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Filmed as Xerox University Microfilms 300 North Zaeb Road Ann Arbor, Michigan 48106 I I 1 I 75-14 ,780 LOCKHART, Robert M o r r e ll , 1934ACCOUNTABILITY IN THE ADMINISTRATION OF UNEMPLOYMENT COMPENSATION IN MICHIGAN INSTITUTIONS OF HIGHER EDUCATION. Michigan S ta te U n iv e r s it y , P h .D ., 1974 Education, higher Xerox University Microfilms, © C o p y r ig h t by ROBERT MORRELL LOCKHART 1974 A nn Arbor, M ic h ig a n 48106 ACCOUNTABILITY IN THE ADMINISTRATION OF UNEMPLOYMENT COMPENSATION IN MICHIGAN INSTITUTIONS OF HIGHER EDUCATION By Robert M o rre ll Lockhart A DISSERTATION Submitted to Michigan S ta te U n iv e rs ity in p a r t i a l f u l f i l l m e n t o f the requirements f o r the degree o f DOCTOR OF PHILOSOPHY Department o f A d m in is tra tio n and Higher Education 1974 ABSTRACT ACCOUNTABILITY IN THE ADMINISTRATION OF UNEMPLOYMENT COMPENSATION IN MICHIGAN INSTITUTIONS OF HIGHER EDUCATION By Robert M o rre ll Lockhart The 1971 Amendments to the Michigan Employment S ecu rity Act extended compulsory coverage to Michigan in s t it u t io n s o f higher educa­ t i o n , e f f e c t i v e January 1, 1972. Under the provisions o f the A ct, e l i g i b l e former employees can draw unemployment compensation on the basis o f service performed f o r an i n s t i t u t i o n o f higher education and fo r which the re sp ec tive i n s t i t u t i o n is held accountable. The purpose o f th is study was to in v e s tig a te opinions and experience o f fin a n c ia l a d m in is tra to rs o f Michigan in s t it u t io n s o f higher education w ith regard to accountabi1i t y in the in te rn a l admin­ i s t r a t i o n o f unemployment compensation two years a f t e r the coverage has been in e f f e c t . S p e c i f i c a l l y , the study was structured to learn whether, in the opinion o f f in a n c ia l a d m in is tra to rs , departmental a d m in is tra to rs should be held accountable fo r personnel actions which r e s u lt in the payment o f unemployment compensation. The population under study consisted o f 39 Michigan i n s t i t u ­ tio n s o f higher education. Included were a l l 13 p ub lic fo u r-y e a r colleges and u n i v e r s it i e s and 26 nonpublic, n o n p ro fit c o lle g e s . The Robert M o rre ll Lockhart data sought were obtained through use o f questionnaires sent to the c h ie f business and/or f in a n c ia l o f f i c e r o f the 39 i n s t i t u t i o n s , a l l o f whom responded. Interview s w ith 15 o f the respondents supple­ mented the data obtained from the q uestion n aires. The data and opinions expressed in the in te rv ie w s were tab u lated by both s iz e and the p u b lic - p r iv a t e nature o f th e in s t it u t io n s in the study. In the major fin d in g s o f the study, n e ith e r size nor the p u b lic - p r iv a t e d i s t in c t i o n was found to be s i g n i f i c a n t although those from the p u b lic i n s t i t u t i o n s expressed g re a te r concern over expendi­ tures a t t r i b u t a b l e to t h is coverage than did those from the p riv a te in s titu tio n s . Over tw o -th ird s o f those from the p ub lic in s t it u t io n s expressed the opinion th a t these expenditures were o f moderate or g rea t s ig n ific a n c e in r e l a t i o n to t h e i r i n s t i t u t i o n ' s t o t a l operating expenditures as compared to s l i g h t l y more than o n e -th ird from the p r i ­ vate i n s t i t u t i o n s . A m a jo r ity o f the f in a n c ia l a d m in is tra to rs b e lie v e t h a t sound personnel p ra c tic e s can serve to minimize the incidence and d uration o f unemployment b e n e fits paid to former employees. A m a jo rity also tend to fa v o r u t i l i z a t i o n o f budgetary co n tro ls in co rp o ratin g f in a n c ia l in c en tiv es to e n l i s t and assure the cooperation o f those whose per­ sonnel actions may lead to the payment o f unemployment compensation. Only o n e - t h ir d , however, b e lie v e such controls are e s s e n tia l. To S a l l y , my w if e ; S c o tt, my son; and Heather, my daughterf o r t h e i r understanding, patience and love. ACKNOWLEDGMENTS I wish to express my ap p reciation to the members of my doctoral committee, D rs. Richard L. Featherstone, W alter F. Johnson, James B. McKee and Eldon R. Nonnamaker, f o r the time and e f f o r t they have given so generously on my b e h a lf. In p a r t i c u l a r , I wish to thank Dr. Johnson, Chairman of the Committee, f o r his encouragement, guidance and counsel, commencing before and extending throughout my doctoral s tu d ie s . I wish also to make special note o f ap p re c ia tio n to Messrs. Emery G. Foster and Paul V. Rumpsa, to whom I have reported w hile employed a t Michigan S ta te U n iv e rs ity during the past six years. Mr. F o ster, who encouraged me to pursue a doctoral degree, served on my committee u n t i l his re tirem en t two years ago. Mr. Rumpsa's under­ standing o f the demands placed upon me as a doctoral student w hile serving as his a s s is ta n t made my burden considerably l i g h t e r . F i n a l l y , I wish to express my ap p reciation to two recent doctorate r e c ip ie n t s , Drs. Joseph G. Rossmeier and Manual G. D ia z , who read portions o f th is d is s e r ta tio n and o ffe re d advice as the study pro­ gressed; and to my s e c r e ta ry , Mrs. Charles Ward, who g racio u sly typed the several d r a fts which preceded th is f i n a l p re s e n ta tio n . iii TABLE OF CONTENTS Page LIST OF TABLES............................................................................................................. v ii Chapter I. II. III. THE PROBLEM...................................................................................... 1 Statement o f the Problem ................................................................. Purpose o f the S t u d y .......................................................................... Need f o r the S t u d y .............................................................................. L im ita tio n s of the Study ................................................................. D e fin itio n s ........................................................................................... Background o f the Problem ............................................................. S i g n i f i c a n c e ........................................................................................... O v e r v ie w .................................................................................................... 1 3 4 5 7 9 12 15 A REVIEW OF THE L E G IS L A T IO N ............................................................. 16 In tro d u c tio n ........................................................................................... The Federal Unemployment Tax A c t ................................................ H is t o r ic a l Review .......................................................................... The Employment S e cu rity Amendments o f 1970 ........................ The Michigan Employment S ecu rity Act ....................................... 1974 A m en dm en ts.............................................................................. B e n e fit Payment S tru ctu re ......................................................... 16 16 17 26 32 36 40 ACCOUNTABILITY IN THE ADMINISTRATION OF UNEMPLOYMENT COMPENSATION ............................................................. 45 In tro d u c tio n ........................................................................................... The Insurance Character of UnemploymentInsurance . . . Methods o f F u n d in g .............................................................................. P riv a te N o n profit I n s t it u t io n s ................................................ S tate In s t it u t io n s o f Higher Education ............................... Unemployment Causes .......................................................................... The Concept o f A c c o u n ta b ility .................................................... Control of Unemployment Compensation Costs .......................... A c c o u n ta b ility fo r Unemployment Compensation Costs . . . 45 45 49 50 56 57 60 65 70 iv Chapter IV. V. IV. Page DESIGN OF THE S T U D Y ............................................................................. 75 In tro d u c tio n ......................................................................................... The Q u e s t i o n n a i r e s ............................................................................ D i s t r ib u t io n o f the Questionnaires ........................................ In te rv ie w s With Respondents ...................................................... S u m m a r y ................................... .............................................................. 75 76 79 79 80 THE ANALYSIS OF R E S U L T S .................................................................... 81 In tro d u c tio n ......................................................................................... A n a ly tic Design ................................................................................ Q uestionnaire Returns ................................................................... Analysis o f the Questionnaires ................................................. Questions One and T w o .............................................................. Questions Three, Four and F iv e — P ublic I n s t i t u t i o n s ................................................................................ Questions Three and Four— P r iv a te I n s t i t u t i o n s . . . Question F iv e — P r iv a te I n s t i t u t i o n s ................................ Question S i x ..................................................................................... Question Seven ............................................................................... Question E igh t ............................................................................... Question N i n e ................................................................................ Question T e n ..................................................................................... S u m m a r y .................................................................................................. 81 82 82 84 85 * 89 97 103 105 109 109 112 114 118 SUMMARY, CONCLUSIONS ANDRECOMMENDATIONS .................................. 122 In tr o d u c tio n ......................................................................................... Premise O n e ........................................................................................ Premise T w o ........................................................................................ Premise Three ................................................................................... Premise F o u r ........................................................................................ The General Question ........................................................................ Recommendations and Im p lic a tio n s f o r Future Research . 122 124 127 128 130 132 133 APPENDICES.................................................................................................................... 138 A. B. ELIGIBILITY FOR LISTING 1972-73 DIRECTORY OF INSTITUTIONS OF HIGHER EDUCATION ......................................... 139 SELECTED EXAMPLES OF PERSONNEL ACTIONS WHICH MAY RESULT IN THE PAYMENT OF B E N E F I T S ........................... 143 v Chapter C. Page COVER LETTER FOR THE QUESTIONNAIRE— PUBLIC INSTITUTIONS QUESTIONNAIRE— PUBLIC INSTITUTIONS COVER LETTER FOR THE QUESTIONNAIRE--PRIVATE INSTITUTIONS QUESTIONNAIRE--PRIVATE INSTITUTIONS ........................................ 147 BIBLIOGRAPHY ............................................................................................................. 160 vi LIST OF TABLES Page Summary o f the Number o f Questionnaires Sent and Returned .......................................................................... 83 Summary of Question 1 ............................................................. 86 Summary of Question 2 ............................................................. 88 Summary of Question 3 --P u b lic I n s t it u t io n s . . . . 90 Summary o f Question 4— Pu blic I n s t it u t io n s . . . . 94 Summary o f Question 5— Public I n s t it u t io n s . . . . 96 Summary of the Accounts to Which Reimbursements Are Charged by the 13 Public In s t it u t io n s ...................... 98 Summary o f Question 3— P riv a te In s t it u t io n s . . . . 99 Summary o f Question 4 - - P r iv a t e In s t it u t io n s . . . . 102 Summary o f Question 5 - - P r iv a t e I n s t it u t io n s . . . . 104 Summary of Question 6 ............................................................. 106 Summary of Question 7 ............................................................. 110 Summary o f Question 8 ............................................................. 111 Summary of Question 9 ............................................................. 113 Summary o f Question 1 0 ................................................ 115 vi i CHAPTER I THE PROBLEM Statement o f the Problem P rio r to January 1, 1972, public and p r iv a te n o n p ro fit i n s t i t u ­ tio n s of higher education in Michigan were excluded from compulsory coverage under the Michigan Employment S e c u rity Act^ which provides, in p a r t , fo r the payment o f unemployment b e n e fits to persons unemployed through no f a u l t o f t h e i r own. Although the Act contained provision f o r e le c tio n of coverage by such an i n s t i t u t i o n o f higher education, none are known to have exercised t h is o p tio n . A ccordingly, they were not l i a b l e f o r co n trib u tio n s f o r the Michigan Unemployment Compensation Fund and former employees were not e l i g i b l e fo r unemployment b e n e fits on the basis of past se rv ice w ith these i n s t i t u t i o n s . In compliance 2 w ith the 1970 Amendments to the Federal Unemployment Tax A c t, however, 3 the Michigan Employment S e c u rity Act was amended in 1971 to extend coverage f o r nonexcluded services performed fo r a l l in s t it u t io n s o f higher education other than those operated by p o l i t i c a l subdivisio ns. The amendments provided th a t e l i g i b l e former employees could draw ^Michigan Employment S e c u rity A c t, Act No. 1 o f the Public Acts o f the Extra Session o f 1936, as amended. 2 Employment S e c u rity Amendments o f 1970, Public Law 91-373, 91st Congress, H.R. 14705, August 10, 1970. 3 Michigan Employment S e c u rity Act Amendments o f 1971, Act 231 o f the Public Acts o f 1971, House B i l l No. 5528, January 3 , 1972. 1 2 unemployment b e n e fits on the basis o f service performed fo r an i n s t i t u ­ tio n o f higher education a f t e r January 1, 1972, and th a t t h e i r re sp ective in s t itu t io n s would be held accountable f o r these b e n e fits . With the passage o f these amendments, co lleg e and u n iv e r s ity ad m in is tra to rs became g re a tly concerned over the u ncertain e ffe c ts on personnel p o lic ie s and the fin a n c ia l burden on t h e i r i n s t it u t io n s com­ ing a t a time o f s p i r a l l i n g costs and increasing demands on t h e i r lim ite d resources. views emerged. coverage. In the ensuing discussions two seemingly divergent One stemmed from concern over the costs o f th is new Proponents o f t h is view argued th a t inasmuch as the costs would be d i r e c t l y re la te d to unemployment b e n e fits paid to former employees, co n tro ls must be e ffe c te d through stron g , c e n tr a liz e d per­ sonnel p o lic ie s and p ractices and by holding departmental ad m in is tra to rs accountable f o r b e n e fits paid. Proponents o f the other view countered th a t any attempt to control payment o f unemployment b e n e fits through strong, c e n tr a liz e d personnel p rac tice s would i n t e r f e r e w ith and i n h i b i t t h e i r e ffe c tiv e n e s s as ad m in istrators in dealing w ith s t a f f ­ ing needs. They contended also th a t most unemployment b e n e fits paid would r e s u lt from fa c to rs beyond departmental control and hence, f o r which they could not be held accountable. As n e ith e r view could be supported from experience, the design and implementation o f programs to control fa c to r s leading to the pay­ ment o f unemployment b e n e fits a t many Michigan i n s t it u t io n s o f higher education were predicated upon appeals to department heads f o r cooper­ a tio n r a th e r than any sanctioned a u th o r ity to hold departments account­ able f o r costs incurred as a r e s u lt o f t h e i r a c tio n s . 3 Purpose of the Study The purpose o f t h is study is to in v e s tig a te the opinions and experience o f fin a n c ia l ad m in istrators o f Michigan in s t it u t io n s of higher education w ith respect to a c c o u n ta b ility in the ad m in is tra tio n of unem­ ployment compensation two years a f t e r coverage has been in e f f e c t . The underlying th esis o f th is study is th a t an e f f e c t i v e method can be developed to minimize the incidence and d uration of unemployment bene­ f i t s paid to former employees o f Michigan i n s t it u t io n s of higher educa­ tio n through an i d e n t i f i c a t i o n o f the actions re s u ltin g in the payment of b e n e fits and a d is t r i b u t i o n o f costs re s u ltin g therefrom to the level of a u th o r ity a t which they were incurred. tig a te d is : The general question inves­ In the opinion o f f in a n c ia l a d m in is tra to rs , should d ep art­ mental ad m in istrators be held accountable fo r personnel actions which r e s u lt in the payment o f unemployment benefits? The question is examined in terms o f fo ur underlying premises which form the basis o f the study. They are: 1. Sound personnel p rac tice s can serve to minimize the incidence and d uration o f unemployment b e n e fits paid to former employees; 2. Fin an cial in c e n tiv e s , e i t h e r p o s itiv e o r n e g a tiv e , are a r e q u is it e p a rt o f any model designed to e n l i s t and assure the cooperation o f those whose personnel actions may lead to the payment of unemployment b e n e fits ; 3. The costs o f unemployment compensation are o f s u f f i c i e n t concern to f in a n c ia l ad m in is tra to rs to j u s t i f y the development and implementation o f an a c c o u n ta b ility model whereby costs o f unemploy­ ment compensation may be d is tr ib u te d to the a d m in is tra tiv e u n it or department whose actions re s u lte d in the payment o f b e n e fits ; and 4. That such an a c c o u n ta b ility model can be developed w ith d e f i n i t i v e , concise c r i t e r i a . 