Budget Presentation

Members of the Board convened at 1:15 p.m.

Regents Present:  Mike Foster, John Mercer, Mark Semmens, Lila Taylor, with Kala French arriving late.  Also present was Commissioner Sheila M. Stearns

Regents Absent: Lynn Hamilton, and Richard Roehm, both excused.

Rod Sundsted indicated there were corrections to the budgets due to some pages being in the wrong areas.  He handed those corrected sheets around.  He thanked Pam Joehler for her efforts on the budget since this was her first time through.  She did a great job, and the light in her office was not off more than three hours a night.  Regent Semmens commented he has served on corporate, non-profit, and state boards and has never seen such a useful presentation of a budget.  It is an exceptional document with a very meaningful presentation.  He thanked Rod Sundsted and the campuses, and offered kudos and thanks.

Rod Sundsted noted the Executive Summary included tribal and community colleges.  Also included were fund and program definitions.  There was a report on negative fund balances across the system, as well as the bonded indebtedness report for each campus and the funds for repayment.  System and educational units included expenditures, revenue, FTE staff, and other.  There were summary schedules which were used more by OCHE.  Campus summaries had detail used for the Executive Summary, followed by budget metrics, with the common use of terms, enrollment expenditures, general operating cost, cost of education, and targeted expenditures, per student funding, and staffing ratios.  Also included were the current year budget changes.  Following were a variety of schedules for such things as current unrestricted revenue, current unrestricted expenditures, faculty salaries, and scholarships/fellowships.  The three community colleges were included at the end.  Pam Joehler then went through various details of the budget, from a total MUS increase of 6.5% from FY04 to FY05,  to decreased state support, increased enrollment, and built-in assumptions such as $350,000 for Regent priorities, which has a current balance of $217,000.  Regent Semmens indicated he would request at least one additional senior staff member for the Office of the Commissioner to be funded within the priorities, or from the lump.  He indicated the amount suggested seemed light when considering the compensation and benefits.  He requested the Commissioner, Rod Sundsted and Pam Joehler discuss the viability of the proposed figures, and to present a better figure to the Board the following day.  Regent Mercer indicated he would like to see Regent Semmens work with them to put together the proposal.  He said that with a $900M operation, helping the Governor’s office, and improving relationships around the state, the Commissioner needs a Chief of Staff.  Regent Foster said he was glad this came up.  The Board has a very aggressive agenda for the Commissioner to accomplish and the reality is that additional staff is required. 

The University of Montana

President Dennison introduced the new Chancellor from UM-Western, Richard Storey.  President Dennison indicated they had approached their budget with prudent and proactive management.  There was a disappointing decline in non-resident enrollment, which will be addressed with a greater investment in recruiting and marketing.  The campus cut costs, fulfilled their quality commitment, and found six more tenure track positions.  They have made strategic increases with more money for the termination account for retirements, and more graduate fee waivers.  Performance retention is up, graduations are up, and the student faculty ratio is 20:1.  They were able to reach most of their targets with the exception of O&M, but even that is in pretty good shape.  Designated and auxiliary accounts are fine except for Athletics, which is on schedule as approved by the Board.  President Dennison indicated their challenges are utilities which are up 89%, improvement in non-resident enrollment, and continued efforts for modest salary increases.  The affiliated campuses are part of the challenge with $2M transferred, $1.5M in cuts across the board, and the one time only transfer from auxiliaries.  There is an increase of 200+ FTE covering added faculty, classified staff, janitorial services, student services, personal services, health and workers comp insurance and faculty retirements.  The operating costs shown are most utilities.  Instruction remains the highest, with the increase in student services due to increased recruiting.  CIS was also transferred into its own budget.  President Dennison recommended against freezing salaries.

Chancellor Gilmore welcomed the Board to his campus.  Performance measures at Montana Tech are good, with placement high with a rate of 99%, enrollment increased in FY04 and they hope it increases again in FY05.  Student faculty ratio is 16:1.  At the Colorado School of Mines it is 12:1.  They have good freshman retention, and graduations are good, but neither are what they want to see.  Chancellor Gilmore said they had a low debt load but it had increased dramatically since 1998 from $10,000 to $16,000.  Contracts and grants are at about $11,000.  They have increased faculty 3.67 FTE and staff 3 FTE, are still funding the termination account, maintaining reserves for enrollment, managing bad debt as best they can, and continue marketing.  Challenges at Montana Tech are to reduce the transfer from Missoula, which is down to $400,000 from $439,000.  Tuition has increased substantially, but is still considered low.

Chancellor Storey indicated the FY05 budget at UM-Western was under serious pressure.  They have unfilled vacancies, and the main challenges for his campus are enrollment, utility costs, payroll increases which even with the small increase allowed is costing $125,000 in new money, and finally general fund support.  With the Experience One programming enrollment is up 40% for freshmen this year, but 1% overall, with applications from non-residents up for the first time in many years.  Tuition remains a good buy, but they may not be able to increase non-resident tuition without pricing themselves out of the market.  Chancellor Storey indicated they plan to continue the growth in the block programs and marketing for enrollments.

