crumbling public foundationsfsu.umb.edu/sites/fsu.umb.edu/files/crumbling... · table 2. umb net...

CRUMBLING PUBLIC FOUNDATIONS: Privatization and UMass Boston’s Financial Crisis

August 2017

A report by the Coalition to Save UMB,

a coalition of students, staff unions and faculty at the University of Massachusetts Boston

Report authors

Anneta Argyres

Janelle Quarles

Joseph G. Ramsey

Warren Hinckle IV

Katherine O’Donnell

Zac Bears

TheCoalitiontoSaveUMBisacoalitionofstudents,staffunionsandfacultyattheUniversityofMassachusettsBoston.Inadditiontoindividualundergraduatestudents,graduatestudentsandemployees,thefollowingorganizationsarepartofthecoalition:ClassifiedStaffUnion(MTA/NEA),GraduateEmployeeOrganization(UAW),ProfessionalStaffUnion(MTA/NEA),andthePublicHigherEducationNetworkofMA(PHENOM).

ThisreportwasacollectiveandparticipatoryendeavorundertakenbytheCoalitiontoSaveUMB.Theauthorsofrecordare:

§ AnnetaArgyres,vicepresidentoftheProfessionalStaffUnion(MTA/NEA)

§ JanelleQuarles,presidentoftheClassifiedStaffUnion(MTA/NEA)§ JosephG.Ramsey,Ph.D.,ExecutiveCommitteememberoftheFacultyStaffUnion(MTA/NEA)

§ WarrenHinckleIV,OrganizingCommitteememberoftheGraduateEmployeeOrganization(UAW)

§ KatherineO’Donnell,UMBPoliticalScienceandCommunicationsmajor§ ZacBears,ExecutiveDirectorPHENOM

Ourthankstothefollowingindividualsforreadingdraftsandprovidingimportantfeedbackonthisreport:SarahBartlett,TomGoodkind,JohnHess,MarleneKim,LindaLiu,MitchManning,GenevieveMorse,WallySoper,andSteveStriffler.OurparticularthankstoMaryJoConnellyforherexcellentresearchandediting.

Formoreinformationaboutthecoalitionoraboutthisreport,pleasecontactAnnetaArgyres,vicepresidentoftheProfessionalStaffUnion(MTA/NEA):[email protected].

-Labordonated-

CRUMBLINGPUBLICFOUNDATIONS(2017) i

ExecutiveSummaryUMassBoston’scurrentbudgetcrisisexposestheresultsofthelong-termunderfundingandprivatizationofpublichighereducationinMassachusetts.ThisreportwillshowthatUMasscanandmustaddressthepressingneedforconstructionandrenovationontheBostoncampuswithoutdoingharmtoUMassBoston’suniqueurbanmission.

UMassBoston(UMB),theonlypublicfour-yearuniversityinBoston,educatesnearlyhalfofthesystem’smostvulnerable,andoftenmostdriven,students—low-incomestudents,first-generationstudents,immigrantstudents,studentswhosefirstlanguageisnotEnglish,andstudentsofcolor.Thus,thecurrentthreatstothecampus’sacademicprogramsandstudentsupportservicesareofgraveconcern.

Ourexaminationofthecampus’sfinancesthroughFY161foundthat:§ UMBhashadapositivenetcashincomeuptoandincludingFY16;§ UMBwouldhaveshownanoverallpositivenetincomeinFY15andFY16ifithad

notbeenrequiredtodeductthefullactuarialvalueofdepreciationfromitsoperatingbudget—anamountthatexceededtheprincipalowedonitscurrentdebt;and

§ theCommonwealthhaswoefullyunderfundedbothpublichighereducationandhighereducationcapitalprojects,leavingUMBtofinancethenecessary,overduerebuilding.

ThiscombinationofinadequatepublicfundingandrestrictiveaccountinghascreatedthecurrentfiscalcrisisatUMassBoston.

WhiletheUMBadministrationshouldlookcloselyatexpensesthathavegrownrapidlyinrecentyears—mostnotably,thegrowthofupper-leveladministrationreportedasInstitutionalSupportinUMass’sfinancialreports—adjustingcampusspecificexpenseswillnotsolvethecurrent$25-30milliondeficit.

Instead,werecommendthattheUMassBoardofTrusteesandtheMassachusettsLegislaturetakethefollowingstepstoaddressthiscrisis:

§ ImmediatelyreleaseUMassBostonfromtheobligationtoachieveapositivenetincomewhilealsoaccountingforthefullactuarialvalueofdepreciation;

§ Identifyfunding—fromtheUMasscentraloffice’sreservesandfromtheCommonwealth’sbudget—toaidinthepaymentsforrebuildingtheBostoncampus,includinginterestandprincipalpayments;and

§ EndorsetheFairShareAmendmentand,shoulditpass,commitsignificantadditionalfundstorebuildingtheBostoncampusaspartofageneralreinvestmentinMassachusettspublichighereducation.

NottakingtheseactionsmeansfailinginourresponsibilitytothepeopleoftheCommonwealthandtoUMassBoston’sstudents.

CRUMBLINGPUBLICFOUNDATIONS(2017) ii

Contents

ExecutiveSummary i

I. Introduction 1

II.AnAnalysisofUMB’sFinancialStatus 2 RevenuesandExpenses 2Depreciation 5InstitutionalSupport 7ScholarshipsandFellowships 9Conclusions 10

III.ExaminingtheDriversofPrivatization 11UnderfundingPublicHigherEducation 11FundingtheRebuildingofUMB 13BalancedBudgetsandDepreciation 15

IV.OurRecommendations 17

Endnote 19

References 20

AppendixA:Upper-levelAdministrativePositions 22

Table1.UMBRevenues,ExpensesandNetAssets(inthousands),FY13–FY17 3

Table2.UMBNetIncome(inthousands),FY13–FY16 4

Table3.InstitutionalSupportacrosstheUMassSystem(inthousands),FY14&FY15 8

Table4.UMBStaffingLevels,2012–2016 8

Table5.High-levelExecutivePositionsatBostonandAmherst,2017 9

Table6.UMBScholarshipandFellowshipSpending,FY13–FY16 10

Chart1.UMBInterestandDepreciationExpenses,ActualandProjected,FY13-FY22 6

Chart2.StudentShareofHigherEducationCostsinMA,FY01–FY16 12

CRUMBLINGPUBLICFOUNDATIONS(2017) 1

I.IntroductionSinceearly2016,UMassBoston(UMB)employeesandstudentshaveheardaboutagrowingbudgetcrisis.We’veheardvariousstoriesandexplanations,rangingfrom‘thereisnocrisis;thisisplanneddeficitspending,’to‘UMBmustlearntomakedowithmuchless,’tothemorerecentcriesof‘anotherpublicinstitutionbeingwildlymismanaged.’SowesetouttodeterminewhetherthereisabudgetcrisisatUMB,andifthereis,whatareitscauses.

Thisisn’tofinteresttousmerelyasanareaofacademicinquiry.ThisisofinteresttousbecausewearestakeholdersinpublichighereducationandinUMassBoston—wearefacultyandstaffemployees,graduatestudentsandstudentemployees,alumni,undergraduatestudents,andparentsofpast,currentandfuturestudents.WebelieveinthepurposeofpublichighereducationandinUMassBoston’sparticularurbanmission.Ourintentinexaminingourcampus’sfinancialstatusistoidentifyappropriatesolutionsthatallowUMassBostontocontinuetothriveandpursueitsmainfunctionofprovidinganexcellentandaffordablepublicuniversityeducationtothepeopleofGreaterBoston.

Thecampusadministrationiscurrentlyseekingitsownsolutionstothe“crisis,”solutionswhichsofarhavetakentheformofcuttingservicesandjobsatUMB—eliminatingnon-tenuretrackfacultyjobs,layingoffcustodians,freezingreplacementsofstaffwholeave,reducingpaidgraduateassistantships(whichmakegraduatestudiespossibleformanyworkingclassstudents),raisingthecampus’sstudent-to-facultyratio,closing(orpotentiallyprivatizing)thecampus’sEarlyLearningCenter,andreducingshuttleservicesforstudentsandemployeestogettoandfromthecampus.Whilethesestepshavesavedthecampussomemoney,shavingperhaps$5millionfromthereported$30milliondeficit,theydonotprovidearoadmapforhowtoensurethatUMB’smissionispreserved.Ouraimistoprovidesucharoadmap.

