Monday, June 29, 2015

A PASCU Chapter at Each PASSHE University - Part 13

PASSHE Stakeholder Groups with an Interest in the West Chester Proposal
 
Last week we identified seven PASSHE stakeholder groups having an interest in whether West Chester University should be permitted to secede from PASSHE to become a State-Related University.  They are:

1)      The Commonwealth of Pennsylvania - In the person of both its taxpayers and its elected officials having the duty and power to vote on State Appropriation to PASSHE.  Over the last sixty-five years, the State share of PASSHE’s annual revenue fell from about 90% to 25%, thereby making the Commonwealth PASSHE’s Minority Financial Stakeholder today.

2)      The PASSHE students, parents and private donors, primarily alumni, are PASSHE’s Majority Financial Stakeholders, now providing about 75% of PASSHE’s annual revenue.

3)      Pennsylvania’s four current State-Related Universities.

4)      The PASSHE Board of Governors (20 members).

5)      The PASSHE Councils of Trustees (14 x 11 = 154 members).

6)      PASSHE employees in the Office of the Chancellor.

7)      PASSHE employees across the 14 PASSHE Universities.

 
We also projected who the winners and losers might be from Stakeholder Groups 1), 2) and 3).  This week, we will continue to project winners and losers from stakeholder groups 4) through 7).  We will then tally winners and losers to see how predictable it was that the West Chester Proposal would fail.   

Winners Under a Successful West Chester Proposal
 
·         The West Chester University Council of Trustees - The few members on the West Chester University Council of Trustees expecting to be elected to the Board of Trustees of a State-Related West Chester University might see themselves as winners.  But most West Chester trustees, whose seats on the Council depend largely on their political support of elected officials, would see themselves as losers.    

·         West Chester University Employees - A small percentage of West Chester University employees—for example the president and a few other high level managers expecting to become part of the management team of a State-Related West Chester University—would see themselves as winners if the proposal succeeded.  But if it failed, those same managers would have huge concerns about possible repercussions if their support for the proposal were to be seen as disloyalty to PASSHE.
 
Some individual West Chester faculty members might also see themselves as winners, provided that they found the cachet associated with faculty life at a private or state-related university sufficiently attractive.   But for the approximately 90% of all PASSHE employees—faculty and staff—who are unionized, their unions, their union leadership and a majority of their faculty and staff membership would be totally opposed to the West Chester Proposal at all fourteen of the PASSHE Universities.  
 
Recall that the West Chester Proposal called for West Chester University to secede from the various 14-university labor contracts to become unionized as a separate entity!  This would be an obvious loser for all of the employee unions within PASSHE since it would break apart the 14-university bargaining units, thereby reducing the clout and leverage that comes with larger bargaining units. Opposition to the West Chester Proposal by PASSHE’s employee unions would be fierce and total.  

·         West Chester Foundation Board Members - The members of the Board of Directors of the West Chester University Foundation would mostly see themselves as winners under the West Chester Proposal because they would be among the most likely candidates for seats on the Board of Directors of a State-Related West Chester University.  

·         West Chester Alumni Association Board of Directors - Similarly, Alumni Association Board members at West Chester might also see themselves as winners under a successful West Chester Proposal.
 
Recall that we previously cited West Chester’s Majority Financial Stakeholders—students, parents and private donors, primarily alumni—as winners under a successful West Chester proposal.  The Foundation Board members and Alumni Association Board members could specifically benefit.

Losers Under a Successful West Chester Proposal

·         The PASSHE Board of Governors - Virtually all members of the Board of Governors would see themselves as losers if the West Chester Proposal were to succeed.  Accordingly, they would be strongly motivated to work with their political allies to help defeat any such proposal.
 
·         Thirteen of the Fourteen PASSHE University Councils of Trustees - Virtually every member of the Councils of Trustees at the thirteen PASSHE Universities, “left behind’ by a successful West Chester secession from PASSHE and progression to State-Related status, would see themselves as losers. 
 
·         Thirteen of the Fourteen Foundation Boards and Alumni Association Boards - Virtually all members of the Foundation and Alumni Association boards at the thirteen universities left behind by the West Chester Proposal would see themselves as losers and would work hard to see the proposal defeated.
 
