MOREHEAD STATE UNIVERSITY
STAFF CONGRESS MINUTES - SPECIAL BUDGET/EMPLOYEE RAISES MEETING
APRIL 24, 2006
*Denotes member was absent
||Dr. Wayne Andrews-President, Beth Patrick-Vice-President for Planning, Budgets & Technology, Mike Walters-Vice-President for Administration & Fiscal Services, Gene Caudill-Staff Regent & Director of Physical Plant, Roger Barker-Director of Human Resources, Stephanie Sanning, Penny Compton, Terry Irons, Margaret Stokely, Diane Wright, Tonya Ashby, Janet Glover, Debbie Dehart, Tina McWain, Marquita Bear, Shana Savard, Lora Pace, Carolyn Poage, Jackie McCleese, Virginia Bocook, Sonja Castle, Tina Flannery, Sarah Whitt, Suzanne Hogge, Phyllis Dehart, J.H. Sanning
Chair Jessie called the meeting to order at 1:01 p.m. A quorum was present. Guests were welcomed. He asked everyone to sign-in on a sheet that is being passed around. There are two items on the agenda today, the upcoming budget and employee salaries. Those are the only two items we can discuss. He suspended the normal order of business and asked everyone to speak clearly and loudly when asking questions so it will be picked up on the tape for the minutes. Also, everyone needs to be acknowledged by the Chair or the presenter before asking questions. The meeting was turned over to President Wayne Andrews and Beth Patrick, Vice-President for Planning, Budgets & Technology.
President Andrews said the purpose of today's meeting is to share information in regard to the anticipated budget for the biennium. It is a two-year budget for 2006-2008. Unless the governor gets into the veto mode, (we will know today if anything gets vetoed), he believes this is going to be one of the best budgets we've ever had at Morehead State University. Having said that, the challenge we have, since it is a two-year or biennial budget, the dollars coming to us in both the base appropriations and the way the capital construction projects are structured don't all occur uniformly both years. The most important part to pay attention to is the base appropriation in year one is very small and it is very large in year two. That has some implications for us as we try to manage this budget and they will try to describe that in this presentation. He wants us to have the same information he has shared with others: the cabinet, the faculty senate, the department chairs and other groups on campus so we will know exactly what is going on. There is nothing secret and nothing hidden. They are trying to manage this budget as carefully as they can to the benefit of the employees and the students we are here to serve.
Vice-President Beth Patrick explained a power point presentation regarding the budget. She said this is one of the best budgets MSU has ever had. A lot of that has to do with the capital portion of the budget. There are two primary parts to the budget: capital and operating. Capital is the money we get specifically to build or renovate major construction items. It is the first time ever, we have had three projects funded in a biennium. We have never had over one project funded in a biennium. We received Agency Bond Authority on two projects and received project authorization for one project. The second part of the budget is the operating money. We received 109% of the money that the CPE recommended. Over the two-year plan, we get $4,773,800 for our base increase. Unfortunately, the first year is very small compared to the second year. The first year we get $624,900 and the second year we get $4,148,900. Regional Stewardship money can only be used for specific purposes and cannot be re-allocated. Technology equipment is one-time money we will receive the second year of the biennium to replace old computers/equipment that has a lifespan of seven years or less.
We have no control over fixed and unavoidable costs. These costs add up to 2.5 million plus. Fixed and unavoidable costs include: KERS Rate Increase, Employee Health Benefits, Technology Service Contract Increases, Utilities, Leases & Contracts, Liability Insurance, Scholarship & Waiver Renewals, Personnel Commitments, & Library Book/Subscription Increases. Last year we had no increase in our health insurance premiums for individual employees and they anticipate that will be the same this year. MSU put $75,000 back, in anticipation of increases that might come in January. This will be the universities contribution to help keep employee rates as stable as possible, resulting in no increase for the second year. Personnel commitments are items that have already been committed that are due July 1, such as, faculty and academic promotions, career ladders, and reclassifications approved. If a person is on a career ladder and has met the requirements and was supposed to move up in the career ladder July 1, that is what this funding is for. Next year we will have these costs again. So if we look at the biennium, we have 4.7 million coming from the state, but we will have 4.5 to 5 million in fixed costs. That leaves nothing to do some of the strategic things we want to do. There are over $8 million in strategic investments we would like to do to be able to move our agenda forward. A 4% pool for salary increases is one of the items on the strategic investment list. If we add $8 million to the 4.5-5 million in fixed costs, we are way over what we are going to get in this biennium from the state, even though we are very pleased with what we are getting from the state compared to what we anticipated.
