Strategies for Challenging Shared Services/AST: Arguments and Counterarguments

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In what follows, we list a number of common arguments in circulation about how to challenge the administration’s plans to implement “shared services”/AST, and offer a series of responses. These counterarguments are based on what SUM has learned about the administration’s financial operations and crisis management techniques by reading statements, records, and documents that are publicly available on the internet. Some of the information here was presented at the recent “Teach-In” and will probably be discussed more in depth at the upcoming Organizing Meeting on December 5.

Argument #1: The university is in crisis, which means that we have to cut costs somewhere. Public universities are being defunded by the state and if we want to avoid tuition hikes we have to implement “cost containment” programs like AST.

a) We just need to make it out of this difficult period. If we cut some costs now, things will get back to normal.

The university will never leave this so-called “crisis” period of having to “cut costs” (which is corporate lingo for firing people, cutting salaries, and stripping benefits) because its financial model is built upon doing just that. The following quote comes from a recent U-M financial report, in which the university administration advertises its continuous efforts to attack labor:

“A disciplined approach to long-term cost containment is a driving force behind our ability to limit tuition increases, provide more financial aid, and continue to invest in teaching and research. The university’s deans, directors, faculty, and staff reduced and reallocated $235 million in recurring general fund expenditures from the Ann Arbor campus budget over the period FY 2003–2012. Beyond that, we’re planning to reduce or reallocate recurring costs by another $120 million by 2017. Our cost containment efforts currently underway include information technology rationalization, strategic sourcing, and administrative services transformation.” (p. 6)

If the university can demonstrate to Wall Street that it is dedicated to “cost containment,” it can attract the attention both of Wall Street capitalists, who might be interested in purchasing their debt, and of bond raters, who determine the university’s credit rating. It’s clear that the Wall Street lenders the university is trying to attract are interested in whether the university is tough on labor. For example, in the bond prospectuses that the University of Michigan issues to entice Wall Street lenders to purchase their debt (bonds), they list all the unions present at the university and when their contracts expire. Unions are seen as a threat, and control of the union is seen as a strength.

b) Universities are being defunded by the state. That money has to be made up for somewhere, so we need to think about “efficiency.”

The administration is no longer interested in getting more money from the state in order to cover the university’s costs, because the state can tell them what to do with the money. In fact, in the same financial report linked to above they proudly advertise to their Wall Street friends that they are successfully achieving a model of “revenue diversification”:

“Revenue diversification has long been an important strategy for the university to achieve financial stability in light of unpredictable economic cycles. In the 1960s, for example, nearly 80 percent of the university’s general fund revenues came from state appropriations, compared to the projected 17 percent in the FY 2013 general fund budget. The current mix of revenue can be seen on the charts below, which show the FY 2012 operating revenue sources with and without the health system and other clinical activities.” (p. 5)

This chart shows a much more complicated picture than simply that the university is lacking in state funding and needs to make it up by cutting the university staff. Their revenue is not just dependent on state funding but rather a complicated mixture of incomes, which many times fundamentally rely on the labor and operating capacity of staff.

Additionally, the university is increasingly dependent on bonds to fund its construction sprees. The administration sees bonds as advantageous because unlike its other sources of funding, which carry frequent restrictions, bonds have none. So, while the state could (and has) put conditions on funding (for instance we won’t give you this funding unless you have a certain amount of racial diversity at your school, or unless the building you want to construct costs under some set amount of money), bonds let top executives at the university use the money for anything they want and run the university any way they desire (the way that will provide those at the top with the most profit).

c) If we don’t cut costs somewhere, they will continue to raise tuition.

The university is dedicated to consistently raise your tuition whether they cut costs or not. Through the shady agreements that they have made on Wall Street, they have promised to continue raising tuition. When the university makes a loan agreement (issues bonds), it has to offer something as collateral, and the university has offered your tuition. In an article titled “They Pledged Your Tuition to Wall Street,” UC Santa Cruz professor Bob Meister’s explains the ties between university construction projects, bonds, credit ratings, and tuition hikes:

“Because UC pledges 100% of tuition to maintain its bond rating, it has also implicitly assured bond financiers that it will raise your tuition so that it can borrow more. Since 2004, UC has based its financial planning on the growing confidence of bond markets that your tuition will increase. (Why? Because you’ve put up with this so far, and because UC has no other plan. Its capacity to raise tuition is advertised in every bond prospectus.)”

