Monday, July 27, 2015

A PASCU Chapter at Each PASSHE University - Part 17


Back on April 6, 2015 we began a series of weekly blog posts that included the words “A PASCU Chapter at Each PASSHE University” in their titles.  Now seventeen weeks later, it may be very helpful to recall the challenge that prompted this series of posts, as referenced in the blog post of April 20, 2015.

Challenge

 “To itemize and discuss the options available to citizens whose elected officials ignore the law.”
 
The law in question is Act 188 of 1982, the enabling legislation which created the public corporation now known as the Pennsylvania State System of Higher Education (PASSHE).

The specific citizens in question are PASSHE’s Majority Stakeholders—the students, parents and private donors, primarily alumni—who currently provide 75% of the operating revenue at each of the 14 PASSHE universities, including Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester Universities. 
 
According to Act 188, the statutory purpose of these fourteen PASSHE universities “…shall be ‘To provide high quality education at the lowest possible cost to the students.’”  According to Merriam-Webster, “when used in law, the word ‘shall’ refers to what is mandatory.”
 
Despite being mandated by Act 188, official PASSHE data show that the PASSHE Board of Governors has failed to deliver ‘high quality education at the lowest possible cost to the students’ since 2002, suggesting that, in fact, the clear specific mandate contained in Act 188 is being ignored by PASSHE’s leadership.  
 
The elected officials include the Governor of the State and leaders and members of the State Senate who together control the appointment of PASSHE’s governance board members on the 20-member Board of Governors and the fourteen 11-member councils of Trustees at each of the individual PASSHE universities.   

Dealing with Malfeasance

According to Dictionary.com, “Malfeasance is the performance by a public official of an act that is legally unjustified, harmful, or contrary to law.”   If a group of public officials chooses to ignore the law—as the evidence in this case clearly shows—what could be more contrary to law than that?
 
Surprisingly, however, there are few options available to the citizens negatively affected by such choices.
 
Legislative Censure and/or Impeachment
 
When malfeasance involves the Governor of a State, legislative censure and/or impeachment are two political options that have historically been employed to deal with it.  In the instant case, however, the malfeasance is political but non-partisan in that Governors and legislators from both major political parties benefit from the current status quo which has lasted 100 years or more, and in which the fourteen universities are seen as huge patronage opportunities for elected officials from both parties.
 
So while legislative censure and/or impeachment might arise in cases of blatant corruption by a sitting Governor, it is unlikely to arise in cases where politicians from both parties benefit from the status quo.

Appeals to the Office of Inspector General and the Office of General Counsel

Although both of the above named offices possess official responsibilities for guiding State agencies such as PASSHE to operate within the law, appeals to both of these offices produced polite but noncommittal responses which generated little assurance that the failure by the Board of Governors to preserve and deliver the Act 188 statutory purpose of the 14 PASSHE universities might be addressed anytime soon.

The problem one might argue is that, because these two offices report directly to the sitting Governor, they are not likely to dissuade the governor from continuing to operate the 14 universities as the great sources of political patronage they’ve been seen as representing for the last one-hundred years.

Appeal to the Office of Auditor General and the Office of Attorney General

Although the above two offices do not report to the Governor of the State and are, in fact, led by officials who are elected independently of the Governor, both of these offices failed to respond in any way to the certified letters which they received regarding the apparent malfeasance involved in PASSHE’s failure to preserve and deliver the statutory purpose of Act 188.
 
That failure may be due to a recent history which shows that Auditor Generals and Attorney Generals in Pennsylvania have tended to be busy preparing to run for Governor of the State and who could hence be reluctant to abolish the patronage opportunities they might get to enjoy later in their political careers.       
        
The West Chester Proposal
 
There can be no doubt that—if the PASSHE Board of Governors had been concerned about preserving and delivering the Act 188 statutory purpose of the PASSHE universities since 2002—West Chester University would never have needed to even consider seceding from PASSHE to become a State-related university.
 
