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The Senate of
Michigan Technological University
Meeting No. 185
President Julien called the meeting to order at 7:12 p.m. on
October 30, 1991 in Ballroom A of the Memorial Union Building.
I. Roll call of regular members
Thirty-four senators or alternates were present. Absent:
None
II. Recognition of visitors
There were so many visitors that recording all the names
was omitted. All 200 chairs were occupied.
III. It was moved by Theodore Bornhorst and seconded by Carl
Vilmann that the agenda be set aside and the order of
business at the meeting be as follows.
A. Budget Liaison Officer's Report
B. Old business
C. New business
Passed.
IV. Budget Liaison Officers Report
Curtis Tompkins agreed to report in person on budget
reductions and to receive questions and comments from
senators and visitors. He began by asking Larry Julien
to read from letters to the faculty and staff dated
October 30, 1991 and November 1, 1991. Copies of these
letters are attached as Appendix A. The letters give
details about the budget reductions and some of the
reasoning behind the need for this action.
The discussion of the report was begun by Randall
Freisinger who read a statement issued by the faculty of
the Department of Humanities. A copy of this statement
is attached as Appendix B. As the discussion continued,
many faculty members and staff persons made statements
and asked questions. Tompkins responded to some points
himself and deferred to Vice Presidents Whitten,
Tahtinen, or Powers or to Terry Gardner (Arthur E.
Andersen & Co.) for replies on other points.
The discussion was extensive, and so many people were
involved that is was not possible to record each speakers
question and the reply. Similar points were made by
several persons. The following is a summary of the
discussion rather than a verbatim record of the
proceedings. The items noted do not necessarily appear
in the order they were discussed.
1. Are the salary reductions legal? Do faculty members
have a contract as a result of receiving the annual
letter from the department head indicating what
salary has been approved for
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1991-92? Dale Tahtinen replies that he has
consulted MTU legal counsel and that as long as the
reductions are made uniformly, they are legal.
Carl Vilmann read a statement prepared and submitted
by the Mechanical Engineering-Engineering Mechanics
Department. The main question arising from this
statement was as follows: A copy of this statement
is attached as Appendix C.
2. What is the origin of the $9.1 million deficit and
to whom are these funds owed?
Terry Gardner reviewed the MTU financial situation.
His discussion was basically the same as given by
Tompkins in the letter of October 30, 1991. He also
described four periods between now and December 31,
1992 when negative cash flow is predicted by the
economic model used. Some items of the deficit were
explained in more detail. These are:
a. Reclassifications from other funds in 1990
comprise mainly equipment purchases which were
not budgeted but paid for from funds other than
the general fund. These items were transferred
to the general fund last year.
b. Accumulated amounts recorded in the general
fund from 1989 and prior refers to two early
retirement programs which had initial debt of
$5.6 million but which was reduced to $1.6
million before being transferred to the general
fund last year.
c. Early retirement benefits listed as $2.08
million arose because health care costs for the
1984 early retirement program were
underestimated.
The first part of the question was answered, but the
second part about to whom the deficit is owed was
not answered satisfactorily even though several
people asked this question.
3. Would there be financial problems if there were no
$9.1 million debt?
Tahtinen and Tompkins responded to this by saying
that the $9.1 million deficit is not related to the
financial difficulties. The problems arise because
of the $7 million line of credit at the Superior
National Bank (6.8% interest rate) of which $4
million has been used and because of $3.7
million in vendor bills currently due. There is a
shortage of cash to pay these bills which would lead
to a negative cash flow of $8.8 million in October
1992 if no action is taken. MTU expenses are about
$8 million per month with vendor bills accumulating
at about $2 million per month ($0.5 million per
week). Falling behind in payments is a new
situation. Tompkins said that the State of Michigan
omitting the payment of $3.2 million last summer was
the event which precipitated the cash flow problem.
4. Are other Michigan institutions affected in the same
way, and how are they handling the situation?
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Terry Gardner described the situation. Michigan
colleges except for MTU, MSU, and Saginaw Valley
maintain contingency funds to carry them through the
July, August, September period of low income. Most
Michigan colleges have cost containment programs now
in place.
5. Josiah Heyman expressed concern that we learn some
lessons from our cash flow problems. There should
be better communications and discussion about the
problems with several opportunities for input from
the faculty level. The initial planning and
information about 10% reductions was good. The
exercise, though carried out differently in
different departments, seemed to be going on
schedule. Then the communication broke down after
the October 28, 1991 cabinet meeting. The faculty
did not have an opportunity to discuss the revised
ideas for reducing expenses which were quite
different from the original plan as stated in the
October 22, 1991 letter from Tompkins to the faculty
and staff. There should have been more interaction
and discussion with those who would be most directly
affected by the actions taken. The need for such
haste is not clear.
