Minutes of the
NIU Board of Trustees
LEGISLATION, AUDIT AND
EXTERNAL AFFAIRS COMMITTEE
March 7, 2001

At this time, Chair Siegel said, I will turn the meeting over to Board Vice Chair Manuel Sanchez for the presentation of the Michael J. O'Malley Award to Mayor George Pradel.

One of the pleasures of serving on the Board of Trustees as Vice Chair is that I sometimes get to step in for our Chair, George Moser, who was unable to be here with us today, and I get the opportunity to acknowledge people who have made a contribution to the university and our regional community. Two years ago the Board's Legislation, Audit and External Affairs Committee established the Michael J. O'Malley Award for Promoting Access to Higher Education. This award was created to honor Mayor O'Malley's work as an advocate of public higher education and as a visionary who helped us build the NIU site in Hoffman Estates. There are many legacies that Mayor O'Malley has left, and we are proud that NIU-Hoffman Estates is one of them.

Today, Vice Chair Sanchez said, we honor the second recipient of the Michael J. O'Malley Award. George Pradel became Mayor of Naperville on May 1, 1995. His entire career has been dedicated to public service. He was sworn in as mayor the day after retiring from the Naperville Police Department where he had served with distinction for 29 years. While working as a police officer, Mayor Pradel established the city's Bicycle and Child Safety Programs. To this day, three generations of Naperville students know the Mayor as "Officer Friendly." During Mayor Pradel's tenure, Naperville has continued to grow rapidly. The city has also gained national and international recognition as a city on the rise. Naperville has one of the lowest crime rates in the country of cities of more than 100,000 residents. Naperville was named the number one city in the United States to raise children in 1997 and received the number two ranking in 1999. Mayor Pradel has been at the helm during recent relocation and expansion projects that have brought some of the country's leading technological and retail businesses. Providing an outstanding quality of life to its residents has helped entice these types of businesses to move to Naperville.

One of the most important aspects of any community is the educational opportunities that it provides. Mayor Pradel has been a true friend to education throughout his career, working in the schools during his years with the Police Department and pushing for enhanced higher education opportunities for Naperville residents since taking over as Mayor. As a leader concerned with quality education, Vice Chair Sanchez said, I am happy to say that Mayor Pradel had the foresight to send his own son to Northern Illinois University. NIU has had a presence in the Naperville area for many years. We have offered classes in corporations, rented classrooms and anywhere we found students who were seeking a way to enhance their lives and career with higher education. Three years ago, when we approached Mayor Pradel about our desire to establish our own facility in Naperville, the first question he asked was, "How can I help?" His enthusiasm for having NIU in Naperville spread to the many other elected officials, city staff and local business people who were all integral to our success in creating the beautiful facility that you now see on Diehl Road. Mayor Pradel's support of NIU-Naperville speaks not just to his good taste in educational institutions, but to his dedication to offering quality, affordable higher educational opportunities close to home for the citizens of Naperville and surrounding communities.

It is with great pride and gratitude that we present the Michael J. O'Malley Award for Promoting Access to Higher Education to Mayor George Pradel. The Vice Chair invited Mayor Pradel to say a few words.

WHEREAS George Pradel has faithfully served the people of Naperville as Mayor since 1995; and

WHEREAS the Mayor and the Naperville City Council have consistently recognized the substantial need for affordable public higher education opportunities in the region; and

WHEREAS George Pradel has worked diligently to promote access to public higher education for the people of Naperville and the western suburbs; and

WHEREAS the Northern Illinois University Board of Trustees wishes to officially express its appreciation for the many contributions of Mayor George Pradel to Northern Illinois University and its students;

NOW, THEREFORE, BE IT RESOLVED that the Board of Trustees of Northern Illinois University in formal meeting herein assembled, extends its grateful appreciation to Mayor George Pradel for his outstanding commitment and dedication to promoting access to public higher education by awarding the heretofore established 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 second MICHAEL J. O’MALLEY AWARD FOR PROMOTING ACCESS TO PUBLIC HIGHER EDUCATION, be presented to Mayor Pradel and a copy of this document be placed in the official files of this Board 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 George Pradel.

Adopted in a regular meeting assembled this 21st day of 

September, 2000.

George A. Moser, Chair

Board of Trustees of Northern Illinois University

Attest:  Myron E. Siegel, Secretary

Mr. Kuhn stated his concern that accessibility on campus is falling behind, especially in computer technology, because many of the accessible programs for computers only work with DOS. It was his thought that the Board should try to obtain state dollars to improve technology, provide updated accessible equipment and improve building accessibility to be more up to date with ADA code. Mr. Kuhn stated that he was not officially representing the disabled community but considered himself an advocate of disability issues.

