Present: A. Crigler, G. Davis, W. Dehning, M. Dudziak, F. Feldman, T. Habinek, N. Hanel, A. Hendrick, B. Jansson, C. Julienne, M. Kann, D. Kempler, M. Kinder, B. Knight, R. Koda, B. Kosko, J. Kunc, R. Labaree, T. Levi, S. Lund, A. Mircheff, P. Nosco, D. O' Leary, W. Petak, N. A. Petasis, A. Pope, M. Safonov, G. Salem, M. Schuetze-Coburn, W. Thalmann, W. Tierney, W. Weber, M. Weinstein.

Absent: W. Dutton, J. Gates, V. Henderson, P. Heseltine, H. Kaslow, L. Laine, N. Lutkehaus, M. Mazon, K. Price, G. Schierle, H. Schor, N. Stromquist.

Guests: L. Armstrong, M. Appleman, J. Aronson, J. Ball, K. Chu, T. Dickey, G. A. Fleischer, E. Glogow, S. Golomb, P. Gordon, P. Hadley, H. Hansen, N. Kanal, M. Levine, J. Manegold, J. McCroskey, W. Wolf, J. Zernik.

President William Tierney called the meeting to order at 2:55 p.m. He then begun his remarks by saying that the representatives of the Medical Faculty Association (MFA) are not present due to an accreditation meeting.

Agenda Item #1: Approval of Minutes

The minutes of the October 20, 1999 Senate meeting were approved unanimously.

Agenda Item #2: Provost's Comments

President Tierney welcomed Provost Armstrong who made some remarks on distance education.

The Provost said that in order to explore some of the possibilities of what USC can do regarding distance learning, he had recently visited Columbia University and New York University, both of which had set-up for profit distance education companies. Although universities continue to struggle with this issue, the for profit companies are considered to be an effective way to transition into a new system of distance learning. While these companies are still evolving, at the end they may be either integrated into the university or function independently.

The Provost then highlighted some of the rationale behind the efforts of Columbia and NYU in this area. He said that Columbia was primarily concerned that the elimination of geographic constraints might result in an "attack from above", i.e. dominance of higher brand names such as Harvard. On the other hand, NYU was mostly concerned with preserving their large presence in continuing education. The for profit companies were established because they can move more rapidly than the university would and they can also take external capital if needed. At Columbia, the Trustees have authorized $10 million for this effort, at a burn rate of $2 million per year in order to develop a variety of new courses on line, each of which can cost up to $200-500 thousand to set-up. At NYU the sum of $20 million was approved but not completely appropriated yet. While Columbia is developing its program internally, NYU is outsourcing to many commercial companies, which have been set-up for this purpose.

Some of the issues under discussion include conflicts among different education theories, such as linear vs non-linear learning, i.e. teaching without any particular sequence of topics. While the web can provide non-linear instruction, it can do this in an interactive way.

The Provost indicated that USC is continuing to consider this issue and that it has been invited to work with other universities in creating joined efforts. He also noted that a number of peer universities are moving quite aggressively on this issue.

Provost Armstrong then responded to several questions by senators. One senator asked if there was an attempt to focus on areas of strength or the emphasis is on whatever the markets demands. He replied that both Columbia and NYU had done market surveys on this issue and that they are focussed on the areas where they have market strength. For example, this effort is more intense in the Business School, where many leading universities have been involved with executive education and are trying to benefit from the elimination of geographic constraints.

A senator asked if this was just driven by market fear or whether there was an effort to improve education. The Provost replied that while there is rhetoric regarding the opportunities of web-based education, there is also the perception that this may lead to new "customers". Another senator said that perhaps we should have a two-tier system: a web-based system leading to low-end certificate level degrees and a campus-based system leading to higher degrees. The Provost responded that one of the problems is to figure out how to sell a high valued brand name without devaluing it. Ironically, prestige and value comes from the difficulty to join a particular program and opening this up to everyone would have the opposite effect. However, the Provost noted that the internet may make it possible to market more than one brand of education products.

Another senator asked if USC is contemplating this and suggested that we may have an opportunity to have a real impact on secondary education in Los Angeles and California, by focussing on teacher education using distance learning. The Provost replied that indeed some new opportunities are created by this, including executive education, some programs in Engineering, as well as new tools for the School of Education. However, USC's main concern is with our core focus on residential students. Any threats to this core markets should be taken seriously, while we should also be prepared to deal with student applicants that have credit taken from other universities using distance learning. The Provost emphasized that if we don't act accordingly, the web may become disruptive to our core business, while on the other hand will allow us to do better in what we are focussed on. Moreover, the web has the potential of allowing some to capture a large portion of the market. Since only few universities can do this alone, due to the high cost, there is a risk of "winner takes all". Therefore it appears that doing a joined venture in this area may be the most effective way to deal with this.

President Tierney thanked the Provost for addressing the Senate.