The fact that all 14 PASSHE universities continue to be operated to serve the best interests of elected officials and their political appointees—at the expense of students, parents and alumni—is the source of a growing discontent at the PASSHE universities, of which the West Chester Proposal was only a symptom.
 
Although the West Chester Proposal was defeated by the politics of numbers, a clear-eyed review of that defeat suggests a path to victory over the tyranny created by ‘privatization without representation.’
 
That victory will also rely on the politics of numbers, just different numbers, that will allow each and every one of the PASSHE universities to escape the suffocating embrace of PASSHE’s totally political governance.
 
To be continued.  

Monday, July 20, 2015

A PASCU Chapter at Each PASSHE University - Part 16

The blog post last time listed some Financial Differences and Governance Differences between State-owned and State-related status.  This post will now focus on some Legal and Aspirational Differences.   

The Differences Between “State-owned” and “State-related Status

Legal Differences - The greatest legal difference between State-owned and State-related universities stems from the different sources of legal advice that they each receive.  As “State agencies” subject to the Commonwealth Attorney’s Act, PASSHE universities by law can only receive their legal advice from the Office of General Counsel (OGC) ¹ which reports directly to the Governor of the State.
 
PASSHE universities pay for the legal advice they receive from OGC attorneys but, as in all “corporate” environments, OGC actually represents the highest entity in the chain that requires legal defense, and extends all the way up to the Governor and the Commonwealth of Pennsylvania itself at the very top.

Therefore, the legal advice that PASSHE presidents receive from OGC will often be designed to serve those above the president in the chain of command—the Chancellor, the Board of Governors, the Governor and finally the Commonwealth of Pennsylvania.  Inevitably, some legal advice given to PASSHE presidents may not represent the best interests of either the president or the president’s particular university as much as it does the best interests of those farther up the chain.
 
State-related universities on the other hand, despite receiving substantial State funding, are not subject to the Commonwealth Attorneys Act and enjoy “independent” legal counsel as a result, i.e., legal counsel that reports to the university president or possibly the Chair of the University Board of Trustees.   
 
Now the purpose of “legal counsel” in both State-owned and State-related universities is ostensibly the same: to ensure that the university in question operates within the law.  However, the interaction between university leadership and its legal counsel often involves “legal opinions” which the legal counsel in question will provide to the university leadership to help guide its managerial decisions.
 
This issue of “legal opinions” becomes critical inside PASSHE universities because of the PASSHE’s “corporate” structure.  With independent legal counsel, a State-related university president might tell the legal counsel to simply “play it straight” and provide a legal opinion that will withstand scrutiny so as not to embarrass the university if the course of action being contemplated were to be carried out.
 
In PASSHE universities, where legal counsel reports much further up in the chain of command, some legal opinions the universities are required to follow were issued and agreed upon by the Governor of the Commonwealth years, or perhaps even many years earlier.  At times, some of those legal opinions might strike one as questionable, self-serving, and for the benefit of those higher up in the chain of command.
 
A specific example of that kind of legal opinion is the one that states in effect that “Money from the private checkbooks of PASSHE students, parents and private donors, primarily PASSHE alumni become ‘State funds’ once they are deposited in PASSHE university bank accounts.”
 
That legal opinion is manifested in Board of Governors Policy 2010-01-A: Expenditure of Public Funds² which includes these words:  “All university funds are public monies…”
 
The notion that the $1.2 billion of PASSHE’s total $1.6 billion in annual revenue which comes from the private checkbooks of the majority financial stakeholders magically becomes “public monies” the instant they are deposited in university bank accounts is preposterous.  By such logic might not a thief argue that his ill-gotten gains suddenly became legally his once deposited into his bank account?
 
The legal opinion that attempts to justify this triumph of chutzpah over common sense brings to mind an appropriate rejoinder from the Charles Dickens’ character, Mr. Bumble, in Oliver Twist, who said: “If the law supposes that, the law is a ass—a idiot.”                

