Minutes of the
NIU Board of Trustees
Legislation, Audit and External Affairs Committee

June 17, 1999

The General Assembly recessed after a week of overtime session, Chair Moser said, after one of the most active sessions in recent history. On a statewide basis, significant changes to the gaming laws were enacted. A $43 billion budget, Illinois' largest, was passed along with a $12 billion infrastructure rebuilding program initiated by Governor Ryan. On a more parochial note, public universities received significant increases on the general revenue side with Northern Illinois University receiving a 4.8% increase above the FY99 base. In addition, with the help of Speaker Madigan, Northern passed the only piece of procurement exemption legislation dealt with by the General Assembly this year which will enable our Continuing Education non-for-credit instruction to be negotiated. This victory represents much needed relief from the Procurement Code for the stability and maintenance of our noncredit instructional programs. Also on our agenda this morning, the Chair said, is the report on the university's FY98 Compliance Audit. Although we will hear a more formal report later in the meeting, we are very proud that this audit contained only two material findings, and both of them have been eliminated.

I have chaired the Legislation, Audit and External Affairs Committee since my appointment to the Board under Governor Edgar, Chair Moser said. During this time, we have accomplished a great deal — special development authority for 250 acres of land contiguous to the West Campus, retaining the income funds at the university level instead of sending them to Springfield, a very specialized and much needed exemption to the Procurement Code for our noncredit instructional programs, and legislation to allow our Trustees to continue serving in their official capacities until reappointed or replaced. We have an unparalleled increase in the university's base budget of almost 5% for the year 2000. The capital funding has been made available for many projects on campus including Altgeld Hall and flood control as well as monies for the Hoffman Estates expansion. In addition, because of this Committee's emphasis on audit compliance issues, Chair Moser said, we have gone from 24 findings when we took over jurisdiction of the university's audits in 1994 to one finding in 1997. The two we had this year were eliminated. We are the only university Board of Trustees that has examined the audit process so closely and our efforts show the results.

With the start of the new fiscal year on July 1, the Board will make routine changes to the Committee's structure and the leadership of the committees. I wanted to take this opportunity to thank my colleagues for serving with me on the LAEA Committee. Your advice and counsel have been appreciated, and I have enjoyed the opportunity to serve with you.

Craig Burkhart, the university's contract lobbyist in Springfield and a partner with the law firm of Sorling Northrup, addressed the committee briefly and provided his perspective on the legislative session.

91st General Assembly Report

Agenda Item 6.a.(1) - 1999 Legislative Session Higher Education Substantive Legislation
Ms. Swanson said that the university was very grateful to Speaker Madigan for moving NIU's bill on Procurement Reform forward. It was the only legislation that moved forward in Procurement Reform this entire session. It was drafted very narrowly at the Speaker's request to apply only to Northern Illinois University. We are very grateful for his help on that, she said. Ms. Swanson also acknowledged Trustee Sanchez for his tremendous efforts in helping move this legislation.

House Bill 325, the public university tuition statement, passed the Senate 59-0. Ms. Swanson thinks this represents an excellent opportunity for the universities to help make their case to the legislature and to the general public in terms of the amount of state support that goes to the public universities and in turn goes to the individual students in each public university. 

The Gaming legislation finally passed. This legislation calls for 2% of the adjusted gross receipts of what is to be the Rosemont Boat to be allocated to a fund called the State Universities Athletic Improvement Fund. That fund is expected to generate approximately $4 million to $5 million a year. The IBHE will administrate that fund, Ms. Swanson said, and we will be working with them over the next couple of months setting up the parameters for funding. That has the potential of easing the athletic capital crunch at the universities in the future.

The ROTC legislation passed both houses and is awaiting the Governor's signature. That legislation was much needed and much sought by the universities to bring our audit findings into compliance with the Auditor General's review of the ROTC statutes, Mr. Swanson said. The universities had been awarding scholarships, and their interpretation of the legislation that existed prior to this bill was different from that of the Auditor General. There was no resolution of this issue, and the university sought legislation to correct it.

Senate Bill 993 on tuition and fee waiver forms did not pass. It passed the Senate, went to the House and was heard in the Higher Education Committee. Ms. Swanson said she talked to Rep. Wirsing and Rep. Kosel, the House sponsor, and explained the difficulties of this legislation. Rep. Kosel was very understanding about it and asked Ms. Swanson to join her in presenting testimony to the committee. Requiring the universities to have everyone who receives a tuition and fee waiver sign a waiver document is not only an administrative burden, but it is the opinion of legal counsel that it is also a violation of the FERPA statutes. We were successful in making that case to the House Higher Education Committee, so that legislation did not pass out of committee and reverted back to House Rules. We were very appreciative of Rep. Kosel's help, as House sponsor, in making clear the difficulties of the bill Ms. Swanson said. Rep. Kosel asked that we continue to work with her on opening up tuition and fee waiver issues to the general public in the future.

