Presentation Given to October 10th 2017 Meeting of the Wright State University Board of Trustees by Geoffrey Owens.

Let me begin with a disclaimer. Except where I say otherwise, all the facts and figures I present today come directly from the administration. So, if you believe any of my data are incorrect, Then FIRST it’s almost certainly because the administration has presented information in an opaque, misleading, or outright inaccurate fashion; and SECOND, we always stand ready to correct any factual mistakes in our statements. Please contact union officers so we can correct any inaccuracies.

Prior to 2013, things were going well. Revenues always exceeded expenses. But then, we drifted from our core mission. We shifted funding away from academics.  Expenses grew and soon exceeded revenues. Despite warnings from the AAUP, the problem only grew. We now still find ourselves in a position where expenses need to be slashed. And the cuts were made in all the wrong places, further weakening the core mission of this university.

We have 71 fewer bargaining unit faculty now than three years ago. And compared to three years ago, the University is spending $4.2 million less annually on bargaining unit faculty alone. Yet, the Dayton Daily News recently reported that the University had 70-80 vacancies, saving the University $3.25 million and that it would have an additional 100 vacancies after this year, saving an additional 4.25 million. How can the University have only 70 vacancies if there are 71 fewer full-time faculty?

Moreover, these data imply that the average compensation for a vacant position is somewhere between $30,000 and $35,000. [If the Board is correct that 100 vacancies save 4.5 million a year, and we take into consideration a 31 percent benefit rate, that is how we come up with the average salary of those vacancies averaging about $34,000 per year].

The average salary of the 68 people hired in 2016 and 2017 as “exceptions” to normal hiring practices, or “named in grant”, was $81,822. With benefits, they would average $107,923 in compensation. In making these calculations, we excluded ‘interns’ making less than$100 [yes, I mean one hundred dollars]. We also endeavored not to count any individuals twice, although on a spreadsheet that was shared with the Faculty Senate many were listed twice because they had been promoted, moved to different positions or given different titles over a period of years. Virtually none of those “special” hires are faculty, and their salaries are far higher than those for the reported vacancies.

There is an obvious conclusion. In your attempts to eliminate positions to balance the budget, you are focusing on low paid faculty and staff positions critical to running a university, and not on the administrative bloat that has brought this institution to its knees. And never mind the fact that this board authorized a budget increase of $1.6 million to subsidize intercollegiate athletics, effectively rewarding athletics for their continuous overspending. This extreme misallocation of precious revenue sends a clear message to the citizens of Ohio that Wright State University values Bonuses over Books, Rebounds over Research, and Free Throws over Free Thinking.

Let’s look at another example: we understand that discussions in University Hall speak of “unexpected losses” in summer school revenue amounting to about $2 million, due to lower summer enrollment [and please note that we had to revise this figure to a 4.8 million dollar loss over the summer, in light of new information brought to our attention this morning]. For faculty, these losses came as no surprise at all, because the administration slashed summer course offerings. But simple arithmetic based on readily available cost and income data show that a class with only 5 students would break even in most cases, meaning that enrollments above that number would essentially generate net revenue.[1][2]

However, when deans were ordered to cut expenses, they tended to cut classes with fewer than 15 students. Fewer classes mean fewer tuition-paying students, resulting in lower revenue for the university. To put it another way, cancelling or otherwise failing to offer all those summer classes allowed deans to meet budget targets, but was both fiscally foolish and a disservice to our students, either by delaying their graduation or by forcing them to look for classes elsewhere. But nobody in University Hall seemed to care.

Unfortunately, in dealing with the budget crisis, the administration seems to have forgotten that there are different kinds of expenses. Some expenses like teaching classes generate revenue and also happen to be central to the university mission. Many millions in other expenses produce less or even no revenue, and quite frankly, lots of that expense just does not support our core mission.

