ISSUE

 

In the Matter of the Arbitration between

ASSOCIATED FACULTIES OF THE UNIVERSITIES

0F MAINE, 
- I OPINION
and AND
AWARD
UNIVERSITY OF MAINE SYSTEM

Grievance Nos. 612-15-01-P,
615-05-01-P, and 616-05-01-P
The parties submitted this case to arbitration pursuant to their collective
bargaining agreement effective December 19, 2013 through June 30, 2015. Seven days
of hearings were held between April 28 and September 10, 2015. Howard Reben, Esq.,
appeared on behalf of and Glenn Israel, Esq., Linda McGill, Esq., and Patricia
Peard, Esq., appeared on behalf of the System; Post-hearing briefs and reply briefs were

received by November 23, 2015.

The parties did not agree on the precise framing of the issues being arbitrated

under the four consolidated grievances.- Based on the parties? proposals and the entirety

of the record, I ?nd the issues to be as followsi

Did the University violate the collective bargaining
agreement by . 
1. its decision to retrench faculty members in the
. fall of 2014; 
2. and/or, the. selection of particular faculty1
members to be retrenched; 

 

Initially the four grievances were filed on behalf of the twenty~six AFUM faculty members who were
retrenched. Eleven of the faculty withdrew from the proceeding. The remaining grievants include.

 
 

 

3. and/or, the manner in which it implemented the
retrenchments? -

If so, what shall be the remedy?

RELEVANT PROVISIONS OF THE AGREEMENT
ARTICLE 3 BOARD ASSOCIATION RELATIONS

B. The rights, functions, powers, duties and responsibilities
of the board and its of?cers and agents, under applicable
state law and the Bylaws of the Board, including the
Board?s right to alter or waive existing Bylaws or policies
in accordance with the procedures Speci?ed in the Bylaws
shall remain vested in the Board and in said of?cers and
agents except as modi?ed by this Agreement.

ARTICLE 17 RETRENCHMENT

A. ?Retrenchment? shall mean the discontinuance of a unit
member with a tenured appointment or continuing contract
from a position at any time . . . fer bona ?de ?nancial or

 --  7-  --

program suspension or elimination.

B. 1. For retrenchment within designated units, there shall
be the folloWing retrenchment categories:

a. less than one (1) year of employment

b. one (1) to three (3) years of employment

c. fear (4) to six (6) years of employment

d. seven (7) to ten (10) years of employment

e. eleven (11) to ?fteen (15) years of employment

f. sixteen (16) to twenty-one (21) years of
employment  

- g. more than twenty-one (21) years of employment

2. No tenured unit member shall be retrenched if there
are non?tenured unit members in the retrenchment unit.

 

 

 

 

3. No unit member with a continuing contract ?shall be
retrenched if there are unit members without a continuing
contract in the retrenchment unit. 

4. Where unit members are equally quali?ed under 1
through 3 above, unit members will be retained whose
quali?cations are most essential to the mission and purpose
of the retrenched unit.

5. The above order of retrenchment shall be applied in
such a way as to minimize any adverse effect on
af?rmative actiOn employment programs.

C. Unit members to be retrenched shall be informed as
soon as possible. Unit members shall receive the
applicable notice period provided for in Article 7,
Reappointment and Non-Reappointment and Contract
Status, except for unit members with tenured or continuing
contract appointments shall receive at least one and one-
half years notice of retrenchment, as described in Section 
of this Article and be noti?ed of the decision to retrench the
faculty member?s - position no later than October 31. or
March 31 of the semester in which notice or retrenchment
is given. - 



appointments shall ful?ll their professional responsibilities
for the remainder of the semester in which they are given
notice, and shall thereafter receive one and one-half (11/2)
years of total compensation. 'During. this one and one-half
(11/2) year period, such unit members shall have no further
professional obligations to the University unless
appropriate alternate or equivalent employment at the
retrenched unit member?s campus, ?with the expectation of
continuance beyond eighteen months, is made available to
the unit member in accordance with Section of this
Article. . . 

B. 'At the-time of notice of retrenchment, the University
shall make a reasonable effort to locate appropriate
alternate or equivalentemployment within the University
for retrenched faculty members. A retrenched unit member
shall have a priority right to alternate or equivalent
positions within the bargaining unit from which the unit
member was retrenched. -

 

F. For the purpose of this Article, a retrenched unit
member shall have been considered to have been laid off.

ARTICLE 19 LEAVES

B. LEAVES 7

4. b. The unit member must return to the University for at
least one academic or ?scal year following the sabbatical.
Agreements to the contrary must be in writing prior to
participation. Salary received during the sabbatical must be
returned to the University where neither of the above is
satis?ed. 

ARTICLE 27 NON-DISCRIMINATION

The University and the 'AsSociation agree not to
discriminate illegally with respect to wages, hours and
working conditions based upon; race, color, religion, sex,
sexual orientation, including transgender status or gender
expression, national origin, citizenship status, age,
disability, genetic information, veterans status or

- -  -    - 

ARTICLE 32 PROGRAM ELIMINATION

The Association shall be noti?ed in writing of any
proposed elimination or suspension of a?program to which
unit members are assigned at the time a Program
Elimination Procedure is initiated. The Association shall
have the opportunity to meet and discuss with the campus
administration prior to completion of an impact study.

BACKGROUND
USM Structure. The University of Maine System (UMS or System) is

comprised of seven universities, the largest of which is the University of Maine, in

 

Orono, and the next largest is the University of Southern Maine (USM), approximately
two-thirds the size. The remaining ?ve universities are signi?cantly smaller, as are the
School of Law and some forty outreach centers and course and cooperative extension
sites.

The System is overseen by its Board of Trustees and although each university is
charged with the responsibility of developing an operating budget, ultimately the System
has a uni?ed Operating budget. The majority of non-capital revenue is derived from
student tuition and fees, with progressively lesser amounts coming from the annual State
appropriation, grants and contracts, gifts, and endowment income. How the State
appropriation is allocated among the component institutions is decided upon by the Board
of Trustees. In recent years, an outcomes-based formula has been adopted for a portion
of the appropriation that has resulted in the USM receiving a disproportionately larger

share of the total.

   
decision of the USM administration to eliminate programs in the fall of 2014 and retrench
tenured faculty were not new. After the world, national, and state economies began to
contract in 2007, concerns were-being raised about the ability of USM to maintain its
extant level of Operations. In February, 2008, then Interim Provost Mark Lapping
noti?ed theUSM faculty that permanent, base-budget savings would be necessary to
enable the institution to be sustainable. identi?ed around thirty undergraduate,
graduate, and certi?cate programs that hadlow enrollment and graduation numbers. He
opined that a process of program assessment would have to be undertaken, although he

opined that he did not expeCt-this would lead to the elimination of full-time faculty

 

positions. A year and one-half later Kate orhan, the successor provost, issued her own
equally extensive list of programs, based on the number of degrees conferred, that had to
be considered for elimination or merger.

The ?nancial situation faced by the System became more stressed. The
noncapital State appropriations peaked in Fiscal 2008 at $200 million and declined in
subsequent years. After ?ve years of large tuition and fee increases, the Board instituted
caps on increases because it was concerned the schools were pricing themselves beyond
the reach of the Maine population, whose median income had not kept pace with
in?ation, let alone the rate of tuition increases. Enrollment across the System was
dropping, meaning the main source of revenue was shrinking.

In 2011, the Board of Trustees tasked the academic of?cers at each university to
review all programs that had fewer than ?ve graduates in each of the prior three years as

part of an system-wide-initiative called ?New Challenges, New Directions.? This



Faculty Senate. Approximately thirty such programs were identi?ed and Provost John
Wright recommended the elimination of .four of them, with varying actions to be taken
regarding the balance. .

During this period and in the ensuing years, USM sought to stay within its budget
as its revenue was shrinking by laying off 100 non-faculty employees, deferring
maintenance, and reducing real estate costs. In August, 2013, then President Theodora
Kalikow and the president of the Faculty Senate forined a USM-wide Directions Package
Advisory Board comprised of representatives of all stakeholders. One member was

Joseph McDonnell, who had come to USM in July, 2011 as the dean of. the College of

 

Management and Human Services. The Board presented its recommendations to
Kalikow in February, 2014. Among its ?ndings were that 90% of the USM student body
was from Maine, and the number of high school graduates would continue to
decline, dropping over 12% between 2012 and 2021. The enrollment at USM, as
re?ected by credit hours, declined by 4% between 2012-2013 and 2013-2014, and was
6.6% below the budgeted amount, meaning there was a signi?cant revenue shortfall. It
was determined that class size was unusually small for a public university and that many
programs were under-enrolled and were not self-sustaining, meaning tuition and grant
revenue did not cover the expenses, which were mostly faculty and staff salaries.
Various programmatic ideas were advanced to attract more students and increase
enrollment, thereby generating more revenue. Among the recommendations to reduce
costs was that any programs that were not self-sustaining should be examined and tested
forconsolidation or elimination.

