President's Budget Advisory Committee

Minutes March 18, 1999

As Approved Unanimously by PBAC at its meeting of April 1, 1999

Members Present:

Staff Present:

Members Absent:

Guests Present:

Meeting Agenda

APPROVAL OF THE AGENDA

Bernie Goldstein brought the meeting to order at 8:10AM and asked for a motion to approve the Agenda. A motion was made by Dennis Harris. A second was obtained from Steve Wilson. The Agenda was approved unanimously.

APPROVAL OF THE MINUTES: 3-4-99

Goldstein asked for a motion to approve the minutes of the March 4, 1999 meeting. A motion was made by Wilson. A second was obtained from Rand Link. Harris noted that he was absent from the meeting; other minor corrections had already been provided to the author of the minutes. The minutes were approved as corrected, with Melinda Barnard, Harris and Marty Ruddell abstaining due to their absence at the 3-4-99 meeting.

CMS UPDATE

Referring a Memorandum from Chancellor Read to the Presidents, dated March 9, 1999 and included in the Agenda Packet, Larry Schlereth stated that the memorandum would also be distributed to the VPBAC and the CRC as a reflection of current CSU System thought on the CMS project. He asked if Steve Orlick could distribute this to the Academic Senate and Cara Puccio to the Associated Students' Board of Directors. Orlick responded affirmatively. Puccio stated that, although this was possible, neither she nor other AS students would be participating in the SSU-CMS Steering Committee. According to Puccio, the Associated Students does not contribute to the costs of CMS, nor should it. Schlereth stated that the non-participation of SSU AS students was duly noted. He also stated that the CSU CMS Board of Directors would select a student member.

LAND ACQUISITION UPDATE

Schlereth stated that he had no new information on this topic.

DISCUSSION OF THE UNIVERSITY RESERVE

Referencing the material included in the Agenda Packet, Schlereth introduced the topic by stating that he and Bernie believed it important to have a full discussion of the current Reserve prior to a PBAC discussion of establishing a University Reserve. Under current conditions, there is no established Reserve. Directors and Division heads bring items to the Cabinet for discussion; the Cabinet makes a recommendation to the President; and the President makes the final decision on what items shall be considered subject to the University-Wide Reserve. In an emergency, a unit head may go directly to the Chief Financial Officer, who then talks with the President and gets his decision. Since there is no Reserve funding, each of the units is assessed its fair share, using the all-funds, marginal cost formula. These assessments are made at the end of the second Quarter and near the end of the fourth Quarter of each Fiscal Year. This is a poor way to handle Reserve requirements; it is very difficult for the units to anticipate the amount they will need to hold back. Historically, $200,00 to $300,000 has been spent each fiscal year, on average. The current list of 1998-1999 Unit Assessments (reproduced below) gives the PBAC a sense of the costs, although the items might vary from year to year. Goldstein added that what is now needed is a more thorough discussion of the Reserve.

STATUS OF THE UNIVERSITY RESERVE 1998-1999
Unit Assessments

Current known reserve obligations for 1998-1999 stand at $288,535, as indicated below:

Known Reserve Obligations 1998-1999
Obligation Amount
Risk Pool Deductibles $ 75,000
Presidential Scholars 97-98 $ 38,500
Presidential Scholars 98-99 $ 75,000
Film Series $ 5,500
Toddler Center $ 8,000
CSU Assessment** $ 3,500
Bond Campaign** $ 10,000
Chancellor's Visit** $ 5,035
Environmental Impact Report 98-99* $ 50,000
Interest Cost - Intefund Loan from Trust, July 99 $ 18,000
TOTAL $ 288,535

Goldstein began that discussion by asking whether or not there was an established limit to the Reserve; is there some point at which we stop and say nothing more can be added to the Reserve assessment? Schlereth responded in the negative, explaining that, at the beginning of each Fiscal Year, he provides members of the Extended Cabinet with an estimate of Reserve requirements; that estimate is revised at each of the monthly meetings of the Extended Cabinet, at which point the CFO urges units to hold funds in anticipation of the assessment. Wherever possible, any item, which comes in between now, and the end of the Fiscal Year will be held or deferred until the beginning of the next Fiscal Year.

