Finance Committee Minutes -- March 13, 2002 -- Board of Trustees -- University of Louisville
MINUTES OF THE FINANCE COMMITTEE
UNIVERSITY OF LOUISVILLE BOARD OF TRUSTEES
The Finance Committee of the University of Louisville Board of Trustees met on Wednesday, March 13, 2002, in the Mary Bingham Room of the University Club, Belknap Campus, with members present and absent as follows:
|Finance Committee Present:||
Mrs. Joyce Hagen Schifano, Chair
Mr. Kevin D. Cogan
Dr. Richard C. Feldhoff
Mr. Nathaniel E. Green
Mr. Owsley B. Frazier
|Finance Committee Absent:||
Mr. Ulysses L. Bridgeman, Jr.
Mr. William P. Mulloy, Sr., Vice Chair
|Other Trustees Attending:||
Ms. Melissa Long Shuter
Ms. Linda Wallbaum Cauble
|From the University:||
Dr. Carol Z. Garrison, Provost
Dr. Nancy C. Martin, Vice President for Research
Mr. Larry Owsley, Vice President for Finance & Administration
Dr. Joel Kaplan, Vice President for Health Affairs
Mr. Joseph S. Beyel, Vice President for Development and Alumni
Dr. Ronald L. Moore, Vice President for Information Technology
Ms. Angela Koshewa, University Counsel
Mr. Glenn Bossmeyer, University Counsel
Mr. Mike Curtin, Director, Office of Planning & Budget
Ms. Linda Shapiro, Associate University Provost
Dr. David Wiegman, Associate Vice President for Health Affairs/Academic Affairs and Vice Dean for Academic Affairs
Mrs. Terri Rutledge, Associate Vice President for Finance & Administration
Dr. David Barker, Director, Audit Services
Ms. Rae Goldsmith, Associate V. P. for Communications & Marketing
Mrs. Susan Ingram Howarth, Office of Planning & Budget
Mr. Eugene Gilchrist, Vice President for New Ventures
Ms. Susan Wilhelm, Controller's Office
Dr. Brian Huot, Professor, English Department
Mr. Patrick Klapheke, President of the UofL Medical School Student Senate
Ms. Trisha Wolf, Board Liaison, President's Office
Mrs. Debbie Dougherty, Board Liaison, President's Office
I. Call to Order
Having determined a quorum present, Chair Schifano called the meeting to order at 12:15 p.m.
II. Consent Agenda
- Approval of Minutes, 1/25/02
- Information Item: Quarterly Financial Report, 2001-02
Hearing no opposition from any Trustee present, the Chair declared the Consent Agenda items adopted.
III. Action Item: Approval of Capital Construction Project - Kornhauser Auditorium Upgrade
Vice President Owsley reported this renovation project will upgrade and modernize the auditorium by replacing worn seats, carpeting and wall covering and adding new acoustical wall panels, curtains and other refurbishing items. Vice President Kaplan described the current improvements as first class, high technology improvements that include the entire auditorium. Mr. Cogan made a motion, which Dr. Feldhoff seconded, to approve the
President's recommendation that the following project be approved:
Project Estimated Cost Fund Source Kornhauser Auditorium Upgrade $192,000 HSC Funds
The motion passed.
IV. Action Item: Approval of Fees
- Dental Instrument Fee
Vice President Kaplan introduced Dr. David Wiegman, Associate Vice President for Health Affairs/Academic Affairs and Vice Dean for Academic Affairs, and Patrick Klapheke, President of the UofL Medical School Student Senate. Dr. Kaplan reported the dental instrument fee will recover costs associated with providing instruments, supplies, infection control materials, and course manuals/instruction materials for the preclinical and clinical dental (DMD) and dental hygiene programs. The Board of Trustees originally approved the fee in 1989 and adjusted the fee once (in 1997) to offset increased costs of providing these items.
Vice President Kaplan explained the School of Dentistry proposes to phase in a $700 fee increase over the next four years for the DMD program. The DMD instrument fee would increase from $1800 to $2500 for first year dental students beginning July 1, 2002, through the year 2005. In order to monitor this fee, UofL will establish separate accounts for income and expenditures, and will review them annually during the fall semester with the Dental Student Council, the class presidents, and the director of HSC academic programs.
Mr. Klapheke noted that university administration informed the students about the fee during freshman orientation and he shared the positive feedback from students. The students agree the fee is fair and expect it to be implemented in a fair manner.
