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Minutes of the
NIU Board of Trustees
LEGISLATIVE, AUDIT AND EXTERNAL AFFAIRS COMMITTEE MEETING
March 19, 1996
CALL TO ORDER AND ROLL CALL
The meeting was called to order by Chair Moser at 12:35 p.m. at the Northern Illinois University Hoffman Estates Education Center (NIU/HEEC) in Hoffman Estates, IL. Recording Secretary Mimms conducted a roll call of Trustees. Members present were Trustees Moser, Boey, Sanchez and Fowler. Also present were Committee Liaison Kathy Swanson, Trustee Raymond and Board Parliamentarian Ken Davidson.
VERIFICATION OF APPROPRIATE NOTICE OF PUBLIC MEETING
Confirmation of Open Meetings Act notification compliance was given by Board Parliamentarian Ken Davidson.
MEETING AGENDA APPROVAL
Trustee Sanchez made a motion for approval of the agenda; seconded by Trustee Boey.
REVIEW AND APPROVAL OF MINUTES OF PREVIOUS MEETING
A motion to approve the minutes of the January 17 meeting was made by Trustee Sanchez and seconded by Trustee Boey.
CHAIR'S COMMENTS
Trustee Moser welcomed everyone to the second meeting of the Legislation, Audit and External Affairs Committee. He emphasized the importance the Board places on the Hoffman Estates facility and asked the center's director, Ms. Kathy Gilmer, to stand and be recognized.
Trustee Moser also took the opportunity to congratulate, on behalf of the Board, the Northern Illinois University Men's and Women's Basketball teams and their coaches. Not only did they achieve national recognition for the NIU athletic program, he said, but they also provided a tremendous amount of positive visibility for Northern Illinois University in general, and he thanked them for a year that made all of NIU very proud.
The Chair recognized State Representative Terry Parke and invited him to make comments. Representative Parke said he was happy to have the NIU/HEEC campus at Hoffman Estates. He said that one of the reasons he had introduced a bill in the legislature allowing the Board to meet at any of its campuses is that he thought the citizens, the staff and faculty, and the students would benefit from seeing the Board in action.
Chair Moser made the comment to HEEC Director Kathy Gilmer that it was his impression that the HEEC was at capacity. Director Gilmer replied that, in fact, Hoffman Estates was beyond capacity. Representative Parke requested that the NIU Board move towards expansion to meet the needs of those who have to be turned away simply because the HEEC does not have the capacity to accept them. Chair Moser stated that expansion of the HEEC is high on the Board's agenda.
Chair Moser introduced other special guests including Hoffman Estates Village Manager Peter Burchard, Sears representatives Ron Culp (Vice President of Public Affairs), Rick Rothschild (Head of Government Relations), and Sam Falcona (Director of Communications). Also in attendance was Trustee David Raymond, who is Vice President and General Counsel for Sears. Chair Moser told the guests that the Board appreciated their efforts and thanked them all for being there and showing their support for Northern.
Agenda Item 6 - Hoffman Estates Education Center Briefing
Kathy Gilmer gave a report on the Hoffman Estates Education Center. The 46,000 square foot Center opened in August 1992 and is located in Prairie Stone in Hoffman Estates. It is a 786 acre business park which is also the home for Sears Merchandise Group and is an excellent example of cooperation between local and state government, private enterprise and higher education.
The Center is a national model for the delivery of off-campus programs for adult business and professional students. Graduate level courses make up the majority of the credit offerings. Currently, the University is seeking IBHE authority to offer three additional master's programs at Hoffman Estates. The Center has operated at capacity beginning with the 1994-95 school year. It currently serves 4,000 students per year and offers more than 80 classes each semester. This reflects a 100% increase in both offerings and students for the northwest suburban area over the 1991 school year, the year before the Center opened. The demand is growing for academic and instructional programs. In order to meet the demand for the planned new programs, Ms. Gilmer said, additional classroom space will be needed.
The Center's public service and development mission includes renting daytime space, which generates needed revenues to support the Center's academic mission and creates positive relationships with area businesses and local communities. In service and in instruction, NIU is and must continue to be a major force in the economic well-being of the region.