Dean Hoyle reported enrollment growth is down for the first time, but the enrollment reserve is on target.  However, they have not met their benchmarks.  Designated and auxiliary funds are positive except for the cafeteria which has reduced its deficit from $50,000 to $6500.  Their challenges are the drop in enrollment, and increased utilities.  They are surviving on some vacancy savings and $516,000 transferred from Missoula.  They anticipate enrollment will drop 30 by spring, which is a $95,000 shortfall in tuition.  The outlook for FY06 at the Helena College of Technology is dependent on increased enrollment.  Tuition will also be an issue, as well as affordability and accessibility.  There will be increases in health care and utilities, and salaries must also be increased.  Dean Hoyle said they need additional revenue streams.  

Regent Semmens expressed amazement at benefits and insurance for staff.  Rod Sundsted indicated the state contribution to health insurance rose from $410 to $460 per employee which is a 12% increase.  Regent Semmens indicated to President Dennison that he appreciated that he had clearly delineated in his budget where he had cut funds.  Chair Mercer questioned the decline in contract personnel and increase in part time faculty at Helena College of Technology.  He asked Dean Hoyle if that was a way to save money.  Dean Hoyle indicated that was a benefit, but it was unplanned.  Two faculty took leave without pay over the past year, and they had two retirements in office technology which also lost enrollment.  Chair Mercer asked if protections against a shift from full time to part time personnel was at the Board level, the university level, or the campus level.  President Dennison said he believed it was an issue left to the CEO of the campus, followed by budget approval at the flagship campus and then the Board.  He indicated he had raised the same question about the decline in dollars dedicated to instruction at the College of Technology, which is a very significant issue.  Chair Mercer stated he was very concerned and wanted to pursue this issue.  If enrollment drops and state support goes down, it could be a trend leading to tuition increases.  He sees deferred maintenance and shifting to temps, and asked if there are other practices which are saving money but affecting quality, or if these were the two big tools used.  President Dennison indicated those were the two big ones, but there is also the use of the contingency accounts which are drained.  Chair Mercer said he has been hearing that people are breaking down the doors, but there is no space and the campus needs to add room.  He asked what was causing the drop in enrollment.  Dean Hoyle indicated they have had 55 fewer agency referrals this year.  Those tend to be full time students since they follow agency guidelines.  He believes there may be other factors as well.  Regent Semmens noted that while other campuses increased their reserves by only 2% to 2.4%, Dean Hoyle had more than doubled his.  He asked if it was possible to put some of that into recruiting to address the long term.  Dean Hoyle indicated that is their holding tank, with earmarked dollars being moved out at appointed times.  Chair Mercer indicated a subject for later discussion is whether the college of technology has reached its capacity in a couple of ways – needing more room for students, or overselling.  They need to define between the two scenarios.  Commissioner Stearns asked if Dean Hoyle had waiting lists for some of his programs.  He replied they did for nursing, although they don’t have a formal waiting list, with those taking their general education classes while they wait for the program.  Commissioner Stearns said Senator Baucus had held a press conference in the CoT lab, indicating all those graduates go directly into good paying jobs.  She asked Dean Hoyle if those employers had told him they would hire all he could produce.  He replied the machine shop and welding are full and providing good paying jobs with the biggest suppliers of those positions being Summit Group and Gateway Economic.  A company out of Pocatello needs 150 machinists.

Montana State University

President Gamble indicated they had used two year sustainability grants for the smaller campuses rather than transfers.  They have worked with MSU-Northern on their debt service and were able to find some relief for FY04-05.  There was direct assistance to the Great Falls College of Technology which was compressed for space, and Bozeman picked up the costs of moving the fire service training and nursing programs out.  Bozeman also gave direct assistance to MSU-Northern by picking up the costs on a boiler that had gone out.  President Gamble indicated AES is exceeding its mission, but is becoming less competitive due to the same constraints that are affecting the campuses.  They have lost three faculty to positions outside Montana.  They have downsized to remain in budget, but are not able to provide all the services they should.  Two sessions ago, the state put aside $1M as a match to deal with deferred maintenance at the stations.  Efforts to raise the other $1M are now at $820,000, and MAES is doing a fundraiser.  The stations have been impacted greatly by utilities, fixed costs, lower interest earnings, and the fact they must project sales of commodities as part of state funding.  They are highly stressed financially. However, a new agent has been placed in a county that has not had one for 62 years.  Since the Fire Service training has been moved off the Great Falls campus, they must pay rent for the first time.  The rent is covered partially by general fund, with the balance coming from President Gamble’s office.  The rent will need to be factored into future budgets.

