A letter from 172 MU faculty sent to key administrators in late May criticized a policy in the university’s new budget model, calling it a “punishment for success and for being careful with money.”

The letter said the policy of taxing a percentage of unspent reserve funds for administrative use was unfair to faculty who use those funds for research.

Signed by professors and researchers from numerous departments and colleges, the letter was addressed to UM System President Mun Choi, Chancellor Alexander Cartwright and Provost Latha Ramchand.

The accounts affected by the tax are typically comprised of money from incentive programs and are controlled by one or a few faculty who use it for research, lab maintenance and paying doctoral students, among other things.

University administrators have promoted the tax as necessary for growth by investing surplus funds into “strategic initiatives.” Faculty are concerned about loss of access to the funds, how quickly the new budget model will be implemented and the way the taxed money will be invested.

In the letter, faculty urge administrators to scratch the tax policy until a plan can be established they believe will not be detrimental to them.

The letter also references MU professor George Smith’s Nobel Prize-winning phage display research, which relied on funding that would have been taxed under the new budget model.

Shortly after 5 p.m. Friday, the provost sent an email to faculty updating them on the status of the model’s implementation. The email was sent more than two months after the faculty letter was drafted in May, and a week after the Missourian contacted the MU News Bureau to comment on the letter.

The provost’s email stated that the university was going forward with the tax, which it referred to as a pull-back of unrestricted reserves. The email noted that startup funds would be excluded from the pullback, but otherwise the new policy appeared to be unchanged.

How the account tax works

The account tax is part of MU’s new resource allocation model unveiled in May. The model aims to create a more responsible financial environment for the university while being “flexible, transparent and easily understood,” according to a report by the University of Missouri Resource Allocation Model Committee.

The new model reallocates tuition and fees, facilities and grants based on the amounts generated by schools and colleges.

The particular policy called into question by faculty returns 5% of unused money from individual accounts to a new administrative fund, called University Central Mission Support Funds, at the end of the first fiscal year, to be invested in “strategic initiatives” by administrators. Thereafter, the tax will increase to 10%.

More than two months after the plan’s reveal, that policy still stands, according to the provost’s email Friday evening.

That same email states that based on conversations with faculty, start-up funds will be excluded from the equation that determines the tax, a change from the original report released in May.

The email also emphasizes the role of colleges’ deans in deciding which accounts are hit hardest by the tax — those that are “least disruptive to the success of the faculty and the mission of our University.” It says that reports of what the taxed funds are used for will be released annually.

Previously, the unused money would roll over year after year but remain within each individual account. According to several faculty, that was relatively unusual among universities but could be cited as a pro when recruiting researchers and faculty.

However, that rollover resulted in significant financial buildup, with a total of $314 million sitting in MU reserve funds at the start of fiscal year 2019, according to a document released by the Provost’s office.

More than 3,000 of these accounts exist within the university. Much of the money in the accounts has come from programs that rewarded faculty for research work that is productive and beneficial to MU.

Marc Johnson, a professor in the School of Medicine and a leader in the letter-drafting process, said he used his account just last year.

After a freezer in his lab unexpectedly died and other expenses piled up, he was nearly $30,000 short at the end of the year — a gap he filled with funds from his individual account.

“If I didn’t have that account, I don’t know what I would have done,” Johnson said.

He’s especially critical of the tax, given it will affect money he and his lab earned — money that he could have used for his own benefit, but instead invested for the future of his research.

“I could’ve taken some of this discretionary money and used it as a bonus to myself,” Johnson said. “I never did that, I never used a dime. I took that money and I set it aside for my lab, for very specific purposes. And now that is the very money that they are going to be taxing.”

A game of catch-up

Those who signed the letter are concerned about how quickly the new model was rolled out, and they say important details are still missing.

Although the Resource Allocation Model Committee began work in October 2017, according to its website, faculty believe very little heads-up was given to those not directly involved in the process.

Immediately following the final committee report’s release May 13, the university held two open town hall meetings where faculty, students and other interested parties could question several administrators about the model.

That week was the first time faculty had a chance to see the model and assess its implications. Now it’s a matter of coming up to speed, they say.