Trustee Sanchez asked how long the Center had been at capacity. Ms. Gilmer said the Center has been at capacity for about two years, which is half the time originally projected. This indicates a definite need for the programs and services provided, especially in graduate and professional education.
Trustee Boey asked how well equipped or prepared the Center is for the future in terms of a distance learning facility. Ms. Gilmer replied that a distance learning room was started in January 1996 and was almost complete. Beginning with the Fall Semester, distance learning classes will be offered on several week nights, as well as Saturdays. The Center will be originating as well as receiving.
Trustee Boey then asked the Director of the Business and Industry Services division if there was any possibility of incorporating distance learning into that program. She replied that the technology is not available to them right now, but a number of companies have asked if BIS has the potential to telecommunicate over the country, as many institutions do have that ability.
Trustee Fowler asked if there are currently waiting lists for classes at the HEEC. Director Gilmer said there were waiting lists for classes each semester but no records have been kept
of how many students are turned away due to lack of classroom space. Trustee Fowler emphasized the importance of keeping track of these numbers and monitoring the situation in order to know how best to help meet the increasing need in the future.
Chair Moser said that on Wednesday, March 6, Governor Edgar delivered his budget message for FY97 and that education did very well. He said that, overall, the Governor plans to spend $332 million more on public education in the State of Illinois in FY97. Of that $332 million, higher education received a $112 million increase. This means that 73¢ on every new dollar received by the State of Illinois in FY97 will be earmarked for education if the Governor's budget remains intact during the appropriation process in Springfield. Northern Illinois University's 1997 appropriations bill is sponsored by Senator Burzynski and is scheduled to be heard in the Senate Appropriations Committee on March 27. Chair Moser indicated that the Trustees need to support the Governor's FY97 budget recommendations. He asked them to encourage their own legislators to support the Governor's FY97 budget, particularly in the area of higher education.
Chair Moser then recognized Gordon Shneider and Kate Romano, the two University Advisory Council members assigned to the Legislation, Audit and External Affairs Committee.
Agenda Item 7 - Business Industry Services Program/Funding Briefing
Trustee Moser introduced Mary Rose Hennessy, Executive Director of the Northern Illinois University Business and Industry Services program and informed those present that she and many of her staff joined Northern Illinois University in 1991 as an intact consulting and training organization. He then asked Ms. Hennessy to give a brief report on the BIS program.
Ms. Hennessy passed out an informational brochure on the Business Industry Services program. She said they work with about 300 companies every year, including Fortune 500, AT&T, Motorola, McDonald's, Brach's, GM and Ford,. She also stated that the BIS program has been growing at a rate of about 40% a year since coming into the University five years ago. Their mission - to keep employees working in Illinois, to keep business here. BIS is working with such organizations as the Illinois Manufacturer's Association, the Chamber of Commerce, the SPI (a plastics institute), the Cast Metals Institute, and the Fabricators and Manufacturer's Association. The mainstay of BIS, however, is turnaround in companies through on-site training and consulting. Surveys conducted annually by BIS staff indicate very positive results. Smaller firms really dependent on Northern for this work would not otherwise even consider this kind of training.
One of the more interesting projects BIS is involved in is a partnership with AT&T in which BIS is designing their work place of the future. AT&T would like this to be a credit program, and BIS have been assessing this possibility with deans and department chairs. Companies want and are demanding more corporate and educational partnerships and more reactive training and education tied together.
Ms. Hennessy said that BIS has outgrown its present 6,000 square feet and is in need of expansion. Chair Moser said that obtaining a permanent space for BIS was a very real problem and a priority of the Board.
Agenda Item 8 - Higher Education Legislative Overview
Chair Moser asked Kathy Swanson to give an update on the key legislation under consideration this session which would affect Northern Illinois University.
Ms. Swanson said that out of 130+ bills that she tracks on a regular basis, only five or six of them are listed in Agenda Item 8 in the report. The reason for this is that the rest of them are not active at present. This is the second year of the two-year session; and with the primary and general elections this year, there is not a great deal of legislation moving forward, particularly in the higher education area.