The other area of revenue we have outside of what the state gives us is tuition. The CPE gave us authorization to raise our tuition by 13.8% based on 2006-2007 funding. We chose to raise tuition 12.8% in 2006-2007 and have projected an increase of 8.3% for 2007-2008. MSU is still very affordable compared to our peers. Other structural changes include: Internet courses will be billed at in-state rates regardless of residency. This is necessary to stay competitive nationally. There will be a $35 per credit hour access fee for all Internet courses. This will help offset the in-state rate for Internet courses and pay for the increase in cost associated with the delivery of Internet courses. There will be no mandatory housing requirements after 60 credit hours for waiver or scholarship students. Even with the tuition increase, we will still have a funding imbalance. We need to remove over $1 million from the 2006-2007 budget in strategic investments to be able to balance. The two big dollar items in the strategic investments are: student scholarships and a 4% salary increase. At this point we have recruited those students and the scholarships have been committed, so really the only flexibility we have in balancing the 2006-2007 budget is to hold back on the 4% salary increase. As of now, at best, the budget for 2006-2007 would support a 2% salary increase. There is an alternative strategy to delay the implementation of the 4% and make it effective January 1 instead of July 1. We would reduce the amount we spend on salaries by one-half because we are only going to pay it for one-half of the year. It reduces the cost by $1.1 million and enables us to put the larger percent on everyone's salary. If we wait and add 4% in January, employees will still make as much money over the one year period (2% for one year or 4% for six months is the same), but if we get 4% in January, employees will have a larger base salary to add to in upcoming years than if 2% were added in July. The employee would net a greater amount of money in the two-year period. This model pushes the greater amount of money more toward the second year.
Question from Rep. Thacker: If someone retired between July and December, would they get any benefit? Was that taken into account?
Answer from VP Patrick: No, they would not get any benefit. It was discussed, but that is one of the downsides of this plan. If someone retires prior to January, they would not benefit from the salary increase.
Question from Rep. LaFontaine: I understand the numbers, but if the employee is not getting the increase until January, how does that help them cope now with the increased cost of utilities, gasoline, and everything else? Our employees are facing higher costs of living now, but they are going to have to wait six months to see an increase in salary.
Answer from VP Patrick: The question is, what is the value. Is the value having less money sooner or more money later? For the employees' benefit over a two-year period, you are going to position yourself as an employee much stronger going into the next fiscal year by delaying the raise for six months. To answer your question, it does not help them in the first six months, but it significantly helps them in the latter 18 months. It helps them more so than if we had gone with the other strategy.
Comment from Rep. LaFontaine: But if they don't have the money in their savings account to get them to January, there's going to be a problem. We are hearing in the news now of people going to pawn shops and pawning things to fill up their gas tank.
Answer from VP Patrick: Do you think a 2% increase is going to pay for the cost of increases that are going on anyway? From the institutions perspective, it would cost less to do the 2% in July, but it would not be best for the employee because you are going to leave 2006-2007 with a smaller base increase which earns you less going into 2007-2008.
Question from Rep. A. Moore: How does it cost the institution less to do 2%?
Answer from VP Patrick: On a recurring basis it is less. As we build the raise for the second biennium we would be building it on a smaller base. Each 1% salary increase the institution gives costs $550,000. If we give a 2% raise, it costs the university a little over $1 million, but that causes the entire base not to go up as high. If we give 4%, the base goes up higher, so the next year when we give 4% on top of that, it compounds. That is why it costs the institution more. The delay allows us to live within the current fiscal year with a temporary crunch, but still give the larger base increase.
Comment from Staff Regent Caudill: I understand that it will save $1.1 million to help balance the budget, but according to my calculations, we would still be $1 million out of balance.
Answer from VP Patrick: That is assuming we did all of the strategic investments. Some of those might be delayed.
Comment from President Andrews: The reality for us as an institution is that the way the dollars come to the institution are based on a formula. The formula is based on enrollment. We have to grow as an institution in order to grow our budget. We are not interested in growing just to get more students, we are interested in growing because there are a lot of students in Kentucky who need an education. If we are going to be able to provide quality salary increases for employees and if we are going to be able to keep our benefits at a reasonable level without passing the costs on to you, we have to generate more income. There are two ways to do that. One is through enrollment growth and the other is by growing the state appropriations, the money that comes from the General Assembly. We know that we are not going to have years like we did this year with the funds as significant from the General Assembly. We have to grow the enrollment of the university. If we don't, we're going to have to shrink the size of the university. We won't need as many faculty or staff for fewer students. That is really our challenge over time, to continue to grow in a reasonable way so that we can fund the things we need. The strategic investments outlined in this document are things we have some choices on. We don't have to do all of those things. We can delay some. The question is which can we do without, without interrupting the flow of students and student support to the university. That's the reason we're here, because we have students. It's not that you and I have jobs, we're here first because we have students, then we have our jobs. What we're trying to do here by showing you these two models is to present a reason or rationale to put a 4% increase in salary in play, but do that in January instead of July. Across the two years of the biennium, the employee comes out ahead financially as opposed to giving 2% in July and assuming a 4% increase next year. You will come out ahead, you will have more money in your pocket, but we all will have a short-term situation where we won't have an increase. There was no guarantee we were going to have an increase anyway. There is no guarantee in any business in this community that they are going to give a flat amount of a raise in any given year. In some organizations, it depends solely on production. If business is real good there might be a raise, if not, there might not be any raise and there might be fewer employees working. What we are trying to do is give the maximum amount of money we can, but do it in a manner that will allow us to keep the university on solid footing and do the strategic things we need to do.
