Delivered May 12, 2020
I would like to take this opportunity to offer comments regarding the Budget Priorities Committee’s six point resolution that will be read during today’s Faculty Senate meeting.
To supplement my oral presentation, I will be providing my written comments to the Faculty Senate. In addition to my written comments, we have catalogued the presentations, reports and official university communications to the Faculty Senate and Faculty Senate Budget Priorities Committee over the past six years. While these presentations and reports are memorialized in the Faculty Senate meeting minutes and should be accessible through the Faculty Senate archives, for the faculty’s convenience, we have posted these presentations, reports and official university communications on the Provost’s website at http://www.buffalo.edu/provost/policies-and-resources.html.
A National View
Nationwide, state spending on higher education is declining. In 2017, state spending on higher education was more than $9 billion less than 2008, far below pre-recession levels.
Within New York state and during the time period from 2011-2019, direct state funding of higher education has remained flat. But it is also important to remember that UB experienced an almost 30 percent cut (approximately $80M) to our state budget during 2008-2011. As state support decreases, UB bears a rapidly increasing share of the costs to support our student body.
Like most public research universities with declining/flat state support, we are increasingly dependent upon tuition revenue. In a time of tightening budgets and forecasted significant budget cuts from the state, UB is (and has) made internal changes in order to responsibly manage its financial resources. Previous to COVID-19 and the subsequent worst economic downturn since the Great Depression, we initiated a series of changes1 to help us remain fiscally sound, while retaining enough resources to invest in critical near-term needs. As helpful as these decisions have been, we know that dramatic cuts in our state operating budget will make it challenging for us to maintain our competitive edge and meet our strategic goals.
Response to the Faculty Senate Budget Priorities Committee
Public access to university financial information. The university absolutely recognizes the importance and value of financial transparency—and the value of discourse regarding the university’s financial vitality. This includes how the university links resources to our mission, and current and future institutional priorities and aspirations.
As we examine published reports of UB peer institutions, we find, in fact, UB is very transparent in publicly sharing its financial reports. With that being said, we are working toward providing a unit-level financial view which will include, for example, enrollment, credit hours, and research.
In an effort to provide factual clarity regarding institutional data, audited financial statements, budget information and processes, and financial information that is in the public domain and posted on buffalo.edu websites, I offer the following:
Also, as previously mentioned, since 2014, university leadership has made a number of financial presentations and provided financial reports to the Faculty Senate Budget Priorities Committee and the Faculty Senate (please refer to: http://www.buffalo.edu/provost/policies-and-resources.html).
UB Foundation. The Provost and Vice President for Finance and Administration have presented the state of the University finances at many Faculty Senate Executive Committee and Budget Priorities Committee meetings. This includes comprehensive presentations regarding UB Foundation (please refer to: http://www.buffalo.edu/provost/policies-and-resources.html.)
In SUNY’s 2018 audit of the UB Foundation, SUNY noted that “the information made available to the public by the Foundation was in most cases, comparable to, or above and beyond what other campus-related foundations publicly disclose.”
As you will see upon review of the each of the aforementioned website, individually UB and UB Foundation prepared lengthy substantive responses to prior UB Foundation critiques. These substantive responses included full and proper context to each unsubstantiated point as well as detailed, reasoned, and factually-supported rebuttals.
Institutional Support. For purposes of factual clarity, “Institutional Support” is one of several Functional Categories of expenses that institutions under Governmental Accounting Standards Board (GASB) reporting and the Integrated Postsecondary Education Data System (IPEDS) are required to report. The classifications are based on audited financial statements. Institutions have a fiduciary responsibility to report accurately on these categories.
“Institutional Support” is defined by IPEDS as follows2: A functional expense category that includes expenses for the day-to-day operational support of the institution. Includes expenses for:
If an institution does not separately budget and expense information technology resources, the IT costs associated with student services and operation and maintenance of plant will also be applied to this function.
One will note that a myriad of operational areas of the university are recorded in this category. The majority of the expenses, as the IPEDS definition indicates, are staff working in IT (network operations, application development, student help desk, etc.), payroll (both State and Research Foundation), human resources, procurement, printing and mailing services, research administration (i.e., staff supporting principle investigators in pre- and post-award activities), and other functions that support the entire university enterprise.
