Minutes of Meeting 399
28 January 2004
Synopsis: The Senate
President Robert Keen called University Senate Meeting 399 to order at 5:35 p.m. on Wednesday, 28 January 2004, in Room B45 EERC.
1. ROLL CALL OF SENATORS
Secretary Terry Monson called roll. Absent were
representatives from Army/Air Force ROTC, Materials
Science and Engineering, the Keweenaw Research
Center, and Finance and Advancement.
2. RECOGNITION OF VISITORS
Visitors included Jim Moore (School of Forest
Resources and Environmental Science), Kent Wray
(Provost), Kim Wells (TV6 News), Ryan Olson (Daily
Mining Gazette), Dean Woodbeck (University
Relations), and Julie Schmid (AAUP).
3. APPROVAL OF AGENDA
Keen presented the agenda and asked for
modifications or additions. There were no
modifications or additions and there were no
objections to the agenda. [Appendix A. NOTE: Only
official senate and library archival copies of the
minutes will contain a full complement of appendices.]
4. APPROVAL OF MINUTES FROM MEETINGS 396,
397, AND 398
Keen presented the minutes from Meetings 396,
397, and 398 and asked if the Senator who moved to
adjourn Meeting 397 (see page 10493) to identify
him/herself. Senator Anil Jambekar indicated that he
had made that motion. The minutes of Meeting 397 will
be corrected to indicate his motion. Keen then asked
if there were any additions or corrections to the
minutes of Meetings 396, 397, and 398. There were
none. With no objections, these minutes were
approved.
5. PRESIDENT'S REPORT
President Keen reported that:
A. The following proposals were transmitted to the Administration for approval: 15-03, Procedures for Loss of Untenured Faculty and Staff Positions; 11-04, Amendments to Proposal 15-02, Procedures for a Financial Crisis; 12-04 Amendments to Proposal 16-02, Procedures for Periods of Financial Stress; and 13-04, Position Statement Regarding the Value of Professional Staff to the University. [Appendices B-E]
B. President Curtis Tompkins approved the following proposals on 22 January 2004: 15-03, Procedures for Loss of Untenured Faculty and Staff Positions; 2-04 Honorary Posthumous Degrees; 9-04 Enhancing the Campus and Community; 10-04 Request for Independent Review of Systemic Financial Problems at Michigan Tech; 11-04 Amendments to Proposal 15-02, Procedures for a Financial Crisis; 12-04 Amendments to Proposal 16-02, Procedures for Periods of Financial Stress; and Proposal 13-04 Position Statement Regarding the Value of Professional Staff to the University. [Appendices F-L]
C. President Tompkins will transmit Proposal 10-04 to the Board of Control for its review. Keen noted that he had informally transmitted this Proposal to the Board at its 12 December 2003 meeting.
D. He had incorrectly thanked Senator Craig Waddell for his one and one-half years of service as Senate secretary. In fact, Senator Waddell had served two and one-half years as secretary.
E. David Shonnard had resigned his position on the Academic Tenure Committee and that President Tompkins had named Beth Flynn to replace Shonnard for the remainder of his term, which ends in 2006.
F. There has been inconsistency in the Administration's submission of concentrations and options to the Senate for its approval. Sometimes they are submitted; other times they are not. President Keen referred this issue to the Senate Curricular Policy Committee for its recommendation when Senate review is necessary. Keen suggested that the criterion for review should be based upon the number of new courses introduced when a new concentration or option is proposed.
G. The Administration should not have called a weather advisory on Thursday, January 22, since it eliminated weather advisories from its inclement weather policy in 1998. At that time, the policy became one of either closing of the University or remaining open during inclement weather. Henceforth, the Administration will adhere to its 1998 policy and no longer call weather advisories.
H. The School of Business and Economics plans to reactivate its Masters of Science in Business Administration (MSBA) degree program, which was suspended in 1985 without the advice and consent of the Senate. The Provost asked Keen for advice concerning whether the Senate needs to review this degree program. Keen indicated that this issue is an administrative decision and the Provost needs to decide if the MSBA is reactivated with or without Senate review.
