CALIFORNIA HIGHER EDUCATION INFRASTRUCTURE INVESTMENTS

The Policy Issues

Assembly Higher Education Committee
Assemblymember Carol Liu, Chair
March 1, 2006


The Assembly Higher Education Committee met to review the Governor's Higher Education Bond Proposal addressing the infrastructure needs of California's public college and universities.

As Secretary of Education Bersin articulated in his testimony, California’s higher education system is at a critical turning point:
• Thoughtful investments are needed now in higher education to ensure the economic future of California;
• California needs additional instructional capacity to serve an increasing number of students in our colleges and universities; and
• Some of our campuses have significant seismic safety issues that need to be addressed as soon as possible.

The Governor has proposed a multi-year bond for higher education, providing $11.7 billion over a six year period, out to 2012. The first bond, to be placed on the ballot in 2006, is for $5.4 billion to be divided equally among the University of California (UC), the California State University (CSU), and the California Community Colleges (CCC). In addition, $200 million would be allocated for telemedicine at the UC. Additional bonds in 2010 and 2012 would provide for the remaining funding.

Assembly Speaker Nuñez has authored a competing proposal for higher education infrastructure, with a two-year Capital Outlay Bond totaling $2.887 billion. This proposal allocates 50% of the bond funds to the CCC and 25% each to the UC and CSU.

As demonstrated in the following CCC, CSU, and UC Capital Outlay Estimate summaries, their needs far exceed amounts provided for in the proposed bonds.


California Community Colleges
Five-Year Capital Outlay Plan

The CCC Chancellor's Office (CCCCO) estimates the total unmet facilities needs for the CCC system at approximately $15.4 billion. The CCC Five-Year Plan includes $4.5 billion for construction of new facilities for enrollment growth and $3.9 billion for modernization of existing facilities. The remaining $7 billion of currently identified facilities needs are deferred to future years.

Funding for CCC facilities is a joint responsibility shared by the state and local CCC districts. The primary source of financing for the local share of construction costs is voter approved local bonds. From June 1998 through November 2002, when bond measures required two-thirds voter approval, only 10 CCC districts passed local bonds providing $875 million for CCC facilities. Since passage of Proposition 39, voters have approved 55 of 59 local bond measures, authorizing $12.1 billion in bonds for 51 CCC districts.

In addition, in November 1999, the Board of Governors of the CCC adopted new criteria for prioritizing capital outlay projects, emphasizing a "least cost to the state" policy. The intent of this policy is to stretch state resources to help meet enrollment growth and modernization needs by providing an incentive for districts to contribute local dollars to projects.

In the 2006-07 CCC Capital Outlay Plan, 47 of 58 of new state-funded projects will provide a local contribution. These local contributions will provide $238.7 million to support the state projects proposed for 2006-07, and an additional $50 million in 2007-08 to complete the projects. This equates to a "system" contribution of approximately 32%. In addition, according to the Chancellor's Office, $519 million in projects will be funded entirely with local funds in 2006-07.

During the next decade, approximately 70% of the anticipated enrollment growth in California Community Colleges will occur in 7 counties. The statewide allocation of capital outlay funding should be responsive to these anticipated enrollment trends.



California State University
State Funded Capital Outlay Program, 2006-07 Priority List

The Capital Outlay Program for the CSU states that:
1) More than half (56%) of all state funded buildings – and 60% of the university's 40 million square feet of state funded building space – are more than 30 years old. As a result, CSU has established a capital renewal program designed to address the significant need to renew the facilities, including a CSU request to utilize $50 million of General Obligation (GO) Bond funds to extend the useful life of many CSU buildings.
2) A second key issue is energy efficiency and sustainability. The CSU is committed to operating energy efficient buildings. CSU is looking to the bond issue to provide needed funding to achieve important efficiency improvements on the campuses.
3) Additional facilities are needed to accommodate enrollment growth statewide. During the next two years, approximately $400 million is needed for this purpose.

