Dear Clemson,
To ensure good communication about our funding priorities and other matters, I wanted to share the following presentation, which I had the opportunity to make yesterday to members of the South Carolina Senate Finance Committee. I thought you might be interested in this information.
Sincerely,
Jim Barker
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Chairman Courson, Senator Matthews, Senator Pinckney, Senator Cromer, and Mr. Parks:
Before I begin my formal presentation, I’d like to address questions that may be on your mind as a result of recent media coverage stemming from a lawsuit filed by a former Clemson employee who was terminated last summer by the Board of Trustees.
As a named defendant, I have been advised by legal counsel not to discuss specific details of the lawsuit, and I am trying very hard to follow that advice. We deny all allegations and look forward to having an opportunity to present our case at the appropriate time in a court of law.
But contrary to what you may have read, I can assure you that the lawsuit has nothing to do with Clemson’s financial management practices, which are based on sound, conservative business principles – such as planning ahead for known and unknown future expenses.
As you know, the state allows agencies to carry forward funding from one fiscal year to the next. This policy promotes long-range planning and discourages wasteful year-end spending. Clemson has followed this practice for at least 20 years. Most agencies, colleges and universities do the same, as do most of you. You don’t wipe out your checking account on December 31st of each year. You carry funds forward to cover bills you know will be coming in January.
Clemson did have an unrestricted fund balance at the end of last fiscal year of about $79 million. These funds are on deposit with the State Treasurer and are publicly disclosed in our audited financial statements.
Let me point out that “unrestricted” is an accounting term that simply means there are no externally imposed restrictions on how funds are spent. Unrestricted does not mean uncommitted. These funds are an important source of revenue for our university plan.
Let me put the number $79 million in context.
First, it is about 12.6 percent of our total budget, which is not out of line with what you will find at most state colleges and universities. It is roughly in the middle of the pack: For example, Francis Marion’s year-end balance was about 8 percent of total revenues, while Lander’s was 21.9 percent. The College of Charleston’s was 5 percent, while the USC system’s was 23.8 percent. In fiscal year 2006 the technical college system’s unrestricted fund balance represented 19.6 percent of total revenues.
Second, it is a cumulative total that includes the following:
- $12 million in the E&G budget, which represents about 3.5 percent of our E&G revenues and would cover E&G spending for about two weeks;
- $23 million in our Public Service Activities budget, which is almost exclusively self-generated from external customers, land and timber management, and investments by local and county governments;
- $24 million in plant funds – which includes funds designated for approximately 100 individual facility renovation, maintenance or construction projects. About $5 million of this amount is committed to complete work under way at CU-ICAR.
- $20 million in auxiliary units, such as athletics and housing, which by law must be self-supporting and which currently have $96 million in outstanding debt.
These are all one-time funds, which should not be used for ongoing expenses such as salaries, operating budgets, or budget cuts. We’ve used these funds for projects such as a recent $8.5 million computer network upgrade and major campus security investments following the Virginia Tech tragedy. Carry-forward funds have been designated and invested for information technology upgrades, classroom and lab renovations, faculty start-up costs, and other investments demanded by our students.
Let me illustrate with this example. When the General Assembly created the TERI program, it gave state agencies the knowledge of when faculty would retire. At Clemson we knew a big wave of retirements was coming: In fact 1/3 of our faculty would retire within a 5 year period. We did not have the annual budget to fund searches and start-up costs for this number of faculty members in this short a time frame, but we had the tool of carry-over funds to help manage this crisis. We planned for these needs by carrying over funds for several years to be good stewards of state dollars. We believe this example illustrates good business practice and wise fiscal planning.
These fund balances are fully disclosed on audited financial statements, which are published annually and available on the university’s web site. As part of last fiscal year’s audit process, the allegations in the lawsuit were shared with the external auditing firm KPMG. This firm was hired by the State Auditor, not by Clemson, and was fully aware of these allegations as it was conducting the audit, and the firm ultimately issued a clean audit report.
If you feel that you need more information on this or any other financial matter, please let me know. I’ll be glad to ask our Chief Financial Officer to meet with you and go over our financial statements in detail and answer all of your questions.
Now, I will move to the reason you invited me here today. You have received a comprehensive packet of information including data that you specifically requested, but I’d like to take this opportunity to talk about our highest priorities for the coming fiscal year.
But first, let me just say thank you for your support of higher education and Clemson University.
That support is a major reason that we are keeping more of our brightest students in South Carolina, recruiting outstanding faculty into endowed chairs, and improving the quality of a Clemson education. This year’s freshman class had an average SAT of 1221, and more than half were ranked in the top 10 percent of their high school graduating class. Those numbers are a tribute to the LIFE Scholarship program.
Because of your commitment, we continue to make strides toward our goal of giving South Carolina a top-tier research university. We are now ranked 27th among national public universities according to U.S. News and World Report, 33rd on Kiplinger’s list of the best values in higher education, and the #1 place to work in academia by readers of The Scientist magazine.
