Faculty, CMU spar over unrestricted net assets as compensation talks continue
In the middle of the bargaining ring between faculty and Central Michigan University stands one point of contention — $228 million in unrestricted net assets.
Debate over what it means, and debate over how the money can be used.
Source: Detroit Free Press *Includes Ann Arbor, Dearborn and Flint
"The administration sets its own priorities," he said. "If your priorities change, you shift the money."
The $228 million is pre-designated as reserves for several purposes, including maintenance, construction projects and contractual commitments. Public universities across Michigan have similar funds, most of which are in the dollar amount of hundreds of millions.
Steve Smith, CMU director of public relations, did not comment on whether the funds can be shifted toward other designations.
A 2010 financial report describes the unrestricted assets as "funds that have been designated by the governing board for specific purposes as well as amounts that have been contractually committed for goods and services, which have not yet been received."
The use of the assets is not restricted by donors or grant agencies, according to the financial report.
That factor has drawn the eye of faculty, who are asking for increased salaries and benefits during bargaining talks.
"Based on the FA bargaining team's salary proposal in the fact-finding document, the FA's salary proposal is an estimated 0.5 percent of the annual CMU budget," said FA president Laura Frey, in an emailed statement.
According to a Chronicle of Higher Education database, a fully-promoted professor at CMU earns an average salary of $98,400. An average associate professor makes $75,000, assistant professors make $61,400 and instructors collect $40,000 on average.
The numbers are not far off from universities of comparable size, such as Western Michigan University and Eastern Michigan University.
CMU's unrestricted net assets in reserve, however, are considerably higher than both and have risen over the past several years. Only EMU and Michigan Technological University have witnessed declines.
David Burdette, vice president of Finance and Administrative Services, has stated about $5 million is available in the form of cash as an emergency fund. He referred comment to Smith for this story.
Meanwhile, CMU's day-to-day cash reserves are separate and total about $61 million.
"CMU operations cost roughly $1 million a day," Smith said. "This reserve gives us roughly two months of operating expenses."
Smith said operational budgets from different universities have many complexities that can make comparisons misleading.
Effect on appropriations
Kurt Weiss, public information officer for the Michigan Department of Technology, Management and Budget, attributed some universities' higher net assets to specific expenditures.
"Some universities included capital and maintenance funds, and others did not, with the former obviously reporting a larger amount," Weiss said.
Reserves at public universities played no role whatsoever in sharp appropriations cuts this year, he said.
Rather, university's tuition actions over the last five years were the most significant factor, Weiss said.
"The goal was to get the budget into structural balance where ongoing expenditures could be covered by ongoing revenues, eliminating the one-time fixes each year," he said.
But CMU is still preparing for the worst.
"The university anticipates further state appropriation challenges and a structural deficit in the years ahead," Smith said. "This has required us to reassess our budget priorities, as we no longer can rely on higher tuition to sustain us."
Regardless of any cuts to state funding, the FA points to the unrestricted funds as a prime showing of the administration's priorities and where faculty are placed.
Connors said the administration has the ability to change the designation of the funds but has simply been reluctant to do so.
He compared the funds to a student who has saved up money to pay off a credit card balance, but whose car battery unexpectedly dies. The student then uses the saved money to buy a new car battery because the need for reliable transportation becomes a higher priority.
"Depending on what (the priorities) are and how they change, they can be shifted," Connors said.