.    - ..-By..the for-Fiscal-ZO-l?  
the USM, it showed a $9.5 million de?cit. The Finance Committee of the System Board
ultimately directed USM to ?nd $2.5 million in savings, which USM achieved by cutting
$450,000 in goods and services, $900,000 from the voluntary separation of 
had not previously indicated they were leaving, and the remainder from reductions in
non-faculty positions. That left a projected de?cit of $7 million. Because reducing
expenses by a number Of that magnitudelwould have a profound effect on the University,
the Board of Trustees agreed to give USM up to $7 million to cover the de?cit. As
recounted by Richard Campbell, who Was then the vice president for Finance and

Enrollment Management at USM, and Rebecca Wyke, the vice chancellor for Finance

 

and Administration of the System, it was made clear to the USM administration that the
$7 million infusion was a one-time act and USM would have to take the steps necessary
to submit a balanced budget for Fiscal2016.

The money that was made aVailable to USM came from the System?s $15 million
Budget Stabilization Fund,_which had been established in 2010 and had been built from
net investment income that exceeded budgetary expectations. This was the ?rst time the
Fund was being tapped. USM was not the only university that needed assistance to cover
de?cits. Authorization was also given to transfer up to $900,000 to Orono, $1.3 million

to Fort Kent, and $797,000 to Machias, leaving a balance of about $5 million.

Program Eliminations. Section 305.5 of the System?s Administrative
Procedures Manual establishes the process to be followed when a university contemplates
the elimination of an academic program. In summary, when the notion of elimination

arises from a campus, the president of that campus is to develop a program elimination

proposal that covers seven speci?ed topics, including the input obtained from meeting
and discussing the considered action with AFUM. The proposal is sent to the vice
chancellor for Academic Affairs, who submits the proposal to the. chief academic of?cers
from the seven universities, who make a recommendation to the vice chancellor, who in
turns makes a recommendation to the chancellor. Section 3055.6 then states:

The Chancellor?s recommendation of the Program

Elimination Proposal to the Board of Trustees for its review

and ?nal approval, to come before the Board twice a year at

the January and July Board meetings.

At its meeting on March 10, 2008, the Board of Trustees considered and approved

the elimination of the Associate of Science in Legal Technology Program at the

 

University of Maine at Augusta. The record does not establish whether any AF UM
members lost jobs as a result of this action. The same is true regarding the elimination of
the BS in Environmental Management and Policy and BS in Information Systems
Engineering at the University of Maine. approved by the Board at its March 16, 2009
meeting; and the BS in Bilingual Secondary Education and BS in English/Drama/Art
Secondary Education Programs at Fort Kent approved at the November 15, 2010 Board
meeting. At its May 19, 2014 meeting, the Board approved the elimination of ?ve
academic programs at USM. USM President Kalikow had solicited recommendations
from the USM Faculty Senate and AFUM in January and in response, USM  
President Christy Hammer had communicated the following regarding all ?ve programs:

This is to Con?rm that there are no contractual concerns

with the proposed elimination of the program at USM.

These programs are empty of faculty and students and were

voted on by the SEHD faculty to replace or eliminate some

time ago. USM faculty senate also voted agreeing with
these eliminations.

an 35%;;ng 
AFUM at the campus. He is also a member of the Faculty Senate and the Senate
Executive Committee. Johnson and several. other members of the Executive Committee.
met with USM Chancellor James Page on July 14, 2014. Johnson testi?ed that Page told

the representatives that program eliminations can only occur at the July and January

meetings of the USM Board of Trustees.

Decision to Retrench. In late March, 2014, thirteen tenured faculty were noti?ed

 

by the then Provost Stevenson that they were being retrenched. AF UM ?led a grievance

 

on behalf of eleven of those faculty and within days Kalikow rescinded the retrenchment
notices of those eleven.

On June 26, 2014, Kalikow submitted to System Chancellor Page notice pursuant
to Section 305.5 of intention to move forward with a proposal to eliminate the
Master?s Program in American and New England Studies, the Bachelors Program in Arts
and Humanities at the Lewiston/Auburn Campus (LAC), and the Bachelors Program in
Geosciences. At this time it was believed that USM was facing a $12.5 million de?cit in
its Fiscal 2016 budget. Kalikow had previously met with the USM Faculty Senate, which
had put forth a number of alternative budget cuts and savings. The stated rationales
were that these programs had low enrollment, low graduation rates, high faculty to
student ratios, and hence high relative cost to the University because tuition and grants
did not nearly cover the cost of the faculty. Additionally, the LAC program duplicated 

course content available at other USM campuses and on-line. All three programs were

- - - -- -

Pursuant to Article 32 of the collective. bargaining agreement, USM administrators
subsequently met with the UM leadership and discussed the program elimination
proposal. 

In July, 2014, David Flanagan, who had been the CEO of Central Maine Power,
chair of the Board of Trustees of the University of Maine System, and chair of the Board
of Visitors of USM, was named interimpresident'of USM. He immediately tasked the
four deans of schools within USM to begin reviewing the academic programs with an 
towards making budget cuts. On August 14, 2014, the chief academic of?cers of the

universities in the System unanimously approved the USM proposal to eliminate the three

10

 

academic programs. On August 15, Flanagan sent a letter to Page submitting the
proposal to the System Board of Trustees for review by its Student and Academic Affairs
Committee on August 29, 2014, and by the full Board at its September 22, 2014 meeting.
The three program eliminations were unanimously approved by the full Board. The
Board did not vote at that meeting, nor any other meeting, to waive the requirement of
Section 305 .5.6 that the chancellor?s recommendation of a program elimination proposal
to the Board of Trustees is ?to come before the Board twice a year at the January and July
Board meetings.?

In August, 2014, Flanagan appointed McDonnell to ?ll the vacancy in the provost
position. By the time McDonnell assumed this role, it was believed by the administration
that the projected budget gap for Fiscal 2016, assuming no changes in the academic
programs, hadgrown to $16 million because enrollment continued to fall below projected

levels and grant revenues also declined. This ?gure included the $7 million shortfall that

theSystemstated -   A -- -- 

McDonnell began meeting with Thomas Dunn, a former manager at Accenture
Consulting who was experienced dealing with budget reductions, and Campbell, the chief
?nancial of?cer at USM. McDonnell was asked to reduce faculty expenses by $6 million
to $7 million, and the other two administrators Would try to ?nd the rest of the amount
needed to balance the budget from other areas'of the university, such as eliminating forty-

six non-AF UM positions, reducing planned facility maintenance, and cutting
miscellaneous expenditures. Given the average cost of faculty salary and bene?ts of
$120,000, McDonnell determined that he would have to cut ?fty full-time tenured or

tenure-eligible faculty positions to save $6 million. It was McDonneIl?s understanding

11

 

that the collective bargaining agreement limited faculty retrenchments to October 31 and
March 31, and he felt all changes should be accomplished in fall so incoming students
would have all this relevant information about the school when they were making their
decision in the spring about whether to come to USM. Assuming all these reductions
were achieved, USM would still be left with a projected $1.6 million de?cit, which the
System agreed USM could expend from USM reserve ?mds.

At this point McDonnell did not know how many faculty would need to be
retrenched to hit the budget targets because he did not know how many faculty would
take advantage of the early retirement incentive program that had been in effect for two
years. The cost of the early retirement incentives was being borne by the System, rather
than the individual universities. The deadline for accepting early retirement was in mid-
October. McDonnell also understood that even if fifty faculty elected to retire,

retrenchments might still be necessary because some retirements would be in departments

-- have-to-be replaced with-new - -

hires.

McDonnell reviewed the information the deans had amassed regarding each
academic program, listing the number of faculty, sections taught, and number of majors.
He also had a document that detailed whether each program had been identi?ed by prior
provosts for possible suspension or elimination. Another document broke down the
number of sections, students, credit hours, and revenue generated from tuition and grants
for each program. Based on this infonnation, and his discussion with deans and associate
deans, McDonnell concluded that range of programs was ?a mile wide and an

inch deep,? and many programs were requiring signi?cant subsidies that he believed the

12

 

university could not afford. He felt there were four possibly overlapping approaches:
eliminate existing programs, keep the programsbut thin them, reimagine programs so
they crossed previous boundaries, and look to the other universities in the System to
coordinate offerings.

On August 28, 2014, Flanagan and McDonnell addressed the faculty and staff at
the annual opening day meeting. McDonnell explained that USM was facing a fiscal
crisis, having to deal with a $16 million budgetary shortfall. He said the university had
6000 full-time equivalent students, but faculty for a 75 00 student body. Only about 780
of the 4000 students who applied were coming, and almost 40% of the students who
enrolled left after their ?rst year. He articulated the four possible approaches to
addressing the crisis, and solicited everyone?s suggestions. He met with department and
program chairs in subsequent weeks and discussed the alternatives.

