Minutes of the
NIU Board of Trustees

LEGISLATION, AUDIT AND
EXTERNAL AFFAIRS COMMITTEE

June 18, 1998

Ms. Swanson introduced Representative David Wirsing and asked him to give the Committee a general overview from his perspective on higher education-related legislation that had passed through the General Assembly this session. Rep. Wirsing said the primary purpose of the Spring Session was for the General Assembly to put together a budget for the next year. He said that higher education and education in general faired very well in Illinois. Budgets submitted to the Governor's Office were again accepted without any cuts from the IBHE's proposed budget. Rep. Wirsing said that the legislature, along with Governor Edgar, continues supporting higher education through the budget process. Rep. Wirsing also said that once again this year, Northern has done very well in receiving budget dollars for the funding of various projects.  

Trustee Siegel said that he had talked to both Chair Moser and Trustee Sanchez earlier in the week, and on behalf of the Legislation, Audit and External Affairs Committee, expressed their gratitude and thanks to Rep. Wirsing for his staunch support of NIU. 
  

The Hoffman Estates Education Center, opened in 1992, represents the first suburban satellite educational facility for Northern Illinois University, Chair Moser stated, and its very existence is the product of a tremendous amount of effort on the part of Hoffman Estates Mayor Michael J. O'Malley. For years, Mayor O'Malley has been committed to providing affordable access to higher education for the people of Hoffman Estates and the northwest suburbs. In 1990, the Sears Corporation decided to move its headquarters to the suburbs. Under Mayor O'Malley's leadership, Hoffman Estates made an aggressive and successful bid for the Sears facility. Chair Moser said that Mayor O'Malley's energy and enthusiasm combined with his relentless negotiating skills resulted in the donation to the university of almost four acres of prime land on the Sears site for construction of the Hoffman Estates Education Center. Within two years of its construction, however, the Center had reached capacity enrollment and this fall is expected to turn away as many as 18 classes, almost 400 potential students, due to a lack of space. Demand for affordable, quality public higher education is rapidly escalating in the northwest suburbs. Mayor O'Malley has continued to assist Northern Illinois University in its efforts to expand its Hoffman Estates presence to accommodate additional students. In April, the NIU Foundation received a 20-acre gift of land along Interstate 90 from a developer who plans to build and develop a commercial park. The 20 acres of land donated to the University Foundation would allow for a 100,000 square foot educational facility and necessary parking to be constructed if state funding is obtained. Such a facility would double NIU's presence in Hoffman Estates and allow the university to reach an even greater number of prospective students, Chair Moser said. Mayor O'Malley has remained proactive and extremely supportive of an expanded presence for NIU in Hoffman Estates. NIU would not have an educational facility in Hoffman Estates, the Chair said, without Mayor O'Malley's leadership and support for providing his neighboring northwest suburban residents with affordable access to public higher education through Northern Illinois University. 

Chair Moser said the Committee would like to create the Michael J. O'Malley Award for Promoting Access to Public Higher Education. This award will be given periodically to individuals who have made a significant and lasting impact in promoting access to public higher education in Illinois and will be named in perpetuity, the Michael J. O'Malley Award for Promoting Access to Public Higher Education. Chair Moser asked for a motion to approve the award criteria as indicated in the Committee materials. Trustee Siegel so moved, seconded by Chair Moser. The motion was approved. 

Agenda Item 6.b. – Resolution Approving Receipt of Award by Mayor Michael J. O'Malley 

It is a fitting tribute to present the first award to Mayor O'Malley, Chair Moser said, because his legacy to NIU is lengthy, invaluable and ongoing. I believe this award and its presentation to Mayor O'Malley to be a small way the university and this Board of Trustees can demonstrate our gratitude to someone who has worked so hard to propel Northern Illinois University forward in meeting the high level of demand for affordable, quality higher education within the northwest suburban area. Chair Moser presented the resolution approving receipt of the award by Mayor O'Malley.  