I. The so-called 'Kershner' Committee has met and plans to report on its activities in four weeks. The Committee consists of Larry Davis and Jim Pickens (co-chairs of the Senate Finance Committee), Keen, Roger Kershner (chair of the Board Finance Committee), Amy Hughes (MTU's Internal Auditor), and Mike Hendricks (MTU's Controller). The Committee's function is to analyze the expected FY04 deficit and predict the FY05 deficit and to examine University cash flows for FY04 and FY05. It will present credible information to the University community on the deficits and financial problems faced by the University.
J. He did not release the Sense of the Senate approved at Senate Meeting 398 because, upon further investigation, he determined that forensic audits are always connected with litigation or searches for criminal financial activity. In his judgment, the Senate did not wish to publicly imply that the Administration was involved in criminal activity or to accuse the Administration of criminal activity. He asked the Senate to pass an explicit accusation of criminal activity in University finances if that was the Senate's rationale for passing the Sense of the Senate at Meeting 398.
Senator Monson asked for clarification of Keen's remarks on the disposition of the MSBA program.
Keen reiterated that the Provost has to decide whether to reactivate the degree program with or without the Senate's review.
Senator Bruce Barna questioned if the Kershner Committee was specifically prohibited from looking at past actions. Keen replied that it was not and that the Committee acquired data from 1996 at its last meeting.
6. COMMITTEE REPORTS
Historical analysis of MTU's current financial
situation [Appendix M]
Senator Jim Pickens and Senate Alternative Larry
Davis, Co-Chairs of the Senate Finance Committee
presented this report.
Senator Pickens began with a historical analysis of MTU tuition, enrollment trends, and bond financing, as well as reinterpretations of some information presented by President Tompkins at Senate Meeting 386 of 30 April 2003. Information presented at that time included, among other items: (a) General Fund trends for Michigan's 15 public universities showing an increased reliance on tuition and the relationship between state appropriations and tuition charges and (b) Trends in Michigan Public School Employees Retirement System (MPSERS) payments, which affect seven Michigan universities, including Michigan Tech.
Senator Pickens reported that:
A. MTU's financial problems derive from its declining enrollment. From 1991/2 to 2003/4, MTU enrollment fell by 13% while enrollment at all Michigan universities rose by 10%. Over this period, only five Michigan universities suffered from enrollment declines (MTU, Ferris, Lake State, Eastern, and Western) with MTU and Ferris having the most significant enrollment declines.
B. Tuition's share of General Fund revenues at Michigan universities increased from 25% in 1973 of General Fund revenues to 51% in 2003.
C. MTU's tuition increase for 1991/2 (about 22%) was associated with the financial crisis when President Tompkins arrived. He thought that the 1991/2 increase marked the end of the period when MTU was rated as a 'best buy' by the US News and World Report. From 1992/3 to 2002/3, MTU's tuition increases were comparable to other Michigan universities, while the 2003/4 increase was higher. MTU's tuition rose by 171% over this period while there was a 37-38% increase in the cost of living, as measured by the Consumer Price Index.
D. There is a negative relationship between changes in state appropriations and tuition revenues.
E. President Tompkins misinterpreted the MPSERS' data at Senate Meeting 386. There was a large increase in the retirees' health premiums under MPSERS from 1997 to 2003 ($462,000 to $2,364,000). However, during the same period, state appropriations to MTU rose by $8.6 million. The MPSERS' increase has not offset increased state appropriations. Rather the MPSERS' increase represents about an average of one year's increase in state appropriations since 1997.
F. MTU's bonded indebtedness increased substantially after 1991. However, it is important to separate bonded indebtedness financed by cash flows from the bonded activity from indebtedness financed by General Fund revenues. For example, the outstanding debt of $820,000 from 1993's SDC and MUB renovations (financed at a 5%-fixed rate) is repaid by student fees. In contrast, interest (at a variable rate, currently 1.1%) on 1993's $10 million debt for building construction bridge funds is funded by the General Fund with the principal to be repaid from donors. These interest payments currently represent about $100,000 per annum and will rise when interest rates increase. In 2003, $4.9 million was borrowed at a 4.91% fixed rate for fire protection systems in the dormitories and for repairs to the power grid. Of this total, the General Fund is responsible for repaying $2.4 million (power grid) while student services are responsible for repaying $2.5 million (fire protection). Interest payments on this indebtedness (excluding payments on the principal) made from the General Fund are about $115,000 annually.
