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U of L Board of Trustees - Finance Committee

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May 12, 2005

The Finance Committee of the Board of Trustees of the University of Louisville met on Thursday, May 12, 2005, in the Jefferson Room of Grawemeyer, Belknap Campus, with members present and absent as follows:

Prof. Bill Pierce, Chair
Mr. Kevin Cogan
Mr. Nathaniel Green
Mr. Ryan McKinley
Mr. Bill Stone

Mr. Owsley B. Frazier
Ms. Sandy Metts Snowden

Other Trustees Present:
Ms. Marie Abrams
Judge Angela McCormick Bisig
Mr. Ulysses L. Bridgeman, Jr.
Mr. Bill Forman
Mr. Grant Helman
Mr. Mike Livingston
Ms. Jessica Loving
Mr. Steve Poe
Mr. J. Chester Porter
Ms. Beth Worland

From the University:
Dr. James R. Ramsey, President
Dr. Shirley Willihnganz, Executive Vice President and Provost
Dr. Larry Cook, Acting EVP for Health Affairs
Ms. Angela D. Koshewa, University Counsel
Dr. Denise Gifford, Vice President for Student Affairs
Mr. Mike Curtin, Vice President for Finance
Mr. Larry Owsley, Vice President for Business Affairs
Mr. Dan Hall, Vice President for External Affairs
Dr. David Howarth, Associate University Provost
Mr. David Barker, Director, Audit Services
Ms. Susan Ingram, Director, Budget
Ms. Anne Rademaker, Controller’s Office
Ms. Terri Rutledge, Asst. VP for Business Affairs
Ms. Carolyn Cochran, Office of the Provost
Mrs. Kathleen M. Smith, Assistant Secretary

I. Call to Order

Having determined a quorum present, Chair Pierce called the meeting to order at 2:55 p.m.

Approval of Minutes

Mr. Green made a motion, which Mr. Cogan seconded, to approve the minutes of March 23, 2005. The motion was passed unanimously.

II. Statements from Student Groups

Chair Pierce reported that because several students have requested the opportunity to speak directly to the Board about the tuition increase, the Committee has set aside time for these students to share their statements. Ms. Abrams acknowledged the importance of the students expressing their opinion about the tuition increase and assured them all board members are sensitive to the financial difficulties this may cause them. She also assured them that, upon her inquiries, the University of Louisville may have the smallest increase compared to other Kentucky colleges. After the Board approves the tuition increase, administration will focus attention to those students whose education might be disrupted because of financial hardship with additional scholarship monies. Ms. Loving thanked the students for coming today and assured them they are welcome to attend all open session board and committee meetings. Mr. Bridgeman noted the Board understands the hardship tuition increases creates for the students. Mr. Green encouraged the students to attend future meetings. Ms. Eileen Hagerman, representing the Students United for Peace and Justice spoke to the Committee, offering the following suggestions from her organization:

  • A five-year moratorium on tuition increases. This would allow students the necessary breathing room to organize against future state-level budget cuts.
  • Direct (and more thorough) communication between students and the Board of Trustees on future decisions regarding tuition increases.
  • A student budgetary review board to monitor University of Louisville budgetary decisions. (This group should be composed of a significant amount of students not serving in SGA.)

Chair Pierce thanked the students for coming to the meeting to voice their concerns.

III. Information Item: Interim Financial Statements as of March 31, 2005 and 2004

Due to the late hour, Vice Curtin reported the University’s financial position was a very good, stable position and offered to answer any questions at this meeting or at a later time. On behalf of the staff senate, Mr. Forman expressed gratitude to the administration for the efforts made to give salary increases to the staff during these difficult economic times. He expressed concern about the method of this year’s salary increase distribution. Administrators told the Senate there would be a 3.5% salary increase this year and inquired concerning distribution. The Staff Senate surveyed the staff and found the majority (60%) preferred a 3.5% across-the-board increase to all staff with at least a satisfactory performance appraisal. Later, the Administration decided to give a 2% across-the-board increase, and the remaining 1.5% as merit based on performance appraisals. Many of the staff senators have expressed concern for the performance appraisal system, noting it was flawed. The Staff Senate also learned the March 2005 price index indicates the cost of living has risen by 3.1% over the past year; therefore, the 2% across-the-board doesn't’t cover the cost of living increase. Chair Pierce thanked Mr. Forman for expressing the concerns of the staff.

Chair Pierce noted the financial statements were provided as information and no action was required.