McDonnell ultimately adopted six criteria for assessing programs: student

- interest, whether-theprogram- was-uniqueor- -  -r

was a duplication, whether the curriculum within a program could be slimmed down, the
extent of the. community engagement, and the relationship of a program to the other parts
of the System. Of the seventy-?ve programs, he considered?fteen for elimination if the
totality of the budget reduction were going to'corne from program elimination alone. He
ultimately decided to recommend the-elimination of two additional programs, beyond the
three already by elimination by the Board of Trustees: Applied Medical
Sciences and French. The essential reason was that on average both programs graduated
fewer than ?ve students annually and the costs of the faculty exceeded revenue from

tuition, in the case of Applied Medical Sciences, and funded research.

13

 

McDonnell sent a letter to the faculty on October 6 detailing the various steps that
would be taken to reduce the budget de?cit. These included restructuring numerous
departments and programs, eliminating the twoadditional programs, and eliminating ?fty
faculty positions. McDonnell speci?ed how many positions would be cut from each of
twenty-?ve departments or programs, including the ?ve programs that were being
eliminated. He stated that he would not know if retrenchments would be necessary until
alter the October 20 deadline for the retirement incentive program. McDonnell noted that
the proposals for program elimination wouldbe sent to the Faculty Senate and AFUM
that day for their review by October 17, and consideration by the System Board of I
Trustees later in October, in time for layoff notices to be sent to faculty by the
contractually mandated October 31 deadline. on October 20, McDonnell learned that
only twenty-?ve of the forty faculty who accepted the retirement package were in

departments or programs scheduled for elimination or reduction.

. - --   - -

pursue the elimination of the Masters of Science in Applied Medical Sciences and
Bachelor of Arts in French programs. On October 17, after the Faculty Senate had
provided their objectionslto the program eliminations, and AFUM had proffered its oral
and written input, Flanagan submitted the program elimination proposals to Page. The
chief academic of?cers approved the proposals and the Academic and Student Affairs
Committee of the USM Board of Trustees voted to recommend the proposals on October
22, after hearing from'Flanagan and McDonnell. After the vote, Committee members
?elded comments and questions from numerous students, faculty, staff, and-members of

the public who extolled the value-of the programs. The Board of Trustees considered the

14

 

proposals at a special October 24 meeting heldat USM. Flanagan and McDonnell
presented the rationale behind the proposal, and the Board then got comments in
opposition to the proposal from almost sixty individuals. Page reported that the Trustees
had given USM from the previous spring to take the steps necessary to balance its budget.
He stated that although program eliminations were difficult, the time had come for USM
to act. The Trustees then voted nine to two to approve the elimination of the two

programs.

Selection of Individuals For Retrenchment. Once McDonnell'learned of the

 

faculty who would be retiring, he determined that twenty-six other faculty from a range
of departments would need to be retrenched to achieve the cost reductions he sought.
McDonnell conveyed to the USM Human Resources Department the numbers of
positions in which departments would be impacted, but he played no role in identifying
the particular faculty in those departments who would-be retrenched.

    
Labor and Employee Relations forthe- System, for guidance on how the retrenchment
procedures in Article 17 should be implemented. ?He told them that only  the ?rst four
factors were equal would the affirmative action provision in 35 come into play to break
a tie. The Human Resources Department sent to Schmelz an analysis of each department
that McDonnell had indicated needed to have one or more retrenchments. The
department?by-department breakdown listed each faculty? member in the department with
their tenure status, tenure date, hire date, service date, gender, race, age, and veteran

status. Where the retrenchment was the result of a program elimination, the rationale for

the elimination was also included. In every case where the entirety of a program was not

. 

 

being eliminated, the faculty member designated for retrenchment was the junior person.
Schmelz forwarded all the material to Meghan Clough, the associate director of Human
Resources and Director of Equity Diversity for the System, and asked her to determine
if the proposed retrenchments at USM would demonstrate an adverse impact based on
age and gender. Schmelz believed such an analysis had to be conducted to comply with
Article 27, the non-discrimination provision of the Collective bargaining agreement,

Clough had extensive experience in human resources, and had performed adverse
impact analyses ?fteen to twenty times previously, having taken courses in
discrimination law and related statistical practices during her graduate studies and
afterward. She does not have an advanced degree in statistics. 

Using the sheets provided by .U SM that listed all the faculty by department,
Clough reviewed the recommended retrenchments by individual and by work unit or
group. She believed that best practices and research support an analysis at the level of
the?mctionalu group at- which these-election decision was made.- 
inputted the data. into the Fisher Exact Test calculator, which she believed was the most
appropriate and precise tool for small sample analysis. Given that many of the
departments had between three and ?ve faculty, the samples were deemed to be small.
Clough used both what she termed the"5% standard for determining if a result could be
attributed to something other than chance, and the more conservative 10% standard. She
also utilized a two-tailed approach, which she termed a more conservative method,
focusing more on lihelihood and less on direction.

Looking at the data on the individual, function, and group level, the closest she

came was 13%, which she said was many standard deviations above and even above

16

 

the conservative 10% standard. Clough also conducted a T?Test, a less exact
methodology, comparing the leavers versus stayers, which included the retirees,

reasoning that retirement constituted a self-selected choice. In every department or work
unit, and in the faculty as a whole, Clough found that there was no statistically signi?cant
impact because of gender or age. Clough was aware there was an Af?rmative Action
Plan that was drafted in 2003. She did not review or consider that plan in reachng any of
her determinations because she felt the document was ?aged out? and making decisions
based on old statistics Would have produced invalid results.

After Clough informed Schmelz of her ?ndings, retrenchment notices were sent to
twenty-six faculty members before October 31, 2014, effective at the end of the fall
semester. The System agreed to contribute the $4 million that would be expended for the
eighteen months of salary due the retrenched faculty, and the $7 million attributable to
the retirement incentive for the forty faculty who decided to take advantage of that
- -0ption;--  ?led-four grievancesregarding the programeliminations"and    

retrenchments, which were ultimately consolidated.

?Efforts to Locate Employment. On October 28, Schmelz and Clough sent a
notice to the employee relations liaisons and chief academic of?cers of all the
universities in the system entitled ?Facilitating Employment Support for Retrenched
AFUM Employees at They identi?ed the following action item to be taken
immediately:

Please ensure your job postings are upI-to?date and posted
as of 10.28.14. Retrenched faculty will be referred to a
central website where UMS will be posting all. job postings

found on campus websites to see if they have. interest in
any current vacancies. Additionally, UMS and USM will .

17

 

cross-reference the departments and areas of teaching

expertise of retrenched faculty to all open University

positions, including teach-out positions. UMS HR will

contact any employees for whom there may be a possible

employment option at another campus. USM HR will work

with any campuses involved to facilitate a review of

quali?cations and the consideration of an interested faculty

member.
The memorandum stated that for the two years following the effective date of the
retrenchment, retrenched USM faculty had to be informed of any vacancies at other
universities before the positions could be generally posted so they could indicate their
interest in being considered. The ultimate hiring decision would rest with the hiring
campus? provost and hiring department, who would determine if the retrenched faculty
member?s quali?cations matched their needs. If the position from which the faculty
member was retrenched became available at USM, USM Human Resources would be
responsible for offering that position to the retrenched faculty member, assuming the
person chose to be on the recall list. The retrenched faculty received weekly email
noti?cations with a link to the website of current employment opportunity throughout the
System.

A few of the retrenched faculty applied for open positions. 

 Her curriculum vitae was reviewed by the
chief academic of?cer and the departmental committee comppsed of bargaining unit

members, but she was not offered the job. 

 

18"

 

 

.. . .7 

Besides the general noti?cations, Schm?elz facilitated discussions between .USM and the

University of Maine about moving the entire Applied Medical Science program to brono.

Ultimately those discussions did not result in a- transition of the program.

Differing Perspectives on the FinancialHealth of USM and the System. 

System Vice Chancellor for Finance and Administration Wyke was the source of much of
the System?s presentation on the budgeting process and the factors that led up to the
System Board agreeing to make available $7 million to USM to cover the projected
budget de?cit for Fiscal 2015, on the condition that USM present a balanced budget for
Fiscal 2016. She testi?ed that most of the conditions that led to the de?cit budget in

2015 were still present ?when the 2016 budget was being prepared. Maine was in what

she termed a ?demographic winter,? with the college-age population continuing to
decline until 2020, when there would be a slight uptick. The System had already lost
1700 full-time equivalent students, 888 of ?whom had been lost at USM, 20% of its
enrollment since 2006. The disproportionate loss at USM was due in part to the fact that
there was greater external competition for students from other higher education providers
in the southern part of the state. 7

To assess the relative ?nancial health of USM, Wyke looked to the core ?nancial
ratios and composite ?nancial index, a measurement tool for higher education institutions
developed by KPMG and used bythe Department of Education and Standard Poor?s.