The 2006-07 priority list presented in the appendix has an estimated $427 million cost. This list includes 31 projects ranked in priority order. The CSU has also established a non-state funded capital outlay program list for that includes 14 projects with a total cost of $101.4 million.



University of California
Budget for State Capital Improvements, 2006-2007

The University of California (UC) request for state capital funds covers only 2006-07 and totals $340 million, to "expand and upgrade academic facilities to support enrollment growth and to maintain progress on seismic and other life-safety improvements while also addressing essential infrastructure and building renewal needs." A total of $336.7 million is requested to support 29 major capital projects and $3.3 million is requested to equip one project for which construction has already been approved and funded by the state.

According to the UC, this "financing is essential to the ability of the UC to address existing and projected facility deficiencies."
• UC enrollment has increased by approximately 29% since 1998-99, and the expansion of facilities has lagged the increase in enrollment.
• Student demand is forecast to continue to grow dramatically through 2010-11, for an enrollment increase of approximately 49%.
• Funding is needed to correct serious seismic and other life-safety hazards. Specifically, funds are requested for construction of Seismic Safety Corrections for Giannini Hall at Berkeley and for preliminary plans and working drawings for Arts Building Seismic Correction and Renewal at Santa Barbara. At UCLA, most general campus facilities damaged by the 1994 Northridge earthquake have been corrected, but the magnitude of work required to rebuild the Center for Health Services will also require years to complete. Funding is also needed to address critical infrastructure deficiencies on eight other projects.
• Funding is also needed to address the space deficiencies and deterioration of aging buildings to support evolving academic program needs. Projects are proposed for the San Diego, Davis, Santa Cruz and Santa Barbara campuses.



Key Issues Regarding Higher Education Infrastructure Bonds

As Legislative action is taken this year on higher education capital outlay funding, the Legislature should consider the issues summarized below.


Issue # 1 – Should Bond Acts for future years be adopted now?

The Administration has proposed a multi-year bond for higher education, providing $11.7 billion over a six-year period. From the perspective of the colleges and universities, this longer time frame provides more stability and predictability in their capital outlay planning.

The Legislative Analyst's Office (LAO) suggests that the Legislature not fund more than one bond right now, given the absence of a multi-year infrastructure plan. In addition, adopting a multi-year plan this year would tie the hands of future legislative sessions.

In 2002, the Legislature adopted AB 16 (Hertzberg), which included the Kindergarten-University Public Education Facilities Bond Acts for 2002 and 2004. The Legislature should follow the same approach this year as was followed in 2002, by enacting the Kindergarten-University Education Bond Acts of 2006 and 2008.


Issue #2 – How should the proposed capital funding be divided among the three public segments of higher education?

The 2002 and the 2004 higher education bond issues (Proposition 47 in 2002 and Proposition 55 in 2004) provided 40% of the revenue for the CCC and 30% each to UC and CSU. The Governor's proposal for 2006 would divide the funding on a one-third basis for each segment plus an additional $200 million for the UC's telemedicine program. Speaker Nuñez's proposal (AB 58) would divide the available funding with 50% for the CCC and 25% each for the UC and CSU.

In addressing this issue it is important to remember that the demonstrated statewide need in California higher education far exceeds the proposed funding levels. According to the California Postsecondary Education Commission (CPEC), "based on the Department of Finance's most recent projections…there is little doubt that each public higher education system will need to expand its physical capacity to meet anticipated enrollment demand by year 2014. In addition, all three segments have a significant backlog of projects to address seismic safety issues as well as the general need to modernize existing facilities.”

While all three public segments have significant need for investments in infrastructure, decisions about the allocation of capital outlays funds should reflect the distribution of enrollments among the three public segments of higher education. The CCC accounts for the largest share of higher education enrollments by far. The Legislature should follow the same distribution share used in 2002 and 2004: 40% of the revenue for the CCC and 30% each for the UC and CSU.