G. Most important, enrollment problems are not tuition-related. He based this conclusion upon the facts that MTU's tuition increases were, until recently, similar to those of other Michigan public universities, that enrollment at Michigan public universities as a whole rose 10% (as tuition was rising), while MTU's enrollment fell by 13% while tuition was rising.
Several Senators asked questions or made statements during his presentation.
Senator David Hand indicated that Civil and Environmental Engineering has been making a concerted effort to boost its enrollment. The department's freshman class this year increased by 25% from the previous year and there have been 42% more applicants this year than last year at this time.
Senator Ron Roblee asked if the decreased College of Engineering enrollment was part of the University's Strategic Plan. President Keen indicated that the College of Engineering wanted to lower its student-faculty ratio through lower enrollment and increased faculty size. Senator Jim Turnquist stated that the College of Engineering tightened its entrance standards just prior to the arrival of President Tompkins. As a result, there were fewer applicants and many high school seniors felt that MTU would accept only valedictorians and salutatorians, regardless of students' intended majors.
Senator Pickens also noted that there was a 22% tuition increase in 1991/2.
Co-Chair Larry Davis then described the University's various budget balances and outlined trends in these budget balances.
The General Fund represents 'core' activities of the University with revenues consisting mainly of tuition, state appropriations, and research grants and contracts while expenditures are on educational and research activities. The Current Fund includes the General Fund, the Designated Fund (so-called D-accounts which includes a range of designated monies such as research contract overhead), the Auxiliary Fund (the MUB, SDC, dormitories), the Retirement and Insurance (R&I) Fund and the Expendable Restricted Fund (research grants). The totals of these accounts reflect the University's principal operating activities.
He reported that:
A. The General Fund balance has been negative in nine of the ten fiscal years (FY) between FY1993 and FY2003. At the end of FY2002, the accumulated deficit was $7.6 million. Adding an FY2003 deficit of $1.8 million and a projected $5.1 million FY2004 deficit (his estimate) results in a projected accumulated General Fund deficit of $14.5 million as of 30 June, 2004.
B. General Fund expenditures have exceeded General Fund revenues in five of the last six fiscal years (FY1998 through FY2003).
C. Transfers from the Auxiliary Fund and the R&I Fund have helped offset annual General Fund annual operating deficits over the last decade. These transfers totaled about $12 million (Auxiliaries $4 million and R&I $8 million). Had these transfers not been used, he estimated that the General Fund deficit at the end of this fiscal 2004 would have been $26.5 million (estimated balance of -$14.5 minus the $12 million transfers).
Based upon these trends in annual General Fund expenditures and revenues, transfers into the General Fund, and accumulated General Fund deficit balances, Davis concluded that the University has been spending more upon its 'core' activities than it has earned through its General Fund revenues.
He then focused upon the Current Fund balance, which rose from $4.385 million in FY93 to $7.714 million in FY02. An $8,820,500 increase in the Designated Fund balance (from $338,000 in FY93 to $9.158,500 in FY02) accounted for substantially all of this increase since balances in the General Fund, Auxiliary Fund, and Expendable Restricted Fund all decreased. He suggested that it might be inappropriate to consider the Designated Fund when evaluating available funds to support ongoing University operations since it has committed moneys in the Designated Fund. Subtraction of the Designated Fund balance from the Current Fund balance yields an adjusted Current Fund deficit balance of -$1,444,450 at the end of FY02. However, he noted that the adjusted Current Fund balance had risen to $67,580 at the end of FY03.
Senator Bahne Cornilsen asked for a clarification of adjusted Current Fund balance, which Davis provided.
Senator Don Beck asked about the type of activities that were included in the Designated Fund. Davis responded that the wide range of individual D-accounts made it difficult to describe Designated Fund activities and that Designated Funds were generally under the control of individual researchers or departments.