4 In accordance w ith the foreg o in g, the study is stru c tu red fo r the c o lle c t io n o f data to e i t h e r support the development o f an account­ a b i l i t y model, to demonstrate the absence o f a need f o r such, or to support the view th a t the development o f an a c c o u n ta b ility model is im practical o r in f e a s ib le . Need f o r the Study With the passage o f the 1971 Amendments to the Michigan Employment S e c u rity Act, p u b lic fo u r-y e a r colleges and u n iv e r s itie s and p riv a te n o n p ro fit i n s t it u t io n s o f higher education in Michigan became subject to the provisions o f the Act as covered employers. None of these i n s t it u t io n s had p r io r experience w ith an unemployment insurance program nor could they turn to the experience of in s t it u t io n s of higher education in other sta te s fo r d e f i n i t i v e answers to the many questions 4 th is coverage ra is e d . What w i l l the costs o f t h is coverage be? Should costs be d is tr ib u t e d to departments o r absorbed in a c e n tra l adminis­ t r a t io n budget as a n o n distribu ted cost o f operation? In an era in which " a c c o u n ta b ility " has become a catchword, should the ad m in istra­ tio n o f t h is program be structured to hold departments accountable fo r s p e c ific personnel ac tion s as causes leading to the payment of b e n e fits , i . e . , the e f fe c t s o f those causes? 5 remained unanswered. 4 These questions in la rg e p a rt have S ta te law coverage v a rie s s i g n i f i c a n t l y from one s ta te to another. 5 The w idely heralded re v is io n o f College and U n iv e rs ity Business Adm inistration (Washington, D .C .: American Council on Education, 1968 ), published under the same t i t l e by the National Association o f College and U n iv e rs ity Business O f f ic e r s , Washington, D .C ., 1974, devotes only two paragraphs to t h is program. 5 L im ita tio n s o f the Study This study 1s designed to in v e s tig a te the views o f persons knowledgeable about th e cost Im p lic a tio n s o f unemployment compensation coverage to Michigan I n s t it u t io n s o f higher education and to whom r e s p o n s ib ilit y fo r the fin a n c ia l operation has been entrusted or d e le ­ gated. As such, the study is lim ite d to an in v e s tig a tio n o f the e x p e r i­ ences and opinions o f f in a n c ia l a d m in is tra to rs o f In s t it u t io n s o f higher education. * The study is also lim ite d to the 13 p ublic fo u r -y e a r colleg es and the 26 p r iv a te n o n p ro fit colleges: w ith f a l l term 1971 enrollments o f more than 500 as l i s t e d 1n the 1972-73 D ire c to ry of I n s t it u t io n s o f Higher Education, 6 published by the to which the Michigan Department o f Education, 1971 Amendments to the Michigan Employment S e c u rity Act extended compulsory coverage. There are a d d it i o n a ll y 22 nonpublic c o l ­ leges l i s t e d 1n the d ir e c t o r y whose enrollments ranged from 14 to 468. They are not Included 1n th is study as i t is considered l i k e l y t h a t t h e i r experience w ith unemployment compensation may not be represen ta­ t i v e o f the l a r g e r schools whose operations are o f f a r g re a te r magnitude and whose budgetary p rac tice s and in t r ic a c ie s are f a r more complex. Nor are the 29 community and ju n i o r colleges operated by p o l i t i c a l sub­ d iv is io n s and f o r which coverage was e l e c t iv e under the Act Included 1n t h is s tu d y .7 Only one o f these community colleges ele cte d coverage ®See Appendix A f o r l i s t i n g c r i t e r i a and an I d e n t i f i c a t i o n o f the I n s t it u t io n s included in the study. 7Act No. 104 o f the Pu blic Acts o f 1974, Senate B i l l No. 741, May 16, 1974, extended coverage to these I n s t i t u t i o n s . Coverage, which is not e f f e c t i v e u n t i l January 1 , 1975, 1s reviewed 1n Chapter I I I . 6 and is subject to the provisions o f the A ct. Also, the considerations o f a community co lle g e governing body leading to e l e c t iv e coverage may be such so as to i n j e c t a fo re ig n element in a study w ith others fo r which coverage is compulsory and lead to a d is t o r t io n o f the f i n d ­ ings. Although a knowledge o f the Michigan Employment S e c u rity Act as administered through the Michigan Employment S e c u rity Commission is es se n tia l fo r the purposes of th is study, the study is not concerned w ith the philosophical or q u a l i t a t i v e aspects th e re o f. While such might w ell be o f i n t e r e s t , c r i t i c is m o f the Act and attempts to change i t s provisions sh a ll be l e f t to o th ers. The Congress o f the United States and the l e g is l a t u r e o f the S tate o f Michigan have enacted laws to lig h te n the burden of persons unemployed through no f a u l t o f t h e i r own through the payment o f unemployment compensation. This study is concerned w ith problems posed by and the im p lic a tio n s of those laws and, as such, does not focus on a discussion or consideratio n as to whether o r not those laws per se should be challenged or amended. F i n a l l y , w hile th ere is general u n ifo rm ity in the laws r e la t in g to unemployment compensation throughout the 50 s t a t e s , inasmuch as a l l conform to c e r ta in standards set fo r t h in the Federal Unemployment Tax A ct, th e re are s i g n i f i c a n t d iffe r e n c e s . For example, the laws of two sta tes provide coverage to students in the employ o f an i n s t i t u t i o n o f higher education in which they are e n ro lle d and r e g u la r ly attend ing g classes, whereas the laws o f th e o ther 48 sta tes exclude such coverage. g John F. Adams, Risk Management and Insurance Guidelines f o r Higher Education (Washington, D . C . : National Association o f College and U n iv e rs ity Business O f f i c e r s , 19 72 ), p. 113. 7 T h e re fo re , w h ile the outcomes o f th is study are expected to have a p p l i ­ cation beyond Michigan, th is study is based on Michigan law and inferences to other j u r is d i c t io n s must be drawn in r e la t io n to such s i m i l a r i t i e s or d i s s i m i l a r i t i e s as may e x is t . D e fin itio n s Unemployment Compensation, Unemployment Insurance and Unem­ ployment B enefits as used in th is study are synonymous. The terms m denote payments to e l i g i b l e in d iv id u a ls form erly in the employ o f an i n s t it u t io n o f higher education during periods in which they are unem­ ployed through no f a u l t o f t h e i r own. I n s t it u t io n o f Higher Education as defined in Sec. 53(2) o f the Michigan Employment S e c u rity Act means an educational i n s t i t u ­ tio n which does a l l o f the fo llo w in g : a. Admits as re g u la r students only in d iv id u a ls having a c e r t i f i c a t e o f graduation from a high school, or the recognized e q u iv a le n t of such a c e r t i f i c a t e . b. Is l e g a l l y authorized in t h is s ta te to provide a program of education beyond high school, c. Provides an educational program which is acceptable f o r f u l l c r e d i t toward such a degree; provides a program of post­ graduate o r post-doctoral s tu d ie s ; or provides a program o f t r a in in g to prepare students f o r g a in fu l employment in a recognized occupation. d. Is a public o r o th e r n o n p ro fit i n s t i t u t i o n . Adm inistrators is meant to include deans, d ir e c t o r s , department chairmen, managers and a l l persons serving in such or s im ila r c a p a c itie s regardless o f t h e i r t i t l e s . Fin an cial A d m in istrato r is meant to include the c h ie f business o f f i c e r or o ther high-ranking person responsible f o r the conduct o f the 8 business a f f a i r s o f an i n s t i t u t i o n o f higher education and who has had a d ir e c t involvement in the form ulation o f in te rn a l p ractices and pro­ cedures w ith regard to unemployment compensation. Public Tax-Supported I n s t it u t io n s o f Higher Education are those which operate as in s tr u m e n ta litie s o f the S ta te and whose governing boards d e riv e t h e i r a u th o r ity from A r t i c l e V I I I o f the C o n s titu tio n o f the S ta te o f Michigan. No d is t in c t io n is made between the terms ta x - supported and ta x -a s s is te d . P riv a te In s t it u t io n s o f Higher Education are those which operate under t h e i r ch arters or a r t i c l e s o f in c o rp o ra tio n , incorporated under g Act 327 o f the Public Acts o f 1931, as amended, o r organized and operating in accordance w ith Act 142 o f the Public Acts o f 1 9 6 4 , ^ as amended. Accountabi1i t y Model as used in t h is study is meant to describe a method o f cost d is t r i b u t i o n which is predicated upon the concept th a t a ll incurred costs ( e f f e c t s ) th a t r e s u lt or evolve from an i d e n t i f i a b l e ac tio n (cause) should be borne by the u n it responsible f o r th a t action as a cost o f o p e ra tio n . The j u s t i f i c a t i o n or r a t io n a le upon which th is concept derives i t s leg itim a cy l i e s w ith in the broader concept o f a c c o u n ta b ility in education whereby i t is r e q u is it e to any meaningful attempt to evalu ate the outcomes o f a program in terms o f the f in a n c ia l inputs th a t a l l costs a t t r i b u t a b l e to th a t program be i d e n t i f i e d . This concept is developed in Chapter I I I . g Michigan General Corporation Act. ^ P e r t a in in g to nonincorporated p r i v a t e l y operated n o n p ro fit in s titu tio n s . 9 Background of the Problem The Federal Unemployment Tax Act imposes an excise tax every employer 12 11 on w ith respect to having in d iv id u a ls in his employ equal to a percentage o f t o ta l wages year w ith respect to employment. 13 paid by him during the calendar The Act also provides, however, th a t co n trib u tio n s to a S tate Unemployment Fund, under the unemployment compensation law o f a s ta te which is c e r t i f i e d by the Secretary of Labor, 14 may be c re d ite d against the tax . P rio r to the enactment o f the 1970 Amendments to the Federal Unemployment Tax A ct, 15 by d e f i n i t i o n the term "employment" did not include services performed f o r an i n s t i t u t i o n o f higher education in the employ o f a s ta te or any p o l i t i c a l subdivision th e re o f or by any in s tru m e n ta lity o f the s t a te . 1 fi S im ila r ly excluded from the term employment were services performed in the employ o f an i n s t i t u t i o n o f higher education operated by c e r ta in r e l ig i o u s , c h a r it a b le , educational or o ther organ izatio n s described in Section 5 0 1 (c )(3 ) o f th e In te rn a l ^ I n t e r n a l Revenue Code, 26 U .S .C ., Sec. 3301 (19 70 ). ^ I b i d . , as defined in Sec. 3 3 0 6 (a ). ^ I b i d . , as defined in Sec. 3306(b). 14I b i d . , Sec. 3304. ^ P u b l i c Law 91-373, op. c i t . 16I b i d . , Sec. 3 3 0 6 ( c ) ( 7 ) . 10 Revenue Code o f 1954 17 and exempt from income tax under Section 501(a) th e re o f. The passage of the 1970 Amendments to the Federal Unemployment Tax Act excepted from the exclusions to the term employment services s p e c i f i c a l l y performed f o r i n s t it u t io n s of higher education in the employ o f a s ta te or any in s tru m e n ta lity of a s ta te 19 as well as those performed in the employ o f those r e l ig i o u s , c h a r it a b le , educational or other o rg a n iz a tio n s . 20 T h is , in e f f e c t , made coverage under the unem­ ployment insurance program mandatory f o r a l l p ublic and p r iv a te i n s t i ­ tu tio n s o f higher education w ith the exception o f those operated by a p o l i t i c a l subdivision o f a s ta te . 21 This meant th a t as a condition of c e r t i f i c a t i o n , es se n tia l so th a t covered employers in any given s t a te would continue to receive tax c r e d i t under the Federal program fo r t h e i r c o n trib u tio n s to t h e i r s t a t e 's program, t h a t the s ta te extend coverage to employees o f in s t it u t io n s o f higher education on the same basis as f o r other covered employees. Without exception, the l e g i s ­ la tu re s o f each o f the 50 states responded by enactment o f amendments 17 Section 501(c) l i s t s the organizations exempted from ta x a tio n under Section 5 0 1 (a ). Subsection (3) includes corporations organized and operated e x c lu s iv e ly f o r educational purposes. 18I b i d , , Sec. 3 3 0 6 ( c ) ( 8 ) . 19l b i d . , Sec. 3 3 0 9 ( a ) ( 1 ) ( E ) . 20I b i d . , Sec. 3 3 0 9 ( a ) ( 1 ) (A ) . 21 The Michigan Employment S e c u rity A ct, Section 2 5 ( 2 ) (a) pro­ vides t h a t "a p o l i t i c a l subdivision may e le c t by ordinance or re s o lu tio n to cover e it h e r or both o f the fo llo w in g f o r a t le a s t 2 f u l l calendar years: (a ) A ll services performed f o r i t in employment in a l l o f i t s h o spitals and i n s t it u t io n s o f higher education as defined in Section 53; . . . ." E f f e c t iv e Janaury 1, 1975, community colleges w i l l be subject to compulsory coverage. (See note 6 . ) 11 placing t h e i r s t a t e 's program in accord w ith the provisions of the Federal Act e f f e c t i v e January 1, 1972. In Michigan, the unemployment compensation program is adminis­ tered by the Michigan Employment S ecu rity Commission. The Commission maintains a r a t in g account f o r each covered employer to which c o n t r i ­ butions are c re d ite d and to which disbursements in the form of b e n e fits paid to unemployed in d iv id u a ls on the basis o f past employment w ith th at employer are charged. On the basis th e re o f, a c o n trib u tio n ra te f o r each employer is determined a f t e r an i n i t i a l period o f th ree years in which the r a t e is predetermined by law, and applied to covered wages paid by him w ith respect to employment. 2? Amounts paid to the Commission on the basis th e re o f are c red ited to the employer's ra tin g account main­ tained by the Michigan Employment S ecu rity Commission and to which expenditures in the form o f b e n e fits are lik e w is e charged. i n s t it u t io n of higher education or a p o l i t i c a l A s ta te subdivision which e le c ts to be subject to the A c t, however, is required to pay in to the fund in lie u o f co n trib u tio n s an amount eq u iv alen t to the amount o f b en efits paid and charged to i t s account. 23 Thus, as a reimbursable employer, a s ta te i n s t i t u t i o n o f higher education is held responsible by the Com­ mission f o r the repayment o f every d o l l a r in unemployment compensation b e n e fits paid and chargeable to i t . This provision may not operate to the advantage o f a s ta te i n s t i t u t i o n o f higher education depending, o f course, on a number o f fa c to rs both w ith in and beyond i t s c o n tro l. 22 Michigan Employment S e c u rity A c t, op. c i t . , Section 19. 2 3 I b i d . , Sec. 1 3 ( g ) ( 1 ) . 12 P riv a te n o n p ro fit in s t it u t io n s o f higher education are c o n tr ib uting employers. 24 Such an i n s t i t u t i o n may, however, e le c t to become a reimbursing employer f o r a period o f not less than two years in lie u o f co n trib u tio n s fo r the unemployment compensation fund. 25 Two or more p riv a te n o n p ro fit in s t it u t io n s may also f i l e a j o i n t a p p lic a tio n w ith the Commission f o r the establishment o f a group account. 26 In a l l other aspects, p riv a te and public i n s t it u t io n s are accorded the same treatment under the A ct. As c o n trib u tio n ra te s are based on expedience, ad m in istrators of in s t it u t io n s which are c o n trib u tin g employers a r e , in th is sense, held accountable f o r t h e i r personnel actions which r e s u lt in the payment o f b e n e fits as are those of reimbursing employers. Within the a c c o u n ta b ility context o f t h is study, th e r e fo r e , the d is ­ t in c t io n between c o n trib u tin g and reimbursing employers is not one of s i g n if ic a n t import to warrant separate treatm en t. S ig n ific a n c e Unemployment compensation may or may not be a f r in g e b e n e f i t , depending on one's point o f view. It i s , n everth eless, unique among the usual f r in g e b e n e fits or d i s t i n c t from them in th at b e n e fits are a v a ila b le only to former employees during periods in which they are unemployed. By d e f i n i t i o n , then, persons drawing b e n e fits are no longer employees and owe no a lle g ia n c e to the former employer against whose account the payments are charged. 24I b i d . , Sec. 1 3 ( a ) ( 1 ) . 2 5 I b i d . , Sec. 1 3 ( a ) ( 2 ) . 26I b i d . , Sec. 1 3 (c ). i Conversely, the w e lfa re o f an 13 employee is not under consideration by an employer once a claim fo r b e n e fits is f i l e d . I t is an employer's r ig h t to contest the payment o f b e n e fits f o r which he b elieves a former employee may not be e n t i t l e d . Should such ac tio n be taken, the re la tio n s h ip between the two p a rtie s becomes th a t o f adversaries. Thus, were th ere no term inations or la y ­ o f f s , no b e n e fits would be paid, a condition which would be r e fle c te d in the employer's r a tin g account o r , even more d i r e c t l y , in the amount paid to the Commission by a reimbursing employer. Furthermore, th.e employer who successfu lly contests a claim fo r b e n e fits , re s u ltin g in a ru lin g o f i n e l i g i b i l i t y or a d i s q u a l i f i c a t i o n , stands also to gain. To a la rg e degree, then, the costs of unemployment b e n e fits are a r e f le c t io n o f personnel p rac tice s and p o lic ie s and can be c o n tro lle d as can no ( o t h e r ) - f r i n g e b e n e f it . As such, the a d m in is tra tio n of unemployment compensation w ith in in s t it u t io n s o f higher education lends i t s e l f to an a c c o u n ta b ility model. Unemployment compensation costs also may or may not p resen tly be a s i g n i f i c a n t concern to f in a n c ia l ad m in is tra to rs o f in s t it u t io n s o f higher education in Michigan. I t is the in te n t o f t h is study to make c le a r what they now b e lie v e in l i g h t of t h e i r experience during the f i r s t two years o f coverage. T h e ir views may suggest problems not p reviou sly known or evidence concern about the f u tu r e under t h is program. Some examples which may g iv e r i s e to the l a t t e r are: (1 ) Employees g e n e r a lly did not have s u f f i c i e n t c r e d i t weeks in covered employment w ith i n s t i t u t i o n s o f higher education to q u a lit y f o r unemployment b e n e fits u n t i l the second week o f A p r i l , 1972, and were not e l i g i b l e f o r the maximum number o f weeks of b e n e fits u n t i l Ju ly o f the same y e a r. 14 The f i r s t y e a r's experience, th e r e fo r e , may be deceptive as a p ro je c ­ tio n o f b e n e fits to be paid in succeeding years. (2 ) Reassignment o f employees, p a r t i c u l a r l y in seasonal o peratio ns, to other areas and with other duties is a common p ra c tic e of i n s t it u t io n s o f higher edu­ cation to s t a b i l i z e the work fo rc e and provide year-round employment fo r those employees desirous of such. Should the Commission fin d th a t work to which an employee is so reassigned is " u n s u ita b le ," the employee need not accept the reassignment and would be e l i g i b l e to f i l e unemployment b e n e fits . fo r- A d d it io n a lly , union agreements may preclude such reassignments w ith the same e f f e c t . and p r iv a te support f o r i n s t i t u t i o n a l (3 ) Reduced Federal funding research programs may fo rce l a y ­ o ffs and term inations re s u ltin g in the payment o f b e n e fits . economic conditions may have the some e f f e c t . 