wayne state university · 6/26/2013 · wayne state was the only university to receive an increase...

WAYNE STATE UNIVERSITY

Board of Governors

BUDGET AND FINANCE COMMITTEE

June 26, 2013

Minutes

The meeting was called to order at 11 :05 a.m. by Governor Pollard in Rooms BC in the McGregor Memorial Conference Center. Secretary Miller called the roll. A quorum was present.

Committee Members Present: Governors Dingell, Driker, Massaron, Nicholson, and Pollard; Michael McIntyre, Faculty Representative, Louis Romano, Faculty Alternate Representative; Erika Giroux, Student Alternate Representative

Committee Members Absent: Adham Alijahmi, Student Representative

Also Present: Governors Dunaskiss, O'Brien, and Trent, and President Gilmour; Provost Winters; Vice Presidents Lessem, Lindsey, Nork, Ratner, Ripple, Staebler, and Wright; and Secretary Miller; Brandon Shamoun, Student Senate President

APPROVAL OF MINUTES, May 1, 2013

ACTION - Upon motion by Governor Massaron and seconded by Professor McIntyre, the Minutes of the May 1, 2013 meeting of the Budget and Finance Committee were approved as presented. The motion carried.

CONTINGENCY RESERVE

Mr. Kohrman reported that there were no transfers requested from the Contingency Reserve. With the return of funds remaining after a completed Dean Search, the balance of the Contingency Reserve is $216,029.

FY 2014 TUITION AND FEE RATE RECOMMENDATION FY 2014 GENERAL FUND BUDGET FY 2014 AUXILIARY FUND BUDGET

Governor Pollard indicated that the above three agenda items would be discussed as a unit and subsequently voted on in one motion. He called on Mr. Robert Kohrman, Director of Budget, to make the presentation.

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With the help of a series of slides, Mr. Kohrman reviewed the University's budget situation, including tuition revenue. WSU finds itself in a relatively high cost structure, with low tuition rates compared to its peers, and a drop in state support over the last decade, from $250 million to $183 million annually. During this period the budget was kept in balance with a slight increase in enrollment and a mild rise in tuition. However, over the last few years, enrollment has dropped and tuition rates have increased at a lower rate. The challenge faced with the FY 2014 budget is that it must cover inflationary increases and provide funding for critical investments in retention and research.

Examining the issue in more detail, Mr. Kohrman looked at the decrease of $70 million (28%) in state appropriations between 2002-2013. If state appropriations had kept up with the Consumer Price Index (CPI) during those years, WSU would be receiving $147 million more than it received in FY 2013, and tuition rates could potentially be 44% lower than their current rate. In a comparison with other universities, 30 years ago WSU's annual tuition rates for a full-time student were similar to those of the University of Michigan and Michigan State, ranging from $1796 to $2026, with the MPU average at $1504. For FY 2013, U-M is at $12,994, MSU at $12,675, and WSU at $10,190, with the MPU average at $10,465. The annual percentage increase for other universities during this time ranged from 6.4% to 6. 7%; WSU's was 5.9%. Mr. Kohrman also compared WSU's faculty salaries and administrative costs with other universities. The average salary for a full professor at WSU is $117,000, less than at MSU or at the U of M, but higher than the MPU average of $104,000. With respect to administrative costs, the average MPU percentage is 15. 7 administrators per 100 students; MSU has 16.5%, while Wayne State has 10.3%. To get to the MPU average, WSU would have to add 1600 additional staff.

As Mr. Kohrman mentioned earlier, the challenge is to fund inflationary increases, including the mandatory compensation increase for faculty of 2.75%, and inflationary increases for facility services, primary utilities, and deferred maintenance, as well as an increase of 11 % in financial aid. In addition, there is debt service of $3.4 million and strategic investments in retention and research of $5. 7 million.

Significant efforts were also made in the FY 2014 budget, cutting $19 million from the previous year, or 5.5%, across the board in the divisions and schools and colleges, from their personal, administrative, travel, and general operating costs. Schools and colleges also took a reduction in part-time faculty and reductions in vacant faculty lines.

On the revenue side, Mr. Kohrman presented a chart illustrating the percentage increase in state appropriations for all of the Michigan public universities. The highest was Grand Valley State University with 4.2%, and the U of M and MSU both had roughly a 1.8% increase. Wayne State was the only university to receive an increase of below one per cent, specifically, .29% or $535,000. Indirect cost recovery will also have a slight decrease of about $5.5 million, while investment income will have an increase of 16% or about $1 million.

