The official minutes of the University of South Carolina Board of Trustees are maintained by the Secretary of the Board. Certified copies of minutes may be requested by contacting the Board of Trustees’ Office. Electronic or other copies of original minutes are not official Board of Trustees' documents.
The Executive Committee of the University of South Carolina Board of Trustees met on Thursday, February 22, 2001, at 2:00 p.m., in the Westin Room of the Westin Poinsett Hotel in Greenville, South Carolina.
Members present were: Mr. Mack I. Whittle, Jr., Chairman; Mr. Herbert C. Adams; Dr. C. Edward Floyd; and Mr. William C. Hubbard. Trustees absent were: Mr. James Bradley and Mr. Michael J. Mungo. Other trustees present were: Mr. Arthur S. Bahnmuller; Mr. Alexander English; Mr. A.C. Fennell, III; Mr. Samuel R. Foster, II; Mrs. Helen C. Harvey; Mr. Toney J. Lister; Mr. Miles Loadholt; Mr. Robert N. McLellan; Mr. M. Wayne Staton; and Mr. Othniel H. Wienges, Jr. The faculty representative, Professor Caroline Strobel, and the student representative, Jotaka Eaddy, were both present.
Others present were: President John M. Palms; Secretary Thomas L. Stepp; Executive Vice President for Academic Affairs and Provost Jerome D. Odom; Vice President and Chief Operating Officer J. Lyles Glenn; Vice President for Information Technology and Chief Information Officer William F. Hogue; Interim Vice President and Chief Financial Officer Allan Barber; Vice President for Student and Alumni Services Dennis A. Pruitt; Vice President for Human Resources Jane M. Jameson; Vice Provost and Executive Dean for Regional Campuses Chris P. Plyler; Vice Provost and Dean for Libraries and Information Systems George D. Terry; Executive Director, Office of Foundations, and Distinguished Professor Emerita Susie H. VanHuss; General Counsel Walter (Terry) H. Parham; Interim Chancellor of USC Aiken Thomas L. Hallman; Chancellor of USC Spartanburg John C. Stockwell; Dean of USC Union James W. Edwards; Director of Athletics Michael B. McGee, via telephone; Interim Budget Director, Office of Budget and Finance, Robert E. Bugbee; Director of Facilities Planning and Construction and University Architect Charles G. Jeffcoat; Director of Planning Services, Office of Facilities Planning and Construction, Donna Collins; Member of the University Business Partnership Foundation Manuel Gaetán; Member of the University of South Carolina Development Foundation William W. Doar, Jr.; Director of Public Affairs Russell McKinney; Executive Director of Ifra Kerry Thorpe; Senior Chaplain, The Christ Church School of Greenville, The Reverend Dena Bearl; Wife of the President of the University of South Carolina Norma Cannon Palms; Office of Media Relations representative Jason Snyder; and representatives from the media.
Chairman Whittle called the meeting to order and invited those present to introduce themselves. Mr. Snyder introduced members of the media who were present. Chairman Whittle stated that notice of the meeting had been posted and the press notified as required by the Freedom of Information Act; the agenda and supporting materials had been circulated to members of the Committee; and a quorum was present to conduct business.
There were personnel matters dealing with the appointment of the USC Aiken Chancellor, salary supplements, and a contractual matter which were appropriate for Executive Session. Chairman Whittle called for a motion to enter Executive Session. Mr. Adams so moved, and Dr. Floyd seconded the motion. The vote was taken, and the motion carried.
The following persons were asked to remain: Dr. Palms, Mr. Stepp, Dr. Odom, Mr. Glenn, Dr. Pruitt, Ms. Jameson, Mr. Parham, Dr. Plyler, Dr. Barber, Dr. Hogue, Dr. VanHuss, Mr. Bugbee, Mr. McKinney, Ms. Jenkins, Ms. Warren, and Ms. Tweedy.
Executive Session
Chairman Whittle declared the meeting returned to Open Session.
Return to Open Session
Chairman Whittle explained that at approximately 3:00 p.m. the presidents of Clemson University and MUSC would report to the Committee via telephone conference call regarding budget cut discussions during their respective board meetings as well as the status of the dialogue among the three presidents concerning the potential of collaboration among Clemson, MUSC, and USC as research universities.
