Opening Statement of the 
University Administration's Representatives on the Joint Committee

December 6, 2004

    Refining Directions is the strategic plan that sets out the future direction for McMaster University.  Our vision is articulated in three main goals:
     


    These three goals guide our decision making and are the basis upon which we enter into our discussions.

    The University Administration's representatives on the Joint Committee look forward to our Committee's deliberations to determine the remuneration provisions for the next few years.  We recognize and have great respect for the relationship that the Faculty Association and the administration have.  It is our intention to participate in open dialogue to achieve a mutually agreeable outcome.  This opening brief outlines our view of the context and considerations that pertain to our discussions.  In preparing for this meeting, we have reviewed the interests that formed the basis of our successful negotiations in 2001.  Many of those interests are still applicable today.  The interests presented herein inform and underlie all that we hope to contribute to, and achieve through, this process.
     

    1. Our primary interest is to maintain, and, wherever possible, enhance, provisions that allow the University and the Faculty Association to ensure the highest standards of excellence of McMaster's faculty.  This is the single most important ingredient necessary to ensure the University's achievement of its goals and mission.  In so doing, we have paid due attention to the "Principles for Negotiation of Faculty Remuneration" that the University Administration's representatives accept as an important and relevant guide to our discussions.  [Document 1-3]*  (*The documents referred to are available in the MUFA Office for viewing)

    1. It is our strongly held preference that the Committee achieve agreement in direct discussion.  Agreements made directly between the members of the Joint Committee are always superior to ones imposed by someone external to the relationship.

    2. In view of the demands and challenges that lie in the immediate future for the university and its faculty, it is our belief that we will all be best served by the stability and predictability provided by a three-year agreement on matters of remuneration.

    3. Recognizing the uncertainty surrounding the outcome of the Rae commission, we support flexibility in our decisions that will result in fair and sustainable outcomes.

    4. As set out above, Refining Directions [Document 11-1] sets out the strategic direction for the University and provides a framework within which all decisions must be aligned.  The strategies agreed to through our discussions must advance the goals of the University.

    5. As in all matters, the agreement needs to be mindful of the fiscal health of the University.  It is the Committee's challenge to balance this stewardship responsibility with the achievement of the interests stated above.


    There are several major areas of consideration that form the backdrop to our discussions during this round of negotiations.  In each case, the members of the Joint Committee have access to recent documentation and information providing specific data.  With this submission, we are including the documents that are especially pertinent.  We remain committed to providing any other information that the Association's representatives might request.  Attached please find:
     


    As an overview of the major areas of considerations we offer the following.
     

The Financial Environment
Consideration of McMaster’s financial position cannot be separated from discussion of increased faculty remuneration.  The financial plan [Document 2-4] was recently approved by the Finance Committee of the Board.  The plan recognizes the uncertainty with respect to revenue and therefore models several scenarios.  Even in our most optimistic revenue scenario the University is faced with an operating deficit in each of the next three years unless we develop financial strategies to address the shortfall.

The University Administration’s members of the Committee look forward to a full and open discussion of these numbers, trends and plans as our deliberations ensue.  We welcome the input of our faculty leaders to assist in the strategies that will ensure financial viability and sustainability for the University.
 

Pension and Other Benefit Costs
Pension and other benefit costs are an area of significant concern for the University.  Section 4 of our submission details the dramatic cost increases that the University is facing to sustain our pension, health and dental benefit programs.

The registered pension plan liability is outlined in Section 3-1.  The University contributions to the pension plan were reinstated in the 2004-05 budget.  Currently at 100% of employee contributions, this amount will increase to 300% of employee contributions over the next two years.  In addition, a funded status shortfall will require a significant contribution at the date of our next regulatory filing.

In the past fiscal year, costs for health and dental benefits rose by $400,000, or approximately 13% [Document 4-2].  This cost includes both active and retired faculty members.

The cost of retiree benefits is of significant concern.  At the present time the unfunded liability of post-retirement benefits has reached a staggering $145 million.  This has received a considerable amount of attention at the Board and we are presently preparing a complete review of these costs for presentation to the Finance Committee in February 2005.  Information on the post-retirement benefit liability can be found in the Management Discussion and Analysis [Document 2-2 and Document 3-3], and in Note 9 of the Audited Financial Statements [Document 2-1].  These annual costs, funded through the operating budget, will be in excess of $8 million by the year 2013.  We cannot continue to ignore these costs and must begin to address a model that would be affordable and sustainable.  We have offered some suggested options to consider to control these escalating costs [Documents 4-5 and 4-6].
 