·         PASSHE employees in the Office of the Chancellor - Virtually every PASSHE employee in the Office of the Chancellor (OOC) would see themselves as losers if West Chester or any other individual PASSHE University were to be permitted to secede from PASSHE to become State-Related.  Employees in the OOC would be concerned about a loss of power, and possibly even their jobs, if one or more PASSHE Universities were permitted to secede from PASSHE.
 
·         PASSHE  Employees at the Thirteen PASSHE Universities Left Behind - Virtually all PASSHE employees at the thirteen PASSHE Universities left behind by the West Chester Proposal would see themselves as losers if it succeeded.  In addition, the unions, union leadership and the vast majority of unionized employees at all 14 PASSHE universities would see themselves as losers if the Proposal succeeded. 
  
Predictably, the many groups of “losers” under the West Chester proposal fought hard to prevent its passage, and lobbied their legislative delegations to help defeat it.  Not surprisingly, they preferred the status quo over the proposed change.  The rather small number of winners under the Proposal, along with their correspondingly small number of supportive legislators, virtually assured legislative defeat of the West Chester Proposal with no chance of getting it to the Governor’s desk. 
 
To be continued.
 
Next time:  Lessons Learned and the Path to Victory.

 

Monday, June 22, 2015

A PASCU Chapter at Each PASSHE University - Part 12

PASSHE’s Various Stakeholders

Dictionary.com defines the word “stakeholder” as “a person or group that has an investment, share, or interest in something, as a business or industry.”   (Emphasis added.)
 
Employees are not normally seen as financial stakeholders in an organization in that they receive compensation in exchange for the services they provide.  But they certainly have a valid “interest” in what happens to their employer and by implication—to them—if the status quo were to be changed.  For that reason, we will include the various employee groups within PASSHE on the list of stakeholders who, along with other groups, may enjoy significant support in the Pennsylvania Legislature and, as a result, would have potentially significant influence in any legislative debate on changing the status quo.
 
For slightly different reasons, we will also need to include the four State-Related Universities on our list of PASSHE stakeholders in this debate to change the status quo because they too would have a valid “interest” in what the competition and financial implications would be for them if one or more PASSHE Universities were to join them as State-Related universities.  It is safe to say, e.g., that the state-related universities would see a state-related West Chester University as a serious threat to their best interests. 
 
Due to the geographical distribution of the four State-Related universities and their sheer size and large legislative delegations, the State-Related universities have always been a force to be reckoned with in terms of Pennsylvania public policy.  I’ve been told by people who were present and witnessed IUP’s attempt at State-Related status in the 60s that, the failure of that attempt could be traced to a resolute effort against IUP’s proposal by the legislative delegations associated with the State-Related universities.
 
To gauge the numerical power of State-Related delegations, Penn State, e.g., reportedly has more of its alumni serving in the Legislature than any other single university!  Temple University and the University of Pittsburgh, owing both to their large size and location in major cities, also possess powerful legislative delegations that are inclined to support their best interests and to oppose any threats to those interests.            
 
We will now look for the winners and losers from the following list of PASSHE stakeholders:
1)      The Commonwealth of Pennsylvania - In the person of both its taxpayers and its elected officials having the duty and power to vote on State Appropriation to PASSHE.  Over the last sixty-five years, the State share of PASSHE’s annual revenue fell from about 90% to 25%, thereby making the Commonwealth PASSHE’s Minority Financial Stakeholder today.

2)      The PASSHE students, parents and private donors, primarily alumni, are PASSHE’s Majority Financial Stakeholders, now providing about 75% of PASSHE’s annual revenue.

3)      Pennsylvania’s four current State-Related Universities.

4)      The PASSHE Board of Governors (20 members).

5)      The PASSHE Councils of Trustees (14 x 11 = 154 members).

6)      PASSHE employees in the Office of the Chancellor.

7)      PASSHE employees across the 14 PASSHE Universities.
 
The Instant Proposal for Change
 
Recall the instant proposal for change is one in which an individual PASSHE (i.e., State-Owned) university would be permitted to secede from the PASSHE system to then become a State-Related university. 

