Montana Board of Regents of Higher Education
April 24, 2002
Montana Higher Education Complex
These minutes were approved unanimously at the
July 11-12COMMITTEE REPORTS
, 2002 meeting of the Board in Glendive, MT.
WEDNESDAY, APRIL 24, 2002
The full Board convened at 8:00 a.m. - Roll Call indicated a Quorum Present
Regents Present: Lynn Morrison-Hamilton, Christian Hur, Ed Jasmin Vice-Chairman, John Mercer, Richard Roehm, Mark Semmens, Margie Thompson Chairwoman, and Commissioner Richard Crofts, ex officio.
Regents Absent: Governor Judy Martz, ex officio, Superintendent of Public Instruction Linda McCulloch, ex officio excused
Item g. Fiscal reduction plans for 2003 was added to the agenda today.
a. Revision of Board of Regents By-Laws, Article V
the item or items and submit them to the Secretary of the Board of Regents at
threefour weeks prior to a meeting.�
Regent Jasmin MOVED for APPROVAL of Item a. of Unfinished Business
The motion was APPROVED unanimously
b. Presentation on Cost of Education Allocation Model
Following the presentation on the Cost of Allocation Model by Rod Sundsted, there was extended discussion on the merits and flaws of the model. Regent Mercer recommended changing the model from one of equity to one that would ask the campuses to show specifically how they would use the dollars and what the returned value would be. It was agreed that Rod Sundsted would provide to the Regents a correlation on the allocation model to how the campuses actually budget their dollars. Regent Roehm indicated that positive incentives are built into the current model during evaluation of the presidents and approval of the budgets. He believes it is best that the factors be made equal and then hold the campuses to best accomplish the strategic plans and objectives. There is a high level of satisfaction on all the campuses that the current model takes into consideration the differences of each campus and equitably distributes the available funds. Commissioner Crofts indicated that to move away from this equity and toward competition between the campuses would destroy the satisfaction, and budget hearings will be increasingly rancorous. There was discussion of creating a pool for incentives, but there is too little money in the budget to do that. To remove what is available at one campus that has not accomplished all their goals in order to reward a campus that has done much better, would leave the first campus in a position of not being able to cover fixed costs. Chair Thompson asked if Regents Jasmin and Semmens could suggest to their sub-committee a dialogue on how the state funds the university system. Regent Semmens indicated he would raise it at the next meeting. Regent Jasmin indicated that WICHE, using a PEW Foundation grant, is bringing together like-states to discuss these issues and find beneficial solutions for all. The Commissioner further noted that WICHE will also ask its Commissioners in May to approve a major study involving state revenues/taxes that enable a state to support higher education.
c. Presentation & Discussion of Alternate Budgeting Process
Commissioner Crofts noted that it is very difficult in Montana to fund incentives since MUS campuses have about 80% in state funding and tuition to do what is done in comparable states with comparable programs. He therefore recommended that the Regents think first about what they want to achieve before considering what they want to change. He recommended bringing in an outside consultant to facilitate this discussion. Regent Mercer indicated there is a cultural difference between him and the MUS. He believes that if they continue to budget the way they have in the past, they will continue to just take what dollars the state offers. He believes the culture of the MUS should be changed to one of selling something for an investment of state dollars. He believes that specific issues from the Strategic Plan need to be addressed to the legislature indicating that they will receive a given return on the dollars they invest in them. Regent Roehm indicated that it is already the plan for the next budget to be presented as business plans by the campuses, and he believes it would be good to have an outside consultant work through these issues with the Board. Regent Semmens indicated they needed to decide how to integrate into the budget process and discussion how funds are being allocated to achieve principal goals. MUS is achieving much with the resources it has. He recommended thinking about how objectives are being achieved and that some amount of money be made available for an incentive pool to reward performance above and beyond. Chair Thompson noted that four years ago, a percentage was taken for this. The Commissioner noted that $200,000 was taken each of four years. Using that money, the system has dramatically increased the number of on-line courses available. Some was spent for course development, and some was returned to the campuses to make their own decisions on what they needed to develop. It is better to identify what needs to be done, how much the Board is willing to spend, and allocate in the regular process to the campuses, holding them to accountability for achievements. The Commissioner cautioned against putting the campuses in competition with one another. Much effort has gone into countering that trend. Regent Semmens indicated the starting point is the Strategic Plan. The next question is how and to what extent the Board wants to directly relate financial flow to achieve those things. Chancellor Capdeville asked if Regent Semmens was talking about getting away from an FTE model, to which he replied �not totally.