Probably the most important issue to all of higher education this particular session is HB2836. This legislation would allow universities to retain their income fund revenues instead of having to return them to the State for appropriation one year later. This bill is sponsored by Rep. Mike Weaver, Chairman of the House Education Appropriations Committee, and cosponsored by Rep. Wirsing, Chairman of the House Higher Education Committee and the State Representative representing Northern Illinois University. Senator Burzynski has agreed to sponsor it in the Senate. The Governor's Office and the Bureau of the Budget oppose this particular bill because of the fiscal note provided by the State Treasurer. According to the State Treasurer, the State would lose approximately $3.5 million in general revenue funds annually based on the interest earned on university tuition revenues.
House Bill 3475 is a new initiative sponsored by Rep. Art Tenhouse from Quincy. The bill would require the Board of Higher Education to develop a plan for standardizing the course numbers at all the public universities and community colleges throughout the state. Northern Illinois University formally opposed this legislation at the House hearing. After talking with the sponsor, Ms. Swanson said she does not anticipate the bill moving much further this particular session.
House Bill 2251, which has been actively debated for about 18 months, finally passed the Senate last week and is back in the House. This bill contains a several key areas for NIU. Lapsed period spending has been reduced from a three-month period to a two-month period. The bill also sets up a three-member debt collection board comprised of the State Director of Central Management Services, the Illinois Comptroller and the Attorney General, or their designees. This board will set up rules and regulations regarding time tables and the assumption of responsibility for agency accounts receivable. The rules and regulations are not specified in the legislation but are left up to the Illinois Administrative Procedures Act. The bill is now in the House for concurrence on the Debt Collection Board amendment.
House Bill 3226 is sponsored by Rep. Parke and allows the University to hold full Board of Trustees meetings on any University-owned property located in Illinois. That bill was also up on subject matter only in the Higher Ed Committee. NIU testified in favor of the bill. It is to be amended onto another vehicle bill along with several areas of technical corrections needed in the higher education field.
Senate Bill 1338 is an interesting initiative this year put forth by Sen. Stan Weaver. His proposal involves riverboat gambling and changing the flat 20% tax currently placed on riverboat owners to a graduated tax of 15% to 30%, depending on the revenues generated from each boat. The revenues generated from switching from a flat tax to a graduated tax would be split between the Teacher's Retirement Health Fund and a $25 million annual allocation to the State Universities Athletic Capital Improvement Fund. That bill is currently on Third Reading in the Senate. Ms. Swanson said that if it passes the Senate, she thought it would encounter significant changes in the House, which would mean there would probably be little or no resolution of the issue this Spring.
Trustee Fowler asked, in regard to HB2836, if the universities would be able to hold their own tuition monies and draw interest, as the state does now, thereby decreasing the monies the University would have to request from the State.
Ms. Swanson replied that right now, the way the bill reads, the universities would be allowed to retain their income funds and the interest earned therefrom. Our income fund account, which is a separate allocation, is about 19% of the FY96 budget. The General Revenue Fund allocation actually approved through the appropriations process represents 39% of our budget. This initiative would give the universities the flexibility of not having to wait for the appropriations process, if there is a sudden surge in enrollment and more sections of classes are needed. If the universities had the money invested and had control of it, those sections could be offered right away to meet student demand. It's more a management flexibility issue for the universities, over and above the interest income issue.
To answer a question asked by Trustee Fowler on what the State does with the $3.5 million it usually receives in interest, Ms. Swanson answered that it goes into the General Revenue Fund.
Agenda Item 9 - Pension Fund Issues Briefing
Chair Moser asked Steve Cunningham, Director of Human Resources, to provide the Committee with an update on pension legislation under consideration.
Mr. Cunningham stated that pension issues are carefully watched by employees. who delay decisions on retirement waiting to see the outcome of legislative proposals. These pension issues are very controversial in some ways and would have a great impact on NIU's budget.
Mr. Cunningham explained that the State of Illinois is divided into five retirement systems: the State Universities Retirement System (SURS), which has about 73,000 participants; the State Employees Retirement System (SERS), which has about 79,000 participants; the Teacher's Retirement System (TERS), which has about 122,000 participants; a Judge's Retirement System; and a General Assembly Retirement System. Over the years, there have been a number of proposals to augment or enhance the retirement system or the pension terms available to employees. Five of these bills are currently active. Key to this issue, Mr. Cunningham explained, is that any enhancement to the retirement system has some influence on the unfunded liability for the retirement system. Effective this fiscal year, Public Act 88-593 establishes a continuing appropriation to bring all of the retirement systems to a 90% funding ratio. SURS is presently at about 52%. Anything done to change the long-term picture of unfunded liabilities for the system affects the statewide budget and the higher education budget in terms of implementing this public act. There is no way to avoid the increasing cost, which is a resource distribution issue as the budgets are determined.