In terms of tuition increases, the administration proposes that an undergraduate resident taking 30 credit hours per year would have an increase of 8.9%; a graduate resident 4% and non-resident 2%; while the Doctor of Pharmacy would be 4% and the Law School 6.8.%. Mr. Kohrman also presented a chart explaining the rates for various credit hours, ranging from 7.6% for three credit hours per semester to 8.9% for 15 credit hours. A full-time undergraduate taking 30 credit hours over two semesters would pay $900 more per year, or

Budget and Finance Committee Minutes - June 26, 2013

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$300 more per week for each of the 30 weeks while attending classes. In addition, a linear chart and two tables compared the effect of WSU's 8.9% increase to that of other Michigan universities, including the University of Michigan which had adopted a 1.1 % increase, and Michigan State University, a 1.9%. The two tables compare the cost of tuition for students taking 24 credit hours per year as well as the standard 30 credits, since Mr. Kohrman explained that the average credit load for WSU students is 12. 7 credit hours per semester. Despite Wayne State's 8.9% increase, its tuition rates in dollar amounts are still considerably lower than either U-M's or MSU's. A WSU student would pay $8,968 per year for 24 credit hours compared to an MPU average of $9,582. For 30 credit hours, the cost would be $11,097 compared to the MPU average of $10,816, a figure slightly higher than the average but still less than four other universities in the state.

In terms of enrollment, a slight decrease of 2.2% is expected for the Fall Term 2013. Mr. Kohrman pointed out, however, that the registration process is only half-way completed, and the administration will provide updates during the next few months.

Turning to the General Fund budget, Mr. Kohrman said the budget will be balanced at $576 million for both revenues and expenditures. With the tuition increase of 8.9%, the overall budget will be increased by 1.1 %. Again, WSU's percentage increases do not correlate with the dollar amount increases when compared with other universities. The U of M's tuition increase was 1.1 % but their budget will grow by 4.5%; MSU's tuition was increased by 1.9%, but their budget will increase by 3.7%. Wayne State is consistently two to three percentage points below either U of M or MSU in terms of the growth rate of its revenue and expense structure.

A study of the revenues show that tuition and fees encompass about 60% of the total revenue budget, or about $348 million, while state appropriations are at 32% or $138 million. Mr. Kohrman showed how the revenues changed since 2001, the year that state appropriations began declining. In 2001 the state picked up two-thirds of the cost for an instate student to attend a university, with the student responsible for one-third. Shifting forward to 2014, the state now picks up only one-third of the cost, with student tuition covering the remaining two-thirds.

In terms of expenditures, compensation accounts for 65% of the budget, followed by operating expenses at 15%, facility services at 7%, and financial aid at 11 %. In addition, the University must make investments in three critical areas: • Retention - Funds will be invested in graduate and undergraduate retention, and plans

are being made to establish an office of multi-cultural affairs within the Provost's Office as well as a transfer center to recruit and retain students currently in the community colleges.

• Research - Plans are to invest in four areas: 1) improving core facilities; 2) providing bridge funding for faculty members who currently have grants; 3) providing additional funding for School of Medicine faculty lines; and 4) putting more money into faculty start-up packages.

• Campus-wide strategic investments - The largest of these is debt service at $3.4 million. Additional money must be added to the library acquisition budget, since that budget has an inflationary growth of about 9% annually. The administration is also looking at changing some part-time faculty to lecturer status, under the assumption that lecturers would be more effective in retaining students than would part-time faculty. Enhancements are also planned to the Provost's Office, human resources, and the marketing budget.


The auxiliary budget, of which 47% is housing, will grow by about $1 million or 2% over last year. The auxiliaries also took budget reductions, including a 5.5% reduction for those that receive general fund support. The expendable restricted budget of about $197 million houses the federal grants and contracts. Because of federal budget cuts, research and development expenditures will be at about $217 million, compared to well over $250 a few years ago. This reduction will also impact indirect cost recovery which is projected at $33 million in the FY 2014 budget, compared to $35 million for FY 2013.

The total overall current funds budget will be about $893 million. State appropriation revenue will represent about 20%, tuition and fees about 39%, the expendable restricted fund about 22%, the auxiliary budget 5%, and the designated fund revenue at 9%. In terms of expenditures in the current funds budget, the primary mission of the university - instruction, public service, and research - make up about 54%; the various support programs -academic, instructional, and student services - about 32%; and auxiliary, plant operations, and transfers about 14%.

In summary, despite the zero percent increase in the budget and the fractional increase in state appropriations, the administration has done as much as possible to protect all the academic programs and offerings. Notwithstanding the budget reduction of $19 million over last year, limited funds have been provided for critical investments such as retention, research, and new facilities. Although the tuition increase of 8.9% moves WSU's rates closer to the MPU average, they still remain below the average for students taking 24 credit hours. Finally, financial aid will have an 11 % increase, or about $6 million, for both the need- and merit-based scholarships and grants to help offset the tuition increase. Mr. Kohrman concluded his presentation.

