BUDGET AND FINANCE COMMITTEE. July 21, Minutes

Transcription

1 BOARD OF GOVERNORS BUDGET AND FINANCE COMMITTEE July 21, 2004 Minutes The meeting was called to order at 11:55 a.m. by Governor Driker in Great Room BC at McGregor Memorial Conference Center. Secretary Miller called the roll. A quorum was present. Committee Members Present: Governors Hardy Bernstein, Driker, Massaron, and Washington; Michael McIntyre, Faculty Representative; Charles Elder, Faculty Alternate Representative; Joshua Smith, Student Representative, Earl Carruthers, Student Alternate Representative Also Present: Governors Dunaskiss, Hillegonds, and Miller, and President Reid; Provost Barrett; Vice Presidents Davis, Hollins, Lessem, and Oliver; Secretary Miller APPROVAL OF MINUTES, JUNE 9, 2004 ACTION: Upon motion made by Governor Massaron and supported by Governor Washington, the Minutes of the meeting of June 9, 2004 were approved as presented. CONTINGENCY RESERVE The report on the Contingency Reserve as accepted as presented. There were no transfers reported. TUITION AND FEE RATES, FY Provost Barrett began the presentation on tuition and fees by discussing the State s reduction in appropriation, and the promise of a return of 3% of the reduction for the current fiscal year, including restoration of the base budget by that same 3%, if the university holds undergraduate tuition increases to the inflation rate. The rate of inflation has not yet been decided, but at this point, the legislature is discussing rates between 2.3 and 3.0%. Because of the continuing uncertainty on what the final number will be, the Provost has prepared budget materials based on a 2.4% increase to undergraduate tuition. She also indicated that the Board of Governors could, after discussion, decide to 2628

2 2629 Budget and Finance Committee raise tuition by 2.8%, or make it contingent upon action taken by the state. Actions have differed at other state institutions, within this range of 2.4 to 2.8%. Governor Driker asked the implications of the difference between 2.4 and 2.8%, and whether the decision could be flexible to accommodate what the Legislature approves. Provost Barrett responded that the difference between these two tuition rates is roughly $200,000. She expressed reservations about a decision that might call for retroactively billing students, which causes both technical and good will problems. President Reid asked Vice President Harvey Hollins to comment on the reaction of the Governor and the Legislature to these varied rates, and whether the university would face any penalty for utilizing a 2.8 versus a 2.4 inflation rate. Vice President Hollins indicated that the Legislature continues to wrestle with the rate, but that it is most likely to be 2.8%. In preliminary discussions that Vice President Hollins had with the State s Budget Director, the university would not be penalized by the governor for using the rate of inflation set by the legislature. President Reid added that in his view, if there was uncertainty regarding the inflation rate at this time, he would recommend that the Board approve the higher rate of 2.8%, and give the university the prerogative of reducing it, rather than trying to come back later to increase it. He further commented that while the amount of money generated by the difference is not large, the governor s pledge is much more important. If the pledge is broken, the university will lose approximately six and a half million dollars. The university is moving forward assuming that these dollars will be restored. The impact on the students of the difference between these two rates is about $5.00 per credit hour. Professor McIntyre asked about the method the university would use to handle adjustments in the inflation rate that might occur after the tuition recommendation is adopted. President Reid indicated that he would ask Vice President Davis to recommend the most fair method for the students. Governor Massaron indicated that he felt the Board had made a commitment to 2.4% and that they should honor that commitment. Governor Dunaskiss added that, from a student s perspective, they should know up front the maximum they are going to need to pay, so that they can plan accordingly. She indicated that the university should plan on what would be most economic. Governor Washington indicated her unease with the pledge that the Board had committed to earlier in the year, and asked for clarification from Vice President Hollins on the language of the pledge, and what happens to the pledge if the legislature changes their mind on the rate of the inflation. Vice President Hollins indicated that at this moment in time, there is general consensus to uphold the pledge; it is the inflation cap that is at issue. Governor Bernstein also indicated his support of the Board s original commitment to 2.4% for undergraduates; and that the Board had given its word, and they should stand