The ratios are developed annually for-each of the universities in the System, and then for

_19

 

the System as a whole, looking back at the most recent nine ?scal years, using data from
audited ?nancial statements. The ratios are:
1. Primary Reserve How long could the institution function using its expendable
net position? The benchmark is .40, approximately ?ve months. USM had been
essentially level at .19 from Fiscal 2011 onward, while UMS had slowly risen during that
time frame to .42 in Fiscal 2014.
2. Net Operating Revenue Is the University living within available resources? The
high and low benchmarks are 4 and 2, respectively. USM dropped from 4.69 in Fiscal
2011 to -.37 in Fiscal 2014. UMS dropped from 5.16 to .41 during the same period.
3. Return on Net Position Is the University ?nancially better off than in the
previous year based on total economic return? The benchmark is 6. Using the same
time frames, USM declined from 6.37 to ?2.25, while UMS declined from 9.04 to .16.
4. Viability - What is the University?s ability to assume new debt, as measured by
expendable resources? The benchmark is 1.2-5. USM had improved from .49 in Fiscal
2011 to .58 in Fiscal 2014, while UMS had gone from 1.28 to 1.73.
5. Composite Financial Index Overall measurement of University?s health. High
benchmark is 10, low is 3. USM declined from 2.4 in Fiscal 2011 to 1.0 in Fiscal 2014,
while UMS went from 3.9 to 2.9. According to the evaluative tool, a rating of 1.0
indicates a need for an institution to consider substantive programmatic adjustments.
-  "Wka - -  -
component unit of the System for accounting purposes, because it is of suf?cient relative
size. Most of the funds of the Foundation are restricted, meaning they can only be spent
for Speci?c purposes, and the unrestricted ?inds are allocated for use in 0rono by the
Foundation board, not the System. None of the Foundation?s ?mds can be used to offset
operating expenSes at USM. There is a much smaller USM Foundation, but only about
$600,000 to $700,000 of its $22 millionendowment is unrestricted.

Wyke also enplained the role of depreciation in the USM budget. She stated that

100% of depreciation must be shown on ?nancial statements as an expense, and it Was

Board policy that each university was to budget to spend the ?ll] 100% to deal with the

20

 

deferred and current maintenance. Because suf?cient funds were not available, however,
USM could only afford'to plan to spend 72% of the depreciation total. She said that that
did not mean the difference between the 100% and 72% ?gures was available cash that
could be used to pay faculty salaries.

Wyke spoke to the historical ?nancial projections the System had produced, and
the actual results that ensued. She recounted that in 2009 the System had projected a
structural gap or de?cit of $43 million over the next four years. That projection. was
based on the assumption that no changes were made and there would be prospective
salary increases. In response, the System negotiated a collective bargaining agreement
with AFUM that had no across-the-board raises, reducing the projected gap by $32
million. Other changes to how the System was doing business resulted in other savings.
By 2013, the projected $43 million de?cit turned into a $23 million surplus.

Wyke noted that while the Board was unwilling to provide another $7 million
infusion of ?cash-to USMtO'balance' its 'Fiscal'2'0?1' 6"bud'get; the'B'oard?did' agree'to make 
$4 million available from the bene?t pool to cover the cost of the USM retrenchments,
and it was funding the cost of the early retirement incentives. The Board also agreed to
provide USM $3m to be put towards ?nancial aid, and student suCcess enrollment,
recruitment, and retention efforts. Another $3 million was lent so USM could replace
some boilers.

USM CF 0 Campbell disputed that additional monies allocated to increased
?nancial aid would produce higher enrollments in Fiscal 2016, and hence greater than
budgeted tuition revenue. He noted that ?nancial-aid had been increased in the preceding

years and the effect was merely to lessen the impact of continually declining enrollment

21

 

 

levels. He also explained that it was necessary to offer enhanced aid packages to attract
out-of?state students, so bringing more such students did not mean the University actually
received the full out-of?state tuition levels.

Campbell testi?ed that he was familiar with the multiyear projections the System
had undertaken in the past. The long term projection for Fiscal 2010 undertaken in 2008
was a $18 million de?cit, while the actual result in 2010 was a $55 million surplus. The
projection for Fiscal 2011 was a $10 million de?cit, and the actual result was a $80
million surplus. The Fiscal 2012 projection was a de?cit of $8.6 million, and the actual
result was a $38 million surplus. Finally, Campbell stated that when he projected a
Fiscal 2016 deficit of $16 million, he did so based on the representation by the System
that the State appropriation would be level. In January, 2015, Governor LePage issued
his preposed budget for the 2016/2017 biennium that included a 3.48% increase in the
appropriation for'the System, a total of $14 million.
notjustify'the?faculty 
retrenchments, AFUM offered the testimony and analysis of Dr. Leroy Dubeck. Dubeck
is a retired professor of Physics and the former president of the Temple University
chapter of the AAUP. He has been involved on the local and national level for many
years in budget analyses of institutionsof higher education and he haswritten and spoken
extensively on the topic, largely for faculty association publications and events.

Dubeck reviewed the audited ?nancial statements of the System going back to
2001, which he regards as the gold standard of documents re?ecting the actual position of
the enterprise. His fundamental point was that it is appropriate to look at the ?nancial

health of the System as a whole, as opposed to focusing on USM, because the System is a

22

 

uni?ed entity and the System Board has the authority to move resources to the individual
universities. The State appropriation is given to the System, not its component units, and
as has been evident ?om the System?s decision to provide USM $7 million in Fiscal
2015, and to fund the cost of the USM retrenchments and early retirements, the System
can provide funds when it chooses todo so. I

It was Dubeck?s conclusion that the System is ?nancially sound and growing. Its
net position has increased every year, increasing from $641 million in Fiscal 2008 to
$877 million in Fiscal 2014. The System has been able to build up surpluses in its bene?t
pool carryover and reserve funds. Dubeck dismissed the System?s reliance on the trends
of the Core ratios, noting that those ratios failed to include the assets of the University
Maine Foundation, despite the fact that the oundation is a component unit that must be
reported as part of the annual ?nancial statements. When the component unit resources
are included, primary reserve ratio in Fiscal 2014 improves from .40 to .52; the
net operatingrevenues-ratio improves form  l- to :82;"the returnon net-position ratio
improves from .16 .to 2.09; the viability ratio improves from 1.73 to 2.16; and the
composite ?nancial ratio improves ?om 2.9 to 3.8.

Dubeck noted that the System has historically overestimated potential ?scal
challenges, repeatedly ending with surpluses instead of long-predicted de?cits. On the
local level, Dubeck disputed the accuracy of a projected $16 million de?cit for Fiscal -
2016, citing the inclusion of over a $1 million for increased student ?nancial aid, which
he declared will by economic axiom generate more enrollment and tuition dollars. He
stated that the 17% gap between expensing of depreciation and the amount in the

budget to be spent on facilities meant more dollars were available to avoid retrenchments.

23

 

Dubeck disputed the gloomy prognostication regarding revenues. He opined that
contrary to the System assertion about the limited State appropriations, he expected the
State appropriation to rise in coming years. This opinion was based on his assessment of
the political climate in the state towards higher education, the growing national economy,
and the expectation that the Maine economy would also grow, generating increased tax
revenues. Dubeck pointed to the governor?s proposed 2016/2017 System appropriation
as con?rming the correctness of his prediction. He challenged the assessment of
declining student enrollment, pointing out that the expected shrinkage in student?aged
population in Maine wOuld only continue for a few more years, after which it would start
to rebound. Further, the population decline will be partially offset by the increasing
percentage of high school students who will complete their high school education and the
percentage of high school graduates who will enrol] in college. Dubeck also. stated there
was no reason why USM could not compete-more effectively for 'out-of-state students
whosetuition- is ?three timesthat of?in=state students.? 

On balance, Dubeck found that USM faces some ?nancial challenges, but it is not
approaching the level of ?nancial exigency that would justify the retrenchment of tenured
and tenure?eligible faculty. He said that institutions _of higher education always have
?nancial stresses, but they survive short-term problems. Given the strength of the
System, he said the resources could have been made available to preserve the faculty

instead of funding the retrenchments, early retirements, and capital expansion.

Battle of the Statistics and Statisticians. As part of its presentation on the

 

gender and age impact of the retrenchment seleCtions, Susan Feiner, professor of

Economics and a member of the Women and Gender Studies Program, and the president

24

 

of the USM chapter of AF UM, testi?ed. She noted that in the eleven continuing
departments where faculty were retrenched, there were four in which 100% of the
females were retrenched.  .
einer asserted that her research showed that ifa university wants more women to enter
these ?elds, there have to be female faculty role models, which is why the National
Science Foundation has invested millions of dollars to promote the inclusion of women

into the STEM areas.

