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The twin issues of enrollment growth and campus renovations dovetailed at the Feb. 11-12 meeting of the Board of Governors, setting the stage for a large budget request for capital improvements.
Back-to-back reports brought board members up-to-date on the state's plans to accommodate an expected enrollment surge over the next decade and the General Administration's ongoing report on the condition of facilities at the state's 16 campuses.
Enrollment at the 16 campuses is expected to increase by 47,600, a jump of 30.7 percent, in 10 years, said Judith Pulley, vice president of planning for the UNC System. All those students will need classrooms and residence hall space, as well as offices for the faculty and staff to support them.
The extra buildings needed to accommodate enrollment growth will come on top of the construction bill to meet the state's needs to renovate or replace outdated buildings, said Eva Klein, the consultant conducting the survey of the quality and condition of buildings on the 16 campuses.
Klein did not put a dollar figure on the renovation/replacement bill, but her presentation did include reference to "the multi-billion dollar problem." And there was little mystery among members of the Board of Governors that the bill will be huge.
"I think the General Assembly is going to choke when they see some of these numbers," said Wayne Peterson, a board member.
Klein agreed.
"I have my personal suspicions that the quality study will generate a very big number," Klein said.
Faced with huge building needs at a time when state legislators have made clear that the budget is tight, the UNC System is studying new ways of financing construction. The bulk of Klein's 90-minute presentation addressed what new ways are being considered.
To develop potential financing methods, Klein said she has met with "an informal working group" which includes chief financial officers of several universities and consultants from Lehman Brothers. That group includes the University's Jim Ramsey, vice chancellor for finance and administration, and Kate McGaughey, associate provost for finance.
The alternate financing methods the group is considering include: dedicated tax revenue; 10-year plan for annual state bond issuance; varied/combined 10-year, 20-year and 30-year bonds; long-term leases; private investment; and quasi-public financing authorities.
These financing plans seek to provide more money for capital projects by creating steady sources of money and by establishing long-term financing plans.
Using any of these methods would be a change from the long-standing way North Carolina has pursued construction projects on campuses. Klein and board members referred to the state's long-standing method as the "pay-as-you-go" approach to building construction.
That approach has legislators vote money -- usually the entire cost -- on a list of buildings during each annual legislative session. This approach is rooted both in the state's fiscal conservatism and the constantly changing political landscape that sees legislators coming and going with each election. Since the legislature's membership changes every two years, long-range construction plans have been eschewed since each new General Assembly can alter plans of previous bodies.
Klein told board members that this year's financial crunch -- huge capital needs at a time the state budget is tight -- demonstrates the need for a new financing method.
"If there is no money available this year for capital projects when so much is needed to get ready for the 21st century, then I can think of no better illustration that pay-as-you-go doesn't work," she said.
Klein did not present a proposal for the board's approval, but board members did encourage her to continue her work on financing alternatives.
"I urge you to go full speed ahead," said Brad Wilson, a board member. "We should not be shackled by the past, but learn from it."
Klein's report on buildings complemented Pulley's report on enrollment as each report depends upon the other.
"She needs my facilities data to determine how many students each campus should enroll, and I need to know how many students you want at each campus so I can tell you what to do with the buildings," Klein said. "We've got a real chicken-or-the-egg process."
The enrollment problem involves balancing the goals each campus has with the need General Administration has to find room for 47,600 more students in 2008, Pulley said.
To find a balance, Pulley said she started with the enrollment plans submitted by each campus and added several guiding principles. Those principles are:
* Use existing capacity to the fullest extent possible;
* Set a minimum enrollment of 5,000 to 6,000 students to promote economies of scale;
* Provide facilities for growth beyond current capacity for some campuses; and
* Emphasize accommodation of undergraduates.
Given those guidelines, the two-stage proposal Pulley presented would push for rapid growth at many of the system's smaller schools, such as Winston-Salem State, Elizabeth City State, Western Carolina, North Carolina Central, Pembroke State and Fayetteville State.
Over the next decade, this plan would call for many of these schools to grow by 50 percent. Fayetteville State, for example, would grow from 3,943 students to 5,900, Pulley said.
The proposal also allows large numbers of students to enroll at larger schools that want to grow, specifically East Carolina and UNCC.
The proposal Pulley presented to the board affirms the plan the University sent to General Administration last year. That proposal suggested that the University would grow by more than 5,000 students over the next decade.
The University's proposal had one condition: that the growth would occur only if the necessary resources were allocated. Pulley voiced that condition to the Board of Governors, but none of the members responded to the statement.
The scenario Pulley presented is under review by the chancellors. Once the chancellors have had a chance to comment on the plans, General Administration will make a final proposal to the Board of Governors, Pulley said.
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