Mr. Cunningham then detailed the five legislative bills noted in the report:
Agenda Item 9.a. - Optional Retirement Plan
One of these bills, The Optional Retirement Plan (ORP), is already in effect. It allows, at the discretion of each employer, the establishment of a private sector option to the State Universities Retirement System. It is an option, already available in many states through companies such as TIAACREF or Fidelity, that establishes an alternative and independent pension program for employees who elect to participate. Participation in an ORP means the employee does not have the option of ever returning to a State retirement plan. Partly because of that issue, the bill was amendatorily vetoed to require a counseling session at the SURS office for employees seeking participation in the ORP. NIU is presently working with other institutions in higher education to coordinate efforts in implementing the ORP program. Another conceivable option is that the SURS system might establish an ORP and manage it at the system level.
Agenda Item 9.b. - House Bill 3020 - Change in General Formula Retirement Rates
House Bill 3020 would change the General Formula rates. Presently, employees move from approximately 1.67% as they build their annuity per year in the first ten years to 2.3% in the fourth ten years and thereafter. This would establish a flat 2.2% across-the-board rate. This would be an enhancement of the formula rate for shorter term employees and would affect the unfunded liabilities for the system.
Agenda Item 9.c. - House Bill 3302 - Other Private Employment with Respect to SURS annuity Calculations
House Bill 3302 will allow employees to purchase service they had in private sector colleges and universities by paying both the employer and employee contribution costs (about 17% per year) and then add that service credit to their SURS calculations. This bill would allow the University more flexibility in working with former private sector employees and their pension programs.
Agenda Item 9.d. - Senate Bill 1718 - SURS "5+5" with Variations
One of the more popular proposed retirement enhancement programs is Senate Bill 1718, called the "5+5" legislation. This bill passed for the State Employees Retirement System in 1991 and for the Teachers Retirement System in 1993. The "5+5" bill is established as a discretionary program set up independently by each employer. However, for an employee participating in this plan, NIU would have to pay the total cost of the unfunded liabilities from its budget to the retirement system over a five-year period. For example, after one year of implementation in the State Employee's Retirement System, this enhancement created a $231 million increase in the unfunded liabilities for that system. In the Teacher's Retirement System, over a two-year period, a $420 million increase in unfunded liabilities was created. the program would force an allocation into the contribution to the retirement system.
Agenda Item 9.e. - Senate Bill 1717 - SURS "10&30" Retirement Initiative
Senate Bill 1717 is "10&30" legislation. It establishes a 10% augmentation to the general formula retirement rate, assuming an employee has 30 years of service and removes the penalty if you retire prior to age 60. This bill has, compared to "5+5," less significant affect in terms of unfunded liabilities. The Economic and Fiscal Commission recently estimated that it would create an approximate $175 million increase in the SURS unfunded liabilities. Previous estimates were far lower than that, so we are researching that calculation.
The main issue with all of these retirement enhancements is, obviously, that the university cannot implement all of them, but they are available. They are all in the Rules Committee or the Pension Committee and going out for hearings. We will be watching these bills carefully and working to amend the legislation at that level to avoid some of the costs associated with the enhancements.
Trustee Sanchez asked if any consideration had been given to an attempt to decrease rather than increase the amount of unfunded liability of pension plans or pension funds. Mr. Cunningham replied that the public act implemented this year to establish continuing appropriations to bring the funding level for that unfunded liability up to a 90% coverage ratio is considered very positive in terms of the stability of the pension systems. However, any small ripple in that unfunded liability, he said, creates considerable pressure on the state budget and the higher education budget to fund the continuing appropriations. Committee Liaison Swanson noted that there was an additional $35.6 million allocated in the Governor's FY97 budget to meet the actuarial projections under the new bill just for the SURS system.
Director Cunningham said his department looks for things that benefit employees across the board as much as possible such as permanent changes in the pension code. He is opposed to temporary changes which tend to cause a massive sign up and result in a spiking affect on the unfunded liabilities.