27 (4) Adverse (5) In te r p r e ta t io n s of the Act may extend e l i g i b i l i t y f o r b e n e fits to persons and s itu a tio n s not now covered. (6) Changes in the law might also extend coverage and/or increase b e n e f it payments s i g n i f i c a n t l y . 27 28 Michigan has been a ffe c te d by the "energy c r i s i s " to a f a r g re a te r degree than most other s ta te s . During the f i r s t fo ur months o f 1974, statew ide unemployment as reported by the Michigan Employment S e c u rity Commission was c o n s is te n tly close to 10 percent of the lab or fo rc e . In s t it u t io n s o f higher education in Michigan are by no means immune from the e f f e c t s o f th is phenomenon as employees discharged, l a i d o f f or who otherwise term inate w ithout leaving the lab o r fo rc e may have d i f f i c u l t y securing o ther employment and thus draw b e n e fits charge­ able to the i n s t i t u t i o n a t which they were employed. A d d it io n a lly , reduced s ta te funding and/or p h ila n th ro p ic givin g and reduced e n r o l l ­ ments may place fin a n c ia l c o n s tra in ts on i n s t i t u t i o n a l programs w ith a concomitant reduction in the i n s t i t u t i o n ' s work fo rc e . A d d itio n al d is ­ cussion on th is to p ic is included in Chapter I I I . OQ Act No. 104 o f the Public Acts o f 1974, op. c i t . , brought about a s i g n i f i c a n t increase in the maximum b e n e fits payable to e l i g i b l e claim ants. Act No. 11 o f the Public Acts of 1974, House B i l l 4143, February 15, 1974, elim in ated the w a itin g period o f one week before a claim ant could draw b e n e fits . 15 From t h is study, then, some statements about the experience of f in a n c ia l ad m in is tra to rs w ith regard to unemployment compensation and whether or not i t is o f s u f f i c i e n t concern to w arrant f u r t h e r research should be possible. L ater researchers w i l l have a s t a r t in g p o in t. At present, th ere are no general studies o f th is nature. Overview In Chapter I I a h is t o r ic a l review o f the l e g i s l a t i o n r e l a t i n g to unemployment compensation coverage as i t applies to i n s t it u t io n s of higher education w i l l be presented. A d d it io n a lly , the b e n e fit payment s tru c tu re o f the Michigan Employment S ecu rity Act w i l l be reviewed. Chapter I I I w i l l be devoted to the development o f the concept o f a c c o u n ta b ility as i t r e la t e s to t h is study. design o f the study w i l l become e x p l i c i t . Then, in Chapter IV the In Chapter V, the re s u lts o f the survey instrument and in terview s w i l l be presented and analyzed. The conclusions and recommendations w i l l chapter, Chapter V I. be presented in the f i n a l CHAPTER I I A REVIEW OF THE LEGISLATION In tro d u c tio n There is no d e f i n i t i v e work addressed s o le ly or in su b stantial p art to unemployment compensation coverage or i t s im p lic a tio n s for, in s t it u t io n s o f higher education in the United States or s p e c i f i c a l l y in Michigan. Several a r t i c l e s , however, have appeared in n e w s le tte rs , jo u rn als and b u lle t in s addressed to ad m in istrators o f i n s t it u t io n s o f higher education. As these i n s t i t u t i o n s were not g e n e ra lly subject to coverage p r io r to January 1, 1972, the a r t i c l e s contain l i t t l e e m p iri­ cal data or references to actual experience. T h e ir content is explana­ to ry and stru c tu red to provide an overview o f the new coverage and g uidelin es upon which actions could be taken. The more substantive a r t i c l e s w i l l be reviewed in t h is chapter and the chapter which f o l ­ lows. Together, these two chapters w i l l comprise a review o f the l i t ­ e ra tu re , a review o f the a p p lic a b le l e g is l a t i o n and a more in-depth development o f the problem th a t was o u tlin e d in the previous chapter. The Federal Unemployment Tax Act A thorough understanding o f the Federal Unemployment Tax Act is not e s s e n tia l to an understanding o f th is study. As noted p re v io u s ly , in s t it u t io n s o f higher education operated as n o n p ro fit o rg a n iz a tio n s , in s tr u m e n ta litie s o f the s ta te or p o l i t i c a l subdivisions th e re o f are not subject to the provisions o f t h is A ct. The Federal Employment 16 17 Security Amendments o f 1 9 7 0 ,^ however, provided th a t the states must extend unemployment compensation p ro tectio n to employees who perform services fo r in s t it u t io n s o f higher education or r is k n o n c e r tific a t io n 2 of t h e i r p rovisions. Accordingly, Michigan, as did a l l 50 s ta te s , amended i t s Employment S ecu rity Act to provide th is coverage. It seems a p p ro p ria te , th e re fo r e , to include an overview of the Federal Act, including a b r i e f h is t o r ic a l review with p a r t ic u la r focus on developments th a t led to coverage o f in s t it u t io n s o f higher education. H is to ric a l Review The Federal Unemployment Tax Act is a p a rt of the Social Security Act, passed by Congress and signed by President Roosevelt on August 14, 1935. A major work by W illia m Haber and M e r r i l l G. Murray e n t i t le d Unemployment Insurance in the American Economy, published ^Public Law 91-373, 91st Congress, H.R. 14705, August 10, 1970. 2 The Federal Unemployment Tax Act is patterned a f t e r the Federal Estate Tax Act o f 1928. This Act imposed a Federal i n h e r i ­ tance tax w ith a provision th a t 80 percent c r e d it would be given f o r taxes paid under a s ta te in h e rita n c e tax law meeting Federal guide­ lin e s . I t was passed to induce F lo rid a to pass a s im ila r law, thus removing the com petitive advantage i t had gained over o ther states by repeal o f i t s in h e rita n c e tax law in an attempt to lu re wealthy persons to move to F lo r id a . As the Roosevelt A dm inistration per­ ceived the strongest obstacle to s ta te ac tio n on unemployment l e g i s ­ l a t io n to be the f e a r th a t such l e g is l a t i o n would place ind ustry in such sta tes a t a com petitive disadvantage with industry in states w ithout s im ila r l e g i s l a t i o n , i t adopted the Federal Estate Tax Act scheme. For a more d e t a ile d h is t o r y , see W illiam Haber and M e r r i l l G. Murray, Unemployment Insurance in the American Economy (Homewood, Illin o is ^ Richard D. Ir w in , I n c . , 1966), pp. 72-73. 18 in 1966, provides in s ig h t in to the developments which led to i t s passage.^ Although th ere had been sporadic a c t i v i t y a t the Federal level since 1916,^ the Federal government gave very l i t t l e serious a tte n tio n to unemployment insurance before the economic holocaust o f 1929. Nearly 30 years elapsed from i t s f i r s t mention in Congress to passage. Whereas in 1935 unemployment insurance met w ith only token opposi5 t io n , opponents had p reviously been drawn from many d iverse q u a rte rs . Samuel Gompers, President o f the American Federation o f Labor, fo r example, had taken a strong stand against such l e g i s l a t i o n . At hearings conducted in 1916 in response to a re s o lu tio n f o r the "appoint­ ment o f a n ation al insurance commission and f o r the m itig a tio n o f the e v il o f unemployment," Gompers went on record as against the proposed Commission. I f e s ta b lis h e d , he s ta te d , I would have them in v e s tig a te the subject o f social insurance of a vo lun tary character and how f a r i t can be estab lished in the United States w ith such aid as the government can g iv e . I am more concerned . . . w ith the fundamental p rin c ip le s o f human l i b e r t y and refusal to surrender rig h ts to government agencies than I am w ith social in s u ra n c e ."6 3 Haber and Murray, op. c i t . Dr. Murray served as associate d ir e c to r o f the unemployment compensation s t a f f f o r the Committee on Economic S e c u rity , which d ra fte d the l e g i s l a t i o n . He i s , th e r e fo r e , in a somewhat unique p o s itio n to c h ro n ic le the events leading to i t s passage. ^ I b i d . , p. 70. According to the authors, the e a r l i e s t known o f f i c i a l recommendation was t h a t of the United States Commission on In d u s tria l R e la tio n s . In i t s f i n a l re p o rt in 1916, the Commission recom­ mended the in v e s tig a tio n and preparation o f plans f o r insurance against unemployment "in such trades and in d u s trie s as may seem d e s ir a b le ." 5 The House o f Representatives passed the Social S e c u rity Act by a vote o f 371 to 33; the Senate by a vote o f 77 to 6. g Haber and Murray, op. c i t . , p. 70. 19 He maintained th is p o s itio n , one which was also the o f f i c i a l o f the American Federation o f Labor, u n t i l positio n 1932. Nor did Secretary of Commerce Herbert Hoover seem favorab le to unemployment insurance l e g is l a t i o n in his opening remarks to a national conference on unemployment, c a lle d by President Warren Harding in 1921. Hoover spoke o f " d ir e c t doles" to in d iv id u a ls as "the most vicious o f s o lu t io n s ." 7 He added th at he hoped the conference would fin d solutions th a t do not "come w ith in the range o f c h a r i t y . " In. seeming response, the Economic Advisory Committee on Unemployment and Depression Insurance, appointed a t the conference, recommended th a t reserve funds be created and used in depressions, not to pay p a r t wages to workers in idleness but to keep them employed on making re p a ir s , producing to stock, e tc . The f i r s t Federal unemployment insurance b i l l was not introduced O in Congress u n t i l 1928. While no action was taken on the b i l l , l a t e r th a t same year the Senate adopted a re s o lu tio n introduced by Senator James Couzens o f Michigan to provide f o r "an a n a ly sis and appraisal o f reports on unemployment and systems f o r prevention and r e l i e f t h e r e o f." Hearings were held by the Coimiittee on Education and Labor which recom­ mended th a t: (1) The government should encourage p r iv a t e ind u s try in i t s r e s p o n s ib ilit y to s t a b i l i z e employment; and (2 ) th a t i f any p ub lic insurance scheme is considered, i t should be l e f t to the s ta te l e g i s ­ la tu re s to study the problem. Spurred on by the depression, i n t e r e s t in an unemployment insurance program gained support. 7 I b i d . , p. 70. In 1931 Senator Robert F. Wagner 8 I b i d . , p. 71. 9Ib id . g 20 o f New York secured adoption o f a re s o lu tio n providing f o r the appoint­ ment o f a Select Committee on Unemployment In s u r a n c e .^ Again, upon the completion o f i t s hearings, the Committee concluded th a t a Federal system o f unemployment insurance would be u n c o n stitu tio n a l and undesir­ able. Accordingly, i t favored vo lun tary plans. Issuing a m in o rity r e p o r t , Senator Wagner stated t h a t "unemploy­ ment insurance or wage reserves, to be successful, should be inaugur­ ated under compulsory S tate l e g is l a t i o n and be supervised by S ta te A u th o rity "; th a t "each system should be organized to provide incentives to the s t a b i l i z a t i o n o f employment"; and th a t the Federal government should allow employers to deduct from income tax t h e i r payments in to unemployment reserves or insurance p la n s . ^ Senator Wagner thereupon introduced l e g is l a t i o n to t h is e f f e c t in 1931 and again in 1933. Feeling apparently was s t i l l be enacted a t the s ta te l e v e l . strong th a t such l e g i s l a t i o n should The f a i l u r e of any s ta te to do so in 1933, however, pointed to the necessity o f Federal a c tio n . To a l l a y the f e a r o f u n c o n s t it u t io n a lit y , Wagner's b i l l was modified to porate a F e d e ra l-s ta te tax Estate Tax 12 in c o r­ c r e d i t program patterned a f t e r the Federal which had been held c o n s titu tio n a l by the conservative Supreme Court. 13 The Wagner-Lewis b il 1 which is s i g n i f i c a n t in th a t i t had a pronounced in fluen ce on the provisions included in the Social S e c u rity 10Ib id . 11 I b i d . , pp. 71-72. 12See note 2. 13F lo rid a v. M e llo n , 273 U.S. 12. 14 Representative David J. Lewis o f Maryland introduced in the House o f Representatives a b i l l id e n tic a l to the Wagner b i l l . Hence, the b i l l came to be c a lle d the Wagner-Lewis b i l l . 21 Act, imposed a 5 percent excise tax on employer p a y ro lls w ith the proviso th a t i f a s ta te law met prescribed co n d itio n s , a covered employer could receive 100 percent c r e d i t against the ta x . The pre­ scribed conditions included minimum b e n e fits to unemployed workers and s tip u la te d conditions which could not be used to support a denial o f b e n e fits .^ This time opposition came mainly from employer o rg a n iz a tio n s . Although the b i l l had the endorsement o f President Roosevelt, the~ opposition succeeded in convincing him th a t fu r t h e r study was warranted. As the President was also not s a t i s f i e d w ith a b i l l providing f o r the subsidy o f s ta te old age pensions, he proposed th a t the best course would be to delay action on both b i l l s and formulated plans fo r a com­ prehensive study o f social insurance f o r presentation a t the f i r s t session o f the next Congress.^® In a message to Congress, d e liv e re d June 8 , 1934, the President stated: I b e lie v e th ere should be amaximum o f cooperation between States and the Federal Government. I b e lie v e th a t the fundsnecessary to provide t h is insurance should be raised by c o n trib u tio n r a th e r than by an increase in general ta x a tio n . Above a l l , I am con­ vinced th a t social insurance should be n atio n al in scope, although the several States should meet a t le a s t a la rg e portion o f the cost o f management, lea vin g to the Federal Government the respon­ s i b i l i t y o f in v e s tin g , m aintaining and safeguarding the funds con­ s t i t u t i n g the necessary insurance r e s e r v e s .'7 Thereupon, l a t e r th a t same month, the President appointed the Committee on Economic S e c u rity to study problems r e l a t i n g to the economic s e c u rity o f in d iv id u a ls . 15 Haber and 16I b i d . , p. Hurray, op. 74. c i t . , p. 73. 1 7I b i d . , p. 77. 22 Haber and Murray note th a t the Committee on Economic S ecurity did not d e l iv e r i t s re p o rt to the President u n t i l January 15, 1935. Considering the many d iv erg e n t views and problem areas to be resolved, a lapse o f less than six months does not seem excessive. In i t s re p o rt, the Committee recommended: 1. Federal l e g i s l a t i o n on unemployment insurance to include a uniform Federal excise tax on employment w ith a tax c r e d it to employers fo r t h e i r co n trib u tio n s under a compulsory s ta te unemployment insurance law; and 2. That the Federal Government grant the states s u f f i c i e n t funds f o r proper a d m in is tra tio n o f t h e i r unemployment insurance laws. S p e c if i c a l ly , w ith in these two major recommendations, the Committee advocated: 1. That the tax be imposed on a l l employers (emphasis added) who employ fo u r or more workers f o r 13 or more weeks in a year; 2. That the tax be equal to 1 percent o f t o t a l p a y ro lls 1936 and 3 percent by 1938; 3. That a c r e d i t up to 90 percent o f th e Federal tax be allowed employers f o r c o n trib u tio n s under a s ta te unemploy­ ment compensation law which meets c e r ta in prescribed con­ d it io n s ; 4. That i f a s ta te allowed lower c o n trib u tio n ra te s to employ­ ers w ith s ta b le employment, a d d itio n a l c r e d it toward the Federal tax be allowed f o r taxes t h a t otherwise would be paid under the s t a te law; 5. That a l l money c o lle c te d by the sta tes be deposited w ith the Federal Treasury and placed in a t r u s t fund w ith an account to the c r e d i t o f each s t a te ; and 6. That the Federal Government 9^gnt th e states money f o r a d m in is tra tio n o f t h e i r la w s .* ” 1 8 I b i d . , pp. 8 2 - 8 3 . 19I b i d . , pp. 8 3 - 8 4 . in 23 The unemployment insurance provisions included in the Social S ecurity Act as passed by the Congress were not b a s ic a lly d i f f e r e n t from the recommendations o f the Committee. The recommendation th a t employers who employ 4 or more workers f o r 13 o r more weeks in a year was changed to include only those who employ 8 or more workers in 20 weeks a year and the requirements f o r experience ra tin g were modified. For the purposes o f t h is study, the changes made in the r e q u ire ­ ments f o r experience r a tin g (see item number 4 o f the Committee's recommendation above) are o f l i t t l e import. Of s ig n ific a n c e is th a t the concept o f experience r a tin g i t s e l f , whereby employers w ith fa v o r ­ able experience may pay a le s s e r s ta te tax and s t i l l be afforded the f u l l allow able c r e d i t against t h e i r Federal ta x , was adopted. Nor f o r the purpose o f th is study is the change in the number o f employees employed during a s p e c ifie d number of weeks of import. 