                                            R E S O L U T I O N 

WHEREAS Michael J. O’Malley has faithfully served the people of Hoffman Estates as Mayor since 1989; and
 

WHEREAS the Mayor and Village Trustees of Hoffman Estates have consistently recognized the substantial need for affordable public higher education opportunities in the region; and
 

WHEREAS Mayor O’Malley has worked diligently to promote access to public higher education for the people of Hoffman Estates and the northwest suburbs; and
 

WHEREAS Mayor O’Malley has led the effort to increase said access through creation of unique partnerships between the private sector and Northern Illinois University; and 
 

WHEREAS Mayor O’Malley’s unswerving support for increased access to public higher education has resulted in substantial private support for expanded facilities in the northwest suburbs; and 
 

WHEREAS the Legislation, Audit and External Affairs Committee of the Northern Illinois University Board of Trustees wishes to officially express its appreciation for the many contributions of Mayor Michael J. O’Malley to Northern Illinois University and its students;
 

NOW, THEREFORE, BE IT RESOLVED that the Legislation, Audit and External Affairs Committee of the Board of Trustees of Northern Illinois University in formal meeting herein assembled, extends its grateful appreciation to Mayor Michael J. O’Malley for his outstanding commitment and dedication to promoting access to public higher education by establishing in perpetuity the MICHAEL J. O’MALLEY AWARD FOR PROMOTING ACCESS TO PUBLIC HIGHER EDUCATION.
 

BE IT FURTHER RESOLVED that this RESOLUTION, along with this presentation of the first MICHAEL J. O’MALLEY AWARD FOR PROMOTING ACCESS TO PUBLIC HIGHER EDUCATION, be presented to Mayor O’Malley and a copy of this document be placed in the official files of this Committee as a part of the permanent record of the university and the great state of Illinois and as a lasting tribute to the accomplishments of Mayor Michael J. O’Malley.

Trustee Siegel said that Chair Moser's involvement in this process over the years should also be noted. He said it was probably unknown to a lot of people that even before Chair Moser became a member of the Board of Trustees at Northern Illinois University he was actively involved and instrumental in obtaining the first facility in Hoffman Estates for NIU. He said Chair Moser had been instrumental behind the scenes in many of the university's legislative victories this past year and in obtaining the 20 acres that will eventually hold a new NIU facility. Thank you for all of your help prior to becoming a Board of Trustees member and during your tenure as a Board member, Trustee Siegel said, especially as chair of this Committee. Board Chair Boey said he wanted to reaffirm Trustee Siegel's remarks and told Chair Moser that the Board and the university owed him a debt of gratitude. President La Tourette also thanked Chair Moser for all the help he had given at Hoffman Estates. The President said the university's relationship with Trustee Moser went back as far as 1989, when Sears announced their relocation to Hoffman Estates. He said Chair Moser had been there behind the scenes supporting NIU's development in many different ways and, as indicated by Trustee Siegel, sometimes people do not realize how important it is to have someone there, on a daily basis, who is advancing your objectives. President La Tourette said the university is very appreciative of Trustee Moser's continuing support, because the challenge to offer affordable access to higher education is still there. The President said that Trustee Moser shared a great deal in the legacy that Mayor O'Malley has created for access to affordable higher education. He thanked Trustee Moser for the role he had played and continues to play in Northern Illinois University's efforts to extend its programs throughout the region. Trustee Siegel said that President La Tourette should also be commended because he is the one who has overseen the establishment of the Hoffman Estates facility and its successes. A lot of credit goes to President La Tourette, Trustee Siegel said, in seeing that NIU has been able to be very successful there. 
  

