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 Thursday, June 14, 2001, at 10:30 a.m. in the Carolina Plaza Board Room.
Members present were: Mr. Mack I. Whittle, Jr., Chairman; Mr. Herbert C. Adams; Mr. James Bradley; Dr. C. Edward Floyd; Mr. William C. Hubbard; and Mr. Michael J. Mungo. Other Board members present were: Mr. Alexander English (via telephone); Mr. A.C. Fennell, III; Mr. Samuel R. Foster, II; Mrs. Helen C. Harvey; Mr. Toney J. Lister (via telephone); Mr. Miles Loadholt; Mr. Robert N. McLellan; Mr. M. Wayne Staton; Mr. John C. von Lehe, Jr.; and Mr. Othniel H. Wienges, Jr. The faculty representative, Professor Caroline Strobel, was also 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 Operating Officer William F. Hogue; Vice President for Business and Finance Richard W. Kelly; Interim Vice President for Business and Finance Allan W. Barber; Vice President for Student and Alumni Services Dennis A. Pruitt; Vice President for Human Resources Jane M. Jameson; General Counsel Walter (Terry) H. Parham; Chancellor of USC Aiken Thomas L. Hallman; Chancellor of USC Spartanburg John C. Stockwell; Vice Provost and Executive Dean, Regional Campuses and Continuing Education, Chris P. Plyler; Interim Budget Director, Office of Budget and Finance, Robert E. Bugbee; Interim Vice Provost and Dean, Libraries and Information Systems, John N. Olsgaard; Dean of The Norman J. Arnold School of Public Health Harris Pastides; Dean of the South Carolina Honors College Peter C. Sederberg; Associate Chancellor of Business and Finance, USC Aiken, Virgina S. Steel; Director of Business Affairs Richard D. Wertz; Director of Facilities Planning and Construction and University Architect Charles G. Jeffcoat; Director of the Department of Internal Audit Alton McCoy; Director of University Housing Gene Luna; Director of Business Services, University Housing, Darryl Davis; Director of Student Health Services William R. Hill; Assistant to the Vice President for Business and Finance Ken Corbett; Director of Printing Services Don Pruitt; Associate Budget Director and Senior Analyst, Office of Budget and Finance, William Bragdon; Director of IV-99 University Publications Laurence W. Pearce; Director of Periodicals, University Publications, Chris Horn; Administrator, Carolina Mall, Trademark and Licensing, Vending, and Gameroom, Karen Crocker; Assistant Treasurer Susan Hanna; Director of Presidential Communications and Research Gail Widner; Director of Governmental and Community Relations, Office of the President, Shirley D. Mills; University Legislative Liaison John D. Gregory; Director of the Office of Public Affairs Russell McKinney; and members of the media.
Chairman Whittle called the meeting to order and invited those present to introduce themselves. Mr. McKinney introduced members of the media who were in attendance. 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 the members of the Committee; and a quorum was present to conduct business.
Chairman Whittle stated that there was a personnel matter regarding an appointment which was appropriate for Executive Session. Mr. Bradley moved to enter Executive Session and Dr. Floyd seconded the motion. The vote was taken, and the motion carried.
The following individuals were asked to remain: Dr. Palms, Mr. Stepp, Dr. Odom, Mr. Glenn, Dr. Barber, Dr. Hogue, Dr. Pruitt, Ms. Jameson, Dr. Stockwell, Dr. Hallman, Dr. Plyler, Mr. Parham, Mr. Gregory, Mr. McKinney, Ms. Warren, and Ms. Tweedy.
Return to Open Session
Under the contract, the University would provide an on-site supervisor, housing for conference participants, meals for conference participants, access to the Koger Center, the Russell House, 25 classrooms, and the PE Center for scheduled events and activities, and the use of certain parking in the Bull Street garage. In exchange for these services and use of these facilities, the Church of Christ would pay the University the sum of $250 per conference participant (with a minimum of 1,500 participants guaranteed by the Church of Christ); therefore, the contract base line would be $375,000. Any additional services provided by the University would be on a fee basis.
