Oregon State Board of Higher Education
Joint Committees on Budget and Finance and System Strategic Planning
Mount Shasta Complex - College Union
Oregon Institute of Technology

October 19, 2001

Minutes

Committee members present: Leslie Lehmann (co-chair), Geri Richmond, Don VanLuvanee, Erin Watari, Bill Williams (co-chair) Phyllis Wustenberg, Tim Young

OUS University Presidents: Dan Bernstine, PSU; Martha Anne Dow, OIT; Paul Risser, OSU; Betty Youngblood, WOU; Elizabeth Zinser, SOU

Chancellor's Office staff: Chancellor Joe Cox, Tom Anderes, Shirley Clark, Robert Dryden, and Diane Vines

Meeting attendees also included other institutional representatives, other members of the Chancellor's Office staff, and interested observers.

Call to Order/Roll Call

The meeting was called to order at 9:15 a.m. by Director Williams, and roll call was conducted by Board Secretary Vines.

Changes in the meeting agenda.

Mr. Williams noted that Director Lehmann would co-chair the meeting. He explained that the Chancellor's goals would not be heard and the presidents' goals would be moved to the end of the agenda in order to allow enough time for presidents to make their presentations. There were no objections to reordering the agenda.

Dr. Richmond suggested another change for the agenda. She requested the Board discuss the Governor's reduction planning process prior to discussing the Veterinary Medicine program facility since the budget could impact that decision. Mr. Williams asked Vice Chancellor Anderes to provide a summary.

Approval of July 20, 2001, meeting minutes.

Ms. Lehmann moved and Mr. VanLuvanee seconded approval of the July 20, 2001 meeting minutes as submitted. The motion unanimously passed.

Governor's reduction planning process and time line

Vice Chancellor Anderes distributed a memorandum from the Governor's office regarding the reduction process and copies of OUS documents that were sent to the Administrative Council, presidents and others, framing the process for the System. He stressed that these are only preliminary means of gaining information and they were working through all approaches with the universities at a System level. He stated that staff will be working on providing additional written information to the Board and will arrange a conference call briefing prior to the November 16, 2001, Board meeting.

Vice Chancellor Anderes stated that the Governor has identified reductions or deficits for this biennium of $300 million and, for the next biennium, potentially $700 million. The Governor has established a plan to address both immediate and long term deficits and that all state agencies will go through this exercise. Vice Chancellor Anderes pointed out that a two percent reduction has already been applied. In discussing the budget options, Vice Chancellor Anderes explained that administrative cost is defined as institutional support, and that program cost reductions will have the greatest impact if they become permanent. Chancellor Cox noted that programs include all activities receiving General Fund support.

Responding to a question by Dr. Richmond, Chancellor Cox confirmed that reducing the most recent enhancements would fall under the permanent program reduction plan. Vice Chancellor Anderes noted that the Board must determine what level of priority it will place on individual programs. He explained that the permanent program reduction plan must be submitted to the Governor by November 16, 2001. The Governor will develop his own plan after reviewing proposals submitted by all state agencies but, if the deficit increases beyond the current projection, different criteria will be established followed by a special session. Vice Chancellor Anderes noted that the deficit projections continue to increase and the program reduction plan will become permanent in this biennium.

Chancellor Cox noted that there is a difference of opinion among the experts regarding the severity of the deficit. Vice Chancellor Anderes stated that, according to information received from the Governor's office, the total State deficit estimate is $500-600 million in this biennium. He noted, however, that not all state agencies will be held at the same reduction percentages and, therefore, a greater percentage reduction would fall to other state agencies. Vice Chancellor Anderes explained that the options being reviewed are at the System level and not as individualized plans for each campus.

Vice Chancellor Anderes stated that they will not be making cuts across-the-board and the core missions of instruction, research and public service will be reviewed. He cautioned that it may become increasingly more difficult to balance the priority of access with that of quality. If university enrollment is reduced, the logical alternative for students would be community colleges, which, in turn, puts a greater pressure on the community college system. Dr. Richmond expressed concern that requiring the universities to prioritize their own budgets could backfire. Vice Chancellor Anderes noted that programs supported by the public or the legislature probably would receive more scrutiny by outside parties.

