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Talley Student Center
(Ballroom)
 3:00 p.m.

Call to Order
Chair James D. Martin called the meeting to order at 3 p.m.

Economic outlook: ruin or recovery?
Michael Walden, William Neal Reynolds Distinguished Professor & Extension Economist talked briefly about the economic outlook.
Professor Walden stated that, unfortunately, the economy is not very good.  We have officially been in a recession for more than a year, since December 2007.  It is also a deep recession and it is likely going to rival if not surpass the depth of the 1982 to 1983 recession.  We may lose approximately 5% of our income and to put things into perspective because this question comes up quite a bit, "Are we headed for a depression or are we in depression like conditions?" I think I can safely say the answer is no.  During the great depression the comparable measure of income declined by 38% and the length of the depression was 4 years.  Another definition of depression is if the downturn lasts more than three years and again, we hope that does not happen.

There are two features that I think distinguish this recession.  One is the fact that we (households) have lost a tremendous amount of our wealth.  The latest numbers, which the Federal Reserve released last week, indicates that the average household, so far has lost 20% of its wealth.  Typically during recessions, the stock market goes down.  What is different in terms of wealth lost with this recession is that the other major pillow, which there are really two pillows for most household’s wealth -- one is equity or stocks and the other is values of our homes -- and we have seen that the value of people’s homes have gone down. 

This recession did begin in the housing market, which is very unusual in our country.  People could generally count on their home value going up at a modest rate and then for several factors include among other things, the great availability of money for financing, low interest rate, tax law changes in the late 90’s that changed the law that used to say if you sold your home and you wanted to avoid capital gain that you earned on your home as a profit, you had to buy a house with equal or comparable value within eighteen months, so people begin to look at residential housing as a tax shelter.  We have some demographics that we are working in favor of a large investment in housing and so of all these factors that came to a head, really caused a surge, in home building and at the same time caused there to be a tremendous rise in home pricing.  The residential housing market was literally booming and like all boom sales, they eventually ended and there were some economists who were worried and pointed to various indicators that suggested that the housing market was subject to a crash.  The Federal Reserve was actually one of the agencies that began worrying about the housing market, and what the Federal Reserve does when they want to slow down either the entire economy or part of the economy is to begin to raise interest rates. In 2004 they took their key interest rate, which they had lowered to an unprecedented 1%, and began raising it over the course of three years and it ended up around 6 percent.  What happened is that all those folks who got in on that first house by the skin of their teeth with maybe an adjustable rate mortgage now found that as those interest rates went up, that they couldn’t afford those loans, and so they started to be foreclosed upon and it grew as a problem to where finally in 2007 it became an epidemic and was so large and so massive that for the first time again in modern times we began to see housing prices actually fall. Mortgages were always considered a safe investment because the lender could always count on, if they had to foreclose on a borrower, taking the house back, being assured that buying that house would likely be substantially more than the mortgage note.  Well, when they started taking houses back where the house value is now lower than the mortgage note that was a big problem for the financial sector.  This is a recession that has created massive turmoil in the financial sector. 

The financial sector is really a key part of our economy.  Think of the financial sector like the human heart.  The human heart we need among other things to pump blood throughout our body.  If the heart stops pumping blood we die.  Think of the financial sector as the heart of the economy.  It pumps the life blood of the economy, which is credit and money throughout that economy, and if the financial sector stops doing that the economy collapses, because even the best business needs access to credit on a timely basis, so we came as close to a total breakdown in the financial sector last year as we have ever come to since the 1930’s.  I think that is why economists are putting this recession and setting it apart and saying this is an unprecedented recession and that is why I think a lot of us are literally scratching our heads because we don’t quite know where this is going to take us. 

The federal government and the fiscal side of the president’s economic [approach] to the federal budget as well as the monetary side, which is the Federal Reserve, have been working overtime to stabilize the economy.  Economists differ widely on whether prescriptions that federal government and Federal Reserve make for trying to prompt the economy trying to reduce the recession -- whether they work, what policies work best and there is a host of disagreements on that -- but very simply what the federal government has been doing for the Obama administration is two things; one may have been providing funding to literally shore up the banking system to keep the financial system afloat.  Secondly the Obama administration has enacted the stimulus plan, which is a standard operating procedure by economy policy makers to try to boost the economy. 

We have an 800 billion dollars stimulus package and the part that you are probably most interested in is the part that is going to various kinds of spending programs, some on research, development, energy, transportation, etc., so economists think that will begin to kick in this year and it’s not, because we don’t think the economy should turn around on a dime, but we think it’s going to cause the recession to be less severe and to give you a rule of thumb.  That is pretty standard if you look at the economic forecast.  The estimate is that the unemployment rate will be 1% higher than it would have been without the stimulus.