The Church of Christ would pay a deposit of $7,500 once this contract was signed; the balance would be paid within 30 days after receipt of an invoice from the University.
The Church of Christ would be solely responsible for supervising its participants and any damages incurred by these individuals. The contract provided that the Church of Christ would indemnify the University from any claims resulting from its presence on the campus.
Mr. Mungo moved approval of the Church of Christ Youth Conference contract as described in the materials distributed for this meeting. Mr. Hubbard seconded the motion.
Mr. Bradley expressed concern regarding the contract payment terms as stated. He requested that the University require full payment, or at the very least, one-half payment in advance; the remainder should be collected midway through the term of service rather than waiting 30 days after billing to avoid the possibility of debt forfeiture. Mr. McLellan suggested the use of a financial guarantee bond.
A lengthy discussion ensued regarding various possibilities for resolving the fee payment terms. Chairman Whittle suggested that the motion would be as follows: the Committee would approve the Church of Christ Youth Conference contract with the request that the University negotiate the payment structure more prudently. Mr. Bradley recommended that the University receive a larger portion of the money in advance and the remainder 30 days after the conference had concluded. In lieu of the proposed payment schedule, the Church of Christ could provide a performance bond to compensate the University in a satisfactory manner. Mr. Mungo interjected that the Executive Committee should not require a bond to cover the entire amount, but rather "the equal amount we are talking about negotiating for, which might be one-third or whatever." Mr. Whittle restated the amended motion--accepted by Mr. Mungo and Mr. Hubbard--as follows:
That the Executive Committee approve the contract but request that the University better negotiate the payment structure to the University, understanding Mr. Bradley's recommendation that we receive a larger portion of the payment up front (maybe 50 percent up front and the remaining 50 percent 30 days after conclusion or similar provisions within reason), and that in lieu of such a payment schedule, the University would receive a satisfactory performance bond that would compensate the University in the event the Church of Christ fails to compensate us.
Chairman Whittle asked if everyone understood the motion. The vote was taken, and the motion carried.
Mr. Parham further stated that the contract had been competitively bid as a "Competitive Best Value Bid" in accordance with the State Procurement Code. Selection criteria included: (1) commission paid to USC on the sale of all canned and bottled soft drink products; (2) proposed service plan and commitment to the support of campus vending operations; and (3) enhancements offered in addition to commission on sales. By utilizing this type of solicitation, the University could ask interested companies to bid not only what commission on sales they would pay the University on each can of soft drink or juice sold, but also what other enhancements, financial or otherwise, they would offer the University. Of the three companies which submitted bids (Pepsi Bottling Group, Coca Cola Bottling Company Consolidated, Cromer Food Services, Inc.), Pepsi had been selected as the company offering the best value to USC.
The financial terms of the contract would be as follows: USC would receive from Pepsi: (a) an annual commission of 70.5 percent of gross revenues after sales taxes or $350,000, whichever was greater; (b) an unrestricted cash contribution of $10,000 annually; and (c) an annual contribution of $5,000 for the general scholarship fund. Pepsi would be required to pay the University its commission within 15 days after the end of each month, and to provide an auditable report which showed by location individual vending machine gross receipts.
This contract would cover a five-year period from July 1, 2001, through June 30, 2006. The University would control the price of the products and the number and location of the vending machines. Pepsi would be responsible for maintaining and repairing the vending machines, and must respond to repair or out-of-product calls within 24 hours. The University would not be responsible for vandalism or theft of the machines.
In addition, Pepsi would indemnify the University from any claims resulting from Pepsi's presence on University campuses and would be obligated to maintain commercial general liability insurance. The University could terminate the contract at any time upon 30 days advance written notice; Pepsi could terminate the contract at any time upon 90 days advanced written notice.
Mr. Mungo moved approval of the Soft Drink Vending contract as described in the materials distributed for this meeting. Mr. Bradley seconded the motion. The vote was taken, and the motion carried.
The three printers would be leased for a five-year period. The total cost of the leases, plus maintenance, would be $1,347,740. In accordance with state regulations, the University's lease of the three new printers was considered and approved by the State Office of Information Technology Management.