� Regent Hamilton asked if he was talking about performance of individuals or the campuses. Regent Semmens indicated he intended campus performance or program performance. Chair Thompson inquired what direction the Board wanted to give OCHE, to either pursue a meeting with an outside facilitator or do something different. Regent Semmens suggested perhaps a smaller task force should meet first and that the Allocation Model and the Budget should be taken together. Regent Jasmin noted it was necessary to continue with the current model until something better could be found. If the Commissioner wanted to bring in a consultant, he was in agreement with him. Regent Jasmin believes the model used is the only equitable way they have to distribute what funds are available to the MUS. He believes it is not necessary to reinvent the whole wheel, and that there is a lot of data available about all kinds of models. Regent Hamilton indicated that when she spoke of tying the model to goals and objectives, she did not mean to find a different model, but to report on how business is done, with a closer tie to budget, the Strategic Plan and the allocation model. The Commissioner indicated he believes these subjects are all related, however they are not the same. The term budget is being used in three different senses. One is the budget requested from the governor and the legislature. In that budget request, the model has never been used. More money has been requested and they have been increasingly successful in obtaining it. The second �budget� is to determine what dollars the campuses get. When OCHE receives the lump, they determine the portion of the lump each campus will get from the allocation model. The third �budget� is how campuses spend their money. This is the area the Board can take steps to be sure the budgets are related to obtaining specified objectives.
Regent Jasmin MOVED to continue using the current allocation model into the next year.
Regent Semmens asked if OCHE was not continually tweaking the current model. Rod Sundsted indicated that was the case, but that he was holding off at this point to see what the Regents decided today. The current model is currently used into the 2003 fiscal year. Regent Semmens indicated he did not want to see the Board locked into using this model through the next biennium. Regent Hamilton indicated there was a definite disagreement on the Board regarding the validity of the model. She believes that OCHE needs to hear the Board support the model and affirm it or start from scratch. Regent Jasmin noted that was the intent of his motion. Following the presentation of today, it is the desire of the Board to continue using it until something better comes along. Regent Semmens indicated he didn�t understand why that had to be done today. It will remain in effect for at least the next 14 months. Due to time constraints, he felt they had not received sufficient input and needed more thorough discussion on the alternatives. Regent Mercer questioned as a point of order why they would need to reaffirm. He noted that in Havre he raised a question on restructuring, and Regent Roehm put together a Resolution to leave restructuring alone. He indicated the burden is on the person who wants to make the change, not on someone to reaffirm and squash innovative ideas. He objected to the motion and indicated it was a big mistake to preserve the same budget process. Regent Jasmin wasn�t sure any progress had been made in the previous hour, and that with all the discussion nothing had been changed. His motion was to continue using what they had until something better came along. Regent Hamilton indicated this goes back to governance and restructuring issues, and one primary issue was to give clear direction to management. She felt it was necessary to give clear direction to management through a unified voice of the Board. Regent Semmens reiterated he was afraid they may be stuck with this and that there would be no further discussion, and questioned why they needed a motion for something they understood would be in effect for at least 14 months. He asked Rod Sundsted how much time he needed for preparation of the 04-05 budgets. Mr. Sundsted indicated they needed to be defined by December or January, and it took eight months to develop the current model. Regent Hur asked Regent Jasmin to delay his motion until after further discussion. Regent Roehm stated that he supports the concept of using the allocation model as a mechanism to distribute, in a fair and equitable manner, funds received from the Legislature. He suggested they might look at ways to take a small reserve off the top for special initiatives of the Board of Regents, and then distribute the rest according to the allocation model, but they need to be careful not to establish a competitive approach. The present allocation model does not link appropriations to performance by Campus CEO�s, does not reward or punish performance of the campus, and does not establish a competitive environment between institutions. It has been suggested that the Regents should tie accomplishment of Regents� goals and objectives to campus general fund distribution. This practice would create an inordinately high competitive environment between campuses and would reduce the campus CEO�s ability to be flexible and innovative in performance of the mission, all of which Regent Roehm judges should be avoided. In fact, one goal is to encourage cooperation and collaboration between institutions. He submitted that MUS currently has sufficient mechanisms to evaluate campus CEO�s and to reward or punish them for adherence to those goals. During the budget process the Board can require each institution to show how their campus relates expenditures to strategic objectives, and how those objectives are accomplished. Then, during the annual evaluation, an appropriate determination can be made concerning the effectiveness of the campus CEO. The present system also allows Campus CEOs to transfer funds between accounts on their respective campuses, and to use their considerable administrative experience and initiative to accomplish the mission. Strictly tying performance to funds allocation will severely diminish this initiative, and their ability to be flexible�and effective. Further it would turn this Board into micro-managers for each campus.