Aspirational Differences - All universities have aspirations which typically manifest themselves in their written statements of vision, mission, goals and objectives—the documents that define:  i) a university’s essence; ii) what it seeks to accomplish; and iii) the reasons for its very existence.
 
State-related universities answer to a single Board of Trustees.  These Boards often accept their fiduciary responsibilities to the students, which include a Duty of Care, a Duty of Loyalty, and a Duty of Obedience.³   These Boards are dominated by a two-thirds majority of board members selected by the Universities, who put the interests of the University and its 85% Majority Financial Stakeholders above all others. 

·         Duty of Care: Board Members should pay full attention to their responsibilities and protect institutional assets.

·         Duty of Loyalty: Board Members should put the interests of the institution before self-interests.

·         Duty or Obedience:  Board Members should ensure that the mission is being fulfilled and that their actions are consistent with the mission and values of the institution. 
 
Because of these facts, State-related universities are free to pursue and achieve their highest aspirations.
 
State-owned universities answer to a very different reality.  Each PASSHE university reports through a local Council of Trustees to a Harrisburg-based Chancellor and Board of Governors that oversees all fourteen PASSHE universities.  Both the fourteen local Councils of Trustees and the Board of Governors are dominated by a 100% majority of members consisting of elected officials and their political appointees, none of whom are selected by the University or by its 75% Majority Financial Stakeholders.
 
None of the 154 members spread across the fourteen Councils of Trustees, and none of the 20 members on the Board of Governors, are required to accept their fiduciary responsibilities to the students.  In fact the oath of office taken by those 174 members makes no mention of fiduciary responsibilities or duties.
 
To be continued.

¹ http://www.ogc.state.pa.us/portal/server.pt/community/about_the_office/3252/agencies_served_by_ogc/425241.


Monday, July 13, 2015

A PASCU Chapter at Each PASSHE University - Part 15


A Bold Assertion

Last week’s blog post included the following assertion:  “Both West Chester University and the other thirteen PASSHE universities see themselves as losers under the current status quo.”

An obvious corollary to that assertion is this:  “The fourteen PASSHE ‘state-owned’ universities would see themselves as winners if permitted to secede from PASSHE to attain ‘state-related’ status.”

That West Chester University saw itself as a loser under the status quo—and a big winner under the West Chester Proposal—is obvious from the tremendous efforts West Chester supporters put into their unsuccessful attempt to secede from PASSHE and become State-related.  

Not so obvious perhaps is why the other thirteen PASSHE universities would see themselves as losers, both under the West Chester Proposal as well as under the status quo.

The answer may be quite simple: The other thirteen PASSHE universities opposed the West Chester Proposal primarily because it didn’t include State-related status for them!  Had it opened the door to all PASSHE universities, the vast majority of those universities would have welcomed the opportunity.

But Senate Bill 1275, announced by State Senators Tomlinson and Dinniman at a press conference in Harrisburg on March 11, 2014, only made specific provisions for West Chester University to secede and become State-related, while allowing that other PASSHE universities might follow at some future time.¹     
Defining an Onerous Status Quo
 
Last week’s blog post concluded with these words:  “Given the opportunity all fourteen PASSHE universities would love to escape the onerous status quo that West Chester’s supporters had shown the courage and determination to secede from, to gain a much better future.” (Emphasis added.)

If you ask those who have experienced State-owned status first hand from inside a PASSHE university, they might well describe that onerous status quo as “Being trapped in PASSHE’s smothering embrace.”

That sensation in State-owned universities of being suffocated by PASSHE might explain, by simple comparison, why the relatively airy atmosphere inside State-related universities would be so attractive.

