President's Budget Advisory Committee

Minutes May 11, 2000

Members Present

Staff Present

Members Absent

Staff Absent

Guests Present

Agenda

APPROVAL OF THE AGENDA

Larry Schlereth brought the meeting to order at 8:08AM. Kathryn Crabbe moved and Crystal Shrouf seconded a motion to approve the proposed agenda. The agenda was passed by consensus.

APPROVAL OF THE MINUTES

Schlereth asked for a motion to approve the minutes of the April 27, 2000 meeting. Crabbe moved and Jim Meyer seconded the motion. The minutes were approved with no "no" votes. Those not present at the April 27, 2000 meeting abstained.

EMERGING UNIVERSITY-WIDE PRIORITIES

Schlereth announced that some adjustments had been made to the University Reserve list since the last meeting. Funding for the North Entrance had been deleted based upon the discussion at the last PBAC meeting.

Schlereth explained that Employee Professional Development includes faculty, staff, and administrative employees. It encompasses technical training, travel, and conference attendance expenditures. Bernie Goldstein and Larry have discussed the possibility of establishing an "umbrella" committee to coordinate or synthesize the work of both the Faculty Development Committee and the Staff Development Committee.

Other issues noted included Public Affairs and fund raising within the Executive Office, staffing in Student Affairs, OEE in Academic Affairs, and IT and support in Administration and Finance.

Dennis Harris asked whether it was the intent to fund the University Reserve "off-the-top" through the Marginal Cost Formula. Schlereth responded in the negative, saying that PBAC must first determine whether the items were truly "university-wide" and then rank those items that qualified in the order of their importance.

STRATEGIES — FUNDING UNIVERSITY-WIDE PRIORITIES

Schlereth introduced the topic by noting the difficulty of prioritizing items identified as University-Wide and then finding funding sources for those priorities. Goldstein asked whether this category includes sick leave and legal expenses. Steve Wilson asked whether the sick leave category applied to all units. Schlereth answered that the issue primarily applied to Academic Affairs, for which about $500,000 should be budgeted. If other units were included, the amount should be raised to $650,000.

Harris said he had been reminded by Bill Poe that at one point it had been the practice of PBAC and the President to exclude Direct Instruction (by which he meant that part of the Marginal Cost Formula identified as Faculty Salaries, Faculty Benefits, Teaching Assistants, and Instructional Equipment), which is 47% of the Total Marginal Cost, from the charge back to divisions for funding the university's reserve and university-wide commitments. Should PBAC consider reestablishing this practice, recognizing that it would substantially impact remaining portions of the formula? Schlereth responded that the President was committed to the current formula; as a result, such a discussion would not be beneficial.

Schlereth then turned to the various strategies that had been identified. One strategy would be to redeploy Salary Savings resulting from vacated positions and positions filled at less than the budgeted amount. He noted the problem of meeting the costs associated with buying out accrued vacation time of those who resign their position. Victor Garlin asked what the current policy was, and Schlereth answered that currently salary savings stay in the division that generated those savings; below the divisional level, each division handles salary savings differently. Garlin followed up by asking whether, within Academic Affairs, that meant the decision was up to the Provost, in consultation with the Vice President's Budget Advisory Committee (VPBAC). After Schlereth responded affirmatively, Garlin asked what the policy was within the different schools. Schlereth stated that the practice varies among the schools, that the issue is in transition, with on-going salary savings swept to the VPBAC for reallocation by the Provost. Garlin asked whether those salary savings are available for university-wide costs. Schlereth said they could be, that they were one potential source. Goldstein stated that so far we haven't done that; instead, for example, it has been used for the costs of hiring new faculty. Garlin stated that he would have a problem if savings from the retirement of Full Professors and the hiring of Assistant Professors resulted in money funding the Music Center, for example. Schlereth reiterated that it was the practice of the campus to leave these savings in the division; Goldstein stated that there was no plan to change this practice. Crabbe stated that, if the Faculty decided this was a priority, Academic Affairs might use these savings to fund the center. Goldstein noted again that this was a decision for Academic Affairs, in consultation with the VPBAC.

Schlereth observed that professional development falls logically into two categories -- faculty and non-faculty. It would be possible to assign one to Academic Affairs and the other to Administration and Finance, in which case Academic Affairs would find the funds for faculty travel. Bill Barnier noted that, with all the retirements, there could be substantial savings; however, it is possible that accrued vacation time would consume those savings. Schlereth responded that the CSU used to be far more lenient, but now the restriction on no more than 440 hours of accrued vacation time is strictly enforced. SSU provided its employees one year's notice, they it wiped out excess time except in a few extremely rare instances. Scott Gordon remarked that the cap appeared rather high and wondered why employees find it difficult to take their vacation time. Garlin asked whether that was because of the workload in Administration and Finance, to which Schlereth answered that it was across all divisions.