Here is a list of the projected Winners, Losers, and Neutral Parties if, for example, the West Chester proposal to secede from PASSHE and become an individual State-Related university had succeeded.
 
Winners Under a Successful West Chester Proposal

·         PA Taxpayers - Based on news reports that some $100 million would be paid back to the State by West Chester to compensate for the State’s investment over many years in its land and buildings.

·         West Chester’s Majority Financial Stakeholders - West Chester’s Students, Parents and Alumni Donors would have become huge winners if the West Chester Proposal had succeeded.  Financially speaking, the State-Related universities are 85% private, receiving 15% of their annual operating revenue from the State; the State-Owned universities are 75% private, receiving 25% of their annual operating revenue from the State.  But the 10% decrease in annual State funding in moving from State-Owned to State-Related status is more than made up for by the enormous increase in Majority Financial Stakeholder governance shares associated with State-Related status.  PASSHE’s Majority Financial Stakeholders now pay 75% of the bills while controlling 0% of the seats on the governance boards where all key decisions are made.  The Majority Stakeholders at the four State-Related universities pay 85% of the bills but control 67% of the governing board seats!  In a very real sense, the State-Related universities control their own destinies despite receiving funding from the State.          

Losers Under a Successful West Chester Proposal

·         Pennsylvania’s Elected Officials - Based on the fact that the fourteen PASSHE Universities have been operated on the basis of political patronage for 100+ years!  If one PASSHE University were to become State-Related, the patronage opportunities might be a near “wash” (+12 seats gained on a State-Related Board - 11 seats lost on a State-Owned Council of Trustees).  But any loss in political control of the PASSHE universities would be seen by elected officials and the public as an enormous loss of political power.  This is a political, but not a partisan, problem.  Elected officials from both major political parties benefit from the status quo and would lose under the West Chester proposal. 

·         Students, Parents and Alumni Donors at the Other 13 PASSHE Universities - The thirteen PASSHE universities left behind by West Chester’s departure from PASSHE would see themselves as huge losers.  And since the PASSHE universities are also largely spread out, geographically speaking, the legislative delegations for these other 13 universities would provide to a large number of negative votes in the Legislature that might easily dwarf West Chester’s legislative delegation in the process.

·         Pennsylvania’s four current State-Related Universities - As shown earlier, the four current State-Related universities would have been huge losers if the West Chester proposal had succeeded. 

Neutral Parties Under a Successful West Chester Proposal

·         PA Taxpayers: Based on news reports that West Chester would continue to receive the same State Appropriation as a State-Related University as it did as a State-Owned University.
 
To be continued.

Monday, June 15, 2015

A PASCU Chapter at Each PASSHE University - Part 11

The Quest for “State-Related” Status - Redux

In the previous blog post we referenced the two attempts in the past fifty years by individual PASSHE Universities—Indiana (IUP) and West Chester—to become State-related universities.
 
IUP’s quest for state-related status occurred in the 60s, years before the passage of Act 188 of 1982 which created the 14-university system of “State-owned” Universities now known as PASSHE.
 
Two Kinds of “Public Universities” in Pennsylvania

IUP failed in its attempt to become state-related but was later included in the language of Act 188 which made IUP, along with the 13 “State Colleges” of that era, into today’s PASSHE system of fourteen “State-owned public universities” in Pennsylvania.
 
Penn State University, the University of Pittsburgh, Temple University and Lincoln University are often referred to as the four “State-related public universities” in Pennsylvania. 
 
Two Failed Attempts in Fifty Years
 
West Chester’s recent attempt in 2014 to become an individual State-related university was even more challenging than IUP’s attempt, since it would have necessitated overcoming two different and very large hurdles:  1) getting the Legislature and Governor to amend Act 188 to allow West Chester to secede from PASSHE; and 2) getting the Legislature and Governor to create new law granting West Chester its desired State-related status.
 
IUP’s attempt back in the 60s would only have required new law granting IUP State-related status.  But today, any one of the 14 PASSHE Universities seeking individual State-related status—including IUP— would face the same two enormous hurdles that West Chester faced and reportedly failed to overcome.
 