Agenda Item 10 - Report from Northern Illinois University Public Radio Programming and Promotion Task Force
Chair Moser stated that NIU has a task force concerning Illinois public radio programming and the two public radio stations, WNIU (89.5) radio in DeKalb and WNIJ (90.5) in Rockford. He then read a letter received from Trustee Sue Grans saying that she wanted to go on record, with the Legislation Committee members and the radio programming committee, as being very much in favor of enhancing the NIU link with the region through its radio stations. Chair Moser then asked Mike Malone, Assistant Vice President for University Relations, to update the Committee on the status of the radio task force and their recommendations.
About six weeks ago, Mr. Malone said, Chair Moser asked him to put together a small task force that could move quickly. The questions the task force needed to answer were: how can the radio stations add more value to the University's efforts to increase awareness of its programs and services? And how can they enhance its image? How the radio stations can contribute more to the University's teaching mission might be a second or corollary issue. The task force consists of Harold Kafer, Dean of the College of Visual and Performing Arts; Charles Larson from the Department of Communication; Melanie Magara, Director of the Office of Public Affairs; and Mike Malone, Assistant Vice President for University Relations. The task force met with Mike Lazar, the General Manager of the radio stations. Input is being received from the academic areas also.
Public radio at Northern Illinois University is 42 years old. It is part of the public service mission of the University. The three services offered by the two radio stations are classical, news and jazz. There is a reading information service for the print handicapped.
Several of the Trustees commented on the great reception of the two stations in the Hoffman Estates and DeKalb areas.
Mr. Malone said FCC regulations would not permit the frequency of the stations to be increased in this direction. However, the fastest growing county in Illinois is Winnebago County and that is at the heart of the WNIJ listenership area. About 40,000 individuals each week, listen to NIU radio.
About 40% of the money for the radio stations comes from federal and state grants; about 32% from fund raising, sales of underwriting and various other income-generating mechanisms, such as leasing space on their tower, and 28% comes from NIU. The federal component is shrinking because Congress is set on zero budgeting the Corporation for Public Broadcasting within the next two to five years.
The task force conducted an inventory on current station activities and, based on a conservative estimate comparison to comparable stations in the same market, assigned a market value to the appropriate areas. There were 1,248 underwriting credits per year, in exchange for the NIU general revenue contribution, some of which are longer commercials centered around messages regarding the Centennial given to the radio stations by Public Affairs. The stations then plug these messages into the broadcasting programs. There are approximately 5,000 public service announcements (free announcements for nonprofit activities) per year. The task force is asking for some clarification on NIU's share of that from the stations' programming logs. Programs from NIU include Northern Concert Hall, a weekly, hour-long production of NIU Classical Music; ArtSounds, a half-hour program covering the types of art: visual, theatre, performance art, etc.; and there are paid-spot announcements, news appearances and regular commentators, a number of whom are NIU faculty.
The second thing the task force looked at is what changes could be made quickly with no additional resources. They are doubling the number of NIU IDs per hour, which would be approximately 35,000 per year, during live programming. They intend to double the number of paid service announcements (PSAs) to promote NIU programs, whether on campus, in Rockford or in Hoffman Estates, that would be of interest to the community. They are also going to be advertising the opportunity to the University community that these PSAs are available through ads in the faculty/staff newsletter Northern Today, so that student groups, for example, could simply write up their own PSAs or E-mail the PSA to the radio station.
Mr. Malone said Harold Kafer, Dean of the College of Visual and Performing Arts, and his faculty are working to modify the release form to allow more of NIU's recorded performances on the air. The radio committee thinks that is really the key, to integrate NIU performances into the regular day-to-day programming mix. That not only gives us an identification, "This is the NIU Philharmonic" or "This is the NIU Jazz Ensemble," but it also enhances NIU's image in the community.
The Music Department is already in production on a show of "The Life and Times of Ron Modell," long-time Music faculty member at Northern Illinois and director of the Jazz Ensemble, who is retiring. He was in classical and jazz music and is going to do a mixture of interviews and music. Ron is going to be a cohost of the show, which NIU has hopes to syndicate.