The Differences Between “State-owned” and “State-related Status

Financial Differences - See the Penn State vs. PASSHE appropriation funding chart for the fiscal years 1984-2010.² By FY 2014-15, State appropriation provided only 25% of total E&G revenue for PASSHE, and about 15% of total E&G revenue for Penn State.  That is a relatively small difference in funding.

One financial bottom line is this: PASSHE’s Majority Financial Stakeholders (students, parents and private donors, primarily alumni) provide about 75% of PASSHE’s annual revenue, while Penn State’s Majority Financial Stakeholders provide about 85% of Penn State’s annual revenue.

In terms of who pays, PASSHE universities are now 75% private while Penn State is now 85% private, due to the fact that both sectors were privatized without a plan over the past thirty years. 

Governance Differences - While the financial differences between State-owned and State-related universities in Pennsylvania are not very large, the differences in university governance are gigantic.

The State-Related universities control 66⅔% 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 whenever the most important university decisions get made.

Although PASSHE universities receive a slightly higher share of annual State Appropriation (25% instead of 15%) those universities control zero seats on PASSHE’s fifteen 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 now provide only 25% of annual funding. 
The current lack of any voice in governance may be the single most important reason why State-Related status is so attractive to PASSHE Universities.
While the one-third versus two-thirds governance shares (33 ⅓% - 66⅔%) at State-related universities allow those universities—with their supermajority—to control their own destinies while still receiving sizable State funding, the governance shares at the State-owned universities are seriously misaligned.

The great disparity (100%-0%) in governance shares at the State-owned universities can only be described as both counterproductive and conflicted:

·         Counterproductive because the absence of a strong voice representing the interests of the majority financial stakeholders on PASSHE’s governance boards has allowed the 100% political Board of Governors to fail to support or to deliver the Act 188 statutory purpose of the fourteen PASSHE universities: “High quality education at the lowest possible cost to the students.”  If the majority financial stakeholders held a governance share on PASSHE’s governance boards commensurate with their funding share, the Board of Governors would never have been permitted to ignore the Act 188 mandate in regard to PASSHE’s statutory purpose—at great detriment to the majority stakeholders.   

·         Conflicted because since 2002 the Board of Governors has ignored its fiduciary responsibilities to PASSHE’s students, parents and alumni donors and, instead, has made decisions benefitting not the majority financial stakeholders, but the minority stakeholders in the person of the elected officials and their political appointees themselves, who benefit at the expense of the majority stakeholders.  
 
To be continued.

Next time: The Legal and Aspirational differences between State-owned and State-related universities.
¹ https://www.youtube.com/watch?v=DsJxlvjBQtc.  This is a video clip from the press conference that announced Senate Bill 1275 held by Senators Tomlinson and Dinniman on March 11, 2014.
² https://www.keepandshare.com/doc/7610779/privatization-without-a-plan-chart-1-nearly-parallel-twenty-seven-year-funding-trends-for-passhe.    

Monday, July 6, 2015

A PASCU Chapter at Each PASSHE University - Part 14

Lessons Learned
 
The last two blog posts projected who the likely winners and losers might have been if the status quo had been changed to permit one or more State-Owned universities to become State-Related.  Listed below is a summary of the likely winners and likely losers under the West Chester Proposal:
 
Winners - Had the West Chester University Proposal Succeeded

·         The Pennsylvania Taxpayers who would have received $100 million from West Chester University to reimburse the State for its investments in land and building over the years.

·         West Chester University’s Majority Financial Stakeholders (West Chester students, parents and private donors, primarily West Chester alumni).

·         A small number of individuals on the West Chester University Council of Trustees.

·         A small percentage of West Chester University managers.

·         A small percentage of West Chester University faculty members.

·         Many members of the West Chester University Foundation Board.

·         Some members of the West Chester University Alumni Association Board.

 Losers - Had the West Chester University Proposal Succeeded

·         Virtually all of Pennsylvania’s elected officials in the executive and legislative branches.

·         The Majority Financial Stakeholders (students, parents and donors, primarily alumni) at the thirteen PASSHE universities that would have been “left behind.”

