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DOCUMENTS OF THE GENERAL FACULTY
MINUTES OF THE REGULAR MEETING OF THE GENERAL FACULTY FOR 2007-2008
Following are the minutes of the General Faculty meeting of Monday, October 15, 2007.
Sue Alexander Greninger, Secretary
The General Faculty
MINUTES OF THE REGULAR MEETING OF THE GENERAL FACULTY FOR 2007-2008
The regular meeting of the General Faculty for the academic year 2007-08 was held on Monday, October 15, 2007, at 2:15 p.m. in the Main Building, room 212. President William C. Powers Jr. presided.
APPROVAL OF MINUTES.
Minutes of the 2006-07 regular meeting of the General Faculty, which was held on December 11, 2006, and published as D 5206-5207, were approved by voice vote.
ANNUAL REPORT OF THE FACULTY COUNCIL, 2006-2007.
Secretary Sue Greninger presented a brief overview of the annual report, which was published as D 5469-5500.
III. DISCUSSION OF ANNUAL REPORT—None.
COMMENTS BY AND QUESTIONS TO THE PRESIDENT.
Since there were no questions submitted prior to the meeting for President Powers to address, he invited questions from the floor. Mr. Brian Gatten (English, president of the Graduate Student Assembly) asked President Powers to give his preliminary impression of the Brackenridge Tract Task Force report. President Powers described the report as “thoughtful” and “helpful” and indicated that a good deal of time had been spent carefully considering if the property’s usage served the “best interests of the University.” He said the report noted that certain current uses were in accordance with the University’s mission, such as the field lab and graduate student housing; however, he said the report indicated that a review was needed to determine whether these functions were being achieved in the most effective manner. With regard to uses that are not within the educational mission of UT Austin, President Powers said he thought the report was “recommending that we use those resources in some better way to advance the University.” After saying the report would require further study by the Board of Regents, the president emphasized that the UT Austin administration would continue to cooperate in the process. He concluded by saying that the report had pointed out “there are some things that are not part of our mission that are going on that we ought to think very carefully about.”
Professor Paul Shapiro (astronomy) said his colleagues had asked him to request an explanation about the “alarming news” they had received regarding the disposition of accumulated funds in endowments. He said faculty members were told they needed to spend these funds by year’s end or they would lose them, even though in many cases the resources had been “carefully sequestered” by their recipients for important planned future uses. President Powers responded that the amount of unspent endowment funds was “sizeable,” and there was a need to find ways to use these resources. Although recipients of the endowment funds have often had a tendency to accumulate them in a “rainy day fund,” he said the administration was looking for ways to allow multiple individuals to have “drawing rights on the endowment funds for their stated purposes to advance the departments, to advance research, or whatever.” During the preparation of the 2007-08 University budget, he thought some of the colleges
had used those funds for purposes established in the endowment; other than that, the president said he was unaware of any endowment funds that had been expended.
Professor Shapiro then asked if any of the recipients with unspent endowment funds had received requests from their colleges/schools or the University at-large to return the accumulated funds to be spent on purposes that are not controlled by the original endowment. Professor Shapiro said he thought the faculty in his department perceived that the endowment income was available to spend during an academic year but any unspent funds could be carried over by the recipient of the endowment. President Powers agreed that unspent funds from the annual endowed amount would remain with the recipient of the endowment and be carried over at the end of the academic year; however, he said the interest earned or gain realized from these funds is regarded as an “intermediate term fund” and has been used by the central administration to fund University-wide projects. Professor Shapiro said the information provided by President Powers was reassuring since there had been considerable concern about unspent endowment funds in his department.
Professor Thomas Palaima (classics) said faculty members in the College of Liberal Arts were concerned about funds from their endowed chairs being used to pay for their merit raises this past year. He said that unless some sort of compensatory “switch out” were provided next year, there was concern that the impact of this practice would “carry on in perpetuity.” Professor Palaima said the past practice of plowing the interest earned on the endowment income back into the overall available pool of funds protected endowments from the impact of inflation. He said he was worried that the diversion of these earnings to other needs would reduce the real worth of the individual endowments in terms of their purchasing power over time.
Professor Palaima said he had been asked by Professor Karl Galinsky (classics) to ask President Powers the following two questions:
In his own personal situation Professor Palaima said there were “legitimate, long-range purposes” for allowing his endowment funds to roll over and grow. He said he wanted to see data indicating whether or not such accumulated funds were actually being frivolously utilized. He said he was concerned that the end-of-year state-fundamentally of “use it or lose it” would occur with regard to endowment funds. Since the interest is currently being lost to the endowment holder, he warned that the same might occur in the future with regard to unspent funds.
(1) How widespread this year was the use of endowed funds to pay for merit increases across the various colleges and schools? (2) Was any serious study undertaken across the colleges, schools, and departments that have endowments to determine why funds were being “carefully sequestered” and not spent?
President Powers said one of the goals of The University of Texas Investment Management Company (UTIMCO) is to “grow the endowments” by reinvesting some of the gains each year before the endowments funds are distributed to recipients. Instead of distributing “the full amount of the gain on the endowment,” the president said the annual distribution target to endowment holders was currently about 4.75% of a trailing three-year average value.1 He said this policy provides built-in protection against the impact of inflation on available endowment funds.
President Powers emphasized his viewpoint that endowments should be used for the benefit of the department or program for which they are given. He acknowledged that there are times when accumulation of funds makes sense, such as when an expected new hire will be needing additional start-up funds in a couple of years or when future new construction is being planned. However, he said he was concerned that many endowments remain unspent and are therefore not furthering the goals of the faculty member or the department. After saying it was a common practice across campus
1 For additional information about UTIMCO’s objectives and policies regarding the distribution of earnings, readers are referred to the following URL: http://www.utimco.org/funds/allfunds/2007annual/ar_ef.asp.
for endowment funds to be used for faculty salary support, he said some colleges have utilized this practice with greater frequency than other colleges. He said the decisions to use endowment funds for faculty support were made at the college/school level, and he was not aware of the individual cases where this had occurred.
To further clarify the endowment issues, President Powers said the amount of endowment funding allocated each year was made available for the use of the authorized decision-maker for that specific endowment, which could be an individual, college, or department. If the authorized decision-maker chose to not spend the funds, that money would roll over and be available for future use by that decision-maker. President Powers, said, “the central administration had not tapped that money,” but the gains generated by that money have historically funded University-wide projects. He emphasized there was no need for endowment funds to be inefficiently spent at the end of a year when they can be carried over for a more efficient and important use the following year.
V. UNFINISHED BUSINESS—None.
VI. REPORTS OF THE GENERAL FACULTY, COLLEGES AND SCHOOLS, AND COMMITTEES.
VII. NEW BUSINESS.
VIII. REMAINING QUESTIONS TO THE PRESIDENT—None.
The meeting adjourned at 2:38 p.m.
Distributed through the Faculty Council web site on July 31, 2008. Copies are available on request from the Office of the General Faculty, FAC 22, F9500.