OREGON STATE BOARD OF HIGHER EDUCATION
MINUTES OF EXECUTIVE COMMITTEE MEETING
ROOM 309, HOKE CENTER
EASTERN OREGON UNIVERSITY

June 17, 1999

CALL TO ORDER

An Executive Committee meeting of the State Board of Higher Education was called to order by Vice President Christopher at 4 p.m.

ROLL CALL

The following Executive Committee members were present:

Ms. Diane Christopher
Ms. Gail McAllister
Ms. Phyllis Wustenberg

Absent:  Dr. Herb Aschkenasy and Mr. Tom Imeson, who each had business conflicts.

Other Board members:  Mr. Jim Lussier, Mr. Don VanLuvanee, Ms. Katie Van Patten, Mr. Jim Willis

Chancellor's Office:  Bill Anslow, Philip Bransford, Bob Bruce, Shirley Clark, Joseph Cox, Mike Green, Diane Vines, Marv Wigle

Others:  Roy Arnold, John Moseley, Geri Richmond, Wendy Robinson, Rob Specter

MINUTES APPROVED

The Executive Committee dispensed with the reading of the April 15, 1999, Executive Committee meeting minutes. Ms. Wustenberg moved and Ms. McAllister seconded the motion to approve the Executive Committee minutes as submitted. The following voted in favor: Directors Christopher, McAllister, and Wustenberg. Those voting no: none.

CHANCELLOR'S REPORT

Chancellor Cox reported that lawmakers in Salem were heavily into budget negotiations, committing to meet at least five hours a day to work out the details. He felt there was a chance that more would be known about the status of the OUS budget by the end of the following week.

OSU FINANCIAL ISSUES

Vice Chancellor Anslow referred to a document that was distributed on May 21 to the Executive Committee, and to the full Board shortly thereafter. As requested by the Executive Committee on April 15, 1999, Mr. Anslow said the report contained historical patterns on OSU Athletics Department finances, detailed back to the mid-1980s.

OSU Vice President for Finance and Administration Rob Specter asked to first talk about the proposal, then to describe the process for eliminating the accumulated debt and for bringing stability to the Athletic Department.

Mr. Specter assured the Committee that he and other campus officials are fully committed to a candid discussion about the process for achieving stability in the Department. "Stability is two things: (1) balancing the operating budget so that no future deficits occur and achieving that in the context of a competitive Pac-10 athletics program, and (2) eliminate the debt. I believe that we as a University, and you as a Board, need to acknowledge and understand that intercollegiate athletics cannot be self-sustaining," explained Mr. Specter. "It was clear from my review of the history (including departmental audits) that there were expectations by the Board and Boards past that they should be self-sustaining. I don't believe that is possible. However, that is not to say they shouldn't be as revenue productive as possible," he said.

Continuing, he explained, "It is important that we choose a path to stability that involves a variety of revenue sources. There is a need to diversify. We are currently looking at a multitude of sources including ticket sales, summer camps, major gifts, sponsorships, instruction fee waivers, institutional funds, and student fees."

Describing how Oregon differs from other states in how it treats tuition support for student athletes, Mr. Specter said that the state doesn't have a category of instruction fee waiver for its athletes. He clarified that it is not a fund source, but it does support the student athletes. "By allowing a fee waiver category, it could let us re-categorize the nature of the support," he indicated.

Further outlining the current fund sources at the request of Ms. Christopher, Mr. Specter said they are mostly through scholarship funds raised annually to cover instruction fee costs. While instruction fee waivers look different and re-characterize support to the department, there is essentially no financial impact. Currently, the athletes' tuition dollars move from the OSU Foundation to the Athletics Department, then back to the institution.

Mr. Anslow reported that approximately $2 million annually is moving from the institution to the Athletics Department. Foundation monies are also transferred to the department, but $2.5 million is returned to the institution. "Under the new budget model," explained Mr. Anslow, "campuses will propose a series of tuition waivers for a number of things. What Rob [Specter] is suggesting is to create a category in the institutional budget of fee waivers for student athletes. That way, the dollars flowing to athletics would stop at the Foundation, effectively treating student athletes the same as graduate assistants or students who receive waivers under the diversity program. It's a zero sum process, but it changes the campus community perception of the Athletics Department budget and places responsibility inside the institutional budget."

Mr. Lussier asked if the proposed process would actually reduce expenses. Mr. Anslow responded that would not be the case. Tuition waiver expenses for student athletes (currently athletic scholarships) would shift from the Athletics Department to the institutional budget. The existing budget transfer to athletics from the institutional budget would go down, but at the same time, net tuition revenues available for other institutional purposes would be lowered, since tuition waivers would be recorded as an expense in the institutional budget.

