Working Group #3:

Charge - The consistency between our new fringe rates and our strategic goals.





Response to Charge 3 of the Fringe Benefit Cost
Recovery Planning Committee: Fringe Benefits and the Strategic Plan


(Second DRAFT Document of Working Guidelines and Preliminary Conclusions)

  1. MTU’s Strategic Planning Exercise has explicitly identified the need to increase the level of externally-supported research as an important goal. This intention is a natural extension of more than fifteen years of work in this direction. There can be no doubt that sharp increases in the University fringe benefits charges assessed against external research sponsors could damage MTU’s competitive position. (Note:. This point must be proven more completely by the Charge 1 Group.) Such damage should be avoided at all costs.

    It must be understood, however, that MTU’s competitive position involves more than the fringe benefit charge. One of MTU’s advantages in attracting good people are very generous benefits that are much better than most other university packages. The key is to determine how MTU will proceed in attempting to adequately recover the cost of that package for externally-supported researchers and staff.

  2. MTU’s Strategic Plan assumes that Michigan Tech’s research activities should fit seamlessly into the educational program of the University. The Plan goes out of its way to avoid pitting undergraduate teaching against graduate instruction, or teaching against research. Rather, research activities strengthen the overall educational environment of the University for both undergraduate and graduate students. But again, a fringe benefit policy that would damage the ability of researchers to attract funds or to hire 100 percent externally-funded researchers and support staff does not serve the best interests of MTU.

  3. The Strategic Planning group recognizes that one of the fundamental difficulties facing Michigan Tech has been the limited financial resources. While advocating increased research activities and the expansion of graduate education, the strategic planning exercise has heightened understanding of the essential need to increase the resource base upon which these activities depend. In other words, expanded research efforts must rest upon additional external resources, and additional graduate students must be supported by external sponsors. Achievement of the goals of the strategic plan cannot be predicated solely upon heavy subsidies from the general fund.

    With that said, however, it must be remembered that teaching is not the only activity supported by general fund monies. Research is defined as a central function for this University, and it stands to reason that the general fund must support and help advance the research enterprise. Such support is already apparent in Research Services, the Vice Provost for Research and Dean of the Graduate School, and the new buildings with their expanded research facilities. From this perspective, it is possible to defend selective cost-shares decision designed to encourage research efforts. One example would be to forego complete recovery of some costs associated with hiring 100 percent externally-funded researchers and support staff. Such an approach could be viewed as analogous to the incentive structure currently being developed as part of a resource allocation model for Michigan Tech.

  4. Any decision about adjustments in the fringe benefit rate charged to external research sponsors must be made only after a study of the impact of various cost-recovery options might have upon the University’s competitive position against other universities. Additionally, these changes should be discussed with the Research Council, Academic Forum, and other relevant groups, and then presented to the University Senate for discussion to insure broad campus understanding of the goals and intents to these procedural developments.

    One reason that makes this communication step imperative is the potential impact of a University-wide general adjustment in fringe benefit rates (an approach that may be considered by one of the sub-committees). Such a change would reach well beyond the research enterprise in its consequences. Under such a scenario, the overall fringe rate set for Michigan Tech might increase from its current level of 38 percent to, say, 41 percent in order to create a single rate that applied to ALL employees, including those 100 percent supported by external sponsors. This might appeal to researchers, but would instantly increase the fringe benefits charges that Auxiliary Enterprises and the Michigan Tech Fund would have to meet. The point here is that these decisions cannot be considered solely from the perspective of research activities, and we must bring the broader ramifications into our discussions.

  5. When it comes time to adopt a fringe benefit rate(s), the final decisions cannot be dictated by the numbers alone. The final decision will be a POLICY choice that will inevitably adjust the rates in order to advance the overall program of the university especially research efforts. It is not question of whether we should cost-share the fringe benefit expenses of individuals whose presence at MTU advances the research mission of the University. We already do that substantially. The goal is to develop a structure that is perceived as equitable, while also advancing University goals. The means balancing the need for increasing resources against the need to offer competitive programs attractive to external supporters and to provide incentives to researchers on campus.

    We anticipate that the following areas will need the most emphasis in this adjustment process. Our tentative list, which has no surprises, is in priority order.

    1. Graduate students
    2. Postdocs
    3. 100 percent externally supported researchers and staff (Soft money employees)
    4. Faculty summer salary


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