Issue #3 – Has the case been made for the investment of $400 million in telemedicine over the next six-years?

The Administration's bond proposal provides for $200 million in dedicated revenue for UC telemedicine in 2006, and again in 2012. Telemedicine is used effectively in several states to provide clinical care at distant locations. Using modern telecommunication and information technologies, it is possible to assess, diagnose and manage patients needing a wide variety of specialty care, ranging from psychiatry, to cardiology, to surgical consultations.

Clearly, new telemedicine technology will be essential for California medical education and the delivery of health services in the coming years. However, the UC Board of Regents has the constitutional authority to prioritize capital projects for the UC. This raises the question: Should the Legislature usurp this authority by designating its own priorities?

A recent report from the UC concludes that "California's health needs are rapidly increasing and these needs will continue to be driven by growth, aging, and increasing diversity of the population." This 2005 report argues that, "with few exceptions, there has been virtually no growth in UC's health professions programs for more than 25 years. This lack of growth has contributed to the state's shortages of physicians, nursing faculty, public health professionals and others." Rather than preempt the Regents authority to set priorities for capital projects at the UC, a more appropriate role for the Legislature is to engage in long-range planning to identify a funding source and appropriate funding level to support and expand the needed health and dental care facilities and programs throughout our state.

Accordingly, the 2006 Higher Education Bond Act should not specify and require the biennial investment of $200 million in telemedicine. The Board of Regents should be allowed to exercise its authority to make this decision. However, the Legislature, in consultation with the Board of Regents, should take a leadership role in identifying the capital and operational funding needed for the expansion of health and dental care facilities and programs throughout California.


Issue # 4 – Should the CCC system be exempted from the Field Act?

In recent years there has been substantial controversy and debate in the Legislature over the requirement that the CCC comply with the Field Act provisions governing building construction. The Field Act, which was first enacted in 1933, gives the state the authority to approve public school buildings for safety. The Act requires the Division of the State Architect (DSA) to review the construction plans for K-12 and CCC buildings and requires districts to hire onsite construction inspectors to ensure compliance with structural safety standards. The intent of the Field Act is to protect young students, encourage school safety, and enable school buildings to resist earthquakes to the extent practicable.

CCC was once viewed as an extension of K-12 education, i.e., K-14, and thus made subject to the Field Act while the UC and CSU were not. Since the median age of CCC students is 26 (similar to UC and CSU students), it has been asked why the CCC should be subject to the Field Act while the UC and CSU are exempt.

The DSA, in the Department of General Services (DGS), currently performs the seismic review of all CCC facilities projects pursuant to the Field Act. DSA also performs plan checks of all state, K-12 and CCC projects before they proceed to construction in order to ensure compliance with the structural standards of the Field Act, state-fire-life safety requirements and state ADA access compliance requirements. Due to staffing shortages at DSA, and due to the high demand for plan review of projects, a significant amount of the workload of that office is contracted out to private vendors.

The 1992 Field Act Cost Impact Study concluded that compliance with the Field Act results in only 3.5-4% in increased costs for new school construction. However, a 2004 survey of 48 CCC projects completed in the previous five years showed an average 195-day delay by DSA beyond the 42-day period considered appropriate for review. This delay results in significant increased costs. While this sampling is over two years old, the situation at DSA reportedly has not improved. The current DSA process of performing plan checks just before construction is scheduled to begin also contributes to costly delays. These delays will become even more pronounced and costly when the $13 billion of local and state bond funded CCC projects and even greater amounts of recently funded K-12 projects proceed to construction.

This information was the basis for the Legislature’s passage of AB 3010 (Laird) last session. However, this bill was vetoed by Governor Schwarzenegger at the behest of the Director of DGS with the message that the collaborative process proposed in the bill could be implemented administratively.

