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BOARD OF REGENTS BRIEFING PAPER 1. AGENDA ITEM TITLE: 2021-23 Biennial Operating Budget / 2021 Deferred Maintenance Projects MEETING DATE: May 8, 2020 2. BACKGROUND & POLICY CONTEXT OF ISSUE: According to the Board of Regents Handbook, Title 4, Chapter 10, Section 26: Existing Facility and Infrastructure Needs Effective with the 2011 capital improvement budget cycle described in Subsection 5, every even-numbered year each institution must plan for existing facility and infrastructure needs by requesting funding for capital renewal, plant adaption, and deferred maintenance projects. The budgeted figure for these projects shall be two percent of the insured replacement value for owned facilities five or more years since construction or a major building renovation, excluding storage facilities and auxiliary enterprise buildings (e.g. resident halls and athletic facilities). In calculating the amount budgeted for existing facility and infrastructure, the state revenues request for Higher Education Capital Construction (HECC) and Special Higher Education Capital Construction (SHECC) are in addition to the two percent threshold, and may not be applied to the amount budgeted for this purpose. The Chancellor shall establish procedures to standardize the manner in which projects associated with improving existing facilities and infrastructure are identified and ranked. Historically, NSHE received $15 million each biennium for deferred maintenance from HECC and SHECC ($10 million from state funds and $5 million from the SHECC). While NSHE institutions have complied with Board policy, submitting “Two Percent” project lists for consideration by the Board of Regents and the State Public Works Division, none of the projects have been recommended by the State Public Works Board for inclusion in the Governor’s recommended budget. In 2013, NSHE measured the deferred maintenance backlog, which at that point in time totaled $814 million. This has created ongoing concerns for NSHE institutions as the needs continue to grow. 3. SPECIFIC ACTIONS BEING RECOMMENDED OR REQUESTED: Requesting state funding for deferred maintenance is a multi-step process: 1. Inclusion in the BOR’s biennial budget request 2. Project and cost review by the State Public Works Division 3. Recommendation by the State Public Works Division to the State Public Works Board 4. Inclusion in the State Public Works Board recommendation to the Governor 5. Inclusion in the Governor’s recommended budget The Chancellor and Presidents will request the Board provide direction on deferred maintenance projects to be submitted to the State Public Works Board for consideration. Based on the direction provided by the Board at this meeting, the Chancellor and System staff will bring forward a budget to be presented to the State Public Works Board. For additional background and information this briefing paper, based on the requests provided by each NSHE institution, prioritizes deferred maintenance projects to assist the Board in their deliberations. 4. IMPETUS (WHY NOW?): 5. CHECK THE NSHE STRATEGIC PLAN GOAL THAT IS SUPPORTED BY THIS REQUEST: Access (Increase participation in post-secondary education) Success (Increase student success) Close the Achievement Gap (Close the achievement gap among underserved student populations) Workforce (Collaboratively address the challenges of the workforce and industry education needs of Nevada) Research (Co-develop solutions to the critical issues facing 21st century Nevada and raise the overall research profile) Not Applicable to NSHE Strategic Plan Goals INDICATE HOW THE PROPOSAL SUPPORTS THE SPECIFIC STRATEGIC PLAN GOAL 6. BULLET POINTS TO SUPPORT REQUEST/RECOMMENDATION: • Approving a biennial budget request is one of the most important actions required from the Board of Regents and has a direct bearing of NSHE Institutions being able to support their strategic mission and goals, as well as the system-wide strategic goals approved by the Board. • To meet the required timelines requested by the Governor’s Office, it is critical that priorities be agreed upon and direction provided to continue the budget building process. (BOARD OF REGENTS 05/08/20) Ref. BOR-7b, Page 1 of 43 Form Revised: 1/2018 • It is important for the Board to make specific recommendations taking into account the overall priorities and needs of the System, with the ultimate goal of presenting a defendable and realistic budget submission. 7. POTENTIAL ARGUMENTS AGAINST THE REQUEST/RECOMMENDATION: None 8. ALTERNATIVE(S) TO WHAT IS BEING REQUESTED/RECOMMENDED: Defer this agenda item to a future Board meeting with the knowledge that the timeline for approval of a final budget submission will be compressed due to the requirement of having a final budget submission to the Governor’s Office by recommended deadline. If deferred, the Board potentially will have less time to discuss, provide input and approve the budget submission. 