Essentially, the University of South Carolina would purchase a 1980 Beechcraft King Air F90 for $1,000,000 which would be amortized over a ten-year period. During the first two years, the Athletics Department would only pay interest equal to the rate charged the Development Foundation on its line of credit, which was 7.75 percent on February 1, 2001. During years 3-10, the Athletics Department would pay principal and interest. If payments were made for the entire ten-year term at a 7.7 percent interest rate, the total purchase price would be approximately $1,501,000. The Athletics Department could satisfy the outstanding purchase price at any time.
Mr. McLellan asked if there had been any insurance recovery on the plane involved in the crash. Mr. Parham replied that the full value of $600,000 had been received by the Athletics Department and would be applied toward the purchase of the aircraft during the ten-year period. Responding to a question from Chairman Whittle concerning maintenance of the airplane, Dr. VanHuss indicated that an outside company handled service and upkeep. Dr. Floyd questioned why interest only would be paid for two years. Mr. Parham explained that Dr. McGee and Dr. VanHuss had negotiated that particular term of payment to defray expending the entire amount of the insurance recovery until such matters as the arena and other Athletics Department financial obligations had been clarified.
Dr. Floyd moved approval of the purchase of the aircraft for the Athletics Department as stated in the materials distributed for this meeting. Mr. Hubbard seconded the motion. The vote was taken, and the motion carried.
Mr. Hubbard moved approval of the Dorn VA Medical Center Library merging with USC School of Medicine Library as described in the materials distributed for this meeting. Dr. Floyd seconded the motion. The vote was taken, and the motion carried.
In 1860, the Kendall family, which had originated in Camden, SC, had purchased from William Gilmore Simms his collection of books and papers. Dr. Terry commented that Henry Laurens had been the president of the Continental Congress and had been subsequently captured by the English and imprisoned in the Tower of London; one of the items in this collection, valued in excess of $1 million, was the diary he kept while in the Tower. The collection also included papers from John Jay, George Washington, Lafayette and other prominent figures from that time period. Out of consideration for the University of South Carolina, the Kendall family had donated these papers, as well as a small collection from William Gilmore Simms, which would be housed in the South Caroliniana Library. Mr. Stepp explained to Committee members that this collection would be received as a gift, but still needed Committee approval because it was valued at more than $250,000.
Mr. Adams moved approval of the acceptance of The Henry W. Kendall Collection of Laurens Papers as described in the materials distributed for this meeting. Mr. Hubbard seconded the motion. The vote was taken, and the motion carried.
Mr. Hubbard moved approval of the acquisition of the Joel Myerson Collection of Nineteenth Century Literature as described in the materials distributed for this meeting. Dr. Floyd seconded the motion. The vote was taken, and the motion carried.
Mr. Hubbard moved approval of the establishment of the USC Aiken School of Business Administration Quasi-Endowment fund as described in the materials distributed for this meeting. Dr. Floyd seconded the motion. The vote was taken, and the motion carried.
Chairman Whittle indicated that at this point in the meeting President Barker of Clemson University and President Greenberg of MUSC would join the meeting via telephone. Mr. Stepp stated that Dr. Palms would speak initially.
Dr. Palms welcomed the two presidents and thanked them for sharing their thoughts with Committee members. He asked Dr. Barker to offer comments regarding the budget situation and cooperative endeavors of the three institutions.
Dr. James Barker, President of Clemson University, made the following remarks:
Thank you, John, for this opportunity and let me say to the USC Board that I am very proud to be able to have a chance to be a part of your meeting, and I want to thank my two colleagues at the other two research universities for creating a climate where we can have this kind of communication. I think it certainly encourages the collaboration we are starting to build among our three schools. That collaboration has started in research. I think it is now growing in our ability to work together to tell the story that we have to tell about higher education and the work that we do in our research universities.
We found that the messages we had to deliver are pretty clear and being embraced by the citizens of South Carolina and those messages really are two very important ones. One is that higher education is education in our state and that we can't envision our public education stopping at the 12th grade. It is a seamless system that we have built here and we have to envision it from K all the way through the research universities and our graduate programs because that's a very important part of our future. So, the first message is that higher education is education and the second one is that higher education is vital to the economic development of our state.
