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October 9, 2008 - President Addresses Full Senate



Summary of Address

After thanking Chair Bart Miller for inviting him, President Todd commented that he has met with Chair Miller a couple of times this year already and looks forward to working with him throughout the year.  He commended Immediate Past Chair Kenny Blair whom he credited with providing great insight and thanked him for all he did on behalf of the Senate and the University.

President Todd stated that since several senators submitted questions, he would try to answer them in his remarks and reflected on events from a year ago. At that time, momentum was strong:  UK had just received full state funding for the Business Plan for the first time; it had given raises; and it had just approved a mid-year salary make-up pool for staff and faculty.  However, the economy began to slow considerably in 2007, and, in late December, Governor Steve Beshear’s budget office announced that the state budget picture was not looking positive.  There was going to be a three per cent budget reduction for all state agencies, including colleges and universities.  He said that as difficult as that was to digest, the ensuing news over the next several weeks was potentially very damaging.   The weakening national and state economy was worse than originally thought. Governor Beshear went on to ask all state agencies to prepare for an additional 12% budget reduction.  Those were tough days because the administration didn’t know where the dollars were going to come from.

However, he shared that the thing that kept him going during those tough days was the will and resolve of many of the individuals in the room.  He sent out a series of e-mails during that time, encouraging people to keep working hard toward Top 20, living by the mantra, “When in doubt, work! “  And that’s exactly what this campus did, he said.  UK ended up with a six per cent cut. 

Regarding the current budget climate in the nation, President Todd stated that the outlook isn’t good, and talked about how the weakening economy affects UK .   He reported that it led to the budget reduction last year and that he still watches the markets every day, hoping that the school doesn’t get cut again this year, although it remains a possibility.  He remarked that he doesn’t want layoffs and doesn’t expect them, either, but cannot make any predictions about what will happen because it’s too volatile a time. 

Regarding UK retirement accounts, the employer match that the employer provides is not being affected. UK is still matching those payments to employees’ retirement funds on a regular basis.  As far as individual retirement accounts are concerned, each individual makes those decisions on their own.  He said that he is sure plenty of people on campus and around the nation are losing money in the markets right now.

The president stated that no capital projects that have been approved and funded are being affected. The bond borrowing on the UK Chandler Hospital was done last year and those rates are fixed.  Currently, no debt is being issued, so capital projects are not going to be affected by the credit markets.

With a legislative session coming up this winter, President Todd reported that one conversation with policymakers will be flexibility.  He said that if the state is not going to be in the financial position to provide us with the resources we need to move UK forward, we will be asking legislators to provide us with some additional flexibility to spend our own resources.  Although it is not a budget session, an increase in operating funds is necessary, and the top priority every year is lobbying Frankfort for operating dollars that are used to fund salary increases.  In other words, to enable raises, recurring revenue streams are needed, and UK will continue to fight for general fund dollars that will allow investment in salary increases.

President Todd commented that his intent is to do everything possible to provide salary increases next year. Staff and faculty salary increases are a top priority, and he is committed to doing everything he can to ensure raises are awarded, but as he has said several times before, he cannot guarantee them, but that they are top priority in the next budget.

The president then explained the difference between general fund dollars and capital project funding, acknowledging that it can be confusing.   He explained that to pay for things like raises, recurring dollars are needed - a consistent commitment of cash over a several-year period, but when constructing a building, you need cash only that one time.

He said the hospital expansion is not being funded by state or tuition dollars and that the Pharmacy Building and Livestock Disease Diagnostic Laboratory are being paid with non-recurring resources the state provided.  No general fund dollars are invested in those projects.

President Todd exclaimed that he is proud of how the university has been a good steward of the state’s resources, making great progress toward the state-mandated goal of becoming a Top 20 public research university, in spite of difficult financial issues.  He said that when he took the position, he knew there had to be efficiencies in a billion-dollar organization, and was intent on wringing some efficiencies out of the place – some dollars that would allow him to implement some of the innovative strategies we needed to better serve Kentuckians. He referred to this as his “dreaming money.”  However, because of budget cuts over his first several years in office, it quickly became “sustaining money.”

On-going efficiency efforts have meant over $80 million in costs saved and costs avoided. For example, UK has slowed the increasing cost of health insurance with a combination of administrative and health literacy initiatives, and over the last seven years, the cost of the University’s health benefits increased an average of 6.8% per year compared to the national average of 11.6%. He said without these efforts, we would have paid an additional $25.7 million in health care costs over the past seven years, but instead kept health care increases low.  After realizing raises wouldn’t occur this year, the University pledged to gobble up the health care cost increase internally, something he feels was the very least that could be done for employees and their families.

Additionally, UK revamped its administrative structure, including moving to the Provost Model which saved over $18 million, and required revenue- generating units (athletics, housing, etc.) to pay for all of their own costs – like maintenance and operation of buildings – which has saved $6 million.   Outsourcing the office supply contract saved over $5 million.

President Todd stated that he will continue to look at opportunities to privatize some units, if opportunities exist.  When outsourcing some units, Human Resources worked directly with those departments being closed, trying to find staff other jobs on campus.  Other unique opportunities need to be looked at to become more efficient, and the University is close to signing with a company that will conduct an energy audit for campus that will help it to become a more sustainable institution.  He maintains that not only will it allow us to become better environmental stewards, it will help us save money, as well.