Senate Substitute Bruce Barna asked if the General Fund balances represented a systemic problem of $2 million excess of spending over revenues. Davis answered with a qualified yes and said that interpretation was true with regard to the University's core teaching and research activities since 1992. Barna asked if there are real financial problems at the University even if Current Fund balance does not reflect those problems. Davis responded that the University's 'business' is teaching and research, that General Fund deficits reduce the University's ability to finance these 'core' activities, and that the chronic General Fund deficit does not 'paint a pretty picture.'
Davis then observed that FY04 General Fund revenues included some one-time moneys, such as state appropriations and an insurance rebate. Without these one-time monies, Davis' projection of the FY04 General Fund deficit might be in excess of $6.0 million. However, he added the caveat that the true deficit is not known at this time. He also noted that bond payments on the dormitories will reduce cash generated by auxiliaries that has been used previously to offset annual General Fund deficits.
Senator Barna asked if the estimated $5.1 million FY2004 deficit is due to the tuition mis-estimate, if the tuition shortfall is due to offering in-state tuition to exceptional out-of-state students, and, if so, can the University eliminate this program. Davis responded that the tuition shortfall is probably structural in nature since it can be expected to continue; however, he did not know the answers to these questions. Senator Pickens added that the University has not publicly identified the causes for the shortfall. Barna asked if there was any truth to the rumor that the exceptional out-of-state student program accounted for only $1.4 million of tuition shortfall identified in the fall. Davis could not confirm this rumor and said that there were many rumors floating around campus.
Barna then asked if the University will have a $5.1 million FY05 deficit if it does nothing. Davis thought that the deficit would be larger because of the one-time funds received in FY04. Barna asked if Davis thought the deficit is structural and persistent. Davis agreed. Barna asked if the deficit represented an average of $2 million per year from FY93 to FY04. Davis said that prior to FY04, the deficit averaged about $1.5 million annually. Senator Martha Sloan said that Dan Greenlee [MTU's Chief Financial Officer] had indicated to her that the exceptional student tuition shortfall was $1.6 million. Senator Beck asked if that represented only the reduction in tuition to out-of-state students. Davis responded that he did not know but he was confident that $5 million is a lower bound for the FY04 deficit.
Beck asked if FY03 expenditures rose at a faster rate than FY03 income. Davis said that some costs were cut while others such as utilities, health care, and salaries rose for FY04 and that tuition should be $3-$4 million more than FY2003. However, the University had budgeted approximately $6-$7 million more in tuition for an expected increase of $9-$11 million. His perception is that MTU would have broken if the estimated tuition increase had occurred. Beck asked if Davis knew the magnitude of estimated increases in expenses in FY2004. Davis indicated that he did not know.
Senator Craig Waddell asked if there was excess spending of $1.5 million per year until FY2003 and excess spending of $5 million expected in FY04. Davis answered that the General Fund deficits averaged about $1.5 per year with a wide year-to-year variation prior to the past two years.
Senator Terry Monson asked why the Auxiliary Fund showed losses in four years between FY94 and FY02. Davis answered that transfers from the Auxiliary Fund to other accounts explained those losses. Without the transfers, the Auxiliary Fund would have had surpluses in those years.
Senator Erik Nordberg asked if it is true that the University paid no interest on deficits in these accounts since funds in other accounts covered deficits.
Davis indicated that was true since earnings from non 'core' activities (Auxiliaries, etc.) may offset General Fund deficits for some time. He also expressed concern with bonds that have low variable interest rates. If interest rates rise, then the variable rate will also rise. He was also concerned that MTU may find its 'riskiness' rising, which causes borrowing to occur at higher rates. However, he indicated that that issue was not an immediate concern.
Barna stated that the University's need to increase salaries to attract and retain personnel will also cause additional pressure on the University budget beyond the expected current fiscal year's deficit.
Nordberg queried Pickens on his assertion that tuition increases did not affect enrollment. Pickens indicated that after the 1992-3 tuition increase, MTU probably lost its 'Best Buy' status. However, its tuition increases have been comparable (within one percent) to those at other state universities until this past year, which led him to believe that tuition increases were not the cause of MTU's enrollment declines.