Beforewedelveintotheanalysis,itisimportanttoknowalittleaboutUMBitself.Briefly,UMBistheonlypublicuniversityintheGreaterBostonareathatoffersBachelor’s,Master’sandDoctoraldegreeprograms.Sinceitsfounding,UMB’smissionhasbeentoprovidehighereducationtoadiverseurbanstudentpopulation:asoftheFall2016semester,57%ofourundergraduatestudentbodyarefirst-generationcollegestudents,57%studentsofcolor,51%arechildrenofimmigrantstotheUSwhospeakEnglishasasecondlanguage,and48%havefamilyincomeslowenoughtoqualityforPellgrants(UMassAnnualIndicators,July2017).FortheCommonwealth,UMBplaysacentralroleineducatingUMass’sUSstudentsofcolor,educatingmorethan1ofevery3studentsofcolorinthesystem(34%):43%ofallBlackandAfrican-American,35%ofallLatino,and30%ofallAsian-AmericanUMassunder-graduatesareeducatedattheBostoncampus

Weexaminethepublicpoliciesandmanagerialdecisionsthatwebelieve…arefundamentallytransformingUMBfromapublicgoodbeholdentothestudentsandcitizensofMassachusetts,toaprivateinstitutionbeholden

toitsbondholders.


(UMassFall2016StudentProfile).ThesestatisticsareonemeasureofUMB’sspecialandvitalroleasapublichighereducationinstitutionforGreatBostonandforourCommonwealthasawhole.

OurreportbeginswithananalysisofUMB’sfinancialstandingasoftheendofthe2015-2016FiscalYear(FY16),themostrecentyearforwhichfinancialstatementsforthecampusandtheUMasssystemhavebeenpublished.Nextweexaminethepublicpoliciesandmanagerialdecisionsthatwebelievehavecreatedandaredrivingthecurrentcrisis,policiesthatarefundamentallytransformingUMBfromapublicgoodbeholdentothestudentsandcitizensofMassachusetts,toaprivateinstitutionbeholdentoitsbondholders.Weendthisreportwithrecommendationsforbothshort-andlong-termstepstoreversetheprivatizationofUMB.

II.AnAnalysisofUMB’sFinancialStatusInordertoinvestigateUMB’scurrentfinancialstatus,theMassachusettsTeachersAssociation(MTA)consultedwithDr.HowardBunsis,aprofessorofaccountingatEasternMichiganStateUniversitywhohasstudiedthefinancesofnumerouspublicandprivatehighereducationinstitutions.Inaddition,theauthorsofthisreportconductedourownreviewofthepubliclyavailablefinancialdocumentspostedontheUMassPresident’swebsite(umassp.edu).SpecificwebsitesarecitedforallofoursourcesintheReferencesattheendofthisreport.

RevenuesandExpenses1

UMBhasbeeningoodfinancialshapeforyears,withincreasingnetworthandincreasingreserves.ThispicturebegantochangeinFY15whentherebuildingofthecampusstartedtoimpactthecampus’sfinances.Table1presentstherevenuesandexpensesreportedonthe“StatementsofRevenues,ExpensesandChangesinNetPosition”andthe“StatementsofNetPosition”fortheBostonCampusincludedinthe2013through2016UniversityofMassachusettsAnnualFinancialReports,aswellastheprojectedvaluesfromtheUMassbudgetsforFY16andFY17.Thedatashowthattotalrevenueshaveexceededtotalexpenseseachyearsince2013,resultinginanincreasingvalueofthecampus’snetassetseachyear.

Anexaminationoftheseparatecategoriesofrevenuesandexpensesprovidesinsightintohowspecificcampusactivitiesareimpactingtheoverallfinancialstatusofthecampus.Withoutadoubt,theactivitythatishavingthelargestimpactonthecampus’sfinancesistherecentrebuildingofthecampus.Weseetheimpactsoftherebuildinginboththerevenuesandtheexpenses.

Thesinglefactorthataccountsformostofthefluctuationintherevenuesoverthisperiodis“CapitalAppropriations,GrantsandContracts.”DespitetheprojectionsintheFY16budget,capitalrevenuesincreasedbymorethan$14millionfromFY15toFY16,resultinginan11%increaseintotalrevenuesasopposedtotheprojected2%increase.WhiletheFY17budgetprojectedthatallothercategoriesofrevenueswouldincrease,itagain


projectedadecreaseincapitalrevenues,inthiscaseby56%.However,iftheactualcapitalappropriationsfromthestateinFY17aresimilartothoseinFY16,wewillseea2%increaseintotalrevenuesinsteadoftheprojected1%decrease.Wepointthisouttoshowhowpivotalthestate’sdecisionsaboutfundingcapitalprojectsaretoUMB’sfinancialstatus.

Ontheexpensesside,depreciationandinterestbothgrewsignificantlyinFY15andFY16(15%and11%respectively),andareprojectedtogrowevenmoreinFY17(29%and25%respectively).Depreciationaccountedfor3.9%ofallexpensesinFY13;inFY16,itaccountedfor4.6%;anditisprojectedtoaccountfor5.7%ofexpensesinFY17.Interestpayments,whilesmaller,areprojectedtoincreaseby25%fromFY16toFY17,addingsignificantlytotheoverallgrowthofexpenses.

Thustheamountthestateinvestsinthecampus’sinfrastructureisthemaindriverbehindtheincreasingexpensesonthecampus,aswellasthemainsourceofrevenueinstability.

Table1:UMBRevenues,ExpensesandNetAssets(inthousands),FY13-FY17

Note:“TotalRevenues”arecalculatedasthesumoftheTotalOperatingRevenues,theNetNon-OperatingRevenueexcludingtheInterestonIndebtedness,andtheTotalOtherRevenues,Expenses,GainsandLosses.“TotalExpenses”arecalculatedasthesumoftheTotalOperatingExpensesandtheInterestonIndebtedness.TheprojectedamountsforFY16andFY17arefromtheUMassFY16andFY17OperatingBudgets.

Whenwelookatthenetincomeofthecampus—operatingandnon-operatingrevenuesandexpenses,excludingthecapitalrevenues,expenses,gainsandlosses(oftenreferredtoasthecashflowofthecampus)—wegetapictureofthecampus’scashrevenuesandexpenseswithoutthecapitalinvestments.Table2givesthesedetailsforFY13—FY16.

ThenetincomevaluesreportedinTable2showthatthecampushasgonefromonewithpositivenetincomeinFY13andFY14tonegativenetincomeinFY15andFY16.Overthis

IndividualRevenues:2013 2014 2015

2016Projected 2016

2017Projected

%Change2015to2016

%Change2016to2017

TuitionandFees 153,084 160,317 169,657 183,545 186,884 204,819 10% 10%StateAppropriation 89,435 100,553 110,295 116,305 117,987 127,230 7% 8%Auxiliaries 9,743 9,981 9,211 7,423 5,965 7,508 -35% 26%GrantandContracts 70,007 68,608 72,000 76,340 77,481 79,904 8% 3%CapitalAppropriation,Grants&Contracts 26,401 44,834 36,408 50,586 39%AllOtherRevenues 14,220 18,085 9,304 13,120 41%TotalRevenues 362,890 402,378 406,875 416,422 452,023 447,616 11% -1%

IndividualExpenses:SalariesandFringes 216,654 229,512 244,755 266,519 279,031Non-personnel 78,495 86,312 95,721 93,407 100,290Scholarships 11,832 11,654 12,254 13,241 16,047 14,523 31% -9%Depreciation 12,770 13,284 16,572 20,820 18,989 24,418 15% 29%InterestandOther 9,570 6,665 8,133 9,674 9,064 11,345 11% 25%TotalExpenses 329,321 347,427 377,435 403,661 411,912 429,607 9% 4%

ChangeinNetAssets 33,569 54,951 29,440 12,761 40,111 18,009As%ofTotalRevenues 9.30% 13.70% 7.20% 3.06% 8.90% 4.00%

367,812 8% 3%

32,809 28,155 -56%


Table2:UMBNetIncome(inthousands),FY13-FY16

Note:“TotalRevenues”inthistableincludeonlyoperatingandnon-operatingrevenuesfromthe“StatementsofRevenues,ExpensesandChangesinNetPosition.”Similarly,“TotalExpenses”includeonlyoperatingandnon-operatingexpenses.Noitemslistedas“OtherRevenues,Expenses,GainsandLosses”areincluded.

period,thetotalrevenuesforthecampusincreasedby20%,whilethecampusexpensesincreasedby25%.Thetwotypesofrevenuesthatdidnotincreaseatthesameratewererevenuesfromauxiliaryservices(whichdecreasedbyabout$4million)andrevenuesfrominvestmentincome.Investmentincomeisnotfullyunderthecontrolofthecampusbyitsverynatureandmustbeexpectedtofluctuate.Thedecreasedrevenuefromauxiliaryserviceswasmatchedbyasimilardecreaseinexpensesinthisarea,sothattheoverallcontributionofauxiliaryservicestothefinancesofthecampusremainedessentiallyunchangedoverthisperiod.