·         All four of Pennsylvania’s State-Related Universities.

·         Virtually every member of the PASSHE Board of Governors.

·         Most of the members of the Council of Trustees at West Chester University, and all members of the Councils of Trustees at the thirteen PASSHE universities left behind.

·         A few members on the Foundation Board at West Chester University, but virtually all members of the Foundation Boards at the thirteen PASSHE universities left behind.

·         Some of the members of the Alumni Association Board at West Chester University, and all members of the Alumni Association Boards at the thirteen PASSHE universities left behind.

·         Virtually every employee in the Office of the Chancellor.

·         Most of the employees at West Chester University, and virtually all of the employees at the thirteen PASSHE universities left behind.

·         All eight of PASSHE’s employee unions, representing 90% of PASSHE’s 12,500 employees.

A Legislative Tally
 
Aside from a one-time financial payment to the State of $100 million, amounting to only 3.3% of Pennsylvania’s $30 billion annual budget, the only other winners under the West Chester Proposal were many, but not all, of the individuals closely associated with West Chester University itself.
 
However, the losers under the West Chester Proposal included: a) Virtually every elected official in Pennsylvania’s executive and legislative branches; b) all thirteen of the PASSHE universities left behind together with the many individuals closely associated with them; c) all four of the State-Related Universities together with the many individuals closely associated with them; d) all eight of the employee unions representing the vast majority of PASSHE’s employees;  and e)PASSHE’s 12,500 employees, the vast majority of whom are associated not with West Chester University but with the thirteen PASSHE universities left behind under the West Chester Proposal.
 
From this simple listing alone it is very clear that, even if all of West Chester University’s legislative delegation had been in favor of the West Chester Proposal—itself a very generous estimate since West Chester’s various employee unions were strongly opposed to it—the combination of the legislative delegations from the thirteen PASSHE universities left behind, plus the very powerful delegations from the four State-Related Universities would simply overwhelm whatever number of Pennsylvania legislators may have been in favor of the West Chester Proposal.
 
The small number of “winners” under the West Chester Proposal (with its correspondingly small number of positive legislative votes), combined with the huge number of “losers” (with its similarly huge number of negative legislative votes), preordained the demise of the West Chester Proposal.

The legislative calculus in this case was stacked totally against the West Chester Proposal despite the fact that both the University itself, as well as West Chester’s Majority Financial Stakeholders, would have benefitted greatly had it been permitted to secede from PASSHE and  become State-Related. 
 
Despite its merits—and there were many—the West Chester Proposal was destined to fail. 
 
The Merits of the West Chester Proposal

The fact that a successful West Chester Proposal would have had so few winners and so many losers may say more about the onerous status quo from which West Chester University was desperately trying to escape, than it does about any alternative explanation.  

One way to think about this is to recall that whenever a status quo is changed to suddenly embrace an alternative future, the winners and losers typically, but not always, switch places.

That West Chester and its Majority Stakeholders would be huge winners under the West Chester Proposal suggests that West Chester currently sees itself a huge loser under the status quo!
 
Why else would West Chester supporters launch a legislative battle with such low odds of success?

Similarly, the large number of losers under the West Chester Proposal suggests that many, but not all, of those groups are large winners under the status quo.  For example, on the above list of ten groups that may see themselves as losers under the West Chester Proposal, every group except one—West Chester’s Majority Stakeholders—see themselves as winners under the status quo.

One group prominently listed as a loser under the West Chester Proposal—the thirteen PASSHE Universities left behind, together with their Majority Financial Stakeholders—ironically see themselves as losers under both the West Chester Proposal and under the status quo! 

The only way to understand that apparent contradiction is to recognize that, given the opportunity all fourteen PASSHE universities would love to escape the onerous status quo that West Chester’s supporters had shown the courage and determination to secede from, to gain a much better future.        

To be continued.

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.