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Good morning.  I am Renu Khator, and I serve as Chancellor of the UH System and President of the University of Houston.

Thank you for the opportunity to speak with you today and for all you do for Texas.  It takes hard work and many late nights to put together the state’s budget.  It wouldn’t be possible without you. 

I’ll begin my presentation as Chancellor, with a brief overview of the UH System, and then summarize our legislative priorities for the upcoming session.

UH System: A Decade of Transformation—

Last year marked my tenth as Chancellor – how time flies!  As I reflect on the past decade and the UH System, one word comes to mind: transformation.  Our universities have made so much progress – thanks to support from the Legislature, but also our students, faculty, staff, and alumni.  Rarely a day goes by when someone does not express their astonishment at the magnitude of these transformations.  

The four UH System universities – the University of Houston, UH-Clear Lake, UH-Downtown, and UH-Victoria – educate over 74,000 students each year, 17,500 more than when I arrived in 2008.  

Our four universities are true engines of opportunity.  The Brookings Institute ranked the UH System fifth in the nation for social mobility and socially beneficial research.  We are taking students, many from low-income and minority families, and providing them opportunities to move up the economic ladder. UH System’s progress shows that access and excellence can go hand-in-hand.

UH System Major Accomplishments—

Let me highlight a few of each university’s major transformations in the past decade:

• The University of Houston became a Tier One university, greatly increased its graduation rates and research output, and welcomed more academically competitive students and distinguished faculty.
• UH-Clear Lake and UH-Victoria now serve freshmen and sophomores, a major shift in the missions and cultures of both universities.
• UH-Downtown implemented stronger undergraduate admissions standards while increasing degree production and research output.
• The UH System also includes three off-campus teaching centers – in Sugar Land, Pearland, and Northwest Houston – and recently broke ground on a fourth in site Katy. We are taking educational opportunities to our students where they live and work, in the high-growth areas of Greater Houston.  We are grateful for the Legislature’s investment in Tuition Revenue Bonds, which made projects like these a reality.
• The UH System, along with Texas Southern University and regional community colleges, launched Houston GPS, creating academic pathways and seamless credit transfers that will lead to more degrees and fewer excess semester credit hours.

I’m especially proud how our universities came together a year ago, when Hurricane Harvey devastated the Gulf Coast region.  Instead of sitting back helplessly, the UH community took action.  There were so many “Hurricane Heroes” – the staff and first-responders who cared for thousands of students on campus; faculty who offered spare bedrooms; and students who organized on social media.  

In an effort to provide immediate relief to students in need, we asked the UH community to donate funds to support our students. As of August 1, almost $1.2 million has been distributed to 582 UH students in crisis, as a result of 761 generous alumni and friends who provided this critical support.  I am happy to report that among those students reporting being affected by Harvey, we have a 95% retention rate, and already graduated 44 of those students last May.

In addition, UH men’s basketball coach Kelvin Sampson challenged basketball programs from across the country to send t-shirts and shoes to deliver to those in need.  The response was overwhelming.  Over 1,500 NCAA member universities, junior colleges, high schools, middle schools and others made donations that were then distributed throughout our region.  

UH even welcomed both a local theater and a TV station to campus so they could continue to operate. While our community did tremendous work to help with the cleanup, our own universities were not spared, with 60 percent of UH System buildings impacted, which I will detail in our legislative request.  

UH System Legislative Priorities—

None of the UH System’s accomplishments would have been possible without strong state support, and as we look to the upcoming session we bring several priorities to your attention:

First is stable base formula funding:

• Reliable formula funding is the foundation of the state’s public universities.
• While the formula funding rate for the current biennium was 1% higher than the last biennium, it was about 25% less than the 2010-11 rate, considering inflation. The UH System encourages the Legislature to return to this rate.

Second are Hazlewood exemption costs:

• Last year, our Hazlewood costs reached over $14 million – about $10 million more than when the legacy program was established. Simply put, we can’t stay on this path without more financial support or program changes.  