Chair Moser asked Kathy Swanson, Executive Director for State and Federal Relations, to provide the Committee with an update on the FY97 Financial and Compliance Audit Report. Ms. Swanson distributed a copy of the audit prepared by the Auditor General's Office to the Board. Last year there was only one finding, which was eliminated this year; and the university had only three findings this year. Ms. Swanson said the university did extremely well the previous two years compared to the 24 findings inherited by the Board of Trustees at the beginning of its tenure. Finding 97-1, which stated that the university did not submit a 1996 Workforce Report to the Governor, was a minor one shared by all state institutions, she said. Ms. Swanson explained that the forms prepared by the Secretary of State's Office for this report did not indicate that a copy had to be filed with the Governor's Office. Statewide, all agencies and universities filed this information as appropriate with the Secretary of State's Office; however, everyone received an audit finding due to the lack of other filing information. The university has filed its Workforce Report with the Governor's Office. Now that the agency is aware of the problem, the form will be corrected for future reports. 

Ms. Swanson asked Kathe Shinham, Associate Vice President for Finance and Facilities, to explain the other two findings. Ms. Shinham said that finding 97-2 was a fairly complex account fed by many different systems that had somehow not been reconciled for nearly 20 years. The department came up with the adjustment last year, Ms. Shinham said, and has been adjusting all of its procedures so that the account is no longer as complicated as it once was. The scheduled date for clearing up the problem was June 30 and the department was on target to meet that deadline. She said it is not expected that this will be a repeat finding.  

Finding 97-3 dealt with system limitations in the inventory system for all inventory maintained by the Physical Plant and Materials Distribution Center. The department is having the Director of the Physical Plant approve adjustments on all postings of sales or withdrawals from the system. Ms. Shinham said installation of the new system should eliminate these limitations. 

Ms. Swanson thanked the Committee for their leadership in the audit area. Because you take the audit situation very seriously, she said, through your efforts and those of Senior Vice President Eddie Williams, Associate Vice President Kathe Shinham and others on the accounting staff, we have eliminated many audit findings for the university. Chair Moser stated that each of the 24 findings the Board of Trustees encountered when they took over from the Board of Regents had to be explored, corrected and satisfactorily removed. This Committee will watch very closely and concentrate on the three findings we now have, Chair Moser said, to discover what the problems are and correct them. Answering a query from Trustee Siegel, Ms. Swanson said she believed that Northern Illinois University is still the only public university with an Audit Committee. 

Ms. Swanson gave a summary of some key legislative initiatives affecting higher education this spring. Rep. Wirsing sponsored House Bill 2805, which would have established a continuing education instruction exemption in the procurement legislation for professional service contracts. The bill passed the House and was held in Senate Executive Committee through an arrangement with the Senate Appropriations chair, who also authored the original purchasing code passed last year. We think we have a temporary fix to our instructional exemption problems, Ms. Swanson said, and we are hoping for a permanent piece of legislation that will correct many of these issues for the universities either in the Veto Session or by next spring. Ms. Swanson thanked Rep. Wirsing for helping NIU and all of the other universities on this issue which has received and will continue to receive a great deal of attention in Springfield. 

Another issue sponsored by Rep. Wirsing was a matching grant program created by the Illinois Board of Higher Education for higher education institutions statewide as an incentive to compete for federal research grants and contracts. This program was funded at $10 million. Ms. Swanson said it was originally presented by the Board of Higher Education at $5 million and the legislature added another $5 million at the end of session. The majority of those dollars will go to Northwestern University, the University of Chicago and the University of Illinois; however, Northern Illinois and Southern Illinois Universities will also receive some of those federal matching grant dollars. 

Ms. Swanson reported that House Bill 452 was the revamp of statewide elementary and secondary education that included detailed and complex teacher certification issues. NIU's Visual and Performing Arts College had significant problems with this legislation as passed by the General Assembly last December. There was a licensing and teacher certification issue in that legislation that would make it very difficult for music and art teachers going through the program as well as those currently serving in the school districts statewide. The flexibility in the teaching certificate process that was originally provided them was in jeopardy as a result of this legislation. Ms. Swanson said the university worked very closely with the sponsors, Sen. Burzynski, and Senator Cronin, the Senate Education chairman, to help pass House Bill 1640, which corrected this issue for art and music teachers statewide.  