Schlereth then turned to the strategy of Indirect Cost Recovery Revenue, noting that this was primarily an issue for grants and contracts, where SSU's average rate was very low, about 9%, when Federal guidelines permitted as much as 40%. Harris asked how difficult it would be to raise the rate. Goldstein responded that this would be quite difficult. In some cases, the project is so fundamental to the institution's educational mission, especially those involving K-12 education, that we must continue the project even though the real cost is 15% and we are only receiving 9%. One answer, he continued, is more grants, especially in the sciences, from agencies such as the National Institute of Health (NIH) and the National Science Foundation (NSF). Katie Pierce stated that federal agencies have substantially lowered their indirect cost recovery rates; the Department of Energy (DOE) and the Department of Human Services now want a rate of 8% or less and are even demanding a share back. Harris asked how the university could afford a program where the real costs were 15% and the reimbursement was only 8%; isn't the campus guilty of gifting public funds? Crabbe responded that the campus was trying to build grants and contracts, to establish a track record that would result in more and larger awards, but we do need to look at how much really low cost work we do. Harris responded that he had no problem with funding based upon programmatic decisions but a serious problem with hidden, unrecognized, funding subsidies. Rank Link noted that both Affirmative Action and Upward Bound were part of the mission of the campus. Barnier asked how this is reflected in our budget and audit statements. Schlereth said first he wanted to clarify the indirect cost of grants and contracts; this is 8 to 9%, not 15%. The real issue is how the indirect cost recovery is distributed. The President's practice has been to distribute all that amount above the actual indirect costs to Academic Affairs. However, Schlereth continued, at present grants and contracts pay nothing for technical support, little for rent (space, furnishings, and utilities), and little for the administrative overhead represented by the time of people like Katie and Bernie. Garlin asked whether this meant that Administration and Finance was subsidizing Academic Affairs. Schlereth answered no doubt it was, but so was the Provost's Office. Garlin asked whether this was because the current overhead rate was too low. Schlereth said yes. Goldstein said there will be a summit on this. Any good university must support grants and contracts for faculty, and for administrators and staff. He noted that the University of California keeps indirect costs in its grants.

Schlereth then turned the committee's attention to the strategy of utilizing Growth Money to fund university-wide priorities. He noted that those funds are reduced by various mandates, and that all that is left is just enough to cover the actual costs of enrollment growth. The Marginal Cost Formula is insufficient for the actual costs. Barnier asked whether there had been any progress in decreasing the system-wide mandates. Schlereth answered that there has been no movement at the system level from the marginal cost formula. Schlereth noted a recent memorandum informed the campuses that there could be another $1 to 3 million in increased system-wide costs. Link observed that growth funds do provide some resources; otherwise, we would be eating into existing resources.

Schlereth then turned to Trade-Offs within the Divisions as a funding strategy. He explained that this would require prioritizing existing functions within divisions, determining which functions were more important, then trading reduced resources for a function within one division for increased resources to a function within another division. For example, the campus could decide to give up or reduce the Career Center or Environmental Health and Safety and make those resources available somewhere else.

Schlereth next raised the possibility of External Funding as a strategy. The campus has had extraordinary success in raising funds for may issues. With this strategy, the task would be identifying issues with donor appeal. Meyer noted that the campus does donor-centered fund-raising and that it takes time to redirect donor interests. Most rewarding in the long run is planned giving. The nation is about to undergo the largest transfer of wealth in its history, with some $15 trillion shifted from the World War II generation to their heirs. Our challenge is getting our fair share and keeping the funds local. Crabbe asked which of the identified items would have the most external appeal. Meyer answered faculty development, diversity - at least in some areas, merit scholars, potentially the University Center, and, sometimes, instructional equipment.