Chancellor Sexton handed out a document detailing the budget process at MSU-Billings.  He indicated the newest piece of equipment at the College of Technology is twelve years old.  He pointed out the challenges listed on page four which include fixed costs and demographical changes.  The Billings revenues and expenditures were listed on page five, with general budgets from the general fund and metrics on page six.

Chancellor Capdeville gratefully acknowledged the assistance that President Gamble had provided to the MSU-Northern campus.  He indicated Northern has served northeast Montana and has started upper division courses at the tribal colleges.  The collaborative nursing cohort in Shelby will finish this year.  They have made major investments in the infrastructure with completion of IT, roof repairs, upgrades to campus buildings, and the beginning of new construction.  They are in the last year of reducing the deficits, and after FY06 will gain $100,000 from finished debt payment.  They have fiscal constraints, but put additional funds into recruiting next year because of reduced enrollment this fall.  They also added funds for retention.  Challenges continue with less general fund, and raising tuition.  Chancellor Capdeville said they have “hit the wall” on raising tuition.  This summer they were down 90 FTE, and this fall 75 FTE.  He believes that by spring they could be down 120 FTE.  He reported they have completed some of the Indian Education grants, and are focusing more on the Tribals.  There is a small enrollment at Stone Child of 120.  Fort Peck is up with 150, so there is the possibility they could do some collaborative programs with them.  Chancellor Capdeville expressed the hope of engaging and finishing the tribal four year degrees.  At the end of this year, there were some reserves, but those will be gone by the end of the year.  He expects to cut personnel in FY05, but will have cohorts in Browning and Medicine Hat.  Administrative changes are reflected in the budget, with four colleges being collapsed to two, and those Chair/Dean faculty members affected no longer being administrators.  There is a declining enrollment in the high line public schools, which will impact the Northern campus.  They have had three failed searches for faculty this past year, and adjuncts are not available in small communities.  Chancellor Capdeville stated that 12 people from John Deere had flown in the previous day to interview their students, and they needed more than Northern had available.

Dean Moe said they had some successes at the Great Falls College of Technology over the past year.  They had budgeted based on 10% increased enrollment which only came to 4.3%.  They dropped 21% evening FTE, and 12% summer FTE.  For the first time, they have more non-traditional than traditional students.  They have a 13.7% increase in FTE for the on-line courses.  Sixty percent of those taking on-line courses also take classes on campus and say the on-line classes are critical to their goals.  Great Falls CoT offers dual enrollment credit classes to high school students, and have helped 24 high schools teach SYSCO.  There are high school faculty teaching at the College of Technology.  Dean Moe indicated they had to double the pay in order to recruit adjuncts, but have added four full-time faculty this year.  Using a sustainability grant from President Gamble they invested $74,000 to educate teachers to teach on-line, providing laptops, and faculty to mentor them.  Sixty percent now teach on line.  She suggested they should be considering the acquisition of some school district property next to the campus.  They have had a turnover in staff, with many of the positions being filled from inside the campus.  The dental hygiene program had a separate allocation, but no operating costs were included in the  budget.  Great Falls has had to absorb those costs in their own budget.

President Gamble reported they anticipate healthy enrollment, and they have over double the Native American freshmen.  Quality measures are up, and retention is up from 70% to 73%.  Bozeman has planned for a decrease in WUE of 100, and backfilled with non-resident students with a good increase in revenue.  There is a decrease in non-resident  graduate students which can’t be explained.  Health costs will rise, as will utilities, library costs, and scholarships/fellowships.  Fixed costs will rise $2M.  Athletics closed slightly better than anticipated with a deficit of $430,000 rather than $440,000 as previously reported.

Regent Semmens noted the increase in transfers made by Bozeman from $142,000 to $146,000 this year.  Craig Roloff indicated those figures are accurate for transfers from the general fund, and the remaining amount will be from funds other than general funds.  The total amount of transfers is greater than what is shown – MSU-Northern was not from the general fund.  Chair Mercer said the Board needs to know the total funds transferred from all funds for both UM and MSU.  Craig Roloff indicated the total was about $350,000 to $400,000 inclusive of the above amount, which Regent Semmens noted is down from the previous year.  Regent Foster asked Chancellor Sexton if he had gauged the effect of their fund raising on enrollment, and if they had more scholarship money.  Chancellor Sexton said 1/3 is devoted to scholarships which will help maintain affordability.  One of the challenges before the campaign was no endowed scholarships for the College of Technology.  That has now been changed and will enhance enrollment.  The crafts, trades and industry courses all have waiting lists.  He noted that the national average tuition for two year schools is $1450, which at Billings is $3000.  Regent Foster asked what could be done to update the outdated equipment at the colleges of technology.  Chancellor Sexton replied he had previously suggested bonding for $7M.  But lacking that, they have made it part of their campaign.

Following a ten minute break, the Board reconvened at 3:40 p.m.

