FACULTY COUNCIL

FACULTY COU= NCIL MINUTES

APRIL 1, 20= 04

1. Re= port from the Fiscal Committee: Dr. Grady Chism introduced the Chair of the Fiscal Committee, Richard Gunther, = who began his report by comparing traditional budgetary practices with the new budgetary system in order to clear up some misunderstandings that persist around campus.

Traditional budgets involve a base budget for each aca= demic unit that goes predominantly unchallenged each year. Added to that budget are increment= al increases usually on the basis of specific guidelines for salary increases, increases in graduate stipends, and specials for materials and supplies. In the past the two elements for t= he budgetary system were an inherited base, and every year central administrat= ion decides by what percentage that base should be increased for each of the separable aspects of the budget. The system was essentially a central-command budgetary system. There were a couple of problems wi= th this: one; it is extremely rigid. As there are enrollment shifts over time, the traditional budget system cannot accommodate that. For example, one academic unit in a period of just seven years went from having 400 undergraduate majors to hav= ing 1200 undergraduate majors. An= d yet according to the traditional budgetary system, there would not have been any obvious means of increasing the base of that unit. Over time, some units are being under-compensated in terms of the amount of revenue they actually generate through their enrollments of students, which generates state-instructional subsidy as well as tuition, while other units were being heavily subsidized. Moreover, there w= as no incentive structure either to encourage entrepreneurialism in generating additional outside funds, since marginal dollars would go into some central pool which would never be seen again, (this was particularly the case with regard to indirect cost recoveries, only a tiny part of which would go back= to the generating unit), and conversely, there were no disincentives to engage= in free writing or behavior that is downright irresponsible, such as poor enrollment management.

Therefore, a budget system was developed that was base= d on certain practices that had been implemented previously elsewhere (Indiana),= in which the amount of money made available to academic units would be brought much closer into alignment with the actual generation of revenues by that unit. This was in several dif= ferent forms. Tuition and fees would= go straight back to the unit in which those particular students are enrolled.<= span style=3D'mso-spacerun:yes'> State instructional subsidies woul= d go back to the unit in accord with the Board of Regents funding formula that channels State money to the university.&nb= sp; Finally, indirect costs would go predominantly back to the colleges rather than remaining in central pools under the control of the Vice Presid= ents for Finance and Business and Administration.

In short, this new budget system is something approach= ing a modified pre-market budget system, where you receive revenues in accord with your revenue-generating activities. This is not an entirely enrollment-driven system, however. From the beginning, it was acknowl= edged that the quality of academic programs had to be taken into consideration

as a separable component of budgetary decision-making.= Under no circumstance should money= be automatically channeled in accord with the number of students enrolled in <= /p>

courses. Therefore, measuring quality of programs is an extremely important task. It is expected that some units, because of the inherent nature of the teaching process itself, will = be higher cost units than others. Therefore, it is an ongoing expectation that there still will be the subsidization of high-cost units by low-cost units. One comparison is that in Political Science class size can be increased from 45 to 55 without sacrificing anyth= ing in terms of academic quality, but this would result in more generated income from tuition and fees and state subsidy. Conversely, in the teaching of pian= o, the ratio is 1:1 forever. Thus, i= t is understood that there will be differences between high-cost units and low-c= ost units such that the rebasing of budgets would never lead to the elimination= of these subsidies. The goal tha= t was specifically stated was that units would be brought to within 10 to 15 perc= ent of the actual revenues that the units generate. This would be phased in over a per= iod of years.

What is found then is that there is a shift away from = a very conservative and static allocation by the center to a much more dynamic and flexible allocation that is to a large degree a function of the revenue generated by the unit, both in terms of state instructional subsidy, tuition and fees from students enrolled in their courses, but also because almost a= ll indirect costs are returned to the units of the faculty that are involved in the externally funded research project.&nb= sp; Obviously, there are central taxes that go back to central administration which amount to 24 percent of marginal revenues, 19 percent = of which go toward common services such as library, groundskeeping, etc., 5 percent = goes to the Office of Academic Affairs for redistribution, but until 2007, all of that 5 percent will be used to finance the rebasing of these budgets.