3 Budget and Finance Committee 2630 by that commitment. He further stated that should the governor or the legislature not live up to their part of the bargain, then it would be appropriate to come back to the Board for further discussion at that time. Governors Hardy and Driker asked for clarification on what the resolution stated. President Reid indicated that the Detroit CPI of 2.4% was what was used when the resolution was drafted, contingent on the 3% rebate from the state. Governor Hardy commented that the Board was agreeing to whatever number was identified by the state as the inflation rate, rather than a certain number, and that the Board was making a commitment to a certain tuition number in exchange for the 3 percent rebate. She believes that as long as Board uses the number settled on by the legislature, the Board is adhering to its commitment. Vice President Hollins read from the resolution, which states: The Wayne State Board of Governors will limit the FY resident undergraduate tuition increase to the rate of inflation or no lower than 2.4%. He further commented that the 2.4% was a floor, to provide the university with some flexibility. Governor Driker asked that a motion be put on the floor for discussion. Governor Hardy moved that undergraduate tuition be set at 2.8%, and be adjusted to whatever the inflation rate set by the Legislature, when it concludes its deliberations on the budget. Governor Driker seconded the motion. Governor Washington asked how students would be notified; Vice President Davis indicated that bills are sent to students in the middle of August, and that a letter of explanation could accompany the bill. President Reid asked if Governor Hardy would include a provision authorizing the President to reduce the tuition rate, should the legislature come in below 2.8%, to allow action to be taken on the final tuition rate without calling for another meeting of the Board. Governor Bernstein spoke against the motion, and believes that acting on 2.8% before the legislature finalizes the budget gives the legislature an opportunity to say that the university violated its pledge, and that this weakens the university s credibility. Governor Massaron also spoke against the motion, and believes that there is room within the current budget to keep the undergraduate tuition rate at 2.4% and the graduate tuition rate at 8.5%. He further indicated that he personally felt the Board had committed to a 2.4% tuition rate for undergraduates.

4 2631 Budget and Finance Committee Professor McIntyre indicated that he would abstain from the vote, as the Budget Committee did not address this issue, and that he didn t believe that the extra.4% would have a major impact on the University. President Reid asked for some options that would help get some sort of unanimity on the tuition recommendation. Vice President Hollins indicated that the legislature was targeted to make decisions on this issue in mid-august. President Reid asked the Board to consider the option of 2.4% now, and provide the President with the ability to increase it to 2.8%, if an adjustment is made in Lansing. President Reid also commented that the $200,000 would make a difference, and is not an insubstantial amount of money. Governor Driker also discussed the impact of the $200,000, which could go to fund a few new faculty members or fix a crumbling laboratory, and that the university is still, by far, the best value in the state in terms of an education at a top-tier research university. He added that the world is getting more competitive, and that the university s students are entitled to the very best education possible. Governor Dunaskiss spoke in support of a 2.8% increase, and indicated that had the rate of inflation of 2.8% been set by the legislature when the initial agreement was made, it would have been supported by the Board. Professor Elder thanked Governor Driker for his comments, and added that the university is in the current situation partially because, for a number of years, the university adopted tuition increases well below what other institutions were imposing in the state. He also believes the university remains a tremendous bargain. Governor Miller asked whether it was possible to delay the vote until the legislature acts, and then call a special meeting to consider tuition and budget. Governor Driker suggested that the Board needs to act on the tuition and budget recommendations now, and that $200,000 out of a $450 million budget should not delay the decision. Governor Driker suggested that there appeared to be consensus for 2.4% now, and should there be a move by the legislature to 2.8%, President Reid could contact the Board for either a special meeting or a telephone vote. Governor Washington offered a substitute motion, and moved that the Board adopt a 2.4% increase in undergraduate tuition, with the possibility of raising it to 2.8%, depending on the vote of the Legislature, and that the administration be given the authority to raise undergraduate tuition up to 2.8% once the Legislature has acted. Governor Driker asked Governor Hardy if she accepted the substitute motion as an amendment. Governor Hardy raised concerns about the confusion this motion might raise with students, and when a final action from the Legislature might come forward. Vice President Hollins indicated that final action will likely occur by mid-august; Vice President Davis indicated the need to process bills for students, and the subsequent