Thisleavesuswiththeexpensesasthedriversofthisreversaloffortuneforthecampus.Theexpensesthatexperiencedthelargestpositivechangeoverthisfour-yearperiodare:

§ depreciationandamortization(definedinthenextsection),whichincreasedatarateof49%(or$6million);

2013 2014 2015 2016

%Changefrom2013to2016

RevenuesTutionandFees 153,084 160,317 169,657 186,884 22%GrantsandContracts 70,007 68,608 72,000 77,481 11%SalesandService,Educational 3,000 3,433 4,197 3,709 24%AuxiliaryEnterprises 9,743 9,981 9,211 5,965 -39%StateAppropriations 89,435 100,553 110,295 117,987 32%Gifts 3,767 4,535 3,149 3,775 0%InvestmentIncome 8,692 11,306 4,519 4,743 -45%EndowmentReturn 1,718 1,997 2,346 2,876 67%OtherOperatingRevenues 749 998 854 2,837 279%OtherNonoperatingRevenues (636) 275 487 767 221%TotalRevenues 339,559 362,003 376,715 407,024 20%

ExpensesEducational,Research&StudentServices 221,516 233,074 247,957 271,498 23%InsitutionalSupport 40,376 46,159 55,199 57,467 42%OperationandMaintenanceofPlant 22,692 25,238 28,319 31,567 39%DepreciationandAmortization 12,770 13,284 16,572 18,989 49%ScholarshipsandFellowships 11,832 11,654 12,254 16,047 36%AuxiliaryEnterprises 10,565 11,353 9,001 7,280 -31%Unrealizedlossoninvestments 593 622Interestonindebtedness 9,570 6,665 8,133 9,064 -5%TotalExpenses 329,321 347,427 378,028 412,534 25%

NetIncome 10,238 14,576 (1,313) (5,510)

NetIncomenotincludingDepreciation/Amortization 23,008 27,860 15,259 13,479


§ institutionalsupport(upperadministrationcosts,definedmorefullybelow),whichincreasedatarateof42%(or$17million);

§ thecostsofoperatingandmaintainingthecampus,whichincreasedatarateof39%(or$9million);and

§ scholarshipsandfellowships,whichincreasedatarateof36%(ornearly$4million).

Depreciation

Depreciationandamortizationstandsoutamongtheseexpensesastheonlyitemthatisnotanactualcashexpense.AsexplainedbyRudyFichtenbaum,ProfessorofEconomicsatWrightStateUniversity:

Depreciationisawayofallocatingthecostoffixedassetsovertheusefullifeofthoseassets.Itisanexpenseandthereforeitreducesthenetassetsofauniversity.Whetherthisdiminutionofnetassetsrepresentsarealdeclineinthewealthofaninstitutionisquestionable.Forprivatecompanies,depreciationrepresentstheallocationofthecostofpurchasingplantandequipment.However,atuniversitiesandcolleges,asignificantportionofbuildingsandequipmentarepaidforbygovernmentalappropriationsorprivategifts.Thus,universitiesandcollegeshaveasourceoffundingforpurchasingfixedassetsthatisnotavailabletoforprofitbusinesses.Depreciationisanexpensethatwillshowupontheincomestatement,butunlikeotherexpensesitdoesnotrepresentanoutflowofcashfromthecollegeoruniversity.(p.5,emphasisadded)

UMassusestheoperatingfundssetasidefordepreciationtopayforconstruction-relatedprincipalpayments.AccordingtotheUniversityofMassachusettsFiscalYear2017-2021Five-YearCapitalPlan(September2016):

[Thereporteddepreciationexpense]essentiallyaccountsfortheannualdebtserviceandothercapitalexpendituresmadeandrecordedinOtherRevenues,Expenses,GainsandLossesontheSRECNP.Existingbuildingsarecurrentlyincludedinthedepreciationexpensebasedontheirusefullife.Additionally,ascapitalprojectsarecompleted,adepreciationexpensemustbeaddedintothebudget.Giventheamountofcapitalinvestmentinrecentyears,thisexpensehasincreasedsignificantlyinsupportofthatplan.(p.16)

However,theFY2017-2021CapitalPlanreportsamountsspentonprincipalandinterestforUMB($19,812,00forFY15and$21,281,000projectedforFY16)thatwerelowerthanwhatwas

Thepracticeofcoveringthefullactuarialvalueofdepreciation…reducestheamountoftuition

andstateappropriationsthatarespentonprovidingstudentswithaneducation,andbyincreasingtheapparentcostofeducation,drivesadditionaltuitionandfee

increasesforstudents.


reportedasinterestanddepreciationexpenses.ForFY15,thisamountis$4.9millionlessthanwhatUMBreportedspendingoninterestplusdepreciation,andforFY16,itis$6.7millionless.Inbothinstances,theextradepreciationthatwasnotspentonprincipalpaymentsexceededthecampus’soperatingdeficit:inFY15therewas$4.9millionofextradepreciationwhenthecampusreporteda$1.3millionloss;andinFY16therewas$6.7millionofextradepreciationwhenthecampusreporteda$5.5millionloss(seeTable2).

Thesedifferencesraisetwoquestions.First,wheredidtheextradepreciationgosinceitwasnotspentonprincipalpayments?Presumablyitwentintothecampus’sreserves,whereitcanbesavedorused.1Second,shouldthesystemcountthefullamountofdepreciationagainstthecampus’sbottomline?IfwedonotincludedepreciationamongUMB’scashexpenses,thecampus’snetincomeincreasesdramatically.ThebottomrowonTable2showsthatthecashrevenuescontinuedtoexceedthecashexpensesofthecampussuchthatin2016thecampushadanactualnetcashincomeofover$13million,asopposedtoadeficitof$5.5million.Evencountingonlytheprincipalpaymentsasacashexpenseinthelasttwoyearsresultsinapositivenetincomebalanceof$3.6millioninFY15andof$1.2millioninFY16.

Continuingtocountthefullamountofdepreciationasacashoperatingexpensemeansthatarapidlyincreasingportionofthecampus’srevenueswillbesetasidefordepreciationeachyear.Chart1showstheactualandprojectedamountsthatthecampushasandwillsetasidefromitsoperatingbudgettocoverinterestpaymentsanddepreciation.InFY16,the

Chart1:UMBInterestandDepreciationExpenses,ActualandProjected Note:FY13-16valuesareactualvaluesreportedintheUniversity’s“StatementsofRevenues,ExpensesandChangesinNetPosition.”FY17-23areprojectedvaluesasreportedintheSeniorVicePresident’sReporttotheUMassBoardofTrustees,Administration&FinanceCommitteeonSeptember13,2017.

$0

$10

$20

$30

$40

$50

$60

$70

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

Millionsofd

ollars

Interest Deprecia:on


campussetaside$19millionfordepreciation.ByFY19,depreciationisanticipatedtobenearly$30million,andbyFY23,nearly$35million(SeniorVicePresident’sReporttotheUMassBostonofTrustees,Administration&FinanceCommittee,September13,2017).UMassrecognizesthatthevalueofdepreciationwillincreaseascapitalprojectsarecompleted,regardlessofwhetherthecampusisresponsibleforpayingtheprincipalforthoseprojectsornot.Thus,thepracticeofcoveringthefullactuarialvalueofdepreciationrequiresthecampustosetasideanincreasingportionofitsoperatingrevenuesevenwhenthosefundsarenotrequiredtopayoffdebt.Thisreducestheamountoftuitionandstateappropriationsthatarespentonprovidingstudentswithaneducation,andbyincreasingtheapparentcostofeducation,drivesadditionaltuitionandfeeincreasesforstudents.