"What happens to the department where a student has a waiver?" asked Ms. Christopher. Mr. Anslow reiterated that the waivers are recorded as an institutional cost. Indicating that one purpose of the proposal is to match the philosophy that certain numbers of students are recruited for special reasons, Mr. Specter noted that OSU's 460 student athletes have an aggregate average 3.02 GPA.

Responding to a question by Ms. McAllister about the legality of such a proposal, Mr. Anslow said that determinations would be made by legal counsel. Continuing, he assured the Committee that, at this point, the proposal is in the idea stage. "We need to have conversations with the other campuses. I raised it today in Administrative Council; we're going to form a group to start looking at this," he shared.

Mr. Specter indicated that, although the original plan approved by the Board was to repay the loan from the University accounts, he felt certain that this would not be possible. Ms. Christopher asked if discussions on this issue with the campus community had taken place. Mr. Specter responded they had been initiated and, while not, particulary well received, the complexity and difficulty of the problem was understood.

Ms. Christopher asked how the institutional support at OSU compares to other campuses. Mr. Anslow said that at UO, it is approximately $2 million of a $24 million athletics program. At PSU, estimated costs were $1 million out of a $6-7 million athletics budget. Currently, OSU is at $2.1 million out of a base of $16-17 million. Under the proposal, the OSU relationship would be $4.1 million out of $19 million.

Briefly referring to the subject of increasing student fees related to athletics, Mr. Specter said staff are still considering a proposal to double the fee in fall 2000 and raise it again in fall 2001. He added that it might be possible to back down the level of increase if the University meets with the kind of success that would provide stability.

Moving to the prospect of reducing the $6 million operating budget deficit, Mr. Specter proposed that, since the debt accumulated over the course of several years, a reasonable rate to reduce the debt should be identified. He felt that a minimum of $500,000 per year would be reasonable, which, at that rate, would take 12 years to repay. "This debt has been in the public eye, and it's been a concern to you and System staff. We need to do all we can to get this debt eradicated so that we can focus on the excellent program and students we have," observed Mr. Specter.

Mr. Specter explained OSU has a number of auxiliary units that operate independently and do not use General Fund resources. He indicated that he would like to take available funds from those sources, along with some gifts, and chip away at the debt. "I think the success of our residence and dining halls, restaurants, copy center, etc. depends on enrollments. We need to acknowledge there's a benefit to those operations because of the success of athletics. To a small degree I think it's appropriate to use some of those funds to work on the debt. Not indiscriminately, but in a measured, responsible way as any business would."

Moving to the actual process for an on-campus, open debate of the proposal, Mr. Specter said that he has spoken to the Executive Committee of the Faculty Senate and, subsequently, to the full Faculty Senate. Feeling the need to reach the students before the end of the year, he went to ASOSU leadership about the approach. A press release of the proposals was also distributed. "We have been about as open and quick as possible on this," reported Mr. Specter.

Mr. Specter deferred to Provost Arnold as to the initial response by faculty and students. Dr. Arnold explained that the students' concerns centered around process. "They want to make sure that it's not just happening without their input and it's in place when they return to school in the fall," he said. In terms of faculty response, Dr. Arnold said, "Although not everyone appreciated the message, they appreciated it's delivery in a very direct, clear manner. It certainly helped eliminate some of the confusion and provided a greater understanding about the extent of the problem." He went on to say that President Risser met with the Faculty Senate Executive Committee; from that meeting, a joint statement to the University community was issued that articulated the situation and plans for rectifying it.

Ms. Wustenberg asked about the status of the College of Science and its deficit issues. Mr. Specter said the financial situation was receiving close attention, and a financial recovery plan was in the works, although the College was in transition due to the resignation of the dean.

Expressing his concern over the trend of intercollegiate athletics becoming big business, Mr. Lussier questioned if that alone makes it more difficult for athletics departments to be self-sustaining. "The price is going to keep going up and the question is, 'how do we approach it?,'" he asked.

"The campus is under great pressure to increase costs to remain competitive," observed Vice Chancellor Anslow. "When the Board begins talking about an accountability framework, we have to think about campuses as economic units and OUS as an economic unit, rather than individual departments that own 'their' money. Our obligation is to come back to the Board, with status reports and key indicators, so that you can be assured our responsibilities are being met. It's also our obligation to signal the Board early on when something might be running the wrong way."

Referring back to student fee increases, Mr. Willis urged staff at OSU to be certain students have a clear understanding of what the fees are accomplishing. He added that he felt the connection between athletics and academia is important.