Community College Budgets

President Karas stated the 16% increase in FTE was more than Flathead Valley Community College had budgeted.  The Budget Committee is made up of members of all their stakeholder groups.  The FY05 budget was based on the strategic plan with increased expenditures for adjuncts, full time faculty, insurance and utilities.  They are investing in distance learning and enhanced technology.

President Hetrick told the Board that the summary in their packet detailed the primary changes for Dawson Community College, with an increase of about $186,000 this year.  Personnel increases were the largest category.  The Board of Directors negotiated a two year contract, and classified staff also will receive an appropriate increase.  There has been no salary increase over the last two years.  President Hetrick referred to the Farm/Ranch Business Management course which has increased Dawson’s general resident growth the most since 1966 when it went from 160 to 300.  They now have 38 FTE in Glasgow, and will have another 12 FTE in Miles and Plentywood this spring.  There are currently about 460 to 470 which is 35 over the state allocation.  If the Board continues to support expansion of this program, they will continue to grow, as it is much needed, and welcome in the field.  Another major item for their campus is the completion of the physical education and performing arts center this November or December.

President Hammon reported when his students arrived at Miles Community College this fall, they were in dorms rather than hotel rooms.  Last year saw an increase of 6% in FTE, and now 6% over last fall.  The major focus on campus is working with health care providers.  They have 21 RN students in Sydney and Glendive.  They are also looking at some of the other community colleges to bring some of their programs to Miles.  These would improve their ability to help with dual enrollment.  They also have a FIPSE grant that has added 19 high school students to the enrollment.  They continue working with area hospitals and have found them to be exceptional partners with financing.  In an effort to keep better data on campus, they are switching their system out to a new one.  The general population of Miles Community College has averaged 55% county and 45% out of county.  This year it is 45% county and 55% out of county.

Chair Mercer said it appeared enrollment grew at all but Flathead Valley Community College.  President Karas replied there was an adjustment for dislocated workers, and they do have some growth but not as much.  Chair Mercer asked her if it was the same for FVCC as for Helena CoT that when the economy improves the campus loses FTE.  She agreed this is a general trend. Chair Mercer asked if there was any part of this budget process that might be improved, and general consensus was it was fine in the current format.

Chair Mercer said enrollment at MSU-Northern is a major concern.  He wants to have a dialogue at some point about this, and asked if Northern did not exist what would happen if a program was put there.  If they are on a collision course, funds need to come from some place.  Referring to the 100 non-resident students at Bozeman, he would like to see the data in a better format to show the economic impact of these students on the community and state, as well as their support of resident students.  He requested that Agenda pages be numbered sequentially from beginning to end to make it easier to find particular pages.

Regent Semmens indicated he found it very helpful to have the metrics on a single page, along with the dollar and percentage amounts, the staffing formula, and student funding.  He found it gives a better sense of what is being spent to educate a resident student, which is $9400, with the resident student paying $3500, or one third.  The rest is state support and non-resident subsidy.  Non-resident students provide the flagship campuses with about $8M.  Regent Semmens indicated the Board had directed the two presidents to decide how to spread the dollars around their campuses, but with different approaches, there have been very different results.  Because of this dramatic change, Regent Semmens said he doesn’t feel the Budget Committee has focused enough on working out this issue, which a few years ago was a non-issue.  He noted that MSU has a benefit of $900 per student and provides $30 to their campuses, while Missoula has a benefit of $630 but benefit their campuses with $550.  Regent Semmens indicated he will suggest the Budget Committee tackle this issue, and believes it needs to be dealt with in the allocation model.  Chair Mercer agreed the problem needs to be addressed, but believes the allocation model is arbitrary, and the Board has set no policies on how the funds are allocated.  He does not believe it is the responsibility of the flagship campuses to support the others, but rather should be based on what it costs to run a campus.  That amount will be supported by state funding and tuition.  Chair Mercer also indicated the local tax payers are another possible source to support the local units.  Regent Semmens agreed it was important to consider how state funds are allocated.

Commissioner Stearns announced that Governor Martz would arrive at the meeting on Thursday at 9:00 a.m., and Bud Clinch would be in attendance at 1:30 regarding the land grant issue.  Chair Mercer said they would take action on the budgets at 7:30 the next morning.

The Board adjourned at 4:15 p.m.

The Budget Committee convened at 4:30 p.m.

Budget Model for academic programs

Rod Sundsted stated this provides a consistent way to present the enrollment and fiscal impacts for every program.  The second page details incremental expenditures, with the following page detailing incremental revenue corresponding to that program.  Roger Barber noted that the Academic Officers were involved in developing this format, and it must be remembered that many cells will be left blank depending on the circumstances of the proposed program.  Chair Mercer asked if it could all be put on one page, and questioned how they would be able to tell how these proposed programs affect the FTE for other programs, and if they take funds from other programs.  Regent Semmens thought a good addition to the information would be the breakdown of enrollment and shifting enrollment.  As far as taking funds from other programs, he indicated to Chair Mercer that the Academic Officers had convinced him it was impractical, since it is all so fungible due to the numbers of students taking so many different classes.