Question from Rep. Thacker: Is there a guarantee of the 4% in January?
Answer from President Andrews: We intend to do 4% in January, yes. Now, the variable there is that if we don't grow as an institution, we won't need as many people working here. I'm not hiding behind that. It's real important and you need to know that. I'm not saying we are going to take your job. That's not what I said. What I said was that if we don't grow as an institution, we're not going to need as many faculty or staff. What are we going to do in January? Our intention is to give a 4% pay raise. What if we don't make our enrollment goals this fall? Are we still going to give 4%? I suspect we will give 4% in January, but we will have to go into the strategic budge initiatives and whittle away at those and take some money out on the expenditure side. Over the long haul, we've got to work together to meet our enrollment goals. Everyone of us has a responsibility with that because the quality of what the faculty do in the classroom is very important, but the quality of what you all do as staff and what I do as staff is equally important. Parents like to see a campus that is well kept. Parents like to go up to residence halls that are attractive, clean, and well-painted. Parents like to deal with somebody in the First Year office or the Registrar's office, etc. that is pleasant and forthcoming with answers. We all have a role to play in that. I believe in the institution because of its solid history. I think we can continue that. We are all in it together. I would never want to frighten anybody by saying we are going to lose jobs, but the reality for us is we've got to continue to grow in a responsible manner. That is really important for us. So we'll have a 4% raise in January, but if we don't make our enrollment goals for fall, we're going to be scrambling come January to make it work. We won't take it out of employees pockets, but it will have to come from somewhere. What I hope we would do today is answer your questions. I want you to understand what we're doing. Just like you, I'd like to have a pay raise in July too. I really would, for the same reasons you want a raise, but this way, we think we can put a little more money in your pocket. It will be delayed, but then come January, you will have a better amount to work with. The most important part, as Beth says, you'll be building on a bigger base because that base salary gets rolled forward the rest of your career.
For employees who are in a career ladder or have been reclassified, those will still go into effect July 1. Those types of annual increases that were scheduled to be effective July 1 will be effective July 1. It is only the 4% increase that is being delayed until January 1.
Any portion of the salary increase that is based on merit will be based on the 2005 performance appraisal. They'll go ahead with the merit increases as they always have on schedule. Human Resources is in the process of sending memos out to supervisors saying here are your employees, how do you want to distribute your merit. They'll go ahead and calculate those. When they print the roster this year, they will list the July salary and the January salary. The January salary will include that 4%, whatever portion is merit and whatever portion is across the board. It will be calculated like it's going into effect in July, but it won't roll to your paycheck until January. For faculty, the tentative distribution will be 3% PBSI (their version of merit) and 1% equity. One percent goes to the department chair and he/she looks at all the faculty in their department and applies that 1% where they have the biggest equity issues within their department. For non-exempt or hourly staff, the recommendation is 2% across-the-board and 2% merit based on 2005 performance scores. For exempt or salaried staff, the recommendation is 1% across-the-board and 3% merit based on 2005 performance scores.
Question from Rep. James: Since there is a shift and it is going to be weighed more on merit, is there any discussion of changing or revamping the performance appraisal process? In the past, there have been complaints that it is not very good.
Answer from VP Patrick: We talked a lot about that issue. Is it a complaint about the form and the process or is it a complaint about how supervisors interpret it differently? We can change the process or the form, but if we have issues where we have supervisors who aren't adequately implementing the process, then we could change it over and over and not ever change, so we've really got to address the latter and make sure we have good education of our supervisors and they are going through that process the way it should be happening. From our discussion, the problem seems more with the latter and not with the forms.
The next step will be to finalize other strategic investment decisions. They are still looking at what they can do this year and what can be delayed to the second year or what might have to be delayed to the next biennium. They are also planning to hold other budget discussions with groups on campus. The final budget recommendation will be made to the Board in June.
Question from Faculty Regent Irons: I support the idea of a lump sum raise for people at the lower end of the pay scale. I talked with the administration about putting that in place last year. Especially since fuel costs are so high this year, are we looking at doing that again?
Answer from VP Patrick: Yes.