Regent Jasmin WITHDREW his motion.
Regent Roehm moved the Board obtain the services of an appropriate outside consultant to assist at a Special Meeting prior to the December, 2002 regular meeting to consider alternatives and determine the activities and programs the Board wishes to encourage through a budget/allocation process, and the employment method by which they provide incentives in the FY 04-05 budget.
The Motion was APPROVED unanimously.
d. Policy on Tuition and Fees for 2004-2005
Expansion of tuition differential
Commissioner Crofts referred to his memo, and specifically the portion on tuition differential. This was discussed at the Senior Management meetings last summer and fall, and it was agreed that three tiers would be better than two tiers. The highest tuition would be at the flagship campuses in Missoula and Bozeman, the medium at the comprehensive campuses and the lowest at the two year campuses. (Please see memo) Regent Hur indicated he would support this because the campuses should charge what the market will bear. Regent Semmens noted the cost differential is important and asked if there would still be some variability. The Commissioner indicated that there would be a range with flexibility within the three tier approach. The notion is that resident students would pay more to attend UM-Missoula and MSU-Bozeman. It would take a period of some years before such a plan could be in place. There was extended discussion of super tuition for high cost/high reward programs at the various campuses, particularly Montana Tech and many of its engineering programs. Regent Semmens referred to the sizeable course fees they had approved, and indicated he liked the three tier concept with an active use of special tuition for areas of strong demand and reward.
Regent Roehm moved the Board endorse a three tier approach to tuition differential and direct the Commissioner to begin developing a specific methodology that encourages maximum flexibility that would be used in setting tuition beginning in FY 2004.
The Motion was APPROVED unanimously.
Offer students from Alberta the WICHE Western Undergraduate Exchange tuition rate
Discussion ensued on the WICHE/WUE programs which are not approved by Canada. Currently Canadian students are charged 300% tuition, but it was recommended that the WICHE/WUE model be available as an option for campuses to use to draw more Canadian students to MUS campuses. That cost would be 150% tuition. There was discussion on which parts of Canada should be included and finally concluded that it could be offered to the three neighboring provinces. Regent Mercer requested that campuses first do an economic development assessment. If it shows that it would be good to bring in Canadian students, the Board would then take it to some policy leaders, indicating that this is something MUS is planning to do. He believes that if MUS steams ahead as it is, it will simply be a knee jerk reaction.
Regent Hur moved the Board authorize the campuses to offer tuition at 150% to Canadians.
Following further discussion on the analysis as the first step, which provinces to include, and flexibility being left to the campuses-
Regent Hur stated his MOTION was that the campuses have flexibility to choose whether or not to make the offer, and to which specific provinces.
Chancellor Capdeville indicated it would benefit the MSU-Northern campus by bringing Canadian students from their two-year institutions to complete their four-year degree at the Northern campus. Regent Mercer indicated he was worried about the wording of the Motion. He noted it should speak to an invitation for proposal to these three provinces, or combination thereof, and how it will benefit the Montana economy, rather than it is being offered simply to be friendly neighbors.
Regent Hur ADDED to his MOTION: with the understanding that campuses will present to the Board such tuition fee schedule based on these provisions and an economic analysis be included.
Regent Semmens offered a NEW MOTION to authorize the campuses to bring to the Board proposals to offer to residents of British Columbia, Alberta and Saskatchewan, tuition consistent with 150% of existing resident tuition being provided to any or all of the three neighboring provinces, and with the campuses demonstrating financial and economic gain to the campus and the community (limited to a one page report).
Regent Hamilton recommended that the Commissioner and campus CEOs get together to determine the parameters on what economic impact information should be included, to prevent wasting campus personnel time on items that won�t be included.
Regent Hur withdrew his motion in favor of that proposed by Regent Semmens.