The last issue Ms. Swanson brought to the Board's attention was the Student Trustee vote. This legislation passed the Senate, for the second time this year, just before adjournment. The Governor amendatorily vetoed the first bill because he had concerns about student trustee selection methods. He added one significant provision to the bill regarding the qualification for selection, designation and service as a voting member, but his comments were not adopted by the legislature. NIU's Student Association supports the Governor's position. The Governor is now reviewing that legislation but has made no decision on whether he will sign the bill.  

Ms. Swanson asked Steve Cunningham, Associate Vice President for Administration and Human Resources, to brief the Board on pension-related legislation before the General Assembly this session. Mr. Cunningham said it had been an extraordinary two-year period for SURS legislation. Major pension reform was passed in Public Act 90-65 with the 2.2% upgrade to the general formula, one of two primary formulas under which employees may retire. The university and Rep. Wirsing were very active in sponsoring and advocating these initiatives in Springfield. About the same time, Mr. Cunningham said, we had an internal retirement enhancement program that was coordinated with the implementation of the legislative enhancements. As of April 1, the new retirement plan option program relating to SURS choices for employees was also implemented. 

By comparison, he said, this year's session was relatively mild. A similar 2.2% pension reform provision was passed for the Teachers Retirement System; however, teachers will pay an additional 1.5% in individual retirement contributions, moving their rate from 8% to 9.5%. The same provision passed for higher education with no increase in employee contribution. One remaining aspect of Public Act 90-65 was the provision that employees with less than 20 years of service have a co-payment for health insurance premiums depending upon their length of service. That has been a fairly controversial aspect because it was implemented retroactively for employees who were already in their career paths. This issue has been of great interest to NIU employees, but it affects relatively few employees when the 2.2% enhancements are factored into the calculation. Again, Mr. Cunningham said, Rep. Wirsing has been working with the university on this. There is a choice bill which would enable employees to elect whether to accept the enhancements or go back to the original formula and maintain the fully paid health insurance. Another option is the Medicare Rate Option, which would benchmark the insurance premiums at about half the cost of the Medicare rate. Both of these options continue to be researched since they did not pass in this session. 

Another issue Mr. Cunningham said the university and Rep. Wirsing are working on with NIU's Annuitants Association is an ad hoc annuity increase for annuitants. One proposal would add a percentage to the annuitants' pensions, depending upon how long they had been retired. That had substantial cost from an unfunded liability perspective and, therefore, was not really feasible. In another option, called the 13th Check, SURS would issue an additional annuity check any year in which investment returns exceeded 19%. That proposal would not increase unfunded liabilities for the system. 

Mr. Cunningham said there had also been some SURS administrative cleanup measures that passed. One would allow university police and firefighters, who contribute at a 9.5% rate, to have their accounts calculated with the money-purchase calculation as well as the general formula calculation and add a 9.5% contribution rate that would represent significant pension enhancements for them. 

One major administrative cleanup measure specific to SURS did pass, Mr. Cunningham reported. This measure would allow university police and firefighters who contribute at a 9.5% rate to have their accounts figured with the money-purchase calculation as well as the general formula calculation and add a 9.5% contribution rate that would represent significant pension enhancements. 

Trustee Siegel mentioned receiving communications from some annuitants who disagreed with the proposal. Mr. Cunningham said that President La Tourette, Board Chair Boey and he attended the annuitants meeting last week where there was some controversy about the ad hoc annuity increase that did not pass this session because of unfunded liabilities approaching a billion dollars. The Association felt the university could have done more to push that legislation. It was part of the SURS platform, Mr. Cunningham said, and we endorse the system. 

