March 3, 2009

Admins Explain Rationale for Retirement Plan

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This article is part one in a series examining the University’s current financial plan.

With university budgets coming under sharp scrutiny as institutions attempt to streamline their operations, the announcement of Cornell’s new initiative on Friday to encourage staff retirement is the latest step in the administration’s effort to keep its finances in check.
The initiative, including two new voluntary programs – the Staff Retirement Incentive Program and the Staff Phased Retirement Program — are the most recent contributions to what Preisdent Skorton described yesterday as the University’s “three strands” approach: necessarily reducing overall spending, but with a conscience; initiating strategic planning; and a forward-vision of greater transparency and inclusion, continuing the sense of “community” for the University as a whole.
“Employers — including the University — have options available to them to reduce payroll costs,” stated Vice President for Human Resources Mary Opperman in an e-mail, noting the positive and negative nature of these options, from the incentive programs recently announced to “involuntary layoffs, short term layoffs or furloughs, to pay cuts”.
“[I]nvoluntary changes may become more necessary but they are difficult and we need to think about the impact on our workforce carefully before we implement them,” she stated. “As [President David Skorton] indicated, we talked with many staff and faculty before making the hard decision not to give salary increases this year.”
Though Opperman, Provost Kent Fuchs, and Skorton have indicated that the number of expected layoffs is not yet able to be determined, as of now, 33 staff have been laid off this calendar year, and roughly 68 were laid off last year. These staff members receive one week’s pay for each year of service, and receive outplacement service, a continuation of benefits and at least one months’ notice, according to Opperman. She indicated that future projections will be dependent on how many take up the offers of the retirement programs.
Skorton emphasized a conscientious approach to reducing overall spending and an administrative effort to minimize such losses.
“One [strand] is this very thoughtful approach to allowing people who are eligible for retirement to make that tough decision in a time where the financial environment is so scary,” Skorton said. “[The retirement initiative] has been done in a very organized way that’s respectful of the enormous work that these people have done, and respectful of how scary it is to consider retiring right now.”
Opperman stated that the University decided on the retirement incentives after examining demographics and retirement patterns, which indicated that staff retire consistently “when they can afford to do so” but that during periods of economic constraint, the retirement age goes up, preventing a natural attrition that allows a reduction of work force without layoffs.
Allowing retirement and holding open an equivalent number of positions has the long-term benefit of reducing the size of the payroll, which will essentially pay for the cost of the incentive, released “one-time” by Fuchs.
“[W]e looked at the cost of adding an incentive to the retirement option and considered that cost against the cost of paying severance (the payment due at layoff) and decided the additional funds were worthwhile if we were able to hold open an equivalent number of positions,” Opperman stated in an email.
While attempting to assuage staff fears about retirement, and answer the University’s “responsibility to give … the opportunity to leave with dignity and a measure of financial security” as Opperman described, both programs are also intended to facilitate expediency in staff turnover.
Both begin March 1, but the application period for the Incentive Program will last the month to March 30 due to limited funds, and persons who choose to participate must agree to retire on or before June 30. If applications exceed these funds, they will be considered on a “years of service basis.” The Phased Retirement Program has been determined of “indefinite” length.
Opperman cited the need to have an accurate grasp of the financial situation for Fiscal Year ’10 as a reason for expediency.
“The reason that there’s a fairly rapid decision making process around it is because we need to know whose going to make that choice so that we can redesign the work place in an effective, fairly rapid way,” Opperman said.
“[W]e’ve put money that’s fairly scarce into this program to help our longest service folks make a decision that we feel they have a right to be able to make,” she said, “But we need to know that as quickly as we can because we can’t then make replacements because we have financial issues here. We have to … reconvene as a community, and figure out how we’re going to do get the work done without those individuals.”
Not all are eligible for both programs, which is dependent on an employee’s status. Opperman explained the difference between the variety of terms, stating that faculty refers to tenure and tenure-track faculty, including assistant, associate and full professors, while academic staff generally refers to the group including librarians, lecturers, senior lecturers, extension associates, senior extension associates, research associates and senior research associates. Staff, to whom these programs are largely directed, generally refers to non-academic staff in support, union and administrative positions.
Endowed and contract colleges staff including academic staff are eligible for both programs, along with positions sponsored by 25 percent or less of outside funds. Tenure and tenure-track professorial titles, those with sponsorship exceeding 25 percent, and those who have already signed voluntary resignations prior to March 1, and Cornell Cooperative Extension Association employees – not on Cornell’s payroll, according to Opperman, are excluded for both. A phased retirement program for faculty already exists.