Regent Semmens� Motion was APPROVED unanimously.
Regent Mercer indicated he hoped the Board would sell it to the Legislature to get their proper understanding of it, before taking any action.
Marginal cost for non-residents in programs with excess capacity
Commissioner Crofts� next recommendation was for the campuses to look at all non-resident students as potential students in this same manner to make use of excess capacity on the various campuses. He asked the campuses to document if they could bring non-resident students to campus for less than the 300% of current tuition, without that being a burden on the campus. Regent Semmens was concerned about being able to accurately determine excess capacity from course to course. President Dennison suggested this issue be dealt with in the same manner as scholarships. The scholarship would only be good for excess capacity programs so long as the student remained in that program.
Regent Mercer MOVED ADOPTION of this concept and that the Board move ahead with this, but not necessarily based on tuition but maybe scholarships and include a one page business/economic analysis for the campus and community.
The Motion was APPROVED unanimously.
Marginal cost for non-residents in summer programs with excess capacity
Commissioner Crofts then moved to the 4th issue of summer school and non-resident students. It was pointed out that the summer session generally has excess capacity, and providing the 150% of current tuition rate to non-resident students in summer school would draw more of them and make the programs more stable. This would help resident students.
Regent Semmens MOVED ADOPTION of this concept and that the Board move ahead with this, with scholarships provided and to include a one page business/economic analysis.
The Motion was APPROVED unanimously.
Additional flexibility on non-resident tuition
Commissioner Crofts referred to the 5th issue on non-resident students and the MUS commitment that these students pay the full cost of their education. This is done with flexibility allowed between campuses and the rates run from 106% to 109%. With the clear ability of MSU-Bozeman and UM-Missoula to attract more students than the smaller campuses, they have requested additional flexibility in establishing non-resident tuition. The Commissioner noted that the ability of the larger campuses to draw non-resident students has contributed to their overall fiscal health. He requested the Regents confirm that campuses have the flexibility to charge no more than the full cost of education. He further recommended the above approach allowing the campuses to submit business plans that would document their ability to receive non-resident students at a lower tuition rate and still provide benefit to the university system as a whole and to the State of Montana. These business plans might be based upon cohort groups, excess capacity that goes beyond single programs, and improvements in all funds budgets. Guidelines and criteria for the approval of these business plans would be developed by Associate Commissioner Sundsted. Upon the approval of the Commissioner, the lower tuition rates would be submitted to the Regents for approval in the regular process of establishing tuition rates. In aggregate, non-resident students would continue to pay at least 100% of the cost of education.
This recommendation could be implemented effective with the 2003-2004 academic year.
He then asked the Regents to approve a recommendation that Montana State University � Bozeman and The University of Montana � Missoula charge non-residents at least 105% of the full cost of education. The smaller campuses could recommend non-resident tuition rates less than the full cost of education. OCHE would ensure that system wide non-resident students in total are paying the full cost of their collective education. This recommendation could be implemented by the Fall semester of 2002.
The general purpose of these four proposals is to make it easier for small campuses to recruit non-resident students.
Regent Hur MOVED ADOPTION of this concept to give the campuses the flexibility to offer lower tuition, with scholarships provided only for excess capacity programs, and to include a one page business/economic analysis.
The Motion was APPROVED unanimously.
Commissioner Crofts indicated he had no recommendation on this item. It is a very complicated issue involving identification of the competitive market place and how to apply the policies to non-resident students on campus who also are taking courses on-line. He indicated that MSU-Billings has non-resident students from 17 states in their on-line courses, and those students are paying the stated non-resident tuition. There are arguments that say on-line courses are very expensive, they take a lot of preparation, that tuition rates make it too high to be competitive in the market place, and others that say non-residents can be added to on-line courses for less money. MSU-Bozeman has done a second version of their �white paper� following recommendations from the Commissioner�s office. It is anticipated that definitive information about competitive tuition levels for on-line courses, and a clear and specific process to determine the full cost of an on-line course to be charged to non-residents can be brought back to the Board.