Provost John Moseley pointed out that the System is unrealistically being asked to continue accepting students at ever decreasing amounts of funding per student. On the issue of taking cuts out of enhancements, he argued that, by definition, enhancements are new programs not previously funded, so if a campus takes a disproportionate amount of their cut out of enhancements, they are better able to protect pre-existing programs in ways that other campuses may not have the flexibility to do. He noted that some of these enhancements are politically untouchable beyond an average cut and it is up to the Chancellor's office to recommend to the Board how to address those programs. He argued that it shouldn't be left to the campuses to decide how much of their cuts would be taken from enhancements.

Vice Chancellor Anderes addressed the key principles, both from a System standpoint and a campus standpoint. He discussed the add-backs from reduction scenarios and the importance of looking at all of those programs and making judgments about administrative efficiencies.

Mr. Williams asked if there was any objection to moving on to the next agenda item. There were none.

Veterinary Medicine program and facility requirements

Vice Chancellor Anderes stated that OSU is requesting the Board approve the expansion of academic programs in the Veterinary Medicine College from the present, two-year program at OSU and two years at Washington State University, to a full four-year program provided solely through OSU. The legislature has approved funding of $8 million, of which $4 million is in General Fund and $4 million is in XI-G bonds, to build a facility that will address the additional program needs. He said that the legislature also approved a budget of $6.4 million for expanded operations in the next biennium. OSU is requesting the programs and facility be fully operational by fall 2003, which requires immediate approval by the Board of Higher Education and the Emergency Board. He stated that OSU is in the process of developing the second and third year programs, and will hire faculty and support staff near the end of this biennium to transition into a fully operational program in the fall of 2003.

President Risser stated that, as a Land Grant University, OSU has a special mission and part of that mission is the Veterinary Medicine program. He explained that the program, which is a high priority at OSU, affects the state's economy both in the urban and rural areas. He introduced Dean Howard Gelberg, who recently joined OSU from the University of Illinois.

Dr. Howard Gelberg, OSU, stated that there are 27 accredited colleges of veterinary medicine in the United States and they are all, in some form or another, supported by their states either through Land Grants or special arrangements for financing. He noted that OSU is the only college of veterinary medicine that doesn't provide a full four-year program on-site. He explained that, because OSU doesn't have a four-year program, the curriculum is split with WSU. He pointed out that the split curriculum affects OSU's ability to control costs and OSU currently sends $4 million every biennium to WSU. He said that the 12 new students to be admitted under the program would be Oregonians.

Dr. Gelberg discussed the rapid response team, which travels throughout the state to investigate wildlife and human diseases, especially in the area of agro-terrorism, such as foot and mouth disease. He identified additional services that graduates from this program would be able to provide, particularly with regard to disease and human health. He said the program has the support of the Oregon Veterinary Medicine Association and the Oregon Humane Society.

Dr. Gelberg stated that OSU recently hired a medical doctor who brings with him $2.5 million in transferrable NIH support to do research on tuberculosis; a disease that is transmited from animals to people. The long range plans, Dr. Gelberg explained, include: delivering a four-year program; gaining control of the curriculum; and establishing a Mobile Field Investigation unit, which is a rapid response team for food-borne disease, bio-terrorism, agro-terrorism, and wildlife die-offs. He noted that OSU also plans, through fund-raising efforts, to add a second floor to the small animal hospital in order to provide research space, office space and additional classroom space.

Ms. Wustenberg asked for clarification on the $4 million that OSU pays WSU. Dr. Gelberg explained that we pay them $4 million every biennium, which includes direct payments for instruction and the students pay tuition directly to WSU.

Responding to a question by Ms. Lehmann, Vice Chancellor Anderes explained that the veterinary medicine program has its own cell within the model and the operating budget of $6.4 million would relate to enrollment support.