I had a chance to meet Governor Hodges on Sunday as our guest on our campus and the focus of our visit was to let him see a few of the research projects that we are doing here....I thought that was an important way for us to be able to tell that story about how higher education is vital to economic development....
I think one cooperative effort was working with our students when they visited the Legislature a week ago. That was not the work of one school; it was the work of all of us together. When I visited the Legislature the day after those meetings, the hallways were buzzing with how important they thought that dialogue with the students was and how well informed they were and how professional they were and how they balanced between being polite and being aggressive in getting those messages across to the members of the Legislature. So, I think their message was very clearly that they recognized the tuition increases should be aimed at quality and increasing the quality of programs and not at balancing the state's budget. I believe that is a message they can tell better than anyone. They are delivering that message very clearly and are committed to helping us through the remainder of this legislative session....
I think we have come to the realization, the three of us working together as we had on our campus, too, that we would never have a better opportunity to tell our story than we have right now. We have never had a better opportunity to engage our alumni and to really focus on making sure that we are telling our story as clearly as possible. I think, longer term, what we concluded is that we have to find a clear and designated revenue stream for our research universities in South Carolina. If we don't do that, then we will be experiencing what we are experiencing this year over and over again, and I think that it is impossible to build institutions with the quality we are striving for in such a climate.
Dr. Palms introduced Dr. Ray Greenberg, President of MUSC, who made the following remarks:
Let me begin by saying that, on behalf of the Medical University, I thank the Board at USC for allowing us a few minutes in your meeting to express our support for the joint efforts. In front of the USC Board, I would like to particularly thank John for his leadership as the senior president among the research universities. He has really provided excellent leadership, and I believe I am speaking on behalf of Jim as well. Those of us as newcomers have really benefitted from John's support and guidance and encouragement.
I think the general tone of the discussions of collaboration has really moved forward in a comparatively short period of time and it is not just rhetoric. I think each of the three Boards should know that perhaps the first real test of the leadership of the three institutions on this issue was this information technology grant. I think we sat down and worked out a solution which, I hope, meets USC's needs in the context of addressing technology issues statewide. I think it was a good example of compromise on everybody's part toward a shared common goal and I am proud of the way the three institutions worked together on that, and I think that bodes well as we look to future initiatives and how we can partner among the universities....
I suspect that John has already talked to you, or will be talking to you, about our meeting with the governor the other day. The three presidents had an excellent meeting with Governor Hodges. It could have been divisive in the sense that all of us feel a little underappreciated in his budget recommendations. I think appropriately we focused not so much on the short-term budget challenges, but on the long-term issues of creating, as Jim just alluded to, a sustainable, dedicated revenue stream that can promote the kind of growth and development of the research universities in the state that will make the state competitive with our neighbors to the north and to the west of us. I thought it was a very positive, constructive session and I hope at least one message the governor came away with is that we are united. He actually saw that as a great strength in terms of how we interface with the General Assembly that if we came to them with a coordinated message, he felt it would be very well received by them.
Finally, let me conclude by saying facing budget problems is unfortunately not a new phenomenon on this campus. We have been dealing with them here, unfortunately, for about three years now. Our most difficult year was actually two years ago and, from that point, we have recovered from about a $75 million problem hopefully to have a balanced budget this year....But, again, I think trying to keep our three campuses united as we move forward through the budget process and, most importantly, focusing on the long-term issues, seems to me to be where our energies can most constructively be spent.
Dr Palms made the following remarks:
Thank you, Ray. I appreciate your comments very much. I think all of us agree it is the value that is going to be added in the future when we coordinate and collaborate. I think all three of us, though, will have to admit that our actions somewhat come from the fact that our three Boards have already passed a memorandum of understanding promoting us to engage in this discussion. I certainly want to give tribute to all three of the Boards and appreciate their encouragement to have us do this.
Thank you both very much. I know both of you have busy schedules and had to come out of meetings. I appreciate your doing this. Does any member of the Board have any comments or questions that they would like to ask of the two presidents? If not, thank you very much.
