OREGON STATE BOARD OF HIGHER EDUCATION
MINUTES OF EXECUTIVE COMMITTEE MEETING
CALAPOOIA ROOM, WERNER UNIVERSITY CENTER
WESTERN OREGON UNIVERSITY
April 15, 1999
CALL TO ORDER
An Executive Committee meeting of the State Board of Higher Education was called to order by Vice President Christopher at 5:30 p.m.
The following Executive Committee members were present:
Dr. Herb Aschkenasy
Ms. Diane Christopher
Ms. Gail McAllister
Ms. Phyllis Wustenberg
Mr. Tom Imeson (arrived at 6:15 p.m.)
Other Board members: Mr. David Koch, Mr. Jim Lussier, Mr. Jim Willis
Chancellor's Office: Bill Anslow, Philip Bransford, Bob Bruce, Shirley Clark, Bob Dryden, Mike Green, Grattan Kerans, Diane Vines, Marv Wigle
Others (all from OSU): Mitch Barnhart, Bob DeCarolis, Paul Risser, Rob Specter
Ms. Christopher facilitated the meeting on behalf of Mr. Imeson.
The Executive Committee dispensed with the reading of the February 18, 1999,
Executive Committee meeting minutes. Dr. Aschkenasy moved and Ms. Wustenberg
seconded the motion to approve the Executive Committee minutes as submitted.
The following voted in favor: Directors Aschkenasy, Christopher, McAllister,
and Wustenberg. Those voting no: none.
Board Secretary Vines explained the reasoning behind the request to amend and resubmit the January 15, 1999, minutes for approval. She said that legal counsel advised Board's office staff to better articulate Vice Chancellor Clark's role as Hearings Officer for a grievance involving a former UO employee. Ms. McAllister moved and Dr. Aschkenasy seconded the motion to approve the amended minutes from the January 15, 1999, Executive Committee meeting. The following voted in favor: Directors Aschkenasy, Christopher, McAllister, and Wustenberg. Those voting no: none.
Chancellor Cox reported that it had been a very active week in the legislature. Noting that he would provide greater detail at the full Board meeting, the Chancellor said, "It is becoming abundantly clear that the work we do in the interim is vital. If you have not made your case during that time, it is a challenging situation." He mentioned that former Board member Rob Miller was "incredible" at his testimony before the joint Ways and Means Subcommittee earlier in the day.
OSU FINANCIAL ISSUES
Providing a context for the discussion, Mr. Anslow reviewed the recent concerns over patterns of expenditure and revenue estimates at OSU, notably in the Athletic Department. He reminded Executive Committee members that President Risser had presented a plan for balancing OSU's budget to the Board approximately 18 months ago. Moreover, ongoing status reports have been submitted to the Executive Committee on a bi-monthly basis. Indicating that the challenges continue to plague the University, Vice Chancellor Anslow called President Risser and Vice President for Finance and Administration Rob Specter to the table. "I suggest that we begin to discuss key issues and where to go from here," said Mr. Anslow.
Dr. Risser explained that some good strides have been made in athletics, including improvements in revenues, but added that challenges remain, particularly on the side of expenditures.
Mr. Specter opened by saying that the Athletic Department budget remains the number one challenge to the University. Continuing, he explained that new leadership has been getting a handle on management, as well as financial issues. "My office has come to engage in a new and, in some cases, enhanced role with the Athletic Director in monitoring and reducing expenditures. We have covered about all the ground we can by reducing expenditures and still have a viable department. It is at the minimum level we must maintain. Where we have the most opportunity is to increase revenue," Mr. Specter said.
Mr. Specter explained that two different kinds of revenue exist--one time or intermittent (e.g., television appearances) and stable platform revenue--from which to build programs and services. The latter is accomplished by providing athletics a subsidy from the OSU budget and from student fees. "Each of the larger campuses in this System relies on both. OSU is no different. We will need to focus on building a stable revenue platform by enhancing one or both of these revenues."