U-M does the same thing, since it pledges general fund revenues, the pool in which tuition is deposited, as collateral for its construction bonds. It’s true, as the university states, that tuition is not used directly to pay for “most construction projects.” But it is always used indirectly, both as collateral on the university’s debt and as funds with which to service the debt (i.e. pay interest).

Argument #2: Disruptive actions will only make the situation at the University of Michigan worse. In order to accomplish anything for the staff and for ourselves, we have to include the administration in our conversations. Only through bringing them into the room with us and consulting them will we be able to reach the top where these decisions are being made.

In fact, this is exactly want the administration wants. They want to placate and silence us as quickly as possible. Why? Because protests and disruptions at the University of Michigan threaten the administration’s plans for running the university. Where does this power to make them so afraid come from? For one thing, the credit rating.

In advertising itself to Wall Street as an attractive investment, the single most important factor in this self-promotion is the credit rating, which shows how likely the university is to repay its loans. If the University of Michigan’s credit rating is high, Wall Street will be more likely to lend it money, and the interest rates on those loans will be more favorable. What factors into this credit rating? Not only the liquidity afforded by tuition (and thus ever higher student debt) but also the ability to contain, control, and exploit labor will allow the company (oops, university) to continue generating revenue and thus repay the loans.

If there is turbulence in the labor environment or even the general campus environment, however, any investment becomes more risky and credit ratings go down. The administrators, in other words, are terrified of us. Why beg them to listen to us when we have the upper hand? Only demonstrating our capacity to create turbulence can we begin to make headway in this struggle.

In thinking about the administration’s goal to dismantle and placate any dissent as quickly as possible to salvage their credit ratings, it is insightful to take a look at an administrative guide to “managing resistance.” As the first tip in this guide states:

“Consider the following change management activities:

  • Utilize a structured change management approach from the initiation of the project

  • Active and visible participation by senior leaders

  • Advocacy by management levels including middle managers and front-line supervisors

  • Communications that describe the need for change, the impact on employees and the benefits to the employee (answering ‘What’s In It For Me?’ or WIIFM)

Each of the four change management tactics, all of which are part of a structured change management approach, directly address some of the main sources of resistance and can actually prevent resistance from ever happening if they happen early in the project lifecycle. Front-line employees understand the ‘why’ behind the change and see the commitment from leaders throughout the organization. In many cases, this will prevent resistance from occurring later in the project when it can adversely impact benefit realization, project schedules and budget.”

We are seeing that the university has already employed several of these tactics in order to “manage our resistance.” However, as we have indicated above, the “why” that they are trying to sell us (cutting costs is inevitable and has to be done somehow) is a sham that they are spinning in order to keep the university running on debt and funneling pools of money in the university’s top positions of power. The administration is not acting in good faith. By going to the table with them, we are actually assisting the administration in “managing” the very resistance that we might imagine we are trying to incite. Negotiating with the administration means we have to start with their argument — “change is inevitable,” which ultimately means that returning to their system of university financial operations is inevitable.

What would it be like if we refused this argument from the opening moment of resistance? We will not accept that your way of running the university (hiking up tuition and creating a luxurious campus in order to draw wealthy out-of-state students, while simultaneously drastically reducing the university’s racial and class composition) is inevitable. What if we decided to create our own demands that radically diverge from the terms on which they decide we should be talking? One thing is for certain, if we really want to challenge the major issues we see, it cannot be by sitting at the table in the boardroom during the regents meeting and listening to their proposals for how they will mask their ongoing violent attack on labor and diversity with alternative solutions. Instead of sitting, however, what if we stood defiantly and silently in the boardroom meetings refusing negotiations and demonstrating that we will define the terms of the argument and that the only things that have to be “inevitable” are the changes that we seek?