Chairman Whittle requested that Committee members direct their attention to the next agenda item.
Mr. Adams moved approval of the proposal for a contract rate for graduate courses/programs as described in the materials distributed for this meeting. Mr. Hubbard seconded the motion.
Chairman Whittle asked whether Dr. Odom could project the number of participants who would be involved in this program. Dr. Odom indicated that the numbers were slowly increasing as contacts were re-established throughout the state. The new Dean of the College of Education fully supported this initiative and full-time faculty on the Columbia campus had been encouraged to participate through Distance Education. Mrs. Harvey asked if classes would be taught at the regional campuses or in school district buildings. Dr. Odom responded that the location of these classes would be in several different places as determined by the school districts. He further explained that the maximum number of participants per class would be 25, not 30 as originally stated in the information Committee members received.
The vote was taken, and the motion carried.
Mr. Hubbard moved approval of the special tuition rates for teachers holding emergency certification as described in the materials distributed for this meeting. Mr. Adams seconded the motion. The vote was taken, and the motion carried.
Mr. Adams moved to approve the appointment of Dr. Thomas L. Hallman as Chancellor of USC Aiken, effective January 1, 2001. Mr. Hubbard seconded the motion. The vote was taken, and the motion carried. Without objection this appointment would be presented to the full Board in Executive Session.
Before discussing the University Budget Report, Chairman Whittle addressed those matters requiring Committee action; therefore, the order of agenda items was altered.
Mr. Hubbard moved approval of the salary supplement for the Chancellor, USC Aiken as described in the materials distributed for this meeting. Dr. Floyd seconded the motion. The vote was taken, and the motion carried.
Mr. Hubbard moved approval of the salary supplement for the Chancellor of USC Spartanburg as described in the materials distributed for this meeting. Mr. Adams seconded the motion. The vote was taken, and the motion carried.
Mr. Hubbard moved approval of the three proposed modifications to Coach Lou Holtz's employment agreement with the University of South Carolina as described in the materials distributed for this meeting. Mr. Adams seconded the motion. The vote was taken, and the motion carried.
Chairman Whittle reminded the Committee that members had requested quarterly budget reports on financial aspects of the University. This report was the initial offering. Chairman Whittle recognized Dr. Palms.
Dr. Palms introduced Dr. Allan Barber, formerly the chief financial officer at the University of Georgia for many years, and Mr. Robert E. Bugbee, his primary budget officer. They would present the budget report to the Committee.
Dr. Barber prefaced his remarks by stating that the University of South Carolina budget was in balance, the budget process was working well, and that Mr. Bugbee would review the figures in a format he had developed for this process. Dr. Barber considered it "astounding that the University of South Carolina in FY 2000 spent fewer dollars in custodial and maintenance and grounds than it did seven years ago considering the increase in space and also in terms of just absolute dollars. If you figure a three or four percent annual inflation factor, the institution has been an extremely good steward of the resources it has had and the resources have gone where they should go and where they need to go." Facing the budget situation next year, he believed, would be more difficult because of the conservative stance the University had adopted in the past. At this point, Dr. Barber asked Mr. Bugbee to review the budget report with the Committee.
Mr. Bugbee stated that since December, when he last reported to the Board concerning the budget, only a few small changes had been made. He indicated that the income from student fees had been reduced approximately $126,000; departmental income had been reduced approximately $17,000; and the fringe benefits which were paid from the general fund, were "on target" for this year. Mr. Bugbee also advised Committee members that he had improved the computer reporting system so that deans and business managers could have immediate on-line access to their particular budget information in order to monitor and gauge expenditures at any point in time. He noted that the Office of Budget and Finance had completed a mid-year review which covered the first seven months of the fiscal year; in almost every instance, the deans of the schools and colleges were on budget.
Mr. Bugbee reviewed and briefly explained the budget status reports. At the end of the year, a $10 million carry forward was anticipated which would be available one time to help departments financially through the next year.
