I am pleased to present for the General Assembly's consideration the FY 2003 Operating Budget of the University of Maryland Center for Environmental Science. I would like to briefly review the considerable progress made by the Center over the past year, but then focus on the budget request itself and the Department of Legislative Service's analysis and recommendations.

The Center's work is guided by its statutory mandate for a comprehensive program in research, education, and advisory services related to the environment and our natural resources. Specifically, we are charged by the statute "to develop and apply predictive ecology for Maryland to the improvement and preservation of the physical environment."Furthermore, like the other institutions of the System, the Center is challenged by the statute establishing the University System of Maryland "to achieve and sustain national eminence."We feel we have been responsive to both mandates by continuing to make important contributions to the conservation of Maryland's environment and natural resources and by being recognized as arguably the nation's premier institution for research and graduate education in coastal marine science.

Through our diverse programs at our Chesapeake Biological Laboratory on Solomons Island, Appalachian Laboratory in Frostburg and Horn Point Laboratory near Cambridge and through our management of the Maryland Sea Grant College Program we are working to sustain and build on the Center's accomplishments over the past 77 years of its history and its emergence over the past decade as a national leader in environmental science. The State's investments in the Center, particularly capital investments such as the Aquaculture and Restoration Ecology Laboratory presently under construction at the Horn Point Laboratory, have been essential to these accomplishments.

RECENT ACCOMPLISHMENTS

Our scientists are integrally engaged in conducting research and applying knowledge related to the critical environmental and natural resource management issues for Maryland, the Chesapeake Bay and coastal bays and their watersheds, and the nation. We continue to work with other Bay scientists, managers and resource users in the recovery and management of living resources, for example:

1. Our studies of survival and longevity of blue crabs and the population models we have developed have played a key role in the development of a bi-state management plan. With regard to oysters, we produced over 60 million disease-free oyster spat on shell for use in the State's oyster restoration program and have developed promising new approaches for establishing healthy oyster populations in the face of disease. We are developing the experimental approaches and security protocols for research to evaluate the benefits and opportunities of the non-native oyster, Crassostrea ariakensis in the Chesapeake Bay.

2. Our scientists are working with state and federal resource agencies, the shipping industry, and the environmental community to select scientifically sound options for placement of dredged material.

3. We have developed landscape approaches for managing forests for their harvestable resources as well as protection of the streams and estuary downstream.

4. Scientists from the Center are providing the scientific expertise needed to determine water quality requirements for living resources and the maximum pollutant loadings tolerable to achieve the required water quality. We are doing this for Baltimore Harbor, the Patuxent and Choptank rivers, and streams throughout the watershed as well as for the Bay as a whole. This work supports the development of realistic and effective restoration goals and strategies.

5. Through the innovative combination of towed environmental sensors, optical instruments that count and measure plankton, acoustical fish survey methods, and remote sensing of plant production from overflying aircraft, we have developed the first-ever census of all forms of life in the Bay.

This work is of national and even international significance as well as having direct utility for Maryland and the region. For example, an assessment of the status of marine pollution produced last year for the Pew Oceans Commission has been referred to recently in articles in the New York Times and stories on National Public Radio. It has been an important factor in the inclusion of more significant conservation measures in the Senate version of the Farm Bill presently in conference in the U.S. Congress. I have just returned from the Netherlands and have been invited to lecture this summer in Japan, so I can confidently report that our success here in Maryland of seamlessly integrating cutting-edge science and its use in environmental policy and management has become a model to be emulated throughout the world.

The Center is broadly engaged in education at all levels. It is the mainstay of the University System's largest multi-institutional graduate program, the Marine-Estuarine-Environmental Science Program. Our faculty members teach most of the courses in that program and last year supervised 12 Ph.D. and 15 M.S. recipients. Although we continue to reach upwards of 13,000 students in our Environmental Education Program, as the Department of Legislative Service's analysis points out, we have dramatically increased the number of K-12 teachers we train as a result of our strategy of focusing on teachers to broaden our impact and increase the capacity for science instruction in general.

Although it is often not understood within our own state, the University of Maryland Center for Environmental Science is, based on a number of indicators, the premier institution in the nation for research in coastal marine and watershed science.  Based on National Science Foundation statistics for FY 2000, we were ranked 6th in the nation in terms of R&D expenditures among the 45 universities that reported expenditures under the category of oceanography.  All of the larger institutions, such as the Scripps Institution of Oceanography and Woods Hole Oceanographic Institution, are engaged primarily in global ocean studies with expensive ship operations.  Our Center is the largest in terms of expenditures for coastal marine research, which in this case does not include activities at our upland Appalachian Laboratory. Along with the top 10 ranking by the National Research Council for the University of Maryland in doctoral research programs in ocean science, this is clear indication that the Center is among the most nationally eminent academic programs within the University System of Maryland. Consistent with these indicators is the key leadership roles played by the Center within the national and international scientific communities. This, I believe, is another important sign of national eminence.

The Center serves as the responsible institution for management of the Maryland Sea Grant College Program, which is included in the Center's budget.  Maryland Sea Grant is celebrating its 25th year as a program this year. Over this period it has been a catalyst for research, education and outreach related to marine resources in partnership with academic and research institutions statewide. It is widely viewed as being in the top tier of the 29 Sea Grant colleges in the country. Sea Grant receives funding from the National Oceanic and Atmospheric Administration to support these activities.