5 Budget and Finance Committee 2632 financial aid processing, before the last week of August, which requires a rate for tuition be set. President Reid suggested that the Board move forward with 2.4%, to show unanimous support of the Board. He reiterated that his larger concern is for the 3% rebate from the state. Both Governor Hardy and Governor Hillegonds restated their support for a 2.8% rate. Governor Hillegonds indicated his interest in hearing from students and faculty about the trade-offs they face with shrinking budgets, its effect on class size, and other pressures in the classroom. He believes that there will continue to be concerns about the effect on the quality of education, and that the extra $200,000 built into the base would be helpful. Professor McIntyre expressed his support for Governor Washington s substitute motion, which would allow the administration to act in a prudent fashion, once the Legislature takes final action. Governor Bernstein would support a 2.4% increase, with the understanding that any further increase would be addressed by a telephone vote of the Board. Governor Hardy accepted Governor Washington s substitute motion, and the Board took the following action: ACTION: Upon motion made by Governor Washington and supported by Governor Massaron, the Budget and Finance Committee recommended that the Board of Governors set FY undergraduate tuition rates at levels that reflect an average increase of 2.4 percent over FY rates for undergraduate students. An increase of 2.4 percent is also set in both the registration fee and the omnibus fee for all students. In addition, if the Legislature sets the rate of inflation as part of its bargain with the universities at higher than 2.4%, the Board empowered the President to contact the Board for a telephone vote to consider whether it wants to increase tuition to whatever rate of inflation the Legislature then sets. Further, the Board of Governors authorized the President or his designee to make adjustments to the rates for special programs or where otherwise appropriate. The motion carried. The Board then considered graduate tuition rates. The Provost identified the background material relevant to the graduate tuition proposal. The administration recommendation is for an 8.5% increase to graduate tuition, which will leave the university 8 th in the State, and behind all of the other research universities. This tuition level will support programmatic needs and help maintain the quality of the university s programs. Professor McIntyre indicated his support of the proposed graduate tuition rate, but he suggested that the university needs to better understand the impact of increases in

6 2633 Budget and Finance Committee graduate tuition on the competitive advantages that professional schools may have in the market, both nationally and locally. He believes that this rate of increase will have a negative impact on that advantage for the Law School, and suggested that this issue be considered next year. There was some additional discussion about whether or not in-state and out-state tuition increases should be at the same rate. Governor Bernstein asked how this issue is handled at other institutions. Professor McIntyre indicated that some institutions may increase in-state tuition but not out-state tuition because of the higher tuition rate already paid by out-of-state students. Provost Barrett indicated that Wayne State s percent of out-of-state graduate students is relatively low, and is primarily composed of international students who are getting institutional financial support. The other component of out-ofstate graduate students are largely in the Medical School and the Law School. President Reid confirmed with the Provost that it is not unusual that students enrolled in doctoral programs are supported by grants that advance the university s research enterprise, through graduate assistantships. Governor Hardy then followed that if the university increases out-of-state tuition for a graduate student whose tuition is supported by an investigator through a research grant, then the grant covers the increased cost for tuition. Governor Driker called for the question. ACTION: Upon motion made by Governor Washington and supported by Governor Hardy, the Budget and Finance Committee recommended that the Board of Governors set FY graduate tuition rates at levels that reflect an average increase of 8.5 percent over FY rates for graduate students. The motion carried. GENERAL FUND BUDGET Provost Barrett presented an overview of the administration s budget recommendation. This presentation was also done for the Academic Senate Budget and Policy committees. Provost Barrett identified one change in the Budget related to indirect cost recovery funds. In FY 04, 3% of indirect cost recovery funds were earmarked for the Vice President of Research, in effect replacing some general fund support that had been cut from the Research budget. The Senate objected to earmarking any level of funds for a particular unit, and felt that the Division of Research should need to follow the same criteria as all other units in the university in preparing budget requests. There was general agreement about the amount of money budgeted for the Division of Research, but the Provost agreed that no funds will be earmarked specifically for that Division. Provost Barrett also commented on the share of the budget allocated to schools and colleges. She shares the concern of the Academic Senate that she would like to see more progress in this area. There have been some internal reallocations to move

7 Budget and Finance Committee 2634 resources to various schools and college that have occurred over the past year. She discussed some of the various funds that have contributed to this resource reallocation, including scholarship funds from Financial Aid, portions of the omnibus fee, program enhancements, and other funds from the Office of the Provost. Professor McIntyre expressed his appreciation for Provost Barrett s comments, and is pleased with the resolution on the question of earmarking. He expressed disappointment in the progress for the percentage of the budget allocated to schools and colleges. There have been some improvements over time, but he believes this is a disturbing trend, and affects the number of tenure-track faculty hired by the university. The level of hiring of tenure-track faculty has not kept pace with the areas of growth in the university. Governor Massaron raised questions about the budget management procedures, and whether they were changed since the last budget was adopted. He also raised the issue of the Board s previous request for quarterly reports regarding actual versus budgeted expenditures. Budget Director Rose identified the budget management procedures in the budget book. Some of the changes include the following: Funding method for schools and colleges, which changed from an enrollment-based method, to a base budget which includes a number of factors. Spring/Summer program funding treated differently than tuition revenue, it is first used to cover direct costs for spring/summer programs, and then a portion used to cover year-round university expenditures Distribution of indirect cost recovery now reflects new distribution system Budget management authority outlines day-to-day elements of the budget, and the line authority for deans, vice-presidents and units heads. This section also discusses the policy on unspent balances, and the % for carry forward. Ms. Rose also discussed the request for quarterly reports on actual to budgeted expenditures, and confirmed that those will be presented to the board on a quarterly basis. Governor Massaron stressed his interest in having projected actual expenses included in the budget document, which will allow the Board the ability to see how schools and colleges are spending money. Professor McIntyre asked that the quarterly reports also be provided to the Academic Senate; Governor Driker asked that the Budget Office send a copy of these reports to the Senate. The Committee then took the following action: ACTION: Upon motion made by Governor Washington and supported by Professor McIntyre, the Budget and Finance Committee recommended that the Board of Governors approve the proposed FY 2005 General Fund budget, its projected revenues and expenditures, and the budgets for individual university units and specifically funded programs. The Committee also recommended that the Board of Governors authorize the

