August 4-5, 2005

AUGUST 4/5, 2005

1. Roll Call
Present- Mr. Thomas Carlson, Governor
Mr. Michael Duggan, Governor
Mr. Gordon Elliott, Governor
Mr. Michael Franks, President of the Board
Ms. Carol Pinegar, Governor
Ms. Mary Sheid, Vice President of the Board
Mr. Ryan Sivill, Student Governor

Absent- Ms. Phyllis Washington, Governor

Present- Michael Nietzel, President
Paul Kincaid, Chief of Staff
John McAlear, Secretary of the Board

2. Presiding --- The presiding officer for the meeting was Mr. Michael Franks, President of the Board of Governors. He called this board retreat to order at 1:00 p.m. in the Colorado conference room in the University Plaza Hotel in Springfield, Missouri.

Mr. Franks welcomed the other governors to this retreat stating that the Board will be making a lot of important decisions over the next few years in charting the path of the University. He indicated that this session is important to understand where we are at the present time regarding enrollment, revenues, expenditures, compensation, and academic programs. We need to establish the base line for each of these areas.

3. Board Bylaws and Procedures --- Mr. John Black, General Counsel, first reported that the Board would need to adopt new bylaws at their first meeting following the change of the University's name to Missouri State University. He summarized some possible changes to the bylaws including:

* establishing a three-member Executive Committee of the Board to act for and on behalf of the Board of Governors when the Board is not in session;

* authorizing the President of the University to subdelegate to other University officers and employees the authority to execute contracts for the University;

* requiring the Board of Governors, or its designated committee, to approve fringe benefit policies, levels, and qualifications;

* changing the number of governors required to vote "yes" for certain actions from a quorum of the majority of all members of the Board to a majority vote of a duly constituted quorum; and

* establishing a consent agenda for each regular meeting of the Board.

After discussion, the Board indicated that they believed that the proposals presented could help in their roles as governors. Mr. Carlson commented that there should be a procedure in place to handle those individuals who would like to address the Board. Mr. Franks asked that Mr. Black distribute a copy of the Board policy regarding this issue to the individual governors.

4. Enrollment Trends and Tuition Policies --- Dr. Don Aripoli, Vice President for Student Affairs, first provided a brief history of the University's 1993 decision to adopt a "selective admission" standard and the adoption of a "selection index" (sum of high school class rank percentile and ACT or SAT percentile) concept to determine the eligibility of first-time freshmen. For Fall 2006, the Board has already approved a "selection index" of 108. He also briefly mentioned what the Enrollment Management Committee has approved as the total enrollment targets for the Springfield campus: undergraduates – 16,500 to 18,000; graduates – 3,000 to 3,500; for a total of 19,500 to 21,500. The Fall 2004 enrollment was 19,330. Dr. Aripoli then briefly discussed the concept of charging differential fees based on the differences in cost of specific programs. He ended his presentation with what many schools are currently investigating – a tuition policy that will let students and parents know what tuition costs will be during their stay at an institution. Dr. Michael Nietzel added that we will try to come up with a policy for our next cycle – we can't go forward with a policy where the fees are uncertain each year.

5. Revenues --- Mr. Kent Kay, Chief Financial Officer, reported that the budgeted total revenues for FY06 are $248 million. Regarding the increase in credit hours each year, he explained that one has to look at the mix of credit hours when projecting student fee revenue as nonresident credit hours (higher fee per hour) have been decreasing and in-state credit hours and pre-college (lower fee per hour) have been increasing. In an expanded discussion on a differential fee concept, Dr. Nietzel explained that you would not necessarily set your fees based on academic major as most of your course work is outside of your major.

6. Budget, Expenditures, Salaries, Benefits, and Capital Projects --- Mr. Kay then indicated that to meet the expectation that state appropriations will continue to be flat and that there is pressure to keep student fee increases close to the rate of inflation, the university's budget policies and practices will need to change. To fund our priorities, a planned internal reallocation will need to take place. Also, as much as possible, responsibility and accountability for budget decisions will be pushed down to the major unit level. For FY06, $1.2 million has been identified in the existing budget for programmatic initiatives and enhancements. Also, we are requesting a reallocation of 1% of personnel expenses by cost centers to be used for mid-year merit and/or equity based salary adjustments. Dr. Nietzel added that this is to help address the common theme that came out in the departmental summaries that he received in May – low compensation. Since the salary adjustments will take place mid-year, one half of the reallocation is available for one-time expenses. It is planned that in each of the next two years, reallocations of 1% of total expenses by cost center will be established. Another change from the past is that salary savings will not be retained and managed centrally – it will be retained and managed by cost center. He added that the policy of carrying forward unspent budgeted funds from one year to the next will change – at the end of FY06, 50% of unspent budgets will carry forward.