Ms. Shuter expressed concern regarding an increase in fees, noting the Board's discussions surrounding the approval of a fee increase last year. Mr. Cogan recalled that with that approval, the Board determined a need to consider the professional schools in a manner different than the undergraduate schools. Dr. Feldhoff stated that the overall policy, and the agreement of the Board to assess each professional school on an individual basis, emphasized the importance of accountability. Provost Garrison acknowledged Trustee Shuter's concerns, and observed the fee increase did not affect undergraduate students. Dr. Garrison reiterated the fee would be monitored in a separate account and evaluated annually. In response to Mr. Cogan's question regarding the equipment fee, Dr. Kaplan acknowledged that in prior years, students purchased their own equipment. Today, the School provides standardized equipment for the students to use and that equipment remains with the school. Mr. Frazier made a motion, which Dr. Feldhoff seconded, to approve the
President's recommendation that the Board of Trustees approve an increase in the Dental Instrument Fee as outlined below:
Four-year DMD Fee Increase Effective Effective Effective Effective DMD Class 7-1-02 7-1-03 7-1-04 7-1-05 1st Year $2500.00 $2500.00 $2500.00 $2500.00 2nd year $1800.00 $2500.00 $2500.00 $2500.00 3rd Year $1800.00 $1800.00 $2500.00 $2500.00 4th Year $1800.00 $1800.00 $1800.00 $2500.00
The motion passed.
- Fee for English Portfolio Assessment
Provost Garrison introduced Dr. Brian Huot, Professor of English in the College of Arts & Sciences. Dr. Huot explained that the Department of English had been using the College-Level Examination Program (CLEP) to grant exemption from English 101 and 102 for students who requested to "examine out" of these two courses. He noted that problems associated with CLEP encouraged the English Department to design a less expensive alternative exam and portfolio process whose authorship can be authenticated. This procedure offers a better opportunity for students to test out of and earn credit for English 101 and 102. Dr. Feldhoff made a motion, which Mr. Green seconded, to approve the
President's recommendation that the Board of Trustees approve a fee of $30.00, effective immediately, for an English Portfolio Assessment as a replacement for the current fee of $66.00 for the CLEP examination.
The motion passed.
- School of Medicine Technology Fee
Vice President Kaplan explained the School of Medicine has taken a leadership role in its discipline to draw upon technology to enhance teaching and learning. Enhancements have included a Patient Simulation Center that allows students to practice clinical skills on computerized, lifelike patient mannequins and a Standardized Patient Center (Spring 2002) that videotapes students practicing their communication and physical examination skills for future review and feedback. In addition, the School, through a partnership with Information Technology, piloted an online course evaluation system. The School distributed Personal Digital Assistants (PDA's) to all third year students, and evaluated the impact of handheld technology on the clinical education experiences of these students. The School plans to distribute PDA's to every medical student beginning in August 2002, and to partner with the School of Dentistry and Information Technology to build an infrastructure that will support the full integration of PDA's as an educational tool in the curriculum. The School has devoted considerable resources to these technology-related initiatives, and has committed to provide additional funds to ensure that medical students receive training in the use of information management and the tools that support practicing physicians. Chair Schifano voiced her support for making timely and good information available to caregivers.
In response to Mr. Cogan's request, Dr. Kaplan offered the Board a tour of the simulator. Dr. Feldhoff offered his full support, but noted his concern for a university-wide budget advisory or the tuition-setting fee committee to monitor the accountability of these new fees. Provost Garrison acknowledged Dr. Feldhoff's concerns and agreed to ask the tuition assessment committee to review these fees, and report back periodically. She further supported the positive aspect of keeping these fees in separate accounts. Vice President Kaplan assured the Board that the School will continue to evaluate the fee programs, noting that the University of Kentucky does not have a simulator, which makes UofL's curriculum a unique opportunity for its medical students. Mr. Frazier made a motion, which Mr. Cogan seconded, to approve the
President's recommendation that the Board of Trustees approve a $500 annual School of Medicine technology fee, effective with the class entering July 2002.
The motion passed.
V. Information Briefing from Chief Financial Officer
- University of Louisville Endowment Investment Process and Performance
Vice President Owsley reported on the status of the endowment investment performance. He referenced Joe Beyel's letter to the trustees dated February 8 with an attachment of a Chronicle of Higher Education article discussing the endowment performance of 600 universities. Vice President Owsley acknowledged key components that led to the success of UofL's endowment were 1) the work of the Foundation's investment committee, and 2) the advice from its investment advisor, Cambridge Associates. The current asset allocation-75% equities, 25% income-represents a diversified portfolio. Mr. Owsley noted that Vice President Beyel and he have written an article for the Alumni Magazine regarding the success of the endowment. In response to Ms. Cauble's question concerning comparisons of NACUBO, Vice President Owsley stated that the comparisons are consistent for the same time period ending June 30, 2001. In response to Dr. Feldhoff's question, Mr. Owsley reported the annualized return as of December 31, 2001 for the past five years was 14.7%. Mr. Green observed that the Foundation has hired minority money managers, also. Vice President Owsley said the Foundation solicited proposals from minority firms and made a selection based on performance and recommendations from Cambridge Associates. Currently, VP Owsley stated there are 13 money managers. Mr. Green noted the Foundation's investment committee's review of the money managers' performance is currently underway.
- Overview of University of Louisville Research Foundation
Vice President Owsley stated the University of Louisville Research Foundation (ULRF) is a 501(c)(3) affiliated corporation organized for the purpose of conducting research, clinical operations and other sponsored activities of the University. It has separate audited financial statements but, as an affiliated corporation, has its financial activities consolidated with the University of Louisville. Mr. Owsley reviewed the nature and definition of restricted and unrestricted funds. Mr. Owsley noted he would also review ULRF materials with the Board's audit committee.