Dr. Richmond asked to compare a timetable in terms of implementing the program in 2003 versus 2004. Dr. Gelberg explained that the goal is to admit 48 students in 2002 instead of 36 students, and in the second year of their program, in 2003, rather than transferring to WSU, they would stay in Corvallis. Vice Chancellor Anderes noted that, in the next biennium, there is an additional $6.4 million in General Fund monies that has been appropriated and there will be additional tuition dollars added to that budget as well. He suggested they look at the options and determine whether they have to move to implementation in the fall of 2003 or whether it could be pushed back to fall of 2004. He noted that there would be some savings if they delayed implementation and, in doing so, it would allow additional time to make sure that the facility is constructed and all the faculty hired. He noted that they have to construct the facility, make it fully operational and have all the appropriate faculty in place to be fully operational in the fall of 2003. He suggested the Board push the timeline back a year, to have the additional year with WSU and ensure a more comfortable transition and save money in the process.

Mr. Young asked whether this program is one of the more expensive cells. Mr. Williams noted that the Board was instructed by the legislature to present this program. He stated that the question is whether the Board should ask the legislature to consider this as part of the deliberations of the Emergency Board. Mr. Williams suggested the Board move forward with the recommendation and reserve the flexibility of the year for implementation. Mr. Williams recommended the Joint Committee recommend Board approval with the understanding that implementation could be delayed for one year without a detrimental impact to the program. In order to avoid bringing it up again later for consideration, OUS ControllerMike Green requested the Board be clear in stating that it approves the program and is only delaying the timeline. Mr. Williams agreed that it would be best to approve it either for this year or next, and to leave it open-ended is not an alternative.

Mr Young stated that the legislature is cutting taxes while at the same time asking OUS to take on a greater burden. Outside of the merits of the veterinary medicine program, he argued that this recommendation is fiscally irresponsible. He stated that he won't vote for this proposal at a time when the System is facing serious reductions. Mr. Young suggested a more appropriate motion would be to table the matter for a year. Mr. Williams noted that this issue can't be tabled because of the relationship with WSU.

Mr. Williams reminded everyone that the Board did not originally recommend the veterinary medicine program, but, rather, the legislature requested it, making it a highly political issue. He noted that, given the current economic environment, the legislators will probably reconsider their prioritization of this program. He suggested the Board present a recommendation to defer implementation of the full four-year program to 2004. Chancellor Cox pointed out that the Board doesn't have the ability to table something upon which the legislature has already acted.

Mr. VanLuvanee moved and Dr. Richmond seconded the motion to recommend Board approval of OSU's request to expand the veterinary medicine program from a two-year to a four-year program and to defer full implementation of the program to fall 2004.

Vice Chancellor Anderes noted that $4 million is currently in the operating budget and the mitigating circumstance is that the money is only for a match to build the facility. If they reduce any portion of that budget, the facility will be in jeopardy. He agreed that deferral of the program makes sense, but cautioned against unduly delaying the construction process. He recommended the Board make an acknowledgment that construction of the facility move forward. He noted that, while the program itself need not be ready until fall 2004, the construction must move forward to receive the funding.

Vice Chancellor Anderes pointed out that the Board has two recommendations regarding the veterinary medicine program and a second motion was needed to move forward with the facility. He explained that it was necessary to separate the issues because of bonding requirements. Mr. Williams noted that the bonds are currently scheduled to go out in December 2001 and asked about the timing of the sale. Vice Chancellor Anderes noted that the schedule was already tight for implementation in fall 2003 and said the facility should stay on schedule. He stated that he will work with the dean and president to determine what would be an appropriate date for construction to begin so that the Emergency Board is clear about when the bonding has to be done.

Director VanLuvanee moved and Director Richmond seconded the motion to amend the motion to include recommendation of Board approval to request authorization from the State Emergency Board for $4 million of General Funds and $4 million of Article XI-G bond expenditure for construction to provide space for the expansion. Mr. Young reiterated his concern about committing additional expenses for the System and said he would not support the motion. The following voted in favor: Directors Lehman, Richmond, Williams, Wustenberg and VanLuvanee. Those voting no: Directors Watari and Young.

