Chronicle X Back to School Special: Let’s Make a Change
September 2008
Foreshadowing a primary theme in the national presidential debates, faculty and student
leaders at SSU’s Convocation called for change and spoke of “past mistakes, poor decisionmaking, and outright wounding.” We cannot help but be struck by the similarities between the
failed administrations at both the national and local levels. When President Arminana took the
podium, he rehashed his “blame the budget” speech. He offered a grim future that could only get
grimmer and offered no vision for those embarking on the new academic year. Meanwhile his
counterpart at Humboldt State spoke about “their successful journey into the future.” He only
briefly discussed the budget crisis, noting that academic programs were too significant to be cut,
and continued with praise for the incoming class and the accomplishments of faculty, staff, and
students. SSU has existed within a toxic culture of gloom and fear for so long that many of us,
like victims of abuse, have forgotten that there are other models and that change could only be
good.
Working from the WASC report and the 2007-2008 Expenditure Plan (a.k.a., “Black
Book”), Chronicle X will identify problems in four areas: (1) the rise of Administration &
Finance (A&F), (2) misalignment of resources, (3) debt, and (4) rewriting history.
The Rise of Administration & Finance
In the realm of memory, student learning and the academic mission set the priorities at
SSU. A quick look through SSU organizational charts from 1990 to the present clearly
demonstrates the decline of the academic side. In that year, the Vice President for Academic
Affairs oversaw the entire academic program, including Student Affairs and Administrative
Services. The “Business Manager” ran the finance and personnel side. Within 6 months of
arriving, Ruben Arminana elevated Larry Schlereth to Vice President for Administration and
Finance (A&F; he eventually became the Chief Financial Officer [CFO]) and created a Vice
President for Student Affairs. By 2000 Information Technology had moved from Academic
Affairs (AA) to A&F, and the Grant & Contract program moved to A&F from the Foundation. In
2007 A&F took over CIHS and in 2008 Athletics. Each of these programs could be seen as
moneymakers in creating opportunities for generating unrestricted funds or charge-backs that
help reclassify restricted funds. In 16 years, the Arminana administration has reduced the role of
AA from the center of university priorities to second fiddle after A&F, the real seat of power at
SSU.
With this growth in A&F has come an explosion of Vice President and Senior Director
positions with salaries to match the titles. According to the 07-08 Expenditure Plan, 60
individuals at SSU earn more than $100,000 a year. Of these, 33 report directly to the Executive
Office or A&F, 8 work within Student Affairs, and 19 within Academic Affairs, including
faculty and librarians. Compare this with the California state salary survey prepared by the
National Educational Association: in 06-07 the average salary for faculty on 11/12-month
contracts at an institution that granted MAs was only $71,467. The salaries within A&F continue
to increase in relation to the campus budget. A&F has next to no “operating expenses” (7% of
AA’s); these are covered by assessments and charge-backs across campus. Their costs come first
at the expense of AA—the word “parasitical” has been used to define a relationship that once
was symbiotic.
Misalignment of Resources
Responding to student concerns “with regard to the institution’s resolve to align mission
and resources” and faculty concerns with disjuncture in the decision-making process
characterized as a “slowly unfolding tragedy,” WASC reviewers could find no “easy answers”
(pg. 29-30). They did find, however, a multitude of planning processes, whose very extent may
“have sown seeds of confusion within the University” (pg. 25). The WASC team continued:
“The lack of clear and sustained alignment between ‘planning’ (by a campus wide committee
with constituency input) and these presidential initiatives [GMC, residential experience] raises
questions regarding the engagement of ‘multiple constituencies in institutional reflection and
planning processes’; the clarification of the institution’s strategic positions; the articulation of its
priorities; the alignment of purposes, core functions and resources; and the defining of ‘the future
direction of the institution’ (CFR 4.1)” (pg. 26). Strong words from a committee containing a
number of fellow CSU administrators.
Misalignment of resources in this case primarily means money and this is where SSU’s
Expenditure Plan provides a wealth of information. As usual, the CFO released last year’s Plan
just after the faculty left campus at the end of the Academic year in a transparent approach to
limiting consultation. It contains two kinds of data that masquerade as equals: official financial
statements from 06-07 and budget projections and commentary by the CFO for 07-08. The CFO
tells us that close to 100 members of the campus community engaged in a “consultative process”
to develop this Plan (pg. 7). The question is: Who sits on these important committees and do they
merely serve as witnesses? As the CFO tells us: he just needs to consult, ultimately it is the
President who determines the budget. And the President’s response to the Senate resolutions
makes it clear that “all budget committee recommendations will remain advisory in nature” (pg.