Mr. Bugbee discussed the next publication, the "A" Funds at the Columbia campus, which was listed by school, college, and other divisions. He directed the attention of the Committee to the footnotes which explained overdrafts; he noted that the overdrafts would be replaced with transfers from "E" Fund revenues. Mr. Bugbee cautioned the Committee to be aware of the figure in Exhibit C concerning the reduction in revenue; the number misrepresented the actual reduction because of the manner in which transfers had been processed. On the last report, by handling transfers on both the expense and income sides, the budget appeared larger because it was redundant. "We netted them out on the income side because that's the way it really should have been done to start with, and we all agreed with the Controller that would be the best way to handle it." Schedule E indicated any changes that had occurred since the last meeting in December. In conclusion, Mr. Bugbee believed that "if it wasn't for what we were looking at next year, we would be in pretty good shape. I thought a $5 million problem was tough, but it looks like we have a $25 million problem at this point next year that we will all work on."
Chairman Whittle asked what procedures had specifically been employed to balance the budget. Mr. Bugbee replied that overhead had been charged to some of the departmental income; departments had received the entire proceeds for summer school without deducting fringe benefits; and departments had been asked to be more prudent regarding expenditures. In some instances, he indicated that one-time school/college approved allocations had been incorrectly retained.
Mr. McLellan expressed concern regarding carry forward figures. Mr. Bugbee stated that there were three types of carry forward figures: accrued leave carry forward; "E" funds carry forward; and general funds or "A" funds from state appropriated monies and student fees. He further explained that the carry forward amount had been restricted to no more than 5% for each school/college. The figure was carried forward one time and was not part of the recurring budget. "They understand that is not part of the recurring budget and they can't set the recurring base and spend money based on adding that to the budget."
Mr. Stepp stressed the importance of receiving feedback from Board members regarding the format of the mechanism which would be used to present suitable quarterly reports in the future.
Mr. Bugbee stated that the schools/colleges had been encouraged to carry forward a large balance at the end of the year to assist the University through the ensuing fiscal year of state-mandated budget reductions. Dr. Palms responded to Mr. McLellan's inquiry about that policy which, he believed, did not cut the budget "when you have encouraged them to carry forward money that they didn't spend." The budget cuts, Dr. Palms stressed, would create an entirely new base for the future. The University budget had to be reduced by $25 million which would ultimately require years of recovery. He further noted that the University, unlike businesses, had certain constraints, i.e., state policies regarding employment restrictions as well as strictures affecting non-tenured and tenured faculty. He said we were trying to buy time so that we had more than just three months to do this budget cutting. Anytime we could help next year or even the year after that through carry forwards, that would help us restructure the institution to live with these new budgets. He also noted that "This is not a $25 million reduction in a $500 million dollar budget; this is a $25 million reduction in $181 million we get from the state."
Dr. Palms addressed tuition increases. This year the state legislature would allow a 10 percent increase; normally, the University could not raise tuition above HEPI (Higher Education Price Index). However, if we raised tuition significantly next year, then for the next two years tuition could not be raised at USC. Dr. Palms explained to Committee members that, in order to offset a 10 percent budget cut with tuition, tuition would have to be raised 25 percent; therefore, University officials were exploring other avenues.
In addition, Dr. Palms noted that he had recently met with the University deans to discuss the situation. They had been diligently considering various possibilities for restructuring their respective colleges. "We will take all that information plus some other things we are trying to do and we will keep you informed during these sessions. We are not ready to make any major decisions right now." Responding to a question from Mr. Wienges regarding schools in neighboring states experiencing similar problems, Dr. Palms stated that the University of Mississippi was faced with a 19 percent budget cut and North Carolina would cut appropriations this year even after passing a substantial bond bill. Dr. Palms also indicated that the University had recently lost faculty to other institutions, as well as the primary candidate for the Dean of the College of Journalism and Mass Communications position who had withdrawn from the search. A number of other searches to replace retiring faculty had been placed on hold which, ultimately, had affected morale.