Agenda item 6.a.(2) - State Universities Retirement System (SURS) Pension-Related Legislation
About two years ago, Steve Cunningham, Associate Vice President for Administration and Human Resource Services explained, the university reported the passage of a substantial pension enhancement package which became Public Act 90-65. This package converted the graduated retirement formula to a flat 2.2% per year of service calculation, which substantially accelerated the rate that employees advanced through the general formula annuity calculation table. In this legislation, the cap was increased from 75% to 80%, and a phase-in 30-and-out provision was introduced that would allow for employees to retire at any age so long as they had 30 years of service, which becomes fully activated in the year 2003. This enhancement package was effective in July 1997, and for SURS it was not an extremely expensive proposal due to the different actuarial situations and characteristics of retirees and the availability of the alternative money purchase formula in SURS. The implementation of this for SURS was about a third of the cost for the code agencies. Because of the expense of the package for the code agencies, the state, mainly the Bureau of the Budget and other state lawmakers, insisted that there be some sort of offsetting reduction in benefits. This was accomplished through AFSCME negotiating with the code agencies. The primary element of this was the introduction of a copay with respect to retiree health insurance premiums. Formerly, if an employee was eligible to retire, they would have had fully-paid health insurance for the duration of their retirement. The public act required that they have a copay at the rate of 5% for each year of service for which they have less than 20 years. So, at 20 years, it would be 100%. An employee with ten years would be covered at a rate of 50%. This was a component that Northern and President La Tourette led in opposing, Mr. Cunningham said, because we knew that with respect to the SURS, we really did not need to have this benefit reduction to have a cost-effective package for higher education. But it passed on a statewide basis, and since that time, the rates upon which the copays for retirees are based have increased by over 75%. We predicted this would be a problem because they are a separate risk management pool with respect to the insurance system. It is a good example of the work of our shared governance system here at Northern. Northern really led the state. Senate Bill 211 did pass in this session to give employees a choice at the time of retirement either to elect the enhanced program or to revert to the pre-Public Act 90-65 situation and retain the full-paid health insurance provisions. The only problem is what to do with those who retired during the interim period, Mr. Cunningham said, but that is the only problem in an otherwise very positive bill.

President La Tourette commented that this bill passed in the House 117-0 and 58-0 in the Senate. It is clearly a fact that the change in the governorship and the changes in the legislature allowed this bill to go through. So, though our employees were disappointed that this could not go through under the Edgar administration, he said, I think they have to realize that a change in the governorship and a number of other things had to occur before it really would be seriously considered.

Agenda Item 6.a.(3) - Allocation of the Governor's Fiscal Year 2000 Appropriated Budget
Ms. Swanson reviewed the University Operations and Grants chart in the University Reports section of the Board materials to provide a slightly better perspective on the base increases over FY99 in percentages and actual dollar allocations. Northern's base budget increase was 4.8%. The University of Illinois received a 4.28%, and Southern received 4.78%. The average for the public universities was 4.37%. Of the larger universities, we did exceedingly well. The smaller schools received higher base budget increases; and there has been an ongoing commitment over the last few years to catch up from funding problems they experienced in the 1980s and early 1990s. We are very pleased with this base budget recommendation and very grateful to the Governor for his support of the operations side of the university.

Under priority number one on the capital table, capital renewal was funded. Our share of capital renewal dollars under that fund of $14.5 million is $993,000, Ms. Swanson said, so we will receive almost a million dollars under that fund. The Hoffman Estates Education Center expansion planning funds were appropriated at $1.3 million. This should allow the university to get a substantial start on the architectural and design plans for the Hoffman Estates Center. Item number 23 on the list, the Founders Library basement buildout, was two projects below the cut line for funding this year. Ms. Swanson said she expected that the Board of Higher Education would fund both these projects as part of next year's capital request. Starting at item number 49, General Assembly action differed from IBHE recommendations, or in many cases, new projects were added by the General Assembly over and above the Governor's budget. Northern did receive funding for the Engineering Building to address the rather substantial clean room and roof issues. We were able to receive the funding working with the Capital Development Board and the Governor's Office in this year's budget request, Ms. Swanson said. All the projects starting with number 50 on down are basically new projects added by the General Assembly. The effect of Illinois FIRST can be seen somewhat, but in addition, legislative add-ons for the different institutions, and the Engineering Building were dealt with in this manner this year.