Status of capital renewal and maintenance on the OUS campuses (item heard out of order)

Dr. Marilyn Lanier stated that the capital renewal focus is on addressing a long term solution and recognizing that deferred maintenance on campuses has been a concern for many years, noting that this is only an informational report, she said that the annual renewal requirement for the System is at over $50 million. She introduced Dr. Rick Biedenweg, president of Pacific Partners, to provide a presentation.

Dr. Biedenweg explained that the capital renewal backlog is a national problem that affects all segments of higher education and that recent surveys indicate over $50 billion in deferred maintenance needs nationwide. He explained that the crisis facing higher education is disproportionately associated with public institutions since private institutions are better able to address the issues of deferred maintenance. He stated that approximately forty percent of buildings currently used in higher education were constructed between 1960 and 1975. He went on to describe problems of the physical buildings, noting that they are wearing out. He described four different types of maintenance and the maintenance cycle of facilities. Private industry, Dr. Biedenweg said, has the ability to depreciate their buildings which, in turn, lowers taxes, but higher education doesn't have that option because it is non-profit. He discussed the accounting methods utilized by industry that allow them to stay on top of the maintenance issues, and also addressed the liability issue of not maintaining the buildings.

Dr. Lanier went on to discuss the System campuses and noted that even the newest campus, OIT, is starting to show signs of wear. She pointed out that two-thirds of the total gross square footage is devoted to academic and administrative space, and yet that also happens to be the most difficult area for the System to receive funds. She explained that the System is increasingly having to rely on gifts and grants and, in order to receive G bonds, they must be a 50/50 match either in gifts and grants or through State General Fund dollars. She stated that the institutions continue to attract more students and the increased number of students, faculty and staff lead to a more intense use of the available space, thereby increasing the need to reinvest.

Mr. Williams thanked Dr. Biedenweg and Dr. Lanier for the presentation and recognized that this is a big issue, suggesting the Board devote an entire meeting to this subject. He suggested that the first part of the presentation should provide the background and suggested that the System Strategic Planning Committee work on developing options on a strategic level.

Energy Resource Fee

Vice Chancellor Anderes explained that, in July 2001, the Board of Higher Education approved the energy surcharge fees for five campuses, with fees varying based upon each campus' need. The fee was driven by a shortfall in state funding to support utility costs and a $12 million shortfall was projected based on existing, unfunded commitments and utility costs. He pointed out that OUS was not aware of the final state appropriation until the end of June 2001, thereby limiting the ability to assess funding shortfalls and determine possible solutions. Three of the five universities have since reduced their fees, and one has eliminated the fees based in part on revised utility projections. He explained that the process and timing of setting tuition was very different this session and, as a consequence, the problem of coordinating with students was difficult.

Grattan Kerans, OUS Director of Government Relations, suggested that, when the budget instructions are provided in March 2002 for the 2003-2005 biennium, the Board specify that operating costs will be met by the operating budget and that fees paid by students will be directed at student-related activities. He also suggested the Board consider a two-meeting process on items that have a similar impact, noting that the current problem exists due to the collapsed time schedule.

Director Young asked whether the revenue generated from this fee would be used solely to address current energy costs. Vice Chancellor Anderes affirmed that they would adding a mechanism to monitor how the funds are used.

Mr. Williams turned the meeting over to co-chair Lehmann to hear the president's goals reports.

Report Items

Presidents' goals for 2001-02

Ms. Lehmann invited PSU President Dan Bernstine to begin his presentation. Dan Bernstine stated that, when he first joined the campus, he developed initiatives regarding diversity, advising and assessment. Since those initiatives were first identified, committees were established on campus to address the issues. He announced that enrollment is up in each of the ethnic and racial groups and, over the last three years, about six new faculty of color have been hired as a result of an incentive plan. He added that there has also been an increase in staff of color.