Chair Moser asked if the number of credits for descriptive messages, 1,248 which equated to three a day, was the new number. Mr. Malone answered that it was the old number. What we are doing, Mr. Malone explained, is looking at what is common practice for underwriters.
Chair Moser said that in addition to frequent identification of NIU on the radio stations, deans, faculty and staff he has talked to, as well as the Trustees, would like to see more promotion of the activities of the individual Colleges and Schools at Northern.
Trustee Boey stated that the key issue is the Trustees would like to emphasize more of the NIU culture. "We're talking about culture. We're not talking about music alone, but the cultural identification of NIU. And not just DeKalb County, but to northern Illinois."
The potential programming and promotional opportunities would require some reallocation of resources within the station or additional resources from the University Mr. Malone said. In addition to recorded performances by our ensembles, NIU would like to have performances of NIU ensembles broadcast live from Studio A and recorded for rebroadcast. Another thing Melanie Magara, Kathy Swanson and Mike Malone are working on is locally produced public affairs programming. This is a staffing and logistics issue.
Trustee Fowler said he did not think students were aware of the fact that they could submit PSA's from publications like Northern Today and the Northern Star to the NIU radio stations. He said that like the rest of the Trustees, he thinks we need to center the radio stations around the University because they are the University's radio stations.
Mr. Malone said he thought Trustee Boey hit on the issue the task force was talking about in terms of Northern's culture, the diversity and the richness of it. Communicating that on our stations is something that the task force is interested in facilitating.
Agenda Item 11 - FY94 Compliance Audit Update
Chair Moser stated that the other main function of this committee is to ensure that the University is in compliance with the external audit recommendations from the Illinois Auditor General and asked Dr. Eddie Williams, Vice President for Finance and Planning, to give an update on Northern Illinois University's FY94 Compliance Audit.
Dr. Williams stated that the audit process is guided by state statute. It is undertaken by the Auditor General and an outside accounting firm chosen by that office to serve as assistant auditors which, in NIU's case was Arthur Andersen. The audit is conducted on the previous fiscal year. The external auditors work with the University's Internal Audit division and staff and then report the results to the Legislative Audit Commission (LAC), which includes members of both the House and the Senate from both parties.
In March of this year, the Auditor General reported the results of the FY94 audit to the Legislative Audit Commission. There were 24 findings of which 22 were accepted and implemented by the institution. One of the two "not accepted" findings included the system of reporting faculty sick and vacation time to which the university provided an alternative that was subsequently approved as acceptable and pursuant to the question raised in the audit finding.
The second finding categorized as "not accepted," was a technical accounting issue on bond revenue activity reporting. NIU has had several bond revenue entities. The university has refinanced its debt so that it has one revenue bond system. Because NIU has one system, all the revenues, reserves, etc., are considered to be one. Unfortunately, the guidelines were developed prior to universities refinancing and unifying their debt. Ms. Swanson is pursuing legislative relief which allows the universities to report their bond revenue areas as one entity instead of trying to separate entities, because legally it is one system. It is anticipated that the LAC will review and approve the NIU audit at its May meeting.
Chair Moser stated to Dr. Williams that the most serious part of this Committee is the audit function and suggested that an Audit Compliance Subcommittee consisting of two members of the Board - one member from this Committee and a member from the full Board - be created to focus strictly on external and internal audit recommendations, findings, etc. This Subcommittee will work closely with President La Tourette and the Northern Illinois University staff in implementing audit recommendations, reviewing findings and exceptions to the report, and making sure that the University is in compliance with any recommendations. Dr. Williams said he agreed that special attention and focus on these issues was needed.
Chair Moser then asked for a motion to recommend such a subcommittee to the full Board. Trustee Sanchez made the motion; seconded by Trustee Fowler. The Motion carried.
Next Meeting
The next meeting of the Legislation, Audit and External Affairs Committee will be at 11:00 a.m. on June 19.
Agenda Item 12 - Other Matters
Trustee Sanchez noted that the University has scheduled its Centennial Celebration on June 8 at Navy Pier in Chicago. He urged everyone to attend this hundred year celebration of our thriving institution.
Chair Moser asked for a motion to adjourn. Trustee Fowler so moved with a second from Trustee Sanchez. The meeting was adjourned at approximately 2:45 p.m.
Respectfully submitted,
Sharon M. Mimms
Recording Secretary
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