Pursuant to the veto message, the Board of Governor's of the CCC and the State Architect in the DGS have recently entered into a Memorandum of Understanding (MOU) to ensure that "a collaborative, timely and consistent approach to the development and review of community college capital project plans is achieved." This MOU is the product of a task force formed in January 2005, composed of DSA staff, CCC Chancellor's Office staff, CCC district staff, and professional consultants and designers. The agreement was signed by CCC Chancellor Drummond and DGS Director Joseph on January 31, 2006. It is anticipated that this action will alleviate concerns regarding application of the Field Act to CCC.

Accordingly, the Legislature should monitor the effectiveness of the new MOU before considering any further legislative action.


Issue # 5 –California's obsolete space standards

The existing higher education space standards were adopted in the 1970's in response to the state's economic challenges during that decade. In 1990, CPEC completed the first comprehensive study of California higher education space planning and use standards since 1966 and the first study of research space since 1955. CPEC, working with the colleges and universities, recommended comprehensive changes in these standards. However, these CPEC recommendations were not adopted by the Legislature. As a result, California's space standards are now the oldest in the country. Nationally, the average date of the most current space planning and utilization standards for the 20 states with these standards is 1994.

Accordingly, the Legislature should adopt up-to-date higher education space standards.


Issue # 6 – Funding incentives

In addition to specific questions about funding levels, the Committee discussed possible alternative strategies to encourage more extensive utilization and improved maintenance of existing facilities on the college and university campuses. The most favored approach was to provide incentives in the form of state matching funds to encourage the colleges and universities to:
• discontinue the current practice of deferring maintenance and expend a larger share of their annual appropriations for the ongoing maintenance of the existing buildings;
• expand the instructional program during the summer to make better use of existing campus facilities year-round;
• expand the joint-use of existing facilities by bringing CSU and UC upper-division programs to community college sites; and
• expand the use of technology in instruction through web-based and web-assisted courses that can be accessed by students in off-campus locations.

Accordingly, the Legislature should provide funding incentives to encourage college and university campuses to budget annually for ongoing facility maintenance and to expand (a) year-round operations, (b) the joint-use of educational facilities, and (c) the use of technology in the delivery of instruction.



































Appendix

Document Page #

California Community Colleges – Capital Outlay Needs in 2006 Statewide 9
2-year bond

California State University State Funded Capital Outlay Program 2006-07 10-11
Priority List

University of California 2006-07 Budget for State Capital Improvements 12-14
































CALIFORNIA COMMUNITY COLLEGES
Capital Outlay Needs In 2006 Statewide 2-Year Bond


A. Current Resources $13.0 billion
o $13 billion local Prop 39 bond funds
o $0.08 million state Prop 55 bond funds

B. 10-Year Projected System
Needs $31.1 billion
o Non-State Supportable Needs (Not eligible from state bonds):
§ Land Acquisition
§ Parking
§ Stadiums /Athletic Facilities
§ Office space – non instructional staff
§ Cafeterias
§ Bookstores
§ Health Centers
Subtotal Non-State
Supportable Needs $6.9 billion

o State Supportable Needs (Eligible from state and local bonds):
§ New Facilities $8.9 billion
§ Modernization $11.5 billion
§ New Centers $1.2 billion
§ Inflation (for years 6-10) $2.5 billion
Subtotal State Supportable
Needs $24.2 billion

C. State GO Bond $$ needed
over 10 years $18.1 billion
Assumes average local contribution of 25% towards State Supportable
Needs ($24.2 billion x 75%) minus $76 million Prop 55 bond funds

