Special Meeting of the Board of Regents
June 10, 2003
Chairman Kendall called the special meeting of the Board of
Regents to order at 3:13 p.m. Those in attendance were: Regents
Kendall, Finan, Florestano, Houghton, Johnson, Marcus, Nevins,
Rosapepe, Tydings, Wood; Regents Canter and Chapman via
telephone; Chancellor Kirwan, Vice Chancellor Vivona, Interim
Vice Chancellor Boesch, Associate Vice Chancellor Bryce,
Presidents Dudley-Eshbach, Gira, Lowe, Mote, Hrabowski, Heeger,
Dr. Malinda Orlin and Dean Donald Wilson (UMB), Don Reznikov,
(UMBI), Donald Paddy, UB, Ronnie Holden, UMES, David Harnage,
Towson, Assistant Attorney General Anderson, Ms. Ryan, USM staff,
other interested individuals and members of the press.
A. Regent Kendall: The Purpose of the meeting was to discuss
the anticipated $50 million budget cuts to the FY 2004 budget; to
gather information; to give guidance to the Chancellor for the
allocation of funds; to discuss principles for distribution, and
to look at a the "big picture." No decisions were made and no
votes were taken.
Regent Kendall thanked the presidents for providing their
thoughts and concerns for their campuses and the System as a
whole in their written materials.
B. Overview of FY 2004 by Chancellor Kirwan.
Chancellor Kirwan stated that we are expecting further cuts
to the FY 04 budget. It is important that everyone understands
where we are and the decisions we have to make over the next
three weeks. This session is important so that everyone receives
relevant information; asks questions; and gives guidance to our
decision-making. Our Presidents are having an extraordinarily
difficult time with the cuts; addressing the situation while
still maintaining morale is most difficult. We owe a debt of
gratitude to them.
The FY2004 budget, through legislative reductions and mandatory
increases, has been reduced by $166.2 million dollars. The
reductions have been addressed to date as follows:
With the additional additional cuts of $50 million (7-1/2%),
there are three issues that need to be considered over the next
- Reduction in salary and wages (including elimination
of 770 positions and approximately 150 layoffs systemwide
- Reduction in operating expenses
- Reduction in facilities renewal
- Additional tuition increases
- Indirect cost recovery revenue
C. Presentation by Vice Chancellor Vivona:
The General funds are dropping. The decisional framework
comes about in two stages:
Stage 1: Immediate consequences that come from legislative
appropriation where the reductions are known and considerations
for the next possible reduction to cure the FY05 budget deficit.
The report that was sent to the legislature 2 weeks ago will
handle Stage One of any revenue decisions that the Board has to
make. The state budget is down 6.5 percent; the university's
budget in general fund terms is down 13.2%. The university
represented about 17% of all state reductions; university
represents 7.5% of the total state supported budget. We are now
at the 2001 funding level. What will come before the Finance
Committee and the Board of Regents are the suggested rate changes
of 9% tuition increase, which would require Board approval, plus
a look at increases for UMB and UMUC. At the current funding
levels, we have moved below the FY1996 state funding levels for
Stage 2: Further Reductions:
1. Consideration of funding guideline achievement;
2. Consideration of historic enrollment. System has grown by
11,200 FTE students in last three years;
3. This demand is happening on a demographic level. This is
a natural consequence of the high school graduating
classes which are growing as a result of the Baby
Boom Echo. The major issue is future enrollment growth.
4. Budget equivalencies: What this means is what is
generated toward a bottom line when you take a 1% cut
among general fund or reduce funding guideline or
increase tuition 1%. A one percent tuition increase
generates $6.1M - would have to be in the 7-8% range
if $50M would be covered exclusively by tuition. If
we take budget reductions as the general fund
is reduced, every time we take 1% of this 7.5
percent it would generate about $7.8M in savings.
Regent Florestano: explain a furlough day
VC Vivona: a furlough day system-wide against all ranks
including faculty would generate about $3M. A reduction in
force or layoff of one non-faculty FTE, would generate about
$45,500 per year.
