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.
² https://www.keepandshare.com/doc/6939771/bog-policy-2010-01-a-expenditures-of-public-funds-pdf-91k.
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