One-On-One: Billions in Construction at UK Leading to Improved Education Outcomes

By Mark Green

Dr. Eli Capilouto was named as the 12th president of the University of Kentucky in 2011. Under his leadership, the $3.5 billion flagship and land grant research university has gained significant momentum in carrying out its multi-faceted mission of teaching, research, service and healthcare.
Dr. Eli Capilouto was named as the 12th president of the University of Kentucky in 2011. Under his leadership, the $3.5 billion flagship and land grant research university has gained significant momentum in carrying out its multi-faceted mission of teaching, research, service and healthcare.

Mark Green: As we conduct this interview, first-round games of the NCAA basketball tournament are underway. UK’s basketball team is one of the most successful in history, which also makes it a target for criticism. How do you view the role of major college athletics at UK?

Eli Capilouto: I’m very pleased with the athletic program at the University of Kentucky. The tournaments are a time when everybody drops their differences and comes together. That is an emotional and cultural phenomenon in Kentucky. But what brings me satisfaction first are the student athletes, some 500 who receive grant-in-aid enabling them to go to college. We have wonderful academic support for our athletes. Inside Higher Education published who would win the academic competition among all the teams in the NCAA tournament using their indicators of academic success, and Kentucky was in the finals with Bucknell.

We’re one of the few self-sustaining athletic programs in the country. No state funds, no tuition dollars go to any of this. Even more unique, funds come from athletics to support our academic enterprise. A display panel in our new $112 million Jacobs Academic Science Building recognizes the $65 million contribution to that project made by UK Athletics. It’s really acknowledging the Big Blue Nation fan support and those committed athletes who make people so proud of how we perform on the field and off the field.

MG: Has any other university athletics department provided funding for
academics at that level?

EC: I’m unaware of a commitment at that level. Certainly we’ve created some envy amongst college administrators. I like to tell people that when you support athletics at UK, you’re not just supporting our ability to recruit the best student athletes; when you walk into that new Academic Science Building and other facilities on campus, you’ve got to realize that athletics made possible those facilities, and you are then recruiting the best scientists, students who enter the STEM fields. Again, it is a way to build community.

MG: What is the annual budget for the university, and what major revenue streams support it?

EC: The University of Kentucky has a $3.5 billion budget; $1.5 billion of that is the hospital and clinical services. Probably another $500 million is in our College of Medicine. We also have $300 million of external research, for which we compete against the very best; we bring those dollars into the state, creating high-paying jobs. We have over $800 million in state appropriations, and tuition and fees; $267 million of that is a state appropriation that has declined steadily. About $80 million of that $267 million heads out to 120 counties in programs that, for instance, support our Cooperative Extension Service offices.

People say $3.5 billion should give you extreme flexibility to do whatever you want. But you can’t use a research grant to hire mentors or award scholarships for freshman students. You can’t use a Medicaid dollar collected for delivering services other than for healthcare and teaching healthcare. So those are some of the constraints that do come with what certainly is a big budget.

MG: Universities use an increasing level of public-private partnership funding. When and how did P3 become important to modern university operations?

EC: Five years ago at UK, through strategic planning discussions with our board of trustees, we recognized we needed to modernize our campus and do so quickly. Only 600 of our 6,000 beds were sort of “modern.” Through a public-private partnership, we were able to accelerate the construction of 14 halls that will contain 7,000 beds. But there are probably 200 learning spaces in these facilities; we’re able to create academic programs based in a residence hall. We put out a competitive bid and found a publicly traded company, (Memphis-based) EdR, that could build these things faster, of better quality and lower cost than if we did them ourselves. More importantly, they provided the equity to construct these facilities. We think it’s a fair and good agreement. They do an excellent job maintaining these facilities.

We also saw another opportunity because when you have over 30,000 students, up to 7,000 living on campus and the other 23,000 visiting daily, we wanted them to have attractive dining spaces. We want to be a community, a family, and one of the most sacred things communities and families do is break bread together. We needed more venues to do this. We went to the market, again attracted a private partner, Aramark, who came in and built dozens of dining facilities. One, The 90, is a 1,000-seat dining hall with some retail spots on the outside, but on the second floor it’s academic space. When we went to remodel our 1903-vintage Patterson Hall, which was the first residence hall for women, $10 million of that $15 million project was provided by our dining partner because they were so anxious to land the business at UK. You would think meal prices went up after this, but in fact we have five meal plans and they all went down in price.

MG: Public-private partners pay for construction of facilities the university then owns and in turn collect revenue from students for their room and board. Is the residence hall and dining facility construction and operation money within the $3.5 billion budget?

EC: EdR put $450 million in capital into the housing construction. Aramark put in $75 million. They built those facilities on campus, and they’re ours now. It is outside the university budget. We have some original residence halls that we still maintain, and those are in the budget. What also is attractive about these arrangements, which is atypical when you look at other universities, is that the private partner is assuming a risk. If they don’t sell the meal plans, they internalize that cost. If you don’t fill the beds, the company internalizes that. At other universities, there are occupancy requirements (in the contract) of 95 percent; if they don’t hit them, then the schools have to pay a penalty. In the case of our dining, it is we who have performance indicators: quality service assessments. We do these through surveys and other means. And if they don’t hit certain benchmarks, there’s a financial consequence, too. So we work to build accountability into these arrangements.

