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Funding woes at heart of UM curators' concerns

Thursday, September 23, 2010 | 9:46 p.m. CDT; updated 7:37 a.m. CDT, Friday, September 24, 2010

SPRINGFIELD — At its meeting Thursday, the UM System's governing body returned to one perpetual issue: funding.

The system's president and top human resources administrator began the meeting by fielding questions from the Board of Curators about the objectives of creating a new retirement plan.

At the issue’s heart is how the system could move from its current pension-based plan to a different one, based on employee contributions. The Missourian previously has reported on the two plans in depth.

In creating objectives for the new retirement plan, the administration has been working “tirelessly” to listen to employee concerns, UM President Gary Forsee told the board.

Meetings on campuses with Betsy Rodriguez, UM vice president of human resources, are providing faculty and staff input. Those meetings will continue through October, Rodriguez said.

Any new retirement plan, which likely would take effect in 2012, would apply only to new employees. Some faculty and staff have argued that the change’s short-term costs could jeopardize their pensions.

“Our challenge will be to design the plan so as not to have an unintended consequence for existing employees and retirees,” Forsee said. “And we think that is possible.”

In an effort to save the system money, Curator John Carnahan suggested trimming the benefits offered under the current plan. Rodriguez acknowledged it as an option but said it would not be in the best interest of employees.

Thrown into the discussion was a recommendation from Curator David Wasinger that the system look into outsourcing its retirement plan to the Missouri State Employees’ Retirement System, or MOSERS.

“The board frankly does not have the time to devote to all of these issues,” Wasinger said about the system’s administration crafting a new retirement plan.

The agency has the “breadth and expertise and manpower to address a large retirement fund as it does with other colleges and universities within the state of Missouri,” he said. “It’s my understanding that many other states have a similar process in which the statewide retirement fund is managed as opposed to having a standalone defined benefits plan within the university itself.”

Wasinger had not mentioned the idea to the other curators before the meeting and said he would like them to “digest and analyze” it for future discussion.

“There may be issues or problems that I haven’t thought about,” Wasinger said.

The curators plan to continue discussion on the matter at a special meeting in November, and Rodriguez expects to present a proposal to them at their December meeting in St. Louis.  

Facilities proposals

To take advantage of historically low interest rates, UM wants to borrow $190 million  to finance several proposed projects, including the renovation of a residence hall and the construction of a chilled water plant at MU, said Nikki Krawitz, UM vice president of finance and administration.

“At this point in time, we don’t have alternative ways to finance these buildings,” she said. “It would perhaps be a mistake to pass up the opportunity to take advantage of (low interest rates).”

The debt would be issued at an interest rate of about 3.25 to 3.5 percent, she said.

Some of the money for the proposed projects could come from Build America Bonds, which are 35 percent federally subsidized. Krawitz said because the current bond subsidy expires Dec. 31, the system would like the board to approve the projects early that month.

She said for several of the proposals, debt would be repaid by revenues generated from sources such as student housing fees, parking fees and energy-cost savings.

Although several of the curators agreed now is a great time to take advantage of low interest rates, they were hesitant to consider approving projects that don’t generate their own revenues, as is the case with some academic buildings.

“We’ve got to have a dedicated revenue stream that we know is going to pay off,” Curator Don Downing said.

Forsee acknowledged the board would have to assess the risk of projects that don’t produce natural revenue.

“We’ve been encouraging campus leaders to think outside the box about creating a revenue stream or finding partners to share space in a building,” he said.

The board agreed to discuss the matter at a later date.

Financial aid shortfalls

Although UM’s financial aid grew from 2005 to 2009, funding shortfalls could cut a major Missouri grant by more than half by fiscal year 2012, Krawitz told the curators.

Access Missouri, a taxpayer-funded grant that in fiscal year 2010 gave an average of $1,383 to 8,919 students, is projected to be so underfunded in fiscal year 2012 it would only be able to provide $549 per student, Krawitz said.

Gov. Jay Nixon earlier this year announced $50 million in cuts to the grant program, which $30 million from the Missouri Higher Education Loan Authority helped to offset. The loan authority's funding is finite, however, and might not be able to aid the program in the future, Krawitz said.

“Were concerned, because we think students are borrowing at close to their maximum level of eligibility,” Krawitz said. “Therefore they’re going to have to look for alternative means … or their parents will have to help them with additional loans.”

On the plus side, UM’s change in demographics from 2005 to 2009 reflects a growing likelihood that new students can pay tuition without aid.  

In fiscal year 2009, there were 14,954 UM students with need-based aid — a 1.5 percent change over five years — while 6,101 students could pay in full without aid — an increase from 5,366 in fiscal year 2005, or 15.4 percent.

“So while enrollments increase, the increase is in students who can pay,” Krawitz said.

The board’s meeting will continue Friday morning with an executive decision and votes on many discussion points from Thursday’s committee meetings.


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Comments

Ellis Smith September 24, 2010 | 7:53 a.m.

Article, above, says, "On the plus side, UM's change in demographics from 2005 to 2009 reflect a growing likelihood that new students can pay tuition without aid."

Oh, really? Here's a quote from a brochure recently released by one of UM's four campuses: "One-third [of our current students] are first-generation college students. Thirty-two percent (32%) are from household incomes under $40,000."

That doesn't sound like a bunch of rich kids to us! Nor would anyone today or historically characterize the campus in question as being a "rich kids' campus." Should any state-supported university ever be capable of being characterized as a rich kids' university?

It would be very interesting to see the same information for each of the four campuses. I'm speculating that while there could be variations it might not be all that different.

Incidentally, the brochure I've cited was released to alumni, businesses (including domestic and foreign corporations) and other individuals who habitually provide monetary support to financially needy students at the campus in question.

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