Professor McIntyre made the following statement:

I am very supportive of efforts of the administration and this Board to come to some kind of a resolution that preserves the core functions of this University during very, very difficult economic times. If we accepted the cap that Lansing proposed, it would have not only impoverished this University now, but it would have had negative effects that would have carried forward for the next ten years. I just do not think that is an option that this University can consider. I regret, of course, the need for again raising tuition on our undergraduate students. I have been a strong advocate over the years of trying to minimize the increases. I understand the difficulties that they create, but I think that in order for us to provide the quality education that we want to provide and that these students are coming here to get, we need to have a certain minimum amount of money. And I do not think that what we are doing here goes beyond just doing what is needed to keep us going, to keep us going at a good level and giving us hope for the future.

I would like to make a couple of comments about various investments. If you look at these investments closely, you would see that in almost every case they are not some kind of a new initiative that we have decided to take on just because we happen to be broke. We are not taking advantage of the situation to raise tuition more than we need in order to get some funds for special projects. In almost every case you will see that


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these are remedial, that we talk a new building, a new something. Go look at the old one and you will see that we are not doing something to make the situation better than we had in the past, we are simply trying to restore our buildings that are worn and need repair or need to be replaced, and I think that is a very important thing to understand about these various items. We can argue back and forth about each one of these; this is not the time and place to do that. My committee, the Budget Committee, is not taking on any of the particular items on that list. What we had hoped was that there would be provisions for money in the Provost's Office to handle the inevitable problems that would arise because of the really, really big budget cuts that were imposed on the schools and colleges. These cuts were not minor. I sat through the budget hearings for a month and a half, and it was very sad. Every time the dean came in it was to cut something beyond the core. We just do not have the money. And so I think that what we are trying to do here is maintain as best we can a high quality institution.

I would like to make two other comments. This is the University of Opportunity. I came here in 1975. That's how we viewed ourselves. That's how we were viewed by the State. And that was thought to be a good thing. That was a good thing, that we were the University of Opportunity. And if you look what has happened over the last several years, the University of Opportunity has been the university that has suffered the most from budget cuts and budget shifts. I know that Lansing has problems with their budget; they are facing budget issues just like we are and they are making priority choices and the priority is the community colleges in the western part of the state or elsewhere, and it is not the University of Opportunity. In fact, that seems to be the one that they are going after, when you look at the numbers. And I want to say, on a number of the various categories that the state has been collecting data on like retention, that we do very badly, yes we do; and that is part of the fact that we have been a University of Opportunity, so we're going to look bad on those numbers. But they do not give the numbers that make us look good. Those are not out there. And I think that some of the enrollment drop is due to demographics. We know that. We were anticipating that, but it is more than I would have anticipated and I think the bad publicity that we have gotten from the way Lansing has been packaging the description of the various schools has not been very helpful to us in our recruiting efforts. Thank you.

Governor Driker made a motion on the three agenda items in order to place the issue formally in front of the Committee. The text of each motion is given separately.

MOTION by Governor Driker and seconded by Governor Massaron that the Budget and Finance Committee recommend that the Board of Governors approve the FY 2014 tuition rates and mandatory fees as presented. In summary, the base tuition and fees for Wayne State University are increased by 8.9 percent for resident full-time (students taking 15 hours per semester) for undergraduates and 4.0 percent resident for graduate programs.

In terms of mandatory fees, WSU requires all students to pay a registration fee (per semester), a fitness center fee (per semester), and a student services fee, formerly called the Omnibus fee (per credit hour). The registration fee is increased by 6.0 percent, while the fitness center fee remains unchanged. The


student services fee rate will increase by 6.0 percent for both undergraduates and graduates.

Further, the Committee recommended that the Board of Governors authorize the President or his designee to make adjustments to the rates for special programs or where otherwise appropriate.

MOTION by Governor Driker and seconded by Governor Massaron that the Budget and Finance Committee recommend that the Board of Governors approve the FY 2014 General Fund budget, its projected revenues and expenditures, and the budgets for individual University units and specifically funded programs as summarized. Also, the Board of Governors authorizes the President to implement the budget management procedures, and budgetrelated policies with such modifications as may be deemed necessary during the fiscal year.

Further, the Board authorizes the President to make budget adjustments and/or recommend tuition adjustments to the Board in sufficient amount to offset an initial or subsequent state appropriation funding adjustment from the projected amount as shown in the proposed FY 2014 General Fund budget.

MOTION by Governor Driker and seconded by Governor Massaron that the Budget and Finance Committee recommend that the Board of Governors approve the FY 2014 budgets for the Auxiliary Activity units as presented.