The Federal Reserve has been doing unprecedented things. Chairman Bernanke has really been rewriting the rules for the Federal Reserve.  He has done the standard things, like lowering interest rates and printing money.  He has also been insuring loans, so we have a program that was announced last week that was designed to simulate commercial loans and consumer loans.  He has insured Fannie Mae and Freddie Mac loans and so he has been rewriting or remaking the balance sheet of the Federal Reserves.  The current forecast is that we are probably in for another quarter, this quarter, second quarter, third quarter of likely negative growth, which will see the unemployment rate rise, so be ready for more bad news, but by the end of the year the combination of the stimulus package, the efforts to shore up the financial sector and what the Federal Reserve is going through, particularly in terms of money and interest rate, policy, will combine to begin to lift the economy out of recession.  Now when I say that, don’t mistake that I’m saying that the recession will be over by December.  Think of a recession as a person falling down a pit and the farther you fall the deeper the recession.  Economists say recession ends when you stop falling.  It doesn’t mean that you are back to the top, but you have stopped falling and it may take a fairly long time for you to climb out of that pit.  Indeed, Chairman Bernanke’s forecast is that it will likely take a minimum of two years for the economy to recover. 

Looking ahead, North Carolina can really count the big boom in housing that other states had.  We have some pockets in the mountains, some pockets on the coast, but most of our time here in the Piedmont did not go through the [bubble in] housing, so why are we suffering through the recession?  Well, because we are tied in with the national financial systems; we are not an isolated occurrence, so this area for example, in particular is hurting because people aren’t moving here in the numbers that we had become accustomed to, so North Carolina unfortunately is suffering through the recession.  The bottom line here is that the State of North Carolina relies on the private sector and if the private sector isn’t doing well that will come back and hurt the public sector. 

My news is not good in terms of public budget.  I think the Governor is a little optimistic in her budget that the kind of reductions in spending that we will likely have over the next fiscal year probably will be larger than what was called for in the state budget.  The good news is that we think we will see a moderate turn around at the end of this year. 

Remarks from Professor Jim Martin, Chair of the Faculty
The economy and the budget is clearly a topic that is on a lot of our minds.  There have been people who have asked me on multiple occasions, why are we spending so much time talking about the budget and others understand it completely, but the more you look into the budget, the budget is not just a dollars and cents aspect that we are dealing with.  What we have been seeing in the Faculty Senate is that when we deal with the issues of budget, we have to really understand the issues of programs.  We all as faculty know the programs in our own units.  We know that some of the programs in our own colleges, although even departments don’t often know what neighboring departments do. 

In some efforts over the last year the Faculty Senate has been trying to get a better handle on what all programs exist on campus because if you don’t know what programs exist, how do you make wise decisions when it comes to cutting budgets. So part of what we have been trying to do this last year is to gather some better understanding of the university as a whole. 

Chair Martin noted that another thing the Faculty Senate continues to focus on is to think about those people who populate those various programs.  What do we have at the university?  What do we all do?  The best numbers I could come up with show that the faculty are below 25% of the employees at the university, which is down from about 26% in 2000.  Who are we?  What do we do?  This is an important area of concern that we need to keep looking into because faculty really are the life of who the university is and then we have to ask those issues about tenure, tenure track, non tenure track, where do we need people doing what kinds of programs, so this is another reason why we are focusing on budget issues.

Another thing that continues to come down the pipe as we look at budget is the whole issue of reporting.  Many of you are aware of the Delaware Study.  This is just one more thing that is coming down the pipes because when we get into these tight budget lines one of the quick questions is [assessment] and that again is an area that we have to pay specific attention to from the faculty/ faculty governance perspective.  The assessment raises a question, assessment is important in balance up to some point, but at what point are we assessing for the sake of assessing or assessing for the sake of the people who would like to assess us because they don’t know what we are doing or why we are doing it, so at what level do we need the more assessment and what level is the assessment valid and valuable to giving us better product.  This is yet another area of policy/regulation that I think we have to do that we are trying to pay attention to as we afforded the legislature last year to debate one and yet another budget of faculty activity and if you read anything in the news you are going to see more and more about faculty activity reporting.  Somehow I have yet to see a faculty activity reporting correctly coming even close to measuring what I do.  So these are our aspects of policy of bigger ideas in just the budget, which are the reason why in the Faculty Senate this year we have spent so much time talking about the budget and why that is some of the topics for today.