COMPENSATION STUDY

Kathy Crego handed out the Compensation Survey Report and there was considerable discussion on the appropriateness of the comparators, the studies used, the amount of expenditures at research intensive institutions, among other things.  It was agreed it was a good start, and the Committee solicited input from faculty and staff to consider the nuances.  This report will not be put away, but will continue to evolve.  Erik Burke from MEA-MFT indicated he believed the use of CUPA was appropriate but suggested there are other studies that reflect overall trends.  He handed out two sheets of data, one for TIAA-CREF, and one for defined benefit programs comparing employer-employee contributions by state.

Chair Mercer indicated the response to this mandated plan should be that the MUS has budgeted for this level of quality, and if the general funds are reduced will have to make up the lost revenue.  The MUS will not cut expenditures because that would dilute quality.  Regent Semmens agreed that any reductions would have to be backfilled from other sources, which need to be determined.

BUDGET INITIATIVES

Chair Mercer asked that the minutes show these initiatives were adopted by the Board of Education, and this Committee endorses them as well.

 Regent Semmens indicated these are backup materials which must be organized under the initiatives, since many are still not clear.  The concept has been agreed upon, but the dollars may yet be different.  He believes it will take at least $5M for the biennium.  He indicated he was not familiar with the wild lands initiative.   Rod Sundsted noted this was the requested redraft of the initiative from agriculture and forestry.  Regent Semmens thought it was still a stretch that it created jobs.  President Dennison replied it was job creation for those in the industry with use of the products off the lands.  The request was for $300,000 to be matched by $300,000 from the timber landowners.  Rod Sundsted said they were requested to beef up three of the initiatives and he would hand those out at the end of the meeting.  He reminded the Regents that in November they would be moving forward with the Operating Budgets for FY06 and 07, and they need to make them meaningful.  He will put together parameters for such things as what should be allowed for utilities, and would share those with the Board, perhaps in a conference call meeting.  He would like to at least have input from the Budget Committee, if not the full Board.

The meeting of the Committee adjourned at 5:26 p.m.

The Full Board convened at 7:30 a.m.

ROLL CALL

Roll Call indicated a quorum present.

Regents Present:  Mike Foster Vice-Chair, Kala French, Lynn Morrison-Hamilton, John Mercer Chair, Richard Roehm, Mark Semmens, and Lila Taylor.  Also present was Commissioner Sheila M. Stearns

Regents Absent: Governor Judy Martz ex-officio, excused, and Superintendent of Public Instruction Linda MdCulloch ex-officio, excused.

APPROVAL OF MINUTES

      Regent Foster MOVED for APPROVAL of the Minutes of the July 7-9, 2004 meeting in Polson, MT

      The Minutes were APPROVED unanimously on a 7-0 vote.

Commissioner Stearns introduced Cathy Swift, Chief Legal Counsel replacing LeRoy Schramm in the Office of the Commissioner.  She also acknowledged Kathy Crego who is replacing Sue Hill for the next year.

Regent Semmens said the operating budgets presented at this meeting were by far the best and most meaningful he has ever seen in any position he has served.  He congratulated Rod Sundsted and Pam Joehler for a great job.

Regent Semmens gave an overview of the budget presentation given on Wednesday.  The budget totals $920 million, with $149 million from the state.  The budget has an increase of 6% this year.  Enrollment is up 2%, there are dramatic increases in utility costs with gas up 50-60% over last year.   Health insurance is up 12% for 7200 employees, as well as increased scholarships and fee waivers due to tuition increases.  He indicated there are clearly differing opportunities and challenges on each campus.  The Budget Committee feels this budget permits continued quality but is sensitive to constrained resources.  Regent Mercer indicated the request for funds in item g. are included in the operating budgets.  Regent Roehm inquired about the status of Information Technology for the system.  President Dennison suggested the CIOs from the two campuses, who have worked closely together to develop the IT plan that was submitted to the state as well as the strategic plan, might give a presentation at the November 17-19, 2004  meeting showing how the system is using the present technology, including the data system.  He wants to know the retention rates of faculty and students.  Regent Mercer asked if there are students who complain the technology in the system is behind.  President Dennison indicated they would be behind some and ahead of others.  President Gamble indicated they have implemented some new things, but there are others they can think about over the next five years.  Although the campuses have been given a guideline of 12% in the budgets for O&M, it is only about 10.7% this year if the agencies are included, and for the campuses alone it is 11.7%.  Regent Semmens indicated this is natural in the resource constrained environment.  Deferred maintenance is also a state issue, and he recommended that in the current environment of low interest rates, they should address a solution now rather than later.  Chair Mercer agreed that it would cost more to defer the work, than to complete it now on borrowed money.  The majority of the dollars shown for O&M are actually for utilities.  Regent Roehm proposed working with the Governor to consider moving the unused fire season funds to O&M for state buildings.