Mr. Mungo moved approval of the Digital Printing Equipment lease agreements as described in the materials distributed for this meeting. Dr. Floyd seconded the motion.
Responding to a question from Mr. Bradley regarding the possibility of buying the equipment, Mr. Parham stated that USC Printing Services officials had advised him that it was more efficient to lease the equipment because of ongoing technology advances. As a point of notice, Chairman Whittle noted that Xerox may be experiencing financial difficulties. He wanted to be assured that University money was "not too far out in front of the services that we are getting." Mr. Parham replied that the University rendered payment on a monthly basis.
The vote was taken, and the motion carried.
Mr. Parham explained that the South Carolina Department of Social Services had contracted with UNISYS to develop a computerized system which would monitor child support payments throughout the state. The federal government, through the Department of Health and Human Services, would supply DSS with matching funds to defray the cost of the project. In order to receive this funding, DSS was required to contract with a third party advisor to ensure the efficacy of the new system.
As the third party advisory, the University would be required to evaluate the UNISYS product. In other words, the University would basically provide a "watchdog" function during the entire process of planning and implementation.
The contract would cover a one-year period, but may be extended from one to four additional years depending upon the development status of this system. It was anticipated that the system would be completed within three years. The University would be paid a total amount not to exceed $3,688,102 for services rendered; invoicing would occur on a monthly basis. The contract could be terminated by either party upon a material breach by the other party.
Mr. Mungo asked whether this contract would be affected if the Department of Social Services experienced a 15 percent budget reduction. Mr. Parham replied that a non-appropriations clause had been included in this standard state contract which automatically permitted dissolution of the agreement if sufficient funds were not available.
Mr. Bradley moved approval of the South Carolina Department of Social Services contract as described in the materials distributed for this meeting. Mr. Mungo seconded the motion. The vote was taken, and the motion carried.
At this time, Chairman Whittle indicated that the third agenda item would be discussed followed by a short recess to address budget issues which had recently developed.
Mr. Bradley moved approval of the appointment of Mr. Richard W. Kelly as Vice President and Chief Financial Officer of the University of South Carolina beginning June 1, 2001. Mr. Mungo seconded the motion. The vote was taken, and the motion carried. Chairman Whittle congratulated Mr. Kelly and, on behalf of the Board of Trustees, enthusiastically welcomed him to the University of South Carolina.
The House Ways and Means Committee had recommended an 11.5 percent budget cut, or nearly $21 million, for USC Columbia and the School of Medicine and 11.9 percent (more than $4 million) for the other seven campuses.
At that point, the Governor had reviewed other possible resources to reduce the proposed cuts including tapping the Barnwell Nuclear Facility Clean-up Fund. Then, the Senate recommendation was established including a proposed 13.6 percent (more than $29 million) cut to the University ameliorated by the use of "Barnwell Funds." The University would receive a total of $9,599,743 in relief from this funding source. However, these were non-recurring funds which would only be available for one year.
Further, Dr. Palms reminded the Board that in May all state agencies had been advised of a year-end budget cut of one percent. He pointed out that this cut was recurring and would contribute for an even lower base for the budget year under discussion. Together, the FY01 year-end one percent cut and the likely FY02 13.5 percent cut reduced the base budget by $22,513,870.
He then explained the summary of changes to the base budget as proposed for the budget under review. The FY01 budget reduction of one percent reduced the FY02 budget base by $1,567,213. A 13.5 percent budget cut would further reduce the base by $20,946,657. An addition to the budget from proposed performance funding would increase the base by $4,529,420. Proposed "Barnwell Funds" could increase the base by $7,257,398. Proposed student tuition increases could be used to increase the base of the proposed budget by $4,300,488. These amounts left a reduction in funds available of $6,426,546.
