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A Cost Component of Participation: The Campus Physical Infrastructure

Introduction

The Lt. Governor's Commission on Higher Education and Economic Growth has appropriately identified the state's higher education system as an essential engine for driving Michigan 's economic future. The charge to the commission points out four major challenges we must meet to reach the full utilization and potential of this system to support the crucial enhancement of Michigan 's emerging new economy. In the background report for commission members, the issues that compose these challenges are set out and the commission is called upon to develop strategies for addressing them.

Foremost among the four challenges is the charge to increase the participation of Michigan citizens in postsecondary education. The report notes that slightly more than 20 percent of the Michigan adults have attained a bachelor's or advanced degree and at the current rate of attendance, Michigan projects only a 2 percent increase in those numbers by the year 2015. To be on par with the best performing states, the projected increase would be need to be closer to 37 percent. As a result, a "participation gap" of some 222,000 students is projected (35 percent above the AY2000 level of participation), unless we act now.

This projected "participation gap" will result from a variety of factors, including the impact of differences among the segments of Michigan 's postsecondary education system: vocational/technical schools, community colleges, and Michigan 's 15 public universities many falling into the broad category of "financial" concerns. More specifically, this can be translated to costs incurred by students and their families (tuition) as well as from institutional concerns about adequately meeting the costs incurred to deliver the educational enterprise. This paper will address a vital segment of Michigan 's educational institutions, its public university system, and will raise for consideration the university built environment as a critical cost factor for participation in higher education.

The Campus Physical Infrastructure as a Factor in the Participation Gap

Many factors contribute to the cost of attending a postsecondary institution. A significant percentage derives from the need to maintain, update and add to the physical infrastructure of higher education institutions, the "place" where education occurs, along with the portion of the cost that is attributed to academic, academic support and student support programs.

Generally, the physical infrastructure on campuses encompasses buildings; the utility generation and distribution system; the campus grounds, including the natural and built landscape, pedestrian pathways, roadways, and paved parking; and the electronic network that supports the delivery of modern technologies. Regardless of the size or mission of Michigan 's 15 public universities, each campus includes some combination of these major systems.

At a higher level of resolution, selected building spaces directly related to the delivery of education include: classrooms, computer laboratories, specialized teaching laboratories, sophisticated research laboratories and laboratory support space, specialized student study and project spaces, faculty and staff offices. Depending on the mission and programs of the institution, research laboratories take on a greater importance and also act as teaching spaces not only for graduate students but undergraduate students as well. Finally, on-campus residential facilities (student housing) are also a necessary and sizable component of the campus built environment.

The people of Michigan have made a tremendous investment in the built environment of Michigan 's universities over the years. As reported in the state's higher education data reporting system, the Higher Education Information Data Inventory (HEIDI), for the most recently completed reporting year, FY03, the total building square footage across all 15 public institutions equated to approximately 101 million square feet. Further, the value or the physical plant replacement cost across the same set of schools was reported as $6.1 billion.

As an example, the scope of the physical infrastructure and value of the main campus of Michigan State University , the state's land grant institution, is noteworthy. In terms of building square footage, MSU is the second largest campus among the Michigan universities. The following description of the university's physical infrastructure is offered here as an illustration of the complexity, value, and magnitude of this essential state asset:

• Campus grounds approximate 5,200 acres or eight square miles.
• The natural and built landscape has over 7,000 types of trees, shrubs, and vines that serve as a collection for teaching, research, and demonstration. Its replacement value is estimated at over $255 million.
• There is more than 21 miles of university owned roadway, six bridges, and 25,000 parking spaces (surface lots and parking decks) with a combined replacement value of $185 million.
• Pedestrian walkways total another 3.7 million square feet valued at $20 million.
• Approximately 21.7 million gross square feet of building space exists on the campus including general fund and self-supporting facilities. General fund and farm facilities account for approximately 12.3 million square feet with a replacement cost of $1.6 billion. The self-supporting facilities, including residential facilities, account for the remaining 9.4 million square feet at a replacement cost of $1.0 billion.
• The utility generation system includes a coal/gas fired cogeneration power plant with an interconnection to the national electrical power grid. The distribution system includes approximately: 107 miles of water and steam lines, 163 miles of electrical conduit and cable, 88 miles of communication cable, 96 miles of storm and sanitary sewers, and 4 miles of chilled water distribution. The combined replacement value of the utility generation and distribution system reaches $403 million.
• The campus-cabling infrastructure for data and video transmission includes a fiber optic and coaxial cable system. These systems provide data and video services to roughly 130 buildings and over 44,000 PC's, servers, and mainframes. The replacement cost is estimated at $50 million.