MG: University tuition and college costs have risen faster than the rate of inflation for several decades. What in your view is the cause of ongoing higher education cost increases?

EC: There is that sticker price, but we also have had a growth in financial aid for students. The out-of-pocket cost of tuition for students has gone up considerably less. Over a 10-year period, it’s something like $400. I would ask folks to look at this through that lens as well. Yes, costs have gone up at universities. We believe infrastructure and talent are important in providing a quality education, to making discoveries that are useful to those we serve. The facilities in which you do those, and the regulations which we all must respect, have gotten certainly more costly. In the form of faculty, at UK we’ve been fortunate in the past four years to have a salary plan; we want to keep this talent. Other states are beginning to invest more heavily in education. We do not want to lose our most precious resource, our talent. Even so, we lag behind some of our peers when it comes to compensation benchmarks. We are very cognizant of the cost to students and families, and we are further restructuring our scholarship program in recognition of that financial need.

MG: Are universities concerned about having a conflict of interest in the role they play in rising student debt, which tops $1 trillion and is even discussed as a headwind in today’s sluggish economy?

EC: Our board of trustees heavily scrutinizes any recommendation we make for tuition and fee increases when we develop our budget. Having said that, 85 percent of all the students who come to UK get some form of grant or scholarship that they don’t have to pay back – 50 percent of students who graduate from UK have no debt. Of those who have debt, the average is around $27,000 – a lot of money, but depending on your career and the degree, it may be a wise choice to have made that investment and should be something one can manage. So our students will have financial well-being while they’re here and post-graduation, we’ve introduced heavy financial literacy into our curricular and extracurricular activities.

We are revamping our financial aid program; we still want those best and brightest to come to Kentucky. But we recognize that students from families who have more children, less income, who may need additional acknowledgement on the scholarship side, are wise for us to undertake, because it’s going to lead to more students with degrees. So we’ll be shifting the dollars to allocate more towards needs-based than previously.

The cost of our education is below the national average. The incomes our students are able to earn when they get a degree from UK is above the average. The default rate on loans, meaning you don’t have the means through employment to pay your student debt, is much lower than the average of the country and much lower than the average in the state.

MG: What is the four- and six-year graduation rate at UK, and how does that compare with peer institutions?

EC: Our four-year graduation rate is 44 percent. Our six-year graduation rate is about 64 percent. This is the first-time, first-semester graduation rate measure the federal government uses. So if somebody transfers in and graduates, that’s not counted. Five years ago we were at 60 percent. Sixty-four percent is at a healthy level above the national average and we’re the highest in Kentucky; but that’s not good enough for us. Our goal is to get to 70 percent in the next few years; that’ll put us in the top 150 universities out of nearly 3,500 to 4,000 in this country. So that would be, I think, a strong indicator of the kind of value we add for a student experience at UK.

MG: How many colleges, departments, programs and/or majors does UK have nowadays?

EC: We have 18 colleges; our newest is the Lewis Honors College, made possible by a $23 million contribution by Tom and Jan Lewis. We have 130 departments – and we have a few of those endowed in name this year – 115 programs and over 700 majors. Arts and Sciences has nearly 6,000 students and over 400 faculty. That’s to be expected, because the Arts and Sciences curriculum supports many of those other colleges; English is a required course across every college, but that’s provided in Arts and Sciences. Engineering comes in second, with almost 4,000 students, followed by Business and Economics, with 3,500 students. Agriculture, Food and Environment has 3,000. And rounding off the top five would be our College of Education, with nearly 2,700 students.

The largest faculty is at our College of Medicine: nearly 800 faculty. While the enrollments may be smaller there, the responsibilities in delivering care at our hospital and clinics is such that you have that large number of faculty. And they teach in all those roles as well. The College of Agriculture, Food and Environment has 245 faculty, but there are many positions embedded in communities through our Extension offices. Arts and Sciences has over 400 faculty; Engineering and Education, respectively, have 139 and 112 faculty.

MG: There has been a tremendous amount of construction and infrastructure upgrades on the campus during your administration. What are the high points of the various projects and why did you feel it was a priority to do this?

EC: All our facilities are really a means to an end. We’re building so we can better deliver programs, make discoveries that attack scourges that plague Kentucky, and we need facilities to do that. In the last five years, we’ve had about $2.2 billion of construction on campus amounting to over 6 million s.f. We have our residence halls with some 7,000 beds. We have a new academic science building where 4,000-5,000 students a day are educated. Several thousand students a day are educated in the Gatton College of Business – that building funding was raised entirely through philanthropy, some $65 million. We’ll be coming soon to our board of trustees with plans for a complete remodeling of the law school, which is in bad need of renovation and expansion. In tackling the health disparities that we suffer in Kentucky, we have a new, $270 million research building under construction; half is funded by the state, and the other half we’ll make a commitment to fund.