For too long this administration and board have had misplaced priorities, allowing expenses to grow out of control by “investing” in supposed revenue generating schemes that ignore and in fact harm the core mission of this institution.[3] Sadly, most of these schemes have actually lost money for the University. Our biggest fear right now is that the administration and board are so focused on a single number, our Senate Bill 6 score, that you will do anything to avoid fiscal watch even if it means causing additional damage to our students and our community.

If we do not change course, we risk leading Wright State University into a death spiral from which we may never recover. This, ladies and gentlemen, is not rocket science — it is simple math of the kind that each of us uses almost daily to balance our checkbooks.

Thank you!

[1] See “Cracking the Nut,” Part 10 http://www.wright.edu/administration/aaup/Cracking-the-Nut-Part-10.pdf

[2] If the average BUFM makes $85,283 then teaching a 3 hour summer school course on average costs $7,107. Even if you add in the retirement benefit for faculty, the average cost is $8,100. The cost of 3 credit hour course for an in-state undergraduate is $1,183 (@$394 per credit hour), and higher if we include out-of-state and graduate students. If you get $0.37 per dollar of tuition in state subsidy, then the total revenue per in-state undergraduate student is $1,621. This implies the break-even enrollment in an undergraduate class is about 5 students.

 

[3] See “Cracking the Nut,” Part 11 http://www.wright.edu/administration/aaup/Cracking-the-Nut-Part-11.pdf

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Update on Contract Negotiations: Mediation Session on Friday, September 15

I wish that we could say that we made progress and negotiated over any contract articles during Friday’s mediation session in Columbus. I wish that we could say our time was productively spent. Unfortunately, none of that happened.

Two facts emerged during Friday’s mediation.

First, the administration/Board is still not willing to negotiate a new CBA. Its negotiating team presented neither proposals of its own nor counters to proposals that we had made. Thus, nearly six months have gone by since it has engaged in any legitimate negotiations.

Second, the administration/board has proposed yet another meeting where instead of negotiating with us, they will present us with a “global discussion” of how the current CBA prevents them from addressing the fiscal crisis of the University. From what little they have been willing to say about what that language actually means, we have concluded that, in essence, they want to “restart” the negotiating process so that they can “cherry-pick” language that they would like to see changed. Since all of the non-economic articles were already on the table before the administration/Board hired an outside labor attorney as their new chief negotiator, such a “restart” would amount to regressive bargaining, or an unfair labor practice.

As if to confirm the conclusions that we drew at our mediation session, at the Board of Trustees Committee meetings on Friday, Board members said that they would like more flexibility in making contingency plans for retrenchment.

We want to emphasize, again, that maintaining job security for all of our members is one of our top priorities, and we suspect that what they will propose will affect both TET and NTE BUFMs.

We have told the administration/Board that we will listen to their “global discussion” before our next mediation session, but only if that presentation is attended by both WSU President Cheryl Schrader and Board of Trustees Chair Doug Fecher.

We also informed them that our attendance at the next mediation session on October 20 will be conditional on their giving us proposals in writing 48 hours in advance–in accordance with the ground rules that both sides signed before beginning the negotiations–so that we can see that they are truly ready to negotiate.

We have made it clear that our team has very little trust in the administration’s new chief negotiator because we feel he has lied to us on several occasions about what he has been prepared to do. We are not even sure that he has actually been given the power to negotiate with us.

We cannot be expected to negotiate a contract in good faith without some degree of trust that the administration is reciprocating. We will reject any loss of real compensation or erosion of job protections for TET or NTE faculty. Job security is a top priority. Faculty didn’t create this financial crisis, and eliminating faculty positions isn’t the way to solve it. We are ready to go to fact-finding and beyond to protect the faculty.

Adrian Corbett

Chief Negotiator, AAUP-WSU

 

 

“Cracking the Nut,” Part 9

The subtitle to this analysis might be “Following in the Money Trail to Oblivion: The Continuing Saga of Misplaced Priorities.”