Members of the Board of Governors made the following statements:

Governor Driker

The students and all others who are interested in this tuition question should understand the efforts that the administration and the Board of Governors have put into considering the situation we find ourselves trying to resolve in the most sensible way possible. I enrolled in this institution 58 years ago. I was the beneficiary of the low tuition, and my wife was in the 1950s. My son and his wife were graduates of the Medical School and were beneficiaries of low medical school tuition in the 1990s. Nobody is more sensitive to the impact of increasing tuition than I am because I had to pay it when I worked my way through this school, and my wife and various members of my family went through the same process. So I feel this up close and personal. But what I remember vividly when I graduated the Law School in 1961 is that not even the top student in my class could get a job at any downtown Detroit law firm in 1961. That was because the reputation of the University was not where it should have been. Now, every downtown Detroit law firm is run by graduates of the Wayne State University Law School and heavily populated by them. And the reason that that has happened is not through magic; it is because over the years the reputation of the Law School as part of the University has increased dramatically, and that is because we have had better faculty, better facilities, better libraries. So the


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employers finally woke up one day and said that this is a great university with a great Law School. I mention the Law School only because that is where I graduated from. The same is true about the Medical School, the Engineering School, the Nursing School, and the Pharmacy School, the entire University.

The value of a diploma from this University depends upon what an employer sees as the value of the education that has been received from the University. Employers are not going to applaud a student and say "I want to hire you because the university you graduated from had the lowest tuition in the state." That is not the criteria that the employer uses. The employer wants to know what is the quality of the education of the graduate sitting before her or him, and that is entirely based on the quality of the faculty, the quality of the labs, the quality of the libraries, the quality of the facilities. And we cannot maintain, let alone increase, the quality by being the cheapest product around. That does not do it in a field where quality counts so much. We cannot be the Costco of universities and figure that our graduates are going to be greeted at the door by employers throughout Detroit and southeastern Michigan and around the state and around the country.

So what we are doing today, we understand is going to inflict some real burdens on students, and it is not done cavalierly. But I do not think anybody is more sensitive and more knowledgeable about budget matters than Professor McIntyre, who knows a lot more about the University budget than I do because he spends a lot more time studying it. To hear him talk about the need confirms to me the wisdom of supporting this recommendation, as difficult as it may be, because we cannot cut our way to a future here. We have got to intelligently spend our resources to be sure that the University maintains and enhances its quality so that people, when they walk across the stage and get that piece of paper, say "I got something of value that is going to translate into a job or a career."

It is deeply disturbing to me, and Professor McIntyre alluded to this, that there is not a greater recognition in various places throughout this state that Wayne State University educates the children of Michigan taxpayers and is being punished for doing so. About 94 percent of our students come from Michigan homes. Some of our sister institutions have almost half of their students coming from out of state. That translates into capturing an enormous amount of out-of-state tuition that balances their budgets. We have never done that. We have tried to focus on educating the children of Michigan residents, and our graduates, by and large, remain here. So there is an interesting statistic that we just looked at that although we only get 14% of the entire state appropriation for higher education, we are now graduating about 45% of the medical doctors from all the state universities. So the state is getting a payoff of more than 3 to 1 in terms of doctors produced by Wayne State University versus the investment they put in Wayne State University. And you look at similar numbers in the Pharmacy School, in the Nursing School. The resources that are given to Wayne State University versus the number of graduates we are producing in muchneeded disciplines is simply out of whack. It does not recognize the contribution that we make to this state.

So, I hope the students who are represented by two members of this committee understand that we are not blithely saying, "Well, let's just pass the increased cost


down to the students." First and foremost, we are increasing financial aid by 11%. And when we use the word "financial aid," it is important for everybody in the room to understand we are not talking about loans, but about outright grants. This is money that is given to students that does not have to be paid back. And we are going to increase that by 11 % to help the students overcome what is clearly a hefty increase in tuition. But if we do not do this, if we do not take this step at long last - which frankly we have been skating around for some years, hoping that funds would come from other sources and that hope, at least to date, has not been fulfilled. We have to do this now. For the 1 O years I have been on the Board, we have ignored something called "deferred maintenance," a term that kind of barely explains an enormous amount of money that is needed to keep the buildings, equipment and facilities here in top shape. And what a pity it is to invest tens of millions of dollars in a building and then not maintain it. That does not make a lot of good sense. In my recollection, and Jim Sears can correct me if I am wrong, my recollection is that the national standard is to invest 2.5% a year in maintaining the buildings and our investment is less than half of that. So we are not even maintaining what we are building right now; that does not make good sense. So, I support this, recognizing that it is the least pleasant alternative, but I believe it is necessary for the future of the University.