e. Budget Request for 2004-2005
Commissioner Crofts noted that the item before the Board reflected their comments at the last meeting, and includes approximately a 5% increase for the MUS in the four initiatives. An attempt was made to run a balance between specificity and brevity. A 5% increase is about $25,000,000. The whole package is about $25.2 million and includes some from outside the lump. Regent Semmens indicated that these dollars are without the present law adjustments. The Board�s general guidance at the last meeting was that 5% was reasonable. It was also recommended to include the specific campus detail in an exhibit to the document. The returns on investment are general statements. It is difficult to pin down precisely the return on this investment. He indicated they had taken a middle ground. He asked the Board if they believed the dollars were about right, if they believed the format was right, and if they wanted all the campus details or a more succinct exhibit, and if they wanted greater specificity with just examples. Regent Roehm indicated he would like to see the campus activities as an exhibit at the end, with a one page, easily understood proposal, and return on investment examples. Regent Mercer noted that it was important to show that the $22 million investment would return more than that to the state. He believes lots of detail should be included. He stated they should start with the big picture, starting with present law adjustments, and then clearly convey that they have looked at everything possible to reduce and economize, and give examples. They should then show what is needed to run the programs. He said that a return on those dollars should be demonstrated. New proposals must satisfy the same test, being simple to understand, with samples and analysis. There was discussion on the pros and cons of giving specific dollar amounts for return on investment, with most regents believing it would be a dangerous position to take, particularly if the numbers were not realized.
The meeting recessed at 2:00 p.m. for a meeting with the Montana Ag producers.
The Board Reconvened at 4:00.
e. Budget Request for 2004-2005 CONTINUED
Commissioner Crofts summarized the Board�s recommendations as the need to find a shorter way to make the presentation without specificity, and to move to an appendix the details on the budget requests, and to work with Regent Semmens on examples for return on investment. The Budget Office needed the MUS Budget by April 15, therefore the figures that were in the original document were used as placeholders, without any detail attached. The Budget Office will be mailing to the joint Board on May 1 and they must have some figures by then. In June the Budget Office will convene the Budget Committee for initial discussions with Chuck Swysgood. By the middle of July the Joint Board will meet and the governor will advise the recommended funding to education and how it should be prioritized.
The Board reached CONSENSUS for OCHE to proceed with the revisions outlined to make the proposal more effective.
g. Fiscal reduction plans for 2003
Rod Sundsted informed the Regents that he needed direction from the Board in order to reply to the Budget Office by May 10 on the mandatory 3% budget reductions. Discussion covered the difficulty of cutting the campus budgets without increasing tuition. Some constraints on cuts are employee contracts, utilities, and other committed items. Difficulties in raising tuition to cover the cuts come from schedules already being printed and distributed, and registration already taking place for fall. A few recommendations made to cut budgets included eliminating the dental hygiene program and Yellow Bay, instituting pay freezes, deferring maintenance further, cutting back on classified staff and adjunct faculty, cutting MTAP and student assistance, applying cuts to the ag experiment stations as well as the agencies, and eliminating the 1% quality enhancements if the funds have not been expended. If the full 3% reduction is taken an increase in tuition of 4% or 5% would be needed to offset it. That would come to about $80 or $90 a year per student. This would affect both resident and non-resident students. Following this exercise of cutting the budget by 3%, revenue enhancement issues will be pursued. It was suggested that campus people recommend areas where they can generate extra revenue, and the ag extension service was mentioned in particular as having the possibility of imposing a service fee. Across the board cuts were ruled out, and it was the consensus of the Board that Rod Sundsted will work with the campuses and others involved the following week to identify any possible areas for reductions that would not impair missions. He will return a package to the Regents shortly after the conference call meeting.
f. 5% reduction plan mandated by the Legislature in HB 2
17-7-111(3)(f), MCA requires agencies of state government (with more than 20 FTE) to provide the budget director, "a plan to reduce the proposed base budget for the general appropriations act and the proposed state pay plan to 95% of the current base budget." This plan must include reductions of 5% for the general fund and the state special revenue fund types. For the Montana University System, this 5% reduction totals $7,561,794 annually
The Commissioner indicated this item will have greater impact on the system than the previous item. It will provide a list for base budget adjustments. He cautioned that they need to be very careful what they include on the list. It was the consensus of the Board that this item should be handled in the same manner as the previous item. Regent Mercer requested Chair Thompson to call the Governor and get an extension of time on this item. Rod Sundsted indicated he would need at least until the first of June. Chair Thompson indicated she would do that the next day.
With no further business to come before the Board, the meeting adjourned at 5:45 p.m.