5. Decline/weakening of USM balance sheet: One important item
is the relationship between outstanding debt and available
cash. As a benchmark number we set that at 50%; for every
$2 of debt we like to have about $1 dollar in reserves
which includes the quasi-endowment as well as fund balances
from all sources. With the next bond sale we will drop
below that threshold. We have presented Wall Street with
our corrective action plan. We will hear from them in the
next month; we plan to go to the market in July and to do
the official statement. We will get a preliminary
indication from Wall Street and then if the news is not
favorable, we will consider taking further corrective
Regent Finan: Does the threat of the additional $50M
reduction come into Wall Street's decision?
VC Vivona: It does weaken the balance sheet in that we
will miss our reduction targets and then rely on fund balance
to balance the budget. If cash reserves are utilized overtly
or it happens because we assumed we would achieve savings by a
certain set of layoffs, or achieve revenue by a tuition
increase and don't achieve it, at the end of the end of the
year we will to balance the budget using the fund balance.
Your reserves are reduced.
6. Management's Tool Box for use by Presidents/Chancellor
- Guiding principles for the distribution of reductions
between tuition and further cuts;
- Timing of tuition decisions if to be raised (must give
General Assembly 45 days notice before raising tuition);
- Guiding principles for allocation of cuts among the
Funded vacant positions eliminated
Layoffs - will take on a greater share of reduction
Furloughs - an option but not a major mechanism to
achieve savings for FY2004
- Reduction in Salary and Wages
If the Thornton succeeds and the number of high school
graduates continues to increase at a greater rate, the
following items will likely happen:
- Reduction in operating budgets - not a major mechanism
- Tuition - an open option
- Use of Fund Balance - off the table
- Effectiveness and Efficiency Initiatives - will be looking
for new ideas that will come from Regents/Presidents to deal
with cuts now and in the future
Regent Florestano: Do I understand that the Legislature could
declare that there are insufficient resources to meet the
Thornton Commission mandates. They have an "out."
VC Vivona: Yes
Other items affected:
- Time to degree will be lengthened
- Decrease in retention
- Loss of research monies will affect all institutions
4. Principles and Guidelines for Budget Reductions:
Chancellor Kirwan: What factors should guide a decision in
making and allocating additional cuts? In making such decisions,
we need to be mindful of the governance priorities. Bill 682
lists the following areas as important:
1. Enhancing the flagship institution
2. Enhancement of academic health center and education research
programs in the Baltimore area
3. Enhancing undergraduate teacher preparation at the
4. Towson mentioned as state's largest comprehensive
5. Importance of enhancing he HBCU's
6. Regional Centers and the need to maintain access to System
programs through the centers
7. University College and its importance as the State's center
for on-line and distance education
Other items that need to be considered:
8. Inter-institutional variance in funding guidelines - a
measure in some sense of the adequacy of the funding to the
institutions in relation to their peers. It gives a measure
how well institutions are funded. It's not a perfect measure.
9. OCR Agreement - There is an agreement that the State has
reached with the Office of Civil Rights and there is an
expectation that the State will meet its commitment to
enhance the HBCU's. Right now, the funds are being
allocated to these institutions by MHEC. The Gov and
Legislature have appropriated the funds in MHEC's budget
to enhance the HBCU's. They are getting increments to
their budgets - $2.2M in '03 and $4M in '04.
10. Low/no tuition institutions - UMCES/UMBI limited source of
revenue - they receive general funds but do not have tuition
dollars. If they receive a cut of the same magnitude as the
teaching institutions, they are disadvantaged because they
can't turn to tuition to raise funds. It can be argued
that if you mitigate their cut, then you are increasing
the cut to the teaching institutions who will have to
raise tuition higher to offset that higher cut.
11. Regional Centers - expectation on the part of Regents and
General Assembly that these centers will be maintained.
System must take regional centers into account.
12. Minimize financial impact on students - some of our
institutions are open access institutions that serve
populations that come disproportionally from low income
families. If they receive a cut of same magnitude as
more selective institution that can afford to raise
tuition, again there is a disadvantage.
Another consideration are those institutions that are
experiencing significant enrollment growth. How do we take that
into consideration as we make these decisions?
