State Commission of Investigation Report Blasts Public Higher Education Governance — Recommends
Sweeping Reforms
October 2007
Click here for the full report.
For years the Council has warned that the absence of central oversight of our system of public higher education was detrimental to sound governance and contrary to the public interest. On October 25, 2007, the State’s Commission of Investigation (SCI) confirmed this prediction in spades. In a scathing report, triggered by the scandals at the University of Medicine and Dentistry (UMDNJ), the SCI found “the entire system vulnerable to waste, abuse and violations of the public trust” and recommended “comprehensive structure change” to correct these problems.
The SCI focused on practices at UMDNJ, Rutgers University, New Jersey Institute of Technology (NJIT), Rowan University and Ramapo College, but its findings reveal a “complete absence of any mechanism to ensure internal accountability, independent external oversight and proper transparency” at all senior public institutions. In startling confirmation of the Council’s worst fears, the report disclosed “virtually unrestrained borrowing practices that have saddled New Jersey’s public colleges and universities with some of the heaviest long-term higher education debt loads in the nation.” As a result of this shocking example of fiscal irresponsibility, “New Jersey now ranks among the states with the highest average four-year cost of public college tuition and fees in the nation.”
It is instructive in this regard to quote the report at length:
“…individual schools have been left largely to their own devices in borrowing for capital projects and necessary maintenance. State oversight is virtually non-existent, project approvals are granted on a virtually rubber-stamp ba-sis and there is no established statewide context in which capital construction initiatives are undertaken, and many institutions seem to neglect—to the point of abject indifference—the need for proper maintenance of existing facilities. (emphasis in original)
The root cause of the crisis is plain to see. The report takes direct aim at the State’s “wholesale disengagement from higher education,” occurring in 1994 when Governor Whit-man abolished the Department of Higher Education and along with it “all meaningful elements of state involvement in safeguarding the taxpayer’s sizable investment in the system.” Since then, our public institutions of higher education have become “islands unto themselves”, accountable only to local Boards of Trustees who are little more than political appointees. The bitter fruit of this system of institution-based governance has been the “excessive intrusion of politics, including millions of dollars in lobbying expenditures, efforts to solicit state college and university officials for campaign fundraising and influence peddling…” Each state college and university hires its own lobbyist to compete for limited state and federal resources as it was a private institution. The report further documents “instances in which the boards “through action or inaction, exercised questionable due diligence through inappropriate delegation of authority and/or failure to keep abreast of matters carrying fiscal or operational consequences.”
The SCI’s recommendations are compelling and manifold:
- Elevate the Commission on Higher Education into the Governor’s cabinet, expand its membership, and provide it statutory authority as well as additional staff and resources to ensure effective governance and oversight of the state colleges and universities. This would include the authority to develop a unified budget proposal for submission to the Governor and Legislature and to conduct long-range planning.
- Expand the size of the boards of trustees, provide each member with training and a “job description” and revamp the process by which state college and university governing boards are appointed. Boards would be required to recruit, screen and recommend candidates to the Commission, which would in turn evaluate these candidates and make appropriate recommendations to the Governor. The Commission would develop guidelines for appointment and a training manual. Each board should include at least one member with financial and accounting expertise. To ensure transparency and availability, “all meetings and deliberations of Board committees, as well as all meetings and deliberations of the Board itself, should be recorded in minutes or otherwise memorialized…”
- Establish a Code of Ethics, enforced by the Commission on Higher Education, to define and regulate lobbying practices of state colleges and universities.
- Require each state college and university to create a long term capital plan and budget to submit to the Commission on Higher Education for approval. The Commission itself would develop a comprehensive statewide Master Plan for Capital Expenditures and Maintenance in public higher education. Amend the statues governing the New Jersey Educational Facilities Authority to require it to exercise “due diligence” before it approves the issuance of bonds for capital construction projects, taking into consideration both the fiscal position of the State and the system of public higher education as a whole.
- Create a Task Force on Higher Education to define and codify the structure and mission of our state colleges and universities, consistent with public policy and sound academic practice.
The SCI report further recommends new legislation that would (1) subject all state colleges and universities to rigorous and uniform standards governing financial management and internal controls, modeled after the federal Sarbanes-Oxley law and (2) require the New Jersey Educational Facilities Authority to review the financial probity of bond sales it facilitates on behalf of the state colleges and universities.
Missing from its recommendations are two long-time Council proposals: the appointment of two union representatives to every board of trustees and empowering the Commission on Higher Education to impose limits on the number and salaries of upper management at our institutions.
The report does not recommend the restoration of the Department of Higher Education. It calls for the retention of institutional autonomy within a framework of effective State oversight, accountability and transparency. Yet it makes clear that public higher education must have an advocate at the highest levels of State government and that the Commission on Higher Education would fulfill this role “as the premiere advisory agency to the Governor and the Legislature on all policy-making for higher education in New Jersey.”
Management’s response to the SCI report was predictably cool. According to press reports, Darryl Greer, Executive Director of the New Jersey Association of State Colleges and Universities rejected the SCI’s findings and touted a general obligation bond to pay for campus construction projects as the solution to the ballooning debt load. He also stressed that lean state budgets forced the colleges to borrow.
However, the SCI report identifies unregulated borrowing as the problem, not the solution. For example, this March, Kean University issued another $275 million in bonds, causing Moody’s Investment Service to downgrade its rating. The Council certainly agrees that the State budget continues to shortchange higher education. If the Legislature and the Governor had more control over how our institutions are managed, it stands to reason that they would be more willing to increase appropriations.
The SCI Report is nothing short of a bombshell. It opens the door to a major overhaul of public higher education that could impose the kind of reforms that the Council has been demanding for over a decade.
However there could be an unfortunate backlash against public higher education funding as a result of this report. We have received news reports that next year’s funding will be cut to help reduce the State’s extremely high debt. Several reports have indicated that there could be as much as a 20% reduction. The SCI report could lead legislators to institute more severe cuts on the grounds that the institutions waste the taxpayers’ money.
We have a better alternative. Rather than cut the current level of funding, next year’s budget should earmark funds for specific line items in each institution’s budget, such as deferred maintenance or hiring more full time faculty. An other priority should be to shift allocations from general funds, which carry few, if any restrictions, to fully fund salaries and benefits.
There will be legislative hearings on these issues in the coming months during both the lame duck and new legislative sessions. In anticipation of these hearings and the formulation of next year’s budget, we have been meeting with our union collegues from Rutgers and UMDJ to formulate a unified approach to the legislature in support for the SCI Report and the reforms it recommends. As the Executive Summary from the report states, “This should be regarded as a time of opportunity…The findings and recommendations of this investigation should serve as a powerful springboard to help move this system to the next level, to ensure strong governance, oversight, accountability and transparency and to achieve and maintain administrative and academic excellence.”
As the Legislature and Governor consider the SCI’s recommendations, the Council is committed to ensuring that our voice is heard loud and clear in the days ahead.
