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significantly, and it is greatly appreciated. The University also received some authority
from the legislature to build a $46 million dormitory. This will provide approximately
500 beds for the students. In addition, the University received some bonding authority
for a lease/purchase agreement for an apartment complex on Virginia Avenue. This
bonding authority will help the University with its housing issue.

       President Todd reported that there was about $18-$ 19 million put back in the
budget after the legislature did the cuts. The University received $3.7 million of that
money. He said that it was a tough session, and the administration spent a lot of time in
Frankfort.

       President Todd said that he wanted to let the Board know that the University has
been in its current financial position for some time. He asked the Board to set their minds
back to September 2001 timeframe when the Board discussed tuition, and the
administration asked the Board to pass a 5.5% increase in tuition for that period. The
administration said that it wanted to go ahead and pass a 5.5% tuition increase for the
next period so that parents and students could start planning. He said that the earth has
shifted somewhat financially since that point in time. The University's original
appropriation in 2001-2002 was $313.6 million. Governor Patton had vowed to try to
keep from cutting higher education, but he ended up with a $6 million cut that the
University had to deal with on a non-recurring basis because it came at a point in time
where the administration had to find the money to pay that off. That also lowered the
University's base and became a recurring $6 million decrease.

       President Todd explained that the administration then revised its budget to $307.6
and that is what the University started with the next year. Though it has not received a
lot of visibility, the legislature also cut $8.6 million this year. He said the University has
already paid salaries for about two-thirds of this year. . He said that he would show later
in his presentation where they are going to have to figure out where that money is going
to come from in the budget. He pointed out that this cut also lowered the base. When the
University goes into 2003-2004, it starts with $299 million. Of the $19M the legislature
added back to the higher education budget, the University got $3.7. Therefore, the
University's operating base now has been revised to $302 million.

       President Todd said that the administration had heard a general comment that
higher education was cut 2.6%. The Council on Postsecondary Education (CPE) has
been applying benchmark funding for some time, and UK is deemed to be closer to its
benchmarks than some of the other institutions around the state. Instead of getting a
2.6% cut, the University got cut 2.89%. The benchmark formula costs the University
about another $1 million above the 2.6% cut which made the cut $8.6 million. Since the
University is deemed to be close to its benchmarks, it did not get the across the board
percentage increase in when the $18M was added back to the budget. It received less
than that. Therefore, the University got hit going down and going up. He reported that
the University is $11 million down from where it was two years ago.