From the beginning, there were a number of questions t= hat were raised concerning certain problems that may result from the implementa= tion of this budget system. It is = in response to questions that were posed in a memo that came out of an advisory committee in 1999 that was then ratified and built into a founding document= by Ed Ray and Bill Shkurti in 2001 where there were 16 specific questions that were posed, and it was clear that these issues had to be monitored over time not only to see if certain kinds of problems that might be anticipated did,= in fact, emerge that need to be addressed, but also, that there needs to be a = body in place to make certain that there are no unanticipated consequences of budgetary restructuring that could do big damage. This latter item has turned out to= be extremely important as was discovered just last year.

Referring to the 16 points, one of the most important changes made was to ramp up the Fiscal Committee. Its mandate was expanded from the = review of the fiscal resources of the University to the review of fiscal policies = and resources of the University, which means that everything involving money potentially can go before the Fiscal Committee. This increased the workload, and therefore the size of the committee was increased to create standing subcommittees, and one ad hoc committee.&n= bsp; Two fiscal officers were added, the three executive deans were added, and an additional department chair was added. The Fiscal Committee knows that it= needs to be much more active in overseeing how central administration collects mo= ney from the units and how it spends that money. Two standing committees have been established, one of which undertakes the regular annual budgetary review of central services. This subcom= mittee will be receiving budget requests from Grounds Facilities, from the Library, from Painting Services, etc. and will approve or disapprove the requests. It is a faculty dominated committe= e that has real influence, and its recommendations have been followed by Central Administration. Having at lea= st one institution set in place to exercise this monitoring and oversight function= has been very successful. The sec= ond standing subcommittee is charged with analyzing the policies and implementa= tion of those policies by the Office of Academic Affairs and other units that are involved with the reprogramming of funds involving academic and research ty= pe activities. This subcommittee= took over the job of the Budget Advisory Committee in dealing with modifications= in policies that emerge as the environment changes.

The Fiscal Committee has been pleased with the way it = has been able to meet the various challenges of budget restructuring. One of its central recommendations= is that a couple of other committees need to ramp up their composition as well= as their job descriptions in order to fill in some important gaps in the budge= tary process.

One of the committees is the Council on Academic Affairs. The budget process i= s not supposed to be an entirely enrollment-driven formula. It is informed by enrollment level= s, but it is also supposed to be accompanied by monitoring of the quality of acade= mic programs. One thing needed is= to determine where additional investments would be needed in order to enhance academic programs. Collecting= data about program quality is something that Central Administration is now doing, and this ought to heavily involve the Council on Academic Affairs.

One very specific charge to CAA has not been implement= ed yet. One of the problems that= could result from the new budgetary system is the “dumbing-down” of courses, or the cheapening of our instructional offers. Some ways of trying to hold down c= osts and have larger amounts of discretionary revenues left over is to replace tenure-track faculty with adjuncts, lecturers, and instructors and to repla= ce Graduate Teaching Associates with post-docs. This needs to be monitored, and CA= A is charged to do this. However, = CAA is absolutely swamped with other duties and may have to increase the size of t= he committee. Fiscal would like = to see the University Senate move forward in terms of facilitating CAA’s abi= lity to take on these added tasks, which are critical for maintaining the academ= ic quality of the University, and preventing these “crass” financi= al considerations from crowding out considerations of program quality.

Another item involves the University Research Committee. One problem which = Fiscal thinks needs to be addressed is oversight of budgets. With regard to Central Administrat= ion, Dr. Gunther said he was entirely satisfied that the Office of Academic Affa= irs and other Bricker Hall units are providing Fiscal with all the data that it needs and is cooperating with the committee in terms of analyzing Fiscal and formulating policy. This is n= ot the case with regard to the Office of Research in the past. Major allocations of funds were de= cided upon in the absence of any kind of meaningful consultation with a representative body of faculty. This involves a huge amount of money. OAAs discretionary revenues are ab= out $2.6 million in the current budget year while the Office of Research alloca= tes $7.6 million a year. In the p= ast years there has been no systematic oversight of the decisions and the crite= ria that went into the allocation of these funds, and there was no structure of accountability set in place to determine whether these were wise investment= s of the funds or not. Fiscal stro= ngly recommends that the University Research Committee beef up its capacity to participate as an informed partner in decision-making and oversight in rega= rd to the investment of research dollars.

Other problems have cropped up because of the structur= e of the Research Committee, which also has members from the Council on Research= and Graduate Studies. Merging the= two sets of institutions has been a topic of conversation for many years but has been resisted year after year. It is problematic because oversight of decision-making with regard to research dollars an= d the evaluation of the utility of these past investments is a function that is n= ot yet institutionalized and needs to be.&nbs= p; Dr. Gunther urged members to think of how this might be accomplished. One of the prob= lems mentioned in this regard is that a large number of members on the Research Committee sometimes were not active researchers. This may mean that the Senate need= s to rethink how members are recruited to its committees. In this regard, the continued succ= ess of the Fiscal Committee requires that individuals be appointed to that committ= ee who have some expertise with regard to budgeting or administration, because= the learning curve on this committee is quite daunting.