This is not just some idealistic dream. Students and workers (and student-workers!) at universities across the country and the world have won important victories by standing up to their administrations. In 2012, well-organized student groups in Quebec staged several student strikes that succeeded in forcing the repeal of tuition hikes and even led to a new provincial government. (SUM itself was inspired by the success of the student unions in Quebec.) Or to take a US example, in the University of California system where Professor Meister teaches, “students . . . organized successfully to beat back a proposed 81 percent tuition hike in 2011.” And the year before that it was campus protests that led the Governor of California to shift funding from prisons to higher education: “Those protests on the U.C. campuses were the tipping point.” Few victories have come from negotiation and compromise with administrators whose only goal is the corporatization and financialization of higher education.

Here are some of the people who have publicly endorsed “shared services”/AST and probably shouldn’t be consulted:

1. Regents
2. President Mary Sue Coleman
3. Provost Martha Pollack
4. EVP CFO Timothy Slottow
5. Associate VP of Finance Rowan Miranda
6. Executive Officers
7. Deans

Argument #3: It would be better for students and workers to step back and let faculty members negotiate with the administration about solutions to AST. They have better relationships with the administration and better understand the processes that are occurring.

Our strength comes from confronting the university on our terms, not theirs. It is difficult for them to have large communities come together in opposition to bad and corrupt policies outside of officially sanctioned forums and spaces. Not only is it embarrassing, but it threatens their credit rating and future ability to exploit us as students and workers.

We lose that strength if this struggle is displaced into the official, bureaucratic channels controlled by the administration. We also lose if the discussion happens in conference rooms where administrators are allowed to dominate discussions with their talking points and subtle threats. The problem with AST is not (or not only) that faculty was not allowed to weigh in and modify the proposal to their satisfaction — the problem is that AST exists at all.

We cannot forget that this struggle is also about students and workers having a say in the policies that they fund and uphold. Relegating all decision making to faculty, especially after so many department chairs upheld gag orders, is wrong and unacceptable. This is not being moderate or willing to compromise, it is a violent act of exclusion. Students, lecturers, and staff would all be left out of this supposedly inclusive conversation. We do not want faculty to “represent” us in these discussions. We represent ourselves and we are saying “NO,” not “maybe if you change its name and description.”

Argument #4: AST should be stopped and we should implement “Unit-Centric Services” (UCS) instead. UCS is a reasonable, efficient solution to the problem and a good alternative to AST. It would provide a decentralized, democratic process that the university administration could accept.

While we support the call to stop AST in the Open Letter to President Coleman and Provost Pollack, we strongly disagree with alternative it proposes: something called “Unit-Centric Services.” The UCS proposal cedes all our ground to the administration. It accepts, to begin with, the notion that taking advantage of “efficiencies” is the best way to deal with budgetary pressures, while ignoring the possibility that the problem might lie elsewhere (such as executive salaries and expensive construction projects). It takes the administration at its word that staff are a significant drain on resources and that by consolidating (and later eliminating) them we can save significant amounts of money. We know this isn’t true.

Furthermore, no one seems to know what UCS involves because, frankly, it doesn’t actually exist (the Google search below was done the day after the Open Letter was made public: it gives only two hits, both to the letter itself). It doesn’t seem very strategic to invent a name and then, without fully defining it, declare it a useful alternative. An empty term like that could be easily seized and contorted by the administration, in closed-door deals just like they did with AST. There would be nothing democratic about that process.

Some have suggested that the UCS proposal makes it easier for the administration to back down, because they won’t have to admit that they were wrong, just that they picked the wrong process with the wrong consultant. But that’s not enough. If we want to roll back AST permanently, we need the administration to fully acknowledge that this call for austerity is a farce in order to protect ourselves from a repeat in the future.

Decentralizing governance is a great idea, but you can’t do it halfway. The UCS proposal reproduces the same top-down hierarchy of the status quo that got us into this AST mess to begin with. Take a look at the proposal, as outlined in the letter:

“Once the Central Administration has established the general fund budget for each school/college for the next five years, each Dean should assemble a 10-person committee composed of faculty, staff and administrators to develop a strategy aimed at maximizing the productivity of that school/college. Some schools/colleges may decide to move the process down to departments or groups of departments. The committee may consider the elimination of certain activities or functions because of low academic/financial return, the reorganization of services, as well as the local centralization of services if judged to be advantageous to the overall productivity of the unit. . . . The proposed strategy undergoes a vetting process by inviting input from faculty, staff and administrators. It is then submitted to the Dean, who, as the administrative officer of the unit, has the authority to modify it as he or she sees fit.”