IV. Workshop on 2005-06 Operating Budget

Because of time constraints, Vice President Curtin abbreviated the workshop presentation. He observed the budget was an open process in progress with wide consultation across the campus community which began in September 2004. The proposed budget represents a road map for the Challenge for Excellence. The University has sustained three years of budget cuts. Students’ degrees will be worth much more because of the investment today. Mr. Curtin acknowledged the team approach in formulating the budget. He noted the major forces affecting the 2005-06 budget were new state funds, increased tuition revenue and positioning the University for the future. State appropriations and other state funds plus tuition revenue constitute 86.6%.

The remaining 13.2% was derived from transfers from affiliated corporations, sales and services of educational activities, organized activities related to instruction, other non-educational revenue, auxiliary and service centers, and hospital-related revenue. The total state and CPE funding breakdown follows:

2005-06 Projected State Appropriation $176,109,100
Total CPE Budget Earmarked for U of L $ 7,579,000
Total Other State Funds $1,280,000
Total General Fund from State $184,968,100

Other sources of revenue for 2005-06 include:

Transfer from affiliated corporations $10,479,600
Sales & Service of Educational Activities 401,000
Organized Activities – Instruction 803,900
Other Non-Educational Revenue 7,727,700
Auxiliary Enterprises 10,372,000
Service Center Activities 2,688,100
QCCT 18,202,700
Total – Other Sources of Revenue $50,675,000

Mr. Curtin said administration recognized early on the need for an overall 7.3% tuition increase. The tuition-setting process involved consultation/input, review of the University’s goals, review of challenges, issues and efficiencies, and tuition analysis. Tuition currently covers about 45% of college costs; state funds cover the balance. UofL had the second lowest percentage increase last year of Kentucky public universities. He said traditionally, Kentucky’s public universities are considered affordable by national standards. The University received consultation/input from its Board of Trustees, vice presidents and deans, faculty senate and staff senate committees, student government leaders, budget and planning advisory committee, public hearing, campus-wide input from the provost’s website, and the Council on Postsecondary Education (CPE).

Mr. Curtin recognized the challenges the University faced: retaining quality faculty and staff, declining contribution to financial aid from the federal government, rising costs to provide services and materials, meeting CPE goals and objectives for UofL, and obtaining elite university memberships.

Mr. Curtin noted in order to maintain momentum while keeping tuition affordable, the University reinvested $22 million to strategic priorities such as academic programs, student financial aid, libraries, technology and research during recent years; eliminated and re-configured low productivity programs; reallocated positions and academic space; conserved energy; outsourced services; began charging users for specialized goods and services; charged overhead for indirect costs to continuing education programs, and scaled back original investments in strategic initiatives.

Mr. Curtin presented the 2005-06 Proposed Tuition Rate Schedule. He compared U of L’s proposed tuition rate with the University of Kentucky’s 2005-06 tuition rate. Mr. Curtin shared benchmark institutions’ tuition rates and an affordability comparison. Mr. Cogan made a motion, which Mr. Stone seconded, to approve the

President’s recommendation that the Board of Trustees approve the following components essential to the construction of the 2005-2006 Operating Budget proposal:

  • Increased Tuition Rate for 2005-06
  • Increased Technology Fee for Students in the School of Public Health and Information Sciences
  • New Clinical Laboratory Fee in School of Nursing
  • New Recital Fee for School of Music
  • New Technology Fee for Law School
  • Increase in Application Fee for School of Law
  • Increase in Candidacy Fee for Graduate School
  • Increase in Dental Instrument Rental and Technology Fee
  • New Technology and Career Management Fee in the College of Business and Public Administration for undergraduate courses
  • New MBA Program Fee in the College of Business and Public Administration

The motion passed with one abstention. Judge Bisig urged administration to give some deliberation to the students’ suggestions and allow some avenue for input for non-Student Government Association students. Mr. Stone urged the University to provide tuition and fees information sooner to the students and applauded the University for doing all it can to keep the tuition as low as possible. (From the notes: this committee can ask the vice president for finance to help it understand what a 5 year moratorium would mean.