Regent Roehm then indicated that some plan needs to be forthcoming on where salaries are going following two years of flat increases.  In this regard he put three questions to the Board: 1) Fee waivers and scholarships slide the burden of paying for those students to the other students who pay tuition.  He requested that all fee waivers be reviewed at some point, to develop an overall plan on how to handle requests for new waivers.  2) Tying to the state pay plan has a lot of implications and ramifications.  He recalled in the past they thought about paying above the state plan, and the state indicated the Board was in charge of the university system.  He indicated the Board has asked the CEOs to produce and bring forth quality students and educational environment, and they have responded.  He believes the Board needs to listen when the CEOs say recruitment and retention is difficult and quality will diminish.  A lot of faculty leave Montana for better pay because they have family responsibilities.  Regent Semmens indicated the salary survey was discussed the previous day and is considered a start, and will not be left on a shelf.  Associate Commissioner Rod Sundsted indicated there is no good data in the system covering the reasons for turnover.  Regent Roehm indicated he wanted to let the campuses pay more if they want to do so.  Chair Mercer agreed this was a topic needing discussion, but questioned disconnecting from the state pay plan.  Rod Sundsted indicated the state pay plan funds the university system pay plan.  Chair Mercer was pleased to hear fee waivers questioned.  He indicated the students have been asked to look into the waivers, but there has been no interest to do so.  He suggested Student Regent French talk to MAS to see if they know the magnitude of fee waivers, and that they are subsidizing those students.  Regent Hamilton pointed out that all employees have experienced the same increases in utilities and other costs of living, and rather than selective raises, she would like to see an overall long term plan for all employees.  She questioned the “complex” performance based tuition scheme for resident and non-resident students.  She asked if it had been approved by the Board, and if not, did it need too be.  If it was approved, does it comply with the tuition guidelines?  Although the campuses have been given some latitude in pricing, Regent Hamilton asked if the Board needed to set firmer guidelines at this time.  President Gamble indicated the “complex” referred to the blend of scholarships and tuition discounting under the authorized 2% non-resident fee waiver.  The resident and non-resident scholarship programs are straightforward.  They have had great success in fundraising for scholarships, and have leveraged in automatic scholarships.  Some non-resident students automatically qualify for $8000 scholarships, depending on test scores.  in looking at the bottom line, they have turned away some non-residents to attract others.  He suggested they could provide a complete report of enrollments and the effects.  Regent Hamilton indicated that would be helpful, particularly data showing shifts in low income to high income students.  Discounting usually helps high end students.  The cost of education in Montana could negatively change the population of the campuses, leaving only the affluent able to attend.

Regent Roehm did not want to encourage and endorse an operating cost that Montana does not want to fund.  He questioned the size of the system, all the new things being taken on by the campuses, and whether they were all germane to mission statements.  He stated he didn’t want to approve a budget that the legislature would call out of control.  Chair Mercer noted that is probably one of their fundamental debates.  Is the MUS an expense like the Department of Corrections, or is it the driver of the state’s economy?  He believes they have taken the stance they are the driver.  The Board and the system need to get the message out to the entire state that for a $150M investment, they have a $900M business in the MUS that is inventing, discovering, bringing more business, and educating old and young.  He hopes to see that number over $1B in a few years.

Regent Semmens PROPOSED adding to the budget the addition of two staff members for the Office of the Commissioner for a total of $180,000 a year to be funded from the Regents discretionary $350,000 each year, with the hope the legislature will fund these positions in the future.  However, if the legislature does not fund them, the Board will continue to fund them every year from their own discretionary budget.

Although Regent Semmens proposed this as part of the overall budget, he suggested it could be separate.  Due to dramatically increased activity in advancing the MUS around the state, there is need for additional staffing to keep the Commissioner from being stretched too thin.  He believes the Board must be able to afford additional staffing.  He requested the Board authorize the addition of two staff members, one senior position for outreach activity, shared leadership, coordination and leverage of the great research in the system, and assistance in building partnerships.  The second would be a junior- to mid-level administrative assistant position to give support to the Commissioner and the new person.  Regent Semmens indicated the annual cost would be $180,000 in the $920M budget before them.  The Board has a priority budget of $350,000 every year, and still have $217,000 available at this time.  He would like to allocate $100,000 now for two positions for about six months.  He believes the Board needs to make clear to the Commissioner that this is a commitment going forward.  It is an initiative they could take to the legislature, but if that fails the Board would commit themselves to funding the $180,000 from their $350,000 set aside every year.  Commissioner Stearns appreciated the comments, but noted her office has been hesitant to make such a request because of the stretched conditions throughout the system.  A year ago she never thought it would become this extensive, but she has taken ownership of their initiative to make MUS a driver in shared leadership and it has required a tremendous external commitment around the state.  The relationships have been very beneficial, but it has spread her office very thin.  Regent Hamilton asked Regent Semmens if this was an acceleration of the FY06-07 budget.  He indicated it was the Board taking charge at this point and realizing how critical the issue is, and he hopes the legislature will agree.  Regent Hamilton asked if additional funds for shared leadership were added to the budget, and Regent Semmens indicated they were.  Regent Hamilton said it is obvious the Office of the Commissioner has been understaffed, but they must know where the money came from, such as tuition and fees from the students, or from the campuses.  She wants the Board to be clear on who pays the cost.  Further, she did not believe two more staff would be sufficient, and if they were to fulfill their Constitutional responsibility they must have a strong central office.