To sum up, Fiscal Committee would like to see both CAA= and the Research Committee beefed up so they can perform the functions that at present represent a gap in the implementation of this new budget scheme.

A third problem: When Ed Ray announced the creation of this budget system and impleme= nted it, he wisely called for the creation of college-level faculty consultative committees to play a regular role in advising deans on how they should allo= cate their funds. That hasn’= t been done universally across this campus. In some cases there are adequate functioning advisory committees, although almost none of them are elected, or are accountable to faculty pee= rs, and there is little in the way of two-way flow of information. This is something that needs to be attended to as quickly as possible. Dr. Gunther said that 75% of complaints that Fiscal received and responded to in its evaluation of the budgetary process did not involve the University wide system itself but rather college-level aberrations in the implementation of policy. Fis= cal thinks it is extremely important to have Deans discuss the formulation of budgetary policies with a representative body of faculty on a regular basis= . This would go a long way towards institutionalizing historical memory and cumulative expertise that might he= lp to avoid some of the problems that have been encountered in undertaking this review of the budgetary process. The common denominator with regard to the budgetary process is that decisions have been evolved from Bricker Hall down to the college level, and there needs to be accountability, transparency, and oversight exercised at = the college level in order for the system to work properly.

There is no uniformity as to how colleges administer t= heir budgets, and this may be unavoidable. In SBS, decisions are devolved down to the department level. In other units, such as the College of Humanities where some academic uni= ts are very small, these units might not have the expertise necessary to make these very complicated decisions. <= /p>

In Dr. Gunther’s personal view, there is one thi= ng that is deficient in most colleges. The logic of budget restructuring is that these incentives should be efficient in terms of the teaching functions, i.e., good enrollment practic= es, making certain that you are offering courses that meet real student demand,= but also, perhaps more importantly, that the indirect cost dollars that are generated ought to go back to those individuals who are generating these dollars. This does not happen= in most colleges. In most colleg= es, these funds are retained by the Deans.&nbs= p; It is in Dr. Gunther’s own strong view that incentives work be= st when presented to those individuals actually engaged in the revenue-generat= ing activity.

At this point, Dr. Gunther received questions from mem= bers of Faculty Council. A member = asked how Administration, i.e., Academic Affairs, fit into this process. Would OAA be able to short-circuit= this procedure? Dr. Gunther respon= ded that OAA engages in two different sets of decisions. One is that there are small pocket= s of money that are dispensed by Central Administration to encourage certain kin= ds of activities. One example is= that Administration wants to make certain that there is continued dynamism with regard to creating honors courses. Central Administration, therefore, would make available money to individual colleges and departments for the creation of new honors courses.= Another decision that is more substantial is rebasing, i.e., how one goes about to bring the revenues flo= wing to academic units closer in line with the revenues generated by the units.<= span style=3D'mso-spacerun:yes'> This could not be done over the sh= ort term, because some of the levels of subsidy were huge. The College of Humaniti= es, in terms of subsidizing other academic units, was losing $18 million a year. It would take time to b= alance this out. In terms of the pac= e of rebasing is clearly where the Provost is playing an extremely important rol= e, but related to that rebasing is the introduction of these qualitative concerns. It was never intend= ed to be an enrollment driven model; it was supposed to be an enrollment-informed= or enrollment-based model which also included significant considerations of program quality. Those kinds = of subjective judgments are by the Office of Academic Affairs at least for tho= se units that fall within its purview.

A question was raised as to whether rebasing is going = on, and Dr. Gunther responded that the University is in its second year of reba= sing budgets. Rebasing is somewhat= ahead of schedule, and there is no reason to doubt that the complete implementati= on of rebasing will have been achieved by 2007. It is at this point that Fiscal recommends that the five percent tax collected on marginal revenues by Cent= ral Administration for programmatic redirection which is currently devoted exclusively to rebasing should be used by OAA for reprogramming funds in ac= cord with clear, transparent criteria and ideally on the basis of the same kind = of competitions as was seen with regard to academic enrichment and selective investment. Fiscal does not w= ish to tie the hands of OAA. It is n= ot a large amount of money and there will always be emergencies that pop up that require something other than a full-scale grand competition. Information about rebasing is incl= uded in the Fiscal report.

