Problems of the EIU Pay Cut Proposal

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On March 5, 2016, President Dr. Glassman of EIU communicated a proposed pay cut plan to the University Professionals of Illinois, which represents over 500 Faculty and Academic Support Personnel at EIU.

 

As Dr. Glassman explained, EIU is “about $2M short of making payroll through the end of the current fiscal year without further action.” He further stated that because UPI rejected the offer of furloughs and offered to take pay deferral instead, he is offering a compromise of pay reduction accompanied by a repayment plan. Dr. Glassman also explained that in order to maintain equity and fairness across campus, “the additional furlough days assigned to other employee groups will be converted to salary reduction and conditional repayment too.”

 

It was clear to me that EIU does have a cash flow problem – how can we not have a cash problem when we have been operating on reserve funds depleted by Perry’s (EIU president who left his post in May 2015) team, while receiving $0 for FY2016 from Rauner’s government? However, the mechanism proposed to resolve EIU’s financial crisis is misaligned with the stated purpose presented by Dr. Glassman. I also believe that the fundamental structure of the proposal is a breach of the labor-management relation defined by contractual obligations. Further, parts of the proposal are unclear and missing key details, making it impossible to evaluate the full impact of this proposal. In addition, there are elements in the proposal that raise significant concerns over the sincerity and commitment of EIU to repay UPI members, thus making the proposal disingenuous and misleading. Finally, the proposed plan is likely to cause permanent and extensive damage to the retirement planning of all our members.

 

In the following paragraphs, I will explain these key objections.

 

  1. The misalignment of the proposal with the stated purpose of garnering sufficient fund to sustain payroll through fiscal year 2016

The proposed repayment scheme, where any MAP money released by Illinois will not count towards the repayment thresholds set in the proposal, raises serious question as to why the MAP money is excluded in funding repayment. Further, under this proposal, UPI members will not receive 100% of our pay reduction until EIU receives at least $37M. Finally, only money appropriated under FY2016 will be used to repay UPI members and any money appropriated under FY2017 will not be used for this purpose.

Taken together, these actions paint a picture of the EIU administration not just needing $2M for cash flow to sustain payroll, which is the stated intent, but to also rebuild EIU’s financial health on the backs of our UPI members. There are no other reasonable explanations to account for all these provisions. The step-wise repayment scheme where between $10M received and $27M received, not a single penny is repaid to UPI members who are asked to take a voluntary pay cut, is damning to the sincerity behind the stated offer to “repay” UPI members. EIU is asking UPI members to wait, after they take off 20% of their monthly take-home pay for 3 to 4 months, while EIU fills up its coffer.

UPI understands the urgency for EIU to rebuild the cash reserve, should any appropriation arrives. However, that should not be a burden carried solely on the shoulders of our members. The administration should come forth with an equitable plan so our members are not left with empty bank accounts while EIU revives its reserves.

 

  1. The proposal is a breach of the labor-management relation defined by contractual obligations

Furloughs are enforced stopping of work to reduce the pay to a worker. UPI summarily rejects furloughs as an option because periodic forced stoppage of work is detrimental to the primary mission of educating our students. Classes cannot be suspended once every 7 days without disrupting student learning. Furloughs are anathema to our commitment to our students.

The EIU administration’s response to this objection is to reject our offer to defer pay, and offers us the choice to do work where the payment for that work is shackled to layers of contingency and which hinges on the unlikely scenario of the Illinois government reversing its course of destructive political gamesmanship.

This amounts to making us choose to work without pay, and it is a severe undermining the raison d’etre for unions, which is to protect the value of labor.

Further, the conversion of furlough days for non-UPI members to the same model of pay reduction followed by repayment will serve to equalize treatment of all EIU employees, as stated by Dr. Glassman. This decision offers the benefits of union contracts to non-union members. Whether the EIU administration intends it or not, this provision is a round-about way of union-busting.

 

  1. Parts of the proposal are unclear and missing key details

A few parts of the proposal are impossible to evaluate due to a lack of clarity in the language and/or the absence of information. For instance, what does the “additional furlough” mean? Furlough days that occur after the ratification of the proposal? Or reference to some other time point?

Another example of missing detail is in how the repayment will interact with the SURS pension system (see 5).

 

  1. Sincerity of EIU’s commitment to repay UPI members

The EIU administration knows that by many estimates, Illinois is unlikely to pass a full appropriation or a budget for FY2016. The one type of legislation that may yield some funding for EIU would be piecemeal, small in amount, and most likely linked to MAP grants. Yet, the proposed repayment scheme excludes MAP grant money and restricts repayment to be drawn only from FY22016 related appropriation. The layers of contingency further cement the likely scenario where most of our members will not receive anywhere close to a full repayment. The exclusion of MAP money as a source of repayment is doubly troubling when Dr. Glassman had said in previous occasions that receipt of the $9M MAP grant money will cancel the need to fire the 177 civil service staff and remove the need to ask UPI members to take pay cuts.

Furthermore, in the proposal, the administration decides not to stipulate that if the FY2017 budget is appropriated with the intent to backfill the gap of FY2016, or that there’s a funding for FY2017 at all, then UPI members can receive repayment, in part or in full, from the FY2017 money. This is a reasonable approach for repayment. Yet, it is deliberately excluded from the proposal. This raises serious doubt of the administration’s sincerity and readiness to repay UPI members of the reduced wages.

Now, imagine if UPI members had accepted this pay cut proposal and then not received any of the repayment, a likely scenario – that will mean that UPI members are the only members on campus who will have performed work without pay. A&P members were furloughed, which reduced pay, but which also came with reduction in work. Their workload was cut to reduce their wages, but they have not performed work without pay. Civil service staff members either had their jobs eliminated, or they have been bumped by the seniority shuffle. Again, they have not been made to do work that is not compensated, even if many of them are impacted severely in their income.

 

  1. Damage to retirement income

Since state employees of Illinois do not earn Social Security, the state-sponsored retirement plan is the major source of retirement income for us. This means that any reductions that will impact the retirement payment are the same as cuts to Social Security for other people. In this light, this pay cut plan is atrocious. In the highly likely case of the pay cut not being repaid (see 4), it will mean that the retirement pay for all our members will be permanently lowered. For those members whose highest 4 consecutive years includes this year, this will translate into tens of thousands lost over the entire length of their retirement.

In the unlikely case of EIU receiving FY2016 budget, but not the MAP grant, where repayment will be made, it is still not clear whether that repayment will be counted in the SURS system since it is not marked as payment for service. If it were, that would make it a deferral, a mechanism that EIU admin didn’t offer. So the repayment amounts seem to be in a sort of accounting limbo, and the impact on retirement is uncertain at best.

 

 

Taken together, the EIU proposed pay cut plan offers an unlikely case of repayment so that UPI members will end up doing work without pay, a first and only group amongst EIU employees to have that happen. On top of that, it will also mean a severe impact on many members’ retirement income, totaling to tens of thousands of dollars. In the unlikely case that we are getting repaid, the mechanism is convoluted and unnecessarily prolonged, so that our members are holding on to empty bank accounts while EIU rebuilds its financial strength. That is not a fair thing to do.

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