InstitutionalSupport

InstitutionalSupport(IS)isanothercampusexpensethathasgrownsignificantly.ISisdefinedbytheNationalCenterforEducationStatisticsintheirIPEDSGlossary:

Afunctionalexpensecategorythatincludesexpensesfortheday-to-dayoperationalsupportoftheinstitution.Includesexpensesforgeneraladministrativeservices,centralexecutive-levelactivitiesconcernedwithmanagementandlongrangeplanning,legalandfiscaloperations,spacemanagement,employeepersonnelandrecords,logisticalservicessuchaspurchasingandprinting,andpublicrelationsanddevelopment.Alsoincludesinformationtechnologyexpensesrelatedtoinstitutionalsupportactivities.Ifaninstitutiondoesnotseparatelybudgetandexpenseinformationtechnologyresources,theITcostsassociatedwithstudentservicesandoperationandmaintenanceofplantwillalsobeappliedtothisfunction.

FromthedatapresentedinTable2weknowthatISexpandedfroma$40millionexpenseinFY13(12%ofallUMBexpenses),toa$57.5millionexpenseinFY16,(14%ofallexpenses)—agrowthof42%.Incontrast,theexpensesforeducational,researchandstudentsupportonlygrewby23%overthesametimeperiod.

Table3presentsHowardBunsis’analysisofthedataonISsalariesandfringebenefitsinthe2013-2014IPEDSreport,andouranalysisofthe2014-2015IPEDSreport.ThesedatashowthatUMBwasanoutlieramongthecampusesinFY14,spending7.7%oftotalexpensesonISsalariesandfringebenefits.Thefollowingyear,inFY15,UMBincreaseditsspendingonISsalariesandfringebenefitsbyover8%(from$27.2mto$29.4m),whilethesystemoverallincreasedspendinginthisareabyonly4.4%(from$192.6mto$201.1m).

UMB’sISsalaryandfringeexpensesarealsohighincomparisontoUMassLowell.UMassLowellisusedasacomparisoncampusforUMBduetoitssimilaroperatingbudgetandstudentpopulation.InFY14,UMassLowellspent6.9%ofitsoperatingbudgetonISsalariesandfringebenefits.InFY15theyhadreducedthatto6.1%;whiletheiroverallexpenseshadincreasedby10.5%fromFY14toFY15,UMassLowellhadreducedtheirspendingonISsalariesandfringesby2%.Thus,inFY15,UMassLowellspent$4,130perfull-time-equivalent(FTE)enrollmentonInstitutionalSupport,whileUMassBostonspent18%more,or$4,872perFTEenrollment(IPEDSFY2015).


Table3:InstitutionalSupportacrosstheUMassSystem(inthousands),FY14&FY15

Note:DatainthistablearefromtheFY2014andFY2015IPEDS.

Inconductingourownresearchintothenumberandsalariesofadministrators,we’vefoundthatUMBreported77full-timeand1part-timeexecutives/administratorsinits2012StatisticalPortraitreportavailableontheUMBOfficeofInstitutionalResearch,AssessmentandPlanningwebsite.Fouryearslater,in2016,theyreported86full-timeexecutives/administrators.Thisisnearlya12%increaseinupper-leveladministratorsinjustfouryears.Bywayofcomparison,Table4showsthechangesinemploymentlevelsforfacultyandstaffinthesametimeperiod.From2012to2016,asthestudentpopulationgrewby9%,thefacultyincreasedthemostby13%,theprofessionalstaffincreasedby11.6%,andclassifiedstaffdecreasedby0.2%.Overthistimeperiod,thestudent:employeeratiosdecreasedslightlyforfaculty(from15.2:1in2012to14.7:1in2016)andprofessionalstaff(from15.8:1in2012to15.5:1in2016).Thelargestdecreaseinthisratio,however,wasforexecutives/administrators(from155.9:1in2012to152.3:1in2016)—thegroupthatshouldbetheleastaffectedbyUMB’sgrowingstudentenrollments.

Table4:UMBStaffingLevels,2012-2016

Note:DatainthistablearefromtheUMBStatisticalPortraits(2012-2016),Tables1and43.FTEforemployeesarecalculatedusingtheIPEDSconversionfactoroffull-time(FT)staffplus0.33timespart-time(PT)staff.

UMassInstitution ISSalaries ISFringes TotalExpenses

ISSalaries+Fringesas%ofTotalExpenses ISSalaries ISFringes TotalExpenses

ISSalaries+Fringea%ofTotalExpenses

Amherst 40,527$ 4,697$ 1,023,256$ 4.4% 42,301$ 3,348$ 1,061,031$ 4.3%Worcester 35,028$ 3,348$ 932,057$ 4.1% 37,266$ 4,177$ 797,183$ 5.2%Boston 21,524$ 5,628$ 351,886$ 7.7% 23,175$ 6,242$ 381,298$ 7.7%Dartmouth 12,609$ 3,785$ 231,125$ 7.1% 13,827$ 3,901$ 225,308$ 7.9%Lowell 18,994$ 5,502$ 353,367$ 6.9% 19,707$ 4,288$ 390,360$ 6.1%CentralOffice 32,015$ 8,919$ 99,555$ 41.1% 33,224$ 9,629$ 111,549$ 38.4%TOTALSYSTEM 160,697$ 31,879$ 2,991,246$ 6.4% 169,500$ 31,585$ 2,966,729$ 6.8%AllCampusesLessSystem 128,682$ 22,960$ 2,891,691$ 5.2% 136,276$ 21,956$ 2,855,180$ 5.5%

2013-2014 2014-2015

2012 2013 2014 2015 2016% change from 2012 to 2016

Undergraduate students (FTE) 9,410 9,688 10,079 10,371 10,280 9.2%Graduate students (FTE) 2,591 2,645 2,754 2,825 2,821 8.9%Total Students (FTE) 12,001 12,333 12,833 13,196 13,101 9.2%Exec/Admin FT 77 83 82 88 86 11.7%Exec/Admin PT 1 1 0 2 0 N/AExec/Admin FTE 77 83 82 89 86 11.7%Faculty FT 587 602 650 699 714 21.6%Faculty PT 606 571 569 572 529 -12.7%Faculty FTE 787 790 838 888 889 12.9%Professional Staff FT 694 725 758 758 788 13.5%Professional Staff PT 198 172 169 219 180 -9.1%Professional Staff FTE 759 782 814 830 847 11.6%Classified Staff FT 374 383 380 397 392 4.8%Classified Staff PT 277 258 262 243 219 -20.9%Classified Staff FTE 465 468 466 477 464 -0.2%


Andthenumberofthesepositionshascontinuedtogrow:ourbestestimateisthatasofMarch2017therewere84Executives/AdministratorsatUMB,beingpaidcollectivelyabout$13,184,298insalariesalone(seeAppendixA).Amongthesearepositionsthatinclude“Chancellor”or“Provost”intheirtitles:forexample,AssociateVice-Provost.OuranalysisoftheprevalenceofthesetitlesacrosstheUMasscampuses,presentedinTable5,showsthatinMarch2017,46individualswiththesetitleswereemployedattheBostoncampusandonly32attheAmherstcampus.Basedonstudentpopulations,thismeansthatBostonhadonehigh-levelexecutiveforeach223FTEundergraduatestudents,whileAmhersthadoneforeach738FTEundergraduatestudents.Saidanotherway,Bostonhasoverthreetimesmorehigh-levelexecutivesthanAmherstperundergraduatestudent.

Table5:High-levelExecutivePositionsatBostonandAmherst,March2017

Note:Datainthistablearecompiledfromthe“MassachusettsStateEmployeeDatabase,”MassLive.com,2/18/2016.Accessed2/20/2017.CrossreferencedwithdataprovidedbyUMB:UMass_Salary_List_UMB_Central_3_15_17.