Answer from President Andrews: Last year we did that. Anybody with a cut-off of $20,000 got a flat $900 across-the-board and I've asked Mike to work with OHR to look at that again. It averaged about a 7% increase for those people who earned less than $20,000. I'd like to do that again for that very reason. A 4% increase on $16,000 is significantly different than a 4% increase on $60,000, $70,000, or $100,000. The idea was to try to help those with the least amount of money. We'll look at that again and see if it makes sense. The important thing for today is for you to understand what we are doing. There is nothing in this document that is a secret. Sometimes people might think that the administration puts it together and holds it close to their vest and won't share the information. We want you to have the information we worked with. You might choose to disagree with the approach, but I hope you understand the logic and when people talk about it, you can explain how it's going to work. We're all in this together. We're a community here and I'd like our community to be treated properly through this process.
Question from guest Penny Compton: We will have the money there for the 4% in July, correct?
Answer from VP Patrick: The money is there as of the budget that has been approved by the state.
Question from guest Penny Compton: If we go with the 2%, then would the other 2% go into savings to draw interest to make more money to work with later or what will happen to that 2%?
Answer from VP Patrick: Are you referring to the money that we will save the first 6 months? It is still the same amount of money over the fiscal year, but we won't start paying it out until the second half. Are you referring to the interest that we draw on the first six months?
Answer from guest Penny Compton: Yes.
Answer from VP Patrick: We manage all our cash very carefully. We always invest any excess cash that we have.
Comment from guest Penny Compton: It would make sense to have the cash work for us.
Comment from Faculty Regent Irons: Sometimes we don't receive tuition money for a long time.
Answer from VP Patrick: No, we don't. Sometimes we don't get it at all. Some tuition isn't billed until the second half of the semester. What we're looking at here is the total expenditures for the year.
Comment from guest J.H. Sanning: What a lot of people don't understand is, we don't actually get repaid for a lot of financial aid until later into the semester. We front that cash up front to the students. Some of that cash we're talking about, we pay out to cover tuition and we don't get repaid until late September or early October.
Comment from VP Walters: We don't get all the new money coming in from the state at once. We do not get any interest on state appropriations at all. The state holds that money. As we write payroll checks or checks to pay our utilities, vendor payable checks, etc. on a local bank account, we request reimbursement from the state, from the state appropriation funds, for that exact amount. When all checks clear the bank, we have a zero balance. We do not receive any interest on state appropriation money. The state invests and makes the money.
Comment from VP Patrick: The tuition is ours to invest.
Comment from VP Walters: We can invest tuition and housing money.
Wrap-up comments from President Andrews: What I would ask you to do is to think about the totality of what you receive as an employee. I know right now, what we're the most concerned about is your pay for this next year and I understand that. I don't mean to minimize that. I've had many of you tell me that this is a really good place to work. It is a good environment, you work with friendly people, and we have a good benefit package (health, paid vacation, sick leave, ability to take courses and work on an education or provide that for your children, etc.). If you look at the whole package together, I hope you feel as I do, that this is really a very good place to work. Let's keep that in mind as we move through this next year. Those people of the General Assembly (Rocky Adkins, John Will Stacy, Charlie Borders, Robert Stivers, Tanya Pullin) made this a very, very good budget and I hope what they'll hear from us is, thank you, this is a really good budget, not, those scoundrels didn't give us a pay raise this year. We're trying to make the whole business work well for your benefit, but primarily for the benefit of our students as well. That's why we're here. I really appreciate you. I appreciate what you do here in your respective roles. I've talked to most of you along the way somewhere. Whether you're in custodial services, or you're an accountant, or you're an administrative assistant, or a VP, or a director, each one of us has a very important role to play and if we work together to make this university a better place, it will become a better place. I want to thank you for your time in being here today, I thank you for your listening and for your good questions and my pledge to you is we will continue to do the very best we can to direct money into the salary of our employees because I know it is important to you and it's important to me. You did note in this, I think Beth sort of glossed over it, that we are not going to pass on any health insurance cost increases to you again this year. That will be two years in a row and it is because of the good work of Mike Walters and Roger Barker and Suzanne. The people in OHR have been working diligently to negotiate in a market that is really tough and very competitive. We expect our health care costs to rise, the industry average is about 12%, and we're going to absorb that as a university and not pass that on to you. We will continue to try to do those kinds of things to make your university a place where you can be proud to work and you'll have reasonable compensation. So I do thank you and if you have any other questions, Beth and I will stay behind here to talk with you individually. David, thank you very much for hosting this. We appreciate it.
Response from Chair Jessie: We appreciate you coming. Any more questions?
||Proposed: Rep. Thacker
||Seconded: Rep. James
|Called for Vote:
Minutes submitted by: Rhonda Crisp, Secretary