Kentucky Council on Postsecondary Education Capital Investment Priorities 2024-2026
The Kentucky Council on Postsecondary Education outlines capital investment priorities for 2024-2026, focusing on asset preservation and information technology projects. They address the background, fast facts about the Kentucky public postsecondary education system, drivers of facilities need, and state investments in facilities. The study highlights the historical growth in enrollment and research driving facilities requirements, alongside the significant investments required to bring campus facilities up to industry standards.
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Presentation Transcript
Capital Investment Priorities for Postsecondary Education 2024-2026 Kentucky Council on Postsecondary Education Dr. Bill Payne, Vice President for Finance & Administration Shaun McKiernan, Executive Director for Finance & Budget Dr. Doyle Friskney, Senior Fellow
Overview Background Draft 2024 - 2026 Capital Request Asset Preservation Projects Information Technology Projects 2
Background Fast Facts Kentucky Public Postsecondary Education System: 8 public universities 16 community and technical colleges Over 28 million square feet in E&G facilities More than 30,000 faculty and staff Over 196,000 students 500,000+ alumni 4
Background Drivers of Facilities Need Historically, growth in enrollment and research have driven facilities needs Metric KCTCS FTE Students University Undergraduate FTE University Graduate FTE Students 1999 24,907 71,800 13,909 2022 40,552 77,642 20,910 % Change 63% 8% 50% 1999-2021 % Change 252% Metric 1999 2010 2021 Extramural Research (UK/UofL) $124 M $366 M $437 M Source: Higher Education Research and Development Survey Over the last six years, enrollment growth has slowed, with most institutions experiencing a decrease Campus capital plans reflect the need to maintain and modernize existing space and infrastructure 5
Background Facilities Need and State Investment Vanderweil Facilities Advisors (VFA) Study completed in 2007, updated in 2013 Kentucky Public Postsecondary Institution Appropriations for Asset Preservation Bienniums 2014-16 Through 2022-24 Identified investment needed to bring campus E&G facilities up to industry standards Biennium Millions 2014-16 $ 240.0 2016-18 0.0 Over the past ten years, the state spent $959.0 M on facilities renovation and renewal 2018-20 0.0 2020-22 19.0 2022-24 700.0 This represents about 13% of the projected $7.3 billion system total asset preservation need $ 959.0 VFA Study Need: $ 7.3 Billion 6
Background Facilities Need and State Investment (Cont d) Over the past 12 years, Kentucky has invested: $1.2 billion in new and expanded E&G facilities, $959.0 million in state funded asset preservation projects Ratio of asset preservation to new construction spending was 1-to-1.2, aligning with VFA study recommendations From 1998-2000 to 2010-12, ration of asset preservation to new construction was $255.0 M to $1.3 B, or 1-to-5 7
Draft 2024-2026 Capital Request Process and Timeline Collaborative process involving CPE staff, campus presidents, chief budget officers, and Council members May 2023 Jun 2023 Jul 2023 Aug 2023 Sep 2023 Oct 1 Review budget components from previous biennium Discuss budget components and request amounts Discuss budget components and request amounts Finalize request based on input from presidents Finance Committee endorses request CPE staff submits budget to OSBD and LRC staffs Work with institutions on messaging Discuss budget timeline and key resource needs Update Council members on progress Update Council members on progress Council approves 2024-26 biennial budget request 9
Draft 2024-2026 Capital Request Capital Investment Components Fiscal 2024-25 Fiscal 2025-26 Biennial Total Funding Category New Construction $0 $0 $0 Construction Cost Increases 1 - Debt Service $162,370,000 $0 $162,370,000 TBD TBD TBD Asset Preservation - Debt Service $350,000,000 $350,000,000 $700,000,000 TBD TBD TBD Information Technology and Equipment $0 $0 $0 1 Estimated increase in construction costs on individual capital projects authorized during the 2022-2024 biennium. The requested $162.4 million represents 20% of $811.9 million authorized for new construction projects. 10
Capital Investment Components New Construction Features CPE staff is not planning to include a request for new construction projects in the Council's 2024-2026 budget recommendation However, campus officials will be free to propose funding for new projects to state policymakers and advocate for new and expanded space outside of the Council s recommendation Rationale While some institutions have legitimate need for added facilities space, CPE staff and institutions want to emphasize the importance of renovating and renewing existing facilities (asset preservation) 11
Capital Investment Components Construction Cost Increases Features Request for $162.4 million in bond funds that will allow institutions to offset cost increases on individual capital projects authorized in the 2022-2024 biennium CPE staff will recommend that the full amount be provided in fiscal 2024-25 to facilitate completion of projects already underway Rationale If authorized, these funds would allow institutions to maintain the original scope of projects approved by the General Assembly in the current biennium (i.e., no scaling back, or phasing of projects) 12
Capital Investment Components Construction Cost Increases (Cont d) Allocation Requested funds represent 20% of $811.9 million in bond funds authorized for new construction projects in the 2022-2024 biennium Kentucky Public Postsecondary Institution Allocation of Construction Cost Increases Request Fiscal Year 2024-25 Bonds Authorized in 2022-2024 Construction Cost Increases @20% Campus Individual Capital Projects UK UofL EKU EKU KSU MoSU MuSU NKU WKU KCTCS KCTCS KCTCS Construct Health Education Building Construct Multidisciplinary Engineering Building Construct New Model Laboratory School Renovate Alumni Coliseum --No individual projects funded-- Construct Science and Engineering Building Construct School of Nursing and Health Building Expand Hermann Science Center Construct New Gordon Ford College of Business Construct Student/Classroom - BCTC Newtown Expand Leitchfield Campus - Elizabethtown CTC Renovate Occupational Technical Building - ECTC $250,000,000 65,000,000 90,000,000 31,350,000 $50,000,000 $13,000,000 $18,000,000 $6,270,000 0 $0 If funded, each institution would receive an allocation equal to 20% of previously approved bond funds 98,000,000 45,500,000 79,900,000 74,400,000 52,200,000 9,000,000 16,500,000 $19,600,000 $9,100,000 $15,980,000 $14,880,000 $10,440,000 $1,800,000 $3,300,000 Total Bond Funds and Cost Increases Request: $811,850,000 $162,370,000 13