To offset this deficit and fund certain key needs, it was proposed that internal departments of the University have their budgets reduced by nine percent, generating $16,282,333. Recommended commitments for funding to academic and general institutional programs as proposed totaled $6,714,354. USC's share of payment of salary and fringe benefit increases amounted to $1,377,966. Funds proposed to be set aside for faculty promotions in rank amounted to $246,500. Thus, a fund balance of $1,518,919 could be set aside as a prudent step in such uncertain budget times.
The above items describe a balanced budget recommendation for FY02.
Dr. Palms reviewed those targeted academic programs which would receive additional funding, iterating that departmental budgets had been reduced nine percent. Included were The Darla Moore School of Business for $500,000; the College of Engineering and Information Technology for $300,000; Academic Leadership for $326,000; Academic Programs and Student Services for $232,000; Financial Aid for $109,000; Extended Graduate Campus for $180,000; and Classroom Enhancement for $600,000.
Dr. Palms briefly summarized general institutional costs that the University would absorb during the upcoming fiscal year including a telephone system upgrade which would cost approximately $5 million during the next five years; expected utility rate increases of $1,362,000; and contract and insurance increases of $250,000. Therefore, total yearly operational costs were estimated to be $3.6 million.
Dr. Palms addressed central operations and time limited programs citing the School of Medicine's resource center; the addition of staffing in the Legal Counsel office; the addition of staffing in the Budget Office; a one-time expenditure to complete the Bicentennial celebration programming; an employee assistance program; and the presidential search process and expenditures.
Dr. Palms thoroughly examined tuition increases stating that students had been initially concerned that the increase would be established at a level to generate the 15 percent budget deficit. He indicated that discussions of tuition increases had factored a HEPI (Higher Education Price Index) of 3.7 percent in addition to approximately another 4 percent for a total potential increase of 7.7 percent; however, based upon academic needs and the goals established by the Board of Trustees, a maximum increase of approximately 10 percent may be justified.
Mr. McLellan asked Dr. Palms to explain the purpose of the HEPI limitation for determining tuition increases if, as projected in the FY 2001-2002 budget, an additional arbitrary four percent would be added. Dr. Palms responded that the Legislature had provided relief from this formula because of the anticipated state funding shortfall for higher education this year.
Continuing, Dr. Palms noted that the School of Law would increase tuition 10.4 percent; and, reflecting the national trend, the School of Medicine would increase tuition 20 percent. On the other campuses, USC Spartanburg and USC Aiken tuition would increase ten percent; the Regional Campuses would also increase tuition ten percent.
For the record, a summary of fee schedule changes was distributed to the Committee. Mr. McLellan requested a summary of the figures for the anticipated total state-appropriated funds budget. Mr. Bugbee indicated that the University's projected budget was based upon the Senate-recommended figure of $157,485,215, which did not include additional "below the line" funding of $3 million. He further stated that the FY 2001 non-reoccurring "add-back" amount of $166 million was the current University budget; the difference between these two figures reflected the budget cut.
Dr. Palms emphasized the fact that the FY 2001-2002 budget was a one-year unique budget. "As we all agreed, this was an appropriate time for the University to engage once again in a re-evaluation of itself." He stated that a study had been initiated under the direction of the Provost which would comprehensively review all of the colleges and programs on campus. This Strategic Directions and Initiatives Committee would be composed of senior-level faculty and staff members, Board of Trustees' member Herbert Adams, and several outside consultants. Dr. Odom explained that the twelve-person committee would meet for the first time later that day and recommendations to Dr. Palms would be forthcoming before the end of the calendar year. He hoped that the process would be very open with everyone given the opportunity to offer input.
Chairman Whittle commented that the Board of Trustees would perform an overall strategic plan which would dovetail into the mission of this committee "with the understanding that the document we generate in December will be the document which we use to assist in the PCSC's efforts in finding the new president."