Although the individual size of the infrastructure systems and replacement costs will vary by institution, this illustrates that our public university campuses are an important asset and represent a significant investment over time that the people of Michigan have made in our higher education structure. And analogous to any such investment, if it is not cared for properly, it will lose value and in time deteriorate.

Beyond the immediate value of the campus as a state asset, the cost of maintaining, adapting, updating, and adding to the physical plant of a university is equally significant, perhaps even more so in light of the challenges set out by the governor. As a campus ages, as new health and safety regulations are mandated, and as academic programs change and evolve based on the creation of new knowledge, these rising costs will represent a growing portion of the overall cost picture for participation in higher education.

The capacity of Michigan 's universities to enroll more students, per the commission's charge, will require careful study by each institution and potential revision of their master plans. Academic programs guide the direction of master plans and development of university infrastructure. It follows then that as program realignment is better understood in the context of the commission's report, the infrastructure required to support the realignment and existing capacity relative to required additional capacity of university facilities, will become more clear. But regardless of the outcome of such a process, the value of existing university infrastructure is significant and costs associated with maintaining this asset even at current levels will be considerable.

Cost Factors of the Physical Infrastructure

Beyond day-to-day maintenance, three major factors contribute to the cost of Michigan 's university infrastructure. These elements include:

• Major maintenance or system renewal: the need to perform major maintenance so that facility systems are renewed and continue to function as intended,
• Adaptation or program-driven improvements: the need to adapt campus facilities and systems so that they meet the modern demands of academic programs, and
• New facilities: the need to add additional facilities in cases where existing facilities cannot be adequately renovated or more space is needed to meet programmatic needs.

Major maintenance or system renewal (roofs, mechanical, electrical, plumbing, etc.) is intended to keep the building and its infrastructure system in good working order so that it can continue to operate for its existing purpose. Sometimes this also involves updating the system to meet current life safety, environmental, and barrier free accessibility codes.

Adaptation, also referred to as program driven improvements, means that the facility needs to be altered or updated for a change or enhancement in use; thereby extending the useful life of a building asset. In some cases this may take on the character of a complete building renovation and in others, selective or targeted improvements within facilities. For example, prior to the mid 1990's minimum classroom equipment typically included desks, chalkboards, and a lectern for the instructor. If the room included "instructional technology," it was likely an overhead projector and projection screen. In selected instances, a slide projector or specially mounted television was provided. Today, the "instructional technology" of a university classroom includes connection to the internet, video/data projectors and sound systems. Further, it may include an instructional computer cart including a computer or a place for the instructor to plug-in a laptop, and in selected rooms multiple outlets for power and data enabling students to bring laptop computers to the classroom for instruction and project work. These advances in technology replace the slide projector and televisions of the past. The same analogy applies to updating teaching and research laboratories to meet the technological and scientific advances in higher education.

New facilities are also required in instances where older buildings can no longer be renovated and/or adapted for use and must be replaced and/or where the existing amount of space is inadequate to address expanding programs. As noted earlier, in view of the commission's report, increasing the participation of Michigan 's citizen's in higher education may also mean the need for expanded facilities. Each institution will need to carefully examine its ability to add new students and project the impact this will have on their capital plans.

These elements-major maintenance, adaptation, and additional facilities-represent very real costs that must be addressed on an ongoing basis. The questions are, how significant are these costs and who pays for them?

Costs and the Challenges of Funding

National studies have suggested that approximately 1.5 to 2.5 percent of the replacement value of the physical plant should be invested each year for major maintenance. Another .5 - 1.5 percent of the plant's replacement value should be invested for adaptation or program improvement needs. In total then, 2.0 - 4.0 percent is recommended from these broad studies for major maintenance and facility adaptation.