The administration agrees that it is essential to understand its administrative costs and to ensure that we operate both efficiently and effectively. In the past several years, the university has been systematically implementing a variety of operational excellence initiatives (see http://www.buffalo.edu/administrative-services/about-us/achieving-operational-excellence.html).
Among these are two initiatives relevant to understanding administrative costs:
(1) Ensuring Better Accounting Practices across the University
In FY2018-19, UB began a comprehensive review of all of its charts of accounts across the entire university. The impetus for this was to enable better financial reporting at the unit and university levels and to eliminate shadow systems that introduce inefficiency across the institution.
In February and April 2019, the Vice President for Finance and Administration made presentations to unit business officers and to deans and vice presidents regarding these efforts. As part of this comprehensive review, accounts related to financial aid and admissions were moved to Student Services (which is where they should be recorded by functional category and which is consistent with peer institutional practices) rather than Institutional Support, where they had previously been coded. Below are the definitions for both categories:
05 – Student services – Enter the expenses for admissions, registrar activities and activities whose primary purpose is to contribute to students’ emotional and physical well-being and to their intellectual, cultural and social development outside the context of the formal instructional program. Examples are career guidance, counseling, financial aid administration, student records, athletics, and student health services, except when operated as a self-supporting auxiliary enterprise. (FARM para. 703.8)
06 – Institutional support – Enter the expenses for the day-to-day operational support of the institution. Include expenses for general administrative services, executive direction and planning, legal and fiscal operations, administrative computing support, and public relations/development. (FARM para. 703.9)
With this change, in FY2019 UB’s Institutional Support expenditures represent 12 percent of university operating expenditures which is on par with Stony Brook University.
UB and Stony Brook share the following commonality in the Bunsis comparisons: both institutions are by far the lowest in total salaries and wages expenditures. In fact, UB’s total salaries and wages expenses are only 37.1 percent of the peer average. In terms of absolute dollars, UB spent $38 million less than the peer average on Institutional Support salaries and wages ($60.7 million versus $98.7 million) in FY2018. The most significant differences in total salaries and wages expenses relative to the peer average are in Research, Public Service, and Auxiliaries, where UB’s expenses are only 19 percent 11 percent and 27 percent of the peer average.
(2) Better Understand and Manage Administrative Costs across the University
Two years ago, UB contracted with Academic Benchmark Consortium (https://abc-insights.com/), a faculty-led firm whose sole focus is benchmarking administrative costs across the entire university.
We have now completed mapping three years of payroll data, including mapping every administrative position to specific administrative activities, and have begun the process of benchmarking administrative costs in both central and unit offices to peer institutions. This understanding is important, as many institutions have found that past practices of administrative budget reductions focusing only on central offices merely lead to increased administrative staffing in units across the university—meaning higher costs and inefficiency.
The President also directed Human Resources to review associate dean titles across the university. This work is ongoing.
Faculty hiring. Fall 2006 to Fall 2009 was a period of significant hiring and represents a twenty year peak in the number of assistant professors. Overall, full-time faculty is up 4.4% over the past 10 years (2009 to 2019), ladder faculty is down -2.5% while non-ladder faculty has risen 18.1%.
It is important to note that hiring decisions are made by academic departments within the budget allocated to them by their dean. As UB’s enrollment has increased, the enrollment growth has been in disciplines that are more likely to hire non-tenure track faculty. Areas in which enrollment has decreased due to lower demand have historically hired predominately ladder faculty. Funding and hiring must follow enrollment.
As an important reminder to the faculty senate, mandated contractual salary increases have not been funded by the State. This means that the university has had to absorb these mandated costs of over $81M. The State has, however, continued to cover the costs associated with fringe benefits.
UB Athletics. In modern institutional history, UB has participated in NCAA Division I athletics since the mid-1990s. The determination to pursue NCAA Division I athletics has always been a presidential prerogative. And in the 1990’s, this prerogative was exercised by President Greiner and subsequently by President Simpson and me.