Mr. Kay then reported that when compared to 185 public masters level institutions, SMSU's average faculty salaries are less than the comparative institution's average for all faculty ranks except instructors. SMSU has 41.88% of its faculty at the professor rank compared to 32.5% for the comparative group. He added that when analyzing the breakdown of total compensation and benefits - that both employee insurance and state retirement expenses are making up a larger portion of the total when comparing budgeted FY06 numbers with actual FY03 numbers. He next showed that SMSU's compensation and benefit percentage of total operating expenses exceeds the percentage of several other Missouri public institutions and other comparable institutions. He ended his report by indicating that earlier this year, $814,000 had been transferred to the self-funded insurance reserve to bring the reserve balance within the Board's guidelines of having two to three months of claims in reserve. Our total claims for the first six months of this calendar year are less than last calendar year so we are now in a position of taking back $750,000 of this amount. After doing so, we would still have more than two months of claims in our self-funded reserve.

Mr. Greg Burris, Vice President for Administrative and Information Services, next reported that the salaries of many classified staff positions on campus compare unfavorably when compared to market. He also presented charts showing that many mid-level administrative/professionals and executives have salaries that are less than 90% of the CUPA comparison groups. He next focused on the University's healthcare costs. The University's contribution has grown steadily – 5.30%, 15.80%, and 25.50% increases, respectively, in 2003, 2004, and 2005. He added that the individual employee does not contribute anything to the cost of his/her medical insurance. It was mentioned that to help educate the individual employee of the rising healthcare cost dilemma, the employee should be contributing to the cost. This is one possible change in the near future. He noted that the one segment that is not doing well when compared to their claims is retirees. Even in years where the self-funded plan increased its reserve, the retiree segment could not cover their claim expense with the premiums being paid. It was discussed that to help stop the bleeding in this area, consideration should be given to taking the benefit of being allowed to retain retiree medical insurance away from future hires – it was acknowledged that this would not help the problem in the immediate future. Mr. Burris commented that the Healthcare Plans Review Committee was presented this possibility and did not recommend it. It was noted that the retiree medical claim deficit would need to be investigated further.

Mr. Burris next reported on the maintenance and repair challenges that the University faces. We are last in the state in gross square feet per fte students. He added that the industry standard is to invest 2-4% of your base construction replacement value annually. We grew to 2.4% by 1997 but we are now at 1.6%. We have a maintenance-and-repair reserve of about $350,000 while the boiler replacement project would cost about $2.8 million. He added that we need to design a mechanism to increase our maintenance and repair funds to be ready to respond to emergencies.

At 5:45 p.m., Mr. Franks recessed the meeting. The meeting was reconvened at 8:30 a.m. the next morning, August 5, 2005.

7. Futures Task Force, Mountain Grove Task Force, & Long-Range Plan --- Dr. Frank Einhellig, Acting Vice President for Academic Affairs, next reported on the recently formed Futures Task Force. He indicated that the Task Force is to recommend up to 12 priority academic areas where the University should focus new and reallocated resources. These areas should be compatible with the University's mission, should address special needs of Missouri, Springfield, and the Ozarks, and should be areas where growth in knowledge is expected to be most dramatic. Dr. Jim Baker, Vice President for Research and Economic Development then briefed the Board on the SMSU-Mountain Grove Research Campus Task Force. Its charge is to determine the role that the Campus will play in support of the Missouri State University System. Dr. Baker next informed the Board of the change in the timeline of the University's next long-range plan. With the input received from the Futures Task Force, the SMSU-Mountain Grove Task Force and the other committees recently established by Dr. Nietzel, it is hoped that the long-range plan will be approved by the Board at their December meeting and distributed by February 1, 2006. Dr. Nietzel indicated that he has also asked Mr. Jim Anderson of the Chamber of Commerce to lead a group of external constituencies to provide input on the needs of community and area and that this will be reflected in the long range plan. Dr. Einhellig next reported on the Higher Learning Commission (HLC) 2005 Self Study. The HLC accredits the institution – not individual programs. The University HLC Steering Committee has been working since 2002. He indicated that the draft self-study report will be posted to the internet in early August and sent to the HLC in mid-September. The site team visit will be November 7-9, 2005 with a decision by the HLC Board of Trustees in February/March of 2006.