Regent Semmens gave an overview of the Budget Committee meeting of the previous afternoon.  He reported there was consensus that the budget model for academic proposals is a good starting point and can be adjusted as needed.  Regent Hamilton said it is also important to have a metric reporting model for the Agencies, for although they have no classroom, faculty are there.  Chair Mercer agreed.

Regent Semmens reported on the brief review of the compensation study, and the questions raised.  He indicated this report is a good starting point, and they will continue to receive input from the campuses to improve the Board’s knowledge.  The appropriate contact is Kathy Crego, and the Board encourages input.  Chair Mercer requested a compilation of facts that could be agreed upon before trying to discuss the issue further.  Regent Semmens indicated the system still does not capture data as it should.  Commissioner Stearns reminded all that they needed to prioritize two or three of the points raised, and requested Jim Rimpau and Bill Muse to help gather the most helpful data.  Once Kathy Crego begins bargaining, she won’t have much time to spend on this.

Regent Semmens then indicated that Rod Sundsted was looking for guidance on the MUS response to the standard request for a 5% budget reduction.  The Committee indicated they have identified the fixed expenditures needed for quality, and if there is a 5% cut in general fund support it must be made up from others funds such as increased tuition, and non-resident students.  Regent Roehm indicated it was the same as always, the MUS always survives when they don’t receive what they want, and Montana students will not be able to attend due to the cost.  Chair Mercer replied this is the level of quality the citizens have a right to expect, and the MUS has the requirement to deliver.  While the Agencies can’t fall back on raised tuition, the ability of campuses to raise tuition is not to be considered a luxury but a heavy burden.  The response to the 5% reduction will not be a line item statement, but a general statement of what MUS intends.

Reporting on the Budget Initiatives, Regent Semmens said they are largely in place, but need to be organized for a better fit.  He explained that the MUS Initiatives under the general categories are a little different from those used for Shared Leadership.  The campuses were creative with specific recommendations like a career academy for $1.2M, Montana Tech’s economic development for $100,000, No Child Left Behind for $580,000, and economic development in health care for $1M.  These total short of $3M for the biennium.  He requested a review of Enhanced Access.  The proposal envisions $1M for need based aid, and $2M for non-resident recruitment.  The Shared Leadership group believes it needs $5M for the biennium.  Regent Semmens therefore recommended $3M for need based aid, and $2M for non-resident recruitment.  President Dennison handed out a revised sheet detailing the initiative from the College of Forestry and Conservation.  They request $175,000 which will be matched by $200,000.  Regent Semmens suggested this handout be used instead of the previous one, and that it be placed in the Agriculture, Natural Resource and Rural Development Initiative.  Regent Hamilton asked if they were to vote to approve or disapprove.  Regent Semmens indicated they could do that, but also said he was not comfortable with the package, but in the past legislative initiatives have been discussed at the Board level and it should be done now.  Chair Mercer indicated it must be done at this meeting due to the time line.

Governor Martz arrived at 8:58 a.m.  Chair Mercer told her there was a presentation on Shared Leadership they wanted to show her, and she chose to see it before addressing the meeting.  Following the presentation she stated there was a need to gain new sources of income rather than pulling from the same sources.  She requested that those present assist at the Legislative Session to stop any repeal of the tax deductions.  She said that early in her administration revenues went into decline, and they had a disastrous fire season.  The Governor said the best decision ever made by any state agency during her tenure was the hiring of Sheila Stearns as the Commissioner of Higher Education.  She thanked the Commissioner for her friendship and commitment.  Governor Martz said the transition from the Legislature to the Board of Regents had significant frustrations for Chair Mercer, and she thanked him for his commitment and perseverance.  She thanked Dave Gibson from her office for his leadership in Shared Leadership.  The two-year institutions need to play a big role, and education to the rural areas through on-line courses is vital.  The Governor believes every person in the state should be able to participate in higher education.  Chair Mercer said they could not underestimate the impact the Governor has had on the Board of Regents.

Chair Mercer then gave a brief overview of the history of the Shared Leadership for a Stronger Montana Economy.  They have now arrived at the selection of the Steering Committees and the membership will be announced in about three weeks.  The commissioner’s request for travel expenses has been included in the $50,000 in the budget.  Governor Martz said the state is turning the corner, but she reminded the Board when they go to the legislature to remember there is no increase in long-term revenue.