We need to make sure that as we move forward, that we don’t just run around in circles.  Kind of a last point that Michael made, you know there is going to be a de-stimulus.  We need to be careful how we cut because even if we are not having to de-stimulus, the cuts that we make today are going to impact where we are as we come out of the budget crisis in the upcoming year, so we have our challenges before us and that is why we are bringing this input into the meeting today and after the input we are going to conclude this meeting with some discussion time, so think about what you have heard both from Michael’s perspective and what Terri Lomax is going to share later and then we need to really ask the question, so what are we going to do about it, what are we going to do to make sure we are in the position for moving forward at the university. . 

Chair Martin recognized the faculty senators present and introduced Dr. Margery Overton as the next Chair of the Faculty.

Approval of the Minutes of the October 15, 2008 General Faculty Meeting
The motion passed to adopt the minutes. 

Remarks from Chancellor Oblinger
Thank you all for being here.  I couldn’t help but think as I was listening to Mike Walden that we just heard from one of the most respected economist certainly in the state and in the region if not country, someone who has been on the faculty here for decades and has been able to translate some pretty complex situations in some very understandable terms.  He has made presentations to the Board of Trustees equally effectively and the Board of Visitors as well.  Mike is truly a resource and he’s a humble guy.  He has within the last two months prepared a report for Erskine Bowles that talks about the impact of the university system and the economy of this great state and it is a very impressive piece of work.  Mike Warden is truly an asset and has been for a long time.

Chancellor Oblinger announced that NC State hosted Hannah Gage on this campus last Wednesday.  Hannah Gage is the Chair of the Board of Governors of the University of North Carolina.  He was amazed at the fact that Hannah Gage had been on this campus once and it was about two years ago when she attended a meeting on Centennial Campus.  Chancellor Oblinger urged the faculty not to hesitate showing guests around NC State whether it’s the main campus, Centennial Campus, or the Biomedical Campus.  He noted that Hannah was truly impressed with our campus.

Chancellor Oblinger gave a brief update on the status of the budget.  He urged people to go to Budget Central on the homepage to read the budget updates on NC State.

Introductions
Chancellor Oblinger introduced the Administrative Officers of the university.

Larry Nielsen, Provost and Executive Vice Chancellor; Marc Hoit, Vice Chancellor for Information Technology; Nevin Kessler, Vice Chancellor for University Advancement; Mary Beth Kurz, Vice Chancellor for Legal Affairs and General Counsel; Charles Leffler, Vice Chancellor for Finance and Business; Terri Lomax, Vice Chancellor for Research and Graduate Studies; Tom Stafford, Vice Chancellor for Student Affairs; Kevin Howell, Assistant to the Chancellor for External Affairs; P. J. Teal, Assistant to the Chancellor and Secretary of the University

Deans
Warrick Arden, Veterinary Medicine; Jeffrey Braden, Humanities and Social Sciences; Bob Brown, Natural Resources; Blanton Godfrey, Textiles; Duane Larick, Graduate School; Marvin Malecha, Design; Kay Moore, Education; Dan Solomon, Physical and Mathematical Sciences; Johnny Wynne, Agriculture and Life Sciences

The Stimulus Package and beyond:  the impact on Higher Ed, and how we can best be prepared to respond.
Terri Lomax, Vice Chancellor for Research and Graduate Studies reported on how NC State is going to capitalize on what is coming through the American Recovery and Reinvestment Act, otherwise known as the stimulus money. 

Vice Chancellor Lomax stated that she would be talking about how much money there is, how it will be distributed as far as we know, what rules apply to the agency on the recovery act research funding, what’s expected of us for the funding that we receive and how are we responding to this opportunity. 

Vice Chancellor Lomax stated there is an excellent article in Science Magazine entitled, “Amid the Gloom, Researchers Prepare for a Boom in Funding” that she thinks was a very good summary of the entire situation. If you have a grant application pending at a US Science Agency there is an upside to the global financial meltdown in that pending thing is very important because a lot of the agencies especially in NSF are saying that we can spend all that money that they are giving us without having to do any new programs because [they] are overwhelmed with so many good proposals as it is, so all we have to do is say yes to more of them.  So if by luck you have something in there already and are looking very good, which NC State does have a lot pending right now, but also as they point out that in the President’s budget for 2010 as far as a starting point goes, it looks excellent for doubling the federal investment in basic research over the next ten years.  A lot of it also is, how do these agencies spend this money really quickly, so they have money that has to be obligated by September 30, 2010, but they are under incredible pressure to actually push it out the doors within 120 days from this legislation being enacted.  Now they are coming up on that 120 days, so they had to move really quickly.  They are going to reach down and pick the funds that they weren’t able to fund before and in some cases they are going to go back and deselect things that were refused, but got excellent reading and that only goes back to October 1 of last year. 