As a result of this progress, demand for a Clemson education is higher than ever. Last year we set a record for undergraduate applications, and this year we have already broken it. However, as you see from the enrollment data we provided at your request, our overall student population remains stable. We are carefully managing enrollment to protect the quality of the academic experience, and statistics show that this strategy is working. Retention and graduation rates are at an all-time high, and our student satisfaction scores on the National Survey on Student Engagement exceed both our peers and the national average.
The Carroll Campbell Graduate Engineering Center at CU-ICAR is now open for business, and the first technology neighborhood is near completion. We completed the transfer to land and facilities from the City of North Charleston, the Hunley Commission and the Friends of the Hunley to create a permanent home for the Clemson University Restoration Institute, and a master plan for its development is under way. We expect to break ground this year on an innovation center at the Clemson University Advanced Materials Center, formerly known as the Clemson Research Park. On the main campus, we are in the process of planning, building or renovating facilities to support educational and research programs in bioengineering, packaging science, and the life sciences – all of which can contribute significantly to economic development.
In terms of its commitment to economic development, Clemson in a very different university than it was when I first met with this group as president.
- In 2001, we didn’t generate any start-up companies. Last year we had four.
- In 2001 we had 10 licenses for intellectual property that were generating revenue. Last year we had 35.
- During that same time period, Ph.D. enrollment has nearly doubled, and research awards have grown from $93 million to $141 million.
To continue our progress in keeping our best students in state, building a knowledge-based economy and serving the people of South Carolina, we ask for your support of the following funding priorities.
Our highest priority is financial stability through increased base funding. Our state funding levels continue to lag our counterparts in North Carolina and Georgia. Our current per-student state funding is roughly 32% of the University of North Carolina’s and 48% of Georgia Tech’s. In fact, if we were funded at 100% of the Commission on Higher Education’s formula, we would still be 60% below UNC and about 40% below Georgia Tech. Increased base funding will help narrow that gap.
Our second request is for faculty and staff to be included in compensation increases for state employees, since a university is only as good as its people. State funding for cost-of-living increases and health care costs are critical if we are to recruit and retain outstanding teachers, researchers and the support staff they need in order to be successful.
Our third request is for the following specific initiatives to foster economic development and support Clemson’s academic goals to continue our mission as a land-grant university.
- $4.8 million for the Academic Road Map. This is largely an investment in basic, human intellectual infrastructure. The job of replacing a third of our faculty in a five-year time span has begun, plus we need to add 100 or more faculty members. Hiring nationally competitive faculty members requires additional investments in startup and operating support, graduate assistantships and other expenses.
- $4.2 million for the Cluster Faculty Initiative. Cluster hiring allows us to recruit established teams of researchers rather than individual faculty members, which cuts years off of the traditional start-up period. This allows us to see a faster return on the investment through federal grants, patents and spin-off companies.
These teams will be hired in key emphasis areas that align with the state’s economic development needs, such as advanced materials, bioengineering and life sciences. - $4 million for Information Technology infrastructure. Annual investments are needed in critical IT infrastructure that supports everything from classroom instruction … to student services such as the libraries and registration …. to business and financial operations. This request is for the basic, yet sophisticated, computing needs of a high-tech university.
- $1.5 million for the Clemson University International Center for Automotive Research, or CU-ICAR, to provide funding and support for the CU-ICAR Partnership Office, which serves as the business development and operational hub of that campus
- $3 million for the Clemson University Restoration Institute. The Institute’s mission is to create, develop and foster restoration industries and environmentally sustainable technologies while developing a knowledge-based export-oriented industry cluster in the Lowcountry.
- $1.5 million for the South Carolina Light Rail. The SC Light Rail will provide a premier network as a collaborative project to interconnect universities, research institutions, and research partners to enhance collaboration in support of instruction, research and public service.
- $1 million for Campus Safety. This will fund strategic enhancements to our Fire, EMS and Police departments, enhanced 911 capability and other security improvements.
We also ask for one-time funding for three strategic Capital Improvement investments
- $25 million for an Information Technology Center to allow faculty, students and researchers to take advantage of new information technology resources in a centralized campus location.
- $30 million for the Hunter Chemistry Building to construct a 90,000 square-foot research wing to support the department’s goal to provide nationally recognized research and teaching programs.
- $10 million for Air Quality & Deferred Maintenance to upgrade air quality and exhaust systems and improve building safety and utility infrastructure across the Clemson campus.
With these strategic investments, we can meet the very high expectations of our students, their parents, and the people who hire them. We can bring new jobs to South Carolina by attracting and creating companies driven by innovation. And we can give our state a top-tier research university so that our young people don’t have to choose between academic quality and a LIFE Scholarship.
In addition to these Clemson specific projects, I want to state our strong support for the Endowed Chairs Program and its full funding.
We recognize that this is shaping up to be a tight budget year, and we do not envy you for the tough decisions you’re facing. But we believe that higher education is part of the economic solution. We are making significant progress and we need to continue the momentum. I thank you for your time and attention, and I will be glad to try to answer any questions you may have.