Elaborating on his earlier comment, Mr. Lussier said that he believed intercollegiate athletics are farm teams for the professional teams and institutions are picking up the costs, while pro teams reap the benefits. Dr. Arnold shared that a similar conversation arose with faculty leaders at OSU, where it was deemed to be a national problem. "When a student can no longer get a degree because of athletics, something is wrong," said Mr. Lussier.

Committee members concurred that an important point would be to look at the University as a whole, rather than its components. Building on that, Mr. VanLuvanee said, "Enterprise has got to stand on its own value. We're challenging the value equation of the future. We should not encourage management by silos."

Ms. Wustenberg asked for clarification on institutional funds and the allocation process. Vice Chancellor Anslow explained that in the case of auxiliaries, (e.g., food service, athletics) those monies are not appropriated by the legislature, but there are a set of rules for management. In terms of an overarching rule, he said, the statute says that General Funds (tax funds) cannot be used, but tuition funds do not fall under this legislation.

Vice Chancellor Anslow explained that, in the case of the institutional budget, state tax dollars come to the System, and, in the old budget model, tuition money was pooled by the System, then allocated. In the new framework, campuses retain tuition and receive state funds. A portion of institutional funds going to the athletics budget is tuition money OSU is collecting, not tax money. If Mr. Specter's proposal were enacted, it would be OSU's obligation to meet the budget for that within the tuition dollars collected.

"If that money is coming from students, and other monies from auxiliary enterprises are also going to support athletics, isn't the student being taxed more than the institution?" asked Ms. Wustenberg. Mr. Anslow responded that tuition money could be used for other institutional purposes, and the institution is, in effect, "taxing" itself. The student would pay the same tuition rate and the institution determines where to put funds or to provide waivers.

Ms. Wustenberg said that she was not sure if all students would want their money to go to athletics. "The student body plays an active role in setting fees," said Mr. Anslow. UO Provost Moseley added that there are benefits to the students for those fees, including tickets to athletics events.

Speaking to the specific proposals laid out by OSU, Ms. Christopher asked about number three, pertaining to granting tuition waivers to student athletes. (See page 25 of the special report on OSU intercollegiate athletics dated May 21, 1999.) Vice Chancellor Anslow described the process that would lead to Board consideration of a new tuition waiver category. An initial step, said Mr. Anslow, would be to communicate with other campuses. He also indicated that the Board's Budget and Finance and System Strategic Planning Committees would play a role.

Ms. Christopher then asked about number six of the proposal, which included methods for debt reduction. Board Secretary Vines followed with a question about whom is actually owed the $6 million of the accumulated debt. Mr. Anslow explained the monies were drawn from a Systemwide "checking account." He went on to say that, sometime in the future, he is hoping to present a plan to the Board, which would then go to state lawmakers asking for permission to retain balances and earn interest on System accounts.

Ms. Christopher said that the Committee should formally vote to have proposal numbers three and six expanded upon by staff, then presented to the Executive Committee at a later date, possibly as early as September. Mr. Lussier added that he would like a written statement regarding minimum and variance. Vice Chancellor Anslow agreed staff is on target to return with a framework for regular reporting, but reiterated that it remained a work in progress.

Ms. Wustenberg moved and Ms. McAllister seconded the motion to refer proposal numbers three and six back to staff for more thorough study. These proposals will be brought back to the Executive Committee for consideration in September/October 1999. The following voted in favor: Directors Christopher, McAllister, and Wustenberg. Those voting no: none. [Note: President Imeson has referred these items to the Budget and Finance Committee in consultation with the System Strategic Planning Committee.]

FUTURE MEETINGS

Chancellor Cox explained that President Imeson will be out of the country on October 14-15, the scheduled dates for the Renewal Work Session and the regular Board meeting/visitation at the OIT Metro Center. He asked if it would be possible to move the meetings to October 21-22. Members agreed to move the date if schedules permitted.

Dr. Vines added that institution presidents will have their assessments in June and July, and then discuss their goals and objectives in September with the Executive Committee. This was with the understanding that staff would work on continuation of the Board's work plan. That information will be distributed to presidents so they can see what work remains. The presidents' goals and objectives could be modified if the Board's goals and objectives change at the Renewal Work Session in October.

Following up on a question by Ms. Wustenberg about new Board appointees, Chancellor Cox said his understanding was the Governor intended to wait until after the Legislative Session. Given that, new appointments would not be made before August.

ADJOURNMENT

The meeting adjourned at 5:33 p.m.

Diane Vines
Secretary of the Board

Tom Imeson
President of the Board