In regard to support services, Dr. Gunther said that o= ver the short term, not much will be done.&nbs= p; This past year, the budget system for Central Service units remained= the same as the previous year. Incremental increases were given on the basis of approval or rejecti= on of requests for specific purposes. This is not going to be the case in the future. The Hoffsis Committee stipulated t= hat there be rotating program reviews, which is being implemented for the first time. Clusters of support uni= ts are going to be subjected to very rigorous reviews, beginning this year with Purchasing and Physical Facilities. These reviews will be reconsidering the budget bases of support unit= s, which could bring about changes to the units. What is desired is to break away f= rom conservative-based budgeting and move towards a more dynamic formula for allocating in response to legitimate and documented need.

Dr. Gunther noted that Fiscal had a terrible time in t= rying to get faculty to volunteer their services to serve on these review committees. At the same time,= he has heard an endless stream of complaints about the services from the Centr= al Service. Faculty need to volu= nteer their time and expertise to these external review committees.

A question was raised concerning how programs are being evaluated since the information is generated by Central Administration on parameters that are generated by the unit itself. Dr. Gunther said that the fir= st rebasing allocations did make decisions that shifted funds from one unit to another on the basis of documented program quality. This is one of those areas of dissatisfaction because the assessment of quality has only been half done.<= span style=3D'mso-spacerun:yes'> Academic Affairs has been putting together academic score cards where the unit comes up with its own indicato= rs to show how the unit ranks with peer institutions. One piece that is missing is the systematic programmatic review of graduate programs. This was supposed to have been und= ertaken years ago. Many years ago the= Board of Regents was demanding that a serious review of graduate programs be undertaken with a view of closing down some redundant graduate programs aro= und the state and concentrating expertise and resources in a smaller number of institutions. This would very= much benefit Ohio State, but it just got underway in Winter Quarter. Samples of ac= ademic scorecards are available in the appendices to the Fiscal Report, one of whi= ch is from the College of Social and Behav= ioral Sciences, where one can find what criteria were agreed to between the colle= ge and Central Administration.

A question was raised about the review of graduate pro= grams being pulled “off the burner”.= Dr. Gunther responded that he did not know what the Board of Regents= and the State of Ohio= were doing with regard to this. It was noted that in 1995 some programs were cancelled, i.e., the Biochemistry Program in one college was merged with two others in different colleges to = form one program. It was added tha= t some programs that were to be cut never were, and some that were cut, have reappeared. A faculty member = (Dave Stetson) stated that there has been a proposal at the Board of Regents to unilaterally eliminate programs at the Board of Regents. Dr. Gunther noted that this is a “scary” concept and a reason why program review needs to be up = and running. He said that this is irrelevant to Fiscal’s purposes.&nbs= p; If some funds are going to be reallocated on the basis of program quality, there needs to be accurate assessments of program quality. The quantitative score cards help = but don’t say very much. He= added that Dr. Randy Smith in the Office of Academic Affairs is leading program review.

Dr. Winer referred to “dumbing down of courses”. He said this = does not necessarily happen because of hiring adjunct faculty. It means taking certain steps to m= ake a course more appealing, including lowering of standards, offering “sexy” courses as opposed to more substantive ones. Is there any monitoring of this? Dr. Gunther said that this is exac= tly what the CAA ad hoc committee has committed itself to do. This committee will develop the cr= iteria for evaluation by which programs must commit themselves to quality, the kin= ds of documentation they must produce whenever a proposal comes to CAA that en= sure quality, and there will be an overview of numbers of enrollments, shifts in enrollments, who is teaching the course, changes in GPA in courses. There are some courses on campus t= hat have an average GPA of 4.0. <= /p>

Dr. Winer asked how realistic is it to expect that the= Dean would appoint a committee that would objectively review expenditures by the unit, and Dr. Gunther responded that it is unrealistic to expect that this would happen everywhere to the same degree of success. He reiterated that the Fiscal Comm= ittee has gone from a rubber-stamp type of committee to a proactive, collegial policy-making body.

Dr. Stetson noted that there is some antagonism betwee= n the Graduate School and the Office of Business = and Finance. Dr. Gunther said the= re is a PPAC (President’s and Provost’s Advisory Committee) report circulating that reflects some of the misunderstandings between these two offices.