8 2635 Budget and Finance Committee President to implement the budget management procedures, and budgetrelated policies provided in the detailed budget document, with such modifications as may be deemed necessary during the fiscal year. The motion carried. Governor Driker then noted that the committee s earlier action on tuition did not include language related to the registration and the omnibus fee, and asked for a motion to approve those increases. ACTION: Upon motion made by Governor Massaron and supported by Professor McIntyre, the Budget and Finance Committee recommended that the Board of Governors include in its earlier resolution for tuition the same provisions for an increase of 2.4% in both the registration fee and the omnibus fee for all students. The motion carried. JOSEPH F. YOUNG, SR. PSYCHATRIC RESEARCH AND TRAINING PROGRAM PROPOSED BUDGET, FY2005 Vice President Oliver indicated that this program provides service to approximately 80,000 patients each year, largely within the metropolitan Detroit area. Most of these patients are either uninsured or underinsured. Vice President Oliver indicated that this program is funded separately by the state legislature, which has not yet enacted their budget for the upcoming year. Vice President Hollins indicated that the legislature is still discussing the level of funding for this and other programs, and that the governor had recommended an 8 percent decrease in funding from last year for this program. Vice President Oliver stressed the importance of this program for the community. ACTION: Upon motion made by Governor Hardy and supported by Governor Washington, the Budget and Finance Committee recommended that the Board of Governors approve the proposed FY 2005 budget for the Joseph F. Young, Sr. Psychiatric Research and Training Program to be allocated to program areas as follows: Program Area FY 2004 Approved Budget FY 2005 Proposed Budget Variance $ % Research $3,259,425 $ 2,789,444 ($469,981) -14.4% Facility Cost 1,089,395 1,090, % Instruction 968, ,702 ( 112,876) -11.7% Public Service 403, , , % Total $5,720,400 $5,262,800 ($457,600) -8.0%

9 Budget and Finance Committee 2636 The Budget and Finance Committee also recommended that the Board of Governors authorize the President and his/her designee to evaluate performance of each program area of the Joseph F. Young Sr. Psychiatric Research and Training Program on a continuing basis and make such adjustments as deemed necessary in the distribution of FY 2005 funding to these programs. The motion carried. RESEARCH AND EXCELLENCE FUND CENTERS AND INSTITUTES PROPOSED BUDGET, FY 2005 Vice President Oliver outlined the budgets for several centers and institutes that were initially funded by line item by the State Legislature, whose funding now has been rolled into the university s general fund appropriation. In prior years, these budgets were submitted at a separate time of year than the university s general fund budget, but will be presented at the same meeting as the general fund budget from this year forward. ACTION: Upon motion by Professor McIntyre and supported by Governor Hardy, the Budget and Finance Committee recommended that the Board of Governors approve the proposed FY 2005 budget for the following allocations to the Research Excellence Fund (REF) Centers and Institutes: Centers and Institutes FY 2004 Approved Budget FY 2005 Proposed Budget Variance $ % Center for Molecular Medicine and $2,093,190 $2,051,326 ($ 41,864) -2.0% Genetics Institute for Manufacturing Research 1,681,615 1,647,983 ( 33,632) -2.0% Institute of Environmental Health Sciences 1,441,565 1,412,734 ( 28,831) -2.0% REF Administrative Support 327, ,974 ( 6,55) -2.0% Total $5,543,894 $5,433,017 ($110,877) -2.0% The Committee also recommended that the Board of Governors authorize the President or his/her designee to evaluate performance of each of the REF Centers and Institutes on a continuing basis and make such adjustments as deemed necessary in the distribution of FY 2005 funding to these programs. The motion carried. CONSTRUCTION PROJECTS In the interest of time, Governor Driker asked Vice President Davis to report on four of the remaining six items as one group of construction projects, which could be approved by one motion of the committee. Presented for approval were:

