The Murray State Board of Regents unanimously voted in favor of remaining in the Kentucky Employees Retirement System (KERS) because the financial risk to get out was too high.
Vice President of Finance and Administrative Services Jacklyn Dudley said there were a few options on the table regarding opting out of the KERS, but all of them could put the university in financial jeopardy. One of the concerns MSU President Bob Jackson mentioned during the presentation was the potential amount of debt the university would take on to opt out could impair its ability to borrow in the future, along with the payout options being one lump sum, or a 30-year agreement.
The board had to make its decision based on estimates because, as Jackson noted, the state wouldn’t issue a cost for buy-out until after the board chose that route. Estimates from accounting firm Dean Dorton created a snapshot of possible fixed debt expenses the university could incur if the board opted out of KERS. Jackson said he and his administration recommended the board remain in KERS based on those estimates.
The estimates are as follows:
Remain in KERS (current rate of 49.47%): $122,598,884
Remain in KERS (potential rate increase to 93.01%): $171,446,533
Taxable Bonds, Hard Freeze: $189,765,995
Taxable Bonds, Soft Freeze: $211,473,916
Installment Payments, Hard Freeze: $270,493,288
Installment Payments, Soft Freeze: $336,615,313
After hearing all possible choices and potential risks involved, Regent Don Tharpe said, “It appears to me, if we made a decision to write that big check, that we would really be putting the university in a real bad position going forward. I think future boards would have one question, ‘What drove them to make that decision?’ And I haven’t seen anything here today that would drive me to making that decision. Because if we’re going to write a check that big, there should be compelling evidence of why we would do that, and I don’t see a compelling reason to write a check that big.”
Jackson said he’s only aware of one university in Kentucky that has opted to leave KERS. Northern Kentucky University, he said, chose the ‘soft freeze’ option and planned to pay the fee in one lump sum. He said the other universities plan to stay in for the same reason MSU chose — it would cost too much to leave.
The board’s finance committee voted unanimously to remain in KERS, followed by a unanimous vote in favor by the full board of regents for the same.
Jackson said the work is not finished, that his administration will continue to find ways to mitigate the costs to the university and continue working with legislators to keep the rates as low as possible.
In other business:
- Dudley said based on the analysis her office conducted of the university’s budget through September, it appears the university’s finances are stable. She said the impact of COVID-19 has been “significant,” but federal and state relief funding have been helpful, as well as adjusting the budget and then “living within that budget.” She said the two main challenges identified so far is an increase in scholarships awarded and a decrease in on-campus housing occupancy, but she noted the university sets aside a $2 million contingency fund that could cover it if needed.
- Governmental Relations Director Jordan Smith said Kentucky’s legislative session is set to begin Jan. 5 and he anticipates it will be “fast and furious” until the final date, March 31. He noted a number of bills have already been filed and what the legislature might do with public pensions is of high interest.But he anticipates the legislature won’t pass many bills this session. He predicted “the budget will take up all the oxygen in the room” because last session was only able to approve a one-year budget (instead of the traditional two-year budget) before the pandemic forced closure of the session.
- During his presidential update, Jackson said approximately 65% of colleges and universities across the country had to operate remotely or mostly remote for the fall 2020 semester. With that in mind, he said he was proud MSU was able to remain in-person the entire semester. He said that was the result of a number of faculty/staff who dedicated themselves to working with students/student groups on Racer Safety Guidelines compliance and a campus-wide 95.9% mask-wearing compliance.
- The board approved a revised mission statement: “Murray State University places our highest priority on student learning and excellent teaching, blending the range of educational opportunities often found at research institutions with the nurturing student-teacher interactions usually found at smaller universities.”