Tompkins replied to some of these points and gave
a further discussion of salary reductions and the
communications issue. He said he does not like
across-the-board actions. There will be a sliding
scale of reductions as follows:
Salary Reduction
<10,000 -0-
10,000-20,000 (salary - 10,000)/
250,000
>20,000 0.04
This will help cushion the impact for those who have
low salaries. Some criteria used in the salary
reduction decision were -- no tenure track positions
should be lost; lay-offs should be avoided if
possible. Cabinet will be increased to include
three more faculty members and the presidents of the
two unions. Work on the 1992-93 budget will begin
next week, so everyone will have a chance for input.
We need to build a data base so everyone will be
able to make better decisions. The State of
Michigan is planning nine payments of $4.5 million
each from October 1991 to June 1992. We may not
receive the June payment. Tompkins asked Larry
Julien to make some comments about communications
in the cabinet meetings.
Julien reported that the minutes of cabinet meetings
will be distributed to the cabinet members who will
be able to distribute them further. The minutes for
the meetings of October 14, 21, and 28, 1991 are
available now. Copies are attached as Appendix D.
Julien reported that he is concerned about the
method of selecting cabinet members and about the
haste with which decisions about people were made.
He said most people on the cabinet did not have
timely information and did not ask enough questions.
The meetings seemed to be more
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for information than discussion. Having more
faculty members on the cabinet should help this
situation.
6. How was the D.F. Stein "sabbatical" and compensation
awarded? Will there be any more golden parachutes
or early retirement programs?
Tahtinen replied to these questions saying that
Stein was awarded sabbatical leave at full salary
by the Board of Control which is entitled to make
an exception to the normal sabbatical leave policy.
No new early retirement programs or golden
parachutes are planned. Tompkins says we need
better controls on golden parachutes and other deals
which use up university resources. He hopes to
bring back resources from ESI to the university.
Tahtinen says he is vigilant about reexamining the
propriety of previous early retirement actions to
see if any recovery of funds is possible.
7. How much will it cost to operate the new M & M
building, and what will it be used for if it cannot
be fully operational?
Bert Whitten replied that the operating expenses of
the building have been reduced to $380,000/yr. by
not filling maintenance and custodial positions and
by cutting some utilities and other expenses. The
building cost $32 million to build -- $5 million of
State of Michigan general fund revenues and $27
million of bonding revenues. Powers outlined the
use of the new building by saying that materials
research projects will be carried out in the
recently completed section. Instruction will take
place in the remodelled Benedict Building when it
is completed. The Metallurgical and Materials
Engineering Department has the responsibility to
reach new and higher expectations as a result of
occupying this new building.
8. Does the $1.9 million in unfunded equipment
purchases indicate that people who did not stay
within their budget were rewarded?
Powers replies that he did not find any big cost
overruns in the academic units.
9. What sort of economic model was used to project
negative cash flow?
The discussion focussed on statements by Terry
Gardner (Arthur Andersen) that there had been no
cash flow model up to July 1991. Julien commented
that there should be an independent study of the
cash flow model and the assumptions upon which it
is based. There should be weekly updates and the
assumptions should accompany all cash flow
projections. Tompkins agrees.
10. How can effects on academic programs be minimized?
Several faculty members made statements which
indicate that academic programs are already being
affected throughout the university. Without funds
for equipment and supplies, we can't afford our
instruction. Laboratory sections are being
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cut with the result that not all students can enroll
on schedule. This causes dislocation in their
course of study and may require up to one extra year
to complete course requirements. Faculty donate
personal funds to supply some of these needs and for
professional travel. Tompkins said he wants to make
significant reallocation of funds. This should
begin in two weeks -- we cannot wait until next year
to rejuvenate the funding for academic programs.
11. Why was the cash flow problem not identified sooner?
Tompkins said that the management letter prepared
by Arthur Andersen was not made available to the
Vice Presidents or the Board of Control. Only
Operations and Finance Vice President saw the
report. Terry Gardner said the Arthur Andersen &
Co. was hired to do an audit of fiscal year 1990.
They made some discoveries and developed
recommendations about the financial situation and
about changes needed in two Operations and Finance
departments. Terry Gardner wanted two meetings with
the Board of Control. It is the normal expectation
that the Board will receive the management report
as well as the financial report. This expectation
was not realized. Arthur Andersen has been retained
to do the 1991 audit -- $25,000/week for three
weeks.
There was a lot of general discussion about the
salary reductions and layoffs of personnel. General
tenor of these comments by faculty members was that
the faculty is not pleased by evidence of gross
mismanagement by the former administration. The
people responsible for this mismanagement should be
held accountable. So far, it seems as if only
current MTU employees are suffering any
consequences. We have been left with great
expectations about our future and have been left
without the resources to obtain these expectations.
