Response to Howard Bunsis Report

Published September 18, 2020

While supporters describe the Bunsis report as “an independent financial analysis of the University at Buffalo,” this depiction is not accurate. Howard Bunsis is a paid consultant with a pre-conceived agenda.  The Bunsis report contains several flaws, inaccuracies and inconsistencies that misrepresent and misinterpret UB’s budget and budgeting process.  Readers of the report should be very skeptical of its findings.

Professor Bunsis’ report was commissioned by the UB Living Stipend Movement, with the support of a “Go Fund Me” fundraiser. It was brought forward by the 2020-21 Chair of the Budget Priorities Committee and serves as the basis of a resolution that was introduced at the May 6, 2020 Faculty Senate Executive Committee and was discussed at the September 15, 2020 Faculty Senate meeting.

In developing a response to Professor Bunsis’ report, UB Finance and Administration reviewed thirteen different financial analyses prepared by Professor Bunsis at other universities. Every financial analysis reviewed produced almost identical results:

  1. Institution has a strong financial position or is financially sound
  2. Administration positions are bloated at the cost of faculty and academics
  3. Institution is not transparent in reporting its finances

The similarity of the financial analyses calls into question the objectivity of the analysis. Professor Bunsis consistently favors allocating greater academic resources using past expenditures as a basis while ignoring any future revenue or cost impacts that an institution may be facing. UB (and many other institutions) relies on budgets based on economic forecasts and long-term planning to enable its long-term financial health.

Professor Bunsis’ report does not reflect an informed or cogent understanding of SUNY or our university’s finances. As a public university, UB follows state and federal laws and regulations and the best practices of the National Association of College and University Business Officers. As part of the State University of New York (SUNY) the university's financial information is included in the complete SUNY financial statement which is part of SUNY's Annual Report.

Annually, the University at Buffalo issues financial statements for the fiscal year ending June 30. These unaudited financial statements are compiled based on SUNY campus level financial reports representing the operations for state and Research Foundation activities. We have created a centralized budget and financial information website that includes links to UB’s publically available financial documents.

UB is strongly committed to exercising prudent management of our limited university resources to promote resilience, maintain appropriate reserves and operate effectively and efficiently. In recent years, UB has taken the following steps to strengthen our financial stewardship of university resources:

  • Adopted an Annual Resource Planning Process that includes an all- funds budget process and collaboration with units to plan for the future;
  • Developed a multi-phase approach to the Capital Master Plan;
  • Convened a Space Utilization Study;
  • Implemented a university-wide Operational Excellence Initiative to streamline processes and reduce costs.

Two years ago, UB contracted with Academic Benchmark Consortium, a firm whose sole focus is benchmarking administrative costs across the entire university. UB has recently completed mapping three years of payroll data, including mapping every administrative role to specific administrative activities. UB is in the process of benchmarking administrative costs in both central and unit offices to peer institutions. This understanding is important, as many institutions have observed that administrative budget reductions focused on central offices lead to additional administrative staffing in units across the university. This results in higher costs across all areas and increased inefficiency. UB is always trying to maximize efficiencies in support of our academic mission and this includes evaluating administrative costs against those of our peers in both the academic and central units.

UB strives for continuous improvement and welcomes constructive feedback. Professor Bunsis’ analysis is factually inaccurate and does not provide constructive feedback or recommendations. Professor Bunsis did not speak to any employee within UB Finance and Administration (VPFA) while conducting the financial analysis. As a result, there are false statements and assertions throughout the document that impugn the integrity of university leadership.

This undermines the veracity of the financial analysis and its findings. In order to effect positive change, any financial analysis and recommendations should be at a minimum factually accurate, and we would also hope for them to be constructive.

UB Finance and Administration (VPFA) observed the following concerns, misstatements and errors:

1. Financial Analysis

The report provided by Professor Bunsis purports to be an analysis of the “Financial Situation of the University.” Professor Bunsis does not document any agreed-upon deliverables, scope of the financial analysis, and/or the source of best practices referenced throughout the document. The author makes multiple, inflammatory assumptions throughout the document without meaningful support or evidence, such as:

  • “State appropriation and tuition revenue…are likely to continue to increase in 2019 and 2020” (pg. 1).
  • The budget process includes “only current funds or whatever the admin[istration] chooses” (pg. 2).
  • Revenues are based “usually on a worst-case scenario, predicting them to be as low as possible” (pg. 2).
  • Revenues and expenses “always balance” (pg. 2).
  • “There is a budget ‘hole’ or ‘deficit’ or ‘shortfall’” (pg. 2).
  • “Real goals of RCM [responsibility centered management] are to cut liberal arts program and not hire more faculty” (pg. 2).
  • “The lack of publicly available financial information for UB is unlike any of the roughly 100 public universities I have examined” (pg. 2).
  • “Incredibly, no prior financial overviews are available on this site. If you have a Buffalo email and administrator permissions, it is possible to obtain these. This situation is simply inappropriate and unprecedented” (pg. 4).
  • “Other revenues are not broken down…$37.5 million is a lot of ‘other’” (pg. 6).
  • “The most important fact for assessing the financial health of UB is that the appropriation is increasing in the most recent period (2013 – 2018)” (pg. 9).
  • “If UB wants to maintain its role as a major research university, it must continue to hire new assistant professors. This decline is very revealing in terms of the administration’s commitment to the research mission of the university” (pg. 36).
  • “All of the investing in risk securities seems to be inferior to simply investing in a plain vanilla fund” (pg. 44).
  • “If athletes were not receiving this aid, other students could certainly be receiving it” (pg. 48).
  • “‘Other’ is a very large amount in every year” (pg. 48).