Agenda Item #3: Resolution 99/00-02 re: Proposed Retirement Policy

Resolution 99/00-02: The following resolution by the Executive Board was distributed to the senators:

Proposed Retirement Policy

WHEREAS, an academic community should treat its faculty with respect and dignity, at the time of retirement,

BE IT RESOLVED HAT, the Academic Senate authorizes the Executive Board to work with the Benefits Committee on the draft of a policy that reflects these principles, and requests that any significant changes be brought before the Senate, and

1. endorses the principles proposed for a USC Retirement policy

2 recommends that these same principles be extended to all faculty who have worked for 15 years and reached the age of 59 & 1/2; and

3. requests an annual report on the costs and benefits of the plan.

Prior to the Provost's arrival, President Tierney made some remarks regarding the retirement policy under consideration. He referred to a handout describing the proposed policy and the attached resolution and said that the Senate can either approve, amend, reject or table this resolution. He then mentioned that the MFA representatives requested that the resolution be tabled for the next meeting when they can be present. In addition, he referred to some additional requests for tabling the resolution by LAS faculty, due to the lack of time for its consideration.

President Tierney acknowledged that the retirement policy package was not given to the senators on time and said that this was not an attempt to push this issue. However, he said, if this resolution is acceptable by the Senate it should be approved in order to make it possible to adopt a retirement policy this year. He pointed out that the new policy has to be reviewed by the Benefits Committee and the Provost in a timely manner, in order to be presented to the Board of Trustees in their January meeting.

President Tierney then gave some of the history and rationale behind the pending proposal. He said that a Senate Retirement Task Force, created a few years ago, has made a number of recommendations and worked with the administration on developing a retirement policy. During the Fall, the issue was discussed at the Executive Board and the Benefits Committee, which reports to the Vice President of Administration D. Dougherty and is chaired by Professor J. Aronson. In order to make a final proposal, a Subcommittee was set-up that was chaired by Professor J. Manegold, who was a member of the Retirement Task Force, and included Professor W. P. Weber, chair of the Environment Committee. The Subcommittee has worked with the administration in developing the proposal, now under consideration by the Senate.

He said that the proposed resolution was drafted in a way that would be acceptable to the administration, while it is also something that the Executive Board of the Senate could live with. He characterized the proposal as an improvement of what we currently have and pointed out that the proposal is based on the assumption that the retirement policy should not be a way to get rid of older faculty and replace them with new hires. He emphasized that the replacement of unproductive faculty is not a retirement issue. He also noted that the funds for the proposed policy would come from the benefits pool, which limit the funds available for financing a retirement plan. Finally, he mentioned that while the Subcommittee's proposal differentiates the benefits among clinical and tenured faculty, the proposed resolution recommends that all faculty are eligible for the same benefits.

Following the Provost's remarks, President Tierney made additional remarks on the retirement issue. He said that the university used to have a retirement plan, which has expired as a result of some new legislation. In the absence of a specific retirement plan a number of faculty that are thinking to retire are waiting for a new plan to be in place. President Tierney further noted that due to the booming stock market most faculty have sufficient income to retire on and it may not be appropriate to take additional funds from the university budget in order to further subsidize faculty retirements. Thus, the proposed plan does not provide any funds for buy-outs and instead it offers a package of healthcare benefits.

President Tierney then introduced Professor J. Manegold, the chair of the Retirement Subcommittee, who made further remarks on the proposed retirement plan. Professor Manegold pointed out that upon retirement most faculty are expected to have available funds from the university's 401k plan. In addition, currently USC is offering $50 per month to cover some of the costs of Medicare. The proposed Retirement Plan provides additional flexibility for those faculty that are thinking to retire. It includes: (a) a "Senior Professor" option which allows faculty to restructure their workload as they move towards retirement, and (b) a "Flexible Retirement Option" (FRO) that allows faculty to transition into retirement within a two-year period. The additional cost for these features is virtually zero.

Professor Manegold then elaborated further on the healthcare aspects of the proposed plan. He said that the most significant component of the retirement plan is that it helps with helthcare and dental care coverage for retirees until death. The eligibility requirements for the plan are 15 years of service at USC and at least 59 1/2 years of age. Professor Manegold indicated that there was no universal agreement in the benefits committee or the subcommittee on some of the specifics of this proposal. While the proposal differentiates among tenured and non-tenured faculty all faculty are offered the option to buy into the healthcare plan. He also noted that the plan helps with healthcare coverage beyond the age of 65, when Medicare comes in. The proposed plan tries to fill the resulting gap in coverage at a cost that is comparable to what is offered elsewhere. He also mentioned that this may also become available to existing retirees.

President Tierney then opened the floor for questions. One senator asked how the proposed plan compares with other peer institutions. The same senator questioned the 15 years of service requirement that would not make this plan available to senior faculty hired at age 55. Professor Manegold replied that 15 year limit was included because the eligibility has to be limited and also be equitable. Moreover, senior faculty hired at a later age are expected to have additional retirement resources from previous employment, while any remaining needs can be addressed at the time of their hiring.

Another senator asked what is the reason for the 2-year FRO, rather than e.g. a 4-year option. Professor Manegold replied that the FRO period has to address concerns by the schools regarding office space and teaching needs.

