STATE GOVERNMENT UPDATE #1

49th Legislature

January 16, 2009

The Appropriations Chairmen have released their

"options"
for the FY 2009 and FY 2010 projected shortfalls. The consequences of
all of
their proposals for the Universities is a reduction of $243 M for FY '09
and
$388 M for FY '10 - the latter takes into account much of the '09 cuts.
For
the UA alone the numbers are $104 M for '09 and 154 M for '10.

The damage is accomplished through a mixture of

operating
budget cuts and sweeps of some of our fund balances. The details are not
yet
available so that exactly what fund balances are hit is uncertain.

To call these proposals devastating would be an

understatement. They were created within the guidelines of no borrowing
by
the State, no creative accounting, and no tax increases. They also
assume a
small federal bailout.

We should keep in mind that this is only the opening

shot.
We have seen chairmen's proposals before that were significantly
modified
for the better before the Governor signed the final product, and that
product will have to garner 16 and 31 votes. I detected very little
enthusiasm among Legislators for what was presented Thursday.
 While raising taxes is very difficult it is possible,
and
there are ways of borrowing that are constitutional and would allow us
to
keep going with much smaller cuts. Also, federal relief may provide much
more help than is contemplated.

Governor Napolitano has released her budget proposal

today
and it cuts the Universities by $50 M in FY's '09 and '10. She achieves
these much smaller reductions by securitizing the lottery and the
tobacco
settlement, delaying general fund payments to the Universities (the
"rollover" technique used with K-12) among other devices. While she will
soon leave office, Governor Napolitano is leaving behind some ideas that
would cause much less harm than other alternatives.

Your lobbying team and external support networks are in

gear
and working for a substantially better outcome than the Chairmen's. This
will be tough, but the Chairmen's options can be defeated. But in
language
reminiscent of the late Saddam Hussein, this will be the mother of all
sessions.

Greg Fahey

*************************************************************

STATE GOVERNMENT UPDATE #2

49th Legislature

January 23, 2009

BUDGET
 The majority leadership of the House and Senate has
tried to
move quickly on passing an '09 budget fix incorporating many of the
Appropriations Chairmen's plans. They have not been able to gather the
votes
to do so as members of both parties recoil from the consequences of such
a
package - and as the public outcry builds.

Another factor that has some legislators disturbed is

the
disproportionate results of the proposals on the UA. The total of the
Chairmen's options would have the following reduction consequences for
the
three universities' FY '09 and '10 base budgets:

FY '09
FY '10

UA 25.6%
38.8%

ASU 17.4%
27.5%

NAU 21.0%
32.6%

There is no good explanation for the infliction of

budget
reductions in such an imbalanced manner. We understand that we must be
cut,
but are arguing for a considerably lesser amount as well as for the
traditional approach of allowing the Regents to apportion the
reductions.

A significant occurrence this week was the Speaker of

the
House convening a meeting with the University Presidents and the
President
of the Board of Regents. Talks are to continue with him and other
members of
his caucus next week in an effort to determine a budget reduction amount
for
the Universities that can be sustained without crippling results. If
that
can be accomplished, we would work together on FY 2010.

The negative public reaction to the Appropriations

Chairmen's options has been of great help in gaining support for the
universities within the legislature. But it will be a long process, and
we
need our supporters to stay with us all the way.

BILLS

HCR 2002. Regents; Elimination; Replacement. This House

Concurrent Resolution would, if passed, go to the ballot in 2010 for a
vote
of the people; would abolish ABOR, and establish separate governing
boards
for each university.

HB 2093. Universities; Advisory Boards. Establishes five

member advisory boards for each university (one each appointed by the
Senate
President and House Speaker and three by the Governor). The boards could
issue written recommendations to ABOR, and it would have to publicly
explain
its reasons if it did not follow such recommendations.

HB 2175. Eastern Arizona College. Allows the college to

offer four year baccalaureate degrees beginning in FY 2010.

HB 2246. University Funding Equalization Plans. Requires

ABOR to obtain a financial analysis of each public university to
determine
state support on a student FTE basis. The highest such funding would be
termed "core support," and a university receiving less than such amount
would be required to submit a five year equalization plan to ABOR.

HB 2300. Centennial Scholars Program. Creates a

Centennial
Scholars Program beginning in FY 2012 to provide scholarships -
according to
criteria established in the bill - for students at Arizona's public
community colleges and universities. The program would be administered
by
the Commission on Post Secondary Education.
Greg Fahey