The faculty is not pleased about the hasty manner
by which the decision to reduce salaries and
benefits was made without consultation with those
most affected -- the faculty. It is obvious from
the discussion, that important matters were not even
considered in reaching the decision about salary
reductions. Tompkins response to questions about
how will released time and summer salary be treated
was that these had not been considered. This is not
surprising, since the cabinet members are mostly
people who have twelve month appointments and, do
not ever have released time. Changing a person's
salary rate at the very least affects the amount of
released time available and the planned schedule for
summer activities. This may be accommodated, but
it should have been discussed. Tompkins said that
activities not supported by state funds should not
be affected, but there is no plan. He also said
that he has a moral obligation to return the money
removed by the salary reduction and to correct
salary compression for faculty who have been at MTU
for a long time.
Willie Melton summarized the proceedings by saying
that the Board of Control needs to be more
aggressive in dealing with MTU. The secretary of
the board has heavy responsibility to see that
communication between the board and the faculty
takes
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place. Tompkins said that the board needs more
opportunities to meet with faculty and they need to
become more knowledgeable about MTU. They must take
more responsibility for oversight.
The report of the Budget Liaison Officer was
concluded with a statement by Tahtinen about the
1992-93 budget. This will be developed with input
from all interested persons. He wants to have good
communication and have all proceedings take place
in open fora.
V. Old Business
1. Cynthia Selfe moved and Carl Vilmann seconded that
an ad hoc committee to study departmental governance
be formed. Passed. This committee is charged with
studying the head/chair issue. They will review the
letters from William Powers and develop a proposal
which may include a position description and
selection procedure. The letters from Powers were
attached to the call for meeting No. 185 (pp. 3241-
3242). Members: David Keeble, Michael Mullins,
Theodore Grzelak, Madhukar Vable and Rudolf Greuer.
2. Members were selected for the ad hoc committee on
the Senate constitution and constituency. Randall
Freisinger, chairperson. Members: Anne Marie
LaHaie, Peter Tampas and Robert Keen.
3. The task of developing a method for evaluating deans
and department heads was assigned to the
institutional evaluation committee. Madhukar Vable,
Chairperson. Members: Theodore Bornhorst, Patricia
Moore, Carl Vilmann and John Lukowski.
VI. New Business
1. It was moved by Cynthia Selfe and seconded by
Randall Freisinger that an ad hoc committee to
recommend guidelines for searches be formed.
Passed. Members: Christa Walck, Josiah Heyman,
Carol MacLennan, Cynthia Selfe, Randall Freisinger
and Carl Vilmann. The first committee meeting will
be November 6, 1991 in the Business Administration
Conference Room.
2. It was moved by Terry Sharik and seconded by William
Bulleit that a Board of Control Liaison Committee
be formed. Passed. Members: Randall Freisinger,
David Poplawski, Terry Sharik, Cynthia Selfe,
William Bulleit and Carl Vilmann.
3. Larry Julien reported on the mode of operation of
the weekly cabinet meetings. The procedure has been
as follows:
- Curtis Tompkins makes a statement.
- Vice Presidents make statements.
- Other members may ask questions.
The cabinet is not a voting body. Consensus is
sought on issues which are discussed. It might not
be possible to communicate the results of the
discussions rapidly, but we
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must try. Minutes are being taken by William
Curnow.
4. It was moved by Konrad Heuvers and seconded by
Cynthia Selfe that the faculty representatives on
the cabinet form a committee and report to the
Senate on a regular basis. Passed. A discussion
of cabinet procedures followed. Tompkins said
earlier that he would like three more faculty
members in the cabinet. Three people volunteered
to be nominated from the Senate -- Christa Walck,
Terry Sharik and Theodore Bornhorst. The discussion
concluded with the suggestion that alternate faculty
representatives be selected, so that the faculty
would always be fully represented at cabinet
meetings.
5. William Shapton announced the formation of a
university committee for liaison with ESI. He will
have particulars later.
6. Reports from the Fringe Benefits Committee and the
ad hoc committee on retirement benefits were
submitted. Copies are attached as Appendix E.
VII. Adjournment
The meeting adjourned at 11:38 p.m.
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Pages
3252 Appendix A Letters--Tompkins to faculty,
to faculty, staff and students
3257
3258 Appendix B Statement from the Humanities
Department
3259 Appendix C Statement from the Mechanical
Engineering - Engineering Mechanics
Department
3260 Appendix D Reports about cabinet meetings
to
3265
3266 Appendix E Fringe benefits committee report
to
3268
These pages can be read at the MTU library.
.