In other words, the administration remains at the top, making all budgetary decisions, setting all the goals, and creating all the committees. Furthermore, the administration retains the final word—all decisions made by committees can be “modified” at will. Finally, both undergraduate and graduate students are explicitly excluded from the decision making process- it is inherently undemocratic and covert. All of this is unacceptable. Do we really want the people who rammed through AST behind our backs, using gag orders and manipulation, to stay in charge of the process?

Submitting to this process of “staff consolidation” does not serve us, regardless of what it is called, and we should reject it unequivocally.

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3 thoughts on “Strategies for Challenging Shared Services/AST: Arguments and Counterarguments

  1. Pingback: Special Delivery: Make Rowan Miranda Reapply for His Job | Student Union of Michigan

  2. Pingback: Four Lessons from Monday’s protest and Mary Sue Coleman’s Response | Student Union of Michigan

  3. 1) Given the current economic climate with interest rates at all time lows and the Aaa Moody’s credit rating, not building would be insane. If you want to be part of a top tier university this is how its done, hiring the best and building the best. If you want to do that, you need to spend money, get used to it.

    2) How does a diverse population of students benefit anyone? I understand diversity can help bring new ideas and thoughts in an academic environment, but that is a completely different argument… But really what benefit is anyone getting at any university from having exactly a certain percentage of Caucasian, Black, Latino, Asian etc etc. students? Don’t tell me they all have diverse racial backgrounds and therefore have different ideas and opinions because then you are breaching the line of equality which you also preach. Different socio-economic classes is perhaps one answer to your argument but even here where can we draw the line between equality and “diversity”. Judge me by my ideas and intelligence, not the color or my skin or how much money I have. If your argument is one of affirmative action it belongs nowhere near this article.

    I will say however, and maybe here we can agree, that skin color, income & need for aid, gender, sexual orientation, age, etc. should bear no weight at all in the process of admission. Again this belongs nowhere near such an article, but I figured I would reply to your red herring statements.

    3) What is this some sort of anarchist group? Why do you want to incite rebellion and change so badly? This isn’t the Vietnam era, there is really nothing going on so drastically terrible that would warrant trying to “destroy” something. Why destroy the university’s stellar credit rating? Why ruin all hope for continuing to improve our great university? Of course there are many imperfect things that go on here, but destruction of years of hard work and diligence is no respectable answer. There are other ways to achieve agreements without being obnoxious, and yes negotiations work, that is why they have lasted throughout the existence of humankind.

    4) Where does Shared Services or Strategic Sourcing hurt students? I will admit I am learning about the subject as we speak, so calm down now and take this as a genuine question. From my understanding these initiatives are actually good for our university and will help redistribute funds to all the poor “social justice & environmental science” departments which you stood up for in your other articles. If you want to stop a cost saving initiative I really am not sure why.

    5) One final note, related to what I already discussed earlier. There is no corrupt reason that Mary Sue is paid as much as she is. There are 2 basic reasons that come to my mind right now, and I am sure there are many more; 1] Mary Sue and all other college presidents take on a risk when they assume their position as president. They represent an entire university and if something goes wrong under their watch it is their head at stake. If the university collapses financially or some student or professor commits some heinous act it is the president that has to respond to it. Essentially you may consider her salary as the risk adjusted payoff that makes her willing to take on that risk. This concept is also true for many CEOs, so while you may continue to hate her and the rest of the one percenters, at least know why. 2] There is a competitive market for leaders, it is yet another reason top businesses pay executives so well. Under the proper leadership an organization can thrive, and a lot of these people provide a lot more value to their organizations than they will ever be paid or recognized for. This includes Mary Sue Coleman.

    I hope I get a reply from you, but if not I enjoyed that…

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