There is about 18 billion dollars out of the Recovery Act that is R & D funding that should be invested within the next two years.  Out of that, about 3.5 billion is for facilities and large research equipment.  Out of that about half of it is going to be competitively awarded mostly to universities.  Then there is also money for non R& D science and technology programs, things such as higher education, construction, and education spending related to academia, so it’s not just for research.  There is some money in there for that wing that the Chancellor mentioned that was being clipped by the date that we hope will go back in and repair it again.

Some of the agencies in general are:

The Department of Commerce is about 8 billion dollars

The Office of Science within DOE is 1.6 billion

NIH has a 30 billion dollar budget so they are getting about a 30% increase over that, so 10.4 billion over those two years

NSF 3 billion on top of their budget that is normally 6 billion

NASA 1 billion on top of their 17 billion dollar budget and that is very specifically targeted

NIST is about 600M

The Department of DOD basic science program is getting about $300M

There is even money for the National Endowment for the Arts

Vice Chancellor Lomax said just to talk about the DOE in particular, because this is the one that’s the most spectacular change -- within the Department of Energy -- their budget have been for energy, so most of the Department of Energy could really be called the Department of Nuclear Reclamation Project, so, not counting that, but the part for energy has been about 4 to 5 billion a year. They are getting around 39 billion dollars in new money so we are going to go from 4 to 5 billion to 45 billion for energy in one year and that is a pretty significant change.  We also now have a Department of Energy not a Department of Nuclear Reclamation, which is a huge change in the government.  Out of that 39 billion about 1.6 billion of that is for the Office of Science and we’ve just received clarity on where some of that money is going.  They announced today that 1.2 billion of that 1.6 billion, of that 830 million is going to the National Lab and most of that is on large projects like building neutrons and light sources and research buildings, but there is a component of that that is going to be for energy research that will be managed by the lab and we have very good partnerships in a lot of the labs, especially Oak Ridge National Lab.

Also, within the Office of Science, 277 million of that 1.2 billion is going to go for the Energy Frontiers Research Center and we have three proposals in there for that right now and these are even larger than the Engineering Research Center like we got from NSF last year.  We have a very significant chance of getting some of those with that much money being put in there.  They ran that competition for that program with no money for the appropriation, so that is very good news and a lot of money is going to go into that program. 

ARPA-E is a new program within the Department of Energy that’s part of a DARPA like program only for energy.

There is another 11 billion for R&D tech and demonstrations of smart group technology and as you know we have the Engineering Research Center for the entire United States for smart group technology, so this is an area that we can plan significantly.   

There are 2.5 billion in the Energy Efficiency and Renewable Energy R&D tech and demo portfolio.  That office within DOE does not have a leader right now, so it’s pretty unclear where those dollars are going and then there are additional billions that in play that are funding for the development of batteries, electric vehicles, weatherization, nuclear, clean coal, winds and solar technology.

Other areas where there is funding that is not necessarily directly for universities, but where we may play a role will be in world broadband, money at NOAA, especially if it is for climate modeling.

Economic Development Assistance—this is where our FT2DC’s and Industrial Extension grips can come into play. A clean water fund, drinking water fund, rural waste disposal, and the army corps of Engineers are all areas where we have potential to work. 

These funds can be obligated until September 2010, but there is incredible pressure on the agencies to spend it very quickly.  There are going to be very heavy accountability and reporting measures.  There is going to be quarterly reporting.  You are going to have to have websites that show every job created and how all the dollars are spent, so it’s the new age of accountability. 

This isn’t free money—there is going to be a lot of strings attached to it and the agencies are developing their own processes for how to do this.  They had to get them approved by O & B and that is why we are just now starting to see these calls coming out because they are kids now in the process of getting R&B approval. 

Some of those reporting requirements you have to clearly identify and what we have done already is to make a move in our Pens Program to identify which grants are submitted that are for stimulus funds and which ones that come in that are for stimulus funds.  Remember, some of the agencies are just digging deeper and giving out more grants than their normal solicitation -- for example NSF is going to have to tell us which ones of the grants they fund came with stimulus and which ones didn’t; that is going to be the only way that we can track them.

It’s all going to go up under recovery.gov and we also have ncrecovery.gov where the state is going to track where all the dollars are going.  All the agencies have their own recovery website where they are tracking this and starting March 3 the agency had to submit weekly reports on the breakdown of funding, major actions taken, and major plan action, so their announcements are all going in and that is going to be the prominent labels and tags on all the money that we get from the stimulus. 