Together,thesefindings—rapidincreaseintheinstitutionalsupportexpensecategory,institutionalsupportsalariesandfringesmakingupanunusuallylargeproportionofallexpenses,thegrowthofthesepositionsthatoutstripsthegrowthofstudentsandotherstaff,andasuper-abundanceofhigh-levelexecutivepositions—leadustoconcludethatUMBhasallowedexecutivecoststoexpandtoorapidly.Ifinstitutionalsupportexpenseshadgrownatthesamerateaseducational,researchandstudentservicesexpenses,thecampuswouldhavereduceditsexpensesby$7.8millioninFY16alone.

ScholarshipsandFellowships

Thefundsdevotedtoscholarshipsandfellowshipsalsoincreasednoticeably,particularlybetweenFY15andFY16.Toexaminethisexpense,wecomparedittothenumberofstudentsatUMassBostonandtothecostofUMB’stuitionandmandatoryfees.Table6showsthenumbersofFTEundergraduateandgraduatestudents,thecostofin-statetuitionandmandatoryfees,andthevalueofscholarshipsandfellowshipsmadeavailablebyUMassBoston.

Theamountofscholarships/fellowshipsperstudenthasincreasedfrom$959inFY13to$1,225inFY16,anincreaseof28%.Overthesametimeperiod,thecostoftuitionandmandatoryfeesatUMassBostonhasincreasedby6%forin-stateundergraduatesand19%forin-stategraduatestudents.WhilethescholarshipandfellowshipfundinghasoutstrippedthegrowthinthecostofreceivinganeducationatUMB,weapplaudthecampusadministration’scleareffortsinthisareatomakeUMBmoreaffordableforourlower-incomestudents.

Undergraduate Graduate Undergraduate AllStudentsBoston 46 10,280 2,821 223 285Amherst 32 23,616 4,796 738 888

Chancellors&Provosts

Students(FTE) Students:Chancellor/Provost


Table6:UMBScholarshipandFellowshipSpending,FY13-FY16

Note:StudentFTEsarefromTable4.TuitionandMandatoryFeesarefromUMassPresidentOfficeFactsheets.FundspentonScholarshipsandFellowshipsarefromTable2.

Conclusions

Fromouranalysis,wedrawthreeconclusionsaboutUMB’sfinancialstatus.1First,asoftheendofFY16,UMB’scashrevenuesoutstrippeditscashexpenses,includinginterestandprincipalpayments.ThisisanimportantfindinginlightofthecharacterizationsthathavebeenmadepubliclythatUMBhasbeenmismanaged,thatthecampuscannotcontinuetopayforitseducationalofferings,andthat,therefore,thecampusshouldreduceitsprogrammingforstudents.

Second,weidentifiedoneareawheresignificantsavingscouldbeachievedoncampus,namelybyreducingspendingoninstitutionalsupportingeneralandupper-levelexecutivepositionsinparticular.Webelievethatthecampusadministrationshouldlookcloselyatthisareainordertogarneranyshort-termsavings,andtobetterdistributethecampus’sfinancialresourcesinthelong-term.

Finally,wefindthatthecurrentpracticeofaccountingfordepreciationisdrivinganaccountingdeficit,despitetheactualpositivecashflow.Furthermore,duetotheneededandmuchdelayedrebuildingoftheBostoncampus,thecampus’sdepreciationburdenwillincreasesignificantlythroughFY23,causingthecurrentaccountingdeficittoballoon.Inthenextsectionofthisreport,wewillexplorefurtherthepoliciesforaccountingfordepreciationthatUMassisadheringto,andquestiontheirvalidityforUMBandforallofpublichighereducation.

Moreimportantly,however,thisexaminationofUMB’sfinancesexposesevidenceofamoreprofoundstory—thestoryoftheprivatizationofpublichighereducation.

2013 2014 2015 2016%)Change)2013)to)2016

Number'of'UMB'students:Undergraduate)FTE 9,688 10,079 10,371 10,280 6.1%Graduate)FTE 2,645 2,754 2,825 2,821 6.7%

Tu3on'and'Mandatory'Fees:Undergraduate)instate $11,966 $11,966 $11,966 $12,682 6.0%Graduate)instate $13,506 $14,168 $15,018 $16,115 19.3%

Scholarships'and'Fellowships:Funds)spent)in)fiscal)year)(in)thousands) $11,832 $11,654 $12,254 $16,047 35.6%Funds)per)total)student)FTE $959 $908 $929 $1,225 27.7%

ThisexaminationofUMB’sfinancesexposesevidenceofamore

profoundstory—thestoryoftheprivatizationofpublichigher

education.


III.ExaminingtheDriversofPrivatizationOftenwethinkofprivatizationonlyasthereplacementofpublicservicesandjobsbyprivatecompanies;forexample,whentheprovisionoffoodinacafeteriaisoutsourcedsothatthefoodservicesworkersonacampusarenolongerpublicuniversityemployees.ThistypeofprivatizationhastakenplaceatUMBandonmanyotherpublichighereducationcampuses,anditisoftenaccompaniedbylesscontroloverthequalityoftheservicesprovidedandaworseningofthepayandbenefitsfortheworkersinthoseprivatizedjobs,asmoneyistakenawayfromtheworkerssotheprivatecompanycanpayitsownmanagersandturnaprofit.Butthisisonlyonetypeofprivatization.

ThesituationatUMBprovidesuswithacasestudyofotherwaysthatprivatizationoperates.Weseeprivatizationintheapplicationofprivatesectoraccountingmethodstopublicsectorinstitutions.WeseeitinthetransferofthecostsofconstructionofUMB’spublicbuildingsontothecampus’sbooksandawayfromthestate.Andweseeitintheever-increasingcostofpubliceducationthatisbeingbornebyourstudentsandtheirfamilies.

UnderfundingPublicHigherEducation

Overthelastfewdecades,wehaveexperiencedashiftingofthecostofpublichighereducationfromthestatetotheindividualstudent.Inthe1970spublicfundingpaidfor85%ofthecostofanin-statestudent’seducation,makinghighereducationtrulyaccessibleandaffordableforthevastmajorityofpeopleinMassachusetts(Bears).Thatisnolongerthecase.Inthefifteenyearsbetween2001and2016,theper-studentstateappropriationforourfourundergraduateUMasscampuseshasdecreasedby$4,200,whilethetuitionandfeespaidbystudentshasincreasedby$5,400(Schuster).Thus,thecostofeducationbornebyourstudentsnearlydoubledin15years,evenafteradjustingforinflation,leavingstudentspayingfor56%ofthecostsoftheireducation,asdocumentedbelowinthechartfromSchuster’sreport.

Whilethisshiftingofcostsontoindividualstudentsishappeninginotherstatesaswell,Massachusetts’contributiontowardpublichighereducationisamongthelowestinthenation.IthasbeenwelldocumentedthattheCommonwealth’sappropriationforhighereducationonapercapitabasisisbelowthenationalaverage,andthattheCommonwealthmadesignificantcutstostatefundingforhighereducationafter2008(Schuster).However,despitetheimprovementinourstate’sfinancessincethen,ourpublichighereducationfundingstilllagsbehind:in2008wespentover$10,000perstudent,butin2016wespentonly$8,748,leavingusnearly16%belowourpre-recessionleveloffunding(Mitchelletal.).WealsocomeupshortwhenwecompareMassachusetts’spendingonpublichigher

Inthe1970spublicfundingpaidfor85%ofthecostofanin-state

student’seducation,makinghighereducationtrulyaccessibleand

affordableforthevastmajorityofpeopleinMassachusetts.Now

Massachusetts’contributiontowardhighereducationisamongthelowest

inthenation.


educationtotheinvestmentsmadebyotherstates.InFY2015,ourCommonwealth’seducationalappropriationswere$238lessperfull-timestudentthantheUSaverageforstatespendingonpublichighereducation(StateHigherEducationExecutiveOfficersAssociation,2016).Ourspendingonhighereducationispaltrywhenweconsiderhowwealthyourstateis:MAwas43rdinthenationforamountofstatesupportforpublichighereducationper$1,000ofpersonalincomeinFY2016andFY2017(GrapevineSummaryTablesFY2016-2017).