Remuneration
If we are to retain current faculty members and attract new and equally highly qualified ones, it is of paramount importance that McMaster establish a pay philosophy that supports our goal.  There are four elements to any sensible philosophy:  fairness, equity, ability to pay, and market.  Section 5 details our analysis of each of these factors.  The Career Progress Merit compensation strategy has been a cornerstone of our compensation model.  Details of the financial implications are submitted in Document 5-2.
 

Quality of Work Life
There is more to life as a faculty member at McMaster than salaries and benefits.  A safe, functional, up-to-date, and clean working environment isalso fundamental.  An environment that is conducive to learning is also critical to attracting and retaining the best faculty, and thereby the best students.  Achieving this goal however, does involve a major draw on our resources.  The University Administration believes that this is an excellent investment that will have long-term benefits for all who participate.  Recent improvements to our health and safety programs such as our Healthy Workplace initiatives are highlighted in section 4-1.

Classroom and laboratory investments over the past several years have improved technology and general conditions for our faculty and students.  The University is committed to continuing ongoing investments in these areas.

Faculty can expect to see continued investment in classroom technology, library resources, physical facilities infrastructure, and learning technologies.
 

Expansion Opportunities
The University is currently considering expansion opportunities relating to both academic and research initiatives.  The committee should discuss new models for the delivery of programming that would support these initiatives.

The new expansion opportunities are:

Both of these projects are in preliminary discussion stages.  It would be difficult to discuss elements of these projects during our negotiations as the plans are not yet developed.  The University Administration proposes that these two projects be agenda items for Joint Committee meetings in the future.
 

Faculty Renewal
This issue, the importance of which flows from demographic trends associated with both faculty members and students, is by no means particular to McMaster.  A critical component to our discussion will be an analysis of the size and nature of the challenge facing McMaster in this regard especially in light of the pending legislation to eliminate mandatory retirement.  Faculty renewal is fundamental to the University continuing to achieve its mission.  This will be a source of pressure on our resources but it will also be the opportunity for McMaster to confirm its continued reputation for excellence.  Considerations for discussion are provided in Section 8.  Decisions made by the Joint Committee in these discussions will be key to our success.

PROPOSAL

We propose that the Committee give due consideration to the issues described in the opening statement, so that we might collectively establish an appreciation of the environment within which we are negotiating.

We further propose that we agree without delay to maintenance of the Career Progress/Merit (CP/M) scheme at the “normal” level of 120 par units per 100 faculty members.

Subject to agreement on this point, and working within the parameters of the attached Budgetary Framework, we propose that we then jointly establish an appropriate increase to Salary and Benefits compensation exclusive of the cost of maintenance of the CP/M scheme.  With this in mind, we offer the following:
 

  1. Career Progression/Merit (CP/M):  Our proposal is to make the preservation of the CP/M the foundation of our new agreement.  We have provided information that outlines the cost to maintain CP/M in each year of an agreement. [Document 5-2]

  2. Salary and Benefits

    1. Scale Adjustments
      With the cost of CP/M established, we propose to determine through Joint Committee discussion the most effective way of addressing cost pressures while ensuring that we remain competitive in the market place.  Our data are provided throughout our document but we would bring your attention to the following:

      • The operating deficit facing the University over the next 3 years [Document 2-4].
      • The rising cost of benefits [Document 4-2].
      • Salary comparison data provided in Document 6-3.


      We believe that we have a pay philosophy that supports the principles as outlined in Document 1-3.  This is discussed in Document 5-1.
       

    2. Benefits

      i)  Non-Pension Post-Retirement
      The cost of non-pension post-retirement benefits is an increasing burden on the operating budget, and is having an adverse impact on the University's ability to achieve its strategic goals, and to compensate its faculty and staff.  We wish to engage MUFA in a constructive discussion of how the increase in this cost can be mitigated.  One example would be the full or partial elimination of non-pension benefits for retirees who are hired on or after July 1 2005.  Several options for consideration are provided in Section 3.
    ii) Active Employee Benefits
     
    • Effective July 1, 2005 we would propose that a generic drug formulary be adopted.

    • We would propose that the Faculty Association consider the elimination of semi-private coverage and the enhancement of vision care coverage as outlined in document 4-6.


    iii) Registered Pension Plan Contribution Rate
    The forecasted contribution rate for the University, rising to 300% of employee contributions, is unsustainable.  Document 3-1 provides the information that we would like to review with the Committee.
     

  1. Mandatory Retirement
    We would propose that the Joint Committee agree to develop a strategy that would explore the impact and develop considerations for managing the abolishment of mandatory retirement.  This could be addressed through a letter of understanding.