Dr. Palms offered concluding remarks commending Board members, students, alumni, faculty, and staff for their support during this very difficult time. He particularly thanked the deans of the various colleges and schools "who sat down through long budget hearings to try to come up with a nine percent cut and tried to do that with a minimal effect on the instructional and academic programs." He believed that the many higher education constituencies had transmitted a clear message to the Legislature regarding proposed state-appropriated budget cuts particularly during this time period "when higher education and the information economy are so important to us." Dr. Palms requested the Executive Committee's thoughtful consideration of the FY 2001-2002 University operating budget as presented while understanding that the total budget with minor changes would be presented to the full Board the following week. Dr. Palms believed that University strategic planning initiatives during the upcoming year would create an appropriate restructuring venue in which to continue the achievement of established goals to be an outstanding university worthy of AAU membership.
Chairman Whittle noted, as a point of clarification, that Dr. Palms was requesting a potential tuition increase not to exceed 10.4 percent.
Mr. Mungo moved the adoption and recommendation to the Full Board of the operating budget for fiscal year 2002, as presented, including tuition and fee schedules, the housing budget and associated fee changes, the athletics budget, and the designated funds budget. Mr. Bradley seconded the motion.
Mr. Hubbard requested clarification of the tuition increase. He wanted to be certain that the Executive Committee was approving a 10.4 percent tuition increase which would then be subject to final approval at the upcoming Board of Trustees meeting the following week. Dr. Palms stated that the tuition increase would not exceed that percentage.
Mr. Adams was concerned whether Board members would receive a finalized detailed budget in a timely manner to review. Chairman Whittle assured everyone that they would receive "enough information by next week in order for us to have a full discussion...." He stated that it was important at this time that the Executive Committee move the budget forward for final Board consideration. The vote was taken, and the motion carried.
Mr. Gregory stated that this year had been very difficult; however, due to Dr. Palms' leadership and his strong public statements, as well as Board of Trustees' legislative contacts, "we have been able to lessen the blow." Various funding requests from the University had been approved including EPSCOR for $2.5 million; a $2.7 endowment match of which the University should receive $1 million; and $1 million for the Nano Sciences Center. He thanked Dr. Floyd and Chairman Whittle for their assistance in acquiring these funding initiatives.
Mr. Gregory addressed the Capital Bond Bill stating that $47.5 million had been budgeted for the USC System. Of that amount, $30 million had been designated for USC Columbia, $14.5 million for USC Spartanburg, and $3 million for USC Aiken. Although the bill would not receive Senate approval this year, he indicated that this item would be on the Senate calendar in January. Mr. Gregory urged everyone to contact their legislators regarding the passage of this bill. It would provide the remaining $10 million needed to complete the funding of the new Law School, as well as $20 million for the Gibbes Greene complex renovations and improvements.
Mr. Gregory briefly summarized other legislative activities including the removal of a punitive HEPI proviso; Palmetto Fellows Scholars funding distribution concerns; and the removal of an Appropriations Bill amendment which would have forbidden credit card solicitation on the Columbia campus. The Lottery Bill had been approved, authorizing a lottery and the sale of tickets to begin in November. However, the bill which would distribute lottery revenue and proceeds continued to be under discussion. Mr. Gregory hoped to receive money "high enough in the priority of the distribution of funds to create a sum of money for endowed chairs for the public colleges and particularly the research universities in this state."
On behalf of the Board of Trustees, Mr. Bradley expressed appreciation to Mr. Gregory and his associates for their outstanding efforts to further the cause of higher education in the state legislature.
Dr. Floyd asked that Executive Committee members begin work immediately to "set our priorities and make plans in order to be very effective in what we do with the bond bill coming up in the Senate next year." In response, Chairman Whittle proposed the formation of a legislative committee, with Dr. Floyd as the chair, which would update the Executive Committee on an ongoing basis. Chairman Whittle stressed the importance of a pro-active strategy regarding the passage of the bond bill.
Chairman Whittle informed the Committee that he would keep the Board informed regarding strategic plan activities. He believed that Board participation was especially crucial because "this is going to deal with not only the future of the satellite campuses as it relates to the strategy and the strategic movements of the University, but also the size of the University." A strategic plan would be presented to the final presidential candidates and ultimately the new president for execution.
There were no other matters to come before the Committee, and Chairman Whittle declared the meeting adjourned at 12:10 p.m.
Respectfully submitted,
Thomas L. Stepp
Secretary