I would like to thank Rudy Fichtenbaum and Jim Vance for providing the analysis and several members of our Executive Committee for providing feedback on the early drafts of this piece.

Most of the information in this article comes from the Plante Moran Audit (“the Audit”) dated October 3, 2016 and WSARC’s 990 filed for (IRS Return for Tax Exempt Organizations) for FY 2015, the latest available. While the Board and the administration have been claiming that they support transparency, they refused to release the Audit for more than six months.  The Audit covers a myriad of topics. In this article, we will try to focus somewhat narrowly on the relationship between Wright State Applied Research Institute (WSARC), the Wright State Research Institute (WSRI), and an affiliated entity, ATIC. In subsequent articles, we will present additional analyses of the findings presented in the Audit.

Let us start with the relationship between WSRI and WSARC. WSARC is a 501(c)(3); that is the Internal Revenue Service (IRS) designation for a charitable organization. WSARC is a non-profit organization that “provides contracting administration services for WSRI.” WSARC is used to obtain contracts, and then the work is performed by WSRI. According to the Audit, all labor for contracts and grants received by WSARC is provided by WSRI, and all WSRI’s employees are employees of WSU.

This is consistent with Schedule J Part III of the 990 filed for WSARC (IRS Return for Tax Exempt Organizations). This schedule shows that WSU paid compensation to four officers and 15 other key employees in FY 2015. Although the Secretary’s salary is not listed in the FY 2015 990, it was listed in the FY 2014 990, and using that number, this group of four board members (two working part-time) and 15 other key employees were paid $2.9 million, or an average of $153,525 per person, per year. WSARC’s annual costs for salary as shown as $6.9 million, but even this figure may not include benefits, payroll taxes, and other costs.

Our main story begins in the “Grant Report” section of the Audit. Here, Plante-Moran (P-M) reports that WSARC received an award for a workforce development contract with the state of Ohio. The funds for this contract came from a state appropriation of $4 million per year for four years, totaling $16 million. When P-M asked how the money was spent, WSARC could not provide any documentation, and no one in WSARC was aware of reporting requirements or stipulations as to how the money could be used.

The Audit lists ATIC (Advanced Technical Intelligence Center) as one of WSRI’s affiliated entities. ATIC received a significant amount of its funding from WSARC, much of it from the workforce development grant. P-M notes that WSARC has “limited control and/or oversight” of its payments, leaving it vulnerable to conflicts of interest, double billing, and payments at higher than market rates, especially for overhead. The last of these potential risks is particularly ironic since P-M criticized WSARC for not charging properly for overhead while at the same time paying other “affiliated entities” of the university outrageous rates for overhead.

Now ATIC had been a vendor for WSARC starting in 2012. The audit identified “four invoices [issued by ATIC to WSARC that] contained limited supporting information as well as characteristics that are typical of fictitious invoices.” Three of these were paid by early 2013 and, to summarize the Audit’s implications, seem to represent payments by WSARC for work that had not been completed (or even begun), to “help out” ATIC since ATIC was already struggling financially.

Then, in 2014, ATIC and WSARC signed a management agreement wherein all employees of ATIC became employees of WSU. Among them was Hugh Bolton, the President and CEO of ATIC, whose 2014 WSU base salary was $228,000. WSARC was left to collect money owed to WSARC from ATIC by invoicing them for labor costs including benefits, but under the management agreement was not allowed to collect overhead or G & A. WSARC’s CFO calculates that $410,000 is unrecoverable. Moreover, ATIC was past due on over $585,000 in labor costs and additionally was to be billed for $82,000 more. ($337,000 of these outstanding charges due by ATIC were already 90 days old.) What this all means is that WSU effectively started running a failing company by hiring all ATIC’s employees, when this same company owed WSU at least $1.1 million that will likely never be collected.