“The policy has been rolled out, and we’re now coming to terms with the policy,” said John Middleton, veterinary medicine professor and chair of fiscal affairs for the MU Faculty Council. “Some faculty members feel they are in the dark. They feel that (the tax) was a bit of a surprise that was given to them at very short notice to plan for the coming year.”

The taxed amount on an account depends on the balance accrued by June 30 of this year, less than two months after the policy was announced.

“I really had to press them that they would acknowledge (the timeline),” Johnson said. “That’s not enough time to plan.”

Pressure on administrators for transparency was also made clear at the town halls, when Johnson and other researchers went back-and-forth with the provost and Rhonda Gibler, vice chancellor for finance and chief financial officer.

“All the details were missing,” Johnson said. “We didn’t know when everything was going to happen until after the May 16th meeting.”

The university will be providing “training opportunities” in order to help faculty better understand the new model, according to the provost’s Friday evening email.

The committee on the model has met over the summer to “fine tune the model,” according to the same email.

Trust issues

Another issue flagged by faculty is “bridge funding,” which popped up repeatedly during the May town hall meetings.

Dipping into individual accounts to bridge a gap or keep a lab afloat when faculty run into unexpected costs, as Johnson did last year, or when grant funding is delayed, has been a common practice.

Concern by faculty regarding bridge funding was anticipated, and the final model does include a plan to address it. The priority for the University Central Mission Support Funds is to determine a way to continue bridge funding, but with a caveat — it will be distributed by administration, out of the hands of faculty.

There’s even a plan to create a Bridge Funding Policy Task Force, and a set of principles has already been developed that explain how the task force would distribute bridge funds.

The provost’s email did not mention the status of the task force on bridge funding or the policy behind it. According to Johnson, when he met with the provost shortly after the faculty letter was sent, the task force had yet to be created.

“I keep telling them they’re putting the cart before the horse,” Johnson said.

The idea of taking bridge funding out of the hands of individual researchers is rubbing many faculty the wrong way — they’re worried that those funds won’t always be available when they’re necessary.

“It’s like saying that you’re going to let someone else manage your savings account,” Middleton said. “It really depends on your level of trust that the money will be available when you need it.”

In a meeting with the provost in May, Johnson expressed his concerns with both the lack of bridge funding policy and the timeline. It was a good meeting, he said, but he’s unsure of what will happen as a result.

“(Administrators) understand our concerns,” he said. “I don’t know whether they’re going to do anything.”

According to MU spokesman Christian Basi, Chief Financial Officer Rhonda Gibler has met with several faculty who signed the letter, and has “been working with them to address several of their concerns.” The results of those meetings are addressed in the provost’s Friday evening email.

Implications for MU’s reputation

The faculty letter also lists concerns about the broader implications of a tax, specifically in regard to MU’s national reputation.

MU could encounter problems meeting certain requirements in order to remain a member of the Association of American Universities, according to the letter.

The AAU, comprised of the country’s leading 62 research universities, requires that a university meet certain thresholds of research support, faculty awards, doctoral education and other metrics in order to remain a member. MU has been a part of the AAU for 111 years.

The letter contends that faculty recruitment and retention, graduate student workers and sustained research projects could all be negatively affected, resulting in potential shortcomings in meeting AAU requirements.

The $314 million sitting reserve accounts at the end of the 2019 fiscal year indicates “responsible financial stewardship,” according to the Resource Allocation Model Committee’s final report, but it has also hampered the university in making research investments.

MU has lagged behind competitors in recent years when it comes to research spending, according to the report. For administrators, that $314 million is much better utilized improving MU’s deficiencies, rather than much of it sitting unused in those accounts.

Despite the letter criticizing the tax, faculty say they are, on the whole, sympathetic to the overarching goal of the new model.

Middleton, who said that he would lose money as a result of the tax, was one of them.

“I can understand the administration’s perspective that there’s $300 million sitting there that they don’t have ready access to,” he said. “As a university, we need a pool of resources for strategic investment.”

Although implementation of the new budget model officially begins in July 2020, full implementation isn’t scheduled until 2023. It’s a long road ahead, and everyone agrees that communication will be vital.

“It’s going to take some time to see how this pans out,” Middleton said.

  • Higher education reporter at the Missourian. Reach me at galenbacharier@gmail.com and follow me on Twitter @galenbacharier.

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