the Enhanced General Revenue category under the revised submission. Elimination of state funding would mean significant reductions in job creation, sales growth, and capital expansion, which would translate into a decline in state revenue of $31.6 million a year and a loss of 3,600 new jobs in the region.
The Comptroller of Public Accounts considers the SBDC revenue neutral, and has certified it as such since 1989, when the Center first received state funding. This is why SBDC funding should not be calculated as a reduction against our general revenue.
I want to take just a moment to address one other category. Our request for $25 million for Tropical Storm Allison Recovery under "Enhanced General Revenue" covers the balance of the $103 million in damage repair not recovered from insurance and FEMA reimbursements. We borrowed those funds from our Higher Education Assistance Funds and University reserves dedicated to other institutional priorities.
Excellence Funding
The economic situation in the state and nation underscores the necessity of a strong Texas economy driven by scientific and technological innovations discovered and developed by Texas research universities.
This is why another of the University of Houston's top legislative priorities for FY04 and FY05 is the continuation and expansion of Tier I Excellence Funding, and the merger of the two funds created by the 77th Legislature into a single fund that will allow for an equitable and effective distribution of resources.
The 77th Texas Legislature took a bold and visionary step toward the goal of securing our state's future economic strength and competitiveness with the adoption of HB 1839, which, for the first time in our history, established separate excellence funding for universities outside the Permanent University Fund.
All six of the state's System Chancellors agree that the Legislature must protect and maintain this vital source of excellence funding through the creation of a single fund with meaningful criteria and verifiable data.
Conclusion
Chairman Pitts and members of the Subcommittee, the University of Houston System and our component universities look forward to working with you and the entire Legislature during this challenging session. All of us face difficult decisions as we look for efficient and effective ways to reach our budgetary goals. It is my great hope and expectation we can address these budget issues in ways that preserve the educational quality of our universities and minimize the overall impact on instructional and academic support we provide to our students.
The stark reality, however, is that we face the very real possibility of major reductions in educational services to our students.
As I pointed out earlier, a $33 million reduction will drastically affect our educational and research missions.
To put that number into perspective, it is the equivalent to requiring University of Houston students to pay an additional $27 a semester credit hour in designated tuition just to make up the difference between our General Revenue base and the lower Initial General Revenue calculation. That would be an increase to our students of $648 a year, based on 24 semester credit hours.
It is more realistic, however, to add enrollment growth into calculations. Under the scenario of a $54 million reduction, it would be the equivalent of requiring UH students to pay an additional $44 a semester credit hour, or $1,056 a year, just to bring us up to our current services level.
That amount would double the current designated tuition charged at our university.
Increasing designated tuition levels to make up for losses of state general revenue fund would significantly shift the burden from Texas taxpayers to Texas students. If that would prove to be the last resort and the only way to preserve quality in our universities, then it should be done in such a way that sets aside some of the new designated tuition revenues for additional need-based financial aid so access and affordability would be preserved as much as possible.
The University of Houston System and our component universities touch the lives of every person in our communities. Our programs ripple through many of the issues of vital concern and importance to legislators and their constituents: Public education; economic development; job creation; self-improvement; quality of life; and the ability of our citizens, irrespective of cultural and ethnic backgrounds or their economic positions, to achieve their dreams and goals and to create better futures for themselves and their families.
All of us will make many painful decisions during the coming months. There is no best time for such decisions, but they become especially difficult at this time of record enrollments, when the need of Texans for accessible and high-quality education is at its greatest, and when our momentum at the University of Houston is moving us closer to our goal of being among the nation's premier research universities.
Chairman Pitts, this concludes the formal presentation of the University of Houston. Thank you for allowing us this opportunity to address the subcommittee on these vitally important issues. Now, we are happy to answer any questions you and the members of the subcommittee may have.