My comments from the Penn State Board of Trustees Meeting, February 17 2023
Spoiler alert: Yea: 32 Nay: 1 (Fenchak)
The Penn State Board of Trustees met Friday, February 17th 2023 at the Penn Stater to vote on eight agenda action items. Several of these action items have further details; you can read the published agenda and supporting materials that include details of the history of increases to Room and Board.
As a service to alumni and the public who were unable to access the live broadcast of the meeting, the following is an excerpt of the comments I prepared and the vote results for each agenda item. When the video of the meeting is released I will post a link to it on my website, https://barryfenchak4trustee.com. I encourage you to watch it in its entirety.
Voting items:
Proposed Authorization to Engage External Auditors (Action Item 1)
The selection of an accounting and audit firm for Penn State.
[This is to replace Deloitte, our previous accounting and auditing firm.]
I had no comments and voted Yea.
Vote – Yea: 33 Nay: 0
Proposed Naming of the Building Located at 2137 Research Drive, State College in CATO Park to the “Lidia Manson Building” CATO Park (Action Item 2)
I had no comments and voted Yea.
Total Vote – Yea: 33 Nay: 0
Proposed Authorization to Expend Funds, ICA Facility Investments, University Park (Action Item 3)
[Approval of $7.5 Million Intercollegiate Athletics (ICA) spending, financed via debt, to add a video board, sound system, and other ancillary items to the football practice fields.]
“If our goal is to truly compete with our Big10 athletics peers, including underwriting all of the very beneficial initiatives proposed by Athletic Director Pat Kraft, which I am strongly in favor of, we must be competitive with our peers, especially Ohio State and Michigan, in raising funds via philanthropy. Otherwise, we will always be behind.
“Right now, we are not even close in fundraising. But I know we can be and have been in the past. But we have fallen well short of the mark in the last decade. We must be able to finance projects like this through philanthropy—just as Ohio State, Michigan, and others do. It is not detrimental to our program to do so. In fact, it is critical to the long-term health of our program that we do so. It is well past time that we at least equal the efforts of our Big10 peers and commit to raising funds first, and THEN stick shovels into the dirt.”
For this reason I voted NO on approving this project at this time.
Vote – Yea: 32 Nay: 1 (Fenchak)
Proposed Changes in Room and Board Charges for 2023-24 Academic Year. It will be necessary to increase room and board charges effective with the 2023 Fall Semester due to increasing operating and facility maintenance costs (Action Item 4)
[This proposed increase of 3.56% (1.78% increase at Commonwealth Campuses) brings the total compounded cost increase for the last 10 years to 39.12%. ]
The costs of several items making up the Housing and Food Services (HFS) budget have increased, and it is critical—in my opinion—that HFS operate on a balanced budget.
That said, a large and rapidly increasing portion of that budget is the cost of debt service—largely from the construction projects for new and renovated dormitories. I am an advocate for many of those projects in principle. But I am not an advocate for the prices we have paid for many of those projects. Costs that are as much as double the costs incurred by many of our Big10 cohorts for similar projects, as I have discussed here.
I cannot support increases to student fees for housing and food service unless and until we rein in the costs of these capital projects which directly impact the cost of room and board charged to students.For this reason I voted NO.
Vote – Yea: 32 Nay: 1 (Fenchak)
(Note: Trustee Lubrano voted Nay earlier in the Finance Committee meeting.)
Proposed Purchase of Property at 131-151 Mendels Way, Benner Township, Centre County (Action Item 5)
[This purchase will provide real estate to further Penn State’s Agricultural Research efforts.]
I had no comments and voted Yea.
Vote – Yea: 33 Nay: 0
Penn State Investment Council Resolutions (Action Item 6, 3 parts):
Part 1: Amend bylaws to add Trustees to the Penn State Investment Council (PSIC)
I had no comments and voted Yea.
Vote - Yea: 33 Nay: 0
Part 2: Addition of language to state that the PSIC may take “...social and environmental considerations into account in the administration of the University’s investments”
“This is commonly referred to as ESG, or Environmental, Social, and Governance investing. Adding the sentence citing “social and environmental considerations” to the existing language of “The University’s funds will be invested to achieve maximum return with an acceptable degree of risk” may seem like a clear phrase, but it is not. Many on the Board seem to think it does not indicate any change at all to the existing investment policy. I don’t believe that is accurate.
“To someone like myself, who works in the investment management field, considering other factors aside from pure ‘financials’ is common and prudent. For example, 10 years ago a manager considering an investment in TESLA would certainly, if looking solely at their financial statements, not make such an investment (TESLA’s financial positions at that time were awful, compared to its peers). But considering a more robust set of factors, including the consideration that TESLA might become a future market leader in a rapidly growing business, or that TESLA’s leadership team had a strong track record of successful innovation– a prudent investment manager might very well have made that investment.
“And I am quite sure, those types of considerations have taken place within Penn State’s investment management.
“We on this Board might think that adding the ESG language is not a change from that type of decision making process. But that is not what ESG investing is. For certain, those who advocate for ESG interpret that language as something very, very different. Including a plethora of interpretations/viewpoints that would significantly restrict investment options in the Penn State Endowment for non-financial reasons. Anytime you incorporate non-financial restrictions, and limit options, you are going to be operating in a sub-optimal fiscal manner.
“We need to have our eyes wide open as we consider this change, with regard to what it will mean long-term. None of us, today, can know where this will end up. It could get very expensive with regard to damaging the endowments investment performance - and all the fallout that entails. So, do we want to do this?”
For this reason I voted NO.
Vote - Yea: 29 Nay: 3 (Cairns, Detwiler, Fenchak) Abstain: 1 (Mumin)
Part 3: The proposal to appoint Randall E. Black, Barbara L. Doran, and Brandon D. Short, non-University employees, to membership (of the PSIC) with terms expiring in 2024, 2025 and 2026.
I am a strong advocate for inclusion of Trustees on the PSIC. That said, we have many highly-qualified and experienced elected, voting members of the Board capable of taking on such a role. I find it neither necessary nor prudent to have one of those important positions taken by a non-voting emeriti Trustee.
For that reason, I voted NO
Vote – Yea: 32 Nay: 1 (Fenchak)
Approval of Subcommittee on Compensation Operating Guidelines. (Action Item 7)
[Amendments to the operating guidelines of the Board’s subcommittee on compensation.]
I had no comments and voted “Yea”
Vote – Yea: 33 Nay: 0
Proposed Annual Applications, Renewals and Other Filings Required by the Pennsylvania Liquor Control Board. (Action Item 8)
[Authorizes the Vice President of Finance to execute the LCB applications for various locations on campus.]
I had no comments and voted Yea
Vote – Yea: 33 Nay: 0
As a member of the Penn State Board of Trustees, I will from time to time be made aware of certain confidential information. I will also engage with Trustees and administrators in private, off-the-record conversations, with the expectation of privacy on both parties. I take these expectations seriously, as they are required in order to catalyze important discussions.
As a fiduciary, it is also important that I engage in conversations with all stakeholders of the University. Stakeholders like you. Discussions will involve publicly available information and issues before the Board, as well as my personal thoughts, concerns, and ideas. I also will continue to solicit your thoughts, concerns, and ideas, and plan to engage in meaningful conversations with you on those topics. I hope that you will continue to share your concerns and ideas with me.