D. State GO Bond $$ needed
every 2 years $3.6 billion




California State University
State Funded Capital Outlay Program 2006/07 Priority List
Cost Estimates are at Engineering News Record California Building Construction Cost Index 4633 and Equipment Price Index 2726
Rank Order Category Campus Project Title FTE Dollars Funds to Complete Cumulative Amount
1 IA Statewide Minor Capital Outlay PWC 20,000,000 20,000,000
1 IA Statewide Minor Capital Outlay PWC 5,000,000 25,000,000
2 IA Statewide Capital Renewal PWC 45,000,000 70,000,000
2 IA Statewide Capital Renewal PWC 5,000,000 75,000,000
3 IB San Luis Obispo Eng./Architecture Reno./Replace., Ph. IIB N/A E 4,397,000 79,397,000
4 IB Humboldt Behavioral and Social Sciences N/A E 4,670,000 84,067,000
5 II East Bay Business and Technology ◊ N/A E 1,544,000 85,611,000
6 IB San Bernardino Science Buildings Reno./Add., Phase II N/A E 1,573,000 87,184,000
7 II Maritime Academy Simulation Center N/A E 3,618,000 90,802,000
8 II Monterey Bay Infrastructure Improvements N/A E 257,000 91,059,000
9 IB Stanislaus Science II (Seismic) N/A E 4,951,000 96,010,000
10 II San Bernardino College of Education N/A E 2,438,000 98,448,000
11 IB East Bay Student Services/Admin. Replacement Bldg. N/A C 39,438,000 1,772,000 137,886,000
12 IB Channel Islands Infrastructure Improvements, Ph.1a and 1b 0 PWC 11,264,000 35,926,000 149,150,000
13 IB Los Angeles Corporation Yard and Public Safety ◊ N/A PWC 3,057,000 13,025,000 152,207,000
14 IB Bakersfield Nursing Renovation -7 PWC 1,979,000 220,000 154,186,000
15 IB Long Beach Peterson Hall 3 Replacement 1,177 C 82,696,000 4,548,000 236,882,000
16 II Northridge Performing Arts Center ◊ 380 WC 56,528,000 5,644,000 293,410,000
17 IB San Luis Obispo Center for Science ◊ 66 P 1,866,000 100,321,000 295,276,000
18 II San Francisco School of the Arts Acquisition N/A A 6,930,000 302,206,000
19 II San Marcos Social and Behavioral Sciences Building ◊ 644 P 1,078,000 53,923,000 303,284,000
20 II Pomona College of Business Admin., Ph. I ◊ 2,303 P 177,000 43,258,000 303,461,000
21 II Stanislaus Science I Renovation (Seismic) 611 PWC 13,716,000 1,336,000 317,177,000
22 IB Sacramento Science II, Phase 2 -752 P 1,114,000 65,649,000 318,291,000
23 IB San José Science Building Replacement, Phase I 1,006 P 1,410,000 74,894,000 319,701,000
Rank Order Category Campus Project Title FTE Dollars Funds to Complete Cumulative Amount
24 IB San Bernardino Library Renovation, Phase I -1,130 P 1,056,000 42,436,000 320,757,000
25 II Chico Taylor II Replacement Building 101 P 665,000 36,489,000 321,422,000
26 II San Diego College of Education Building 1,091 PWC 44,769,000 1,476,000 366,191,000
27 IB Dominguez Hills Cain Library Remodel (Seismic) N/A PWC 16,712,000 1,337,000 382,903,000
28 II Fullerton Off-Campus Center Site Acquisition 0 S 1,500,000 384,403,000
29 IB Fullerton Physical Services & Infra. Improvements N/A PWC 39,747,000 771,000 424,150,000
30 IB Fresno Infrastructure, Phase I N/A P 1,430,000 64,852,000 425,580,000
31 IB Humboldt Educational Services Replacement Building 0 P 1,435,000 74,295,000 427,015,000
Totals 5,490 $427,015,000 $622,172,000 $427,015,000

Categories: I Existing Facilities/Infrastructure
A. Critical Infrastructure Deficiencies
B. Modernization/Renovation
II New Facilities/Infrastructure

A = Acquisition P = Preliminary plans W = Working drawings C = Construction E = Equipment S = Study

◊ This project is dependent upon state and nonstate funding.



