Governor Dingell

I would first like to say that this has been one of the most difficult of times since I have been on the Board. I have seen my colleagues reflect upon the decisions made today, and I want to say that there has been no conflict, no harsh words. Many of my colleagues have not slept for weeks. They understand what the impact of this is no matter which decision we make. Our resources are not at the same level as Michigan or Michigan State, but we have an equal responsibility to maintain our institution and the same high research Carnegie classifications. I think it is critical to this institution, Detroit, Southeastern Michigan, and the state that we do so. Our peer institutions - both Michigan and Michigan State -have an out-of-state student component that pays a much higher tuition that helps cover the cost, and their tuition levels are far above those at Wayne State and well above the average of the other 15 Michigan universities. Our problem, as we are looking at it today, is that we must sustain Wayne State's leading research role based on the tuition income of the nonresearch Michigan universities. We are dealing with the fact that our state legislature has decided that higher education is not a high priority for Michigan, despite the fact that the business community of Michigan and institutional leaders have recognized that our research universities are the primary engine for the state's economic growth.

We find ourselves right now - I have said this to my colleagues and I will say this publicly today - having to face the limitations on our basic funding source, student tuition. That limitation dictates that we must begin under the new president to examine the question of what is the right size for Wayne State University. We need to examine whether or not we need to be doing all the things that we are presently doing. Such an examination needs to be done very carefully under the very strong leadership of our new president. It needs to answer the question, What are the basic priorities of this university. Are there things that are more or less important to our diverse mission? And are there things that, while they are valuable of themselves, we cannot afford to keep doing them given the funding limitations that we face in the


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future. I said this to my colleagues - it is a word I used coming out of the auto industry - we must right-size this institution. We cannot go down the same path that I saw and that others have seen in the auto industry and that we're seeing Detroit in right now. We cannot ignore what is happening in the real world. Our tuition has gone down, and we need to try and turn that around. But we have serious things happening here, and we are going to have to make difficult decisions for the university given our reality.

This is the hardest thing I have ever done. I deeply respect my colleagues and no Board member who is sitting here thinking about this today has a good option for a decision on this matter. I cannot vote on that tuition increase today because of what it means to the working families of Michigan. But I do so not happily because I understand my vote means continued diminished resources to Wayne State with potentially devastating consequences to this institution, Southeast Michigan, and I believe to Michigan. I believe that the level of support in Lansing is too low and that the level of tuition that we are talking about is a terrifying burden to many of our students. So I am not happy about anything that I am doing today. I and my colleagues are really suffering as we try to do this, and I believe a strategic plan for the future of this university is going to be critical in the months ahead.

Governor Massaron

I am going to try not to repeat what other people have said. I am supporting the proposal of the administration with regards to the tuition increase because I really do believe that under the leadership of President Gilmour and folks in the administration we have had an opportunity over the last weeks to examine the economics at WSU better than we have had before, at least for the 13 years that I have been on the Board. We appreciate the leadership of President Gilmour in that respect, but we were also in the situation where it was necessary to do that. With the decline in state support it is absolutely necessary because the low tuition structure is not sustainable in going forward. With our responsibility under the constitution of the state, we have to end up with docking the budget and having a structure that sustains this university as a research university. Because of the cuts that we have had to sustain with the historic disinvestment in higher education in Michigan, we have been right-sizing the university. Perhaps we could have done it in a more organized fashion. But ever since I have been on the Board, we have been cutting; I don't remember us adding.

So we have been doing that as carefully as we could, and I think that we will continue doing that with the new president. It is important to note that this has a serious impact with regards to tuition. It is important that we understand that our obligation is not just simply to the students this year, and the following year, but that our obligations are even longer than that. We have existed since 1868 and we will be around in 2068, and we will have an effective urban research university in Detroit, Michigan; and we will have a rebirth of Detroit of which Wayne is one the major leaders. Those are all the commitments that we have and what we are trying to sustain by making this decision. So I support the recommendations and I appreciate, President Gilmour, the decisions that you made to lead us through. It is an extremely difficult and unhappy situation, but in the end it can make us optimistic about the future, not pessimistic.


Governor Dunaskiss

I will not have the opportunity to vote on this during the committee because I am not a part of it, but I will be asked to vote later this afternoon. I want to begin by saying that I also respect my colleagues and the administration for the work they have done, not only in cutting the budget in the last several years, but for how difficult this decision is. I have been on this Board for 18 years and I have been in education for 30 years. My primary concern is the disinvestment in education. I think back to 150 years ago when a sixth grade education was ample for living in an agricultural society. About 100 years ago move that to twelfth grade and that was adequate in society to get a good job in the industrial age. I think now that our state and our federal governments need to start thinking about education as a K-16 proposition. A high school education is not enough for most jobs. And although college education's only worth is not to find a job, it is a primary responsibility. So our state and the federal government have to start looking at education at a four-year university as essential for students, and they need to start investing in that, not only K-12 because they are reducing there, but also in our four-year institutions.