 

 

are female, 

 Enamining the eleven faculty retrenched due to program elimination, einer
testi?ed that seven were older than 58, the median age for the entire USM faculty, and
the salary of eight had been above the overall faculty median of 

-   
presented Professor Jonathon Goldstein, of the Economics Department at Bowdoin
College. Goldstein has written and spoken about disparate impact analysis and has been
involved in eight to ten legal cases. He said Clough should have used a one-tailed test,
not a two-tailed test, since there was no probability of fewer women being laid off than
men. He diSputed the correctness of using the Fisher Exact "fest, which he termed a test
of association or correlation, which fails to control for confounding factors, and assumes
that the selection of the people to be retrenched was random. In reality, the selection was
not random, but was done by seniority, which Goldstein argued needed to be controlled

for. He also asserted the LAC should have been treated as a single unit, rather than the

25

 

 

Arts Humanities group being viewed separately, and that factor also needed to be
controlled for.

The most signi?cant step Goldstein undertook was to control for what he termed
the seniority de?cit, which he calculated to be 5.67 years of service. Using a regression
analysis after controlling for the seniority de?cit, he found that the odds of laying off the
number of women who were retrenched for reasons other than gender was less than 
and hence, there was a disparate impact. In summary, he concluded that the use of the
simple seniority rules in Article 17 led to a disproportionate number of women being
retrenched because of their seniority de?cit. His analysis regarding the LAC treated all
faculty there as equally eligible for retrenchment, without looking at their subject areas.

USM countered Feiner and expert with Frederick Holt, a consulting
economist with a in econometrics and labor economics who has performed
between  and 100 disparate impact analyses, almost exclusively for employers. He
stated-that while-seniority wasa criterion disputed ?Goldstein?s 
conclusion that it had a disparate impact. Holt looked at the faculty eligible for
retrenchment, which he de?ned as those in departments being reduced or eliminated,
including theparticular affected department at the LAC, as oppose-:10 the entire faculty
there. He did not include the faculty who agreed to-accept the early retirement offer, or
who were already on a retirement plan.

'Holt used a two-tailed test, which he asserted was the standard procedure,
although he said he could have accepted Goldstein?s one-tailed test if Goldstein had used
the 2.5% signi?cance threshold on the single tail, instead of On the pool of sixty-six

eligibles, twenty-four of whom were female and forty-two were male, he performed three

26

 

Fisher Exact tests. Looking ?rst at the pool as a whole, he concluded that the expectation
would have been that 9.45 females would have been retrenched, twelve actually were,
yielding a standard deviation of 1.07, which is below the 2.0 deviation that would
indicate statistical signi?cance. The second Fisher test was done to replicate Clough?s
work by examining the retrenchments on a department-by?department basis. While the
work showed no statistically signi?cant impact regarding gender, Holt agreed with
Goldstein that the sample sizes in individual departments were too small to draw
meaningful conclusions. Holt?s third Fisher Exact test separated out the LAC faculty
eligible for retrenchment from the rest of the university, and he found no statistically
signi?cant impact by gender in either the LAC or non-LAC faculty. Lastly, he conducted
a regression analysis, agreeing with Goldstein that this is a reasonable tool given the
problems with the Fisher Exact test with the small samples when looking at each

department. Holt?s regression analysis found no statistical signi?cance to being female

or-i-n-t-he-LAC, abut-did ?nd- factor in determining-  - -- --

likelihood of being retrenched. Regarding age, he determined that the average age of
the retrenched faculty was 55.8,.the average age of the peeple eligible for retrenchment
was 5 7, and the average age of the faculty on campus as a whole was 58, so he concluded
age was not a factor in'the retrenchmentsi .

Overall, Holt opined that Clough?s initial analySis based on the departmental two-
tailed Fisher Exact test, and then'the pooled approach, was apprOpriat?e. He said her data
set was largely accurate, although he felt she should not have included people who were

in the retirement program, and her ?nding of no disparate impact was correct. In

27

 

7 contrast, he said Goldstein?s treatment of seniority as a signi?cant factor, as opposed to a
reality of the labor force, was a creative, but not an accepted, approach.

Holt criticized Feiner?s presentation as an arithmetic, not a statistical, analysis.
He noted that she offered conclusions regarding gender based only on retrenchments
associated with departments that were reduced but not eliminated, while her age
comments were based only on departments that had been eliminated. He termed this
approach arbitrary, cherry-picking, and inconclusive. Holt further noted that since
Goldstein?s calculations regarding gender were based on the total faculty and
retrenchments only in departments that were reduced, and not also on the faculty and
retrenChments in departments that wereleliminated, none of Goldstein?s conclusions are

reliable.

 

Affirmative Action Plan. As mentioned earlier, the most recent Af?rmative
Action Plan adopted by USM was from 2003. The Policy Statement in that plan reads in
relevant part: I

. . in order to address the effects of past'discrimination
and to meet its af?rmative action obligations under federal
and state law, USM will take af?rrnative action to recruit
and hire women and minorities in selected areas in
accordance with the goals outlined in this PlanPersonnel actions such as . .i . layoff . . . will be

administered without regard to race, color, religion, sex,
sexual orientation, national origin, or citizenship status,
age, physical or mental disability, or veterans status. . .

This Af?rmative Action Plan outlines goals and methods
for attainment for the University of Southern Maine. . .

In the section entitled ?AVailability and Utilization Analysis with Goals

Identi?cation of Problem Areas? the Plan provided:

28

 

An examination of the data on utilization and availability of
women and minorities suggests?that the following job
categOries at the University of Southern Maine are problem
areas.

Women: Underutilization, sometimes signi?cant
(Signi?cant is de?ned as an und'erutilization of 8% or
greater), of women in some job categories but not in all job
groups, speci?cally: 

 

b. signi?cant underutilization of women in some
faculty job categories; speci?cally Natural Science,
Business, Arts, Applied Sciences and some Social Sciences

Minoritiesz. Underutilization, sometimes signi?cant, of
minorities in some categories and most job groups,
speci?cally,

g. underutilization of minorities in the faculty areas
of Business, Applied Sciences, Law, Public Policy
Management, Social Sciences, Natural Sciences, Arts,
Humanities 

The Action Plan detailed in the document focused on expanding the applicant

pools for. futureopenings so that they re?ectthe-availabi?l-ity-of women and minorities.? - 7

Related to this goal, speci?c requirements for conducting searches were set forth. No

numerical targets for any departments were established, nor was the topic of

retrenchment addressed. In a section entitled ?Compliance with Sex Discrimination

Guidelines? it was stated that ?[n]ondiscrimination on the basis of sex is observed in the

following areas: . . . 3. Seniority USM: 'Where they exist, seniority lines and lists are

developed Without reference to sex.?

Finally, the Plan had a sectionentitled- ?Goal Accomplishment,? which stated in

Since 1995, USM has made signi?cant progress in hiring
women and minorities: In the 1995 Af?rmative Action

'29

 

Plan, USM identi?ed several areas in which there was an
underutilization of women and minorities. For example, it
was identi?ed that the Social Sciences faculty had an
underutilization of eight (8) women and one (1) minority
and that the Natural Sciences faculty had an
underutilization of ?ve (5) women. Since 1995, the Social
Sciences faculty has hired sixteen (16) women and eight (8)
minorities, and the Natural Sciences has hired eleven (11)
women. . .

The above increase has occurred as a result of the following

initiatives and strategies which are specifically

implemented to recruit and retain women and minorities:
There followed an enumeration of outreach efforts, targeted disSemination of ob
openings, coordination of the administrators responsible for diversity and equity with
search committees, the implementation of a diversity plan on campus, and an
?opportunity hire? policy meaning the waiver of the requirement of a broad search 

that facilitated the employment of speci?c people who can make a unique contribution to

the?imiversity. 



rr at?" 

Pr- .


 

31

 





32

 

 

33

 

34

 

35

 

 36

 

I OPINION

Unfortunate Realities. It is indisputable that by the fall semester of 2014, the
enrollment at USM had. dropped by approximately 13% from the fall of 2010. The
decline in out-of-state students was in excess of 15%. The percentage drops were even
greater if one looked at credit hours. In absolute numbers, the headcount of

undergraduate and graduate students was down by over 1200 students. The demographic

37

 

 

projections of the relevant age groups in Maine, from which the vast majority of students
were drawn, showed a shrinking population for at least ?ve more years. The Board of
Trustees, mindful of the stressed-economic status of Maine families, had frozen the
tuition and mandatory fee levels for threeyears. Grants to support academic research
programs, from which the University received indirect payments, were shrinking and
becoming harder to attain. The inevitable result ?of these factors was that USM was
facing an unmistakable revenue shortfall. The continuing decline in enrollment also
meant that there was an excess teaching capacity. As the numbers of students shrank but
the numbers of faculty remained unchanged, class sizes got progressively smaller.