The Audit reports that President Hopkins justified this management agreement because he thought that ATIC was important to the community. The Audit further reports that while President Hopkins admitted it “may not have been the best financial decision, management deemed it a good strategic decision.”

But wait! It gets even worse! P-M then looked at ATIC’s 990’s and found that in 2011 Hugh Bolton, before he became a WSU employee, was paid a base salary of $249,314, incentive compensation of $72,644, and deferred compensation of $107,998, for a grand total of $429,956. In 2012, with salaries and bonuses he was paid $480,233, and finally in 2013 he received base pay, without any bonuses, of $205,416.  So, after this year with no bonuses and running a company that could not pay its bills, it must have been a relief to be put on the WSU payroll.

Finally, before the management agreement, ATIC also paid Sebaly, Shillito, & Dyer (S, S, & D) over $134,000. This is a law firm where Beverly Shillito, the Secretary of ATIC, is a partner.

While these ATIC payments to Bolton and S, S, & D were made before WSARC signed the management agreement with ATIC, and according to the Audit may have contributed to ATIC’s financial struggles, the question remains:  why was signing this agreement with a company that was struggling to stay afloat a “good strategic decision”?

Maybe the President thought this was a good strategic decision because he was being praised by the Board of Trustees while the Board approved budgets supporting an administrative spending spree, hiring administrators as if they were an endangered species, and paying them exorbitant salaries including, in many cases, outrageous stipends (not to mention reimbursements for “car phones” of as much as $8,000 annually). Why was it not clear already to the Board that these reckless expenditures did not support the University’s academic mission and were putting us on a course to insolvency, while it paid the President bonuses and deferred compensation making him more highly paid than his counterparts at UC-Berkeley and the UNC-Chapel Hill.

In late March, the Board hired an interim President at an annual salary rate of $1.2 million to “set things right.” Since then a remarkable stream of revelations has occurred. Notably, on April 7 alone, as the interim President announced a prohibition on hiring consultants, the AAUP-WSU negotiating team first met a consultant (an attorney from a huge pro-management law firm) hired to be the new chief negotiator for the administration, and this consultant announced that the administration would not be ready to continue negotiations until May 26. (Never mind the ground rules ground rules for negotiations, agreed upon in writing by both AAUP-WSU and the administration, state that the parties would exchange economic proposals on April 7.) A few days later, we learned that the university has hired another consultant, specifically a PR firm. AAUP-WSU has requested information regarding expenditures for this PR firm, for the attorney/consultant/chief negotiator, the interim president, and the president designee. We are still waiting for replies.

So, where do we stand?

First, it is now more obvious than ever before that Bargaining Unit Faculty are not responsible for the out-of-control spending spree that has led our university to the current financial and leadership crisis. In fact, this spending has illustrated what we have observed for many, many years:  the administration and Board have continued to hold fast to misplaced priorities, rather than focusing its attention and money on our university’s academic mission. So, it would be ridiculous and border on obscene to ask BUFMs and our students to “take one for the team”–to accept FEWER BUFMS to do the work or cuts in real compensation, considering inflation and the cost of health benefits. Remember that faculty’s working conditions are student learning conditions.

Second, the only viable means to avoid our “taking one for the team” is to negotiate a fair contract. Although we have a talented negotiating team, the real battle will be won or lost away from the table. The way to win and get a contract that is fair to faculty and our students is for BUFMs to overtly and publicly stand together during the negotiations. You can expect AAUP-WSU to call upon you to undertake various actions in the weeks ahead. In the meantime, REMBEMBER THE STUFF WE HAVE ALREADY ASKED YOU TO DO.

_________________________

On April 15, the Dayton Daily News published an article by Max Filby titled “Audit: Underbilling, Cost Overruns Led to WSU’s Budget Woes.” The article includes the subtitle “Wright State Officials Say They Have Taken Steps to Fix the Problems.”