Maryland Sea Grant supports research on a wide range of research projects on the health of the Chesapeake Bay ecosystem and its living resources. Included among projects recently funded for 2002 are the development of new tools to set water quality targets needed for SAV restoration by the Smithsonian Environmental Research Center, the quantification of the capacity of oysters to remove nitrogen and phosphorus from the Bay by the Horn Point Laboratory, and a genetic analysis of oysters to help us understand how oyster larvae are dispersed in the Bay by the University of Maryland, College Park. On the education front, the National Science Teachers Association has recognized the Maryland Sea Grant Oysters in the Classroom website for excellence and it has been adopted by the Maryland Department of Education as a model teaching unit. To help educate the general public, the Maryland Sea Grant Production "The Pfiesteria Files" premiered on MPT in September.

FY 2003 REQUEST AND ANALYSIS

The increase in State General Funds in the Governor's allowance for the University of Maryland Center for Environmental Science is greater than most at 6.7%. This is largely because of the operating costs of the Aquaculture and Restoration Ecology Laboratory (AREL) that will be occupied during the latter half of FY 2003. These costs total $875,000 and include $200,000 for acquisition of instrumentation. The remaining increases are for mandatory expenses associated with existing personnel:  the COLA annualization, merit increases and fringe benefit costs.

Although, as the Department of Legislative Services has indicated increases in State General Fund appropriations since FY 1998 have exceeded inflation, a longer term view indicates that state support for UMCES has just recently returned to where it was in the FY 1991 appropriation, when adjusted for inflation by the Consumer Price Index. During this same period, external sources of support--mainly federal research grants and contracts--increased by a factor of two, even after adjustment for inflation. As DLS points out in its analysis, the Center continues to demonstrate growth in extramural research funding and is on track to meet or exceed its FY 2004 Managing for Results goals.

The increases in State General Fund Support shown in the DLS analysis have come mostly for the operation of new facilities, both the new Appalachian Laboratory and now the Aquaculture and Restoration Ecology Laboratory, and mandatory increases in personnel costs, including COLA and merit adjustments. Together, contributions to the operating costs of new facilities and mandatory personnel expenses account for 85% of the increase between FY 1998 and FY 2003.

Attaining new state support for the Aquaculture and Restoration Ecology Laboratory in FY 2003 is essential for the effective use of this major state investment.  The facility will double the square footage of research laboratories at the Horn Point Laboratory and has much more sophisticated technical systems (for climate control and seawater supply) than the older buildings at Horn Point. We need to bring staff on board with skills we do not presently have during the final stages of completion of the building so that they can "work out the bugs" in these systems before the contractors leave the site. The long awaited facility will greatly enhance our ability to advance the knowledge base for effective environmental restoration--for example how to rebuild oyster reefs, wetlands, and submerged grass beds--and actively contribute to the State's efforts by increasing our capacity for producing disease-free seed oysters.

Our experience, borne out by the inflation-adjusted funding chart discussed previously, is that the State's investment in new research facilities provides a major stimulus for attracting extramural research support. We are confident that this will also occur after completion of the AREL facility. As the assessment of the economic impact of higher education in Maryland points out, the university research enterprise in our state is itself a significant economic engine, even before considering the commercial opportunities that develop from it.  Maryland ranks first in the nation in federally-supported university research and development on a per capita basis--and far and away so.  The success of the University of Maryland Center for Environmental Science in attracting research support extends this economic impact to the more rural parts of the state, where our labs constitute the only significant university research activity.

The Department of Legislative Service's analysis of the Center's operating budget request was more thorough and detailed than I can remember. Consequently, I am most pleased that it recommends concurrence with the Governor's allowance. DLS did ask, however, that I discuss why the Center's budget is totally listed under the Research category. I am pleased to do so.

The entire budget of UMCES has been included under Research for many years, as it has been for UMBI, based on decisions by the University System and the Department of Budget and Management. Within the System’s research or comprehensive universities it is difficult to apportion the costs of operation of facilities among their uses for instruction, administration and public service. It is appropriate, therefore, to assign such operating costs to the Plant program. For the two research institutions, the plant and administrative costs are overwhelmingly in support of the research mission and are a vital component of the research infrastructure.

Having its entire budget assigned to the Research program assists the Center’s position in negotiating the indirect cost recovery (ICR) rate assigned by federal research sponsors. Such ICR rates are negotiated every three years based on review of the institution’s detailed financial analysis by the U.S. Department of Health and Human Services (DHHS). The rate presently in force for UMCES is 44% of the direct costs of a research project. This is lower than the rates presently in force for the other research institutions of the University System (UMCP, UMB, UMBC, and UMBI), which range from 45 to 48.5%; the difference is in part an historical artifact. The starting point of DHHS in these negotiations is to offer an ICR rate lower than that currently in force. This can only be countered by demonstrating that the true indirect costs of research performance (i.e. the costs of plant operations and administration that cannot be directly assigned to a research project) are significantly higher than the currently approved ICR rate.  We can make a stronger case that most of our realized indirect costs are related to our research mission and support our research projects sponsored by federal agencies, by having our activities within the State budget categorized as Research.  We have recognized increases in our approved ICR rate during times when other newly approved rates have generally been declining.

CONCLUSION

In conclusion, I want to thank the Committee for its consideration and to stress the importance of providing operating funds for the new Aquaculture and Restoration Ecology Laboratory at Horn Point. They are absolutely critical to gaining the full benefits of this highly capable new facility.

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