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Finances constrain employee benefits

The U. remains behind most of its peers in annual tuition assistance for the children of employees

In response to an ad hoc committee report, the University will increase tuition assistance for the children of employees by an amount proportional to percentage increases in University tuition starting July 1, said Provost Mark Schlissel P’15.

But some faculty members believe the change is insufficient. “We’re pleased they’re indexing, but they do not go far enough,” said Professor of Religious Studies and East Asian Studies Harold Roth P’17, who chaired the Joint Committee on Employee Benefits.

Schlissel announced the tuition assistance change along with decisions about retirement benefits and incentives at a faculty meeting last week.

In 2002 under then-President Ruth Simmons, the Tuition Assistance Program was expanded to include all employees that have served four continuous years at Brown. The amount was set at $10,000 per child per year, equal to 36 percent of University tuition at the time, according to the committee’s report.

But steady increases in University tuition and inflation rates over the last decade have eroded the tuition assistance value, which has remained constant at $10,000. The amount now covers only 24 percent of University tuition, leaving Brown near the bottom of the committee’s analysis of 19 peer institutions.

Dartmouth and Harvard — the only peer institutions offering lower tuition aid than Brown — make up for their lack of assistance in other ways, Roth said. Both offer eligible faculty members no-interest loans and increased salaries, meaning Brown ranks last among institutions that provide tuition assistance.

“We’ve been pretty ignorant as to what our status is,” Roth said.

 

Raising benefits?

The committee recommended the administration increase tuition assistance to 36 percent of University tuition, a value “minimally competitive” with Brown’s peers, according to the report. With just over 400 children of employees eligible for assistance, the increase would cost the University roughly $2 million.

In a letter to the ad hoc committee members, Schlissel wrote that to fund the increase in tuition assistance, the University would have to “reduce expenditures elsewhere or find new sources of revenue,” such as decreasing faculty salaries by 2 percent or increasing the cost of tuition by 1.3 percent.

Of the University’s three main revenue sources — undergraduate tuition, funds from the federal government and the University’s endowment — tuition is the most flexible, said Beppie Huidekoper, executive vice president for finance and administration.

But with the University already operating under a budget deficit, significant increases to employee benefits would be difficult to implement, she said.

The University is projected to spend roughly $96 million on employee benefits in fiscal year 2014, a record high, Schlissel said at the faculty meeting last week. That increase would be in line with steady growth over the last decade, documented in University financial statements.

Roth suggested the creation of a voluntary fund for employee benefits to which alums could donate as an example of a way the University could raise funds for tuition assistance.

“I would like to see a more creative rethinking of where the funds come from,” he said.

Schlissel said a major consideration was the fact that tuition assistance is only provided to a subset of the employee population. That money could instead be used to raise employee salaries across the board, he said.

But the University recently revised its childcare benefit to be competitive with other institutions, Roth said. Tuition assistance is “not an unfair gift to an advantaged group.”

“Down the road,” he added, tuition assistance will become an issue for recruiting and retaining faculty members.

The “take-home” salary is a larger issue for recruiting faculty members, Schlissel said. “Very rarely is TAP considered.”

If the administration “thought that increasing the tuition benefit would make Brown a better university,” it would have done so, he added.

Professor of Computer Science John Savage P’88 P’95 P’03 P’05 GP’17 said the recent growth in University tuition is more of an issue than aid.

With tuition growing at “twice the rate of inflation,” he said, “I think we’ve overshot.”

“Institutions will have to moderate the rate of tuition for many years to come,” he added.

Savage said providing benefits such as health insurance and tuition assistance to employees is very costly, and “Brown is considered to be a very good employer.”

Health insurance costs in particular will be an overarching concern for the University’s finances in the coming years, Huidekoper said.

“The incremental cost to Brown of the Affordable Care Act could be millions,” she said. “We’re watching that carefully.”

 

Retiring with ease

The ad hoc committee also reviewed retirement benefits in its report.

Initial worries that too few faculty members were retiring under current retirement incentives sparked the committee’s formation, Roth said.

The current incentive program, announced last December, provides retiring faculty members with a lump sum equal to 1.5 times their salary, $20,000 to help offset costs such as health insurance and annual payments of $2,000 for three years after retirement, The Herald reported at the time.

But after the program ends June 30, no other incentives will be offered, Schlissel said.

Instead, a phased retirement plan introduced in 2010 that decreases a faculty member’s workload and salary over three years is still available, Schlissel wrote in his letter to the committee.

Savage said taxes on the retirement incentives are a concern, and phased retirement plans are more appealing.

Roth said for faculty members “to just go to zero overnight” is not a realistic or attractive option.

“We must allow retiring faculty to have continuity and remain within the community,” Roth said.

The committee proposed creating a center for emeritus faculty members, modeled after Yale’s Koerner Center. The University has since provided an area in the Faculty Club for retired faculty members, though “it’s not really a center,” Roth said.

In his letter to the committee, Schlissel wrote, “We are frankly somewhat skeptical about whether (a center) will be possible in light of the many competing demands we face.”

Another recommendation was for retirees to receive the health benefits of full-time faculty members and to establish “health retirement savings accounts” for employees over 55. But the incremental costs of the various options were “out of the range of financial prudence,” Schlissel wrote.

Roth said all the reasons behind the administration’s decisions were “exclusively financial considerations with minimal regard to community impact.”

The University must “strike a balance between salary and benefits,” Schlissel said.



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