TFA financial expert says UTMB-Galveston "appears to be financially very healthy"

UTMB's alleged financial woes may well be largely fabricated

An analysis of the University of Texas Medical Branch's financial status commissioned by the Texas Faculty Association reveals that through the end of fiscal year 2005 UTMB appears to have been financially very healthy.

Dr. Leroy Dubeck, a Temple University professor of physics, conducted the analysis by examining UTMB financial statements and operating budgets posted online.* Dr. Dubeck also examined the "Executive Summary" of Navigant Consulting's report regarding UTMB, a copy of which was released to TFA. After poring over the documents, Dr. Dubeck reached this conclusion: [UTMB] has increased its Total Net Assets from $945,542,974 as of August 31, 2003, to $1,091,556,579 as of August 31, 2005. It has had a large positive increase in Net Assets each of the past three years with that increase being $100,632,208 for fiscal 2005. It, therefore, appears to be financially very healthy.

Dr. Dubeck's report makes several points on the way to his conclusion.

• While Unrestricted Net Assets decreased slightly from 2003 through 2005, Restricted Assets increased $81 million, and "Invested in Capital Assets, Net of Related Debt" increased $69 million.
• UTMB operated in the black in FY 2004 and FY 2005 even after including depreciation, which President Stobo has declared, along with medical inflation, a major obstacle to UTMB's future success. Dr. Dubeck also says: When one then includes gifts and sponsored programs for capital acquisitions, reclassification from other institutions and transfers to/from other state agencies, mandatory debt service, etc., the change in Net Assets is an impressive $70,502,293 for fiscal 2003, $60,592,449 for fiscal 2004, and a huge $100,632,208 for fiscal 2005.
• UTMB's 2005-2006 operating budget projected an increase of 7.71% in its "All Funds Operating Budget Summary," a rate of growth that, if sustained, should meet or exceed the demands of medical inflation.

TFA Executive Director Dr. Charles Zucker said, "Based on an examination of UTMB's own financial records available online and on the Navigant report, it appears that the financial crisis is largely if not wholly fabricated. Dr. Stobo's intention appears to be to convince everyone that the sky is falling in order to justify massive staff layoffs and a substantial reduction in the payroll for tenured professors. In brief, UTMB's faculty compensation plan is designed to compel some of UTMB's tenured faculty members to leave the institution or compel those who stay to endure draconian cuts in their salaries."

Zucker added, "The real bottom line is that UTMB's compensation plan undermines academic freedom and tenure because it does away with the extensive due process normally afforded tenured professors before they may be stripped of their jobs. Under the new compensation plan, Dr. Stobo is in a win-win position: if a tenured professor leaves because his or her salary has been slashed, UTMB saves the professor's entire salary; if the tenured professor stays, UTMB saves money because the professor now earns less money."

Under state law and UTMB policies, professors whose salaries have been reduced may file a grievance, but UTMB has recently taken steps to water down the grievance procedure. The UTMB office of Equal Opportunity & Diversity, which previously attempted to handle grievances in a fair and impartial manner, has been downsized and its operations placed under the direction of Human Resources. Further, it appears that UTMB has plans for creating an expedited procedure for grieving salary reductions that will, in all likelihood, amount to a kangaroo court.

Zucker said, "Dr. Stobo's frequently repeated claim that the new compensation plan is necessary so that UTMB can find the funds it needs to reward its high performing professors is simply disingenuous. Some of the Medical Branch's best professors, who have national reputations and who bring in hundreds of thousands of dollars in research grants, have been targeted for big salary reductions. Why? Because Stobo's real goal is to cut the payroll. Everyone knows that you improve an institution of higher education by having superstars on the faculty who act as magnets to attract other high performers. Right now, many of UTMB's high performing faculty members are seriously considering leaving the institution."

"As for researchers," TFA member advocate George Reamy said, "Dr. Dubeck points out that pinning any hopes on increased grant funding is dubious, given the current fiscal climate in Washington, yet Dr. Stobo has declared that he wants to double research grant funding from 12% to 24% of UTMB's total budget. Such an overly ambitious goal could be used as a pretext for another round of layoffs and salary reductions if it is not met."

Zucker concluded, "We should caution that Dr. Dubeck is not in a position to comment on the Medical Branch's financial condition at the end of fiscal year 2006 since the records will not be available for another month or two. Dr. Dubeck is also not in a position to make forecasts about the state's financial condition. However, it is clear that Navigant Consulting and UTMB's rationale for the alleged fiscal crisis is based, in part, on gloomy projections regarding the institution's ability to attract additional General Revenue funding. The competition among state agencies for appropriations will be keen when the 80th Texas Legislature meets next January; but, based on the most recent report by Comptroller Strayhorn, the revenue picture for the State of Texas is bright: as of May 2006, state revenue was running 12.6 percent ahead of last year. With the full support of the University of Texas Board of Regents and Chancellor Yudof, the Medical Branch will be in good position to fix whatever legitimate funding problems the institution may have."

Additional background information may be obtained at http://www.tfa-galveston.org.

* Dr. Dubeck is one of the nation's leading authorities on the budgets of institutions of higher education. He is the author of the Budget Handbook for Association Leaders in Higher Education Units (Washington, D.C.: NEA, 1989), and the co-author of College and University Budgeting: An Introduction for Faculty and Academic Administrators (Washington, D.C.: NACUBO, 1984).

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