Our third priority is restoring non-formula support item funding:

• The UH System lost over $20 million dollars this biennium. These are not just dollars lost – it’s fewer faculty and researchers, and fewer businesses and families served by programs like the Small Business Development Center and UH-Clear Lake’s autism center.

Our fourth priority is increased funding for TEXAS Grants.

Many of our students work while attending college and rely heavily on financial aid to fund their education.

Our fifth priority is relief from the effects of Hurricane Harvey.

Harvey impacted nearly 100 buildings system-wide.  UH-Victoria was directly impacted when Harvey made landfall.  We transported UH-V students who lived in dorms in Victoria and housed them at the University of Houston for almost a week.  UH-Downtown’s One Main Building was flooded with almost three feet of water.  While most of our costs are expected to be covered by insurance and FEMA funds, there is a significant portion of the costs that we cannot recover through other means.  The UH System requests relief for outstanding costs.

Finally, part of the system’s transformation has been physical.  To keep up with enrollment, our universities need academic buildings. Each university has requested a Tuition Revenue Bond (TRB), and the UH System requested a TRB for the Katy teaching center, which the University of Houston and UH-Victoria share.   

This concludes my presentation of the UH System.  If you have any questions, I’ll be happy to answer them now.  Otherwise, I’ll move on to my discussion of the University of Houston. 

University of Houston Major Accomplishments—

Over the past decade, the University of Houston has passed many milestones. Since achieving Tier One status, we are now aiming for progress in line with AAU, the Association of American Universities:

• This fall we enrolled over 46,000 students – a new record;
• Last year we awarded over 10,000 degrees – another record;
• UH rose 21 spots in the latest U.S. News rankings (192 to 171), and I expect that we will climb even higher in the coming years;
• Freshman median SAT score was 1218 – more than 150 points higher than when I arrived;
• Phi Beta Kappa established a chapter;
• The UH Honors College was named one of the 10 best in the nation;
• Research expenditures reached a record $169 million. And through our “50 in 5” initiative, UH aims to increase its research output by 50 percent in 5 years; and
• Our 6-year graduation rate reached 59% – a 16 point gain 

That’s a big improvement, but we’re not stopping there.  In 2014, we started UHin4, a program to improve graduation rates. Freshmen are guaranteed a flat tuition rate for four years as long as they earn 30 credit hours per year.

• When we launched UHin4, about half of eligible freshmen signed up. Since thgen, we’ve seen increasing participation in the program every year.  This fall, we expect participation to be around 70 % of the new freshman class.
• UHin4 students are outperforming students who don’t participate. For example, 83% of UHin4 freshmen completed 30 SCH in their first year, compared to 67% of non-UHin4 freshmen.  This kind of performance will lead to more degrees and higher graduation rates. 
• Last year, the program won the Texas Higher Education Coordinating Board’s Star Award for helping meet the goals of 60X30TX.

University of Houston Legislative Priorities—

The legislative priorities for the UH System that I discussed earlier are essential to the University of Houston, as well.  In addition, we have five other priorities specific to UH:

First is the College of Medicine.  I’ve very excited about the opportunity to establish a College of Medicine to confront the state’s lack of primary care physicians.  Training the next generation of physician leaders meets a clear and growing demand in Texas.  We have an obligation to serve our city by responding to the economic, social and cultural issues affecting the quality of life in Houston:

• Texas ranks 47^th in primary care physicians per resident. To keep up with population growth, Texas will need 6,000 more PCPs by 2030.
• Since the last medical school was built in Houston in 1972, the city’s population increased by 4 million. It’s also more diverse. The COM’s graduates will reflect the communities they serve, leading to better care.