- Update on University of Louisville Research Compliance Program (financial aspects)
Vice President Owsley reported that UofL has begun to develop the infrastructure to support a high quality research institution. Mr. Owsley shared background information and distributed an outline of the Policies and Procedures for Research and Other Sponsored Activities. He will update the Board as issues evolve.
- Information on Louisville Medical Center, Inc. Bond Issue
Vice President Owsley briefed the Committee regarding the Louisville Medical Center, Inc., bond issue.
- Update on Phase II of University Housing
Vice President Owsley gave a brief status report on the University's plans to expand residential facilities.
Vice President Owsley discussed the status of QCCT board-related issues.
VI. Information Item: Update on Budget 2002-04
In answer to Chair Schifano's concerns regarding the state budget and how it may affect the University's goals, Mr. Curtin noted that some of the recent newspaper articles have inadequately explained the budget situation. Mr. Curtin summarized highlights of the two preliminary 2002-04 budget-briefing documents (see attached).
In response to Chair Schifano's request to quantify these cuts in terms of dollars, Mr. Curtin explained that a 2% cut equals approximately $3M. He said UofL hoped, through benchmark funding, to receive $3M in new funds. The 2% cut, however, plus no increase in funds translates to a shortfall of approximately $6M. Mr. Curtin stated the first year of the biennium will be more difficult than the second, noting the state's appropriations for 2002-03 total $176,745,200; the state's appropriations for 2003?04 total $179,095,300.
Mr. Curtin observed the budget did not allow for any new construction during the next two years; the state did list UofL's capital construction projects with a funding source of private funds. This was important because UofL depends on deferred maintenance to keep buildings in shape. Provost Garrison said the deferred maintenance is generally the first item to be cut in times of budget problems.
Mr. Curtin reviewed the 2002-03 operating budget strategy principles:
1. No across-the-board reductions
2. Protect core instruction and research programs
3. Protect investments in Challenge for Excellence areas
4. Proceed with "third year" reallocations/reinvestments from President's Reinvestment/Reallocation report
5. Maintain budget reserve funds (for mid-year flexibility and year-end capital expenditures)
6. Protect diversity/EEO initiatives
7. Maximize general fund revenue opportunities
8. Reduce under-productive academic programs
9. Review underutilized endowments
10. No additional tuition increases, beyond the 6% already approved (SGA and TSWG)
11. No complicated process/no university-wide committee - President and Provost make budget recommendations and share with campus community (Deans' and Vice Presidents' recommendation)
12. Review administrative savings from President's Reinvestment/Reallocation report not yet accomplished
13. Everything is on the table, i.e., no "sacred cows"
Mr. Curtin summarized the changes in Revenue and Expenditures for the 2002-03 Operating Budget, as outlined in the documents. The Board-approved tuition increases for 2002-03 will generate approximately $5M in new fund revenue. In response to Mr. Green's question regarding student projections, Mr. Curtin stated that UofL is purposefully increasing graduate enrollment by 300, and decreasing undergraduate enrollment by 300.
Regarding faculty and staff salary increases, he and Provost Garrison shared possible scenarios. He noted that UK employees are receiving a one-time bonus. Ms. Shuter stated that staff senate has not supported one-time bonuses in the past because these do not affect the base salary on which retirement allocations are figured. In response to Mr. Green's question regarding staff and faculty awareness, Ms. Shuter said staff are kept apprised of the budget situation. Dr. Feldhoff observed that a one-time bonus is a better option than no salary increase.
Provost Garrison stated that in the reallocation process two years ago, money was reallocated to the university's highest priorities. She indicated that although the budget situation is a difficult one, there is a lot of room for optimism, noting that the University is very well focused.
In response to Chair Schifano's concern regarding the timeframe, Provost Garrison said the University has identified a strategy, but will consider additional ideas. The administration has met with deans and vice presidents, noting that all involved have agreed to support the strategies. Dr. Feldhoff indicated his desire for the staff and faculty senates to have input. Chair Schifano noted that everyone has a great interest in this issue.
In response to Chair Schifano's request, Vice President Gilchrist will update the finance committee regarding athletics budget at the May committee meeting.
Mr. Green congratulated Mr. Curtin for his dedication and expertise. In response to Mr. Green's request regarding comparison data for other state institutions, Chair Schifano asked that information on budgetary issues in the state be made available to Committee members. Ms. Shuter noted that UofL is the only institution in Kentucky keeping a steady enrollment, thereby making comparison with other state institutions difficult. Ms. Shuter further commented that since UofL's endowment receives coverage in the media, many staff do not understand there is no money available for salary increases.
VII. Other Business
Chair Schifano welcomed and congratulated Provost Garrison in her new role as acting president.
There being no further business, Dr. Feldhoff made a motion, which Mr. Green seconded, to adjourn the meeting at 2:15 p.m.