Reengineering within the Divisions was discussed next. Schlereth began by noting how difficult this strategy was, how hard it is to change, particularly when 80% of the budget is tied to people. Crabbe noted that when Universities actually save dollars by "re-engineering," they virtually always save them by changing administrative or "business" processes, not by changing direct instruction or even curriculum. Schlereth stated that it was rarely tried, in part because there are sacred traditions - tenure, for example - and in part because there are academic programs that are not cost-effective but still required for educational purposes. Crabbe said FIPSE funds hundreds of grants each year on this issue, but they never result in instructional cost savings. Goldstein noted that distance learning appealed to some as a cost-effective alternative to traditional instruction. However, the start-up costs are significant, and there is not a lot of difference in the quality of learning. Gordon asked whether the WTU (Weighted Teaching Unit) load of faculty was increased some years ago. Garlin replied that there had been a contract agreement in 1992 to reduce the load from 12 to 9 WTUs, but the CSU and the CFA agreed to hold that in abeyance with the onset of recession and reduced budgets. Gordon asked how one measures teaching productivity -- more classes per faculty, less pay for faculty, more students in classes, or more classes. Crabbe answered that such measures as increased graduation rates and decreased attrition were utilized. Goldstein noted that teaching and learning are not really tangible products. For instance, students graduate with more units than the minimum required. Would better articulation with the community colleges improve this? Is it wrong that students explore a variety of fields before settling upon a given major? Garlin rejected the assumption that students take too long to graduate. Experimentation, exploration, changing of majors is all part of the educational process and should be encouraged. Shrouf noted that lots of CSU students must work; they can't graduate in the ideal four-year period. Garlin stated that the issue of productivity is political in nature, not scientific. Education's inputs (number of classes taught) can be measured by its output; learning and enlightenment can not. Productivity measures are as inappropriate for education as they are for medicine. This is a political game that has nothing to do with what we do. Garlin then noted that PBAC was the only body upon which he served as a representative of CFA. As a result, he wanted to note CFA's concern with reengineering in general and with the rate of increase in MPP salaries in particularly. CFA has concluded that managers' salaries have increased at a statistically significant higher rate than those of faculty have. CFA believes faculty and manager salaries should increase at the same rate.

Schlereth said there is another strategy, Outsourcing business services to the private sector. Landscaping, housekeeping, payroll, and food services, for instance, have all been outsourced at some institutions. The University of Pennsylvania is a leader in this strategy - a strategy that Schlereth personally opposes. However, there are many vendors willing to run our housing, reprographics, landscaping, and health services. Barnier remarked that both the Engineering Science program and Extended Education are examples of reengineering and outsourcing.

The discussion then turned to Public Partnerships as a strategy There was a possibility of a partnership with the Vallejo schools similar to that in Ukiah. There had been efforts with the local schools and community colleges to share administrative costs.

The strategy of approaching the CSU Trustees was also discussed.

Lastly, Schlereth mentioned the strategy of Reducing/Eliminating Non-Mandated Programs/Services within the Divisions. He said he did not perceive many significant opportunities that would result in savings. Garlin said this is destructive to morale, lots of pain for those involved, and can result in hurtful decisions; it ought to be the lowest priority, only employed in the last instance. Gloria Ogg agreed, saying she would not support reengineering activities designed solely to reduce the budget in a given area; instead, reengineering should be a fact of life. She was concerned that, by dismissing reengineering, the campus may not be continuously looking critically at what we do. Assessment needs to be built into what we do -- greater efficiency, greater quality, and greater collaborative relationships. Goldstein commented that whatever change takes place must account for the articulated academic values of the institution. Gordon said it was difficult to know what was going on around campus; as a result, he had no idea what might be eliminated or reduced to create savings. Barnier noted his service on CRC its first two years when there was substantial reengineering as well as the recent reengineering between Academic Affairs and Administration and Finance. He asked whether there had been any assessment of the impact on morale, productivity, or savings. Schlereth answered that there had been no formal assessment, except through the audit and QI efforts. He said attrition rates had been relatively low, and morale appeared to be good. One example was the change to night custodial services. This saved $200,000, but night was not the most pleasant time to work.

SUMMER MEETING SCHEDULE

Schlereth called member's attention to the schedule of summer meetings:

Wednesday, July 19, 2000, from 8:00 to 10:00 am in the Terrace Room; and Wednesday, August 9, 2000, from 8:oo to 10:00 am in the Terrace Room.

He stated that he would work with Judith Hunt to appropriately compensate faculty not working during the summer and would cover the actual travel costs of students.

ITEMS FOR THE GOOD OF THE ORDER

Goldstein announced that he would be back on campus Tuesday, May 23rd, without the shocking pink cast he had been wearing since his accident

Schlereth adjourned the meeting at 9:55 am.

Minutes prepared by Dennis Harris
May 22, 2000


PBAC minutes 1999-2000
Updated 2007-12-14
afd.webcontact@sonoma.edu