Capital Investment Components Asset Preservation Features Request for $700 million in bond funds to finance renovation and renewal projects at postsecondary institutions If authorized, requested funds would be the second installment of $700 million provided to address a $7.3 billion system total need CPE staff will recommend that the funding be provided without any required institutional match Rationale Over the past decade, the state has provided $959 million for asset preservation, or about 13% of the estimated $7.3 billion need 14
Capital Investment Components Asset Preservation (Cont d) Allocation In 2022-2024, the General Assembly appropriated $350 million each year for asset preservation Kentucky Public Postsecondary Institution Allocation of Asset Preservation Request Fiscal Years 2024-25 and 2025-26 Proposed Allocation Fiscal 2021-22 Category I and II E&G Square Feet Percent of Total Fiscal Year 2024-25 Fiscal Year 2025-26 Institution UK UofL EKU KSU MoSU MuSU NKU WKU KCTCS 6,839,710 3,412,420 2,322,080 673,771 1,429,727 1,998,068 1,964,608 2,659,023 7,080,808 24.10% 12.02% 8.18% 2.37% 5.04% 7.04% 6.92% 9.37% 24.95% $84,351,000 42,084,000 28,637,000 8,310,000 17,632,000 24,641,000 24,229,000 32,792,000 87,324,000 $84,351,000 42,084,000 28,637,000 8,310,000 17,632,000 24,641,000 24,229,000 32,792,000 87,324,000 Allocated based on each institution s share of total Category I & II square feet CPE staff will recommend that requested funds be allocated in similar fashion Total 28,380,215 100.00% $350,000,000 $350,000,000 Total Asset Preservation Request: $700,000,000 15
Capital Investment Components Information Technology Projects Features CPE staff will not include a request for information technology and equipment in the Council s 2024-2026 budget recommendation Rationale Other capital investment components are perceived to be a higher priority for state funding than information technology and equipment projects 16
Asset Preservation Projects CPE staff was asked to identify capital projects that represent the highest priorities for the system At this time, CPE capital priority is for 2024-26 is a second round of $700 M for asset preservation Allocated based on each institution s share of E&G space (same as 2022-24) Our report includes the 99 asset preservation projects that include General Fund appropriations (total scope of $2.8 billion), though institutions submitted a total $6.9 billion in asset preservation projects for 2024-26 Projects were prioritized by the institutions, though these rankings are subject to change 18
Asset Preservation Projects (Contd) Postsecondary Institution University of Kentucky University of Louisville Eastern Kentucky University Kentucky State University Morehead State University Murray State University Northern Kentucky University Western Kentucky University KCTCS 2024-26 Total Scope 1 200,000,000 289,452,000 530,250,000 25,000,000 215,997,000 164,737,000 216,000,000 750,800,000 359,200,000 1 Total scope of proposed asset preservation projects for 2024-26 included in the institutions six-year capital plan that include a request state General Fund support. Totals reflect the correction of several projects categorization in Version 3 in the system. Total $2,751,436,000 19
Information Technology Projects Review of Campus Projects CPE staff was asked to review information technology projects submitted by the institutions. An in-house evaluation committee was used Review was limited given broad project descriptions. Most projects are pools that will allow institutions to make upgrades as needed 35 projects were submitted for 2024-26, addressing network, applications, and systems. (31 university projects - $268M, 4 for UK Hospital - $350M) All projects were deemed High Value Projects focused on infrastructure, security, and system and application upgrades which evaluators considered the most important 21
Information Technology Projects Review of Campus Projects (Cont d) Some institutions requested General Fund support for projects, but most proposed the use of institutional resources 2024-2026 draft budget proposal for the institutions does not include a request for General Fund support for IT projects Reviewers asked that consideration be given to allow a portion (5%) of asset preservation funds to be used for IT infrastructure upgrades because of the importance of these projects for campus operations and student success Campus-requested IT projects can be found in your materials 22
Information Technology Projects Review Rubric Project value rankings were determined by associating business value with the assessed risk of the proposed projects (COT methodology). Lower Value Higher Value High Value = Higher Business Value Lower Risk Higher Business Value Higher Risk Business Value Lower Business Value Higher Risk Lower Business Value Lower Risk Lower Risk Higher Risk Risk Assessment 23
Information Technology Projects Update on 2022-2024 CPE Project Upgrade KyRON Infrastructure funded in 2022-24 budget This project is funding technology equipment to connect public universities and KCTCS to Kentucky Wired Project Scope: $1,000,000 The Kentucky Regional Optical Network connects the state s postsecondary education community to national and international research through Internet2 KyRON was upgraded from 10 gigabit to 40 gigabit, migrated from Windstream to KyWired Added a Second Internet2 network node in Cincinnati to provide redundancy to the Louisville Internet2 node 24
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