Addressing compensation, the president said that the piece of his contract that people constantly refer to as a bonus is actually not a bonus at all. It is a performance award - part of his overall compensation package.  It is confusing because of the way the contract is structured. For instance, most employees receive a performance evaluation so they can receive a raise, but he receives a performance evaluation in order to earn the remaining portion of his negotiated compensation.  If the board deems that he has not done a good job, it will not allow him to receive part of his salary. The performance award does not represent a raise or additional compensation. Like the rest of faculty and staff, he did not receive a raise this year.  He commented that he thinks it is important to understand that the next president will make more than he does because that’s how the academy works. As an institutional business practice, he thinks it is important to maintain the presidential compensation at a competitive level, so that when there is a new president, there won’t be sticker shock.

Regarding Top 20 progress, UK received a record number of undergraduate applications for Fall 2008 – 11,120, up 4.7% from last year.  There are 4,044 students in UK 's freshman class, up from 3,865 last year. This brings undergraduate enrollment to 18,995 and overall enrollment to 26,901.

The commitment to create a more diverse and welcoming campus community is also paying off.  The number of African-American freshmen reached an all-time high of 341, a 32% increase over last year, and Hispanic enrollment also was a UK record.  Also, the number of Governor's Scholars and Governor's School for the Arts Scholars in UK ’s first-year class hit a record high of 389, compared to 348 last year.

Based on preliminary analysis, 81% of fall 2007 freshmen returned in fall 2008 – a record high for UK and up 4.5 percentage points from a year ago. The graduation rate of 61.2% also is a record high and the highest among public universities in Kentucky .  President Todd thanked those present and those they represent on campus for helping in this area, stating that when the Provost declared war on student attrition, many thought it was a call only to our faculty.  In reality, faculty are essential to improving retention and graduation rates, but so are staff - student advisors, people in counseling and testing, the residence and dining staff who interact with students every day; the physical plant workers who keep campus looking the way it does; the student services staff who handle student programming. All of those roles are valuable to the work of keeping students, helping them be successful, and seeing that they graduate.  He stated that we are all in this together and would not be touting those numbers if staff did not play a part in helping create the “feel” that makes UK special.

President Todd went on to mention other Top 20 highlights:

  • Creation of a number of new jobs, going from 11,000 UKemployees a few years ago to 13,500 today.  UK HealthCare has helped drive that increase.
  • UK HealthCare annual discharges topped 27,200 in 2007 – a 43% increase since fiscal year 2003.

    Payroll grew from $368 million in FY2004 to $510 million in FY2007, helping to create 2,000 new jobs.

    UK Research is changing Kentucky’s economy.

  • UK recorded $332 million in federal research expenditures last year.

Not only does UK play a critical role in economic development, but it also has a profound impact on the state's economy.  During last fiscal year alone, research grants and contracts from out-of-state sources resulted in a $347.4 million contribution to the Kentucky economy, including $182.9 million in personal income.

Externally supported research accounted for 8,824 jobs in the Commonwealth – 6,530 jobs at UK and additional jobs throughout the state due to spending from supported research activities.

President Todd shared that he is always open to discussing new opportunities to interact with staff, and meets with staff on a regular basis in a variety of forums that many people don’t hear about.  Recently, he attended a breakfast to thank all the staff who helped take part in Move-In Day and also attended a Staff Appreciation Lunch for the Treasurer’s Office.  He also hosts regular Staff Breakfasts at Maxwell Place and encounters countless staff members around campus on an ongoing basis.

As far as communicating with Staff Senators, Doug Boyd, Chief of Staff, meets each month with the Presidential Advisory Committee (PAC).  President Todd commented that he himself meets with the group once or twice per year, adding that he meets with Chair Bart Miller on a regular basis.  One senator had asked about hosting another Town Hall Forum to which he remarked that many senators attended couple of years ago, and thinks most would agree that the Town Hall format was not a productive session.  When he created and advocated for the Staff Senate, his sense was it would be a communication tool for the University staff.  The Senate and the Staff Trustee are the voice of the staff, he commented, stating that he is always open to new ideas because he values what staff senators do on behalf of fellow staff and the University.  He cautioned that there are only so many hours in a day and that he keeps a pretty packed schedule, one of the frustrating things about his job, having to balance the needs of so many different constituencies – staff, students, faculty, legislators, donors, alumni, sports fans, etc.

President Todd then shared some good news:  1) that the Staff Appreciation Day (SAD) budget was approved in the cabinet meeting.  Frank Butler, Executive Vice President for Financial Affairs, and President Todd will split the cost for the event; and 2) knowing how hard staff have worked to help  move UK forward during these trying financial times, as a token of appreciation, that December 24th, Christmas Eve, will be a paid holiday for eligible faculty and staff.  It will not be recurring each December, but the administration was able to provide it for this year.   He stated that although it’s not as good as a pay raise, they hope people will be able to enjoy the day with family and friends or do some last-second holiday shopping, like he does.

In closing, President Todd again thanked the Staff Senate for helping create a more engaged campus and a better Kentucky and answered a few questions from the floor.