At this time Professor G. Fleischer, the chair of the Senate Retirement Task Force, distributed a number of hand-outs that showed the number of faculty that may be affected by the plan, and the previous experience of USC with the expired retirement plans II and III. He also gave a hand-out comparing the proposed retirement plan with the proposal made by the Task Force and a possible "do nothing" alternative, which is the current situation. He also took the floor to comment on the proposed plan and its differences from the Task Force proposal. He said that as of January 2000, retirees over 65 will have the option to purchase Medigap insurance, which the university is offering at its cost, about $175 per month. This type of insurance is also available from other sources (e.g. Blue Cross, AARP, etc) at somewhat higher cost. Overall, he said that the total advantage for purchasing the university's coverage is about $75-100 per year.

In response to a request by Past President Thalmann, Professor Manegold then elaborated further on the benefits of the proposed plan. He said that the plan is structured so that USC would subsidize a large portion of the healthcare coverage. According to actuaries, faculty retiring at age 65 are expected to have an average of 20 years of additional life expectancy, that would result in an overall cost to USC of $50-70,000. Since this benefit would be offered pre-tax the overall benefit to the faculty would be about $90,000. The age of 59 1/2 was chosen to be consistent with tax laws that allow withdrawals from retirement funds at this age.

A senator made the comment that the resolution asks to approve the principles and not the details of the retirement plan. He then raised the question of fairness in distributing fringe benefits. He pointed out that the fringe benefits pool is shrinking and any additional funds given to retirees would have to be taken away from other benefits or may result in higher deductibles for everyone. He further indicated that it is difficult to make accurate projections for the future and that data provided by actuaries are often not reliable and that the actual cost risks from a retirement plan may be much higher than anticipated. For this reason he suggested to get much more detailed data before the plan is finalized and to also make it available initially for a 2-3 year period, after which it should be reviewed.

Several senators commented on the monetary incentives (buy-out) that were included in the Task Force proposal but were not included in the proposed plan. It was suggested that such incentives may be "win-win" for the university and the retirees and that other peer universities do offer such incentives. Another senator questioned the accuracy of these projections and indicated that quite often retirees are replaced by more expensive hires. In some areas, such as in the Business School, there is great market pressures for higher salaries for younger faculty, who often are given higher salaries than recently retired faculty. Other senators suggested that there may be additional benefits beyond the salary differentials in replacing retired faculty with new faculty with greater vitality. On this issue Professor Fleischer gave a hand-out referring to the rationale for providing retirement incentives at the University of Chicago. He further said that if the proposed plan is approved, according to Vice Provost Levine there would be no more individual settlement agreements possible. Vice Provost Levine replied that he is not being quoted accurately on this matter.

The university's general counsel, Todd Dickey, who was present at the meeting, pointed out that according to the law any "buy-out" incentives can be offered only on a limited basis and only to high paid employees. Unlike other universities, the average faculty salary of $85,000 would not be sufficient to offer this to all retiring faculty.

In response to a question regarding the financial modeling used, Professor Manegold replied that a growth rate of 6-8% for healthcare was considered. He also said that he believed that the retirement incentives proposed by the Task Force would offer only modest savings at best. Another senator rejected the idea that productivity necessarily goes down with age. In response to another question, Professor Manegold said that library faculty are considered part of the tenured faculty.

In reviewing the hand-outs given by Professors Manegold and Fleischer, several senators said that the situation is rather confusing and that there is no adequate time to review these properly during the meeting. It was also suggested that perhaps we should not pass a plan with so many uncertainties. Professor Jonathan Aronson, the chair of the Benefits Committee explained that in an attempt to get a plan this year the principles of the plan were agreed to, while negotiations on the final plan are still ongoing. He pointed out that if we don't act on this now it may not be possible to present this to the Trustees on time to put a plan in place for this year. He suggested that rather than wait for the perfect policy we should get a plan now and try to improve it later. He further noted that his Committee is not planned to meet until January and there would not be time available to complete the plan on time. President Tierney indicated that the resolution asks for approval of the plan's principles and that the Executive Board would bring to the Senate any major changes.

At this time, a senator made the motion to table this resolution until the December meeting. At the mean time he asked also Professors Fleischer and Manegold to send to all senators any additional information that they may have on this issue. The motion was seconded. A senator from LAS asked that this information be provided by November 29, prior to the meeting of the LAS council, in order to have an opportunity to review the materials prior to the meeting.

President Tierney pointed out that the December meeting is currently planned for the Health Sciences campus on December 8, but it can be changed to meet at the main campus if necessary. However, he asked that if we do this we should be prepared to extend the meeting until we can reach a decision. He also said that he may have to ask Vice President Dougherty for a special meeting of the Benefits Committee to deal with this matter after the Senate's decision in December. A senator suggested that since the main contentious issue is the monetary retirement incentives, it would be difficult to reach agreement on that in a short time. Instead he proposed a new Task Force to study this matter in detail and report to the Senate at a later time.

The motion to table the resolution until the December meeting was passed with 17 in favor and 7 opposed.

The meeting was adjourned at 4:40 p.m.

_______________

Respectfully Submitted,

Nicos A. Petasis
Professor of Chemistry
Secretary General of the Academic Senate