Sue Parker said she would like to ask again if any "creative financing" is available for funding the Presidential Scholars Program? Is there an upper limit to the cost of this program, or can it expand indefinitely? Schlereth said he knows Jim Meyer is working to identify potential donors for this program. Meyer said he has one donor now who will gift $1,000,000 if he is able to sell it. A $1,000,000 endowment will realize $60,000 in interest in the first year. There are other potential donors. He has had a few donors underwrite a single Presidential Scholarship. However, it is a fairly new program, and he can't force donors. Current scholarship awards from donor gifts amount to about $400,000, but most of this comes with some restrictions. SSU now has over $40 million in commitments, most in irrevocable trusts, almost all dedicated to scholarships, internships, and student assistantships. However, he can't speed up the process. In the next ten to fifteen years, SSU will have one of the finest scholarship programs available.

The University could also attempt to use existing designated scholarship funds, awarding funds to a Presidential Scholar in a particular major from funds designated for scholarships in that major. However, there is a conflict between the criterion for continuation of the Presidential Scholarship -- maintenance of an A- average -- and the procedures of the University Scholarship Committee. The latter utilizes a combination of GPA, letters of recommendation, and the student's narrative application. It is conceivable that the Committee would score a Presidential Scholar who has entered with a weighted GPA of 4.0 or above or has maintained an A- average too low using its criteria.

Bernard noted that the Presidential Scholars Program was started to attract better students, was initially funded from the President's Discretionary Fund, and was begun without consideration by PBAC or other bodies. This may be a program that we can no longer afford. PBAC is the only place where such a discussion can take place. Puccio responded that these are commitments made by the President, commitments that can't just be taken away from the students. Schlereth stated that there was a lengthy discussion of the proposed program in Extended Cabinet. All heartily endorsed the program, even though Schlereth pointed out at the time of this Cabinet discussion that there was no funding provision. He wanted to strongly convey a message to all that SSU needs to deal with both the financial commitments and the programmatic value of proposals.

Drew Calandrella spoke of the importance of the program in attracting a higher quality of student. Ruddell noted the program was to our benefit as well as that of the students; it rewards hard work and real academic achievement. It is "a real plus." Goldstein, who was unfamiliar with the program prior to his appointment, was "really impressed" with a "first class" program based upon an "outstanding concept."

Katharyn Crabbe noted that institutions sometimes establish rules that turn out to have unexpected consequences, results not in our best interest. We should look at the system we have set up for awarding academic scholarships, changing its rules when necessary to realize our best interests. In the long run, we need more - not fewer - scholarships. Garlin felt it appropriate to look at the scholarship policy, noted that the Scholarship Committee was not a policy-making body, and asked if the Senate Chair and the Vice President for Enrollment and Student Academic Services could pursue the matter. Both Calandrella and Orlick agreed to do so. Orlick also commented on the lost "opportunity costs" of the existing program -- $114,000 in scholarship funding means 28 class sections which can't be funded.

Turning to the last item on the list -- the Interest Cost of an Interfund Loan from Trust for July 99, Schlereth stated that this was an item which had not appeared before PBAC before. The Governor and the Legislature often fail to have a budget in place by the beginning of the Fiscal Year on July 1st. Since employee Payroll costs must be met, SSU borrows from non-General Fund sources, for which it must pay interest. This cash flow problem can last from one to three months.

Katie Pierce noted that the interest cost was a predictable expense; it happens every year. Schlereth explained that at the end of the year, if there is a balance in the University-Wide category, resulting from lower utility or other costs, this balance is applied to items like the interest cost. If funds still remain in the balance, it is rebated to the units; if there is a deficit, that is passed on to the units. Goldstein noted the importance of distinguishing between unexpected costs and unfunded items. Harris noted that in the case of unfunded items, both the Extended Cabinet and the PBAC share responsibility for past failures to address the issue. PBAC failed to fund the Presidential Scholars Program last year in its recommendation, knowing full well that the program would not go away. PBAC and the Cabinet must address these issues and establish a funded Reserve to cover unexpected costs. Garlin drew a distinction between what he referred to as budgetary issues and accounting issues, asserting that if an unfunded budget item was not covered by the General Fund, it would be shifted to non-General fund resources, lowering the amount available to the General Fund. Schlereth responded by urging faculty members to review budgetary issues with their respective Administrative Managers, a process he and Janice Peterson had recently completed.