President La Tourette said the university was not approached about this bill and was asked to support it after it had been introduced. There was a free-rider on the bill, which many legislative people recognized and did not support. The Annuitant Association has been asked to talk to the university before introducing a new bill in order to clear up some of the problems encountered this session and to take advantage of the considerable support that can be obtained through Kathy Swanson's influence in Springfield. Also, he said, we have to be very careful that we do not end up with a bill that requires the university to have a billion dollar unfunded liability. Dr. La Tourette asked the Trustees to have anyone who contacts them to call Kathy Swanson who will try to explain this very complex issue to them. 

Agenda Item 7.b.(2) –FY99 Operating Budget 

Ms. Swanson pointed out a new line item titled Grant for Equity Services Center, in the amount of $450,000, that was added to Program Support Requests in the budget detail chart on page 15. This grant was added by the General Assembly for the creation of an Equity Center that will help the university in its initiatives to enhance the climate for workforce diversity and unity. The Board of Higher Education's $75,000 funding would be used for workforce development and the $450,000 would be used for the actual addition and creation of a center on campus. 

Ms. Swanson stated that the capital budget was signed into law by the Governor and approved by the General Assembly. In that budget, the university received the reappropriation of dollars for Altgeld Hall, as well as $6.7 million set aside for the completion of Phases II and III of the university storm water management and flood control projects. Phase II includes the dredging of the East Lagoon for increased detention capacity. Phase III is the flood control program for the West Campus, including additional detention capacity. Ms. Swanson said the university has been trying to move this project forward since the flood of July 1996, and everyone is pleased to see that it has been funded by the General Assembly. She thanked Rep. Dave Wirsing and Sen. Brad Burzynski for their efforts on those projects. She also thanked the Board of Trustees for traveling to Springfield several times to help her and President La Tourette convey to the legislature the importance of this project for the university. You can see how your efforts do pay off, Ms. Swanson told the Board, and the time that you are willing to put in to help us really is appreciated. Trustee Siegel agreed with Ms. Swanson saying that many of these increases were granted because the Board went down to Springfield as a unified group on various occasions.  

Agenda Item 7.c. – House Resolution 3127 -- Higher Education Relief Reporting Act 

Ms. Swanson said the Higher Education Relief Reporting Act, federal legislation that would exempt colleges and universities nationally from providing taxpayer information to the IRS on eligibility for the HOPE Scholarship and Lifetime Learning Tax Credits, is doing well. This bill has approximately 95 cosponsors in the House and 22 in the Senate. Ms. Swanson said President La Tourette met with Congressman Manzullo, the House sponsor of this resolution, and the House Speaker Newt Gingrich in Chicago to discuss HR3127. Rep. Manzullo is the Congressman for the Rockford-Byron and McHenry County areas, and is very interested and active in higher education issues. President La Tourette said they had very little time to explain the complexities of the issue. However, Rep. Manzullo understood the point very quickly that if the universities have to provide information and track students by who pays the bills, it would cost a great deal to set up these systems and involve the university in a great deal of personal family business. Speaker Gingrich's response was to ask why the university could not just let the students take the bill they receive as documentation to request the tax credit. Out of the over 20 million students involved in higher education, only about six or seven million will actually be eligible for one of these credits. To comply with this resolution as it stands, Dr. La Tourette explained, would involve the universities in a tremendous amount of unnecessary paperwork and interference with the personal lives of students and their families in order to determine who actually pays the bill for tuition or fees. 

Ms. Swanson also informed the Committee that the university had been invited to testify before one of the congressional committees in Washington, D.C. in July because of the success and notoriety of NIU's alcohol policy and program developed by Michael Haines, Coordinator, Health Enhancement Services, and his staff. President La Tourette, Ms. Swanson and others from the campus will be there to participate in that testimony. There are only four universities, nationally, invited to testify on this alcohol issue, Ms. Swanson said, and I think it is a very important honor for the university as well as recognition that what we are doing here is obviously effective not only here but in other model programs. While in Washington, she said they also plan to talk to legislators about the HOPE Scholarship issue. 