So I looked at that and I looked also at the burden that we will be placing on our students. Again I know that my fellow Board members do not look at this lightly but the history of higher education recently has been to continue to increase tuition, and I guess I am at a point where I need to say, Stop it, it's enough. I have to say that I can no longer look at raising tuition on students as the only way to solve the problem. Now, combined with that is for me not to say I have had enough, but for me personally to start looking at what I can do to work with legislatures and with state government, and start sending that message that we have to do something to change the structure of how we fund our universities. So, I cannot vote for it today, not because I do not think it is necessary and not because I do not think this university has done everything they can to reduce its cost. I do believe they have. But I am just at the point in my involvement in education where I have to say stop, and I have to look at what I can do to turn this university around.

Governor Nicholson

Maybe not as eloquently as my peers, but I will be voting for this proposal from the administration. And it comes down to a few things and I think what I see is education is a very competitive market and what I see is the previous governors and administration have done a fantastic job of keeping Wayne State University's tuition below its peers. But for the future of quality of education, I think we need to reinvest the money back into the institution. For 2014 the no-tuition-increase is not really sustainable, and I agree with Governor Massaron that you cannot cut your way to prosperity. There was a chart that was very interesting in Rob's report on the change in the pace, and that showed that the user seems to be paying more than the state. And I think everyone in this room, whether it is administrators, professors, staff, the police must understand that when they interact with the student, they are your new customer; it is not Lansing anymore. And so I would encourage everyone to refocus on them as the customer because I do not see a trend of government reinvesting in university education over the short term. I think the likelihood is that students in


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universities will pay for the cost of education. And you should demand the very best education and the very best customer service.

Governor Trent

I have agonized over the decision to vote for this proposal for tuition increase and I want to explain why I am supporting it. As we all know, and it has been mentioned many times today, Michigan has disinvested in higher education for many years, and our state appropriation for this year is the same as it was in 1989 not adjusted for inflation. Meanwhile Wayne State's tuition rate has been unofficially low when compared to Michigan's two other research universities. Because of cuts in state funding, declining enrollment and other factors, the university will make massive cuts beyond our $19 million we have already cut for our fiscal year 2014 budget without this increase. As been mentioned before, we have already cut $50 million from our last three budget cycles.

I have consistently expressed my great concern about Wayne State's 9% six-year graduation rate for African American students. Among the investments that we will make now is the creation of the Office of Multicultural Affairs for the first time in the University's history. This office will be in charge of creating strategies to address graduation disparities for students of color. I am passionate about both the university's urban mission and research mission. If we are to honor our research mission and compete for research projects, the university has to invest now. We also need revenue to address the various metrics that cause Wayne State University to be punished by the legislature in the first place. No one is happy with the university's low 6-year graduation rate and we need to direct more resources to our effort to boost retention, enrollment, and graduation rates. Because we understand that in addition to being a high activity research university, Wayne State also has an urban mission, it boosted our grants for financial aid by 11 % to mediate the impact on the tuition hike to students who need help most. Wayne State University is Michigan's hometown university; 90% of our students are from Michigan and 75% of our grads stay here. We are and will remain Michigan's research university of opportunity, but we need to step up our game and I am happy to be a part of that process.

Ms. Giroux asked what the increase would mean in dollar amounts for both tuition and financial aid, as well as how much the increase would bring in overall for the University. Mr. Kohrman replied that a resident freshman would see an annual increase of $900, or about $30 per week for each of the 30 weeks that the student is in school. It is difficult to quantify an individual's financial aid because it depends on the level of student need, but overall the tuition increase would bring in $6 million over the current financial aid budget, or about 11 %. The University would see an increase of $13.7 million in tuition revenue over last year's numbers, for a total of $348 million.

Ms. Giroux then asked what effect the financial aid increase will have on the value of the merit scholarships that are offered to current students. Mr. Kohrman said this is a legitimate concern for the merit-based students receiving presidential scholarships, which are contracts for a certain number of years and a set amount. The administration plans to put some additional money aside to provide inflationary increases that would help offset the tuition increases.


Ms. Giroux made the following statement:

I would just like to speak on behalf of the students and say that we very much appreciate the financial position that Wayne State is in and we commend the administrators and staff who work so hard to put together a budget that is sustainable and feasible. But with the student base that Wayne State has to continue to be a school of opportunity as a student body, we cannot afford a tuition increase of 8.9%. Wayne State obviously does not have the same population of students that the University of Michigan or even Michigan State does. We have a lot of part-time students, a lot of students who work full-time and are supporting families. We have a lot of transfer students and even undergraduate program full-time students; many of them aspire to grad school as this is a research university, whether or not they are pre-med or pre-law. We are very concerned with the effect this will have on the student body financially. A lot of our students obviously have federal financial aid or they have financial aid from the university or outside support and donors. We worry about the effect of how the tuition increase will affect the loans they have to take out and the student loan interest rate that will be increasing this year.