6). Nevertheless, these committees are important in their purview and composition.
The President’s Budget Advisory Committee (BPAC) has 17 members: 3 senior
administrators reporting to the President, 5 faculty, 4 A&F administrators, 2 AA administrators,
2 students, and 1 staff. The Campus Reengineering Committee (CRC) is arguably the most
powerful committee on campus. It has 49 members, 25 of whom work in A&F, 7 administrators
reporting directly to the President, 5 AA administrators, 3 students, and only 9 faculty. Twelve of
these members also serve on the PBAC and 12 on the Campus Planning Committee, which has
19 members. Once dual appointments are taken into consideration, the actual number of
individuals allowed to participate across all three of these top “advisory” bodies is only 61 with
the administrative offices of the President and CFO maintaining clear majorities on all
committees.
The campus budget is comprised of Restricted and Unrestricted Funds. Restricted funds
make up the vast majority of dollars earmarked for Academic Affairs and teaching. Unrestricted
funds may be used for a variety of purposes, but they less commonly end up on the teaching side.
An unstated goal of the campus budget planning effort appears to be the movement of funds
from one place to another and reclassifying restricted funds to unrestricted areas. The Financial
Statements, in fact, state “The University has adopted a policy of generally utilizing restricted—
expendable funds, prior to unrestricted funds, when an expense is incurred for purposes for
which both are available” (pg. 21). Hence, the general funds focused on teaching are spent before
the unrestricted funds that can be used for a multitude of purposes.
Sonoma State Enterprises (SSE) appears integral to the shell game of moving funds from
one place to another. SSE by design appears to have the most unrestricted funds to play with, and
its Board is carefully constructed with those friendly to the President. A faculty SSE Board
member has gone so far as to suggest that votes be by secret ballot as everyone is beholden to the
President who chairs the Board. Board members include the President, 2 administrators from
A&F and 1 from AA, 3 faculty, 2 staff, 3 students, and 2 community members. Both community
members are donors to the Green Music Center (GMC)—one in the $200,000-$500,000 range.
SSE is the Board that approved the “secret” bookstore contract with Barnes & Noble.
More recently SSE has purchased a $4 M plus piece of land on Petaluma Hill Road for Faculty
and Staff Housing because it would be “easier” for SSE to do so than the University. Parking and
Housing now pay SSE $295,000 in “rent” for this vacant land. This repays SSE for its
investment such that the funds can later be “invested” in the University Center and Hospitality
Center (SSE, 16 November 2007).
The Foundation, with its $87 M in assets, has perhaps the most shadowy Board with 5
high-ranking members of the President’s and CFO’s offices, 3 faculty, 2 AA administrators, 1
student, and 20 community members. Community members include many alumni and donors,
bankers, investment specialists and CPAs. The Chancellor’s Office audit (06-52) released in
March 2007 found that SSU had not obtained conflict-of-interest statements for all Board
members since 2004. Irregularities have also been found in documenting donor intent. In 2006
the Foundation had $701,000 in “unclear donations.”
Debt
Chronicle IX: Debt 101 (available upon request) began with the CFO’s confession that
from a “debt perspective,” SSU is “highly leveraged for a campus of our size” (PBAC, 13
December 2007). In response, the CFO provided a Debt Service Coverage Ratio, required by CO
EO994, in his “Financial Briefing.” Because debt is divided, buried, and restructured (e.g., SSE
recently refinanced its loan from the Foundation for SSE’s renovations to Salazar Hall, for which
SSE receives rent from A&F), it is very difficult to develop the actual numbers and apply the
formula. However, with the removal of CIHS revenues, the downturn in Extended Education,
and the Student Union running in the red and with the increase in debt service (ca. $14 M this
current FY), the campus appears to be falling very close to the Chancellor’s Office “benchmark”
and this could hamper future necessary construction (classrooms!) on the SSU campus.