10 2637 Budget and Finance Committee Matthaei Athletic Complex Stadium Auxiliary Building Renovation: Cost Increase Authorization Chatsworth Tower Apartments Modernization of Elevators Helen L. DeRoy Apartments Modernization of Elevators Surface Parking Lots Construction/Upgrades ACTION: Upon motion made by Governor Massaron and supported by Governor Hardy, the Budget and Finance Committee recommended that the Board of Governors: 1. Authorize the President or his designee to increase the available funding for the renovation of the Stadium Auxiliary Building by $100,000, thereby causing an adjusted cost not to exceed $925,000. Funding for this increase will be provided from reserves set aside for deferred maintenance projects. 2. Authorize the President or his designee to proceed with the design, solicitation of bids and the award of contracts for the modernization of the passenger and service elevator systems at Chatsworth Tower Apartments, for an amount not to exceed $825,000. Funding for this project will be provided from Housing Authority reserves. 3. Authorize the President or his designee to proceed with the design, solicitation of bids and the award of contracts for the modernization of the passenger and service elevator systems at Helen L. DeRoy Apartments, for an amount not to exceed $885,000. Funding for this project will be provided from Housing Authority reserves. 4. Authorize the President or his designee to proceed with the design, solicitation of bids and the award of contracts to construct three new surface parking lots north of Parking Structure #5 at Anthony Wayne Drive near Palmer, west of Cass Avenue between York and Antoinette, and at the intersection of Woodward Avenue and Harper Avenue, and to provide improvements to Parking Lot #53 located east of Third Avenue between Warren and Hancock for a project cost not to exceed $865,000. The scope will be funded with reserve funds from the Parking and Transportation Services Department, an auxiliary operation. The motion carried. PARKING LOTS/STRUCTURE IMPROVEMENTS Vice President Davis described several projects and repairs to various parking lot and/or structure improvements included in this recommendation including upgrades to the lots at C.S. Mott Center and 110 East Warren, repairs to Structures 2 and 4, and elevator

11 Budget and Finance Committee 2638 upgrades at Parking Structures 1, 2 and 5, all for a cost not to exceed $2.8 million. Funding for the entire cost of these projects includes savings from various parking projects approved in July of ACTION: Upon motion made by Governor Massaron and supported by Professor McIntyre, the Budget and Finance Committee recommended that the Board of Governors authorize the President or his designee to proceed with the design, solicitation of bids and the award of contracts for the consolidation and improvement of the C.S. Mott Center and 110 East Warren parking lots, structural repair at Parking Structures 2 and 4, and elevator upgrades at Parking Structures 1, 2 and 5 for a cost not to exceed $2,800,000. Funding for these projects will be provided from savings on the parking projects approved by the Board of Governors at the July 31, 2002 meeting which were funded from two sources including $8,500,000 from bond proceeds generated through the sale of general revenue bonds during the summer of 2002, and $1,000,000 from the University Parking Authority reserves. The additional scope will be completed within the original approved $9,500,000 budget. The motion carried. CHEMISTRY BUILDING LABORATORY RENOVATIONS Vice President Davis briefed the Board about adjustments in the proposed upgrades to research laboratories in the Chemistry Building, which is part of the larger project to begin upgrades to research space on the main and medical campuses. Upon completing the evaluation of the work to be done in the Chemistry building, the initial $15 million allocation would not provide sufficient funding to improve both the infrastructure and complete some of the deferred maintenance issues with the building. It was also not cost effective to begin work on the building now, and then come back in two years and finish work that would have been less expensive to complete at one time. Vice President Davis worked with Provost Barrett on creating a package of additional funds needed to make the presented repairs and recommendations. ACTION: Upon motion made by Governor Hardy and supported by Professor McIntyre, the Budget and Finance Committee recommended that the Board of Governors authorize the President or his designee to design, solicit bids, and award contracts to renovate research laboratories on floors one through four in the north half of the Chemistry Building for a project cost not to exceed $25,000,000. Funding for this project will be provided from two sources. First, $15,000,000 will be allocated from bond proceeds generated through the sale of general revenue bonds, Series 2004 as authorized by the Board on October 1, 2003 and sold in January Second, $10,000,000 will be funded from reserves currently set aside for deferred maintenance projects, as well as funds to be allocated to deferred maintenance during FY 04 and FY 05. The motion carried.

12 2639 Budget and Finance Committee ADJOURNMENT There being no further business, the meeting was adjourned at 1:30 p.m. Respectfully submitted, Julie H. Miller Secretary to the Board of Governors