Schlereth said that expenditures like that for the Risk Pool Deductibles were truly unpredictable. This item once had funding provided in the budget, but that funding was lost following the failure of PEP. The Reserve has become the place where unfunded items are addressed.

Garlin asked about the "starred" items in the list. Is the EIR item associated with the proposed Music Center. Schlereth responded that the EIR was associated with the Campus General Plan update, which includes both changes to the existing campus, and its access, as well as the land acquired north of campus and the proposed Music Center. The master plan has not been updated since about 1985. Part of that cost is released time for ENSP Professor Tom Jacobson, who is working with Campus Planning to develop a better method of obtaining public comment, as required by the EIR, from the campus community. This includes nine forums and the development of a website to solicit feedback.

Schlereth explained that those with the double asterisk (the CSU Assessment, the Bond Campaign, and the Chancellor's Visit) were items which must be paid with non-General Fund monies. The list is an "all-funds" list, identifying both General Fund and non-General Fund expenditures. Each unit had to identify a source for its share of each type of expense. Puccio stated that there are promises made by the University that can't be kept. The starred items shouldn't come out of the Foundation. The Associated Students paid $11,000 in administrative fees already, and she doesn't understand what the $8,000 is for. The Film Series' cost represents a commitment by Dr. Armiñana and Dr. Link. Rejecting the distinction between state and non-state funds, Bernard said the schools would just reduce their general fund to meet their non-state responsibilities. Schlereth responded that the administrative fee for the Toddler Center represented real costs, costs of overseeing construction, which in this case included problems associated with asbestos removal.

NEW UNIVERSITY-WIDE ITEMS

Schlereth introduced the item, referring to materials in the Agenda Packet (reproduced below). Bill Barnier suggested the term "New" was misleading. It can appear that the items listed are "a done-deal". He suggested that it would be more accurate to refer to them as "Projected". Schlereth noted that some are "real" and some are "anticipated".

Barnard stated that this item is frustrating to the faculty, when Academic Affairs is in deficit, and faculty are told there are no funds for the Center for Teaching and Learning or for conference travel. Wilson said, "from a University perspective, this is frustrating to all members of the community." The campus has to make "hard choices; every [emphasis in original statement] single person is being asked to and currently is making sacrifices." Schlereth said that he and Bernie were prepared to develop a plan, but they were reluctant to do so without some guidance to insure that the plan was consistent with the culture of the campus. Garlin stated that the CSU was underfunded. Schlereth said every year the campus is hit with both new and unfunded items. In some instances, the issue is whether we do or do not fund the item. In others, the decision is imposed from beyond the campus. There is also the question of whether to fund the item from existing resources or to borrow. Being a state agency, General Fund items can only be funded by borrowing for a short term, five to ten years.

NEW UNIVERSITY-WIDE ITEMS: 1999-2000

Analysis of projected new University-Wide expenses in fiscal 1999-2000 suggest Sonoma State University will need to identify approximately $1,318,000 from existing General Fund sources as indicated below. To assist the President in developing a General Fund Expenditure Plan for the upcoming fiscal year, Interim Provost Golstein and Vice-President Furukawa-Schlereth wish to facilitate a dialogue with PBAC, VPBAC and CRC that will culminate in advice for the President in this regard.

Item Amount
CSU Risk Pool Premium Increase $ 260,000
Common Management Systems $ 120,000
Hope Scholarship Reporting $ 20,000
YEAR 2000 Compliance $ 350,000
Schulz Center Warm Shell - 10 yr., principal & interest $ 335,000
Unidentified CSU Items $ 150,000
University Reserve $ 300,000
CMS General Fund One-Time Assessments $ 118,000
SUB-TOTAL $ 1,653,000
Less Projected New Discretionary Dollars from CS $ - 335,000
TOTAL $ 1,318,000

Rudell asked that a distinction be made between the known and anticipated items. Speaking of specific items on the list, Schlereth said there is no alternative to the Y2K compliance expense. Gloria asked whether the Risk Pool item was the full expense. Schlereth responded that the current cost was $760,000, and is shown in the 1998/99 Expenditure Plan under University-Wide. The $260,000 is the estimated increase in the premium charge. Referring to meetings later today with Chancellor's Office representatives, Adler asked Goldstein and Schlereth to appeal to the Chancellor's people. Schlereth said he hoped to be successful with the Y2K issue; however, the Schulz Shell was more difficult. It's funded from the Capital Fund, which means other CSU projects would have to be deferred. Goldstein said they would also raise the BAS technology issue, which is a "huge blow" to IT. Schlereth said the CSU is already pushing the Governor and Legislature to put the technology money back in, but it may come down to technology versus compensation funding.