Mr. Barnhart provided a comparison of PAC-10 campuses' television revenue for football games. He explained that one television appearance might generate between $250,000 and $700,000 in revenues. Noting that two OSU football games are slated for television in fall 1999, Mr. Barnhart said, "Our program has really stepped up competitively."
Turning from the revenue side, Mr. Barnhart reviewed activities of the past year. He highlighted expenditure reduction, indicating that staffing was cut, salaries were frozen, the concessions and souvenir programs were restructured, and expenses in the scholarship fund were reduced. He also outlined revenue improvements, pointing out that, with three months left in the annual giving campaign for 1998-99, $2.1 million in gifts have been pledged, versus $800,000 at the same time last year.
In terms of graduation rates, OSU had the highest in the country, at 78 percent (between 1988-1993) for the football team from recruiting classes. "Overall, we're at 74 percent. No one is doing better in the PAC-10. On and off the field we are doing the right thing," Mr. Barnhart indicated.
Continuing, Mr. Barnhart said, "Our staff is very scaled down, to the point where we have the smallest administrative staff in the PAC-10. We've protected our student athletes very well, but the administrative staff is getting tired. We need to look at how to make that better. Facilities and personnel are our greatest concerns. There's no question in my mind that we can compete."
Dr. Aschkenasy observed that, from the comparative figures provided by OSU, the expenditures for each sport are not notably less than other PAC-10 institutions. Mr. Barnhart responded that the Athletic Department is trying to keep sports competitive, adding that the drop off is in administration. "Our competitiveness is not that far off. The recruiting money is there. It's supporting those areas that are making it difficult," he reasoned.
Mr. Specter indicated that, based on his understanding of the future of financing at OSU, the University needed to lower its deficit to a $6 million level by the end of this year (June 1999), and present a balanced budget. "The first order of business is to be sure we are positioned to have a balanced budget. We would be $4 million out of balance without actions. In the course of making the cuts, the Athletic Director managed to cut that gap in half. We're talking about a structural imbalance of about $2 million. It must be addressed and cured by identifying a stable level of ongoing revenue. Then, we chip away at the debt," said Mr. Specter. In order to do this, he offered the following two solutions:
1) OSU would forgive the planned payback from the Athletic Department's budget to the OSU regular budget and make an additional $2 million base adjustment from the total operating budget.
2) Add this expenditure as a budgeted line item so the amount that is added to the Athletic Department comes from tuition dollars.
Ms. McAllister noted that the original proposal was to be paid back with interest. "Are you thinking about that being a line item in the budget?" Mr. Specter said that he believed OSU Athletics couldn't pay back the original loan, nor the interest accrued.
After Ms. McAllister clarified that both instructional and non-instructional fees would be used, Ms. Christopher asked how the campus community felt about that plan. "I think there is wide support for fixing the problem, but there are different ways of looking at it," responded Mr. Specter.
Chancellor Cox asked if there were any comparisons done on the public universities' level of funding perpetuated by General Fund dollars for athletics programs. Vice Chancellor Anslow responded that, in almost every conference, there was some level of support, and at other PAC-10 schools the amount was higher.
Concurring with the vice chancellor, Mr. Specter said that there is variability in how other universities and colleges support their programs, but the greatest difference, and what affected OSU the most, is the continued increase in the number and cost of tuition waivers, due to rising tuition resulting from Measure 5 fallout and Title IX requirements.
Ms. Wustenberg asked, "What's the percentage of tuition dollars that would go to athletics?" Mr. Specter indicated that it would be $4 million out of approximately $40 million generated, or ten percent of fees.
"We need to use tuition funds because we can't use tax funds," said Mr. Anslow. Continuing, he explained, "Whatever tuition is set (noting that currently tuition rates are frozen), the allocation for athletics would increase from $2 million to $4 million. That $2 million has to come out of various programs. What we want to ask the Board to do is make a more permanent alignment in the budget process."