The article includes these comments on ATIC:

ATIC

 One area agency that embodies several of the auditors’ concerns is the Advanced Technical Intelligence Center, a Fairborn-based nonprofit that partners with WSU for research and technical training. Its website says in 2016 it became a division of the Wright State Applied Research Corporation.

WSARC’s Andersh said ATIC is valuable to the university because it is accredited to handle the highest-level of top secret government information.

“It gives the university and the community access to a facility that is pretty unique in the country,” Andersh said.

But ATIC has struggled financially and in 2014 all of its employees were put on WSU’s payroll under a management agreement that had Wright State billing WSARC for the labor.

The auditors found that Wright State underbilled by at least $410,000 — money the university won’t be able to recover, according to the audit.

In addition, at the time of the audit WSARC still owed the university another $1.4 million because of payments that weren’t made, the auditors said. Andersh on Friday said about $500,000 of that total has been repaid.

ATIC’s financial struggles were known to Wright State officials, according to the audit, but the school wanted to preserve its ties to what it considered to be a community asset. “Therefore, they agreed to hire ATIC’s employees under the management agreement,” the audit says.

 

“Cracking the Nut,” Part 8: WSRI Continued

In response to the previous post in this series, I received a thoughtful message from a BUFM who pointed out that the “real issue” is not the number of high-salaried employees at WSRI but, instead, the failure to set up and manage WSRI and WSARC so that they might be profitable. The BUFM emphasized that most research institutes have a higher percentage of high-salaried employees than most university colleges or departments. Indeed, the BUFM suggested that the post might actually serve to create dissension among those in our bargaining unit because it highlights the wide variations in compensation among faculty in the colleges within our university.

I have no argument with anything that this correspondent has written. But the purpose of the posts in this series is not to highlight why each of the various enterprises and initiatives in which the university has “invested” large sums have been losing money rather than generating revenue. Coming up with those answers is the administration’s responsibility.

Instead, precisely because the administration has been very ambiguous even on how much it has had to subsidize these money-losing ventures, the purpose of this series is to suggest the scope of the revenues diverted from the core mission of the university and the degree to which this diversion represents very skewed institutional priorities. Yes, someone might take issue with the variations in compensation among faculty in the colleges within our university, but those variations are longstanding and exist in most universities across the United States. In striking contrast, that our university has experienced three successive years of negative cash flow is, as far as we have been able to determine, an unprecedented occurrence at a public university.

So, in this post, let’s go a step beyond the comparisons presented in the previous post and look at the highest salaries in WSRI and compare them to the highest BUFM salaries in each of the colleges with BUFMs.

The two highest paid employees of WSRI/WSARC are the chief scientist and the CEO, who earn, respectively, $374,158 and $219,501.

The highest paid BUFM in the university is the former provost, but at the moment, his salary is an outlier because it is the only BUFM salary that falls between the two highest salaries at WSRI/WSARC and because it is one of just several high salaries for BUFMs that has been calculated back from an administrative salary.

Because BUFMs on fiscal-year contracts have typically assumed administrative salaries, we have calculated all salaries to their academic-year equivalent. With that proviso in mind, and bearing in mind that the BUFM data is from April 2016, before the VRIP made it more difficult for us to track data, the highest BUFM salaries in each of the colleges were as follows:

CECS–$201,502.78

CEHS–$95,178.32

CoLA–$116,764.47

CoNH–$118,287.91

CoSM–$173,211.44

Lake–$100,680.78

RSCoB–$192,773.03

Indeed, in terms of suggesting skewed institutional priorities, if one looks at the mean and median salaries of WSRI/WSARC employees earning more than $100,000–$144,009.31 and $122,281.12, respectively—they are higher than the highest BUFM salary in four of the seven colleges with BUFMs.

Again, we acknowledge that this is, in many ways, an exercise in comparing apples to oranges, but it does very tellingly suggest very skewed institutional priorities.

 

“Cracking the Nut,” Part 7: WSRI

This article in our continuing series on the budget issues at Wright State is the first of three concerning the payroll of the Wright State Research Institute (WSRI).