This is a very complicated set of choices we have to take into
account - an over constrained problem. Which means that there is
no unique or optimum solution to this problem! We have to weigh
these various factors and end up with appropriate cuts to the
- Medical, dental, law social work clinical programs for needy
- Agricultural Extension Services will be cut back
- OCR agreement not fulfilled
- Fail to fund maintenance
- Bond rating in jeopardy
Possible Time line scenario:
June 10, 2003- Today's Discussion
June 23 - BOR Finance Committee
June 27 - Meeting of the Board of Regents
July 1 - Advisory to students regarding budget situation
August/September - preparation of FY 2005 Budget
E. CUSP Overview
President Gira stated that there was not 100% consensus
point of view from the presidents about what to do next regarding
the budget cuts. Our budgets have been cut systemwide 13.2%;
those cuts range from 8.4%- to over 15% - they have not been
administered across the board.
Cuts that range from 8-10% at the low range included two
HBIs and the three institutions that do not have a revenue source
- UMBI, UMCES and the System Office. Those that ranged in the
middle area, 12-13%, included institutions that had grown and
UMES; 14-15% cuts include Towson, Frostburg, UMB and UMBC. Seven
presidents are recommending, given the level of cuts that have
been administered to date, that the next cut be administered
across the board - Towson, Frostburg, UMUC, UMBC, UMCP, UB and
UMES. The other six institutions are not of one voice. There
are at least two institutions that are saying make funding
guidelines the primary or exclusive basis on which to look at
further cuts. There is at least one that is very strongly
opposed to any cuts across the board. The presidents are saying
that the cuts have ranged from 8 to 15 percent and some
institutions can be pushed over the edge if those that were
funded at the higher level or are not in a privileged class.
There are three institutions that don't fall into any of those
categories: Towson, UB and Frostburg.
Regent Wood: Did the presidents take into account where their
institutions stand with respect to their particular peers in
taking the position they took on the distribution of the cuts?
President Gira: The funding guidelines include tuition as a
variable. Funding guidelines will reflect the relative tuition
and state appropriations for our peer institutions. One of the
things about funding guidelines that hasn't been mentioned is
that institutions that grow are penalized. FSU controlled
enrollment for 3 years because we had two major buildings out of
service. The result was we did well in funding guidelines but
institutions like SU and UMBC that had significant growth dropped
in the funding guidelines.
F. Regent Discussion:
Regent Kendall: When you look at the funding guideline, some
institutions are penalized by current funding guidelines and also
those that raise tuition seemed to be penalized. We need to look
at funding guidelines. Do you have any suggestions on how these
might be addressed to reflect more current circumstances?
Regent Wood: Do the institutions look at the tuition of their
aspirational peers in determining what their tuition rate and
revenue should be?
VC Vivona: They do not. We do not pick peers based on the
relative position in tuition.
Regent Wood: It would be helpful for the Board to know what
tuition is charged by our peer institutions to see if we remain
VC Vivona: Tuition is much more determined by the state/region
in which the institution resides. Tuition in the East is
historically high; we are 7th in the nation. One indicator is
how we fare in the region in tuition rates - we are now at a high
point in the region.
Regent Florestano: We have always been a high tuition state and
it is not a factor that affects whether we are ranked nationally
or not. I have come to the conclusion that the funding guideline
needs to be adjusted. But I don't think they should be the only
rationale on which to base the cuts.
Regent Nevins: I agree with Regent Florestano's comments. This is
a complicated issue and it seems that funding guidelines are
important but we can only use them as one of many tools that we
have. Otherwise we are giving disincentives rather than
incentives. We need to balance funding guideline, tuition, and
Regent Canter: When we talk about tuition, we talk about a
relatively small percentage of the total burden that the State
has put on us. We also need to consider the total cost of
education - fees such as dining, housing, athletics, health
center, parking and technology.
I hope institutions will communicate with students as soon as
increases are decided so that they can plan for the increases.
Personally, I'm in favor of enrollment caps. We need to consider
leaving executive positions open for a longer period of time -
need to show that everyone is taking the burden.