The ?nancial pressures faced by USM were not the result of a speci?c building
project that had run wildly over budget. They did not result from a sudden and temporary
explosion of energy costs. There was no one-time, non-recurring disequilibrium that
would resolve itself in a year or two. The budgetary de?cit USM faced was structural,
meaning that its existing and anticipated revenue structure was not suf?cient to meet its
on-going expenses. Nor was this situation a surprise development that caught USM and
the System unaware. The problems had been building since at least 2008 and a
succession of USM provosts and presidents had been forewarnng that responsive
measures, mostly program consolidations and eliminatiOns, were inevitable if USM were
going to be sustainable.

Over a number of years, the USM administration took a series of steps to reduce
costs, including laying off 100 non-faculty employees and deferring necessary
maintenance projects, but leavingthe faculty largely unaffected. Despite these efforts,

the budget for Fiscal 2015 showed a $9.5 million de?cit. On the condition that USM ?nd

38

 

a way to cut $2.5 million from its budget, the System Board agreed to the unprecedented
allocation of up to $7 million from its Budget Stabilization Fund, but stressed that this

I was a one-time measure. USM was told that going forward it would have to take the
steps necessary to produce a balanced budget. The Core and Composite Financial Ratios
for USM re?ected an institution in an extremely vulnerable position.

The evidence established that Fiscal 2016 budget, assuming no changes,
would have had a $16 million de?cit. AFUM questioned a few included items, like $1.1
million of increased student aid, but it was persuasively explained that such monies were
needed to stem an even greater decline in enrollment, and hence tuition income. One
might quibble at the margin, but the projected de?cit was real. Hence, there can be no
question that the administration of USM had to either ?nd suf?cient additional revenue
or cut expenses. AFUM never put forth any realistic cost-cutting plan that did not
involve faculty retrenchments. The essence of case was that there would be
suf?cient tuition revenues, supplemented bymore money from the System, to avoid

faculty retrenchments.

Bona FideFinancial Reasons: Applicable Principle Before delving into the

details of the ?nancial information, it is important to focus on the test established by the
collective bargaining agreement for determining the legitimacy of faculty retrenchments.
AFUM argued that faculty at USM could not be retrenched unless the entire System is in
a state of ?nancial exigency. This represents a misreading of Article 17. The contract
sets forth a far less stringent test; namely, that tenured and-tenure-eligible faculty and
those on continuing contracts may be retrenched ?for bona ?de ?nancialor program

I reasons.? The notion that the System may not require one of its units to stem the

39

 

hemorrhaging of money, and to adjust the size of its faculty to meet the current and
foreseeable enrollment levels, until the entire System is close to bankruptcy, de?es
common sense. Such an interpretation of the phrase ?bona ?de ?nancial reasons? will
not be imposed on the contract language without very clear evidence of bargaining
history evidencing the parties? mutual intent. No such evidence was introduced.

What this means is that the primary focus of whether the ?nancial reasons
advanced in support of the retrenchments were ??authentic, genuine, real, true, or actual,?
seemingly as opposed to ?arbitrary, capricious, or discriminatory,? - to quote Arbitrator
Sarah Garraty in the Anderson arbitration between these parties? is on the conditions that
existed at USM. AFUM is correct that USM is part of the entire System, and the System
as a whole receives the State appropriation. The System has discretion in how it allocates
and dispenses funds. It is therefore appropriate to'also examine whether System actions
or inactions contributed materially to the ?nancial condition of USM, and whether the
System Board acted unreasonably in requiring USM to produce a balanced budget,
instead of simply infusing suf?cient funds to allow the previous level of. faculty to

continue to be employed.

:Additional Revenue Turning ?rst to the issue of additional revenue, AFUM

 

argued that projections show that by 2018, the population in the 15 to 19year old
grouping will begin to increase, and the rate of decrease in the 20 to 24 year old grouping
will be much slower than experienced between 2013 and 2018. Referencing the rates of
high school graduation and percentage of students enrolled in college, Dubeck opined

I . that the enrollment decline would likely be over by 2018. Even assuming Dubeck?s

opinion were correct, this meant that in the fall of 2014, when preparing a budget, USM

40

 

had to assume that the University would continue to experience signi?cant enrollment
shrinkage for the next four years. In any event, even by 2023, the-15 to 19 cohort was not
expected to reach the level that existed in 2013, meaning enrollment is unlikely to get
back to the 2014 level that could not support then current faculty. Additionally, USM
experienced a major retention problem, with 40% of the. entering class not returning for
the subsequent years.2

The claimed panacea of out-of-state students ?lling the seats and paying tuition at
three times the in-state rate is a chimera. While out-of-state enrollments increased at a
number of the other campuses in the System, at USM this enrollment level fell by 15.6%
between the fall of 2010 and fall of 2014, a decline that actually exceeded the 12.7% drop
in in-state students. The rate of decline of out~of?state students actually doubled between
the 2012-2013 and 2013?2014 academic years. Further, as testi?ed to by Campbell, to
attract out-of-state students USM has to substantially discount the nominal tuition
through increased student aid, meaning the net revenue gain from such students is far less
than might appear. Finally, USM is in an area where the competition for students is
intense. Allstate schools are vying for out-of-state students and history has shown that
USM had not fared well in that competition. All this data supported the conclusion that
the tuition revenue shortfall at USM was a long term problem that was only likely to get
worse.

Dubeck also opined that State appropriations to the System were likely to increase
in Fiscal 2016 and therea?er. The most cogent piece of evidence to support that

conclusion was the Governor?s proposed budget for the 2016/2017 biennium, which

 

2 Although this information was obviously not available at the time the budgetary and retrenchment
decisions were made, it is instructive that the commitments to attend USM in the Fall 2015 were 15%
below the commitment level the prior year. -

41

 

 

showed an increase of 3.64%, or approximately $7 million a year. The problem with
relying on this figure is that the budget proposal was not issued until January 9, 2015,
well after USM developed its Fiscal 2016 budget and implemented the retrenchments. At
the time the decisions were made, .the relevant information available to USM was that the
noncapital State appropriation for the System had not yet recovered to the level of Fiscal
2008. The System capital State appropriation in Fiscal 2014 was $1.9 million, a fraction
of the $20.7 million received in Fiscal 04. The USM administrators had met with the
legislators from the Portland area and had been told not to expect an increase in State
monies. It was therefore reasonable to assume that there would be no major in?ux of
State funds that might obviate the ?nancial need to reduce the remaining major driver of

costs, faculty salaries and bene?ts. 

:Fiuancial Condition of the System. The central thesis of case was
that even if USM were under ?nancial stress, the System as a whole was in ?ne health.
A careful examination of all the data belies that conclusion. While Dubeck belittled the
signi?cance of the Core and Composite Ratios, institutions of higher education and bond
rating agencies regularly rely on these indices of ?nancial performance. These ratios
showed that in Fiscal 2014, the System was stable, but hardly robust. They indicated that
the System as?a whole was barely living within available resources, the net operating
revenue ratio being just above well below the low benchmark of The
measurement of whether the System was better or worse off than the previous years
showed the System had dropped ?om a high of 9.04% in Fiscal 2011, well above the 6%
benchmark, to a low of .16% in Fiscal 2014. The Composite Financial index indicated

the System was below the low benchmark.

42

 

AFUM argued that these Ratios were misleading because they did not include the
assets of the University of Maine Foundation, which as a component unit of suf?cient
size must be included in the Audited Financial Statements of the System. This argument
ignores the reality that the vast proportion of the assets of the Foundation are expressly
restricted for particular uses. Some percentage of the unrestricted portion can be
expended, but only for things in Orono, and only as dictated by the board of the
Foundation, not the Board of Trustees of the System. None of the University of Maine
Foundation resources are available to pay the faculty salaries at USM. Nor are these
?mgible dollars that could be used by the System to pay ordinary operating expenses at
Orono or elsewhere, freeing up other dollars that could be redirected to USM. Further,
even if one included the Foundation in the Ratios, the net operating revenue ratio

increased only to still well below the low benchmark of the measurement of
relative ?nancial status had fallen ?om 10.06% to 2.09%; and the Composite Financial
Index increased only above the low benchmark.

Another AFUM assertion Was that the ?ll amounts shown as depreciation were
not spent, so there must be excess dollars available to spend on faculty. In recent years it
has been Board policy that the full amount shown as depreciation should be budgeted and
spent for repairs and preventative maintenance. In reality, USM and other schools have
not had available cash to fully fund the depreciation in the budgets, and adjustments are 
made in the ?nancial statements to re?ect this fact. The result has been that deferred
maintenance totals have continued to grow and the physical plant of the System has
deteriorated. It does not mean that there is a pot of money that was allocated to

maintenance projects but was not spent.