Nordberg asked if bonds had any impact on the General Fund. Pickens stated that the principal and interest payments on bonds funded by the General Fund are not insignificant. Further, he stated that MTU is 'cash rich' but chooses not to pay down bonds to avoid more future borrowing. The Plant Fund balance provides a good cash buffer, but, at some point, this balance may need to be used to pay off the $10 million in bonds used as bridge funds for building projects and the $2.4 million bonds used for the power grid. Davis added that the University is not running out of cash.
Senator Ron Roblee asked for clarification. Did total enrollment in Michigan public universities rise while MTU's enrollment fell despite MTU's tuition increases being more or less in line with other state universities? Pickens stated that the University would be better off if enrollment had not fallen. Senator R. Selfe added that increases in female enrollment statewide have not noticeably affected MTU; however, the University has made a significant effort to recruit female students. Senator Jacek Borysow added that there is a need for more female faculty members. Selfe added that MTU needs more programs to attract female students.
Senator William Gregg asked what would happen if the University eliminated the tuition scholarships from its General Fund expenditures and let the Michigan Tech Fund devote more efforts to fund these scholarships. Davis said that a very large increase in MTU's endowment (to about $300-$400 million) would be needed in order to eliminate $12 M of undergraduate financial aid and about $2 million of graduate financial aid from General Fund expenditures. Gregg suggested that this approach to fund-raising might reduce at least some General Fund expenditures on financial aid and contribute to balancing the budget. Davis then indicated that he felt the focus on the 'discount rate' (the share of tuition paid by General Fund financial aid) was not useful. Many other universities have very large endowments and scholarships paid from those endowments usually are not included as General Fund expenditures.
President Keen thanked Pickens and Davis for their informative presentation.
7. NEW BUSINESS
A. Proposal 14-04, A Senate Statement on MTU's
Financial Status [Appendix N]
Senator Scott Pollins MOVED (support from
Senator Tony Rogers) to approve Senate Proposal 14-04, A Senate Statement on MTU's Financial Status.
Senator Roblee suggested that the Senate should discuss the term 'forensic' in the Proposal, given concerns expressed in the President's Report. Rogers indicated that he is willing to change 'forensic' to 'investigative.' Senator William Gregg noted that if 'forensic' is changed to 'investigative,' then this Proposal is a restatement of Senate Proposal 10-04, Request for Independent Review of Systemic Financial Problems at Michigan Tech. Rogers noted that the term 'investigative' does not have the same connotation as 'forensic.' Gregg then asked if it is a restatement, then what is the point of Proposal 14-04. Rogers agreed that it was a restatement, but added that the third bulleted point of this Proposal has a statement related to the long-term health of the University and a substantive role for the Senate in University governance and the setting of goals and priorities, neither of which was found in Proposal 10-04.
Senator Gregg then raised the following issue for the Senate concerning Roberts Rules of Order. A two-thirds majority of all eligible voters is usually necessary when organizations consider motions that are actions against individuals. Only 57% of the faculty and staff voted for non confidence in the referendum. Did this referendum need a two-thirds majority in order to be valid? Since President Tompkins is not a member of the Senate, Gregg asked for a ruling on this issue: Does the two-thirds majority apply to Senators and to individuals outside the Senate? President Keen ruled that the Senate did not approve a censure; rather it approved a referendum vote of the faculty and staff for informational purposes. The vote had no effect upon an individual since it had no legal standing and was only for informational purposes. The only issue is with the credibility of the Senate. The key point is whether the Senate acted with the wishes of its constituency. Rogers said that he felt comfortable with the results and the reporting of the referendum. Gregg then asked if the Senate took any action on the vote. Keen said that the Senate took no action other than releasing the results and informally reporting to the Board of Control that the referendum was occurring. He felt that the Board had seen the results by now.
Senator Selfe stated that he believed the Senate did what its constituents wanted and did represent its constituents. He then asked Rogers to indicate how Proposal 14-04 differs from Proposal 10-04. Senator Rogers responded that he wanted it to be 100% clear that the audit called for in Proposal 10-04 should be more than a 'simple balancing of the checkbook.' He thought that the Senate ought to identify the type of audit that would occur.