Following a ten minute break, the Board reconvened at 10:15 a.m.

SYSTEM ISSUES

a.

The statement on Quality was comprised of items that had commonality across the board, with a narrative description for what each campus does.  Chair Mercer indicated the report still does not satisfy the reason they want to define quality.  He believes target numbers need to be established for each area of measurement to make the reports meaningful.  Roger Barber indicated the group had worked very hard, but perhaps they misunderstood the charge, or didn’t capture the charge.  Chair Mercer said he was not demeaning the work, and they did identify the areas to be measured, but he asked if they could not present something concrete to measure against for each item.  Bill Muse from UM indicated it would be more meaningful to have numbers as benchmarks, and to rate quality against those.  Chair Mercer said he wanted the Board to help decide the benchmarks.  Regent Hamilton said there is no such thing as a minimum level of quality.  There either is quality, or there is not.  It is driven by the market and public perception, and the campuses have many means of measuring their quality.  She believes what the Board needs to do is better articulate their priorities because those benchmarks will change over time.  Chair Mercer explained access and quality are vague, and he wants tools to argue for funding.  One is satisfying accreditation, and he believes there must be four or five things that could be provided at this level.  Regent Semmens said they all agree the committee did a great job in condensing this into management metrics.  These are the ones that should be closely watched for achievement.  Now staff needs to say this is where we are on these measures.  He questioned if it should  be compared to peers, the national picture, or something else.  The MUS expenditures for FTE are $9500, and peers $12,800.  This is a starting point.  He suggested also the percent of family income.  He is convinced that if Montana families are being asked to spend 25% of their income for tuition, while peers are spending 18%, the Board can tell the Legislature this is where they are falling short and here is the reason.  This has been useful in identifying the measures, and now staff needs to insert the numbers on where the campuses are, and showing where peers are.  Chair Mercer agreed that Regent Semmens had captured it, but that it wasn’t just about peers.  For instance the peers fly first class, and Montana carpools, but the important thing is both get to the meeting.  This type of thing needs to be shown besides just the dollars spent.

Motion approved UNANIMOUSLY on 7-0 vote.

b.

c.

Regent Hamilton moved for APPROVAL of item c.

Hill County Commissioner Kaercher said the Boys and Girls Clubs serve 22,000 youth who fit the criteria for need based aid.  He urged the Board to approve this item.  Regent Semmens asked if this was one scholarship per year, and if it was renewable if the student maintains a certain GPA.  Commissioner Kaercher said it was, and that it was awarded to one youth of the year following rigorous competition.  Regent Roehm urged the Board to reject this item.  He said it sets a precedent and any number of groups in the state will be trying to do the same thing.  He asked Student Regent Kala French to review with the students the fee waivers, and to prepare a list of all fee waivers and what they cost for the first level of evaluation.  His next reason to deny this item was its impact on students who are not eligible for the need based aid.  The tuition approved in May was increased by 12%.  He urged the Board to at least defer consideration until after a review of all fee  waivers, but asked that it be rejected because of the precedent and impact on all students who are already paying 12% more in tuition.  Regent Hamilton said she likes this program and on the basis of the data, income level, accessibility of moderate and low income, family needs, and Shared Leadership she thanked Commissioner Kaercher for bringing this proposal forward.  She reminded the Board in the last three years they had approved fee waivers for children of victims of 9-11, veterans, senior citizens, athletes, and none of these waivers had need as a basis.  She said a low income student would have to pay full price, where many of the Board members could go to any campus and get the senior discount.  She encouraged TRIO as a source of support.  Regent Semmens asked if the staff had a recommendation.  Commissioner Stearns said she recommended it, but was cognizant of Regent Roehm’s concerns.  Regent Semmens said that many of them are familiar with the work of the Boys and Girls clubs, and he will support it in the context of outreach.  He said the impact is not just getting one child to college, but what happens when a glimmer of hope is established, the children start focusing on achievement, and they know they have to do certain things to earn it.  President Gamble applauded Commissioner Kaercher for bringing this item forward, and suggested a model.  He suggested the Boys and Girls Clubs go out to fund an endowed scholarship which does not diminish revenue.  President Dennison said it is an admirable goal, but it struck him a better approach would be what is done in other states.  If there are students who are qualified to attend college, but can’t afford it, the campus would guarantee that the tuition doesn’t fall on them. 

Regent Roehm offered an alternate motion to defer consideration until a review of all fee waivers by students, and the Commissioner and CEOs have had an opportunity to provide a systematic approach to this issue.

Item c. was deferred to the November 17-19, 2004 meeting with a review of all fee waivers and their total cost.

Chair Mercer moved for ADOPTION of Item d. with amendments adding “or her designee” and “recommend” approval or disapproval.

Regent Semmens said he did not like the level of detail for the four committees.  He believes it should be more general and this is too specific for by-laws. He was also concerned with the time and commitment of the Board members, and he felt the Work Force Development