Chart2:StudentShareofHigherEducationCostsinMA,FY01–FY16

Asnotedabove,theprimaryeffectofunderfundingfromtheCommonwealthisthatitdrivesupthecostoftuition.Andincreasingtuitionandfeesdirectlyimpactsstudents,drivingupdebtandpricingsomelocalstudentsoutofaneducation.By2015,75%ofUMassundergraduatesgraduatedwithstudentdebt,andtheaveragedebtwasnearly$31,000.Thisdebtloadhadincreased19%inonlyfouryears(UniversityofMassachusettsAnnualIndicators2011-2015).

Underfundingalsopushesuniversitiestoseekhigher-payingstudentsinordertomakeendsmeet,givingmoreseatstoout-of-stateandinternationalstudentswhilemakingitharderforlocalapplicantstobeaccepted.WhilethemajorityofUMassstudentsarestillfromMassachusetts,theproportionofin-statestudentshasdecreasedinrecentyears.TheFactSheetsavailableontheUMassPresident’swebsiteshowthatinthefallof2008,in-statestudentsmadeup86%ofallUMassundergraduatesand91%ofUMB’sunder-graduates.Bythefallof2015,in-statestudentenrollmenthadfallento81%forallofUMass,andto85%ofUMB’sundergraduateenrollment.Initssearchforhigher-payingstudents,ourpubliccampusesdevelopcontractswithentitieslikeNavitas,aprivatefor-profitcompanythatrecruitsinternationalstudentswiththepromiseofadmissionintoUMBuponcompletionofoneyearofstudy.


Finally,underfundingmayputpressureonourcampusestoeliminateprogramsthatrequirestatesupport.Smallerprogramsthataddressimportantsocialissuesofraceanddiversity,ethnicheritageandculture,arts,labor,etc.,maybeeyedforeliminationbecausetheyarenot“profitable.”Iffollowedtoitslogicalconclusion,thiscorporatementality—thataneducationalprogramisonlyofvalueifitisprofitable—willleaveuswithanarrowsetofprogramsthataretiedtolocalindustries,reducingeducationforourstudentstothedevelopmentofskillsforemployment.Thebenefitsofabroadeducationthatencompasseshistory,arts,literature,aswellasSTEMspecialties,wouldbereservedsolelyforthosestudentswhocanaffordtoattendaprivateuniversity.Thisisnotthefutureweenvisionforourstudents,ourcampus,orforanypublichighereducationinstitution.

FundingtheRebuildingofUMassBoston

StatecapitalinvestmentisanotherareawhereMassachusettsranksbelowthenationalaverage.AsreportedinSchuster’s2016analysisfortheMassBudgetandPolicyCenter,whilethestate’sspendingonhighereducationcapitalprojectshasfluctuatedwidelyinrecentyears,ourspendingoverthepast15yearsplacesus30thinthenationforperstudenthighereducationcapitalspending.This15-yearspancoverstheearly2000’swhentherewaslowstatecapitalinvestment(between$50to$130millionannually),andtheyearsafterthe2008highereducationbondbill,whichincluded$1.0billionforUMasscapitalprojects.

Inthisenvironmentoflimitedstatesupport,theUMBadministrationwasconfrontedwiththerealityofcrumblingcampusbuildingsandtheundeniableneedtosubstantiallyredesignandrebuildtheBostoncampus.Updatingandmovingtheutilitiesuponwhichthecampusdepends—water,electricity,heat,airconditioning,gas,telecommunications,andnetworking—hasbeenessential.Thesesystemsarehousedinthecampussubstructurewhich,duetofaultyinitialconstructionfollowedbydecadesofneglect,israpidlydeteriorating,puttingthesesystems,aswellasthesafetyofthestudentsandemployees,atrisk.Inadditiontothecollapsingsubstructure,mostofthecampus’sclassrooms,teachingandresearchlaboratories,andofficespacehousingfacultyandstaff,areinbuildingsplaguedbyleaksandindoorairqualityproblems.Asourcampuspopulationofstudentsandemployeeshasgrown,thesizeandnumberofteachingspacesandofficesarenotsufficienttohouseusall,therebynecessitatingtheconstructionofnewbuildings.

FundssecuredbyGovernorPatrickthroughthe2008HigherEducationBondBillhavehelpedtocoversomeofthecostsofrebuildingtheUMBcampus,includingbuildingtheIntegratedScienceCenter(ISC)andpartiallyfundingtheongoingsubstructureproject.Withnoothersourcesoffunding,thecampushashadtoabsorbtheremainingconstructioncosts,mostnotablyincludingtheutilitiescorridorandthegeneralacademicbuilding,nowknownasUniversityHall.AccordingtoUMass’sFY2017-2021CapitalPlan(issuedinSeptember2016),ofthe$968millionneededtocompletethe12UMBprojects“devotedtoaddressingtheissuesthatderivedirectlyorindirectlyfromthedeteriorationoftheSubstructureandtheneedtodemolishitalongwiththeScienceCenterandClarkPool,”only18.4%($178m)hascomefromthestatesofar;UMBhasborrowedthevastmajorityofthefunds($510mor53%),withanadditional$26m(2.7%)providedthroughlocaland


externalfunding.Aboutaquarterofthefundsneededforthisworkhaveyettobeidentified.ThishasleftthecampuswithoutthefundstoconstructanadditionalacademicbuildingtohousetheprogramscurrentlyhousedinthecondemnedScienceCenter.

Thevisionforthisrebuildingwascapturedinthecampus’sSeptember26,2011reporttitled,FulfillingthePromise:TheReportoftheUniversityofMassachusettsBostonStrategicPlanningImplementationDesignTeam,availableontheUMassBostonwebsite.Inadditiontolayingouttheplanforrebuildingthecampus,thereportaddressesthefinancialimplicationsoftheplan.FulfillingthePromiseidentifiedincreasingstudentfeesandincreasingthenumbersofout-of-stateandinternationalstudentsasthelargestsourcesofadditionalrevenuesfortherebuilding.ThisapproachwasoptimisticinthatitreliedonincreasingstudentenrollmentatUMB,despitetheprojectionsavailableatthetimethatthehighschoolgraduatingpopulationinMassachusettswouldshrink,andthattotalenroll-mentinpublichighereducationinstitutionswouldincreasebyonly15percentoverthedecadebetween2004and2015;UMB’splancountedona16percentincreaseinenroll-mentsinjustsixyears,2010to2016(HussarandBailey,p12).

Moredisturbingthantheoptimismaboutenrollmentistheovertintentionbuiltintotheplantohavecurrentandfuturestudentsshouldertheburdenoftheconstructiondebtbyfurtherraisingthecostoftuitionandfees.Thiswouldbeaburdenonstudentsatanypubliccampus,butitisanimpossibleburdentoplaceonUMBstudents.Increasingthecostofeducationimpactsallstudentsbyincreasingthenumberofhourstheymustworkinordertopayforschool,andbyincreasingthepersonaldebtofthosewhocontinueintheirpursuitofhighereducation.Moreover,tuitionandfeeincreasesdenyaccesstomanystudentswhocannotaffordtotakeonmoredebt,undercuttingthemissionofUMB,itsstudents,andthecapacityoftheentireUMasssystemtoservetheCommonwealth’sgrowingpopulationsofimmigrant,firstgeneration,lowincomeandstudentsofcolor.

TheUMassBoardofTrustees(BOT)hadoversightoverthisplanandoverthedebtshoulderedbythecampus.TheBOTcouldhaveprioritizedtherebuildingoftheBostoncampusunderthe2008HigherEducationBondBill,orsoughtothersourcesoffundingtoensurethattheneededrebuildingcouldhavemovedforward,perhapsataslowerpace,butwithoutseverelyaffectingcurrentandfuturestudents.Instead,theBOTallowedtheplantomoveforward,fullycognizantofthefinancialimplicationsforstudentsandforthecampus.