There are certain grants that they do not want to do—most of them do not want to do five-year commitments, so this is two-year money that they are getting.  We may get some standard grants as they are called that will be the full amount of money up front that could be for four and five year grants, but NSF, for example, has decided not to put additional funds in either in the ERC’s or in the FCC’s, the big five year programs because they don’t want to up their budget later on.  They are trying to spend it on things that are more immediate.  As I said, they can’t go back past October 1, 2008. 

DOE had a lot of trouble moving out money when they had four or five billion dollars in their budget and how they are going to do it with 40 billion plus is unknown.  And then the most important thing is we sent out a warning and remember this is a warning, it’s not a new requirement, it’s not a new rule, but it’s to get your grants in as early as possible because grants.gov that have never worked well in the first place are going to be completely overwhelmed.  O&B has already sent out a circular about that.  Brad Miller, our local representative is the chair of the Oversight Committee for they held a hearing last week on how they are going to cope with all of this.  Everyone agrees that grants.gov is going to crash and we already have cases where we have had people work on grants for months, turn it in two or three days ahead of time to grants.gov and there is a problem, they don’t get an error message and their grant doesn’t get accepted.  We have gone all the way to having our congressional delegation go and talk to the agency and the agency says tough, we don’t care and they can say that even more now because they are trying to get their success rates up, so the less grants they have to review the better, so it’s in everyone’s best interest to get things in as early as you possibly can.

We also have requirements coming down from GA, so we’ve told them who our administration contacts are here.  We’ve set up two reports for them and we have developed a two-way communication plan for sharing information on this campus, and how we have done this is the people that are responsible are the stimulus rapid response team, a small team that we set up of people with good state and federal connections that are mostly to find out what is going on in our area, to share our knowledge; then we have points of contact within each of the colleges both to communicate information out to the colleges and to bring information back from the colleges to us and to hopefully lead efforts there. 

We are also responding with the tracking that everyone at all levels is asking us for, and then the main thing is our Stimulus Central.  The Chancellor has talked about Budget Central, now we also have a Stimulus Central ncsu.edu/stimulus that can give you the real time funding opportunities, the federal agency update, briefing, who are the university stimulus team because we also have different groups around the university from Extension, Engagement and Economic Development, and the facilities have done a stimulus funding rapid response team because of the number of infrastructure grants that are in here and how they are going to deal with it from their level, lots of different teams that are springing up around campus and then people that can help you respond. You can go in and search for funding opportunities by agency, topic, by which ones will come through the state instead of through federal agencies and have access to all of that, but there is also a place to click to get email alerts.

Comments from Chair Martin
We have heard about lots of opportunities.  What we need to do in terms of moving forward is to collectively use all of our best thinking to try to figure out how we need to go forward with the two pieces that we have heard today, both the appropriated funds, which looks like in the cut budget, all kinds of stimulus opportunities.  What do we do about the programs that are not heavily grant funded?  How do we approach the economy, the stimulus, and all these pieces together because some of the non granted funded parts of the university are just as important to us as an institution as the grant funded parts of the university, so how do we move forward with all of this information?  What are the things that we should be putting on the table to try to more effectively address things as a larger body? 

Chair Martin requested that everyone cluster into one of four groups to begin to ask, what are the strategies, what are the internal resources that we need to provide to help leverage some of these things, that we need to put into place to facilitate responding to and to maximize opportunity to address the recovery and the bigger situation of where we are right now. 

Information from the Discussion Groups

3/23/09

Group Exercise at General Faculty Meeting – Dealing with forces of economic downturn and a new federal stimulus program for research and education.  

Lots of $, but how useful for NCSU long term?

Look like individual short-term projects but not institutional support

Cuts are in advising, education—

Problems of sustainability when “post-stimulus” arrives?

Part of Research Overhead should be used for undergraduate education, general university budget, and infrastructure.

Major disparity across institutions in terms of who can get these grants.

Focus on research projects, how does it impact teaching and advising?

How will stimulus $ create links and infrastructure to create sustainable funding?

What do we need/want anyhow (long term) that can be financed through the stimulus package? 

Need administration/faculty of NCSU regularly interacting with Agency heads and Congress to influence policy/opportunities, not just react to them.

a)      Transdisciplinary project

b)      Leverage state funds

Strategies to leverage recovery opportunities

At the end of the discussions Chair Martin thanked everyone for attending the meeting. 

Adjournment
The meeting adjourned at 5 p.m.

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