9. RECOMMENDATION FROM THE CHANCELLOR’S OFFICE: The Chancellor’s office recommends the Board approve $15m in HECC/SHECC funds and an additional $30m in state funding for deferred maintenance projects during the 2021-23 biennium. 10. COMPLIANCE WITH BOARD POLICY: Consistent With Current Board Policy: Title #_4__ Chapter #__10_ Section #_26_ Amends Current Board Policy: Title #_____ Chapter #_____ Section #_______ Amends Current Procedures & Guidelines Manual: Chapter #____ Section #_____ Other:________________________________________________________________________________________ Fiscal Impact: Yes__X___ No _______ Explain: Will be the basis for the 2021-23 NSHE Biennium Operation Budget (BOARD OF REGENTS 05/08/20) Ref. BOR-7b, Page 2 of 43 Form Revised: 1/2018 Last Revised: 2/12/2020 Deferred Maintenance Submission Contents Overview Purpose, overview, background, timeline, etc. Definitions Definitions Summary Summary of submissions from each institution Safety & ADA Summary Summary of submissions from each institution with Life Safety and ADA components Submissions Submissions by each institution Purpose The purpose to this template is to document the deferred maintenance needs of each campus as described in Title 4, Chapter 10, Section 26(6). Effective with the 2011 capital improvement budget cycle described in Subsection 5, every even-numbered year each institution must plan for existing facility and infrastructure needs by requesting funding for capital renewal, plant adaption, and deferred maintenance projects. The budgeted figure for these projects shall be two percent of the insured replacement value for owned facilities five or more years since construction or a major building renovation, excluding storage facilities and auxiliary enterprise buildings (e.g. resident halls and athletic facilities). In calculating the amount budgeted for existing facility and infrastructure, the state revenues request for Higher Education Capital Construction (HECC) and Special Higher Education Capital Construction (SHECC) are in addition to the two percent threshold, and may not be applied to the amount budgeted for this purpose. The Chancellor shall establish procedures to standardize the manner in which projects associated with improving existing facilities and infrastructure are identified and ranked. Requesting state funding for deferred maintenance is a multi-step process. 1. Inclusion in the BOR's biennial budget request 2. Project and cost review by the State Public Works Division 3. Recommendation by the State Public Works Division to the State Public Works Board 4. Inclusion in the State Public Works Board recommendation to the Governor 5. Inclusion in the Governor's recommended budget Background Historically, NSHE received $15 million each biennium for deferred maintenance: $10 million from state funds and $5 million from the SHECC fund. SHECC funds are earned through an annual $250/slot machine tax. (The remaining funds in the account are used for NSHE bond debt service and to support the Distributive School Account.) As the number of slot machines decline (due to single machines being able to offer multiple games and interest in other types of games), the slot tax revenue declines. HECC/SHECC funds are allocated to NSHE institutions based on the percentage of total maintained square footage for buildings greater than five (5) years old and is intended to provide a stable, reliable planning tool for HECC/SHECC deferred maintenance projects. HECC funds represent 2/3 of the funding allocation amount; SHECC funds represent 1/3 of the funding allocation amount. Additionally, the methodology maintains base funding for System Administration totaling $100,000 per biennium and a Contingency Pool totaling $200,000. The Contingency Pool is funded equally from the allocations to UNLV and UNR for use by the remaining institutions for emergency deferred maintenance projects that exceed an institution’s biennial HECC/SHECC allocation. While NSHE institutions have complied with Board policy, submitting “Two Percent” project lists for consideration by the Board of Regents and the State Public Works Division, none of the projects have been recommended by the State Public Works Board for inclusion in the Governor’s recommended budget. This often results in institutions shifting projects from the “Two Percent” list to the HECC/SHECC funded project list. The final list of projects is provided to the State Public Works Division by April 1 of each odd-numbered year. Report Overview and Timeline Delivery Date Provided to NSHE 6-Mar-20 Presented in May for Approval by BOR 8-May-20
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