InsteadoftakingthenecessarystepstoensurepublicfundingfortherebuildingofUMB,thesystemandthecampushaveturnedtopublic-private-partnership(orP3)agreementsforsomeoftheirbuildingneeds.Thesepartnershipscomewithenormouscostsforthestudents,employeesandthepublic.Whilethecampusmaygetaresidencehallbuiltwithouttakingonmoredebt,thestudentsmostinneedofhousingwillnotfinditthere.Insteadofbuildingadormitorycontrolledbythestatetoensurean

Tuitionandfeeincreasesdenyaccesstomanystudentswhocannotaffordtotakeonmoredebt,undercuttingthemissionofUMB,itsstudents,andthecapacityoftheentireUMass

systemtoservetheCommonwealth’sgrowingpopulationofimmigrant,firstgeneration,lowincomeand

studentsofcolor.


affordablehousingoption,anoutsidecompanywillbuildwhatisessentiallyanapartmentcomplex,chargingmarket-raterentswhichmostlocalstudentscannotafford,sothattheprivatecompanycanturnaprofit.Inawell-meaninggesture,thecurrentUMBadministrationisanticipatingissuingfinancialaidtohelpcoverlow-incomestudents’housingcostssosomecouldliveinthedorm.Whilethismayhelpafewstudents,itshiftsmoreoftheUniversity’soperatingbudgetintothehandsofaprivatefor-profitcompany.Thesurroundingcommunitymaysuffertoo,sincethese“partnerships”canchangethelocaleconomiclandscape,perhapsdrivinguprentsandforcingresidentsoutoftheneighborhood.

BalancedBudgets,ReservesandDepreciation

TheBOThasmadeitclearinstatementsatcommitteemeetingsoverthepastyearthattheywillnotallowUMBtocontinuetorundeficitswhilepayingoffconstructiondebt.Instead,theBOTisinsistingthatUMBbalanceitsbudgetandprotectitsreserves.Todothis,UMBwillhavetocutacademicprogramming,faculty,and/orstaffinordertoabsorbtheprincipalandinterestpaymentsontheconstructiondebt.Indeed,thosecutshavealreadybegun.Wewon’tknowtheactualnumbersofthisyear’srevenuesandexpensesuntiltheofficialfinancialstatementsarereleased,butwedohavetwonumberstoconsider:apurported$25milliondeficitandaprojected$23millionofdepreciation.UMBisbeingtolditmustmake$25millionworthofcutsinthe2017-2018academicyearinordertoshowabalancedbudgetthatincludessettingasideapproximately$23millionworthofactualrevenuesforprincipalpaymentsanddepreciation.

Isthisdemandineithertheshort-orlong-terminterestsofourstudents?Wedon’tbelieveitis.UMB’strackrecordshowsthatuntil2014wehadbeenbuildingourreserves.Overthepastthreeyearsthecampususedsomeofthosereservestomakedebtpayments.Toinsistthatthefullamountofthedebtbepaidforoutofthecampus’srevenuestakesresourcesawayfromeducatingourstudentsandlimitstheireducation.

TheBOThasotheroptions.ItcouldallowUMBtorunadeficitforthenextfewyears,usingreservestopaydownsomeofthedebt.Inaddition,theBOTcouldreleasesomeofthecentraloffice’sreservestohelpcoverprincipalpayments,showingthatUMasstrulyisasystemthatbenefitsfromandsupportsallofitscampuses.TheBOTcouldworkhardertosecurestatefundstofullyfundtheconstructionoftheutilitycorridor,substructure,parkinggarageandnewclassroombuildings.Asdiscussedabove,UMBhastakenonthelion’sshareofdebtfortherebuildingofthecampus.Anotherbondbill,suchasthe2008HigherEducationCapitalImprovementAct,couldprovidethestatefundingneededforthereconstructionofthecampus.Finally,theBOTcouldendorseandactivelysupporttheFairShareAmendment,designedtoprovidemoretaxrevenuesforpubliceducation,andcommitaportionofanyresultingrevenuestopayingofftheprincipalofUMB’sconstructiondebt.Thesestepswouldaddresstheshort-termfinancialneedsofthecampus,minimizingoreveneliminatingthepressuretosqueezesavingsoutofacademicandstudentsupportprograms,andtheywouldshifttheburdenoftheconstructiondebtawayfromstudentsandbackontothestateandUMasssystem,whereitbelongs.


ThealternativesoutlinedabovewouldallhelptoreduceUMB’sdebtburden,reducingtheamountofthecampus’soperatingfundsspentoninterestandprincipalpayments.Butthereisanotheraspectofthebudgetingprocessthatposesalong-termproblem:depreciation.Accountingfordepreciationasacashexpense—apracticeimplementedinresponsetothenon-governmentalGovernmentAccountingStandardsBoard(GASB)Statement35atthebeginningofthiscentury—isproblematic.Onitsface,itrequiresthateachcampussetasideaportionofitsannualoperatingfunds(e.g.tuition,fees,stateappropriations,grants,gifts,etc.)topayforthereplacementcostsofbuildingsandequipment.Thisrequirementisflawedbothinitstheoryandapplication.Itdoesnotaccountfortherealitythatthestateshouldpayfortheconstructionofpublicbuildings,whilethecampuspaysannuallyfortheirupkeepandforequipmentreplacementfromotherpartsoftheoperatingbudget.Additionally,inpracticethismoneydoesnotappeartoactuallybesetasidetopayforrepairsandequipmentreplacement;ifitwere,therewouldbeafundavailabletothecampusforsuchcosts.

Countingdepreciationasacashexpenseresultsinreducingtheamountoftheoperatingbudgetthatactuallycanbespentoneducatingstudents.WhiletheBOTmaynotbeabletorefusetoadheretoGASBstatements,wedoexpecttheBOTtounderstandtheimplicationsofthosepracticesandtakestepstomitigateagainstthemostdamagingones.InUMB’scase,theexpectationthatthefullvalueofdepreciation—amountsgreaterthantheneededpaymentsforprincipalandinterestpayments—besetasidefromoperatingfundsisnotinthebestinterestofourstudentsandprograms.Thecampusshouldnotbemadetocutacademicprogramming,orfacultyandstaff,inordertobalancethefullactuarialvalueofdepreciation.Tomakemattersworse,theBOThasinsistedthatthecampusnotbeallowedtospenditsreserves—reservesbuiltupovertheyearsinpartfromaccountingfordepreciation—tocoverthenewbuildingcosts.

Tobeclear,thegoaloftheGASBrequirementsaretoensurethatbondholdersaregivenafullaccountingoftheirinvestments.Whilethismaybewarrantedforinvestmentinprivatecompanieswhereinvestorsruntheriskoflosingtheirmoneyifthecompanygoesbankrupt,thisismuchlessofaconcernforholdersofpublicbonds.Aspointedoutearlier,thefundingmechanismsforlargepubliccapitalprojectsdonotrestsolelyontheshouldersofanyonecampus.Byrefusingtotakestepstomitigateagainsttheseeffectsofhavingtoincludethefullactuarialcostofdepreciationineachcampus’soperatingbudget,theBOTissuccumbingtotheconcernsofbondratingagencies.TheprimaryinterestoftheBOT,however,shouldbeprovidingthebesteducationalexperienceforourstudentsandforthefamiliesofourCommonwealth.TheoverallfinancialhealthoftheUMasssystemandofourCommonwealthshouldallowtheBOTtoloosenthestricturesithasplacedonUMBofafullybalancedbudgetandincreasingreserves.


IV.OurRecommendationsWebelievethatUMBcancontinuetothriveasapublichighereducationinstitutioncommittedtoprovidinganaffordableandricheducationalexperiencetoadiverseurbanpopulationandupdateitscampus’sphysicalinfrastructureandeducationalresources.Weofferthefollowingrecommendationstohelpachievethatgoal:

1. UMBshouldimmediatelybereleasedfromtheobligationtoachieveapositivenetincome,andshouldnotberequiredtoincludethefullactuarialvalueofdepreciationasacashexpense.Thecampusshouldbeallowedtousereservestomakepaymentsontheconstructiondebt,andtheBOTshouldreleaseCentralOfficereservestoaidinthepayingofthisdebt.

2. TheUMBadministrationshouldengageinanopenandtransparentprocesstolookatthefinancesofthecampus,andaplanshouldbedeveloped,withinvolvementofstudentsandemployees,toensurethatthecampuscancontinuetoprovideanaffordableanddiverseeducationalongwithappropriatesupportservicestoitsstudents,andensurereasonableworkloadsforitsfacultyandstaff.Thisplanningprocessshouldincludeareviewofinterestandprincipalpayments,andshouldassesstherapidincreaseinupperadministration(InstitutionalSupport)expenses.