These articles were ready to be distributed late in the Fall semester, but because the vote of no-confidence in Dr. Robert Fyffe was in process, we postponed the distribution of these articles and a follow-up article on the Wright State Applied Research Corporation (WSARC). None of the articles has much to do with Dr. Fyffe’s performance, but because both units are now under Dr. Fyffe’s oversight and because both articles are likely to provoke a strong negative response from BUFMs, we did not wish to appear to be putting our thumb on the scale in the no-confidence vote.

Unlike WSARC, WSRI does not need to file distinct audited annual financial reports. So the only firm information that we have on the university’s expenditures on WSRI are related to payroll.

Over the last five years, 46 employees of WSRI have received salaries of $100,000 or higher. As of October 2016, 27 employees of WSRI were receiving salaries of $100,000 or higher.

Although it is in a sense comparing apples to oranges to juxtapose those numbers with BUFMs in the colleges receiving equivalent salaries, the exercise does, nonetheless, suggest a great deal about this university’s priorities.

The following list indicates the number of BUFMs earning $100,000 or higher:

  • CECS: 45 out of 88 BUFMs, or about 51% of all BUFMs.
  • CEHS: 1 out of 57 BUFMs, or less than 2% of all BUFMs (and that person, who is on a fiscal appointment, would be below $100,000, if her fiscal year salary were converted to the academic equivalent, in which case the percentage would go down to zero).
  • CoLA: 6 out of 211 BUFMs, or less than 3% of all BUFMs (and there would be only 4, if all fiscal year salaries were converted to academic equivalents, in which case the percentage would go down to a bit less than 2%).
  • CoNH: 3 out of 41 BUFMs, or about 7% of all BUFMs.
  • CoSM: 38 out of 158 BUFMs, or about 24% of all BUFMs (and there would be only 29, if all fiscal year salaries were converted to academic equivalents, in which case the percentage would go down to about 18%).
  • Lake: 1 out of 37 BUFMs, or less than 3% of all BUFMs.
  • RSCoB: 45 out of 61 BUFMs, or about 74% of all BUFMs.

More tellingly, WSRI has more employees earning salaries of $100,000 or higher than four of the seven colleges have BUFMs earning equivalent salaries, and in such a comparison, WSRI is just marginally behind CoSM.

As of April 2016, the average salary of TET BUFMs was $94,093.65, and the average salary of NTE BUFMs was $53,996.50. The average salary for instructors, or at-will NTE faculty, was $47,433.02.

So, not expectedly, the salary average for TET BUFMs is very clearly skewed by the numbers from several colleges.

Again, the next two articles in this series will also be related to WSRI.

 

 

An Hour of Television on Higher Ed Issues from a Faculty Perspective

 

This past Thursday, DA-TV in Dayton devoted an hour to a panel discussion about the issues at our university but very much tying those issues to broader statewide and national issues.

Although I was invited to participate on the panel, I was attending a professional conference. After viewing the video, I think that you will agree that my absence may have been something of a blessing because I cannot imagine that I could have spoken as articulately and as effectively as those AAUP leaders and members who did participate.

The panel included: John McNay, President of the Ohio Conference of AAUP; Tom Rooney, Treasurer of the AAUP-WSU; Adrian Corbett, Chief Negotiator of AAUP-WSU; Sirisha Naidu, Grievance Officer of AAUP-WSU; and Andrea Harris, a Lecturer in English and Women’s Studies who helped to organize the recent student protest on the Quad.

If you are pressed for time, the first 7 ½ minutes are a sort of general news overview (the material is very interesting but not related to higher-ed per se).

Citizen Impact is hosted by Logan Martinez and produced by Tim Bruce. It is a project of the Miami Valley Full Employment Council (MVFEC), which works for the interests of low-income and unemployed people in the Dayton, Ohio, area.