Harris asked whether the $335,000 in New Discretionary Dollars represented all the new growth money or the balance after $125,000 was deducted to maintain the 20 to 1 SFR ratio, given a planned enrollment growth of 54 FTES. Schlereth said that was the total amount available in new growth dollars.

Orlick asserted that there was not a single Academic Affairs item on the list; all the items were Administration and Finance issues. Schlereth responded that the Risk Pool affected every single employee; CMS crosses the entire campus - Financial Aid, Admissions & Records, as well as Financial Services and Human Services; the Hope Scholarship is a student issue; Y2K is an IT item; the Schulz Shell is a Library and IT item; and the remaining two -- un-identified CSU pass-throughs and the absence of a Reserve are not AFD exclusive items either.

Barnier asked if the Schulz Shell could be financed through Development. Meyer responded that most of the donor naming opportunities were associated with rooms on the 3rd floor. Barnier said the Presidential Scholars Program should be up for discussion. The amount specified for the Reserve should be reduced by removing items like the Film Series and Toddler Center from the 1998/99 Reserve list (Item V).

Garlin asked that the minutes reflect that there appears to be a consensus among the faculty members of PBAC that they have grave reservations about funding the Shulz Shell from General Fund monies. He requested that this be conveyed both to the President and to the CSU. Wilson and Ogg both stated that the concern went beyond just the faculty. Crabbe stated that she had a problem with the term "priority"; many of the items were external mandates where there was no choice, rather than an opportunity to order priorities to reflect the mission of the University.

Pierce reminded members that the $335,000 for the Schulz Shell was the fully amortized, cost of both principle and interest for a ten-year period. Schlereth explained that the amount included $500,000 to move the Library and IT to the Schulz Center, most of that was associated with IT equipment. $2,000,000 was budgeted for completion of the 3rd floor Shell. Barnard asked whether it was possible to separate the two. Schlereth asked whether or not a $500,00 one-time item was acceptable; the response was negative. Puccio asked whether Prop 1A, the proposed capital bond, could be used for the Shell. Schlereth responded that the project list did include technology funds that could be used for Y2K as part of TSI-2, the successor to CETI, but that SSU was scheduled for the 3rd year of that bond act, if it passes. One topic with the Chancellor's Office today will be moving that to 1st year funding.

Orlick asked whether the North Entrance was included for 1999/2000. Schlereth responded in the negative, explaining that it was part of a longer-range list. It had to be preceded by revision of the campus General Plan. Part of the problem is that the parcel fronting RP Expressway SSU had owned for some time is covered by wetlands and, even if useable, would bring the entrance into campus at the Lakes.

LARGE COURSE SECTIONS

Noting that Sue Parker, who had requested the topic, had left and that Rose Bruce was not available, Barnard Moved, Barnier Second, and the body passed unanimously a motion to table this topic until the next meeting.

ACCOUNTABILITY MEASURES

Schlereth introduced this topic by noting that he and Bernie were providing the information today so that members could have time to review it prior to discussion at a future meeting. Goldstein added that they were seeking input regarding both the format and content, which should be sent to Pierce for purposes of coordination and response.

ITEMS FOR THE GOOD OF THE ORDER

Puccio expressed her concern with the difficulty of absorbing the detail of the issues under discussion and the necessity of asking for explanations at various points. This led to several comments regarding the importance of civility and mutual respect in public discourse over matters of public policy.

Noting the time and the impending meeting with Chancellor's Office people, Harris moved, Ogg seconded, and the body unanimously passed a motion to adjourn and to wish the two vice-presidents success in their meetings.

ADJOURNMENT

Goldstein adjourned the meeting at 9:41 AM.

Minutes prepared by Dennis Harris.


PBAC minutes 1998-1999
Updated 2007-12-14
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