With respect to assessment, Dr. Bernstine noted that PSU has 24units on campus involved in a project that is gradually being phased in with the goal that every part of the campus will be involved in the assessment program. He stated that PSU has reinstated the policy of mandatory advising and that this year internationalizing the university became a new initiative.

Dr. Bernstine went on to describe the Knight Collaborative to put the university in the position of being able to provide educational programs at a time when they are most needed. He noted that growth is continuing and demographics are changing. He announced that PSU recently received $26.5 million in bonds from the legislature to renovate the engineering building and to build a second tower. Dr. Richmond asked how the budget cuts will affect the proposal. President Bernstine stated that the level of the projectory would be the most difficult setback.

Ms. Wustenberg said she is grateful to President Bernstine for the turnaround in attitudes at PSU and in the community. She said it is refreshing to see positive articles about PSU, pointing out that hasn't always been the case.

Ms. Lehmann asked President Bernstine what the Board could do to assist him. President Bernstine noted that more money is always beneficial, but recognized that the Board is working hard to resolve some critical issues such as autonomy. He stated that his major concern is to be able to be responsive to the development of programs where there is a need and to work in collaboration with other campuses in the System and with community colleges so he asked that the question of program duplication be addressed by the Board.

President Bernstine went on to say that, while this is considered an evaluation of his performance and goals, it is actually an evaluation of the performance of his administrative team and he thanked them for their support over the past year.

Ms. Lehmann invited OIT President Martha Anne Dow to present her goals. President Martha Anne Dow thanked everyone for coming to OIT. She said it is a privilege to host the Board and she was glad to have them there. She noted that OIT has recently experienced an increase in enrollment as the result of targeted enrollment efforts as well as new mechanisms of marketing. She noted that one of OIT's primary goals under access is to become the premiere institute of technology in Oregon and the Pacific Northwest. She said that, as they look at their goals for program quality and providing student services, they have focused on new programs for advising and retention and will continue to do so. She expressed the importance of providing access, particularly in science and math.

Dr. Dow stated that OIT has acquired new grant funding to provide additional support. She stated that OIT has done a wonderful job at improving retention, noting that enrollment has increased in large part because of staff support. She stated that they will be seeking more private support as well. One of her goals is to build, with her staff, students and alumni, the opportunity to bring in $3 million annually in order to provide the academic quality needs for their programs. Another goal is to increase OIT's ability to provide programs on the web, by video and by other modalities. She was pleased to report that their Boeing degree program was accredited this year. She noted that many of their programs require partners with private industry. She noted that one of the goals of the campus is to continue to stimulate economic development in the region as well as the state. She noted that the measure of OITs success is the success of its graduates.

Dr. Dow discussed her strategic plan for 2005 and stated that OIT is working with the students to provide for their needs and to address the need for a better physical environment including improvements in the classrooms, library and housing facility. She noted that, since 1998, OIT enrollment has grown by approximately 31 percent in Portland and they have focused on the program in terms of building more opportunities. She expressed a desire to implement some four-year programs. Ms. Wustenberg congratulated President Dow on her successes, noting that there was tremendous support by the audience at the campus visit.

Ms. Lehmann asked President Dow what the Board could do to support her. President Dow stated that, as the only polytechnic institute in Oregon, OIT is unique. She felt that the Board doesn't seem to understand OIT's special position and expressed disappointment that only Ms. Wustenberg, Mr. Young and Ms. Watari attended the site visit. She requested more direct encouragement and more opportunities to address the Board regarding critical issues.

Chancellor Cox stated that Oregon is fortunate to have seven of the best presidents in the country at these institutions. He stated that he has often talked with the Board about concerns for faculty salaries and notes that it remains a concern, but he is equally concerned about presidential salaries. He stated that adequate compensation of leadership is critical in good times but absolutely essential in tough times. He stated that he will provide some additional information and statistics to show how OUS presidents are compensated in comparison with other Systems in the country. [Note: The remaining presidents' goals were continued to the December 21, 2001, Board meeting]

Adjournment

The joint committee meeting adjourned at 11:42 a.m.