Regent Tydings: I think that President Gira's recommendation for
cuts to the seven institutions is the only fair way to go; we
need to face the issue of enrollment in the next 2-3 years and
designate the institutions. We need to advise the legislature
and the governor that we must have enrollment caps and must set
date specific and institution specific.
Regent Kendall: We need to be proactive and develop a plan for
President Dudley-Eshbach presented the concerns of Salisbury
University. The University System has not done well by Salisbury
- tuition revenue is about to exceed general fund revenues.
Salisbury is requesting an increase above and beyond whatever
across the board approach is taken. I cannot get the State
appropriation I need to operate. I've got to have the revenue
from some source. I have submitted a plan that would turn some
of the funds back to financial aid for students that would face a
hardship of a major tuition increase. It seems ironic that it is
impossible to apply the funding guideline. In my experience,
when there is a funding guideline or formula, it is applied. If
it is not going to be used it should be thrown out. If I am not
going to receive the State appropriation, then I need the freedom
to raise tuition to the level that is required. I don't want to
sacrifice the quality of SU. I'm asking for relief.
Regent Wood: What are you asking for?
President Dudley-Eshbach: If there is a guideline, apply it. If
we are not going to use it, throw it out. I want to set my own
Regent Nevins: I just want to make sure I understand your
points: you want as much State appropriation as possible,
greater flexibility to set tuition rates to make up for what you
don't receive from the State and selective growth caps.
President Dudley-Eshbach: Yes.
Dean Wilson, UMB Medical School: UMB requested that the Regents
keep the funding guideline to help build campuses. We have a
unique campus - with professional schools and graduate school
where most of the revenue comes from tuition and the School of
Medicine and Dentistry where tuition is a very tiny part of the
revenue. What we need is flexibility to do what we need to do.
The Medical School generates 93 percent of the budget; only
receive 7 percent comes from the State yet 98 percent of our
problems are having to deal with the State. We have institutions
that are not tuition dependent; we can't increase the number of
students; can't delete departments.
For institutions like UMB where we have to compete on the open
market for everything, we need flexibility to deal with the
Regent Florestano: You need to work with us on the BOR in terms
of regulations that you think could be eased to make life easier
in running you kind of program. I think our status as a pubic
corporation should help us move to that goal. It won't solve the
current problem, but we need to look at this.
President Boesch, UMCES: We have a particular problem - a new
building coming on line. There needs to be common sense on how
we approach these problems. Wisdom and judgment are required.
Need to look at disparity of current services budgets for the
institutions, where we are in respect to state general funds
presently, where we've been able to fill the gap, not the
programmed increases of 4% year but the additional increases in
tuition, and use that gap as a partial part of the guidance of
making the decisions. It relates to all institutions in the
Regent Rosapepe: As was pointed out, we rank 7th in tuition; 5th
in personal income and 32 in state support. The state is not
investing in higher education. The cuts that we have already
taken take us back 10 years on a per student basis. In the
current fiscal year we were cut more than twice as deeply as the
rest of state government. The advice I would like to give is for
the Chancellor not to propose additional tuition increases and
not to propose additional budget cuts unless and until there is a
legal decision by a legally constituted body of the State of
Maryland requiring a cut in our budget. I understand from the
Governor's staff that the Governor intends to propose cuts, but
the Attorney General's opinion dated May 20th states:
"University funds cannot be unilaterally withheld by the
Secretary of the Budget at the direction of the Governor for an
indefinite period. If appropriated funds are held indefinitely,
the authorization to withdraw the funds from the Treasury must be
canceled." "As head of the executive department of the
government, the Governor can request executive branch agencies to
reduce their spending of appropriated and allocated funds. Such
a request would not be legally binding." The reality is: the
governor and the legislature are in political disagreement. The
governor had revenue proposals for slots and the legislature had
some revenue proposals in taxes. They haven't come to an
agreement. To do permanent damage to our System without the
Board of Public Works and the Governor having come to an
agreement on this, I think is dangerous. I would urge the
Chancellor not to come to the Finance Committee or the Full Board
with the recommendation of tuition increase or further cuts
unless the Board of Public Works has voted consistent with the
law to cut our budget.