20 Of s i g n i f i ­ cance is th a t w h ile the Committee recommended th a t no in d u s trie s be exempted (see item number 1 o f the Committee's recommendation above), the Congress s p e c i f i c a l l y excluded service f o r s ta te and local govern­ ments and in s tr u m e n t a lit ie s , and service f o r n o n p ro fit organ izatio n s 20 The 1970 Amendments to the Federal Unemployment Tax Act extended coverage to any employer who (1 ) during any calendar q u a rter in the calendar year or in the preceding calendar year paid wages o f $1,500 or more, or (2 ) on each o f some 20 days during the calendar year or during the preceding calendar y e a r , each day being in a d i f ­ fe r e n t calendar week, employed a t le a s t one in d iv id u a l in employment fo r some portion o f the d a y .— Section 3 3 0 6 (a ). In t e r e s t i n g l y enough, n o n p ro fit organ izatio n s were s p e c i f i c a l l y excluded from coverage unless they employ fo u r o r more persons on each o f some 20 days, each day being in a d i f f e r e n t calendar week.— Section 3 3 0 9 (c ). Obviously, to an i n s t i t u t i o n o f higher education, th is d i s t in c t i o n is moot. 24 of an educational nature. 21 Thus, in s t it u t io n s o f higher education, whether operated p u b lic ly by the s t a t e , a local government or as an in s tru m e n ta lity th e re o f; or p r i v a t e l y as or by a n o n p ro fit organiza­ t io n , were exempted from coverage. According to Haber and Murray, the exemption o f n o n p ro fit organizations was added to the b i l l by the House Committee on Ways and Means w ithout any explanation in the re p o rt. 22 They point out f u r t h e r th at the president o f the American Hospital Association was the ortfy witness in the Committee's hearing asking f o r exemption, adding th a t e v id e n tly his request p re v a ile d . I t is probable, however, th a t non­ p r o f i t org an izatio n s were o r i g i n a l l y exempted on the basis o f t h e i r t r a d i t i o n a l freedom from ta x a tio n , and because o f the fin a n c ia l d i f f i c u ltie s they would experience in paying the required taxes. 23 D iedrich K. W i l l e r s , Personnel D ire c to r o f Cornell U n iv e r s ity , comments th a t: I t is not su rp ris in g to r e a l i z e th a t n o n p ro fit organizations were exempted from payment o f unemployment b e n e fits in 1935, when the Federal Unemployment Tax Act was passed by the Congress. The framers o f unemployment insurance chose to finance the pro­ gram on a "spreading the r is k " approach, ra th e r than a s e l f insurance plan. Since n o n p ro fit o rg an izatio n s have no way of passing the cost o f unemployment on to customers, a dispropor­ t io n a te burden would have f a l l e n upon t h e i r operating funds. 21 Also excluded were a g r ic u lt u r a l la b o r; domestic service in a p riv a te home; service by the crews o f vessels on navigable waters o f the United S tates; service by s p e c ifie d immediate members o f the fa m ily o f the employer; se rv ic e f o r the Federal government or Federal instrumen­ t a l i t i e s ; and service f o r n o n p ro fit organ izatio n s o f a r e l i g i o u s , char­ i t a b l e , s c i e n t i f i c , l i t e r a r y nature or f o r the prevention o f c r u e lt y to c h ild re n o r animals. The exclusions which are s t i l l in e f f e c t today pose some in te r e s tin g inconsistencies f o r i n s t it u t io n s o f higher educa­ tio n . For example, a g r ic u lt u r a l la b o r in the employ o f an i n s t i t u t i o n o f higher education is not covered by the Act. ^ H a b e r and Murray, op. c i t . , p. 152. ^ I b i d . , p. 153. 25 U lt im a t e ly , p riv a te donors, students paying t u i t i o n and other benefactors would be fo o tin g the b i l l o f those p riv a te p r o f i t making en terp rise s with a high r is k of unemployment. Since the adventure in p r o te c tiv e social insurance was new, the framers were u n w illin g to b as ta rd ize t h e i r insurance approach by p erm it­ tin g s e l f insurance funding o f unemployment b e n e fits f o r a non­ p r o f i t o r g a n iz a tio n .24 State and local governments and t h e i r in s tru m e n ta litie s were not covered in recognition o f the c o n s titu tio n a l p ro sc rip tio n against t a x ing states and t h e i r subdivisions. 25 While no d ir e c t reference to the exclusion o f public i n s t it u t io n s o f higher education was included J n the o r ig in a l A c t, they were nevertheless excluded. Between passage o f the Social S e cu rity Act in 1935 and the Employment S e cu rity Amendments of 1970, considerable Federal l e g i s l a ­ tion w ith regard to unemployment insurance was enacted. Other than the 1939 amendments which changed the unemployment tax base from t o t a l p a y ro lls to the f i r s t $3,000 earned by each in d iv id u a l during a c a le n dar year 26 and the exclusion o f service performed by a student who is en ro lle d and r e g u la r ly attending classes a t such school, co lle g e or u n iv e r s it y , 27 little u lt im a t e ly came to a f f e c t in s t it u t io n s o f higher education. 24 D ied rich K. W i l l e r s , "Impact o f Extension o f Unemployment Compensation Coverage to Colleges and U n i v e r s i t i e s ," The Journal o f the College and U n iv e rs ity Personnel A s s o c ia tio n , December, 1970, pp. 6 -7 . I t is in t e r e s tin g to note th a t the 1970 Amendments to the Federal Unemployment Tax A c t, which extend coverage to n o n p ro fit o rg a n iz a tio n s , re q u ire s th a t such org an izatio n s be given the option to s e l f insure. 25 Haber and Murray, op. c i t . , p. 165. 2 6 I b i d . , p. 101. 2 7 I b i d . , p. 93. 26 The Employment Secu rity Amendments o f 1970 The executive branch o f the Federal government urged coverage OO of n o n p ro fit o rganizations and sponsored b i l l s to th a t end since 1958. Coverage fo r employees o f s ta te and local government, the la r g e s t group not protected by unemployment insurance, has been a continuing concern of advocates o f unemployment insurance. 29 I t is not s u rp ris in g , th e re ­ fo r e , th a t the former and a s i g n i f i c a n t portion o f the l a t t e r came under the sc ru tin y of Congress and were included in the Employment Security Amendments o f 1970. Together, coverage was extended to an estimated 3,0 6 1 ,0 0 0 employees in these two ca teg o ries . 30 The 1970 Amendments brought about the most sweeping changes in the unemployment program since i t s inception in 1935. made in three major categ o ries: Changes were coverage, b e n e fit extension and fin a n c in g , a l l o f which a f f e c t i n s t it u t io n s o f higher education. Most s i g n i f i c a n t , o f course, is th a t the Amendments singled out coverage f o r in s t it u t io n s o f higher education. To both public and p riv a te i n s t i t u t i o n s , th is was e ffe c te d by a c irc u ito u s ro u te . As has been noted, these in s t it u t io n s were not brought under the Act d i r e c t l y but r a th e r coverage was made a con dition o f c e r t i f i c a t i o n o f s ta te laws. ^ I b i d . , pp. 152-153. 31 ^ I b i d . , p. 165. 31 ^ W i l l e r s , op. c i t . , p. 5. Section 3 3 0 9 (a )(A ) recinded the exclusion f o r n o n p ro fit educa­ tio n a l o rg an iza tio n s and Section 3 3 0 9 (a )(1 )(B ) s p e c i f i c a l l y recinded the exclusion o f "service" performed in the employ o f the S ta te , or any in s tru m e n ta lity o f the S ta te . . . f o r a h o s p ital o r i n s t i t u t i o n o f higher education located in the S ta te . . and made these coverages mandatory as a condition o f c e r t i f i c a t i o n o f s ta te laws. Without c e r t i f i c a t i o n , no employer in the s ta te may c r e d i t payment made to a s t a te unemployment compensation fund ag ain st his Federal unemployment ta x . 27 While one may look askance a t t h is approach, to those p riv a te i n s t i t u ­ tions f o r whom i t mandated coverage, i t is not w ithout m e r it . Federal unemployment tax ra te is p res en tly 3.2 percen t, 32 The against which an employer may take a c r e d i t o f 2 .7 percent f o r payments to a s ta te unemployment fund. The continued exclusion o f these i n s t it u t io n s under the Federal A c t, th e r e fo r e , re s u lts in a "saving" o f .5 percen t, i . e . , the Federal component o f the tax . 33 Secondly, the F e d e ra l-S ta te Extended Unemployment Compensation Act, incorporated in to the Employment S ecu rity Amendments, provides fo r the payment o f a d d itio n a l b e n e fits to workers who have exhausted t h e i r re g u lar b e n e fit e n title m e n t. Although the Act allows some v a r ia tio n in s ta te law , the a d d itio n a l b e n e fits are g e n e ra lly o n e -h a lf those the worker received as re g u la r b e n e fits . The Federal and s ta te governments share eq u a lly in the cost o f t h is program and the ra tin g account o f c o n trib u tin g employers is not charged w ith these costs. S ta te and p r i ­ vate i n s t it u t io n s which have ele cte d to be taxed as reimbursing employers, however, are charged f o r the s t a t e 's s h a r e . ^ F i n a l l y , the Amendments provide th a t a n o n p ro fit o rg an iza tio n to which coverage is th e re in extended, must be given the option to 32 Section 3301 o f the 1970 Amendments increased the r a te from 3.1 percent. 33 The Amendments also mandated th a t the f i r s t $4,200 o f remun­ e ra tio n paid by an employer to an employee in a calendar year be sub­ j e c t to the s t a t e t a x , an increase from $3,000. This meant th a t f o r each employee w ith earnings o f a t le a s t $4 ,2 0 0 , the s t a te tax on the employer would be $1 13 .40 , up from $81.00. I f coverage was provided under the Federal A ct, the a d d itio n a l .5 percent tax would amount to $21 . 0 0 . 34in weighing the fa c to rs toward a decision as to whether or not to e le c t the reimbursement method o f fin a n c in g , a p r iv a te n o n p ro fit i n s t i t u t i o n must give added consideration to t h is p ro v is io n . 28 reimburse the S tate Unemployment Fund f o r b e n e fits paid on i t s beh alf in lie u o f c o n tr ib u tio n s , i . e . , taxes. 35 A d d it io n a lly , a number o f provisions in the Amendments, some mandatory and some perm issive, apply s p e c i f i c a l l y to i n s t it u t io n s o f higher education. Of p a r t i c u l a r note is the mandatory provision th a t s ta te s , w ith regard to s ta te law coverage o f c e r ta in employees of n o n p ro fit o rg an izatio n s and o f s ta te i n s t it u t io n s o f higher education, th a t: Compensation is payable on the basis o f service . . . in the same amount, on the same terms, and subject t o , the same condi­ tio n s as compensation payable on the basis o f other se rv ic e sub­ j e c t to such law; except th a t w ith respect to service in an i n s t r u c t i o n a l , research or p rin c ip a l a d m in is tra tiv e ca p ac ity f o r an i n s t i t u t i o n o f higher education . . . compensation sh a ll not be payable based on such s e rv ic e f o r any week commencing during the period between two successive academic years (or when the co n tra c t provides f o r a s i m il a r period between two re g u la r but not successive terms, during such perio d) to any in d iv id u a l who has a c o n tra c t to perform services in any such c a p ac ity f o r any i n s t i t u t i o n o r i n s t it u t io n s o f higher education f o r both o f such academic years or both o f such terms. . . .36 This means t h a t , except as otherwise allow ed, a l l employees o f i n s t i ­ tu tio n s o f higher education must be covered under the s ta te ac t w ithout d is t in c t io n o ther than the l i m i t a t i o n on the r i g h t to b e n e fits placed on those serving in i n s t r u c t i o n a l , research or p rin c ip a l a d m in is tra tiv e c a p a c itie s . With re feren ce to t h is p ro v is io n , the J o in t Committee o f the Pennsylvania S ta te -R e la te d I n s t i t u t i o n o f Higher Education observed th a t: 35Sec. 3 3 0 9 ( a ) ( 2 ) . The s ig n ific a n c e o f t h is option is o f such import t h a t i t is discussed e x te n s iv e ly in the next chapter. 36Sec. 3304 ( a ) ( 6 ) ( A ) . 29 The requirement has s i g n i f i c a n t im p lic a tio n s f o r educational i n s t i t u t i o n s many o f whose employees are performing se rvices which are s tro n g ly a ffe c te d by the seasonal c h a ra c te r o f th e i n s t i t u ­ t i o n 's o p e ra tio n s . . . . The seasonal nature o f much o f the i n s t i t u t i o n ' s operations makes i t p a r t i c u l a r l y v u ln e ra b le to charges f o r b e n e fits . . . . This v u l n e r a b i l i t y suggests the urgent need f o r i n s t i t u t i o n s o f higher le a rn in g to reexamine t h e i r h i r i n g , employment, wage and l a y o f f p ra c tic e s in o rder to so schedule or a l l o c a t e work assignments and employees so as to minimize the need f o r la y o f f s an d /o r to l i m i t by c o n tra c t provisions the a v a i l a b i l ­ i t y o f such employees to work elsewhere during slack periods o f work f o r the i n s t i t u t i o n . O bviously, t h is w i l l present a major ch allen g e to any educational i n s t i t u t i o n re q u irin g as i t does the achievement o f s t a b i l i t y o f employment where f o r so long i n s t a b i l ­ i t y has been accepted as an in h eren t c h a r a c t e r i s t i c .37 In the realm o f perm issive l e g i s l a t i o n , the 1970 Amendments re tain ed th e p ro visio n whereby a s t a t e a c t could exclude from coverage se rv ic e performed in the employ o f a school, c o lle g e or u n iv e r s it y i f such s e rv ic e is performed by a student who is e n ro lle d and r e g u la r ly a tte n d in g classes a t such school, c o lle g e o r u n i v e r s it y . 38 While h e re to fo re t h i s p ro visio n had a p p l i c a b i l i t y to an extrem ely lim it e d few schools, c o lle g e s o r u n i v e r s i t i e s , i t now took on added s i g n i f i cance as v i r t u a l l y a l l such i n s t i t u t i o n s came under the A ct. 39 As the J o in t Committee o f Pennsylvania S ta te -R e la te d I n s t i t u t i o n s o f higher education noted, however, the imprecise wording " e n ro lle d and regu­ l a r l y a tte n d in g classes" l e f t open to i n t e r p r e t a t i o n a s i g n i f i c a n t 37 The J o i n t Committee o f the Pennsylvania S t a t e - R e la t e d I n s t i ­ t u t i o n s o f Higher Education, "Unemployment Insurance: 1971 Is th e Year f o r Plan nin g," College and U n i v e r s i t y Business O f f i c e r , February, 1971, pp. 6 -7 . 38Sec. 3 3 0 6 ( c ) ( 1 0 ) ( B ) ( i ) . 39 This p rovision p re v io u s ly had a p p l i c a b i l i t y to nonreTigious i n s t i t u t i o n s o f higher education in the D i s t r i c t o f Columbia, schools, colleges o r u n i v e r s i t i e s operated f o r p r o f i t , and such others as may have been covered by s t a t e laws, a very small m i n o r i t y on which few data ar e a v a i l a b l e . 30 fe a tu re of the Amendments. 40 Does i t include graduate a s sis tan ts or graduate students engaged in research who may not be r e g u la r ly atte n d ­ ing classes? Does i t include the in d iv id u a l who is employed f u l l tim e, or s u b s ta n tia lly f u l l tim e, by the i n s t i t u t i o n b ut, as an in c id e n t to th a t employment, is perm itted by take a course, perhaps a t night school? 41 The Pennsylvania Committee recommended th a t s ta te law be more d e f i n i t i v e . In the absence o f such, the f i n a l would be l e f t to the courts. in te r p r e ta tio n In the in te rim , in d iv id u a l i n t e r p r e t a ­ tion by such "students," i n s t i t u t i o n s , and s ta te employment s e c u rity o ffic e s may leave much to be desired. The 1970 Amendments also permit the states to exclude the service performed in the employ o f a school, c o lle g e or u n iv e rs ity by the spouse of such a student, i f the spouse is advised a t the com­ mencement o f employment th a t the service is provided under a program to provide f in a n c ia l assistance to the student and th a t the employment w i l l not be covered by any program o f unemployment insurance. 42 Once , again, the a p p l i c a b i l i t y o f th is provision is contingent upon a d e f i ­ n itio n o f what c o n s titu te s "en ro lled and r e g u la r ly attending c la ss es ." Ir r e s p e c t iv e , th is provision has been a c o n tro v e rs ia l one. The Pennsylvania Committee allowed th a t th ere are reasons why such service should be covered. " I t must be presumed th a t the spouse is rendering services o f value commensurate w ith the remuneration paid and th at the same c r i t e r i a o f s a tis f a c t o r y performance are applied to such 40 The J o in t Committee o f Pennsylvania S ta te -R e la te d In s t it u t io n s o f Higher Education, op. c i t . , p. 5. 41 I b i d . , p. 6. 42Sec. 3 3 0 6 ( c ) ( 1 0 ) ( B ) ( i i ). 31 services as to services rendered by any other employee.' 43 They acknowledged, however, t h a t o ther i n s t it u t io n s . . . may fe e l th a t employment o f a spouse is very in tim a te ly bound to fin a n c ia l assistance to the student through the con­ d itio n s o f h i r in g , duration o f employment, and conditions o f sep aration , and th a t the employment o f a spouse under these conditions imposes exceptional costs re s u ltin g from a d d itio n a l t r a in in g expenses and tu rn o v e r.44 T heir recommendation was th a t s ta te law provide f o r the exclusion leaving the decision as to whether or not to use i t to each i n d iv id ual i n s t i t u t i o n . F i n a l l y , as a permissive exclusion, s ta te law coverage could exclude the services o f in d iv id u a ls under age 22 engaged in a combined academic and work experience p ro g ram .^ With the passage o f the Federal Amendments, each s t a te had to amend i t s program to comply w ith the mandatory p rovisions. Addi­ t i o n a l l y , i t became incumbent upon each s ta te l e g is l a t u r e to consider the permissive exclusions. In s t it u t io n s were advised to work with t h e i r le g is la t o r s to obtain the best possible l e g i s l a t i o n . Toward th is 43 The J o in t Committee o f Pennsylvania S ta te -R e la te d I n s t i t u ­ tions o f Higher Education, op. c i t . , p. 5. 44 I b i d . , p. 6. ^ S e c . 