President Keen then read Proposal 10-04 and indicated that President Tompkins had forwarded it to the Board of Control for consideration.
Senator Roblee asked if Senator Roger's intention was not just to question the numbers, but also to review the operational and management decisions that led to MTU's deficits. If so, should it be called an audit?
Senator Christine Williams asked for examples of 'superficial and professed.' Rogers responded that faculty/staff participation in University governance is not perceived as substantive.
President Keen asked for a motion to approve rewording of Proposal 14-04. Senator Rogers MOVED (with support from Senator Selfe) to accept the amendments to Proposal 14-04 and to change 'forensic' to 'investigative.'
Senator Amato-Henderson stated that the goals of this proposal were unclear. Was it backward or forward looking, i.e., was its intention to look at past decisions and investigate how the University got into its current situation or was its intention to look at the future and identify changes that should be made? She thought that the term 'investigative' refers only to the past. Consequently, she would not support the amendment.
Senator Williams indicated that there was still confusion over the term 'superficial and professed.' Rogers indicated that most faculty committees, at best, perform only advisory roles in University governance.
Senator Amato-Henderson indicated that she did not like the term 'superficial and professed' since it makes the Senate appear to be a whining juvenile. She thought it was perhaps better to say "would like a greater role in the future."
Senator Marilyn Cooper asked why shouldn't 'superficial and professed' be eliminated and 'substantive' be retained. She also was uncomfortable with the term 'self-inflicted financial wounds are larger than the ongoing state cuts' and wondered about its veracity. Senator Pickens also indicated his discomfort with this term and that this year's tuition shortfall was a human error with a spreadsheet and not an error in University goals and priorities. Senator Rogers indicated that this year's misestimated tuition is an example of a self-inflicted wound. Senator Gregg asked for more examples of self-inflicted wounds. Senator Selfe cited the use of one-time transfers as another example.
Senator Cooper stated that she is concerned about accuracy. The Senate should not claim anything that is not true.
Senator Bahne Cornilsen asked if $14 million deficit over a 12-year period was due to more than cuts in state appropriations. Senator Pickens indicated that the $5 million cut in appropriations is more important since it is ongoing. He was not certain if the wording in the first paragraph of Proposal 14-04 was strictly accurate, thinking it true at a point in time, but not necessarily true in the longer run.
Senator Selfe asked if a friendly amendment to eliminate the phrase 'rather than superficial and professed' would be appropriate. Senator Martha Sloan MOVED (Senator Anil Jambekar supported) to strike 'rather than superficial and professed' in paragraph three of Proposal 14-04. The motion passed with no objections.
Senator Pickens noted that the Senate constitution, approved by the Board of Control, defines the role of the Senate. Consequently, the Constitution may need to be changed in order to satisfy the last paragraph of Proposal 14-04, i.e., some items may need to be moved from the B to the A list. President Keen agreed that it implied changes to the Senate constitution. Senator Gregg raised the same point and suggested that the third paragraph be deleted from Proposal 14-04 and that a new proposal should be developed that incorporates the third paragraph and that indicates the changes in the A and B lists needed to satisfy the intent of the paragraph. He felt that this paragraph was too vague as currently written.
Senator Roblee asked again if Senator Rogers' term 'investigative' means operational or management decision-making that led to the continuing deficit. Rogers replied that there is a larger concern: it is important for the Senate to give its interpretation of the referendum's results and to clarify 10-04. Senator Selfe commented that, since the Sense of Senate from Senate Meeting 398 was never transmitted publicly, this Proposal is the Senate's only opportunity to explain what the referendum indicated.
Senator Cooper asked for clarification of the vote. Was it a vote on the amendment or the proposal?
8. ADJOURNMENT
Senator Sloan MOVED (Senator Jambekar
supported) to adjourn. President Keen ruled that if the
Senate adjourned, the Senate would consider
Proposal 14-04 again at the next Senate meeting. The
motion was carried by a 15-14 vote and the meeting
adjourned at 7:30 p.m.
Respectfully submitted by Terry Monson
Secretary of the University Senate