President Hrabowski: The longer we wait to make a decision; the
deeper the cuts we will have to make. Prudent managers have been
working on their campuses to decide how the cuts will be handled.
1. The reason so many of us agreed on the pro rata approach, is
that we recognize that we don't need to be fighting each other.
2. Focus on Tuition Task Force. 3. Rely on experts as we make
these critical decisions. I'm thinking of Joe Bryce and the
Chancellor who will be working with the Legislators and Governor.
We have to be careful not to come across as adding fuel to fire.
My concern is we should be communicating with our students. In
talking to my students, they said make sure we have classes, hire
more teachers, keep the libraries and technology available.
Regent Florestano: Across the board is good but there are still
certain things we have to take into consideration such as the
research institutions. New capital facilities coming on line have
to be considered. I feel the President of Salisbury should have
the ability to raise tuition to what she thinks the market will
President Hrabowski: My concern is the response is reaction of
legislators if we raise tuition too much and end up with a
President Florestano: I'm surprised that there no backlash from
anyone else in the State regarding the cuts higher education is
President Hrabowski: The citizens have spoken - they don't want
more taxes. We are seen as fat, we have to prove that we are
more accountable and more efficient. I think it is up to us to
figure out ways to survive in this climate.
Regent Johnson: Two points: (1) a real question in that we
don't have overt language to explain the role of the Legislature
or the Governor in terms of how public higher education gets
funded. How do we start to develop what the legal guideline is
to figure out what the State's role is to be? (2) Trying to
maintain OCR settlement. If we get to the point that all the
funding that comes in from MHEC goes to fill the holes of other
cuts, I think we are going to see that we are in violation of the
spirit of that agreement. That is another issue that the State
has to deal with.
President Gira: Frostburg has taken a 14.9% cut and can't afford
any additional cuts. We have a new science center opening with
no money to operate the facility. The institutions have been
treated fairly by the System; differential cuts have been made
but enough is enough!
Vice President Destler (UMCP): President Mote is in support of
pro rata of distribution of cuts because UMCP has done worse than
pro rata both when funds were given to our institution in recent
years and now that funds are being reduced.
Regent Florestano: Mote's memo said: "The only ethical course is
to allocate increased tuition money collected, from students and
their families to replace state cuts to student programs, not to
fund state service functions which include outreach function such
as agriculture extension." Is that what the campus is going to
Destler: Absolutely. We have no choice. We have already begun
to take an approach to the entire year's reduction. We can't be
in the position of charging exceptionally high tuition to our
students and offering lower quality services. The students will
not come at some point. We are going to reduce all of our
programs by the full amount of the reduction in our general fund
appropriation and only apply tuition dollars back toward those
programs that support our core academic and research mission.
Regent Rosapepe: We are a public institution of higher
education; not a group of private institutions. I hope we don't
lose track of that as we go through this debate. All these
discussions are at the margin about the way we can rearrange the
deck chairs. We are losing site of the fact that we are moving
away from having public higher education in the State.
Regent Kendall: Thank you to everyone for participating. The
Regents take this issue very seriously and are very concerned and
understand the concerns you raised. The outcome won't be to the
liking of many; System Administration, Presidents and the Board
will try to do the best we can for System. The System will
continue to go forward. The System has done a magnificent job in
the last 10 years of elevating itself. We need to work to see
how we can elevate the System further - we have not reached the
pinnacle of success.
Chancellor Kirwan: I thank all for their participation today
although there are not common views, the issues we face have been
put on the table very effectively and appreciative of the fact
that we talked both about the near term and long term issues that
we need to begin to address.
Meeting adjourned 5:14 p.m.
- Tuition revenue exceeds general fund appropriation at
several institutions as source of revenue;
- Access - must be certain that we set aside funds to fund
need-based financial aid
- Possible enrollment caps - it is clear from the data that we
are going to have a huge enrollment increase unless we take
action, we will have a 255 increase by 2010. If the State
does not provide adequate state funds and we allow that
enrollment to take place, we will grow ourselves into
- Bond rating