3 3 0 6 ( c ) ( 1 0 ) ( c ) . With the 1974 Amendments to the M ic h i­ gan Employment S e c u rity Act which extends coverage, among o th e rs , to school d i s t r i c t s , th is provision may take on added s ig n ific a n c e w ith regard to various cooperative programs between the teacher tr a in in g i n s t it u t io n s and lo c al school d i s t r i c t s . Michigan S tate U n iv e r s ity , f o r example, has raised the question as to whether o r not t h is exclu ­ sion, incorporated in to the Michigan A c t, w i l l be construed to exclude students in i t s Elementary In te rn Program. In t h e i r f i n a l year o f study, these students, w h ile s t i l l e n ro lle d f o r c r e d i t a t Michigan S tate U n iv e r s ity , are employed by p a r t ic ip a t in g school d i s t r i c t s . In the event t h is program is held to be outside t h is ex clu sio n , local school d i s t r i c t s may be r e lu c t a n t to continue t h e i r p a r t ic ip a t io n in the program. 32 end, in Michigan, the Association o f Independent Colleges and U n iver­ s i t i e s o f Michigan and the Michigan Council o f S tate College P re s i­ dents maintained a close lia is o n w ith th e Michigan L e g is la tu re . The Michigan Employment S e c u rity Act Throughout 1970 and 1971, the p ublic and p riv a te colleges in Michigan, working la r g e ly through t h e i r A ssociations, sought f i r s t to in fluen ce the Federal l e g i s l a t i o n and l a t e r the enabling l e g is l a t i o n under consideration by the S ta te . 46 In the e a r ly months o f 1970, H.B. 14705, then e n t i t l e d the Employment S e c u rity Amendments o f 1969, provided a wide degree o f l a t i t u d e to the s ta te s in terms o f the exten t to which b e n e fits would be payable to seasonal employees. T h e re fo re , w h ile th e re were con­ cerns over the e f f e c t s o f the pending Federal l e g i s l a t i o n , they were a lla y e d by the D ire c to r o f the Michigan Employment S ecu rity Commission, who assured th a t the S ta te would make the f i n a l d eterm in atio n . Of p a r t i c u l a r concern was the s t a f f employed in a u x i l i a r y e n te r p r is e s , such as residence h a lls and student dining rooms. It was pointed out th a t in p r a c t i c a l l y a l l cases, these employees are hired f o r a period t h a t covers only the academic y e a r. I t was argued, ac co rd ing ly, t h a t to not exclude them from b e n e fits during normal recess periods would r e s u l t in increased costs which must be passed on to the students they serve. The observations in referen ce to these e f f o r t s are la r g e ly made from personal involvement and correspondence in the w r i t e r ' s possession. 33 H.R. 14705 as i t f i n a l l y passed in Congress* however, provided no such l a t i t u d e . As has been noted, the only exception provided in the 1970 Amendments applied to those in in s t r u c t i o n a l , research and p rin c ip a l a d m in is tra tiv e c a p a c itie s . As such, the a t te n tio n of the Michigan in s t it u t io n s turned to the permissive exclusions contained in the Federal Amendments. Of p a r t i c u l a r concern, as had been expressed by the Pennsylvania Committee, was the vague referen ce to the exclusion from coverage of a student who is "en ro lle d and r e g u la r ly attending c l a s s e s . " ^ In a meeting between re p res en tative s o f the Michigan Council of State College Presidents and the Michigan Employment S ecu rity Commission s t a f f on November 27, 1970, problem areas i d e n t i f i e d were: I. There are many f u l l - t i m e employees who are e n ro lle d in coursework. There are many f u l l - t i m e students who are employed by the i n s t i t u t i o n . Who is a student and who is an employee fo r purposes o f unemployment insurance coverage? 2. The t r a d i t i o n a l concept o f classroom attendance is inade­ quate f o r id e n t if y in g those who are " r e g u la r ly attending classes" as stated in the l e g i s l a t i o n . The example o f the re s id e n t in te rn who is continuously involved in a " le a r n ­ ing" s it u a t io n was o ffe re d . 3. Many f u l l - t i m e students do not e n ro ll f o r coursework during the summer but are employed f u l l time by the U n iv e rs ity f o r summer only. At the conclusion o f the meeting th e re was t e n t a t i v e agreement th a t the wording should be a lte r e d to exclude se rv ice performed: a. By a student e n ro lle d w ith in the normal academic y e a r who is employed by the i n s t i t u t i o n and who normally works less than 30 hours per week, or; 47 wording. The exclusion i t s e l f was not so much in question as was the 34 b. By a student in any educational program f o r which services re la te d to th a t educational program are rendered. In March of 1971, in response to questions which had been raised at a workshop held a t Michigan S tate U n iv e rs ity on unemployment compensation as i t a f f e c t s Michigan colleges and u n i v e r s i t i e s , the MESC s t a f f , gested a. troubled now w ith the term "normal academic y e a r ," sug­ th a t the language by changed to: By a student e n ro lle d w ith in a term, semester or year and w hile thus e n ro lle d is employed by the i n s t i t u t i o n and normally works less than 30 hours per week. The r e v is io n , which was intended to make c le a r th a t services performed between terms by students would be in covered employment, drew v o c if e r ­ ous protests by the Michigan i n s t i t u t i o n s . The MESC, however, main­ tained i t s p o s itio n and in i t s f i n a l recommendation submitted to the l e g is la t u r e in June, 1971, included, as excluded from coverage, s e r­ vice performed, in the employ o f a school, co lle g e or u n i v e r s it y , i f such service is performed: a. b. By a student who is e n ro lle d and is r e g u la r ly attending classes w ith in a normal academic term, semester or y e a r , and w hile thus e n ro lle d is employed by the i n s t i t u t i o n and normally works less than 30 hours per week, or By a student in any educational program f o r which services re la te d to th a t program are rendered. Thus, e f f o r t s by the Michigan i n s t i t u t i o n s o f higher education to obtain language in the l e g is l a t i o n they considered fa v o ra b le went to the Michigan L e g is la tu re . The Senate Labor Committee reported out Senate B i l l 833 w ith the MESC-recommended language. I t , however, among 74 amendments pro­ posed, included the Council-supported language, which had again been m odified, to w it : 35 By a student admitted or e n ro lle d in an i n s t i t u t i o n and who normally works less than 30 hours per week fo r an i n s t i t u t i o n , however, employment w i l l not be covered between consecutive terms, semesters or q u a rte rs , or during any s in g le term, semester or q u a rter when not e n ro lle d regardless o f the number o f hours normally worked, when the period is followed by enrollm ent in any such i n s t i t u t i o n . 48 In September, 1971, however, the Federal Manpower Adm inistra­ t i o n , which is charged w ith approval of s ta te unemployment compensation laws, indicated to the Michigan Employment S ecu rity Commission i t s opposition to the proposed amendment. They recommended th a t the „ Michigan l e g is l a t i o n p a r a lle l more c lo s e ly the comparable Federal Unemployment Tax Act exclusion. At the same tim e, concern developed w ith in the in s t it u t io n s th a t any reference to the number o f hours a student may normally work and s t i l l be subject to the exclusion would be d i f f i c u l t to adm inister. Accordingly, the Michigan i n s t i t u t i o n s , in a complete reversal to t h e i r e a r l i e r opposition to the Federal language, endorsed i t s use in the Michigan Employment S ecu rity Act Amendments o f 1971. As the Federal language seemingly now had the support o f a l l concerned, i t was incorporated in to H.B. 5528, which was passed by the Michigan L e g is la tu re . The t e x t o f t h i s , and the other permissive exclusions which thus became incorporated in to the Michigan Employment S e c u rity A ct, is as fo llo w s : Sec. 43. Except as otherwise provided . . . the term "employment" sh a ll not include: (1 ) Service performed in the employ o f a school, co lle g e or u n iv e r s it y , i f the service is performed: aft Journal of the Senate, August 13 , 1971, pp. 1583, 1586. 36 ( i ) By a student who is e n ro lle d and re g u la r ly attending classes a t such school, co lle g e or u n iv e r s it y . ( i i ) By a spouse o f such a student, i f given w r itte n n otice a t the s t a r t o f such service t h a t the employment is under a program to provide f in a n c ia l assistance to such student, and th a t such employment w i l l not be covered by any program o f unemployment compensation. (m) Service performed by an in d iv id u a l under the age o f 22, who is e n ro lle d a t a n o n p ro fit or public educational i n s t i t u t i o n . . . as a student in a f u l l - t i m e program taken fo r c r e d i t a t the i n s t i t u t i o n , which combines academic in s tru c tio n w ith work exper­ ience, i f the service is an in te g ra l p art o f the program, and the i n s t i t u t i o n has so c e r t i f i e d to the employer. -y In accordance w ith the mandatory provisions o f the Federal Employment S e c u rity Amendments o f 1970, the Michigan Employment S ecu rity Act was also amended. With th is a c t io n , Michigan i n s t it u t io n s of higher education on January 1, 1972, became subject as covered employers to a l l other provisions of the Act. T h e ir employees a t the same tim e, except as s p e c i f i c a l l y excluded, became e n t i t l e d to the f u l l measure o f b e n e fits accorded to employees o f any other covered employer. 1974 Amendments During 1974, the Michigan L e g is la tu re twice amended the M ic h i­ gan Employment S e c u rity Act. In February, presumably in response to the growing concern over the larg e numbers unemployed in Michigan, the L e g is la tu re passed a b i l l to remove the "w aiting week" requirement. 49 This means th a t unemployed persons who meet the e l i g i b i l i t y r e q u ir e ­ ments can re c e iv e b e n e fits commencing w ith the f i r s t week o f t h e i r unemployment, whereas p reviou sly a one week delay had been imposed. Although i t is d i f f i c u l t to assess the e f f e c t o f t h is a c t io n , i t adds ^9Act No. 11 o f the Public Acts o f 1974, H.B. 4143, February 15, 1974. 37 one e x tra week of b e n e fit payments to those who do not exhaust t h e i r b e n e fit rig h ts during a period of unemployment. To n o n p ro fit i n s t i t u ­ tions o f higher education paying c o n tr ib u tio n s , th e r e fo r e , i t adds to the cost o f coverage through a d d itio n a l charges to t h e i r r a tin g accounts. N o n profit i n s t it u t io n s which have elected to reimburse the Commission and s ta te i n s t it u t io n s which must reimburse the Commission f o r a l l b e n e fits chargeable to them are a ffe c te d even more d i r e c t l y . Of g re a te r s ig n ific a n c e to i n s t it u t io n s o f higher education in Michigan, in May the L e g is la tu re again amended the A c t, th is time with f a r more sweeping p ro visio ns. 50 The Amendments were addressed to three p rin c ip a l aspects o f the A c t, two w ith regard to b e n e fits and one with regard to coverage. B en e fits were changed both in terms o f the maxi­ mum allow able amounts and the formula used to determine the number of dependents upon which a c la im a n t's b e n e fits are based. Whereas the maximum b e n e fit ra te s had ranged from $56.00 to $92.00 per week, based upon average weekly wages and fa m ily c la s s , they now range from $67.00 to $106.00. 51 And whereas the rates were based on a confusing formula which drew a d is t in c t i o n between depen­ dents who are c h ild re n and dependents who are not c h ild r e n , t h is 50 Act No. 104 o f the Public Acts of 1974, Senate B i l l 741, May 16, 1974. ^ T h i s Amendment s i g n i f i c a n t l y increases the cost to i n s t i t u ­ tion s o f higher education. P re v io u s ly , a claim ant w ith no dependents, on the basis o f average weekly earnings o f $100.01 or more, could receive a maximum b e n e fit o f $56.00. The e f f e c t o f t h is change is to allo w such a c la im a n t, whose average weekly wage is more than $100.00, to re c e iv e a b e n e fit o f 55 percent of his average weekly wage up to $67.00. The same adjustment was made "across the board" f o r each dependency c la s s , a llo w ­ ing a claim ant w ith fo u r or more dependents and an average weekly wage of $190.92 or more to draw the maximum weekly b e n e fit o f $106.00. 38 d is t in c t io n was e lim in a te d . 52 Again, i t is d i f f i c u l t to assess the e ffe c ts o f these changes o ther than to note th a t they w i l l r e s u lt in higher costs to employers, including in s t it u t io n s o f higher education. Most s i g n i f i c a n t to in s t it u t io n s o f higher education is th a t the Amendments extended coverage to community c o lle g e s , previously exempted from compulsory coverage, and to school d i s t r i c t s . 53 Whereas the b e n e fit provisions o f the Amendments were given immediate e f f e c t , th is extension o f coverage w i l l not take e f f e c t u n t i l January 1, J975. 54 Community colleges and school d i s t r i c t s were brought under the Act on the same basis as other employers w ith in the State w ith several notable exceptions. F i r s t , the Amendments provide th a t a community co lle g e or school d i s t r i c t which is or becomes subject to the Act a f t e r December 31, 1974, shall make reimbursement payments in lie u o f co n trib u tio n s as a reimbursing employer f o r not less than two calendar years beginning January 1, 1975, unless i t e le c ts to pay co n trib u tio n s as a co n trib u tin g employer. 55 Thus, community colleges and school d i s t r i c t s are given an option s im ila r to n o n p ro fit i n s t i t u t i o n s . I t is in t e r e s tin g to note, however, t h a t the option is p re c is e ly the opposite as provided f o r a 52 The Act had, f o r example, provided a b e n e fit d i f f e r e n t i a l to a claim ant w ith two dependents, one o f whom was a c h i ld , as opposed to a claim ant w ith two dependents, n e ith e r o f whom was a c h ild . CO Sec. 4 2 { 8 ). Coverage under th is section was also extended to p o l i t i c a l subdivisions o f the S ta te . 54 Given immediate e f f e c t , the Amendments, except as otherwise provided, became e f f e c t i v e June 9 , 1974, in accordance w ith Section 6 6 ( 1 ) . 55Sec. 1 3 ( i ) . 39 n o n p r o fit o rg a n iz a tio n which is a c o n tr ib u tin g employer unless i t eg e le c ts to make reimbursement payments in l i e u o f c o n tr ib u t io n s . A c c o rd in g ly , community c o lle g e s and school d i s t r i c t s are now faced w ith e s s e n t i a l l y the same c o n s id e ra tio n in review ing t h e i r o p e ra tio n s as were n o n p r o fit i n s t i t u t i o n s o f h ig h e r education as a r e s u l t o f the 1971 Amendments.^ Secondly, th e Amendments provide t h a t in th e case o f an i n d i ­ vid u a l employed by a school d i s t r i c t o r community c o lle g e , a week in which the in d iv id u a l worked less than 12 hours s h a ll not be used in support o f a claim f o r b e n e f i t s . 58 This p ro v is io n imposes a r e s t r i c ­ t io n not in e f f e c t w ith regard to any o th e r covered employment. T h i r d , and most s i g n i f i c a n t l y , the Amendments introduced a new concept, a "denial p e r io d ," w ith regard to b e n e f it s based on s e rv ic e f o r a school d i s t r i c t o r community c o lle g e . A "denial p eriod" is d e fin e d as a vacatio n period or h o lid a y recess o ccurring during the academic y e a r , a p erio d between two successive academic years o r terms o r a p erio d o f paid s a b b a tic a l lea ve provided f o r in an i n d i v i d u a l 's 56Sec. 1 3 ( a ) . 57 These c o n s id e ra tio n s are presented in the fo llo w in g c h a p te r. Whereas o th e r reim bursing employers are re q u ire d to make payment to the Commission q u a r t e r l y , community c o lle g e s and school d i s t r i c t s w i l l be re q u ire d to reimburse th e Commission a n n u a lly . This w i l l pose an a d d i­ t i o n a l f a c t o r f o r c o n s id e r a tio n , t h a t being "cash f l o w " ; — Sec. 1 3 ( c ) ( 1 ) and Sec. 1 3 ( k ) ( 2 ) . 58 This f e a t u r e is unique to coverage as i t a p p lie s to school d i s t r i c t s and community c o lle g e s . The o n ly c r i t e r i o n used w ith regard to o th e r covered employment is t h a t th e in d iv id u a l must have earned wages in excess o f $ 2 5 .0 0 during a c a le n d a r week f o r t h a t week to be counted— Sec. 5 0 ( b ) ( 5 ) and Sec. 5 0 ( b ) . 40 c o n tra c t. 59 The Amendments provide t h a t b e n e fits s h a ll not be paid to an in d iv id u a l f o r any week o f unemployment w ith in a denial period i f the in d iv id u a l normally would not perform services during th a t period. 60 T h e re fo re , w hile coverage has been extended to employees o f school d i s t r i c t s and community c o lle g e s , the Michigan L e g is la tu re has done so w ith apparent re co g n itio n o f the seasonal and p a rt-tim e nature inh eren t fil to t h e i r employment. B e n e fit Payment S tru c tu re With the extension o f coverage under the Michigan Employment S e c u rity Act to community c o lle g e s , employees o f a l l i n s t it u t io n s o f higher education, whose services are not s p e c i f i c a l l y exempt, w i l l accumulate b e n e fit rig h ts in the same manner as employees of other employers subject to the A ct. The accumulation o f b e n e f it r ig h ts by an employee, however, o f i t s e l f is not a l i a b i l i t y to the employer nor does i t become one so long as employment is not terminated and the CO (form er) employee does not become unemployed. Once unemployed, 59Sec. 2 7 ( i ) ( 4 ) . 60Sec. 2 7 ( i ) ( 2 ) . fil P a rt-tim e in s tr u c to r s re ta in e d to teach a s in g le course, crossing guards and lunchroom workers, f o r example, may not s a t i s f y the 12 hour requirement and, as such, would not be e l i g i b l e f o r bene­ f i t s based upon such s e rv ic e during any period o f unemployment. O thers, whose employment may be scheduled on a school year c o n tr a c t, would sim­ i l a r l y be i n e l i g i b l e f o r b e n e fits during periods when school is not in session. CO Michigan Employment S e c u rity A c t, op. c i t , , Sec. 48. "An in d iv id u a l sh a ll be deemed unemployed w ith respect to any week during which he performs no services and w ith respect to which no remunera­ tio n is payable to him, or w ith respect to any week o f less than f u l l time work i f the remuneration payable to him is less than his weekly b e n e f it r a t e . . . ’ ." 