House Bill 129, the Open Budgets Act, is on Third Reading, which is standard passage stage in the House. That would change the manner in which budget requests are prepared annually. It is more of an internal administrative matter, she said, but it would have a significant impact on the university if it were to pass the House and the Senate.

The Meningitis Vaccination Bill, House Bill 274, we have worked on extensively with the sponsors of this bill to try to reduce the onerous mandates established when the original bill was filed. An amendment has been filed, Ms. Buettner said, and we feel that we can address the issue of meningitis vaccines on campus in a way that would not require the university to accept tremendous liability for this kind of effort if it ever took place.

There are two major policy initiatives this year in higher education. The first would be an automatic admission for any high school student in the top five percent of their graduating class, regardless of their SAT or ACT score. This bill actually passed the House and is now going to the Senate for consideration. It passed the House last spring but was not considered in the Senate. I believe there will be a serious effort to attempt to pass it in the Senate this year, Ms. Buettner said. The Provost, the President and I have had discussions about this bill and what they would do to university admission policies. It would be a statewide issue.

House Bill 583 and Senate Bill 591, the Higher Education Scholarship Act, basically, would create a HOPE Scholarship program in Illinois similar to that in Georgia, which would allow a student who maintains a "B" average in his/her junior and senior years in high school to receive a tuition waiver at any state university for the cost of their tuition. That is a estimated cost of about $180 million, Ms. Buettner said, and ISAC feels that is a conservative number that could grow rather rapidly.

House Bill 375, the Uniform Athlete Agents Act, and the corresponding Senate Bill, would require agents for student athletes to actually register with the Department of Professional Regulation. It also provides other issues, such as, if the athletic agent is not performing according to state standards, he would be banned from involvement with the student and with any university they have dealt with. It is actually a pro-educational institution bill in the sense that it provides institutions with a civil remedy against an athletic agent and a student athlete if they are damaged by any violations in the act.

There are, Ms. Buettner said, a substantial number of substantive pieces of legislation pending that we have either taken positions on or are monitoring very closely that will directly impact the daily administration and operation of the university and the programs offered here.

Agenda Item 7.a.(2)(a) – Fiscal year 2002 Budget Overview - Operating
The Governor's budget as presented to the General Assembly on February 21 had $157 million earmarked for higher education statewide, Ms. Buettner reported. However, within that $157 million, $23 million was earmarked for an allocation to cover escalating group health insurance costs for higher education employees. That brings the actual discretionary spending line down to $134 million, she said, which is about $9 million below the IBHE's recommendation in December. Governor Ryan has requested that the Board of Higher Education reprioritize the higher education budget, which they are in the process of doing. However, when he requested that they reprioritize the budget, he asked that four points be held harmless in the discussions: money for adult education; group health insurance premiums; a $9.4 million increase for SURS; and the funds for higher education faculty pay raises similar to the 3+2+1 proposal that was in the original set of budget recommendations.

Agenda Item 7.a.(2)(b) – Fiscal year 2002 Budget Overview - Capital
On the capital side, Ms. Buettner said, we have a $445 million capital budget. This is not just capital renewal and capital development funds, but also mingled with Build Illinois venture technology and funds. In December, NIU had four or five major capital priorities, and none of them were placed on the IBHE priority list in a high enough manner to determine funding. I want to thank Governor Ryan and his staff for recognizing the importance of these priorities to NIU and our unique situation this year. The Governor included almost $13 million for theNIU chliled water distribution system and the Altgeld Hall additional renovation funs in his FY02 Capital Budget.

Agenda Item 7.a.(3) – SURS and Pension-Related Issues
Ms. Buettner asked Steve Cunningham, Associate Vice President for Human Resources and Administration, to brief the Board on SURS and pension-related issues. Mr. Cunningham stated that the State Universities Retirement System is one of the best benefits our employees have. It is a very progressive retirement system, and NIU has been very active in promoting increased benefits for employees through this system over the last five years. As outlined in the report, there are four key areas of interest with respect to SURS this legislative session. The first is SURS funding. As mentioned earlier, $9.4 million is going to SURS this year. A substantial part of that is to bring SURS toward the 90% funding ratio. However, the $9.4 million cut was made based on the June 30, 2000 fiscal year ratio of assets to liabilities, which was 88.3%. That is now 76.9%, he said, so SURS, along with the rest of the market, has seen a decline in its funding status. This will have an affect on the cost projections of new benefits, making it somewhat more difficult to pass substantial increases in employee benefits. SURS has posted a 10% rate of return to Money Purchase Accounts for the current fiscal year. That will be reviewed again for FY03 and will be affected by the funding ratio in existence at the end of this fiscal year in June.