We’ve already laid the groundwork to make this a success:

• The COM builds upon UH strengths in the health sciences: optometry, nursing, pharmacy, and research;
• With our hospital partner, HCA Healthcare, the COM will add 142 first-year residencies with a total of almost 400 new residencies by 2024, ensuring that an investment in the UH COM will lead to graduates staying in Texas and practicing in Texas;
• We have senior leadership and a facility in place for start-up administration and instruction; and
• And thanks to a generous donation, the first cohort of thirty students will attend tuition-free for all four years of their medical education.

We’re asking for $20 million in exceptional item funding for the next biennium, and much smaller amounts in out years – for a total of $40 million over 10 years.  This is a small investment with a tremendous return.  HCA’s investment in residencies is approximately $300 million, the university is investing $40 million of its IP revenue, $80 million has been put aside to build a new medical school building, and we expect to raise $40 million in philanthropy, a significant amount of it already secured.  The state’s investment is a 10 to 1 return on the cost we are asking the Legislature to provide over the next 10 years. 

Second, equity funding for health programs:

• Currently, there is a large gap between programs like pharmacy and nursing that are funded through the health sciences formula, versus those that are funded through the formula for general academic institutions. UH is grateful for pharmacy non-formula support and encourages additional support for its nursing program.

Third, state funding for research programs for Tier One universities, including the:

• Core Research Support Fund,
• Texas Research Incentive Program (TRIP),
• National Research University Fund (NRUF), and
• Governor’s University Research Initiative (GURI).

State funding for these programs is the primary vehicle UH and other universities not supported by the Permanent University Fund utilize to pursue their Tier One goals.  Each of these has been critical to recruiting top faculty, encouraging philanthropy, and achieving our goal of becoming one of the nation’s top universities.  We encourage further investment in this important programs.

Fourth, are Small Business Development Centers (SBDCs):

• SBDCs are engines for economic development. In 2015, UH’s SBDC helped clients generate approximately 5,000 jobs; $300 million in sales; and nearly $40 million in new tax revenue.  Because these programs generate revenue, they’re really cost-neutral.
• We believe SBDCs are of such vital importance to the economy of the state that they should not be considered as a special item within our budget. In order to protect their funding, we are recommending that SBDCs be funded as a separate item with Article III of the budget, but outside of any university’s budget.

Finally, the UH Law Center desperately needs to be renovated. While the Center is one of the nation’s finest, its building is one of the oldest.  Half the Center is underground, so it consistently floods during storms; it’s largely non-ADA compliant (having been built before enactment); and has no central entrance and is therefore inaccessible to the public.  In short,  it is not serving our students or community well.  We expect that investment in a new building would result in a sharp increase in the Law Center’s U.S. ranking, up to 20 spots higher, securing it as a top 50 college of law.  We ask for a TRB to construct a modern, five-story building to improve the learning environment and service to the community.    

Conclusion: UH is a Great Value for Students—

I want to end on a topic that’s always on everyone’s mind: affordability.

The most effective means of ensuring affordability for our students is to reduce time to graduation. You’ve already heard about the enormous gains we’ve made in our graduation rates.  But more importantly, we’ve reduced the average number of credits our students have at graduation.  

When I arrived at UH ten years ago, our students averaged 151 credits at graduation.  We’ve been able to reduce that number to 141 average credits at graduation. This represents a significant savings for the average student and we intend to continue this trend.

UH has been nationally recognized for affordability and its return on investment for students:

• Our students’ early career salaries are nearly $50,000 – higher than the national average; and
• The U.S. Department of Education named UH an Affordable Four-Year School with Good Outcomes.

In addition, through Cougar Promise, we ensure that mandatory tuition and fees are fully covered for undergraduates with family incomes of $50,000 or less.

We also implemented performance based-funding at the academic colleges, increased the endowment, and are close to our goal of $1 billion for our capital campaign. 

Finally, the Princeton Review says that UH is a College That Pays You Back. That’s true, but UH is about more than just a paycheck. Whether coming together for a football game or to help hurricane survivors, UH transforms students’ lives.  That’s what the past decade of transformation has really been about.      

This concludes my formal remarks.  I’m happy to answer any questions.