41 s p e c ific provisions o f the Act govern the computation o f b e n e f it s , e l i g i b i l i t y and q u a l i f i c a t i o n t h e r e fo r and, in essence, the actual l i a b i l i t y which may accrue. Some understanding o f the b e n e f it pay­ ment s tru c tu re i s , t h e r e f o r e , e s s e n tia l to an understanding o f t h is study. With th is in mind, a general o u t lin e o f the b e n e fit provisions fo llo w s . To be e n t i t l e d to b e n e f it s , an in d iv id u a l must only have earned wages in covered employment in excess o f $25.00 during each of a t le a s t 14 o f the 52 consecutive calendar weeks preceding the week w ith respect to which the in d iv id u a l f i l e s an a p p lic a tio n f o r b e n e fits . Such weeks are c a lle d c r e d i t weeks and may be earned w ith a s in g le employer or in any combination w ith two or more employers. To be e l i g i b l e f o r b e n e f it s , an unemployed in d iv id u a l must: (1) f i l e a claim f o r b e n e fit s ; (2 ) r e g i s t e r f o r work w ith a branch o f f i c e o f the Commission; (3 ) be ab le and a v a ila b le to perform f u l l ­ time work on any s h i f t which he or she is q u a li f i e d to perform by past experience or t r a i n i n g , and o f a c h a rac ter g e n e ra lly s i m il a r to work fo r which he or she has earned wages; and (4) must be seeking work. B en e fits payable to e l i g i b l e in d iv id u a ls range from $16.00 to $106.00 per week, as prescribed by the Act on the basis o f the average weekly wage o f a c la im a n t's c r e d i t weeks and the number o f dependents a claim an t may d e c la re . 64 B e n e fits are computed a t the r a t e o f th ree weeks o f b e n e fits f o r each fo u r c r e d i t weeks earned to a maximum o f 26 b e n e fit weeks. 65 63I b i d . , Sec. 46. 65I b i d . , 64l b i d . , Sec. 2 7 ( b ) , Sec. 2 7 ( b ) ( 2 ) . Sec. 2 7 ( d ) ( 1 ) . 63 42 Under the extended b e n e f it program now in e f f e c t , a claim ant who has exhausted his o r her b e n e f it rig h ts may re c e iv e extended bene­ f i t s f o r h a l f the number of weeks of his or her re g u la r e n title m e n t up to a maximum o f 13 weeks. The o v e ra ll l i m i t on re g u la r plus extended b e n e fits is 39 weeks. B en e fits may be denied, however, under c e r t a in co n d itio n s. The Act provides th a t an in d iv id u a l shall be d is q u a l i f ie d f o r b e n e fits in a l l cases in which he or she: (1) has l e f t work v o l u n t a r il y w ith ­ out good cause a t t r i b u t a b l e to the employer; (2 ) has been discharged fo r misconduct connected w ith his or her work, or f o r in to x ic a tio n w hile a t work; (3 ) has f a i l e d w ithout good cause to apply f o r , i n t e r ­ view f o r , or accept a v a ila b le s u ita b le work; (4 ) has lo s t his or her job by reason of being absent from work as a r e s u l t o f a v i o l a t i o n of law f o r which he or she has been co n victe d , and sentenced to j a i l or prison; (5 ) has been discharged f o r p a r t i c ip a t i o n in a s t r i k e ’ or o ther concerted a c tio n co n trary to th e provisions o f an a p p lic a b le c o l l e c t i v e bargaining agreement, or p a r t i c ip a t i o n in a w ild c a t s t r i k e not au th or­ ized by the i n d i v i d u a l 's recognized bargaining u n i t ; o r (6 ) has been ^ I b i d . , Sec. 64. The 1970 Amendments to the Federal Unem­ ployment Tax Act provide f o r payment o f extended b e n e fits when the n atio n al r a t e o f insured unemployment equals o r exceeds 4 . 5 percent f o r th re e consecutive calendar months and remains in operation u n t i l the r a t e drops below 4 . 5 percent f o r th re e consecutive calendar months. The Michigan extended b e n e fit program goes in t o e f f e c t when M ichigan's insured unemployment r a t e averages 4 percent f o r any 13 consecutive week period and exceeds 120 percent o f the average r a te f o r the same 13 week period in each o f the two preceding years and remains in e f f e c t u n t i l the ra te s drop below these le v e ls f o r a s i m il a r period. 43 discharged f o r an a c t o f a s s a u lt , t h e f t or sabotage connected w ith C7 his or her work. An in d iv id u a l d is q u a l i f ie d in accordance w ith any o f the f o r e ­ going, however, may r e q u a li f y f o r b e n e fits a f t e r a period of six weeks except th a t w ith regard to a d i s q u a l i f i c a t i o n f o r an a c t o f a s s a u lt , t h e f t o r sabotage, the period is extended to 12 weeks. The computation o f b e n e f it s , e n title m e n t and e l i g i b i l i t y t h e r e fo r are made by the Commission. When an in d iv id u a l f i l e s a claim f o r b e n e f it s , the employer or employers upon whose employment the claim is based are n o t i f ie d and required to fu rn is h the Commission w ith such wage and separation inform ation as i t deems necessary to determine the c la im a n t's b e n e f it r i g h t s . 69 I f an employer f a i l s to respond w ith the required inform ation w ith in seven days a f t e r the m a ilin g date o f the re q u e st, the Commission w i l l make a determ in ation upon the a v a ila b le in fo rm a tio n , i . e . , t h a t supplied by the c la im a n t. I t is not only r e q u ire d , t h e r e f o r e , but in the i n t e r e s t o f the employer to bring to the a t t e n t io n o f the Commission any info rm ation t h a t may give r i s e to a determ ination o f i n e l i g i b i l i t y or a d i s q u a l i f i c a t i o n . I f e i t h e r the claim ant or the employer does not agree w ith the Commission's d e te rm in a tio n , a rede term in a tio n may be requested. Subse­ quent appeals may be made to a r e f e r e e , an appeal board, a c i r c u i t c o u r t, the Court o f Appeals and the Supreme Court, in t h a t o r d e r . 70 6 7 I b i d . , Sec. 2 9 ( 1 ) . 68I b i d . , Sec. 2 9 ( 3 ) . 69I b i d . , Sec. 3 2 ( b ). 70I b i d . , Sec. 3 2 ( a ) , Sec. 33, Sec. 34, Sec. 38. 44 Thus, w h ile b e n e f it payments chargeable to an i n s t i t u t i o n of higher education are prescribed and regulated in accordance w ith a body o f law, the actions g iv in g r i s e to these payments o r ig in a t e w ith the in s titu tio n . Furthermore, w h ile the Commission is charged w ith admin­ i s t e r i n g the program in accordance w ith the A c t, i t is dependent and r e l i e s upon in fo rm ation supplied by the p a rtie s to a c la im , i . e . , the former employee and the employer upon whose employment the claim is based. Accordingly, from the i n i t i a l response to the Commission, through the appeals process an i n s t i t u t i o n o f higher education, as any other employer, is affo rd ed an element o f control over the charges to i t s account. addressed. I t is th is c o n t r o l, in p a r t , to which t h is study is CHAPTER I I I ACCOUNTABILITY IN THE ADMINISTRATION OF UNEMPLOYMENT COMPENSATION In tro d u c tio n Unemployment compensation is a new l i a b i l i t y i n s t it u t io n s o f higher education. to Michigan At the o u ts e t, a d m in is tra to rs could not draw on past experience in t h e i r attempts to re g u la te or control th e costs in h eren t to th is program. Advice from those w r it in g in a s so c ia tio n n e w s le tte rs , b u l l e t i n s and trade j o u r n a ls , t h e r e fo r e , took on added s ig n ific a n c e . A review o f t h is l i t e r a t u r e re ve als a f a i r l y uniform approach s tre s s in g the need to e s ta b lis h strong, c e n tr a liz e d co n tro l procedures to cope w ith t h is new cost burden. tuated w ithout a c c o u n t a b ilit y . C o n tro l, however, can not be e f f e c ­ Yet th e re was scant mention to th is aspect o f the control process. This c h a p te r, t h e r e f o r e , is stru c tu red toward an understanding o f th e nature o f unemployment compensation and the causes g iv in g r is e to i t , a development o f the concept o f a c c o u n t a b ilit y , and the a p p li ­ c a tio n o f c o n tro ls and a c c o u n t a b ilit y to unemployment compensation. The Insurance Character o f Unemployment Insurance This study is concerned w ith the program which is commonly re fe r r e d to as unemployment insurance. In M ichigan, i t is adm inistered by a Bureau o f Unemployment Insurance under the d ir e c t io n of the 45 46 Michigan Employment S e c u r ity Commission. The Federal Unemployment Tax A c t, however, does not contain the term "unemployment in s u ran ce ." Nor is the term contained in the Michigan Employment S e c u rity A c t, w ith one excep tio n. The term appears in re fe re n c e to a u t h o r it y granted to the Michigan Employment S e c u rity Commission to " e n te r in to agreements w ith any agency o f another s t a t e or o f the United S tates charged w ith the a d m in is tra tio n o f any unemployment insurance or p u b lic employment s e rv ic e law."^ N e ith e r Act provides f o r the purchase o f insurance, although the Michigan Employment S e c u rity Act does make one re fe re n c e to "insured work" 2 and tw ic e uses the term "insured employment." 3 Nor does e i t h e r a c t r e f e r to employer payments as "premiums." The Federal Act imposes an excise tax on every employer, as defined t h e r e i n , w ith resp ect to having in d iv id u a ls in h is employ,^ I t allow s th a t th e taxpayer may take c e r t a in c r e d i t s ag a in s t the tax based upon c o n trib u tio n s paid by him in to an unemployment compensation fund m aintained under th e unemployment compensation law o f a s t a t e . The Michigan A c t, a c c o rd in g ly , s t i p u l a t e s t h a t each su b je c t employer s h a ll pay c o n trib u tio n s f o r th e unemployment compensation fund. The Michigan Act f u r t h e r provides t h a t an em ployer's c o n t r ib u tio n shal 1 not be ^Michigan Employment S e c u rity A c t, Act No. 1 o f th e P u b lic Acts o f th e E xtra Session o f 1936, as amended ( 1 9 7 4 ) , Sec. 1 1 ( f ) . 2 I b i d . , Sec. 2 8 ( 1 ) { c ) . 3 I b i d . , Sec. 6 4 ( 5 ) ( a ) , Sec. 6 4 ( 5 ) { b ) . ^ In te r n a l Revenue Code o f 1954, Sec. 3301 (1 9 7 0 ). 51 b id . , Sec. 3302 (1 9 7 0 ). 47 deducted d i r e c t l y or i n d i r e c t l y , in whole or in p a r t , from wages of c in d iv id u a ls in his employ. With regard to payments made to q u a li f i e d and e l i g i b l e i n d i ­ v id uals in v o l u n t a r i ly unemployed, ag a in , n e ith e r act r e fe r s to such as insurance proceeds. Such payments are re fe rre d to as unemployment compensation or b e n e f it s , these two terms used w ith apparent synonymity. To the r e c ip ie n t o f unemployment payments, i t is perhaps of little import as to whether such payments are designated as compensa­ t i o n , b e n e f it s , or insurance proceeds. In the sense th a t these pay­ ments, or the assurance o f such, provide p ro te c tio n from the hazards o f unemployment,7 covered employees are insured. The wage earner is g p ro tecte d , as M a l i s o f f points o u t, from loss o f income on account o f l a y o f f or te rm in a tio n and loss o f income because he leaves his p o s itio n f o r good cause, both g e n e ra lly considered to be insurab le r is k s . M a lis o f f also points out th a t the wage earner is protected from loss o f income a r is in g out o f his v o l u n t a r il y leaving his jo b w ith ou t good cause or as a r e s u l t o f discharge fo r misconduct, ris k s which would not g e n e ra lly be in s u rab le i f the program were u nderw ritten by p r iv a te c a rrie rs . Although b e n e fit e n title m e n t in accordance w ith the pro­ v is io n s o f the Michigan Employment S e c u rity Act may vary w ith these r i s k s , the wage earner is nevertheless protected as an insured in each case. ^Michigan Employment S e c u rity A c t, op. c i t . , Sec. 13. 7 I b i d . , Preamble. o Harry M a l i s o f f , The Insurance Character o f Unemployment Insurance (Kalamazoo, Michigan: W. E. Upjohn I n s t i t u t e f o r Employment Research, 19 61 ), pp. 11-12. 48 Haber and Murray review th e insurance c h a r a c t e r o f unemployment insurance 9 as does M a l i s o f f 10 and conclude t h a t the r i s k covered does meet the t e s t s o f i n s u r a b i l i t y . are: The t e s t s to which they r e f e r ( 1 ) t h e r e must be a pure, not a s p e c u l a t i v e , r i s k ; omic loss must be involved ; v e rifia b le ; ( 2 ) an econ­ ( 3 ) th e occurrence o f the r i s k must be (4 ) th e r i s k must be s u b je ct to the law o f l a r g e numbers; and ( 5 ) t h a t the contingency happens to only a p o r t io n o f the insured a t any one tim e. I t is s i g n i f i c a n t to n o t e , however, t h a t the t e s t s have been ap p lie d to th e insurance c h a r a c t e r o f unemployment compensa­ t i o n from the standpoint o f the "insured" worker r a t h e r than the employer who must pay th e costs t h e r e o f . The employer can not pur­ chase insurance to provide t h i s s t a t u t o r y coverage f o r th e employee or to p r o t e c t his own i n t e r e s t s ; instead he is taxed and re q u ire d to make c o n t r i b u t i o n s or reimbursements to the S ta t e Unemployment Compensation Fund from which b e n e f i t s ar e paid. S t a t e i n s t i t u t i o n s o f hig her edu­ c a t i o n in Michigan reimburse the S t a t e Unemployment Compensation Fund for a ll b e n e f i t s paid a t t r i b u t a b l e to t h e i r s t a t u s as covered employers and are not even a f f o rd e d " s t o p - 1 o s s " ^ protection. "Whatever the g Haber and Murray, Unemployment Insurance in the American Economy, pp. 36 -4 3 . ^ M a l i s o f f , op. c i t . , p. 43. p r o v is io n in an insurance p o l i c y designed t o c u t o f f t h e i r i n s u r e r ' s loss a t a given p o i n t . Source: Robert W. O s ie r and John S. B r i c k l e y , Glossary o f Insurance Terms (Santa Monica, C a l i f o r n i a : Insurors Press, 1 9 7 2 ) , p. 147. 49 c h a r a c t e r i z a t i o n o f t h i s system," M a l i s o f f comments, " i t is not insurance, but r a t h e r s e l f ins uran ce ." 12 P r i v a t e i n s t i t u t i o n s o f hig her education in Michigan are affo rd ed l i m i t e d p r o t e c t i o n o f an insurance c h a r a c t e r which i s des­ cribed in the f o l l o w i n g s e c t i o n . Thus, th e unemployment compensation program may more p ro p e rly be considered as a so c ia l w e l f a r e program which to the o u t - o f - w o r k wage earn er may be viewed as one providing income loss p r o t e c t i o n in the nature o f insurance, but which to the employer is lacking in the p r o t e c t i o n of his assets as might normally be affo rd ed through the purchase o f insurance. Methods o f Funding The Employment S e c u r i t y Amendments o f 1970, as has been noted, make a d i s t i n c t i o n between p r i v a t e n o n p r o f i t and p u b li c i n s t i ­ t u t i o n s o f higher education w it h regard to th e method employed to fund b e n e f i t payments. But whereas the method o f funding is pres cr ibed f o r p u b lic i n s t i t u t i o n s , p r i v a t e i n s t i t u t i o n s ar e given an o p t io n . Essen­ tia lly , th e option is t h a t th ey may e l e c t to be accorded th e same special tre atm ent as p u b lic i n s t i t u t i o n s . Should a p r i v a t e i n s t i t u ­ t i o n decide not to e x e r c is e t h i s o p t i o n , i t then would be t r e a t e d the same as any o t h e r employer in the s t a t e . In t h i s se ctio n th e d i f f e r e n c e s in the two methods and the c o n sid e ra tio n s which must be studied by a p r i v a t e i n s t i t u t i o n are presented. 12 M a l i s o f f , op. c i t . , p. 16. The s p e c i f i c r e f e r e n c e here is to reimbursement to s t a t e funds by th e Federal government f o r b e n e f i t s paid to terminated Federal personnel. 50 P r i v a t e Nonprofit I n s t i t u t i o n s P r i v a t e i n s t i t u t i o n s of higher education f o r whom coverage is required under the provisions r e l a t i n g to n o n p r o f i t organiz atio ns may choose to finance t h e i r unemployment compensation program by making q u a r t e r l y co n trib u tio n s to the Michigan Employment S e c u rity Commission f o r the Unemployment Compensation Fund o f the Sta te . Under t h i s method o f f i n a n c in g , t h e i r costs are f i x e d a t a tax r a t e o f 2.7 percent on the f i r s t $4,20 0.00 each covered i n d iv id u a l earns in t h e i r employ. The r a t e remains constant f o r the f i r s t th re e calendar years o f l i a ­ b i l i t y , a f t e r which i t may be less than 2 .7 percent, depending upon the s t a b i l i t y o f each i n s t i t u t i o n ' s employment and p ay ro ll and the amount o f b e n e f it s paid to former employees. A f t e r the fo u r th y e a r , the 2.7 percent l i m i t a t i o n is removed and, again based upon each i n s t i t u t i o n ' s own experience, may in the f i f t h year be as high as 6.1 percent and in the s i x t h and subsequent years as high as 6 . 6 percent o f covered p a y r o l l . With f av o rab le experienc e, an i n s t i t u t i o n ' s r a t e may, on the o th e r hand, be reduced to as low as .1 percent of covered p a y r o l l . Under the c o n t r i b u t io n method o f f i n a n c i n g , a p r i v a t e i n s t i t u t i o n i s , t o a degree, afforded insurance p ro tectio n in t h a t the costs may be held w it h i n known con­ f i n e s in r e l a t i o n to covered p a y ro ll d o l l a r s . For budgetary purposes, the advantages o f t h i s method are r e a d i l y apparent. Inasmuch as the tax r a te s ar e es tablis hed one c a l ­ endar year in advance, the costs f o r a l l or a p a r t o f the next a f f e c t e d f i s c a l year can be estimated w it h reasonable accuracy. A d d i t i o n a l l y , 51 w ith in the minimum and maximum tax r a t e s t r u c t u r e , f u t u r e costs can be projected w it h in known confines. In l i e u o f the c o n t r i b u t io n method o f f i n a n c in g , a n o n p r o fit i n s t i t u t i o n o f higher education may e l e c t to reimburse the Commission f o r a l l b e n e f i t s charged to i t s account. The e l e c t i o n , however, must be exercised w i t h i n 30 days fo llo w in g a determination t h a t i t is sub­ j e c t to the Act. Those n o n p r o f i t i n s t i t u t i o n s o f higher education in existence on January 1, 1972, were allowed 30 days from t h a t date to exercise t h i s option. 