However, we obviously understand that a big part of this has to do with government state funding and we would like to support your efforts to work with Lansing to restructure education. Our governmental affairs committee in particular will probably be interested in that. And we recognize the necessity of this increase. So in return we do ask, as the university seems to be planning to do in the initiatives that have been proposed, that we work towards increasing the academic efficiency and tailoring of programs and advising to the student body to help increase graduation rates. Students may now be tempted to spread out their courses more to help defer the increase in cost. So in the coming year we would like to, as a senate and as a student body, work with the Board to help increase communication regarding major requirements and general education requirements - the things that students need to know to graduate on time that are not necessarily the most feasible for them as the processes stand now, for example declarations of majors. So with that being said, I think that very well represents the student perspective. Thank you.

Before the vote was taken, Governor Pollard thanked the administration for its exhaustive analysis of the budget situation. This is his fourth year on the Board, and it was the hardest the Board has worked to achieve a budget resolution. He thanked the faculty and student representatives as well as the Board members for their comments.

ACTION - Upon motion by Governor Driker and seconded by Governor Massaron, the Budget and Finance Committee recommended that the Board of Governors approve the FY 2014 tuition rates and mandatory fees as presented. In summary, the base tuition and fees for Wayne State University are increased by 8.9 percent for resident full-time (students taking 15 hours per semester) for undergraduates and 4.0 percent resident for graduate programs.

In terms of mandatory fees, WSU requires all students to pay a registration fee (per semester), a fitness center fee (per semester), and a student services fee, formerly called the Omnibus fee (per credit hour). The registration fee is


increased by 6.0 percent, while the fitness center fee remains unchanged. The student services fee rate will increase by 6.0 percent for both undergraduates and graduates.

Further, the Committee recommended that the Board of Governors authorize the President or his designee to make adjustments to the rates for special programs or where otherwise appropriate.

The motion carried with a vote of 5-2; Governor Dingell and Ms. Giroux voted No.

ACTION - Upon motion by Governor Driker and seconded by Governor Massaron, the Budget and Finance Committee recommended that the Board of Governors approve the FY 2014 General Fund budget, its projected revenues and expenditures, and the budgets for individual University units and specifically funded programs as summarized. Also, the Board of Governors authorizes the President to implement the budget management procedures, and budget-related policies with such modifications as may be deemed necessary during the fiscal year.

Further, the Board authorizes the President to make budget adjustments and/or recommend tuition adjustments to the Board in sufficient amount to offset an initial or subsequent state appropriation funding adjustment from the projected amount as shown in the proposed FY 2014 General Fund budget.

The motion carried with a vote of 5-2; Governor Dingell and Ms. Giroux voted No.

ACTION - Upon motion by Governor Driker and seconded by Governor Massaron, the Budget and Finance Committee recommended that the Board of Governors approve the FY 2014 budgets for the Auxiliary Activity units as presented. The motion carried with a vote of 5-2; Governor Dingell and Ms. Giroux voted No.

The items below were discussed in one summary.

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CHATSWORTH TOWER APARTMENTS LIFE SAFETY, TECHNOLOGY, AND MECHANICAL SYSTEM UPGRADES

COLLEGE OF ENGINEERING-VARIOUS TEACHING LABORATORY RENOVATIONS

FREDRICK C. MATTHAEI PHYSICAL EDUCATION CENTER BASKETBALL OFFICE SUITE EXPANSION

MACOMB ADVANCED TECHNOLOGY EDUCATION CENTER (A-TEC) CONSTRUCTION


AUTHORIZATION

ALEX MANOOGIAN HALL SECOND FLOOR RENOVATION

SCIENCE AND ENGINEERING LABORATORY CLASSROOM BUILDING DESIGN AUTHORIZATION

Vice President Nork presented six recommendations for the capital projects listed above. He added the following comments:

• The project to build a suite of offices for both the men's and women's basketball program will be funded entirely by private contributions.

• Two projects - the Macomb A-TEC construction and the Manoogian Hall second floor renovation - were included as part of the FY 2013 bond issue.

• The design work on the Science and Engineering Laboratory Classroom Building must be completed by October 2013 in order to submit the project as a number one request for State Capital Outlay funding for FY 2015.

MOTION by Governor Massaron and seconded by Governor Driker that the Budget and Finance Committee recommend that the Board of Governors authorize the President or his designee to proceed with project plans for the six projects listed above.

Professor McIntyre commented that two of the projects in particular are examples of successful collaboration between the faculty and the administration. The faculty believed that Manoogian Hall was of a higher priority than State Hall, and the administration eventually agreed and found the funding for the project. He said that if WSU is to compete with other universities for students, it must have first-class facilities, and this project is a very important step in that direction.

His second example was the Science and Engineering Laboratory Classroom building, and Professor McIntyre described the consultation process that took place between the Academic Senate and the administration. The budget and policy committees of the Senate had serious misgivings about the administration's original plan. After considerable negotiation, the administration and the faculty arrived at the recommendation that is being presented to the Committee. Professor McIntyre emphasized that the plans are not set in stone, since the consultation process will continue, and in the end the building will be far more useful to the University than it would have been without consultation. Professor McIntyre commended the administration for working with the committees of the Academic Senate.