3. TheBOTshouldendorsetheFairShareAmendmentandworktoensurethat,ifpassed,significantmoniesarecommittedtofundingpublichighereducation,asintended.

4. TheMALegislatureshouldprovidefundsintheimmediate-termtocoverallthecostsofreplacingdeterioratingbuildingsontheUMBcampus,includingfullyfundingtheUCRRandsubstructureprojects.ThiscouldbedonebyapprovingGovernorBaker’srecentbill“AnActProvidingforImmediateCapitalImprovementNeedsoftheCommon-wealth,”whichincludesapproximately$1billionforMassachusettspublichighereducationcampusfacilitiesandgrounds.Whilethisbillstopsshortofprovidingfundingforreplacementacademicbuildings,itisasignificantsteptowardensuringresponsibleandappropriateconstructiononallcampusesandtowardre-establishingthestate’sresponsibilityforthecostofreplacing,renovating,andmaintainingourcampuses.Campusesthatchoosetounderwriteadditionalbuildingprojectsmustbeabletoabsorbthecostsanddebtwithoutincreasingtuition,decreasingacademicofferings,orreducingstaffinglevels.

5. TheMALegislatureshouldannuallyincreaseappropriationsforpublichighereducationuntilweareatleastonparwiththenationalaveragebasedonourstate’swealth.ThisgoalwouldmovetheCommonwealthtowardspending$5.26per$1,000ofpersonalincomeonstatesupportforpublichighereducation,asWisconsincurrentlydoes,andawayfromthe$3.51per$1,000ofpersonal

WebelievethatUMBcancontinuetothriveasapublichighereducationinstitutioncommittedtoprovidinganaffordableandricheducationalexperiencetoadiverseurban

populationandupdateitscampus’sphysicalinfrastructureandeducationalresources.


income,aswecurrentlydo.ThisshouldbedoneaspartofanagreementwiththeUMasscampusesnottoincreasetuitionandfees.TheFairShareAmendment,ifpassed,couldhelpaddressthesefundingneeds.

Inconsideringtheserecommendations,weaskthatweall—membersoftheMAlegislature,theUMassBOT,UMB’sadministration,andthelargercommunityofBoston—rememberthepurposewithwhichwearetasked.ChancellorJohnW.Ryan,atUMassBoston’s1966FoundingDayConvocation,remindedthosegatheredthat“wehaveanobligationtoseethattheopportunitiesweoffer…areindeedequaltothebestthatprivateschoolshavetooffer.”ThisistheexpectationthatthecitizensofourCommonwealthhaveforthemselvesandtheirfamilymemberswhentheycometoUMassBoston.ThisistheresponsibilitythatUMBstaff,facultyandadministratorstakeoneachdayonbehalfofourstudents.ThisshouldbewhatguidesthedecisionsoftheBOTandtheMAlegislatureasweworktoaddressthecrisisatUMB.


Endnote1ThisanalysisisbasedontheinformationprovidedinfinancialdocumentsmadeavailableontheUniversityofMassachusettsPresident’sOfficewebsite.InameetingonSeptember12,2017,shortlypriortotheplannedreleaseofthisreport,theauthorswereinformedbytheUMassBostonadministrationthatthecampushasbeenmakingcapitalizedinterestpayments,interestpaymentsonborrowedfundsthathavenotyetbeenusedforcapitalimprovements.ThesepaymentsaremadefromtheUMBreservefundsandarenotreflectedinanyoftheavailablefinancialdocuments.TheauthorswerealsotoldthatthecampusadministrationexpectsthesepaymentstobecompleteinFY18.Whilewehavenothadtimetoexploreandassesswhatimpactsthisnewinformationhasonourconclusionsaboutthecampus’scashflowandnetcashincome,itisclearthatthisisyetanothercostthecampusistakingonaspartoftherebuildingofUMB.


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APPENDIXA:UMBUpper-LevelAdministrativePositionsasof3/15/2017• 84UMBnon-unit,upper-leveladministratorsearnmorethan$100,000annually.

Thetotalannualsalaryforthisgroup(notincludingbenefits)is$13,184,298.

• 46oftheseadministratorshaveeitherChancellororProvostintheirtitle.Thetotalannualsalaryforthisgroup(notincludingbenefits)is$8,021,129.

o 28upperadministratorpositionsinclude‘Chancellor’intheirtitle,including2positionscurrentlybeingsearched.Thesalariesforthesepositionstotals$4,803,107.

§ 1Chancellor§ 1DeputyChancellor§ 1AssistantChancellor§ 1ChiefofStaff/AssistantChancellor§ 1SpecialAssistanttotheChancellor§ 5ViceChancellor(notincludingProvost/VCAcademicAffairs)§ 1InterimVice-Chancellor§ 1SpecialAssistanttotheVCofStudentAffairs§ 1Sr.AssociateViceChancellor§ 3AssociateViceChancellors§ 12AssistantViceChancellors

o 18upperadministratorspositionsinclude‘Provost’intheirtitle.The

salariesforthesepositionstotals$3,218,022.§ 1Provost/ViceChancellorforAcademicAffairs§ 3AssociateProvosts§ 5Vice-Provosts§ 4AssociateVice-Provosts§ 5AssistantVice-Provosts

• RatioofUMBUpperAdministratorswithChancellororProvostintheirtitlesto

UMBStudents(10,280undergraduatesFTE+2821graduatestudentsFTE):o 1chancellororprovostforevery223undergraduates(FTE)o 1chancellororprovostforevery285totalstudent(FTE)

TitlesandSalariesof46Non-UnitUpper-LevelAdministrators

28ChancellorTitles:Chancellor $355,059DeputyChancellor $250,001AssistantChancellor $212,133ChiefofStaff/AssistantChancellor $219,448SpecialAssistanttoChancellor $116,899


ViceChancellor—Administration&Finance $269,697ViceChancellor—Athletics&Recreation/SpecialPrograms&Projects $219,019ViceChancellor—EnrollmentManagement $223,328ViceChancellor—GovernmentalRelationsandPublicAffairs $194,774ViceChancellor—StudentAffairs $228,938SpecialAssistanttotheVCofStudentAffairs TBD/searchingInterimViceChancellor—UniversityAdvancement $170,000SeniorAssociateViceChancellor—StudentAffairs $183,821AssociateViceChancellor—AcademicAffairs $167,614AssociateViceChancellor—AlumniRelations&UMBFund $141,140AssociateViceChancellor—DeanofStudents TBD/searchingAssistantViceChancellor—AcademicAffairs $115,000AssistantViceChancellor—Budget&FinancialPlanning $169,505AssistantViceChancellor—HumanResources $197,000AssistantViceChancellor—SpecialProjects $164,079AssistantViceChancellor—CampusMasterPlanning $158,230AssistantViceChancellor—CampusServices $153,546AssistantViceChancellor—EnrollmentManagement $128,623AssistantViceChancellor—FacilitiesManagement $201,692AssistantViceChancellor—Finance&Operations $135,976AssistantViceChancellor—Leadership&CapitalGiving $140,077AssistantViceChancellor—UniversityAdvancement $124,203AssistantViceChancellor—Contract&Compliance $163,305

18ProvostTitles:Provost&ViceChancellorforAcademicAffairs $297,769AssociateProvost $209,523AssociateProvost $199,298AssociateProvostforIR $139,398ViceProvost—AcademicSupportServices $184,972ViceProvostforEconomicPlanning $217,921ViceProvostandDirector,OGP $188,650ViceProvostforResearch $242,486ViceProvost—InformationTechnology&CIO $231,753AssociateViceProvost—AcademicSupport $148,048AssociateViceProvost—DirectorofORSP $209,776AssociateViceProvost—ResearchandGraduateStudies $188,649AssociateViceProvost $132,351AssistantViceProvostforCIS $133,164AssistantViceProvost $126,009AssistantViceProvost—ApplicationServices $131,330AssistantViceProvostforBusinessOps $111,925AssistantViceProvostforITClientServices $125,000

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