43

 

AF UM pointed out that the Total Net Position of the System shown on its annual
?nancial statements has increased substantially since 2001. The Total Net Position went
from $451.8 million to $877.3 million in Fiscal 2014; of the total, the Unrestricted Net
Position grew from $40.5 million to $179.2 million, increasing every year. The Total Net
Position includes capital appropriations and grants and income that is restricted, which is
not available for operating-expenses. More importantly, the unrestricted portion actually
decreased between Fisca1'2013 and 2014. A more accurate picture of the state of the
System?s ?nances on an on-going basis was re?ected by the data concerning the
operating revenues and expenses. Total operating revenues declined every year from a
high of $483.9 million in Fiscal 2011to $453.2 million in Fiscal 2014. During that same
period, total operating expenses climbed from $666.8 million to $674.9 million. The
operating loss grew from $182.9 million to $221.7 million. Particularly in light of the
static State appropriations over this period, it was abundantly clear that the System could
not continue to operate without bringing the current budgets of it's universities into
balance.

The current and prospective disequilibrium was- of far greater relevance than the
fact that previous long term projections made by the System had proven to be overly
conservative. Further, those projections were made on a ceteris paribus basis, assuming
all other things remained as they were. The System had in fact been able to utilize those
projections to take prophylactic steps, such as negotiating a multi-year collective
bargaining agreement with AFUM that provided for no across-the-board raises,

implementing early retirement incentives, and effecting numerous other economies. The

44

 

combination of the dire demographic trends, and at best a very slowly recovering state
economy, reasonably dictated thatthe System exercise ?scal prudence.

AFUM maintained that the System in fact allocated signi?cant monies to USM
for other purposes that could have been used to close the budget de?cit and avoid
retrenchments. The capacity of the System to pump money into USM must be viewed in
context. For Fiscal 2015, the System drew upon its $15 million Budget Stabilization
Fund for the ?rst time. USM was allocated $7 million, a greatly disproportionate share.
More than half of the enrollment lost in the System since Fiscal 2010 had occurred at
USM, despite the fact that less than 30% of the total System enrollment was at USM.
Although Fort Kent and Machias actually experienced a greater percentage decline in
enrollment, their substantially smaller size meant the absolute dollar loss was far less. In
any event, the System had to make allocations from the Stabilization Fund to those
schools and to Orono, leaving a balance in the fund of just $5 million. Given investment
returns far lower than long term actuarial projections it was unlikely the fund would be
replenished quickly. It was apparent, therefore, that the System was reasonable in
insisting on compliance with the understanding it imposed on USM in Fiscal 2015 the
$7 million transfer was to be a one-time event and USM would have to bring its budget
into balance in succeeding years.

That the System agreed to Shoulder the-costs of the eighteen month retrenchment
bene?ts and the early retirement incentive does not mean it should have put those funds
into the Fiscal 2016 budget to avoid retrenchments. The retrenchment and retirement
payouts were short term costs that would lead to long term savings. If the ?mds were

spent to fund the salaries of the faculty who were instead retrenched, the funds would

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have been dispersed and the causes of the structural de?cit would have remained. The
System in actuality bestowed on USM and its faculty a major bene?t. Had the System
insisted that USM absorb the cost of the retrenchment pay and early retirement incentives
in its own budget, USM would have had to cut many more faculty positions. A similar
analysis applies to the $3 million the System lent to USM to pay for boiler replacements,
and the allocations that were made for student recruitment and retention efforts.

The overall conclusion is that USM and the System had a good faith ?nancial
justi?cation for the retrenchments that were announced in October, 2014. budget
had a structural de?cit that was not going to be resolved without action short of aligning
the size of the-faculty with the ever-declining enrollment. The Board of Trustees of the
System had an obligation to protect the viability'of the entire network of institutions, not
to maintain the existing employment levels at USM at all costs. In any event, while the
System as a whole had attained some measure of ?nancial stability, it was certainly not
?ush with resources that would have allowed it to subsidize USM for the foreseeable
future.

Given the scope of the ?nancial shortfall, the number of positions potentially
affected, the need to plan and give notice of retrenchments well in advance, and the
inherent imprecision of projections, one cannot expect absolute accuracy regarding
dollars needed and saved, or the short term alignment of permanent faculty and class
coverage. Even allowing for some good faith margin of error, however, USM is not
entitled to simply lay off tenured and tenure-eligible faculty to reduce the cost of
providing the necessary level of service. It is not appropriate to retrench permanent

faculty and then employ them to cover their normal course load, but at less than regular

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contractual rates. It is also not appropriate to retrench faculty and then cover their normal
course load with newly hired adjunct faculty. The retrenchment process cannot be used
to undermine the negotiated contractual compensation requirements. This topic will be
dealt with in greater detail subsequently, since it introduces an unfortunate level of

complication to assessing the propriety of an individual retrenchment.

Good Faith Programmatic Decisions. Under Article 17.A, a university within

the System can legitimately retrench faculty in a program if that program has temporarily
or permanently been suspended or eliminated, separate and apart from being able to
retrench program faculty due to' bona fide ?nancial reasons. A traditional right of
management is to determine the services to be performed and the products to be produced
in the case of a university the programs to be offered. The collective bargaining
agreement does not dictate which programs will continue to exist for the life of the
contract. Rather, the only role of the Association and protection for existing programs is
set forth in Article 32. That provision insures that AF will receive noti?cation when
the Program Elimination Procedure is initiated by a university administration, and .shall
be provided the ?opportunity to meet and discuss.? The right to'eliminate programs is
vested in the System Board of Trustees, and the multiple steps set forth in Section 305.5
of the Administrative Procedures Manual aredesigned to insure that the decision will be
rational and, on balance, are in the best long term interests of the various stakeholders
and the System as an entirety. The contractual requirement that retrenchment must result
from a bona ?de program reason insures only that the decision to eliminate a program
must be made for reasons that are not arbitrary, capricious, or discriminatory, or

otherwise in bad faith.

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AFUM is correct that the Board seemingly failed to follow the dictates of Section
305.5.6 when it voted at meetings other than those held in January or July to retrench
programs at USM. While Article 3 of the collective bargaining agreement grants to the
Board the right to alter or waive existing bylaws or policies, there was no evidence that
the?Board voted to do so. Arguably, by going through the prescribed steps, holding
public hearings, and formally voting on the USM program elimination proposals, the
Board implicitly waived the uly/J anuary guideline. Regardless, however, the fact that
the Board voted to eliminate programs at a meeting in September did not give rise to a
contract violation under the collective bargaining agreement. The parties did negotiate
one explicit time frame into the collective bargaining agreement in Article 177.C regarding
retrenchments. That sole time limit is that faculty members must be noti?ed no later than
October 31 if a retrenchment notice is given in the fall semester, and USM met this
contractual requirement in .2014.

That the Board?s failure to vote on program eliminations only in July or January
does not constitute an actionable violation of the collective bargaining agreement is
supported by the actions, or inaction, of AFUM of?cers earlier. Multiple times since
2008, theBoard voted to eliminate programs at?meetings other than those held in July and
January. Those eliminations affected multiple campuses, yet at no time was there a
protest that such votes violated the collective bargaining agreement and were therefore
invalid. InMay 2014, the Board voted to eliminate ?ve programs at USM, and the
leadership of the USM chapter of did not raised any objection. One can
appreciate that because no faculty member was actually impacted by the elimination of

vacant programs, and the faculty bodies had supported the eliminations, there was no

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need to point out the deviation from Section 305.5.6. At the very least, however,

AF long silence regarding the need for technical compliance with this procedure
represented a waiver. Having now served notice that it would contest non-compliance,
the System can no longer rely on willingness to overlook the failure to observe
the procedural time line. In the future, the Board must vote on program eliminations in
July or January, or explicitly waive the requirement.

In looking at the substance of decision to eliminate the ?ve chosen
programs, it must be noted that their selection was hardly a precipitous decision. A
succession of provosts had undertaken systematic analyses of all the academic programs
and almost all of the ?ve programs had been identi?ed as poSsible targets for elimination
or absorption into other programs. The programs all had very low enrollments and were
relatively costly to maintain, in comparison with other programs. There may well have
been good countervailing arguments, and even disagreements about the cost abcounting
with one of the programs. Ultimately, however, the decisions-on which programs to-
maintain and which to eliminate were made in good faith. The USM administration, the
chief academic of?cers, the assistant Chancellor and chancellor, the subcommittee of the
Board, and the m1] Board, were faced with the need to trim costs in the face of a
structural budget de?cit and they made therational decision to do so in part through the
device of paring less populated programs. There was no evidence of personal animus,
retaliation, discrimination, or other bad faith motivations, so the program eliminations

and resulting retrenchments must be sustained.