Evidence for that failure in West Chester’s case may be seen¹ in the last sentence of a recent newspaper article which referenced West Chester’s plan to withdraw from PASSHE:  “That secession plan has died.” 

Since changing the status of individual PASSHE universities from “State-owned” to “State-related” would require one or more acts of the Legislature, any such attempt could only succeed if it were to prevail in the course of a public and very contentious political process.  That process would allow expressions of support from those wishing to change the status quo, as well of expressions of resistance from those who prefer the status quo over the proposed change.
 
The Role of Politics in “Public” Higher Education

With regard to public policy, every status quo has its share of “winners” and “losers” namely, those who either benefit from, or are disadvantaged by, that status quo.
 
The converse of that statement is also true.  Every proposed change to the status quo, if successful, would create a “new situation” which will also have its winners and losers namely, those who would either benefit from, or would be disadvantaged by, the proposed “new situation.”

The public debate about the relative merits of the status quo—versus any proposed changes to it—begins with the citizens but moves ultimately to our elected representatives in the Legislature and Governor’s Office, whom the citizens have previously empowered to make those public policy choices on behalf of all citizens, whether they be current winners or losers, or future winners or losers.
 
Regardless of the policy choices made by our elected officials, there will still be winners and losers although, in many cases, they just switch places depending on what our elected officials decide.
 
The political process in which all public policy battles get fought and ultimately decided is the same one in which the public policy battles regarding Pennsylvania’s public universities will be fought and decided.  That political process—by definition—is an adversarial one in which the side able to generate more votes in the Legislature is the side whose policy preference is more likely to become, or remain, law.      
The Current Status Quo

The current status quo keeps each of the 14 individual PASSHE universities locked in a system of “State-owned” universities, created by Act 188 of 1982 and statutorily guided today by Act 188, as amended.

The Instant Proposal for Change

Let the instant proposal for change be one in which an individual PASSHE (i.e., State-owned) university would be permitted to secede from the PASSHE system to then become a State-related university. 

Winners and Losers
 
To better understand why the attempts by IUP and West Chester to become State-related failed, it may be instructive to look at two different factors: 1) Who the winners and losers might have been if the proposed granting of State-related status had been successful; and 2) How much political clout those winners and losers might have had in the Pennsylvania Legislature where any attempt to become State-related must first generate enough votes in the House and Senate to get to the Governor’s desk.

Alternatively, we can receive the same insights into the failure of individual PASSHE universities to attain State-related status by looking at who the winners and losers might be under the current status quo.

Public Policy Choices are Dynamic rather than Static

The point of this heading is to remind us that the current supporters of any status quo—i.e., the current “winners”—could be persuaded to support a proposed change to that status quo if, in their view, that proposed change might be more beneficial to them than the current status quo!  It is in that sense that public policy choices tend to be dynamic rather than static.
 
Therefore, before predicting who the winners and losers might be in the instant policy choice situation, we will look at both the current status quo and the proposed change to it as two alternatives to be evaluated against each other from the point of view of the best interests of the various stakeholders.   
 
To be continued.

Monday, June 8, 2015

A PASCU Chapter at Each PASSHE University - Part 10


The Quest for “State-Related” Status

As we saw last week, proposed changes in the law that would benefit all fourteen PASSHE institutions have been successfully concluded over the years but, in the last five decades, there have only been two publicly-cited attempts by individual PASSHE universities to become “State-Related;.”  IUP was the first university to make the attempt in the 1960s, and West Chester University became the second in 2014.
 
Note that Pennsylvania is virtually unique among the fifty states in regard to its designation of a small number of otherwise “private universities” within the state’s boundaries as “state-related” universities.¹
 
State-related status was granted to Temple University in 1965, and to the University of Pittsburgh in 1966.  Lincoln University received that designation in 1972.  As part of the agreement on becoming state-related, all three of these formerly private universities became “instrumentalities of the State,” allowed elected State officials to select one-third of their governing board seats, and looked forward to  receiving one-third of their annual operating revenue from the State.
 