Mrs. Harvey asked if many programs would be discontinued. Dr. Palms replied that all programs of the University would be reviewed. The core curriculum would be protected, particularly the Honors College. Tuition restrictions did not pertain to either the graduate programs or the professional schools, i.e., medicine, law, pharmacy. Dr. Odom added that the University had instituted a hiring freeze and had asked deans to examine carefully travel requests using state funds, as well as equipment purchases, and not to review any renewal contracts for lecturers and instructors at this time. In addition, the University would possibly consider raising the floor of graduate assistantship tuition. He also stated that many colleges would be reviewed in terms of what they cost versus how much revenue they generated.
Chairman Whittle commented that many of the Board members had remarked that they had recently completed the formulation of a University strategic plan with concomitant goals, one of which addressed the academic excellence of the institution; the Board would not want to jeopardize that momentum. Dr. Palms responded that these goals had guided University actions during the process of reviewing various potential reductions.
Dr. Pruitt discussed the possibility of increasing the size of the upcoming freshman class as a means of generating revenue. He explained the diverse activities of those University areas involved in undergraduate student recruitment. He believed that "we are meeting the goals of the Board and of the University to maintain that SAT level, maintain that head count, and maintain that diversity."
Dr. Palms stressed the importance of student retention and the role of advising, particularly for freshmen and sophomores. A successful athletics program had also boosted retention figures. At the previous Phi Beta Kappa meeting, 270 students with grade point averages of 3.75 or higher had been invited into the membership. Many had transferred into the University of South Carolina from other institutions. "Retention, transfers, and an aggressive recruiting program are still what we are pushing very hard."
Dr. Floyd asked what the impact would be financially if the University added 500 students to the upcoming fall undergraduate class. Dr. Strobel replied that "it will mean the faculty who are left will have to teach more classes and larger classes....It will have a detrimental effect on those faculty who are doing research and working on grants." Responding to Mr. Bahnmuller's question regarding the number of students on the Columbia campus, Dr. Pruitt indicated that approximately 14,500 were undergraduate students; 3,000 were full-time graduate students; and 3,000 were part-time graduate students.
Mr. Lister requested information concerning the regional campuses' actions in response to budgetary reductions. Dr. Stockwell, Chancellor of USC Spartanburg, replied that USCS, like USC Columbia, had ceased to hire anyone and would substantially redirect renovation reserve funding next year. In terms of dollars, USCS would need to sustain an impact of approximately $1.5 million.
Mr. Hubbard inquired whether anyone had quantified the net revenue increase from adding 500 students to the incoming freshman class. He had not heard from others in the meeting that this added number would impact the revenue stream. Rather, Mr. Hubbard was concerned that one of the Board's articulated goals, to raise the academic quality of the freshman class, would be adversely affected. Chairman Whittle suggested that the Committee needed information concerning the financial justification of increasing the size of the freshman class. He, too, had not heard anything that "was going to step us up to achieve these goals." Chairman Whittle did not want the University to risk abandoning these established goals and objectives.
Dr. Palms responded that all of these considerations were part of enrollment management, a very sophisticated process which required outside consultants and careful planning. Dr. Strobel informed the Committee that based on a current student's tuition cost, 500 additional freshmen would generate $1.8 million. Dr. Pruitt added that over a four-year period in actuality that figure would be $8 million in tuition, as well as substantial dollars for housing, health services, and student activity fees.
Discussion ensued regarding the importance of maintaining the level of funding based upon enrollment numbers. Dr. Pruitt noted, with respect to out-of-state student enrollment at the University of South Carolina, that USC can award a $250 scholarship per semester, $500 a year, which allowed the out-of-state student to pay a non-resident scholarship tuition. In-state students paid the in-state rate. Out-of-state scholarship students paid a non-resident scholarship rate which was approximately $2500 more than the in-state students paid. The out-of-state student, not on scholarship, paid about $9,000.
Chairman Whittle suggested that the Executive Committee meet again so that the administration could report to members regarding enrollment options and their concomitant financial impact. The meeting would include discussion of the budget cuts, how the University planned to address these reductions, and, specifically, how these cuts would impact the University's goals which the Board had established during their strategic planning retreat the previous October. Mrs. Harvey asked that the meeting include the full Board.
Since there were no other matters to come before the Committee, Chairman Whittle declared the meeting adjourned at 4:50 p.m.
Respectfully submitted,
Thomas L. Stepp
Secretary