2. Executive Summary

The executive summary of Professor Bunsis’ analysis begins by surmising UB leadership’s belief that “the institution is in some sort of financial trouble” by referencing an email from an administrator in the College of Arts and Sciences related to a specific policy decision (pg. 1). As previously indicated, Professor Bunsis did not speak to anyone in UB’s senior leadership, so it is remarkable that he would ascribe that belief to the entire administration based on a single email.

The Strategic Overview presentation to the Faculty Senate on September 11, 2019 by the Provost and Vice President for Finance and Administration noted that UB is similar to most public research universities in that it is experiencing flat or declining state support and is increasingly reliant on tuition revenue. Carry-forwards are used to address recurring expenses, such as unfunded salary increases. The university must maintain a focus on the long-term financial health of the institution.

3. Budgets

The chart outlining the difference between “budgets” and “actual results” (pg. 2) is inflammatory and completely inaccurate. The university uses a multi-year financial plan that contains all funds available for distribution, not “only current funds or whatever funds the admin chooses.” Since UB operates in a decentralized model, base budget dollars are at the discretion of the Dean or Vice President. The university’s multi-year plan is conservative in revenue projections due to the unknown status of future tuition increases. While this is a conservative approach, UB does not model its plan on the “worst-case scenario.” Professor Bunsis has publicly stated that he does not ever consider budget documents in his analysis but only uses audited financial statements, which reflect only past results. COVID-19 related revenue and expenditure impacts being experienced by colleges and universities across the country highlight in stark terms the flaws in this perspective.

UB’s Annual Operating Budget Report outlines the budget process and the assumptions built into the budget. This is presented annually to the Faculty Senate.

4. Lack of Transparency

Professor Bunsis claims that there was “a lack of data availability and transparency” (pg. 1). Currently, the Provost and the Vice President for Finance and Administration provide financial updates to the university community in multiple forums throughout the year. Specifically, eight separate financial presentations, reports and communications have been prepared for the Faculty Senate/Faculty Senate Executive Committee in the past two years. Nine separate financial presentations, reports and communications have been prepared for the Senate Budget Priorities Committee over the past two years. Further, during the past academic year (2019-20), neither the Provost nor the Vice President for Finance and Administration were invited to the Budget Priorities Committee.

UB shares budgetary information. As noted, the Annual Resource Planning Process collaborates with academic Deans and Unit Business Officers to draft the budget. Professor Bunsis noted that if a 2019-20 budget for UB was publicly available, he would analyze it. The 2019-20 budget is posted online.

Finally, audited financial statements for the SUNY, the SUNY Research Foundation and the UB Foundation are published online.

5. Integrated Post-Secondary Data System (IPEDS)

Professor Bunsis claims UB administration submits IPEDS data to the federal government. This is not accurate; SUNY submits IPEDS financial data for all SUNY institutions with the exception of community colleges. SUNY reports expense allocations based on UB’s organizational structure, financial accounts and expenditure object codes. While fringe benefits and debt service are managed by New York State (NYS) and SUNY Research Foundation, SUNY has allocated these costs to campuses for IPEDS finance reporting and financial statement presentation. Such allocations have a material impact on the data reported.

6. IPEDS Institutional Support

Professor Bunsis claims that the expenditures classified in IPEDS as Institutional Support is “pure upper-level administration” (pg. 32). This is incorrect. IPEDS defines Institutional Support as a functional expense category that includes expenses for the day-to-day operational support of the institution. This includes expenses for general administrative services, central executive-level activities concerned with management and long- range planning, legal and fiscal operations, space management, employee personnel and records, logistical services such as purchasing and printing, and public relations and development. It also includes information technology expenses related to institutional support activities. If an institution does not separately budget for student services and operation and maintenance of plant information technology expenses then these costs are also applied to this functional expense category.*

Professor Bunsis repeatedly defines Institutional Support as upper-level administrative salaries, providing an erroneous perception that it represents 13% of salary costs. This is completely inaccurate based on the aforementioned, clear IPEDS definition.

*For further information about how expenditures are charged in higher education, see the Financial Accounting Reporting Manual from the National Association of College and University Business Officers.