Af?rmative Action Caveat. This case presents an interesting twist on the

 

challenge to the seleCtion of individuals in a reduction in force. Historically, unions

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fought to have layoffs conduct pursuant to strict seniority. It was felt that besides being
equitable and predictable, a seniority-based layoff criterion precluded selections
motivated by race, gender, or age discrimination, nepotism, or personal favoritism.
Employers o?en argue that they want the right to lay off employees according to
subjective judgments such as alleged performance differences or value to the enterprise.
Here the administration looked to strict seniority and it is the union that is arguing that
other considerations should have been applied in choosing which of the faculty would
lose their job.

In Article 17.B.1 the parties speci?ed seven seniority groupings that would
govern retrenchments, showing the high importance the parties attached to length of
service. In Subsection 4 they stated that if rankings according to Subsections l, 2, and 3
are equal, members whose quali?cations are ?most essential to the mission and purpose
of the retrenched unit? will be retained. Following that the parties inserted Subsection 5,
stating-that Subsections 1 through 4 ?shall be applied in such a way as to minimize any
adverse effect on af?rmative action employment programs.? USM has argued that the
only way to interpret Subsection 5 is that where faculty are otherwise equal, the
administration would look to ?thher af?rmative action programs when selecting the
person to be retrenched. The problem with this argument is that the parties used the ?if
equally quali?ed? ?lter explicitly in Subsection 4. The absence of that ?lter in the
immediately succeeding section must be interpreted as significant; if they had meant the
two sections to be applied in the same fashion, they would have used the same language.

Hence, it is necessary to assume the parties had some other intent.

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The dif?culty is that there was no bargaining history introduced to give insight
into the parties? mutual intent when they adopted this language. Further, in forty years of
arbitrating and interpreting contracts, this arbitrator has never encountered any similar
language. One suspects that it was largely viewed as aspirational, and that it was adopted
at a time when neither party expected there would be large scale retrenchments. Either
no thought was given to how it would actually be implemented, or the parties could not
agree on how the noble sentiments could be effectuated and hoped this juncture would
never be reached.

Despite the lack of guidance, one cannot simply ignore the provision. It will
therefore be assumed the parties at a minimum intended that the section be applied
according to its literal terms. The starting point-is to determine if there is some
applicable ?af?rmative action employment program? that dictates the pro?le of the
faculty to be employed. The only af?rmative action document put into evidence was the
plan adOpted in 2003. While that plan references underutilization of women in
disciplines such as Natural. Science, Applied Science, and social Science, the plan
establishes no numerical targets or minima. The focus of the plan is on the recruitment of
a more diverse. faculty through expanded and targeted searches, not af?rmative steps to
be taken to protect the gains made in hiring women and other minorities in the event of
retrenchments. Its only reference to seniority is that seniority lists are to be developed
without reference to sex. Rather than support the notion that the seniority tiers
established under the collective bargaining agreement are to be superseded by gender-
based lists, the plan endorses gender-neutral seniority lists. It states that layoffs will be

administered without-regard to sex. As cogent as are Dr. Feiner?s arguments about the

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bene?ts of having women faculty in the sciences and social sciences, and as much as this
arbitrator would have liked to have found a vehicle to protect the only females in multiple
departments, the 2003 Af?rmative Action Plan and Article 17.3.5 do not provide that

mechanism.

The Disparate Impact Analysis. Article 27 bars discrimination on the basis of
sex or age, among other protected categories. One form of discrimination is disparate
impact of a facially neutral policy. There is nopurpose in elongating an already
voluminous arbitration decision with a discussion of the battle of the statisticians. Suf?ce
to say that Goldstein?s novel approach of controlling for the determinative ?seniority
deficit? of women, and then only looking at the faculty who were retrenched from
departments or programs that were not eliminated, does not disprove Holt?s analysis that
there was no disparate impact either as to gender or age. Nor did Feiner?s arithmetic
analysis of the results of the application of the seniority system on gender in remaining
departments, or. age in the eliminated programs. 7

In reality, that the System had Clough conduct a disparate impact analysis
regarding the age and gender of the faculty who were retrenched in October, 2014
represented an excess of caution. section 703(h) of Title VII precludes a ?nding of
disparate impact discrimination in the case of a layoff where the selection of employees
to be let go is driven by the application of a bona ?de seniority system, absent a ?nding
of an intention to discriminate. It was stipulated by AFUM at the arbitration that it was
not claiming intentional discrimination. Certainly the creation of the seniority-based
retrenchment process was not a form of intentional discrimination on the part of the

System. Rather, it was the result of good faith negotiations between the System and

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AF UM. The jointly adopted system was designed to achieve the bene?ts of equity,
transparency, and predictability. It was not designed to disadvantage any protected class
members. If more time had passed before retrenchments became necessary due to
enrollment declines, and the af?rmative recruitment and retention efforts discussed in the
2003 plan had been able to achieve even greater gains beyond those documented in the 
plan, the seniority system would likely produce completely gender-neutral results. That
the System applied this bona ?de seniority syStem when it came time to retrench faculty
cannot be viewed as a form of intentional discrimination. Hence, there can be no finding

of disparate impact discrimination.

Efforts at Finding Alternate Employment. Prior to the retrenchment notices

being issued to the affected faculty, Schmelz sent instructions to the employee relations
liaisons and chief academic of?cers at all the System universities regarding their A
obligations to retrenched faculty in relation to ?rture job postings. After October 31, the
retrenched faculty were sent weeklylemail noti?cations of the link to the on-line listings
of employment opportunities throughout the System.

- At the arbitration Schmelz was asked if he could have met individually with each
retrenched faculty member, or reminded each person to be sure to update their c.v. He
acknowledged that he could have, but did not. Article 17 .E requires only that the
University make ?a reasonable effort to locate appropriate alternate or equivalent
employment within the University.? It does not require that every conceivable effort be
undertaken, regardless how unlikely to enhance the possibility of re-employm?ent within
the System. Faculty do not have to be reminded to update their 

they know they will soon be out of a job. Meeting with each person individually to

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essentially repeat what was stated in the System?wide communications would have been
a waste of time for the faculty and Schmelz. More signi?cantly, no grievant identi?ed
any position that they might have quali?ed for and been interested in,lbut were not given

appropriate consideration due to a de?ciency of effort on the part of USM or System

 

administrators.

 There is therefore no

basis for ?nding the System, through its various administrators, failed to satisfy its

obligations under Article 17.E.

'Return From Sabbatical Irrelevant.- AFUM argued that the fact that a faculty
member returned to campus in the fall of 2014 after a sabbatical precluded the
administration from retrenching that person. The theory was that a condition of getting a
sabbatical is that a faculty member must return for at least one academic or ?scal year.
That a returning faculty member is obligated to return for a year does not give that person
a year?s worth of protection from retrenchment not available to faculty who did not enjoy
the bene?t of a leave with pay. It does not mean the University is required to exercise its
entitlement to have that person be employed. This is analogous to being out on any of the
statutory leaves, such as Family Medical Leave. If a layoff occurs while a person is on
such leave, and that person would otherwise have been laid off, the normal right to return

to the same or similar job is superseded.

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Exception to the General Finding on Selection of Individuals. A review of the

testimony of the individual grievants indicates that in one case a retrenchment did not

I represent the implementation of a management decision to effectively reduce the level of
service being offered. As previously explained, it is an inherent management prerogative
to decide on how much of a product in this case education will be generated.
Adjusting-staf?ng to re?ect that decision is also. an inherent management right. What the
System cannot do, however, is maintain the same level of service but get a faculty

member to provide it at lesser pay and bene?t levels

 

 

 

 than being retained in-?faculty position,-was paid at
either tli? faculty ?loverloador adjunct rate for each course. Given the fact that-was
also receiving retrenchment pay,- did not suffer an actual absolute loss of earnings.

should not have been retrenched, however, and should have continued as a? full-time
faculty member for as long as?was teaching a full load, a fact that was not in the.
record. Tha'rnay not have been required to perform the research and service work
normally expected of full-time faculty was a result of the University?s failure to
recognize .proper status, not any unwillingness on the part of-. At the point-
course load was or is subsequently reduced,-eighteen months of retrenchment pay
should run from that point, less the amounts?has been paid for teaching the courses.
Thecalculation of an exact remedy is returned to the parties, since it is based on facts that

are not available to the arbitrator.

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AWARD

January 30, 2016

With one exception, the University did not violate
the collective bargaining agreement by

1. its decision to retrench? faculty members in the
fall of 2014;

2. and/or, the selection of particular faculty
members to be retrenched;

3. and/or, the manner in which it implemented the
retrenchments.

The retrenchment of did violate the
collective bargaining agreement. As discussed in the
Opinion section,? shall be made whole for any lost
wages'and bene?ts. The calculation of . remedy is
returned to the parties, with jurisdiction being retained by
the arbitrator if they cannot reach agreement.

Mam. Lemma?

Arbitrator

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