University of California
2006-07 BUDGET FOR STATE CAPITAL IMPROVEMENTS

Future Total
Cam- Funding Project
pus Project Prefunded 2006-07 Budget Requirements Cost
($000) ($000) ($000) ($000)

Berk Seismic Safety Corrections P 1,055 WC 24,616 RB ---- 25,671
Giannini Hall C [2,498] X [2,498]

Berk Birge Hall Infrastructure PWC 10,350 * ---- 10,350
Improvements


Dav Veterinary Medicine 3B P 3,100 WC 62,400 65,500
CE [24,450] G [24,450]

Dav King Hall Renovation and PWC 17,925 * ---- 17,925
Expansion PC [3,924] G [3,924]


Irv Biological Sciences Unit 3 PWC 53,712 * E 3,268 ---- 56,980
PWCE [17,372] LB E [3,268] X [20,640]

Irv Social and Behavioral PW 2,850 * C 37,582 * E 2,780 43,212
Sciences Building E [2,780] X [2,780]

Irv Primary Electrical PWC 2,571 * ---- 2,571
Improvements Step 3

Irv Humanities Building PW 1,749 * CE 24,762 * 26,511


LA Life Sciences Replacement PWC 54,242 C 38,576 * ---- 92,818
Building PWCE [45,500] LB [45,500]


Mer Social Sciences and PW 2,667 CE 39,164 41,831
Management Building


Riv Student Academic Support PW 1,650 C 18,035 E 887 20,572
Services Building

Riv Geology Building Renovations PWC 9,025 * ---- 9,025
Phase 2

Riv Culver Center for the Arts P [500] G WC 8,065 8,065
C [4,300] G [4,800]

Riv Boyce Hall and Webber Hall P 900 WC 30,100 31,000
Renovations




Future Total
Cam- Funding Project
pus Project Prefunded 2006-07 Budget Requirements Cost
($000) ($000) ($000) ($000)

SD Mayer Hall Addition and PWCE 29,100 C 13,126 ---- 42,226
Renovation

SD Structural and Materials PWC 75,057 * E 3,000 78,057
Engineering Building E [4,000] X [4,000]

SD Chilled Water and Electrical P [150] X WC 3,157 ---- 3,157
Distribution Improvements [150]


SF Medical Sciences Building PWC 18,351 C 16,379 ---- 34,730
Improvements, Phase 2

SF Electrical Distribution P 525 WC 12,587 13,112
Improvements Phase 2


SB Electrical Infrastructure WC 7,305 * C 6,328 * ---- 13,633
Renewal, Phase 2 PW [782] X C [2,367] X [3,149]

SB Arts Building Seismic PW 1,855 C 19,145 21,000
Correction and Renewal

SB Davidson Library Addition P 1,250 WCE 58,350 59,600
and Renovation

SB Phelps Hall Renovation PW 1,100 C 9,300 10,400

SB Infrastructure Renewal P 489 WC 9,511 10,000
Phase 1 P [251] X W [4,899] X [5,150]


SC McHenry Addition and PWC 38,845 WC 6,821 CE 36,258 81,924
Renovation Project

SC Digital Arts Facility PW 2,218 C 19,751 E 1,037 23,006

SC Infrastructure P 777 WC 7,833 ---- 8,610
Improvements Phase 1

SC Biomedical Sciences Facility PW 6,490 CE 67,710 74,200

SC Infrastructure P 367 WC 6,320 6,687
Improvements Phase 2


ANR Kearney REC Pressure PWC 998 * ---- 998
Irrigation System


TOTAL 339,955 383,311
* "Streamlined" State processing during implementation.
Project Phase Symbols
P = Preliminary Plans
W = Working Drawings
C = Construction
E = Equipment
Fund Source Symbols
No Symbol = State Funds
HR = Hospital Reserves
LB = Long-Term UC Financing
F = Federal Funds
G = Gift Funds
GF = State General Fund
RB = State Lease Revenue Bond Fund
U,X = University Funds


* = “Streamlined” State processing during
implementation