Deferred Maintenance in Higher Education

The Educational Building Fund (EBF) was established in 1941 primarily for the construction of new buildings at state universities. Currently, the fund is primarily used for deferred maintenance projects at state universities. The Kansas Board of Regents (Board) policy definition of “deferred maintenance” is annual maintenance and necessary renewal of facilities systems and components that have been postponed, delayed, or deferred, to a future budget cycle or until funds are available.

History of Deferred Maintenance at the State Universities

The Board prepared a report in 1994 indicating that the six universities needed $288.3 million for capital improvements that included the federal Americans with Disabilities Act compliance, State Fire Code requirements, improving classrooms, major remodeling of existing buildings, and new construction. The 1996 Legislature authorized the issuance of $156.5 million of bonds.

The initiative was referred to as the “Crumbling Classroom Initiative.”
Because the amount financed was less than what was needed for the projects, the Board reduced the amount that would be spent for rehabilitation and repair of university buildings. Since the majority of the EBF was being used to pay the bonds for the Crumbling Classroom projects, the balance of the EBF moneys was insufficient to keep up with the routine day-to-day maintenance projects. The bond payments were made through FY 2012.

In 2004, the Board prepared a new study for the Legislature stating that the State’s universities would need an additional $584.0 million to cover the deferred maintenance costs. The study assessed the condition of 537 academic and administrative buildings as well as utilities and infrastructure components on the campuses.

In July of 2005, the Legislative Division of Post Audit conducted a performance audit titled: “Regents Institutions: Reviewing Proposals for Increased Maintenance Funding at the State’s Colleges and Universities” (https://www.kslpa.org/wp-content/uploads/2019/08/r-05-16.pdf). The conclusion of the audit found that the use of the EBF to pay for the Crumbling Classroom Initiative resulted in the increase of deferred maintenance projects over time.

In 2007, Sub. for Senate Sub. for HB 2237 was passed, which created the State Educational Institution Long-Term Infrastructure Maintenance Program. Beginning in FY 2008, the State would make annual transfers to the Board to fund deferred maintenance projects at the state universities. The transfers would total $90.0 million, including $47.0 million from the State General Fund (SGF). In addition, the universities were to transfer the retained interest from tuition, restricted fees, and sponsored research overhead to the State University Building Maintenance Fund. Each university maintains a deferred maintenance support fund, which receives the interest income from the three other funds. The bill also authorized new tax credits for tax years 2008-2012 for contributions earmarked for deferred maintenance at universities and certain projects at community colleges. The tax credit was to sunset after tax year 2012. Due to the recession that occurred in the United States, this program was never funded.

Future Maintenance Funds

2007 Sub. for Senate Sub. for HB 2237, discussed above, also required that the Board would not request SGF moneys for maintenance and operation of any newly built buildings which were funded with private dollars for at least 51.0 percent of the project (KSA 76-790). The institutions were to maintain a capital improvement account for future maintenance. In 2012, additional language was added to the university bonding authority language in appropriation bills. The added proviso language reads, “And provided further, that [university name] shall make provisions for the maintenance of the [name of project].” Since then, the universities are required to create a maintenance fund for the project for future upkeep of the building being bonded.

Board Oversight

KSA 76-147 allows the Board to acquire land for building or utility construction, however there is no required notification to the Legislature in taking this action nor is there a statute regarding the acquisition of buildings. The Board policy states that state universities may acquire real property necessary to properly maintain and carry on a state university or the business thereof.

The state university must submit a description of all properties they desire to purchase or acquire to the Board for approval. Such description must include a legal description of the property, anticipated use, and the estimated cost of purchase and any cost relating to the razing or renovating and maintaining the property.

Kansas Board of Regents New Policy on Building Maintenance

The Board approved a new policy in June of 2021 for university building maintenance.

Beginning in FY 2023, and each year thereafter, each university shall calculate a maintenance assessment as a percentage of the professionally estimated replacement cost of mission-critical buildings according to an assessment schedule, culminating in a sustainable 2.0 percent of current replacement value as approved by the Board on an annual basis. Utilizing each university’s Deferred Maintenance Projects Fund, expenditures shall be itemized using a standard template for the Board’s review annually.

Each state university shall identify and expend campus funds (excluding EBF allocations) annually for the purpose of addressing annual maintenance according to a prioritized assessment plan reviewed by the Board. Funding for the maintenance assessment may include contributions from university, state, federal, and philanthropic sources.

It is the stated intent of the Board to use the 2.0 percent of current replacement value funds to annually maintain the buildings in proper working order and focus the use of the EBF on strategic projects to reduce the backlog of deferred maintenance.

The Board voted to allow the universities a six-year escalator to ultimately arrive at the 2.0 percent current replacement value.