From an institutional view, UB, as a member of the NCAA, benefits by recruiting outstanding student-athletes who excel in the classroom and on the field. UB also benefits by national media coverage which in turns elevates our name recognition and academic and research reputation. Athletics is a key part of our student experience and an important way for our alumni to continue their engagement in their alma mater.
As an important note, athletics has not been immune to budgetary downturns. In fact, during the Great Recession, athletics (and all support areas) was cut at twice the rate than our academic units. This differentiation in budgetary cuts was done in order to preserve our university’s academic mission.
Capital Construction. As publicly stated, the Murchie Family Field House was funded by donor funds restricted for the fieldhouse project and by MAC Conference revenues which can be used only in support of athletics programs. No state funds were used for the project.
One World Café is funded by two main sources and two minor sources. The two main sources are direct funds from the Faculty Student Association for their portion of the mixed-use spaces and Critical Maintenance funds from NYS, which can only be used for infrastructure and renovations for existing facilities. Two minor sources are student fees to be used specifically for Heart of the Campus (these fees will be used for University FF&E) and university deferred maintenance reserves.
As a note, the Faculty Student Association, Inc. (FSA) is an auxiliary services corporation. FSA was established in 1962 and is a not-for-profit 501c3 Corporation pursuant to the Internal Revenue Code of 1986. The State University of New York system administration has prescribed a set of administrative guidelines governing auxiliary services corporations’ administrative functions, including corporate fiscal stability requirements. Auxiliary services corporations are campus based, not-for-profit organizations, providing dining, vending, campus stores, student ID cards and other essential services to campuses.
Pursuant to SUNY Board of Trustees Policy and Exhibit B-1 State University of New York
Administrative Requirements for Auxiliary Services Corporations Article VI Inappropriate Activities, Corporations shall not engage in any of the following activities or practices: the employment of faculty or staff personnel or their remuneration, when the service performed is not directly related to the operations of the corporation3.
As a reminder, all capital projects are paid with one-time funds. In contrast, hiring and PhD stipends require recurring funding sources.
Over the past few years, there has been much misinformation propagated regarding university finances and the UB Foundation. As stated before, the president, vice president for finance and administration and all university leadership have a fiduciary responsibility to manage ethically and legally our university assets.
The university is a complex organization and that is why we have highly experienced, well-educated professionals who manage our finances. These professionals’ academic disciplines range from business and finance to public policy and accounting and many represent the university in their national organizations.
Throughout my administration, we have shared many financial presentations with the Faculty Senate, Faculty Senate Executive Committee and the Faculty Senate Budget Priorities Committee (although this semester, the Faculty Senate Budget Priorities Committee has not engaged university leadership. We are unaware whether the Budget Priorities Committee convened this academic year.)
Clearly, these presentations, reports and official university communications have not satisfied some. Perhaps it is because these presentations, reports and official communications did not match some members’ existing convictions. Nonetheless, I, along with the Provost and Vice President for Finance and Administration, will continue to present the facts regarding university finances to this body.
I understand that this is much material to digest.
Before the Faculty Senate begins deliberations regarding the resolution that will be brought forth today, I wholeheartedly encourage the members to review the aforementioned referenced presentations, reports and official university communications with the same academic rigor you apply to your respective disciplines (please see http://www.buffalo.edu/provost/policies-and-resources.html).
It is in the spirit of collegiality that I have given this presentation. It was my intention to present the facts regarding university finances and offer the Faculty Senate with a comprehensive view of the materials that have been shared with the Faculty Senate over the course of last six years.
1 Please see UB Annual Operating Budget Report 2019-2020 for additional information. http://www.buffalo.edu/content/dam/www/administrative-services/pdf-docs/Financial/Annual%20Operating%20Budget%20Report%202019-20.pdf
2 Definitions are found at the following URL: (https://surveys.nces.ed.gov/ipeds/VisInstructions.aspx?survey=5&id=30085&show=all#chunk_1271
3 SUNY Board of Trustees, Auxiliary Services Corporations Guidelines, https://www.suny.edu/sunypp/documents.cfm?doc_id=134