One of the most extraordinary success stories in the country in terms of academic medical centers has been UK Healthcare. Ten years ago there were 19,000 annual admissions to our hospital, today some 39,000. We’ve built an entirely modern hospital. Much of its space was shelved when we opened around six years ago; that’s not the case now. A demand for those high-touch, highly-complex cases has continued to grow, and we’ve had to build facilities to be able to deliver these valuable services.

One I want to see completed within the year is going to be a spectacular student center. It is going to be the hub for students, faculty and surrounding community life. Again, Mr. Bill Gatton’s remarkable generosity helped us launch that building without introducing another special student fee, which you typically find across universities. What we’d like to concentrate on now is repurposing, renovating some of our older facilities in the heart of campus.

MG: State government is moving to performance-based funding linked to student success. What is this and how will it affect UK?

EC: We, along with the other universities in the state, members of the House and Senate and the governor’s office, worked on this plan. It’s not perfect, but we all agreed to it. We think it’s in alignment with our strategic plan, which centers around student success. It acknowledges important factors as it weights degrees and weights teaching according to how successful you are with lower-income students, because we’re looking for income mobility from a college education, and with underrepresented minorities, where success rates have been lower than we’d like. We see priorities in the STEM fields and health fields, with higher weight given for efforts and successes in those areas. It’s well-intentioned and you want to know the rules you’re going to play by for several years because you can better plan. This gives us the opportunities. There’s still no new (state) money in higher education. We hope in time there will be new money, which will give extra incentive to your performance within these models.

MG: How many students are in-state, how many are out-of-state, how many are foreign, and what are the top countries of origin?

EC: We have an enrollment of nearly 31,000. Two-thirds of those are state residents. You see a higher percentage of nonresidents in graduate programs, and you see that across the country. We have just over 1,700 students who come from abroad to UK; the top five countries are China, India, Oman, South Korea and Iran. China and India dominate, with 600 and 165 students respectively.

MG: Kentucky lags some of our key peer states in the number of engineers. Are there plans to grow UK’s College of Engineering?

EC: First let’s recognize the remarkable growth of our College of Engineering over the past seven or eight years. In 2010, we had 2,500 students in our College of Engineering; today we have nearly 4,000. The degrees conferred have gone up by a similar number. And we certainly have plans to grow that enrollment, because you’re correct: In an essential field for your economic growth, the number of engineers per capita in Kentucky is well below the national average. You need them for a modern economy. It can continue; we’re going to have to make additional investments in infrastructure and talent.

MG: How much interaction does the UK administration have with the private sector about meeting workforce skill needs and demands in the state?

EC: We work at an administrative level here in central office, but even more of that goes on at the college level. Engineers are closely aligned with their graduates and people in the field to further develop their curricula so that someone who graduates from UK is going to be ready to move quickly into that job force. Our College of Education has a P-20 lab that examines best practices to lead and manage school districts, for instance. They’re on the front line in learning, and that’s incorporated into our classroom teaching. You can see examples across all of our colleges.

MG: All areas of society and the economy have experienced large impacts from tremendous technology advances. How digital is today’s academic process, and how rapidly is it changing?

EC: It’s changing rapidly. If you visit our modern academic buildings, in particular the Gatton College of Business and the Jacobs Academic Science Building, you will see the latest. To make a large classroom intimate, to make it almost conversational between the faculty member and the students and also student to student, this can be achieved through the design of the space. Compare a Gatton College of Business classroom to one built 30 years ago: First of all, the desks and chairs are in a semicircle so people can face one another. If, during class, you need to break into a small group, the design of the tables is such that you can spin the chairs and what was a desk is now a small conference table. You can immediately drop down the technology you need, all plugged in, and work on your laptop to develop a spreadsheet or response to a particular challenge that the instructor may give. You’re able to modernize the teaching in those facilities. We have hybrid learning, too, able to incorporate, through technology, learning experiences from around the globe into that classroom.

MG: How much of UK’s academic offerings are available online?

EC: We have 21 programs fully online, across several colleges, and we have 11 hybrid programs that consist of online and face-to-face coursework. One that you hear advertised frequently is our joint MBA program with the University of Louisville. That is executive training, on-site, certain weekends throughout the semester, but there’s learning made available through technology as well.

MG: Kentucky elected officials have set a public goal of state tax reform for this year. Are there any specific changes that you or the university presidents collectively hope to see happen?

EC: I’ll leave that up to the legislators. I do find that my respect for them grows every time I visit Frankfort. The challenges they face require that you be an expert in pensions, education, Medicaid, you name it. And I think they do a good job getting their hands around those. I do hope that as our economy bounces back, the governor’s commitment to take a look at taxes in Kentucky will offer the opportunity to grow the investment in education, both at the K-12 level and the community college and university level. We learned from the last recession that the greatest antibodies came from an inoculation that you get with an education. The unemployment rates for those without a college degree went from about 5 percent to 10 percent; those with a college degree went from 2.5 percent to a little over 4 percent. If you have a well-educated workforce, you’re going to attract and keep businesses, especially those new businesses on the frontier.


Mark Green is executive editor of The Lane Report. He can be reached at [email protected]

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