7. Salary

UB faculty are part of the United University Professions (UUP) union. UUP is a statewide bargaining unit for faculty and professional staff members employed by SUNY. UUP negotiates with NYS for employment contracts and salary raises. UB is not involved in the negotiation process and, as a result, has a number of limitations related to salary schedules, title classifications and annual raises.

8. Benefits

Professor Bunsis states that benefit rates in the 65% range do not make much sense and are “unrealistically high” (pg. 31). While we agree the percentage is not reasonable, the Office of the Comptroller is unable to report the actual benefits rate paid. As a result, SUNY uses the NYS benefit rate when calculating and reporting IPEDS data to the Department of Education.

UB is able to use a more reasonable benefit rate of 32% when UB reports data to the American Association of University Professors (AAUP) compensation survey.

9. UB Foundation

Professor Bunsis claims that the UB Foundation’s (UBF) audited statement “definitively reveals that these investments have great risk” (pg. 43). UBF has an investment committee that is dedicated to understanding the risks in various investment strategies, measuring and monitoring risks, as well as ensuring adequate rewards for these risks. Under the oversight of the investment committee, UBF benchmarks its asset allocation and risk-return metrics to national standards. UBF’s Long- Term Portfolio is consistent with other higher education portfolios of comparable size and UBF’s gross returns, as well as “risk adjusted returns,” have benchmarked well over-time.

The comparison of UBF returns with the S&P 500 returns is flawed and undermines Professor Bunsis’ argument that UBF should consider a less risky strategy. Investing entirely in public entities would be extremely high risk; more conservative investment portfolios generally minimize stock market exposure.

10. Moody’s

Professor Bunsis supports his allegations of insufficient data via Moody’s rating system. Moody’s rating system for creditworthiness calculates risk using audited financial statements. SUNY prepares audited financial statements for the system. Using unaudited UB financial data and/or IPEDS data is not an accurate use of Moody’s rating system.

Moody’s recent outlooks undermine Professor Bunsis’ argument that financial analysis should be focused purely on past performance. It also undermines his contention that tuition and state revenues will increase. In 2019, Moody’s noted that the outlook for the higher education sector is negative. Business conditions will remain difficult and, “net tuition revenue growth of 1.0% for public universities and 2.3% for private ones will limit the sector's overall revenue gains in fiscal 2020.” The outlook is even more dire in 2020: “lower than expected enrollments will reduce tuition fee income and put pressure on institutions budgets.”

11. Athletics

Professor Bunsis depicts athletics as detracting from the core academic mission, rather than an integral part of the university experience. In order to bolster this claim, he uses inaccurate assumptions and incomplete data.

Professor Bunsis notes that “it is unclear why there is such an increase in coaching salaries from 2017 to 2018” (pg. 48). There is a clear reason for this increase from FY17 to FY18 ($5,560,615); it was driven by a new NCAA financial reporting requirement to include the cost of employee benefits, even if actual expenses are not administered or expended directly by UB. Given that these benefits are “paid” at the state level, UB does not have the true cost and the best way for UB to comply with the reporting requirement is to use a simple calculation to estimate the benefit cost. The fringe benefit rate already established by NYS for use in this type of calculation is roughly 64%, which is significantly higher than the typical fringe benefit rate of approximately 30% as estimated by the US Department of Labor. Given that there is an existing rate utilized by SUNY, UB believes it is appropriate to use the higher rate. The calculation artificially inflates our overall reported figures and skews comparisons to our peer institutions who use a more typical calculation or who actually pay the true benefit costs directly. These “indirect” costs are not funds held or controlled by the university and therefore to be diverted elsewhere.

UB does not necessarily consider the Mid-American Conference (MAC) to be the appropriate peer group for comparison. However, there are key data points that undermine Professor Bunsis’ assertion that “Buffalo has to rely on students…more than any MAC school” (pg. 51):

  • UB Athletics is funded at the lowest level of our MAC peers as a percentage of overall university expenses (per IPEDS data).
  • Removing the fringe benefit calculation referenced above from the FY18 report that artificially inflates expenses, the subsidy percentage has decreased by nearly 10% since 2011.
  • Of the seven MAC institutions that include a dedicated Athletics fee as part of their revenue, the effective fee rate for UB is the lowest and is lower than all three other SUNY institutions that compete at the Division I level.

Athletics is just one area of the university that provides value to our community. Many campus units are not self-sustaining and direct revenues or expenses do not demonstrate their value to the institution. Athletics is an important driver for student and alumni engagement. Athletics benefits UB, alumni and the region by providing national exposure and branding. These are important factors in student and faculty recruitment.

12. Concluding Statement

UB values mutual respect, shared governance, and positive dialogue between university partners. UB is disappointed that a report with numerous errors and inflammatory statements was publically disseminated and considered by the Faculty Senate. During this financial and public health crisis, this undermines the ability of our UB community to work together in good faith.