2009-10 Budget Analysis Series: Higher Education

Capital Outlay—University of California

The budget proposes to spend $479 million on 12 UC capital projects by using various remaining general obligation bonds and issuing $449 million in new lease–revenue bonds. The proposed funding would support additional phases of five projects previously funded by the state and seven new projects. With the exception of the equipment phases of some projects (discussed above), each of the proposed projects would be fully funded in the budget year and would not require additional appropriations to complete in subsequent years.

Telemedicine Projects Need State Oversight

We withhold recommendation on the proposed telemedicine equipment purchases at the San Francisco and Davis campuses. The state’s spending on telemedicine—approved by the voters in 2006 as part of Proposition 1D—is meant to improve communication between specialists and general practitioners in remote locations by providing the infrastructure for UC hospitals and medical schools to support doctors and patients in underserved communities. The majority of the equipment funds requested in these two proposals would support the purchase of telemedicine equipment for the final phase of UC’s efforts: the placement of telemedicine equipment in hospitals and community clinics mainly located in rural regions. At the time this analysis was prepared, however, UC was unable to provide sufficient detail on how these equipment funds would be utilized. The UC could not provide a list of the specific equipment that would be purchased, nor the locations where the equipment would be placed. The UC reports that the partnerships with local hospitals and clinics are still being developed. Until such time as these partnerships are solidified and the Legislature receives information on the type of equipment, its cost, and its ultimate location, we withhold recommendation on these two proposals.

More Information Needed on Telemedicine and PRIME Facilities Phase 2 Project at the Los Angeles Campus

The Governor proposes $23.5 million for the renovation of facilities to supports PRIME and telemedicine. Although the project’s title suggests it would fund improvements at UC Los Angeles (UCLA), it would actually support renovations at the Riverside campuses and provide equipment to facilities at Charles Drew University, as well as for UCLA renovations. The UCLA school of medicine operates collaborative programs with each of these schools. We withhold recommendation on this proposal until UC provides the Legislature with additional information regarding the following two concerns:

Renovation at UCLA Relies on Completion of Unfunded Project. The project would renovate 12,080 assigned square feet (asf) to provide additional medical education space in UCLA’s Center for Health Sciences (CHS) South Tower. The project proposal indicates that these renovations would occur after seismic renovations of the CHS South Tower were completed. However, in the current year and the budget year, UC has requested $123 million in state funding to seismically retrofit the CHS South Tower, but the project has not been funded due to its cost and the lack of general obligation bonds. According to UC, the 12,080–asf project would proceed in alternative space within CHS if the seismic upgrade of the South Tower was not complete. However, the project’s costs and programmatic changes are based upon using specific space within the CHS South Tower. Until UC provides additional information about the potential changes to the scope of this project, we recommend that funding be withheld.

Legislature’s Intentions for UC Riverside Space Should Be Made Clear. The project also proposes to renovate approximately 4,900 asf at UC Riverside to enhance and reconfigure space for the Thomas Haider Program in Biomedical Sciences. The Haider program is a partnership with UCLA’s school of medicine in which students complete their first two years of medical training at UC Riverside, and then complete their final two years of medical school at UCLA. In July 2008, however, the UC Regents approved a new medical school at the Riverside campus with a tentative opening date of fall 2012. The Haider program’s partnership with UCLA would be phased out at that time, as its operations would be absorbed into the new medical school. Consequently, the renovated space in this project would ultimately support the capital plans of the new medical school, a proposal the Legislature has not formally endorsed. While the renovated space is justified for continuing the Haider program, we believe the Legislature should not approve any expenditures on a new medical school without formal hearings. Therefore, we recommend the Legislature specify that funding for this portion of the project provides support for continuing the Haider Program, but should not be viewed as an initial investment or implicit approval of the proposed UC Riverside medical school.

Cost Increases Not Justified for Biological and Physical Sciences Building at UC San Diego

The Governor proposes $81.2 million in lease–revenue bonds to fund a new instruction and research building to support the biological and physical science departments at UC San Diego. The same project was proposed in 2008–09, but was not included in the enacted budget due to the lack of general obligation bond funding. Since submittal for consideration in 2008–09, the project’s proposed costs have increased by 6.5 percent without justification—the rate of construction cost inflation during this time period was only 2.7 percent. We recommend, therefore, that the Legislature delete $2.9 million from the proposed project so the cost increase accurately reflects inflationary increases over the previous year’s proposal.

Scope and Cost Should Be Reduced For Business Unit 2 at UC Irvine

The Governor proposes to use $39.4 million in lease–revenue bonds to fund a new building for UC Irvine’s business school. The campus would also contribute $20 million in non–state funds to support the project—a departure from the business school’s previous two buildings, which were entirely supported with non–state funds. The justification for providing the business school with expanded space is that UC Irvine decided to offer two new undergraduate majors in business that are expected to increase the business school’s undergraduate population. However, the project—with the exception of an open–access computer laboratory and additional offices for new faculty needed to teach the undergraduate students—would not provide any additional instructional space, such as classrooms and instructional labs, to support the undergraduate students. Instead, the project provides numerous meeting and conference rooms for Masters of Business Administration (MBA) students, executive MBA students, doctoral students, faculty, and administration. Such space is either provided in the proposed new building or freed up in existing buildings by moving administrative functions into the new building. The new building would also include an auditorium to support speakers, research symposia, and business conferences.

Of particular concern in this proposal is that the amount of meeting room space provided for faculty and student meetings is far in excess of what the business school requires. We recommend, therefore, that the Legislature reduce the scope of this project by 11,000 asf (a 23 percent reduction) which would allow UC Irvine to maintain the core instructional functions of the building, but remove excess meeting space. We estimate that the reduction in scope would reduce the cost of the project by $10.2 million for a total state appropriation of $29.2 million.

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