13 I n s t i t u t i o n s t h a t chose not t o , t h e r e f o r e , a u t o m a t ic a lly became c o n t rib u t in g employers f o r the f i r s t calendar ye ar of coverage and remain so unless p r i o r to 30 days before the beginning o f any subsequent calendar year they e l e c t to become reim­ bursing employers. In e i t h e r case, the e l e c t i o n must be f o r a period o f not less than two calendar years. In considering the option to be "taxed" as a reimbursing employer, a d m in is t ra t o r s o f p r i v a t e n o n p r o f i t i n s t i t u t i o n s o f higher education were faced with a d i f f i c u l t ta s k. They had to analyze past experience and present conditions in order to determine whether or not i t would be advantageous in r e l a t i o n to the c o n t r i b u t i o n method of fina nc in g f o r a t l e a s t the i n i t i a l two year period commencing January 1, 1972, and ending December 3 1 , 1973. 13 Although the Commission w i l l not re le a s e f i g u r e s on the number o f n o n p r o f i t i n s t i t u t i o n s o f higher education exercisin g the option to become reimbursing employers, o f the approximately 2,700 non­ p r o f i t o rg an iz a tio n s which became subject to the Act in 1972, 715 or approximately 26 percent chose to do so. Source: Michigan Employment S e c u rity Commission, Annual Report f o r Fiscal Year 1973, p. 93. 52 In an address to the College and U n i v e r s i t y Personnel Associa­ t i o n , Harold K e l l e r pointed out t h a t the choice o f the method o f pay­ ment is not one t h a t can be decided on the basis o f g e n e r a l iz a t io n s and must be based on pro je ction s involving a number o f i n t a n g i b l e fa c to r s and "guestimates. A thorough and d e t a i l e d analysis of personnel records and p rac tice s reduced to cost estimates f o r unem­ ployment b e n e f it s which may r e s u l t therefrom w it h in the framework of the S t a t e ' s program is e s s e n t i a l . K e ll e r posed f i v e questions to be answered w it h i n t h is context by each i n s t i t u t i o n considering the e l e c ­ t i o n to become a reimbursing employer: (1) What is the r a t e of employment tu rn o v e r, including temporary and p a r t - t i m e personnel? (2) Are th ere seasonal l a y o f f s in the summer or between terms? ( 3 ) What proportion o f the i n s t i t u t i o n ' s p ay ro ll age under the provisions o f the S tate Act? ment standards and employee rules? i s excluded from cover­ ( 4 ) How t i g h t are employ­ and (5) Are th ere sound management p rac tice s and co n tro ls so t h a t the reasons f o r separations can be f a c t u a l l y communicated and documented by the o f f i c e charged with responding to unemployment compensation claims f i l e d by former employees? 15 Each o f these questions had to be answered in terms o f the i n s t i t u t i o n ' s own operations and coupled w ith a thorough understanding o f the a p p li c a b le provisions o f the S t a te Act. 14 For example, in Michigan, Harold K e l l e r , "Unemployment Insurance— A New Cost Burden f o r Colleges and U n i v e r s i t i e s , " Journal o f the College and U n i v e r s i t y Personnel A s s o c i a t i o n , March, 1971, pp. 25-32. 1 5 I b i d . , p. 26. 53 an i n d iv id u a l receives c r e d i t toward unemployment b e n e fits f o r each week in which he or she earns more than $25.00 in covered employment. In considering a p a r t - t i m e employee's p o t e n t i a l e l i g i b i l i t y to draw b e n e f i t s , the frequency, duration and scheduling f o r employment are not considerations except as a functio n o f p o t e n ti a l weekly earnings. Thus, i t is immaterial in considering the p o t e n t i a l e l i g i b i l i t y f o r b e n e fits with regard to an in d ividu al stagehand who is employed f o r a single performance at an hourly r a t e o f $4.17 t h a t his employment is f o r only six hours in any given week. He has earned a c r e d i t week which may be used in a determination o f e l i g i b i l i t y to re ce ive bene­ f i t s during a subsequent period o f unemployment.^ The Michigan Act also provides t h a t excluded from covered employment is se rv ice performed in the employ o f a school, colle ge or u n i v e r s i t y , i f the service is performed by a student who is en ro lle d and r e g u l a r l y attending classes a t such school, co lle g e or u n i v e r s i t y . 17 "Student," however, i s not defined in the Act, leaving the i n t e r p r e t a ­ t i o n to be decided in l i g h t o f each i n d iv id u a l c la im an t's circumstances, an i n t e r p r e t a t i o n which may u l t i m a t e l y have to be decided in the courts. For any i n s t i t u t i o n employing such students, the i n t e r p r e t a t i o n may have a pronounced e f f e c t on the amount o f p o t e n t i a l b e n e fits charged against i t s operations and must, t h e r e f o r e , be a consideration in any 1 fi I t should be noted, however, t h a t the amount o f weekly bene­ f i t s received is c a l c u la t e d on the basis o f average weekly wages. To the e x t e n t t h a t the number o f hours worked may y i e l d a higher weekly wage and a g r e a t e r weekly b e n e f i t , i t is a m a te ria l considera tion. ^ M ic h ig a n Employment S e c u rity A c t, op. c i t . , Sec. 4 3 ( 1 ) . 54 decision made with regard to the method o f financing an i n s t i t u t i o n ' s program. The e l e c t i o n to become a reimbursing employer, as noted pre­ v i o u s ly , must be f o r a period o f not less than two year s. Thus, those n on p ro fit i n s t i t u t i o n s which may have ele cted to become reimbursing employers on the e f f e c t i v e date o f coverage under the 1971 Amendments to the Michigan Employment S e c u rity A c t, i . e . , January 1, 1972, were given the option o f terminating the e l e c t i o n by f i l i n g a n o tice to t h a t e f f e c t not l a t e r than 30 days p r i o r to January 1, 1974. 18 Thus, i t is assumed t h a t such i n s t i t u t i o n s again reviewed t h e i r programs, t h i s time based upon t h e i r actual experience during the f i r s t two years o f coverage, toward an estimation o f t h e i r l i a b i l i t y f o r the cu rr ent year and a decision as to whether or not i t would be to t h e i r advantage to remain a reimbursing employer another ye ar. 18 Sec. 1 3 ( b ) ( 1 ) of the Michigan Employment S e c u rity Act pro­ vides t h a t “A n o n p r o fit o rg an iz a tio n which makes an e l e c t i o n ( t o make reimbursement payments in l i e u o f co n trib u tio n s as a reimbursing employer) shall continue to be l i a b l e f o r reimbursement payments in l i e u o f c o n t rib u t io n s u n t i l i t f i l e s w it h the Commission a w r i t t e n n o tic e term ina ting i t s status as a reimbursing employer. A n o tice o f term ina tion may not be f i l e d l a t e r than t h i r t y days before the beginning o f the calendar ye a r when the term ina tion is to be e f f e c ­ tiv e ." Sec. 1 3 ( b ) ( 2 ) provides t h a t "A n o n p r o f it o rg a n iza tio n which pays c o n trib u tio n s under t h i s Act f o r a period subsequent to January 1, 1972, may e l e c t to become a reimbursing employer by f i l i n g a w r i t t e n n o t ic e o f e l e c t i o n with the Commission not l a t e r than t h i r t y days before the beginning o f a calendar ye ar f o r which the e l e c t i o n is effective. An e l e c t i o n may not be terminated by the o rg a n iz a tio n f o r the same year the e l e c t i o n is made or f o r the f o ll o w i n g y e a r . " Thus, a n o n p r o f it i n s t i t u t i o n may e l e c t to become a reimbursing employer f o r a period of not less than two y e a r s , terminate the e l e c t i o n f o r a period o f not less than one year and again e l e c t t o become a reimburs­ ing employer f o r a period o f not less than two years as o fte n as i t chooses. The process of review in terms o f the costs to a n o n p r o fit i n s t i t u t i o n o f higher education as a c o n t r i b u t in g employer or as a reimbursing employer i s , t h e r e f o r e , an ongoing one. 55 P r i v a t e n o n p r o f it org aniz atio ns which chose not to exercise the e l e c t i o n to become reimbursing employers f o r the i n i t i a l two year period were faced w ith the same considerations toward the end o f 1972 in making a determination as to whether or not they should then e l e c t to become reimbursing employers. Regardless o f t h e i r choice o f the method of f i n a n c in g , p r i v a t e n o n p r o fit i n s t i t u t i o n s are faced with excessive costs i f they do not s t r u c t u r e t h e i r programs to minimize the incidence and duration of b e n e f i t claims a t t r i b u t a b l e to t h e i r employment. Should they choose the reimbursing method, they w i l l be charged d i r e c t l y f o r every d o l l a r in b e n e f it s paid under the s t a t e program and one h a l f o f a l l b e n e f it s paid under the Federal extended b e n e fits program. Should they choose the c o n t r i b u t io n method, they w i l l re mit to the s t a t e c o n trib u tio n s based upon t h e i r covered pay ro ll a t a predetermined r a t e . But as noted p r e v io u s ly , t h i s r a t e is adjusted annually a f t e r the t h i r d year on the basis o f the amount of b e n e f it s paid to former employees and may d e v ia te s i g n i f i c a n t l y from the standard r a t e o f 2.7 percent or $113.40 on the f i r s t $4 ,2 0 0 .0 0 each covered i n d iv id u a l earns in t h e i r employ. On the basis o f unfavorable experience, c u r r e n t l y the r a t e may be raised to 6 . 6 percent or $277.20 f o r each person a t the maximum. With fav orab le experience, on the othe r hand, the r a t e may be reduced to as l i t t l e as .1 percent or $4.20 per person. As r e a d i l y can be seen, f o r an i n s t i t u t i o n w it h as few as 100 covered employees, each earning a t l e a s t $ 4 , 2 0 0 . 0 0 , the d i f f e r e n c e is t h a t between $420.00 and $ 2 7 , 7 2 0 .0 0 , or $2 7,300.0 0 per ye ar. 56 S tate I n s t i t u t i o n s of Higher Education Under the provisions o f the Michigan Employment Se cu rity Act, s t a t e i n s t i t u t i o n s o f higher education are reimbursing employers and may not e l e c t to pay c o n t r i b u t io n s . 19 The same is tru e f o r an i n s t i ­ t u t i o n of higher education operated by a p o l i t i c a l e l e c t s to be subject to the Act. ?o subdivision which Thus, a determination o f a l t e r n a ­ t i v e costs under the two methods of financing by i n s t i t u t i o n s of higher education operated by the s t a t e or i t s p o l i t i c a l su bdivis ions, w hile perhaps o f i n t e r e s t , serves no end w it h i n the present s t r u c t u r e o f the Act. A review o f t h e i r o pe ra ti o ns , taking i n t o consideration many o f the same f a c t o r s , however, w i l l eration. be es se n ti a l f o r budgetary consid­ Such would undoubtedly also point to the strengths and weak­ nesses in the i n s t i t u t i o n ' s employment pra ctices upon which approp­ r i a t e acti on may be taken. The Michigan Employment S e cu rity Act, Sec. 1 3 ( g ) ( 1 ) , s t i p u l a t e s t h a t "In l i e u of the c o n t rib u t io n s required o f employers . . . a s t a t e i n s t i t u t i o n o f higher education . . . sh a ll pay i n to the fund an amount eq u iv a le n t to the amount o f b e n e fits paid and charged to t h e i r r e s p e c tiv e accounts as well as t h a t portion o f extended b e n e f i t s which are based on employment by them and not reim­ bursable by the Federal government." 20 The Michigan Employment S e c u rit y A c t, Sec. 2 5 ( 2 ) , provides t h a t a p o l i t i c a l subdivision may e l e c t by ordinance or r e s o l u t i o n to cover a l l services performed f o r i t in employment in a l l o f i t s i n s t i ­ t u ti o n s o f higher education, and Sec. 2 5 (2 ) provides t h a t a p o l i t i c a l subdivision e l e c t i n g such coverage sh a ll make payments in l i e u o f con­ t r i b u t i o n s w ith respect to b e n e f i t s a t t r i b u t a b l e to the employment. E f f e c t i v e January 1, 1975, when compulsory coverage is extended to community c o l le g e s , they w i l l be afford ed the e l e c t i o n to pay con­ tributions. 57 As reimbursing employers, s t a t e i n s t i t u t i o n s o f higher educa­ tion , in an e f f o r t to control costs a t t r i b u t a b l e to t h e i r coverage under the Act, must concentrate t h e i r e f f o r t s on an i n t e r n a l program str uctu red to cope with s i t u a t i o n s which may unnecessarily r e s u l t in b e n e f i t payments chargeable to t h e i r accounts. Unemployment Causes While t h i s study does not purport to provide i n s i g h t into the forces a t work in the economy which r e s u l t in f l u c t u a t i o n s in the demand f o r employer s e rv ic e s , a c a t e g o r i z a t i o n o f the types o f unem­ ployment w ith which we are dea ling is e s s e n tia l to an understanding o f the problem. Haber and Murray suggest t h a t a meaningful approach can be derived through c l a s s i f i c a t i o n o f a l l unemployment in t o ; ( 1 ) short-ter m or f r i c t i o n a l unemployment, (2 ) c y c l i c a l unemployment, and (3) unemployment due to s t r u c t u r a l and technological developments. I n s t i t u t i o n s of higher education in Michigan, as elsewhere, c o n t rib u t e to and are a f f e c t e d by a l l th re e . A la r g e p art o f f r i c t i o n a l unemployment is t h a t which r e s u l t s from people en tering or lea ving the lab o r market or being i d l e w hile changing from one job to another. I t presents no special problem to a n a t i o n 's economy and, in the sense t h a t labor f o r c e m o b i l i t y is viewed f a v o r a b l y , is the sign o f a healthy economy. 22 I n s t i t u t i o n s o f higher education, as employers in g e n e r a l , can exercise l i t t l e co ntrol over 21 Haber and Murray, Unemployment Insurance in the American Economy, p. 10. 2 2 I b i d . , p. 11. 21 58 these actions although review of the circumstances leading th e re to is warranted as they may be symptomatic o f unrest or employee d i s s a t i s ­ faction. Of g r e a t e r concern is t h a t p a rt of f r i c t i o n a l unemployment which r e s u l t s from the constant change in demand f o r workers o f a temporary nature f o r any o f a v a r i e t y o f reasons. Rela ting t h i s to i n s t i t u t i o n s o f higher education, examples which can be c i t e d are the changing demand f o r la b o r a to ry technicians and s i m i l a r s p e c i a l i s t s w it h in the research program as grants and contracts commence and con­ clude, or the changes in s t a f f i n g needs as demand f o r a u x i l i a r y services f l u c t u a t e s during the ye ar. This aspect of f r i c t i o n a l unem­ ployment is ch a rac teriz e d by sh o rt-term l a y o f f s a f t e r which the workers re turn to t h e i r former or s i m i l a r jobs. Of even g r e a t e r concern, however, is t h a t p a rt of f r i c t i o n a l unemployment a t t r i b u t a b l e to seasonal demand f o r the services of work­ ers. I n s t i t u t i o n s o f higher education t r a d i t i o n a l l y operate on an academic ye a r. Regardless o f whether an i n s t i t u t i o n operates on a semester, t r i m e s t e r or q u a rte r system, there is g e n e r a l ly some period during which i t is not in f u l l are low. operation or during which enrollments In terms o f employment, the operation o f residence h a l l s and other student housing serves as the most graphic i l l u s t r a t i o n of seasonal demand f o r services and hence, demand f o r those who provide these se rv ices . A d d i t i o n a l l y , c l i m a t i c changes in Michigan, with the a ttendant needs in campus maintenance, o fte n c r e a t e d i f f e r e n t i a l s t a f f ­ ing requirements throughout the four seasons, which may give r i s e to concomitant h i r i n g and furloughing o f workers w it h d i f f e r e n t s k i l l s . 59 C y clica l unemployment, as used by Haber and Murray, is t h a t caused by economic f a c t o r s and conditions on a national scope and is g e n e r a lly ch a rac teriz e d by business recessions. 2*1 In s titu tio n s of higher education, both public and p r i v a t e , are a f f e c t e d d i r e c t l y by such exogenous f a c t o r s . During recessionary periods, reduced s t a t e and Federal funding, a d e c lin e in benevolent and p h ila n th r o p ic support, lower y i e l d from investment p o r t f o l i o s and lower student enrollments are examples o f probable e f f e c t s . A ll may f o rce reduction in program and supportive services with a tte n u a tin g e f f e c t on the work fo rc e . Indeed, at t h i s w r i t i n g the "energy c r i s i s " alone has given r i s e to s t a r t l i n g l y high l e v e l s of unemployment in Michigan and i t s e f f e c t s must be taken i n to account in f i s c a l c o n s id e ra t io n , both short and long term. Technological and s t r u c t u r a l unemployment is t h a t r e s u l t i n g from changes in demand f o r products, a v a i l a b i l i t y o f resources, major s h i f t s in national p r i o r i t i e s and improved production technology. 24 I n s t i t u t i o n s o f higher education are by no means immune to the e f f e c t s o f these developments. T h e i r impact is f e l t both in i n t e r n a l opera­ tions and in the demand f o r the i n s t i t u t i o n s ' graduates. Computer technology has r e v o l u t i o n i z e d record keeping on many f r o n t s , d isplacing c l e r k s , bookkeepers and stenographers, among o t h e r s , with computer programmers and o pera to rs . Changes in the aerospace program alone have caused the demands f o r engineering graduates to r i s e and f a l l dramat­ i c a l l y in the' l a s t 16 years f o llo w in g the launching o f Sputnik, with 2 3 I b i d . , p. 13. 2 4 I b i d . , p. 14. 