V. Action Item: Approval of Changes Related to Retirement Plans

Addition of Mutual Funds Offered by TIAA-CREF

Vice President Owsley reported the university currently offers the following annuity funds with TIAA-CREFF:

CREF Stock Account CREF Social Choice Account
TIAA Traditional Annuity TIAA Real Estate Account
CREF Money Market Account CREF Bond Market Account
CREF Social Choice Account CREF Inflation-Linked Bond Account
CREF Growth Account CREF Equity Index Account

This offering lacks diversification recommended by many investment experts. The addition will provide the needed diversification. Mr. Green made a motion, which Mr. Cogan seconded, to approve the

President’s recommendation that the Board of Trustees approve adding the following mutual funds offered by TIAA-CREF to those funds available for university faculty and staff to choose for their retirement investments. The addition of these funds will provide greater opportunity for faculty and staff to diversify their retirement holdings—an important aspect of retirement planning.

International Equity Fund (TRERX)
Growth & Income Fund (TRGIX)
Social Choice Equity Fund (TRSCX)
S&P 500 Index Fund (TRSPX)
Real Estate Securities Fund (TRRSX)
Large-Cap Value Fund (TRLCX)
Mid-Cap Value Fund (TRVRX)
Mid-Cap Growth Fund (TRGMX)
Small-Cap Equity Fund (TRSEX)

The motion passed unanimously.

Authorization of Fidelity Funds to Offer Investment

Vice President Owsley explained Fidelity Investments offers this service to participants. Authorized advisors are selected by faculty and staff who meet Fidelity guidelines. These advisors will have direct access to accounts. The review process used by Fidelity includes:

  • Determining the advisor is in good standing with appropriate regulatory agencies (State of Kentucky or SEC);
  • Review any complaints or sanctions against advisor or advisor firm;
  • Existence of bankruptcy proceedings; and
  • Records of any convictions.

Fidelity’s goal for this service is to make it easier for registered investment advisors to provide support to those faculty and staff who want the investment advisor. Mr. Green made a motion, which Mr. Cogan seconded, to approve the

President’s recommendation that Fidelity Investments be authorized to offer its registered investment advisor service to university employees. In addition, it is recommended that advisors registered with Fidelity’s registered investment advisor service are authorized to deduct reasonable fees for the service, on a pre-tax basis, from Fidelity investment accounts of faculty and staff.

The motion passed unanimously.

Advisor Service to University Employees Amendment of Section 3.2 of 403(b) Retirement Plan

Vice President Owsley noted current 403(b) plan provisions only allows rehired faculty and staff the ability to participate in the 403(b) plan after completion of a 12-month eligibility period or if employed before December 31, 1989. This change would assist the University in attracting back to the university valued faculty and staff. Mr. Green made a motion, which Mr. Cogan seconded, to approve the

President’s recommendation that Section 3.2 of the 403(b) retirement plan be amended as follows:

Eligibility of Rehired Employees. Any employee who voluntarily resigns from employment in good standing and is subsequently reemployed shall be eligible to become a Participant provided the person is an Employee as provided in Section 2.18 and was a Participant prior to separation of University employment. Solely for the purpose of this Section 3.2, the phrase Termination of Employment shall include retirement. For the purposes of this section, persons participating in an approved early retirement/phased retirement program will be eligible to become a participant upon rehire.

The motion passed unanimously.

VI. Action Item: Approval of Ground Lease for Phase III Student Housing

As reported by Vice President Gifford at the January 2005 Academic and Student Affairs Committee meeting, the University Administration was proceeding with the development of additional on-campus student housing to be ready for occupancy in August 2006, a strategic goal of enhancing the residential component of campus life in line with our benchmark institutions. Trustee authorization is needed for the ground lease to ULH, Inc., which will authorize the financing and development arrangements.

In July 1999 and May 2002, the Board of Trustees approved forty-year ground leases with ULH, Inc. for the construction of Bettie Johnson Hall and Kurz Hall. The current demand for student housing was sufficient to warrant the development of Phase III, an addition of approximately 350 beds. The ground lease for Phase III will be on the east side of Fourth Street south of Louisville Hall. This area was in the housing zone of the University’s Facilities Master Plan. Mr. Cogan made a motion, which Mr. Green seconded, to approve the

President’s recommendation that the Board of Trustees approve a Ground Lease between the University of Louisville and ULH, Inc. for Phase III of our current housing expansion program, in substantially the form as the ground lease approved by the Board of Trustees for Phase I (Bettie Johnson Hall) and Phase II (Kurz Hall).

That the President be authorized to approve exhibits to the Phase III lease as they become available and;

That the President or designee be authorized to take all necessary steps to fulfill the terms and conditions of such lease.

The motion passed unanimously.

VII. Other Business

There was no other business.

VIII. Adjournment

Mr. Stone made a motion, which Mr. Cogan seconded, to adjourn the meeting at 3:20 p.m. The motion was passed unanimously.

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