8. West Plains Campus --- Mr. Kent Thomas, Chancellor of the West Plains Campus, began his report by citing the statute that created the West Plains Campus – "..shall be a teaching institution…to meet the ongoing and emerging employer and educational needs of the citizens of the area served. The area served is Wright, Texas, Shannon, Oregon, Howell, Ozark, and Douglas counties. He explained that they are not considered a community college - there is no local tax base such as at the two-year community colleges around the state. The average credit hour fee of the community colleges is about $73. The SMSU-West Plains credit hour fee is $97. This causes a challenge. To stay within its limited resources, they have moved from two academic deans to one dean and one associate dean and they have eliminated the Enrollment Services department.

Mr. Carlson requested that since the China campus is actually a part of the SMSU-West Plains campus, he would like to hear a status report on our China activities at an upcoming board meeting.

9. Alumni & Development, Intercollegiate Athletics, and the SMSU Foundation --- Mr. Greg Onstot, Vice President for University Advancement, began his report by summarizing the FY06 budget for the Hammons Student Center/Plaster Sports Complex. Most of the revenues of the fund are from student fees. When Hammons Student Center was first built (about thirty years ago), the student fee was $30 per semester. Now, thirty years later, the fee is only $47 per semester and the Plaster Sports Complex has been added. He next reviewed the budget of the Juanita K. Hammons Hall for the Performing Arts. Now that the debt service has been paid on the facility, it only takes a $400,000 transfer from the University to reach a balanced budget. It was noted by Mr. Franks that this is a very small investment for what is provided to the University and the community. Dr. Nietzel added that there are no performing arts centers in the country that do not require a similar type of subsidy. Mr. Onstot next provided a summary of the FY06 budget for Intercollegiate Athletics. We currently compete in 21 sports – more than anyone else in the Missouri Valley Conference. Mr. Elliott requested that more detail be provided in the budget – he would like to see the direct revenues and expenses for each of the individual sports programs instead of grouping some of the minor programs together. He also commented that he would like to see scholarship expense assigned to each program. Mr. Onstot indicated that it takes about a $5 million transfer from the general operating fund to help cover the $11.1 million in total expenses. He next gave some background information on the SMSU Alumni Association and the SMSU Foundation. He remarked that the one area in the recent successful capital campaign that they fell far short of their goal was in faculty chairs. Ms. Sheid commented it was very difficult to promote giving to a faculty chair. Dr. Nietzel replied that this was a very important area of giving that we need to improve. A faculty member is the one person that can bring in funds – by attracting students or by attracting grants. Dr. Nietzel further indicated that to generate excitement on the part of donors, he plans on committing up to $300,000 of his annual contingency fund to immediately fund a scholarship, a professorship, or a chair once a donor has committed to endow such a fund over a period of years.

10. Internal Self-Analysis/Top Ten Future Priorities/Board of Governors Communications
--- President Michael Nietzel began by summarizing some strengths and weaknesses of the University. Strengths include being well-regarded by external constituencies, having a good reputation among students, and that the Springfield community is an asset. Some weaknesses are an overly centralized budgeting process, inadequate compensation, and insufficient staffing in some areas. The major priorities for moving the University forward include: 1) obtaining strategic academic and research priorities from the Futures Task Force and the Springfield Leadership Forum; 2) establishing a long-term tuition policy; 3) instituting the new budget philosophy (annual reallocation, decentralization, accountability, unit level focus); 4) funding competitive compensation; 5) fostering higher expectations; 6) instituting process reengineering – streamline hiring, approval procedures, best practices; 7) recruiting and hiring a provost; 8) developing a strategy to assure adequate public funding; 9) strengthening external affairs – advancement, advocacy network, public relations and communications; and 10) focusing on renovations of facilities as opposed to new construction and reviewing downtown opportunities.

Dr. Nietzel then indicated that he would like to improve the quality of the Board meetings. He plans on some type of academic report, similar to what was provided at the last Board meeting. As far as advanced communications and briefings, he would rather be in a position of providing too much as opposed to not enough. Mr. Franks commented that a formal consent agenda should help with the meetings. The possibility of having some type of event the night before the Board meeting was discussed. Dr. Nietzel commented that he would like to try this in September. As far as the number of meetings each year, Mr. Franks asked the governors if they could accept having fewer meetings per year, maybe six to eight meetings. It was the consensus of the Board to establish such a meeting schedule in 2006.

11. Date of Next Meeting --- The date of the next regularly scheduled meeting was set for September 16, 2005 at 9:00 a.m. on the Springfield campus in Springfield, Missouri.

12. Adjournment--- Mr. Franks adjourned the meeting at 12:05 p.m. on the motion of Ms. Sheid, the second of Mr. Duggan, and the unanimous vote of the Board.

John W. McAlear