Mr. Specter said that as the new budget model is implemented, there is a great deal of probability for increased revenue, which affects the way these revenues will be allocated. "This process is very inclusive/ principle centered. That's how we would make decisions related to the budget. All expenditures will be out on the table and everyone will have an opportunity to participate in the discussion," he indicated.
Mr. Koch asked when the proposal would be presented to the campus community. Mr. Specter responded that deans and department heads will initially bring their proposed budgets to him. From those proposals, a set of priorities will be developed. He said that the full budget will be rolled out by late May. "We should have a better sense by then of what we can and cannot fund," shared Mr. Specter.
"I'm delighted with what is going on at OSU," said Dr. Aschkenasy. Continuing, he observed, "Some of the problems you've described have been around for a long time. This kind of shortfall eventually becomes a problem for the System. Personally, I don't see your past forecasts going anywhere. It would be nice to see something that's realistically achievable and then to achieve it."
Ms. Christopher asked to confirm if Mr. Specter felt OSU could reach the $6 million proposed deficit level by the end of June. Mr. Specter responded that he could not guarantee that would be the case.
"The proposal before you is to take the edge off the payback. Otherwise, the deficit will have grown by another $2 million," said Mr. Anslow. "The second action is that there is $4 million of steady revenue going to the Athletic Department budget. Currently, there's a potential $4 million ongoing gap. What this proposal does is present a way to close a portion of that gap. With this infusion, we are looking at a remaining problem of $2 million."
Mr. Specter said that he felt the expenditures have been cut to the point of almost being unhealthy. "I think with a $2 million base infusion, we can come close or just about balance the budget. We have to position the department to be healthy. That means having enough flexibility to grow. It takes investments before you can see real dollar returns. The Athletic Director and his staff have drummed up additional support for the department. It's an indication there are changes to address the issue raised. There is a new level of rigor in the department at OSU. Controls are tight, but I don't want to strangle the department. It's hard to get people to donate for debt reduction. Donors want to see the program prosper."
Referring to an increased student incidental fee, Mr. Specter conceded that was a difficult issue--one that is hard to pass on to students. "However," he said, "I think the University and student body would be well served if we instituted a fee. I believe that in the fall of 2000, we would enact a fee of $24 per term, per student. We might ramp that to $48 the following year as an ongoing stable funding platform. That's my recommendation to this group."
Mr. Lussier said that it would be beneficial for him to examine past proposals. "I think we need the context. I'm confused and not necessarily convinced the new proposal is going to do any more than prior ones."
In looking at institutional funds becoming a line item, Ms. McAllister expressed concern over faculty salaries. "This should not attack them," she said.
Mr. Specter agreed it was a legitimate concern, indicating that the administration was somewhat apprehensive as well. "We have to keep our priorities balanced. We will have some challenges depending on the level of funding the System receives."
Noting that even in troubled times other departments have maintained balanced budgets, Ms. Wustenberg asked how the Athletic Department's deficit continued to increase. "I can't see how we got to where we are. Are we not smart about money? The bleeding has not stopped," she said.
Mr. Specter replied that it was an incremental deficit increase that began in the early 1980s. Indicating that the activities to solve the deficit cannot be accomplished overnight, Mr. Specter said that he hopes it can be resolved in a shorter time period than it took to get into this position.
President Risser pointed out the close connection between the Athletic Department and the rest of the University. "Our in-state applications for this fall are up 24 percent and out-of-state applications are up 30 percent. That does have something to do with the exposure OSU Athletics has been receiving the past year," he said.
Ms. Christopher suggested the Executive Committee receive a summary of OSU's proposal, along with a history of actions to date, how the campus is involved in the process, and a timeline for consideration and review at the May Executive Committee meeting. Mr. Koch added that he would appreciate a narrative, but also hoped to see a spreadsheet of actual dollar amounts proposed.
The meeting adjourned at 6:45 p.m.
Secretary of the Board
President of the Board