Applying this to the physical plant value of Michigan 's universities, this suggest an annual investment of roughly $122 to $245 million. While this is a staggering amount, it is broadly representative of the breadth of physical infrastructure needs. A much more careful analysis and greater precision is needed based on individual campus assessment.

Since 1999, the State of Michigan has directed universities to develop and maintain a 5-year capital master plan with a professionally developed facilities assessment. The planning process and assessments are intended to facilitate a greater level of precision in the needs analysis. Also, from these assessments and annually updated master plans, capital requests are formulated for major renovations and new construction projects that are forwarded to the state for funding consideration. The intent of the facilities assessment is to more precisely define the scope and costs of maintaining the physical infrastructure.

However, the master plan takes into account not only the assessment of the existing campus facilities but also changes in programs, staffing and enrollment levels; adaptation needs. A recent call to the state office of Management and Budget found that due to the complexity and cost of this process, in some instances, institutions are still completing their assessments and master plans. A summary of the campus facility assessments is not available at this time.

Michigan State University has completed the process and updates its submission annually. Using MSU as an example, more precise cost calculations of the physical infrastructure needs demonstrate that over the next ten years:

• $155.6 million will be needed for major maintenance of the campus general fund/educational facilities,
• $50.0 million will be needed to meet the adaptation needs and facility enhancements driven by changes in academic programs in the educational buildings,
• $82.3 million will be needed to maintain the power, water, and utility distribution system,
• $22.3 will be needed to maintain the campus transportation system of roads and pedestrian pathways,
• Over the next five years, the institution's capital request for new construction (new facilities including additions) approximates $100 million.

A summary for all of the 15 Michigan universities developed by the State Department of Management and Budget for Facilities would yield a set of figures that are considerably higher.

It is a reasonable assumption that Michigan 's public university campuses are struggling to identify the resources to make such an investment in their physical plants. Budget restrictions at both the state and institutional levels and competing demands of other priorities have meant that institutions have not been able to meet the special maintenance and adaptation needs of their campuses. As a result, needed changes based upon programmatic issues have not always been met, a backlog of maintenance has accrued, and facility replacements or additions remain only in preliminary planning stages.

Some examples of how universities have attempted to meet the infrastructure needs their campuses include dedicating larger portions of their general funds and auxiliary operating budgets, attracting private donor support, seeking federal special program facility dollars (when available), and continuing to look to the state for assistance.

Despite such initiatives, it is painfully clear that universities cannot entirely meet the challenge of infrastructure costs from internal resources. Yet, since FY00, state special maintenance dollars have not been allocated.

Prior to this time, between FY94 and FY00, slightly more than $153 million was allocated to Michigan 's 15 public universities for infrastructure, technology, equipment and maintenance to address each institution's highest priority needs. Also, with limited exceptions in FY01 and FY02, capital outlay project funding has not been authorized.

If this pattern continues, Michigan 's institutions must look more carefully to other sources, including setting aside larger shares of operating dollars to fund these needs, potentially increasing the cost to students and impacting current and future increases in participation. Finally, as larger shares of the operating budget and other funding sources are directed towards the campus infrastructure, less support will be available to develop and enhance academic programs. This is particularly critical at a time when the commission's report calls for realigning programs to more closely meet Michigan 's economic future.

Recommendations for Consideration

The following actions are submitted for potential consideration by the commission:

• Encourage completion of comprehensive campus infrastructure assessments so that the scope, magnitude, and critical nature of the physical plant needs can be more precisely understood.
• Continue to support campus development and use of master planning
• Add Capital Outlay to the report's recommendation, "Coordinate appropriations, tuition, and financial aid policies to increase participation."

Enhance the state approach to capital outlay to:

• Provide a more consistent and recurring approach to funding
• Provide a mechanism for addressing selected system maintenance and replacement. As an example, a building's mechanical system.
• Encourage funding partnerships to better leverage a broad array of funding sources: university, state, private donor, industry and federal programs.