The chart that details the Governor's recommendations, senate funding recommendations and final budget in terms of the actual university lines is important, Ms. Swanson said, and one I need to draw to your attention. The IBHE recommendations, with slight alternations, were fundamentally maintained by the Governor. The Senate funding recommendations discussed at the last meeting came to $105,933,000 for NIU's general revenue appropriation this year, based on a complete restructuring of the normal way budgets are done in Springfield. The Senate went back to the FY99 base level and fully funded the salary and library lines. They fully funded the recruitment and retention of critical faculty and staff, thereby recognizing the university's top priorities. They indicated that deferred maintenance is also a top priority, and they felt that the Board of Higher Education and the Governor's budgets did not adequately reflect the universities' priorities on deferred maintenance. The Senate felt they should give us an amount they felt would be appropriate to fund our deferred maintenance lines, and in a departure from past procedure, Ms. Swanson said, NIU received a lump sum budget from the legislature instead of categorical breakouts. This is a very significant shift in policy. This is an issue that we will be taking up and have already started to take up as administration, Ms. Swanson said, and we will be bringing our final recommendations for how this funding should be addressed to the Board. It is not an option for the university to completely defund all new undergraduate educational programming activities. So, we will have to live somewhat with the compromise of trying to meet the Senate Republican Caucus's goal of putting additional appropriated dollars in deferred maintenance lines while still fulfilling commitments that must be made to our undergraduate education, programming, distance learning, computer science areas, technology enhancements, etc.

Agenda Item 6.b. - Fiscal Year 1998 Financial Compliance Audit Report
Kathe Shinham, Associate Vice President for Finance and Facilities, reported that the university limited its findings to two last year. The first was regarding a reconciliation, which turned out to have not been done for almost 15 years, involving MAP awards, all the awards through Veteran Affairs and various other agencies. It was really a very complex reconciliation that had to be done, Ms. Shinham said. We do not expect to have a repeat finding for FY99. The other finding involved the reporting of the number of payroll warrants. The state has many reporting requirements that include sending copies to several other people, and sometimes one is missed. That was the case with this finding. The report has since been filed, and will continue to be in the future. For Fiscal Year 1999, Ms. Shinham said, the university will have a new audit firm and a new representative from the Auditor General's Office.

Agenda Item 6.c. - Federal Issues
President La Tourette and Kathy Swanson had just returned from two days in Washington where they met on several issues with seven members of the congressional delegation and their staffs, including Speaker Hastert. One item they discussed was the Higher Education Reporting Relief Act (HERRA), which springs from the Taxpayer Relief Act of 1997 that passed creating the HOPE Scholarship and Lifelong Learning Tax Credits. Unfortunately, Ms. Swanson said, the universities, colleges and community colleges across the country were burdened heavily with a reporting responsibility to the IRS. We have been working with Congressman Manzullo to eliminate that burden, and the legislation was refiled in April. We also met with Speaker Hastert, who was very enthusiastic and agreed to cosponsor this legislation.

The President and Ms. Swanson also met with the Speaker about financial aid issues, particularly Pell Grant funding. In addition, they met with Congressman Porter on other related issues. He is very concerned with the discrepancy in funding between the amount of resources he has been allocated versus the resources he has available. He has requests for funding in education, higher education, particularly, Ms. Swanson said, and will work very hard to resolve those issues and try to persuade his colleagues in the U.S. Congress to further fund higher education funding this year. Speaker Hastert and Congressman Porter were very supportive of NIU's request for funding for the Family Violence Center this year. NIU has one of the top Family Violence Research Centers in the Northern Hemisphere. Dr. Milner runs that center, and he is an international expert in this area. It was Ms. Swanson's belief that both Congressman Hastert and Congressman Porter would be successful at some point in trying to help the university address some of the financial needs of this research center over the next few months as the federal budget process unfolded.

The last issue the President and Ms. Swanson discussed with the Congressmen was how they might help the university further develop NIU's partnerships with Fermi Lab and enhance the university's participation in the technological commercialization site, the DuPage Airport land, on which the federal and state governments are cooperating. We talked extensively about that, Ms. Swanson said, and I believe that Speaker Hastert's commitment was very strong to NIU and to Fermi. Speaker Hastert is a big proponent of and has been very aggressive in leadership for Fermi, which is in his district, and the DuPage Airport site, which is also in his district. We are the closest research university to that area, she said, and we feel that we can be of significant assistance to them as they further develop those sites. The meetings were very positive, Ms. Swanson said, and we look forward to working with them and these partners in DuPage and at Fermi to facilitate these projects over the next year or so.

President La Tourette said that Speaker Hastert is very concerned about mandates coming out of both the federal and state governments and the impact that those requirements have on cost at the college level. Some of this discussion revolved around his frustration with federal agencies that institute mandates resulting in increased costs at the university level, which then are forced to be passed on to students. The Republican leadership is interested in reducing the mandates that raise costs to students.

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 9:50 a.m.
 

Respectfully submitted,

Sharon M. Mimms
Recording Secretary