Date: Thu, 25 Apr 2002 07:54:20 -0700

From: Elaine Deutschman

Senators - below is my report on last Friday's (and Thursday's) Board meeting. Peter tells me attachments don't work well on our list serve so I'm just appending it to this message. Elaine 

Report to IFS on April 19, 2002 Board meeting:

The Board met at OHSU on Friday, April 19, 2002. The System Strategic Planning (SSP) Committee hosted a 3-hour workshop on strategic planning on April 18th led by Dr. David Longanecker, Executive Director of WICHE, attended by Board members and institution presidents as well as some invited guests. The aim was to outline the questions that must be answered in the planning process underway. Dr. Longanecker outlined Oregon's situation with regard to access, quality, tuition etc. Discussion followed on exactly what's meant by access (geographic?, affordability?, to any institution or just to an OUS institution?). Quality issues were also discussed. The outcome of the afternoon was to ask each institution to prepare a 2-page outline of institutional priorities which would be compared with Board priorities (which donÕt seem completely clear at this time) and look for intersection points.

At the SSP Committee meeting on Friday morning, in addition to consenting to several new programs and amending some sick leave OARs, members also heard a brief review on the newly released OUS diversity report and discussed the next steps in the planning process. Jim Lussier suggested defining some basic underlying tenets like what's the purpose of higher ed. He further indicated a need for more "systems design" before talking of specific policies though the question "how much system" hasn't been adequately answered. The Board won't get what it wants unless it defines what it wants, he said. As an example, he said the Board should define "collaboration vs competition" as the institutions don't know what the target is or how to proceed while staying in line with the Board's position. Another member (I didn't note who) reflected that the Board role should be enabling, not prescriptive; it should be a policy role. The Board's responsibility is to leverage support and persuade taxpayers to support higher ed.

The biennial budget process was the focus at the joint meeting of the strategic planning and budget/finance committees. Vice Chancellor Anderes briefed the committees on the processes to be followed in developing the 2003 2005 budget. He reviewed state finances, the current OUS share of general funds and projected what the likely share of the general fund would be in 2003 2005. He indicated that if OUS stays at 7% of the general fund (where it currently is), OUS might get an $89.5 million increase bringing the OUS share to about $880 million, though he expressed doubts that it would increase that much due to structural debt going into the biennium. The distressing item, however, is just maintaining current service levels (CSL) would require about $864 million, leaving little for any new initiatives. The CSL includes roll-up of personal services (salaries etc.), debt service on new buildings, inflation, running the vet school for a full 4-year cycle, the Cascades campus, enrollment funding roll-up and operations of new buildings that have come on line; about 70 75%of CSL is salary roll-up. The impact of PEBB/PERS costs is a huge part of CSL and will dilute the RAM's disbursement to instruction, according to Anderes. The system would need $1,124 million to fund CSL and the policy packages proposed in the last biennium. The question then arises should OUS limit its requests for additional funds? Tom Imeson asserted the system needs to do more outreach in preparation for the next session and added that the problem with funding CSL is doing so says what we're currently doing is more important than anything we might propose. He urged the Board to clarify its priorities, noting the system wasn't aligned with either the governor or the legislature in the last session and asking whether priorities should be reconfigured with that in mind. Anderes noted that state government requires that agencies present their budgets in three parts: CSL costs, new policy initiative costs and plans for living with 10% and 20% reductions from CSL (giving OUS either $778 million or $691 million). He noted that policy initiatives include enhancements beyond current services as well as discrete initiatives that reflect Board and institution priorities. Chancellor Cox warned that whatever is put on the policy option list may be purchased by the legislature; legislators skip over the instruction pieces to buy what they think is glitzier. Factors affecting decisions on budget items also include Board and institution priorities. Some guidelines have been adopted in building a budget for 2003 2005: emphasis should be on access, affordability, quality and cost effectiveness; tuition structure should be simple, concise and readily understandable; each institution's needs and conditions must be considered. Anderes raised some questions, as well. What are the Board's priorities for the next biennium? Does the OUS request recognize the limitation in state funding growth? What is an appropriate student share of the costs? Does the RAM continue as the mechanism through which the budget is built? He noted there are questions about its viability but it's the best benchmark we have now. This was a most distressing discussion. The comments from Board members and others suggest little optimism about increasing funding for the system from general funds and that a careful analysis of priorities, with perhaps some review of what's included in CSL, is needed.

The full Board meeting was relatively short. The Chancellor thanked the IFS publicly for the citation presented in Ashland and the donation in his honor, saying he was deeply touched. He also presented his report on presidential salaries (which was available only to Board members during the meeting) in which he:

• asked the Board to commit to more competitive salaries for the presidents,
• recommended that the personnel committee review and adjust salaries on a biennial basis
• advocated that the system move away from fixed salaries and instead compensate based on performance through annual reviews, and that the chancellor and personnel committee set minimum salary levels for the presidents of the four large institutions and for the three small institutions
• urged the new chancellor to work with institutional foundations to pool state and private funds to reach the salary floors, adding that bonuses and special compensation packages might be arranged based on performance reviews (one Board member raised the issue of who a president reports to if his/her salary is substantially supported by "outside" sources)
• suggested that the new chancellor's salary should be in the $180,000 - $190,000 range while the new president at Western should receive between $140,000 and $150,000; these figures, he added, would bring executive salaries closer to the 80% - 85% of peers' salary goal.

I was unable to respond in a concrete manner to Chancellor Cox's proposal during my remarks to the Board since I didn't have a copy of the proposal. I did, however, take issue with salary increases at this time of budget uncertainty.

The Board also approved the actions taken by the two committees at their morning sessions before adjourning early.