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President or his designee to proceed with project plans for the six projects listed above. The motion carried.


The texts of the individual motions are presented below.

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Chatsworth Tower Apartments Life Safety, Technology, and Mechanical System Upgrades

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President, or his designee, to solicit bids and award contracts to design and construct various upgrades to Chatsworth Tower Apartments life safety, technology, and mechanical systems for a project cost of not to exceed $1,850,000. Funding for this project will be provided from Housing Auxiliary Operating Budget ($1.2 million) and the reserve for nongeneral fund equipment and facilities ($650,000). The balance in this reserve is $5.4 million at June 10, 2013. The motion carried.

College of Engineering- Various Teaching Laboratory Renovations

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President, or his designee, to proceed with the design, solicitation of bids, and the award of contracts to construct various teaching laboratory renovations within the College of Engineering for a project cost not to exceed $1,200,000. Funding for this project will be provided from the Provost's Academic Program investments budget ($712,000), the College of Engineering operating budget ($238,000), and from the deferred maintenance reserve ($250,000). The deferred maintenance reserve balance was $1.1 million at June 10, 2013. The motion carried.

Fredrick C. Matthaei Physical Education Center Basketball Office Suite Expansion

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President, or his designee, to solicit bids and award contracts to design and construct an expansion of the Matthaei Building to house offices and other facilities for the men's and women's basketball programs at a cost not to exceed $585,000. The project will be funded entirely by private donations to the Athletic Department.

A separate but related project to move an existing waterline that runs along the North side of the building and repair and/or replace concrete sidewalks and landscaping will also be completed at a cost not to exceed $180,000. Funds for this project will come from the deferred maintenance reserve which had a balance of $1.1 million at June 10, 2013. The motion carried.

Macomb Advanced Technology Education Center (A-TEC) Construction Authorization

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President, or his designee, to award contracts to


construct the Macomb Advanced Technology Education Center (A-TEC) in Macomb County for a project cost not to exceed $12,000,000. This value includes $750,000 which the Board approved on February 6, 2013 for design phase. Funding for this project will be provided from the sale of Series 2013 General Revenue Bonds and Extension Center carry-forward balances. The motion carried.

Alex Manoogian Hall Second Floor Renovation

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President, or his designee, to proceed with the design phase activities for the renovation of the second floor of Manoogian Hall for a cost of not to exceed $400,000. Funding for this project will be provided from the sale of Series 2013 General Revenue bonds. The motion carried.

Science and Engineering Laboratory Classroom Building Design Authorization

ACTION - Upon motion by Governor Massaron and seconded by Governor Driker, the Budget and Finance Committee recommended that the Board of Governors authorize the President, or his designee, to solicit proposals and award contracts to program and schematically design a new Science and Engineering Laboratory Classroom Building at a cost not to exceed $750,000. Design documents must be complete by October 2013 and will be used to support a project funding request to be submitted to the State of Michigan as the University's top propriety FY 2015 Capital Outlay project. Funding will be provided from the sale of Series 2013 General Revenue bonds and State Capital Outlay funds, if awarded. The motion carried.

COMMON TRUST FUND - STATUTE REVISIONS

The final recommendation Vice President Nork presented to the Committee was a proposal to change the Common Trust Fund statute with respect to distribution of funds from the endowment. Currently the University distributes 5% of the rolling three-year average of the endowment value, and the recommendation is to gradually decrease that amount to 4.5%. The plan is to freeze the dollars that were distributed in 2010 until those dollars equate to an amount that is equal to 4.5% of the rolling average from the past three years.

This is a necessary step because the University has a fiduciary responsibility to not only support itself today but in the future as well. The 5% amount is based on an estimate that the fund could earn an 8% annual growth rate offset by inflation. The University's investment advisors and others in the investment community no longer feel the 8% figure is sustainable. In addition, many of WSU's peer institutions have revised their policies to reduce the 5% to 4.5% or even lower. Mr. Nork added a reminder that even with the change in policy; the University must still continue to grow the endowment through contributions in order to ensure its sustainability throughout the life of the University.


ACTION - Upon motion by Governor Massaron and seconded by Governor Nicholson, the Budget and Finance Committee recommended that the Board of Governors approve the revised Common Trust Fund statute (WSUCA 2.73.05) as presented, with changes becoming effective October 1, 2013. The principal change is to reduce the annual distribution rate from 5.0% to 4.5%. The motion carried.

ADJOURNMENT

There being no further business, the meeting adjourned at 12: 17 p.m.

Respectfully submitted,

d~ H. Miller

Secretary to the Board of Governors

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