The second area is benefit enhancements for annuitants. It has been a longstanding interest of the annuitants to have an ad hoc increase in annuitant's benefits, especially those who retired prior to the date of the automatic 3% increase in pensions for annuitants. Also of interest, he said, is a beneficiary investment payment bill, which would, any time the SURS funding ratio exceeds the 90% status for a fiscal year, make an automatic one-time payment to currently retired employees. That is a fairly expensive measure and has not seen a great deal of interest.

Survivor benefits are a third category. Currently SURS limits survivor benefits to those spouses who are age 50 or greater, Mr. Cunningham said, a somewhat arbitrary number. This legislation would take away the age limit on that so that any spouse would be eligible for survivor benefits in the event of the death of an employee. A second bill would increase the rate of benefits from 50% to 60% in the SURS traditional formula.

Finally, Mr. Cunningham said, as reported at the last meeting, the 30-and-out is still a key interest of ours in the spring session. It did not make it through the fall veto session due to other pension issues related to the Department of Corrections staff; however, this will be a key agenda for SURS and the universities in the next fiscal year. It would provide for retirement at any age without penalty if an employee had 30 years or more of service.

Federal Report
Agenda Item 7.b.(1) – Physics Department Research Project
Agenda Item 7.b. basically is a secondary action to the Finance Committee action this morning regarding the Physics Department research project, Ms. Buettner said. Since the grant was obtained through the State and Federal Relations Office, we bring it through this Committee as a standard practice. Chair Siegel asked for a motion to endorse the Physics Department research project. Trustee Skoien so moved, seconded by Chair Siegel. The motion was approved.

Agenda Item 7.b.(2) - Tax Relief Act of 1997 - Status Report
I have been giving periodic reports to this Committee since 1997 on the Taxpayer Relief Act, Ms. Buettner said, and how we try to institute these HOPE and Lifetime Learning Tax Credits from the university perspective. They are wonderful benefits to individual taxpayers and students pursuing university educations and even lifelong learning opportunities. However, from the university side, as originally mandated, they have been very difficult to implement and very costly. We have been working on this with Speaker Hastert and Congressman Manzullo since 1997, she said, and we have been very successful in leading a consortium of major universities and community colleges across the country to try to offset some of these mandates initially passed in that legislation. Ms. Buettner asked Ms. Kathe Shinham if she would give an update on this legislation.

We have helped Congressman Manzullo draft some new legislation that is being attached to a small business tax bill, Ms. Shinham said, which will eliminate the key points that bother colleges and universities from an implementation viewpoint. Specifically, the legislation removes the requirement to report refunds given to students because we do not know why they are given a refund, whether it is that they have borrowed more than the cost of their tuition, room and board that is going through the student billing system or whatever. We have eliminated the requirement to report scholarships and fellowships. One reason is that we do not necessarily have a complete handle on all those scholarships and fellowships the student might be receiving outside the university. Some of them have already been taxed, whereas others have not, she said, and, frankly, we had a problem providing that information to the Internal Revenue Service. We will later suggest that they just have a check box to indicate that the student received some sort of financial aid.

We are not able to report the amount of tuition and fees paid because it is a moving target. It crosses calendar years, and not all systems are able to handle that. We are proposing, through the legislation, that universities have the option of either reporting the amount paid or the amount assessed. We believe that will please the House, Ways and Means Committee as well as the Internal Revenue Service. We had a whole laundry list of other concerns that the President presented to the Internal Revenue Service when he gave his testimony in February, and we believe all those issues can be addressed through regulation. Apparently the progress we have made on this is unprecedented, Ms. Shinham said. The Internal Revenue Service has never before worked with colleges and universities to come up with legislation and regulations for implementing legislation that will actually work. The higher education community is amazed at where we are and where we believe we will end up. We do not have it yet, she concluded, but the Internal Revenue Service has committed to not issuing final regulations until we reach agreement. I know we have been the leader on this issue, Chair Siegel commented, it is nice to be at the forefront.

Agenda Item 7.c. - Cash management and Internal Audit Cash Operations Update
Dr. Kaplan reported that about six months ago this Committee asked the university to give some renewed attention to policies and procedures related to cash management. The results of those activities were described in a handout to the Committee members. I will emphasize four things, she said. (1) The university has hired an additional internal auditor. That will be every helpful in allowing the Internal Audit Department to proceed a little more aggressively on these and other audit issues. (2) The Director of  Internal Audit and our Bursar devised and presented, over the last six months, 17 workshops to 239 employees in 76 departments, which was quite a feat. The workshops were very well received. I believe we have raised the sensitivity of supervisors and units on campus to issues related to cash management, and we will continue to conduct these workshops on a regular basis in order to take account of turnover in the staff, lapses of memory and other such things. Finally, she said, it would not have been possible for us to do this without the competence and the energy of the Bursar, Kinga Mauger, and the Director of Internal Audit, Sharon Dowen, who are here today and deserve our thanks.

Respectfully submitted,

Sharon M. Mimms
Recording Secretary