The relationship between Pennsylvania and its four “state-related” universities is clearly transactional as well as mutually beneficial, having persisted for some 50 years.  It is the details of those transactions and the university benefits that make state-related status attractive to PASSHE Universities, as we shall see. 
 
State-Related Status as a Transaction

Merriam-Webster defines a “transaction” as “a business deal; an occurrence in which goods, services, or money are passed from one person, account, etc., to another.”
 
From 1950 to 1967, college enrollments in America by students age 18-19 grew² from 30% to 50% of that population!  That growth spurt shaped the impetus to create “state-related” universities. 
 
With Pennsylvania’s 14 “state-owned” (now PASSHE) institutions already operating near maximum capacity, the Commonwealth needed to find ways of expanding classroom seats  to accommodate that upsurge in college enrollments, and did so in a way that maximized the seats available to these new students, while minimizing the marginal costs that the State would have to provide in the bargain.
 
The “services” which the State-Related universities would provide to the State involved providing baccalaureate and graduate degrees to additional Pennsylvania students.  In exchange for those services, the State would provide a minority share (one-third) of annual university operating revenue, and receive in return a minority share (one-third) of the university governance board seats.
 
These three state-related universities continue to have one-third (12 /36) of their governance board seats controlled by the State, while the State share of their budgets today is closer to 15% than to 33%. But while the State’s financial contribution share has fallen below one-third, the State’s share of the governance board seats at these state-related universities remains at one-third, as originally agreed. 
 
Penn State, Pennsylvania’s fourth state-related university, was considered to be “State-related” long before the other three private universities were so designated in the mid-60s and early 70s.  Penn State is Pennsylvania’s Land Grant University and has been receiving State funding since its founding in 1855.      

State-Related Status as a Mutual Benefit

Pennsylvania has clearly benefitted from conferring state-related status because it enabled the State to meet its growing and Constitution-mandated educational obligation at a relatively low marginal cost, compared to the cost of expanding existing State universities or creating new ones to meet the demand.
 
The four universities also benefitted greatly from the state-related status conferred upon them, both initially when the State was honoring its one-third funding commitment in exchange for its one-third governance share, and even now as the State continues to control one-third of their board seats while providing much less than the originally agreed upon one-third funding share.
 
A plausible reason for why the State-Related universities are content with the state-related bargain—despite the steady erosion of the State’s funding commitment over time—is that these universities share between them more than $0.5 billion each year, while retaining control of their own destinies with a two-thirds super-majority of seats on their respective governance boards.

Why State-Related Status is Attractive to PASSHE Universities
 
For FY 2014-15, the 14 PASSHE universities received a total of $412,751,000 in State Appropriation while the four State-related universities received a total of $521,087,000.  During that same fiscal year, State appropriation made up about 25% of PASSHE’s operating budget, and about 15% of the total operating budgets of the four State-related universities.   The balance of those annual operating revenues comes from the private checkbooks of students, parents and private donors, primarily alumni at those schools.
 
Another way of saying that is this:  The PASSHE Universities are now 75% private, financially speaking; while the State-Related Universities are now 85% private, financially speaking!
 
That is not a very big difference as far as their respective funding shares are concerned.  But governance shares are another matter entirely.  At the State-Related universities, the universities control 67% of the seats on their governing boards, meaning that State-Related universities—with their two-thirds majority in board seats—can control their own destinies when the most important university decisions get made.  
 
Although the PASSHE universities receive a slightly higher share of State Appropriation (25% of their annual operating budget instead of 15%) those universities control zero seats on the fifteen PASSHE governance boards.  As a result, the students, parents and alumni donors at the 14 PASSHE universities, who are paying 75% of the bills, have no say with regard to how their $1.2 billion share of PASSHE’s $1.6 billion annual operating revenue gets spent.  Those decisions all get made by Pennsylvania’s elected officials and their political appointees, PASSHE's minority financial stakeholders, who are now providing 25% of the funding. 
 
The lack of any voice in governance is a major reason why State-Related status is attractive to PASSHE Universities.
 
To be continued.    
 
¹ http://en.wikipedia.org/wiki/Commonwealth_System_of_Higher_Education.
² http://www.postsecondary.org/last12/1131101age.pdf.