Discussi= on followed concerning the budgetary process, under-funding by the State of Ohio by the amou= nt of 20 percent. One positive consequence of the budget restructuring was that faculty salaries were one percent of benchmark institutions. <= /span>

A question was raised concerning cash-flow associated = with a full-time graduate student taking 12 hours. Dr. Gunther said this is a nightma= re because the Board of Regents decided to impose a cap on the amount of money that would be received by OSU in subsidy for graduate students. They stipulated that OSU would not= get any more money even if it doubled the size of its doctoral graduate student enrollments. They would take = funds away if enrollment fell below 85 percent of the cap. Enrollment management of levels of graduate students becomes critical. It would be helpful if there were program assessment reports to allow the phasing-out of some dated graduate programs in order to allow others to expand. In the interim it has= been decided that subsidies would continue to be allocated to colleges on the ba= sis of current enrollment. Howeve= r, this doesn’t make sense in light of the Board of Regents funding cap. Graduate students are no= t only recipients of revenue but also generate revenue. The PPAC report fails to sta= te this. The decision to raise graduate tuition levels significantly this year has been controversial but = was unavoidable, according to Dr. Gunther.&nbs= p; The difference between graduate tuition levels and undergraduate tui= tion levels is only 9 percent. Some departments argue that it is becoming too expensive to hire graduate studen= ts as research assistants, and therefore post-docs would cost less. Fiscal Committee has discussed thi= s and finds it to be untrue.

Post-docs not only are more expensive but also do not generate revenue and do not advance the continuation of the graduate program. This varies across t= he colleges, however. Dr. Gunthe= r gave an example of the cost of GRAs in one college, which was $35,750 a year. Post-docs in the area would cost $45,100. It was pointed out t= hat it would be better off to pay a full-time person $60,000 who would teach 8 lab= s a week.

Dr. Gunther noted that over the past four years of cut= s in State subsidy, the share that comes from tuition, which does not contribute more to high-cost disciplines than low-cost disciplines, is getting out of balance with some of the founding expectations of the budgetary process. One unit may become harmed by exte= rnal events that the unit can not control. A subcommittee of Fiscal looked into this phenomena and noted that t= here is a problem but on the basis of one year of budgetary data, it was inappropriate to take any compensatory steps. Fiscal Committee will come back to= this next year and if it remains a problem, there will be a call for some kind of corrective action to modify the subsidy distribution formula accordingly. He reviewed the $300 million disas= ter of last spring which resulted with the Board of Regents funding formula in the aftermath of the State legislature’s playing games with it. The Legislature wanted to exempt two-year colleges from any of the budget cuts that they were opposing. Academic units at Ohio State that compete with two-year schools in courses such as GEC courses would take all= the hit of the budget cuts. This = worked out that some categories, such as Law, would have increased its per capita subsidy level by ten percent, and general education and baccalaureate cours= es would have suffered a 28 percent cut in subsidy. An ad hoc committee of Fiscal work= ed a new subsidy-distribution formula which was submitted to and adopted by the Office of Finance within a month.

Dr. Gunther noted that the Fiscal Committee will need = to determine when to step in to take corrective action to what appears to be a problem, because if the wrong steps are taken, the rest of the budgetary process is thrown off. The Committee needs to be vigilant, careful, and responsive.

2. Re= search Faculty Rule. Dr. Chism n= oted that members had been sent a copy of the latest version of the rule creating Research Faculty. Dr. Oakley = told members that CAFR had concerns with the rule. He noted that the rule can be help= ful in many instances, but CAFR has concerns about the scope for abuse that could arise under the rule. He note= d that the Tenure-Initiating-Unit will need to devise its own rules concerning Research Faculty. He gave an example of how the rule could be abused.&n= bsp;

It was noted that these rules will become part of the Department’s Pattern of Administration, which has to be approved by t= he College and by Academic Affairs. Some units have faculty participation in the approval process; other= s do not. This rule states that te= nured faculty will vote on whether the Department will have Research Faculty.

Dr. Chism noted that the intent of the Rule is to not = have Research Faculty teach. Others noted that the wording of the Rule suggests that teaching is allowable and determined on an ad hoc basis and is not part of the contract.

3. Dr. C= hism noted that the year-end meeting will take place on May 27. It is hoped that the President and perhaps a Board of Trustee’s member will attend.

At this point, the meeting came to an end.

Respectfully submitted,

Brenda A. Wright

Recording Secretary Emeritus