Public Statement On UMass Boston Finances
According to a State House News Service story yesterday, Education Secretary Jim Peyser told the House Bonding Committee that “the state will use a new process to evaluate capital projects and allocate funds, starting with the fiscal 2019 capital budget. Under the framework, campuses will respond to a request for proposals and their plans will be reviewed by a committee that will make recommendations to the governor.”
This is a welcome development — a win for good government, UMass and taxpayers alike.
Peyser noted that “uneven and episodic” maintenance has resulted in an “enormous deferred maintenance backlog that is getting worse, not better,” even going so far as to say that “the capital investment challenge facing higher education is similar to that of the MBTA.”
Background
A report last year by Pioneer Institute explained that UMass had implemented a $3.8 billion capital expansion at its five UMass campuses from 2005 to 2014, during which the university’s deferred maintenance backlog grew from $2.7 billion to $3.3 billion, as reported by UMass in its Annual Indicator reports.
This aggressive capital expansion increased UMass’s outstanding debt and future funding needs. The UMass FY2015-2019 Capital Plan, adopted in December 2014, notes, “Over the past five years, the collective annual spending on stewardship and asset reinvestment for the UMass system has only been sufficient to sustain but not reduce the deferred maintenance backlog.”[i]
The 2016 Pioneer report also explained that an October 2014 Higher Education Finance Commission report concluded that the 10-year deferred maintenance needs of the Commonwealth’s 29 higher education campuses, state universities and community colleges — including UMass — had reached approximately $4.2 billion. In the same report, the Commission called for the governor and legislature to enact a $4.2 billion bond bill to address the shortfall.[ii]
UMass’s policy of turning to the state for emergency funding for deferred maintenance – only after having exhausted its capital funding on system expansion – has now became a major financial problem for the Commonwealth, similar to the problem created by the MBTA’s nearly identical policy. Pioneer said as much in opinion pieces around the state one year ago, a representation at which UMass President Martin Meehan bristled.
UMass Boston’s Massive Master Plan
In 2009, UMass Boston adopted an expansive Campus Master Plan and instituted a planning process to implement it.[iii] The planning process culminated in the publication of a report in 2011 entitled “Fulfilling the Promise — The Report of the University of Massachusetts Boston Strategic Planning Implementation Design Team” [iv] that established a campus objective of increasing enrollment from 14,912 in 2009 to 18,000 students by 2015, 20,000 by 2020, and 25,000 by 2025.[v] The cost of implementing this plan was detailed in the FY2015-19 UMass Capital Plan and included 41 construction projects costing $1.3 billion, including a new integrated sciences complex ($179 million), three new academic buildings ($150 million, $131 million, and $100 million), two 1,000 bed residence dorms ($118 million, $110 million), two parking garages ($45 million and $42 million), a life science center for personalized cancer therapy ($10 million), a sea wall and harbor walk ($4.5 million), and a new swimming pool facility ($10 million).
The Master Plan would more than double the square footage of the university’s buildings.
A space utilization study conducted by Rickes Associates, Inc., incorporated as an appendix to the 2009 UMass Boston Campus Master Plan, concluded that UMass Boston would need to provide at least 125 assignable square feet (ASF) of campus building space per full-time equivalent (FTE) student, including space for classrooms, laboratories, offices, study areas,[vi] special use, general use, support services, and health care, but excluding residential dormitories. To provide 125 ASF per FTE student in the year 2025 for the enrollment target of 18,000 FTE (which translates to headcount enrollment of 25,000), the campus would need to increase its ASF from 942,954 in 2009 to 2.4 million in 2025.
In other words, the Master Plan’s objective of increasing headcount enrollment on the Boston campus to 25,000 in the year 2025 meant that the total ASF of the campus would have to grow to 239 percent of what it was in 2009, more than doubling the square footage of the university’s buildings. This growth would be in addition to the cost of addressing the $160 million substructure garage problem and other deferred maintenance on the campus.
The Role of the UMass President and Trustees
The building spree undertaken to date was fully vetted and approved by the UMass Board of Trustees and President. Under UMass governance policies, the UMass capital plan requires approval of the University President and the Board of Trustees, as does any capital project with a total estimated cost greater than $2 million.[vii] This policy of expansion before maintenance has left UMass Boston in particularly dire financial condition.
To implement the first phase of its Master Plan, the UMass Trustees approved a FY2010-2014 Capital Plan for UMass Boston that included $556.2 million in approved projects including $354.8 million for new construction (64 percent), $94.8 million for deferred maintenance (17 percent) and $106.6 million for other projects including information technology, equipment, compliance, renovation, and rehabilitation (19 percent).[viii]
The building spree undertaken to date was fully vetted and approved by the UMass Board of Trustees and President.
During the Master Plan process in 2009, UMass Boston’s consultant identified a $160 million cost estimate for repairing the campus’s substructure parking garage, the same garage for which the university recently claimed it lacks funding to address. It is deeply troubling that in its FY2015-2019 Capital Plan, UMass included a total project cost of only $15 million for “Project BOSMP6.06 – Demolish Substructure, Science Center, and Pool” and did not include the realistic cost of $150 million for “Project BOSMP6.06 – Demolish Substructure, Science Center, and Pool” until it approved its FY2017-2021 Capital Plan.[ix] [x]
Now, after its seven-year capital spending program, UMass Boston has all but exhausted its capacity to borrow. According to the UMass FY2017-2021 Capital Plan, even if UMass Boston achieves its expense reduction targets, it has reached its maximum debt service-to-operating expense ratio of 8.0 percent for the year 2020.[xi]
Conclusion
With its capital finance resources now virtually exhausted, UMass Boston’s plans to expand campus enrollment to 25,000 headcount students in 2025— which would require a doubling of the campus’s ASF space from 2009 to 2025— has gone off the rails. It has left the UMass Boston campus unable to address its deferred maintenance backlog, which is estimated to total $375 million with ongoing costs of $101 million due over the next decade, according to a consultant’s projections in UMass’s FY2015-2019 Capital Plan.
These issues were created by the UMass Trustees and the President, and they have left the state to make up for their poor strategic, financial and capital planning. Secretary Peyser’s newly announced state process to evaluate capital projects and allocate funds not only makes good sense but it is also essential to putting order into UMass’ MBTA-like deferred maintenance and finance problems.
[ii] http://www.mass.edu/bhe/lib/documents/HigherEducationFinanceCommission-FinalReport10-2014.pdf
[iii] https://www.umb.edu/editor_uploads/images/university/masterplan/UMass_Boston_Master_Plan_Dec_2009.pdf
[iv] https://www.umb.edu/editor_uploads/images/university/Fulfilling%20the%20Promise%209-26-11.pdf
[v] Headcount enrollment was 14,912 in 2009, equal to 10,828 FTE enrollment; 18,000 headcount enrollment in 2015 is equivalent to approximately 13,000 FTE enrollment; 20,000 headcount enrollment in 2020 is equivalent to approximately 14,400 FTE enrollment, and 25,000 headcount enrollment in 2025 is equivalent to approximately 18,000 FTE enrollment. See 2009 UMass Boston Campus Mater Plan Appendix for explanation of Headcount to FTE ratio. https://www.umb.edu/editor_uploads/images/university/masterplan/Master_Plan_Appendices.pdf
[vi] https://www.umb.edu/editor_uploads/images/university/masterplan/Master_Plan_Appendices.pdf
[xi] report p. 48