Debt is spread around campus. According to EO 994, certain fees may be used to repay
Statewide Revenue Bonds (SRBs): parking, Student Union, housing, Health Center, and
Extended Education. With the exception of the Health Center, the responsibility to pay the
interest on GMC loans is spread among these programs, as well as Enterprises and the
Foundation ($12.7 M Auxiliary Organization Notes Series 2005 that reach maturity in 3-09).
This has had a negative impact on Extended Education, which no longer has funds to distribute
to the Schools, and the Student Union, which has been running in the red and will run out of
reserves ($1.2 M in 06) within two to three years at the current rate.
But this is just the beginning. The Press Democrat (25 August 2008) reported that the
GMC is projected to run an operating deficit of $1.15 M a year. After over 11 years in the
planning, design, and construction phases, A&F only just commissioned a Business Plan
coincidently released the Monday following Convocation. Many promises have been made over
the years regarding GMC financing. In 2001, Larry Schlereth pledged to the CRC: “the intent is
to use instructional dollars for instructional programming only” (12 October 2001). In February
2006, he presented a detailed PowerPoint to the PBAC that showed all Technical, Instructional
and Performance-Related (TIP) operating expenses met and pledged that “No campus programs
will have chargebacks associated with usage of the GMC” (23 February 2006). In September
2006 when GMC costs rose an additional $20 M and SSU took on another $12 M bond rather
than downscale the project, the CFO explained that
“Entrepreneurial Activities and the School of Extended Education are on the hook for
their portions of the Debt payment which stresses the importance of this business plan to be
developed to create revenue that would otherwise not have been possible without the GMC
facility. For the presenting season, only concerts that make money will be featured, this money to
be earned primarily in the sales of parking and food services. In regards to the opportunity cost,
it is not as high as may be thought because this new revenue will occur as result of the new
facility, creating an opportunity that otherwise would not have existed” (PBAC, 14 September
2006).
After selling the GMC to the campus as a revenue source, Larry Schlereth now states that
the operating deficit (to be offset by $500,000 in instruction funds and $650,000 from
endowments and fund raising) “is not unexpected” as this is the reality across the country (Press
Democrat 25 August 2008). If SSU had commissioned a business plan for GMC before
mortgaging SSU’s future, the Chancellor’s Office surely would not have authorized the project.
The GMC appears to need another $20 M in donations for completion. Judging by the
donations received last year fiscal year on its behalf, it will take approximately 20 years to reach
this goal. SSU will either need to fundraise an additional $16 M to endow the operating costs or
engage in a never-ending fundraising effort. Either represents a daunting task and will inevitably
drain resources from the rest of campus.
Rewriting History
CIHS is the body in A&F’s closet that won’t go away and is starting to stink. The
President’s response to the Senate resolution makes it clear there will be no outside independent
audit, while the CFO just wants to move forward. This cannot happen, however, as long as he
continues to misrepresent the events. His preface to the Expenditure Plan once again attempts to
put his office above the fray. Discussing audit activity for 06-07, Larry Schlereth begins with the
A-133 audit of federal awards in relation to CIHS and lists questionable costs. He continues with
the well-known saga of President Arminana requesting a CSU special investigation on the basis
of these findings in February 2007, the KPMG audit, etc. But here is the flaw: The A-133 audit
cited by Schlereth was not released until December 2007, 10 months after the President’s action.
The fact is the special investigation request stemmed from an internal SSU audit whose
discoveries could have been resolved in-house, avoiding the cost and disgrace suffered by SSU.
Change
Change at SSU will only happen from the inside. The cavalry isn’t coming. WASC’s
carefully crafted criticisms of the current administration make it clear that they see and
understand at least some of the problems, but want them settled in a collegial way on campus.
The WASC reviewers are not mediators. Outside, independent auditors will not be allowed and
may be too late at this time anyway. The tone of President Arminana’s response letter is paternal,
even patronizing. He will pursue what he wants to do and define the rest as not understandable,
not possible, or not prudent. Faculty and students should nonetheless strive to work with the
administration for change. For this to happen, the campus planning committees must to be
opened up to more students and faculty, and those sitting on these committees need to be better
informed and vocal on the issues. The information is out there, it can be understood, and it can
be used in powerful ways to promote change.
The administration at SSU has been put on notice by WASC, it is being monitored by the
Chancellor’s office, and carefully watched by others; they can either work toward real change or
face real consequences.
PAGE
PAGE 5