Agenda Item 8 – University Relations Update 

Michael Malone, Vice President for Development and University Relations, discussed higher education issues selected from their appearance in the national press over the past year and a half by a group of higher education associations: (1) Cost, the actual price of higher education versus the real cost to people as they send their children to colleges and universities; (2) tenure; (3) educational rankings — the methods used by U.S. News and World Report, Baron's, Forbes and others when their rankings issues come out have met with mounting protests recently from very prestigious universities against the way they arrive at those rankings; and (4) affirmative action and diversity. Affirmative action and diversity is primarily a California issue right now and a little bit in Texas, Mr. Malone said, but it is the referenda in California that are throwing out affirmative action rules and what impact that has on student recruitment for undergraduate and graduate programs in that state. 

Mr. Malone said it was good to remember that approximately 85% of higher education mentions come on the sports pages. The issue most affecting us here in Illinois and receiving most of the press is tuition. Mr. Malone said there is quite a bit of misinformation regarding tuition. Some parents and students feel the cost of education, whether underestimated or overestimated, is too much once the student is actually enrolled in an institution of higher education. However, he said, college graduates compared to their high school graduate counterparts are earning even more now than they were in the past. The differential between the lifetime earnings of a high school graduate and a college graduate has actually increased. Nationally, 92% of parents understand that the economic value of a college degree has gone up which still makes it a good investment despite the cost. Mr. Malone said there are mixed messages and a muddied perceptual feel about price versus cost. On the other hand, he said, there is a high appreciation and motivation for a college education. An Ace survey in May 1998 said that 55% of those surveyed do not think colleges try to keep the amount they charge at affordable levels. More recently, a Chronicle of Higher Education headline said the proportion of students who graduate within five years hits a record low. Combine the anxiety over tuition and public perception that "it just costs too much" with the fact that fewer and fewer students are graduating even within five years, Mr. Malone said, and you have the two factors that make the NIU plan a very interesting and responsive plan to these two perceived trends. 

Initially, NIU's new tuition plan received very good coverage, Mr. Malone said, but we cannot stop there. There have been some roundup stories as the private institutions in the area announced their tuition increases for the coming year. In one such article, the Sun-Times listed Northern's tuition at minus four-tenths of a percent (-.4%) for 16 hours. NIU is the only Illinois institution that actually showed a decrease in tuition. Following is the narrative from a videotaped WGN Channel 9 news report shown by Mr. Malone: 

The cost of a college education is jumping again in the Chicago area. Tuition and fees reportedly will go up an average of 5% next fall. Chicago State leads the pack with an 18.4% increase. Northwestern is second, jacking up prices 16.9%. Northern is the only institution offering students a break. It is cutting back prices by four-tenths of a percent (-.4%) for students who take at least 16 credit hours each September. 

Finally, Mr. Malone said, either President La Tourette or Provost Moody meet with students and parents for orientation sessions throughout the summer, and part of their talk to the parents of these incoming students is about the benefits of this tuition plan. Bursar Russ Milano has a more detailed presentation when parents start looking into financing their children's education. Mr. Malone recognized and thanked Melanie Magara, Director, Public Affairs, and the Public Affairs staff for being the ones that cultivate those relationships and get the university to the point of front-page stories and mentions on TV news reports. 

Trustee Siegel asked if university personnel were still helping students on Move-In Day. Two years ago we started with about 15 administrators and faculty, Mr. Malone said, and last year there were over 200. Ellen Andersen, Director for Special Events/Centennial, said that this year the numbers might double again. There is a hold on about 160 golf carts for this year, he said, and yes, we will be helping them move in again. 

Ms. Swanson introduced her new assistant, Cathy Cradduck. 

There being no Other Matters, Chair Moser asked for a motion to adjourn. Trustee Siegel so moved, seconded by Chair Moser. The motion was approved. 

The meeting was adjourned at 11:41 a.m. 
  
  
Respectfully submitted, 
  
Sharon M. Mimms 
Recording Secretary