Regent David Gienapp gave a brief overview of the budget process. As chairman of the budget committee for the Board of Regents, he described the process for developing the Board of Regent's budget request. He referred to page 1 (Document #2), and said the Board of Regents is in agreement with the Governor's recommended budget. He said the Board had dropped a $1,400,000 tuition waiver request from their original budget and that a $387,000 request for a medical school office was not included in the budget. He said the O & M based funding had not increased since 1989, and that the institutions had lost approximately $1.6 million in purchasing power. Some of this loss was funded by an increase in student fees and a Great Plains Foundation grant.

Regent Gienapp said salary competiveness will have to be addressed and that the costs will have to be shared between the general funds and student tuition. He also mentioned that a School and Public lands revenue shortfall was not included in the budget. Regent Gienapp said that South Dakota students are getting a quality education and that the Board of Regents strives to maintain this quality and keep students in South Dakota.

Responding to a question from Senator Drake, Robert T. Tad Perry, Executive Director, Board of Regents, told Senator Drake that there are 4,740.4 FTE's system-wide and indicated that he would provide Senator Drake with information about vacancies by university.

Representative Clark questioned why students are going out of state. Board of Regent Vice- President Jack Rentschler said the main reason students leave South Dakota to attend schools in other states is that they want to. Representative Clark indicated that South Dakota should try to be a state that other states send their kids to.

Dr. Perry referred Senator Greenfield to page 21, Document #2, for a list of maintenance and repair products. He referred Senator Kleven to page 38 of the Regent's 2002 Fact Book for information on costs per student, and the state's share of that cost.

Dr. Perry told Senator Apa that Higher Education Facilities Funds (HEFF) are placed into one fund, after which the Board of Regents decides the funding priorities.

In response to a question from Representative Adelstein, Dr. Perry explained that faculty salaries are set in the spring. During the year a faculty member may get a grant and be replaced by another teacher getting a lower salary. At the end of the year any dollars left in personal services would be transferred and used for equipment purchases. Dr. Perry said he would provide Representative Adelstein with further information on these transfers.

Responding to Representative Richter, President Jewett said a 3 percent increase in the state's salary policy translates into a 4 percent increase in tuition funds. He said to achieve salary competiveness, the salary increase should be closer to 4.5 percent to 7 percent, which would also increase tuition. He said a 1 percent tuition increase is equivalent to roughly $1 million. Representative Richter estimated that the state would have to kick in $2 million for salary competiveness to keep the system on track. President Jewett agreed.

President Jewett indicated that the Board of Regents will decide the tuition increase after the legislative session, in response to a question from Representative Adelstein. President Jewett responded to questions from Representative Richter and Representative Lange by stating that although South Dakota students pay a little higher percent of tuition compared to surrounding states, overall the costs are less than surrounding states. He said that 80 percent of students get federal loans, and that student default rates are as low as it gets, demonstrating that South Dakota students are getting education at a reasonable price.

Dr. Perry began briefly reviewing Document #2, the Board of Regent's budget request. He said pages 1 and 2 (Document #2) contain the best summary of the Board's FY 2003 budget request. He referred to page 31 for the FY03 HEFF Condition Statement and page 34 for the nine Higher Education Policy Goals.

Dr. Perry reviewed the Board's funding framework on page 35 (Document #2). He said they are in the fourth year of a five year funding framework He further discussed the incentive funds. He said every year the institutions have target goals that they try to improve upon over previous years. If the campus achieves their goal, they keep the incentive monies; if the campus exceeds their goal, they receive more incentive money; and if the campus does not meet their goal, they lose their allocated incentive money. The Board has made the decision that any leftover monies go into technology. These funds are looked upon as one-time dollars and every year the Board starts with a new $5.5 million. Senator Putnam suggested a revolving five-year program planning process for the incentive program. Senator Putnam questioned why any reversions from the incentive program couldn't be placed into salaries. Dr. Perry suggested that this could be done under instructions from the Appropriations Committee.

Representative Richter suggested the $5,666,793 State Incentive Funding had run it's course and should be redistributed. President Perry replied that the institutions use these funds on an ongoing basis and that any changes would make major disruptions in ongoing operations. He referred the committee to pages 42 and 43 of Document #2, saying these funds can translate into cumulative gains or losses of approximately $400,000. He also referred to page 47, Document #2, saying the chart on this page takes into account the FY02 Base Enrollment Adjustments and the Incentive Fund totals in the Net Impact. Dr. Perry referred Representative Adelstein to pages 42, 43, and 47,

Document #2, as a good place to see the impact of the Incentive Funds on each university. Dr. Perry said he would provide more detailed information on the Incentive Funds broken down by university for Representative Adelstein. In response to Representative Clark, Dr. Perry said the Board may have to discuss new policy goals.

Co-chair Drake recessed the committee at 10:30 a.m. and reconvened it at 10:50 a.m.

Dr. Perry resumed the Board of Regents budget presentation reviewing pages 52, 75, 83, 87 and 89 of Document #2. A handout titled Tech Fellows Home Towns (Document #3), was distributed. Dr. Perry reviewed the information on this handout. He said college freshmen are eligible to become Tech Fellows. He continued, briefly reviewing pages 101, 102, 112, 116, 117 140, 143, and 145 of Document #2.

Responding to Senator Drake, Dr. Perry advised that it now takes an average of 5 years for a student to earn a baccalaureate degree. Dr. Perry briefly explained the status of the California recruiter project for Representative Klaudt. He told Senator Apa that a student's average credit hour load is now 14 hours as there are now many working, non-traditional students or students taking more majors, and not every course is available every semester.

Dr. Perry said the distance education charges for out-of-state students and in-state students are the same and the program has a self-supporting rate.

Allen Godsell, SD Student Federation, addressed the committee. He spoke in favor of the Tech Fellow program and made available student letters favoring this program for those committee members that were interested.

Northern State University

President Hilpert referred to a handout titled Northern State University, Celebrating a Century of Leadership, while making the University's budget request. The handout consisted of twelve graphs. He said the University is down in headcount and FTE enrollment. He also said about 400 students are dual enrolled.

President Hilpert said faculty salaries have been enhanced as part of salary competiveness, but that in doing so, 14.5 faculty members have been sacrificed.

In response to Representative Adelstein, President Hilpert said that if the university had more students, it would need more faculty, and that the university has the physical capacity to handle approximately 710 additional students. He also explained the status of the Incentive Funds.

Dr. Erika Tallman, Director of the Center for Statewide E-learning, addressed the committee. She used a report titled Summary Report for the Joint Appropriations Committee: Jan. 23, 2002

(Document #5), as the basis for her presentation. Her presentation covered the following topics: Service to South Dakota K-12 Schools, E-learning in Teacher Education, E-learning Across the NSU Curriculum, and New E-learning Programs.

Dr. Erika Tallman introduced Tech Fellows Jeremy Iverson and Dawn Hegley. They described their function and activities as Tech Fellows. Dr. Tallman said there are 20 Tech Fellows at Northern State University (listed in Document #6), and that they receive approximately $11/hr. She said they are available to assist all teachers on campus and assigned as needed to faculty members.

Representative Klaudt introduced a high school government class from McIntosh.

Dr. Tallman further described the Master Teachers program for Representative Clark.

Don Erlenbusch, Vice President, Finance and Management, discussed the 1 percent retirement contribution.

Don Cozzetto, Vice President, Academic affairs, spoke about the Reinvestment Through Efficiencies funds as outlined on pages 81 and 82, Document #2.