60 concomitant f l u c t u a t i o n s in the demand f o r the services o f those who s t a f f and support the engineering curriculum. Some unemployment, then, is i n e v i t a b l e and unavoidable. In other instances i t may be inherent to c y c l i c a l fa c to r s in the economy or seasonal demand f o r se rvices. Some unemployment, however, is unquestionably due to poor scheduling, o v e r s t a f f i n g f o r in te rim needs and independent as opposed to cooperative action by i n s t i t u t i o n a l departments. To the extent i t might have been avoided, the i n s t i t u ­ tio n can be held accountable. The Concept o f A c c o u n t a b i li t y The term a c c o u n t a b i l i t y today has a m u l t i p l i c i t y o f uses. It is used in r e l a t i o n to and often interchangeably with such terms as measurement, e f f i c i e n c y , e v a lu a t io n , assessment and r e s p o n s i b i l i t y . Mortimer suggests t h a t the confusion re s u l t s from three d i f f e r e n t areas o f concern, which can be c l a s s i f i e d as managerial a c c o u n t a b i l i t y , a c c o u n t a b i l i t y versus e v a l u a t i o n , and a c c o u n t a b i l i t y versus respons ib ility . 25 The terms are admittedly by no means mutually ex clusive. Some d i s t i n c t i o n , however, does appear es se n tia l to place the terms in proper context w i t h i n the meaning o f t h i s study. Control is the keystone to managerial a c c o u n t a b i l i t y and the prime purpose o f management control is to hold org anizations and those who d i r e c t them accountable f o r t h e i r performance. 25 It is rooted Kenneth P. Mortimer, A c c o u n t a b i li t y in Higher Education (Washington, D.C.: American Association f o r Higher Education, 1972 ), p. 2. 2 6 I b i d . , p. 4. 61 in the basic elements o f c l a s s ic a l o rg an iz a tio n theo ry. to compel events to conform to plans: Control seeks I t measures performance, cor­ re cts negative d ev ia tio n s and thus assures the accomplishment o f plans. 27 "Compelling events to conform to plans means locating the persons responsible f o r negative d ev ia tio n s from planned action and taking the necessary steps to improve performance." 28 A c c o u n t a b i li t y r e l a t e s to the l i a b i l i t y f o r the proper d i s charge of d u ties by a subordinate. 29 Thus, a dean is accountable to the Provost, the Provost is accountable to the P re sid en t, the President is accountable to the Board o f Trustees and the Board o f Trustees is accountable to i t s various public s. In the l i t e r a t u r e today a confusion also e x i s t s in the use of the term a c c o u n t a b i l i t y in r e l a t i o n to the d u ties o f subordinates f o r which a c c o u n t a b i l i t y may be exacted and the e f f e c t s o f t h e i r acti ons. In the narrowest sense, drawing upon the concept o f a c c o u n t a b i l i t y as used in m i l i t a r y o r g a n iz a t io n s , i t is used to i n d i c a te the duty o f an o f f i c e r to keep accurate records and to safeguard public property and funds. 30 Conspicuously absent from t h i s d e f i n i t i o n is any suggestion of a value judgment as to the manner in which the public property and funds were or might have been used toward achievement o f the org aniz a­ t i o n ' s goals or o b j e c t iv e s . Nor does i t suggest a measure o f l a t i t u d e or d i s c r e t i o n a r y use t h e r e o f . 27 Harold Koontz and C y r i l O'Donnel, P r i n c i p le s o f Management (New York: McGraw-Hill Book Company, I n c . , 19 68 ), pp. 50, 6397 2 8 I b i d . , p. 50. 29 I b i d . , p. 66. 3 0 I b i d . , pp. 6 6 - 6 7 . 62 At seemingly the other end o f the spectrum, a c c o u n t a b i l i t y , as the new "in" word in American education, is aimed a t learning the e f f e c t s of education and whether or not the i n s t i t u t i o n is l i v i n g up to i t s claims. 31 Both public and p r i v a t e i n s t i t u t i o n s o f higher edu­ cation are f in d in g themselves held accountable f o r the outcomes or consequences o f higher education. "Public i n s t i t u t i o n s , obv iously, are accountable f o r t h e i r expenditure of appropriated funds. . . . As p r i ­ vate colleges and u n i v e r s i t i e s secure s t a t e support, they too w i l l themselves p u b l i c l y accountable." 32 find And, as Perkins cautioned, "With public support comes the i n e v i t a b l e public s c r u t i n y , not simply of how the money is spent but how well the product turns o u t . " 33 It is t h i s usage which Mortimer r e f e r s to as the confusion r e s u l t i n g from a c c o u n t a b i l i t y versus e v a lu a t io n . H a r t n e t t , however, argues t h a t w hile th e overlap between the concepts is s u b s t a n t i a l , ev alu ation and a c c o u n t a b i l i t y ar e not the same. a process o f s e l f - s t u d y . 34 Evaluation in higher education is I t s concern is d ir ec ted toward an analy sis of the strengths and weaknesses o f the o rg a n iz a tio n s p e c i f i c a l l y with regard to how well i t has met defined o b j e c t iv e s . Evaluation " is con­ cerned p r i m a r i l y w it h educational e ff e c t i v e n e s s (t h e degree to which i t succeeds in doing whatever i t is t r y i n g to d o ), whereas a c c o u n t a b i l i t y 31 Rodney T. H a r t n e t t , A c c o u n t a b i li t y in Higher Education (P rin c e to n , New Jersey: College Entrance Examination Board, 19 71 ), p. 6. 32 T. R. McConnel, " A c c o u n t a b i li t y and Autonomy," Journal of Higher Education, June, 1971, pp. 447-49. 33 D.C .: James P e rkin s, The U n i v e r s i t y and Due Process (Washington, American Council on Education, 19 67), p 7 4. 34 H a r t n e t t , op. c i t . , pp. 5-8. 63 . . . i s concerned w it h e f f e c t iv e n e s s and e f f i c i e n c y { i t s capacity to achieve r e s u l t s w it h in a given expenditure o f resources). . . . 1,35 Thus, by H a r t n e t t ' s d e f i n i t i o n , a c c o u n t a b i l i t y encompasses ev aluati on although i t s emphasis may be more on measurement in r e l a t i o n to the resources expended, i . e . , e f f i c i e n c y , than on the degree to which the outcomes adhere to ex p ecta tion s, i . e . , e ffe c t i v e n e s s . The d i s t i n c t i o n between a c c o u n t a b i l i t y and r e s p o n s i b i l i t y , or to return to Mortimer a c c o u n t a b i l i t y versus r e s p o n s i b i l i t y , is not so e a s i l y d e lin e a t e d . Koontz and O'Donnel d e fin e r e s p o n s i b i l i t y as the o b l i g a t i o n of a subordinate, to whom a duty has been assigned, to perform the duty. obligation. 36 By t h e i r d e f i n i t i o n , the essence o f r e s p o n s i b i l i t y is In t h i s usage, a c c o u n t a b i l i t y means r e s p o n s i b i l i t y . 37 N e f f , however, argues t h a t w hile a c c o u n t a b i l i t y and r e s p o n s i b i l i t y have been used synonymously, the two terms are d i a m e t r i c a l l y opposed in r e a l i t y . 38 A c c o u n t a b i li t y emphasizes a u t h o r i t y , hiera rc hy and sanctions, whereas r e s p o n s i b i l i t y h ig h l i g h t s i n d i v i d u a l i t y , d i v e r s i t y and choice. Accordingly, N e f f proposes "th a t ' r e s p o n s i b i l i t y ' be used to r e f e r only to the v o lu n tary assumption o f an o b l i g a t io n [emphasis added], w h ile ' a c c o u n t a b i l i t y ' be used to r e f e r to the legal l i a b i l i t y assigned to the performance or non-performance o f c e r t a i n acts or d u t i e s . " 39 While the d i s t i n c t i o n proposed by N e f f might be 35IM 1 * * P- 5. 3®Koontz and O'Donnel, op. c i t . , p. 65. 37I b i d . , p. 67. 30 Charles B. N e f f , "Toward a D e f i n i t i o n o f Academic Respon­ s i b i l i t y , " Journal o f Higher E d u c a t i o n January, 1969, p. 14. 64 u s e f u l , th e cu rr en t meaning o f the terms can be understood only in terms of t h e i r usage. Spiro d is tin g u ish es th ree major, and mutually r e l a t e d , connotations in which people speak o f r e s p o n s i b i l i t y : accountabi1i t y , cause and o b i i g a t i o n . ^ mean a l l th re e . In a given instance , we may Drawing on S p ir o 's example, when we say the Secretary of State i s re s p o n s ib le , under the P re s id e n t, f o r the conduct of our fo re ig n a f f a i r s , we mean f i r s t t h a t he is accountable f o r the manner in which such r e l a t i o n s are conducted; second, t h a t he is a cause o f the course which they take; and t h i r d , t h a t he is under o b l i g a t i o n to conduct them. Thus, by S p ir o 's d e f i n i t i o n , r e s p o n s i b i l i t y encompasses accountabi1i t y . From the l i t e r a t u r e , then , i t is concluded t h a t the term a c c o u n t a b i l i t y in c u r r e n t usage may be used w i t h i n a narrow c o n fin e , as in the m i l i t a r y o rg a n iza tio n d e f i n i t i o n o f Koontz and O'Donnel, 41 42 to a f a r more general and encompassing d e f i n i t i o n , as used by H a r t n e t t , which includes e v a l u a t i o n , or as a p a rt o f the concept o f r e s p o n s i b i l i t y , as suggested by Spiro. to a l l . 43 There a r e , n e v e rth e le s s , elements common In each case, a c c o u n t a b i l i t y is construed to be a legal lia ­ b i l i t y o f a subordinate to perform in a predetermined manner or toward the accomplishment o f predetermined goals or o b j e c t i v e s . Inherent to each also is the assumption o f i m p l i c i t or e x p l i c i t a u t h o r i t y necessary ^ H e r b e r t J. S p ir o , R e s p o n s ib i li t y in Government (New York: Van Nostrand Reinhold Company, 19 69 ), pp. 14-20. ^ S e e note 27. ^ S e e note 37. ^2See note 28. 65 to accomplish the stated task. t h a t control 44 Also inher ent to each is the concept is an es se n tia l component o f any d e f i n i t i o n o f account­ a b ility .^ This study is concerned with management a c c o u n t a b i l i t y . defined h e re in , i t sh a ll mean the legal As l i a b i l i t y exacted from subordi­ nates and f o r which they are answerable to a higher a u t h o r i t y f o r the expenditure o f funds a l l o c a t e d to them f o r the accomplishment o f p re ­ determined goals and o b je c tiv e s and over which they have d i s c r e t i o n a r y use. Control o f Unemployment Compensation Costs The i n t e n t o f the unemployment compensation program is stated in the Michigan Employment Se cu rity Act as being to encourage employers to provide s t a b l e employment and to provide funds to be used f o r the benefit of persons unemployed through no f a u l t o f t h e i r own. I t is, therefore, stated as public p o lic y t h a t e f f o r t s by employers to p re ­ clude the payment of unemployment compensation through programs See Herbert A. Simon, Donald W. Smithburg, and V i c t o r A. Thompson, Public Adminis tra tion (New York: A l f r e d A. Knopf, 1964), pp. 215-16, f o r a discussion o f a u t h o r i t y commensurate w ith responsi­ b ility . The authors' p o s it io n is t h a t f o r an in d iv id u a l or an org an i­ z atio n to be held accountable f o r ca rr y in g out a p a r t i c u l a r t a s k , s u f f i c i e n t formal a u t h o r i t y , budgetary resources, personnel and other resources o f s u f f i c i e n t q u a n t it y must be a l l o c a t e d so t h a t , i f used with a reasonable degree o f e f f i c i e n c y , the task assigned may be c a r ­ ri e d out. In t h e i r view, "any a d m i n is t r a t o r who had been given au th or­ i t y o f t h i s scope would probably be w i l l i n g to be held accountable f o r the r e s u l t s o f his work" (p. 21 6). 45 Even w it h i n the narrow d e f i n i t i o n w ith regard to m i l i t a r y o rg a n iz a t io n s i Koontz and O'Donnel conclude t h a t " i t c l e a r l y has strong overtones o f a control technique" (p. 6 7 ) . 46 Michigan Employment S e c u rity A c t, op. c i t . , Sec. 2. 66 structured to minimize f l u c t u a t i o n s in employment are in the public interest. I t is also i n h e r e n t ly implied t h a t there is no i n t e n t t h a t the program should f o s t e r or r e s u l t in payment o f b e n e fits to any who are unemployed through t h e i r own choice. Indeed, the Act s p e c i f i c a l l y provides t h a t to be e l i g i b l e f o r b e n e f i t s , an i n d iv id u a l must be re gis tere d f o r work a t an employment o f f i c e and be seeking work.47 A d d i t i o n a l l y , i t is stated t h a t he must be a v a i l a b l e to perform f u l l ­ time work o f a ch ara cter which he is q u a l i f i e d to perform by past experience or t r a i n i n g . 48 Accordingly, i t is not co ntrary to public p olicy f o r an employer to do a l l w it h in his power to prevent the pay­ ment o f b e n e f it s to those who do not q u a l i f y . courses, i . e . , Through both of these through e f f o r t s to s t a b i l i z e employment and through the establishment o f procedures to assure t h a t payments w i l l not be made to those who do not q u a l i f y , an i n s t i t u t i o n o f higher education can hold down the cost o f b e n e fits chargeable to i t s account. Ray F o r t in o , A s s is t a n t Vic e -P re s id e n t f o r Personnel Services a t Pennsylvania State U n i v e r s i t y , advised i n s t i t u t i o n s o f higher edu­ cation to: 1. C e n t r a l i z e h i r i n g . " I f department heads have the r i g h t to h i r e even casual personnel without c e n tr a l a d m in is t ra t io n knowl­ edge," he cautio ne d, "two things can happen and they are both bad." F i r s t , such personnel may acquire b e n e f i t r i g h t s which might otherwise have been avoided through b e t t e r scheduling. Secondly, i f a l l h i r i n g is not c e n t r a l l y c o n t r o l l e d , a department head may employ a new person to perform work t h a t can be performed equally well by a former employee who is re ce iving unemployment b e n e f i t s ; 2. S t a b i l i z e employment. Departments should share employees when workloads vary and to meet seasonal demands. Student employees, who ar e not covered under the l e g i s l a t i o n , can be used when workloads 1■ 1 “ ‘ l*“ l * ■ 1 ' — 4 7 I b i d . , Sec. 2 8 ( 1 ) ( a ) . r 4 8 I b i d . , Sec. 28(1 ) ( c ) . 67 are e s p e c i a l l y g re at and other permanent employees are not a v a i l ­ able; 3. Make b e t t e r use o f probationary p erio ds. Nonproducers and less than s a t i s f a c t o r y employees should be terminated before they have accumulated s u f f i c i e n t c r e d i t weeks upon which to base an unemployment claim; 4. Consider use o f outside c o n t r a c t o r s . I f an assignment is known to be temporary and a l a y o f f is t h e r e f o r e i n e v i t a b l e , claims can be avoided by using outside contractors to f i l l the p os it io ns . 5. C e n t r a l i z e compensation form han dling . By d i r e c t i n g the State Employment Se cu rity O f f i c e to send a l l claims and r e l a t e d forms to one o f f i c e a t the i n s t i t u t i o n responsible f o r t h e i r handling, c o s tly delays can be avoided. ( I n Michigan, employers have seven days from the date a claim is f i l e d to respond to the Commission w ith wage and separation d a t a . ) ; 6 . Hold e x i t i n t e r v i e w s . Interv iews w ith dismissed or t e r ­ minated employees can help determine reasons f o r turnover and provide information r e l a t i n g to possible f u t u r e claims; 7. Publicize i t is the i n s t i t u t i o n , ployment compensation. be given to those w it h challenge those who do program; the program. Personnel should be informed th at not the employee, which pays the cost o f unem­ I t should be emphasized t h a t assistance w i l l l e g i t i m a t e claims but t h a t the i n s t i t u t i o n w i l l not appear to f a l l w it h i n the purpose o f . the 8 . Have procedure f o r contacts with c l a im a n t s . Every e f f o r t shouldbe made to f i n d s u i t a b l e a l t e r n a t e work f o r former employees who have f i l e d claims f o r unemployment b e n e f i t s . A d d i t i o n a l l y , i f a claimant is found to be u n a v a ila b le f o r work, payment can be c h a l ­ lenged; 9. Examine p rac tice s f o r h i r i n g temporary f a c u l t y . Employ­ ment o f temporary f a c u l t y to meet occasional needs can r e s u l t in unemployment compensation claims; 10. Coordinate c e n t r a l l y a l l dismissals and l a y o f f s . Advance notice o f l a y o f f s from supervisors can f a c i l i t a t e reassignment to other areas o f the i n s t i t u t i o n . 49 Fortino also ra ised the questions: "Should costs be handled c e n t r a l l y or charged to departments causing claims?" and "What charges ^ Ray T. F o r t i n o , "Unemployment Insurance: How to Get Ready f o r Coverage in 1972," The College and U n i v e r s i t y Business O f f i c e r , June, 1971, pp. 1 - 2 . 68 should be made to research contracts and a u x i l i a r y en te rprises to b uild a fund f o r l a y o f f s w it h i n those enterpr ises? " f o r which he o ffe re d no advice. In the months preceding the e f f e c t i v e date o f coverage, others w r i t i n g in the trade jo u rn als and association new sletters presented a ra ther uniform approach toward development o f programs structured to accomplish these same ends. K e ll e r advised ad m in is tra tors of i n s t i t u ­ tions o f higher education (1) to study employer manuals and other pub­ l i c a t i o n s issued by the respective s t a t e unemployment agencies, to become f a m i l i a r with questions o f coverage and e l i g i b i l i t y ; to get the most fa v orab le l e g i s l a t i o n ; o f employment s t a b i l i z a t i o n ; 50 (2) to work (3) to set up good standards (4) to build a sound system o f in te rn a l c o n t r o ls ; and (5) to be prepared to handle claims responsibly and speedily. 51 With regard to employment standards and s t a b i l i z a t i o n , K e ll e r advised t h a t wage standards should be weighed against unemploy­ ment b e n e f i t costs , pointing out t h a t low pay scales which lead to high turnover can be, in the l i g h t o f the a d d it i o n a l b e n e f i t s in the form o f unemployment compensation, an expensive r i s k : A $108.00 a week c l e r k in Michigan can draw as much as $60.00 a week in unemployment b e n e f it s f o r as long as 26 weeks fo llo w in g separation. He also advo­ cated r e a l i s t i c probationary periods f o r new employees, s t a t i n g t h a t 50 As has been noted, unemployment compensation programs are administered by the s ta te s in accordance w it h s t a t e laws enacted, and in a r e a l sense mandated, by the Federal Unemployment Tax Act. While c e r t a i n fea tu res are required as a condition o f c e r t i f i c a t i o n o f a s t a t e ' s act by the Secretary o f Labor, th e re ar e areas in which a g re at deal o f l a t i t u d e in the design o f a s t a t e ' s program is perm issible. 51 K e l l e r , "Unemployment Insurance," pp. 27-32. 69 while i t may take three to six months to judge the performance o f a p ro fe s s io n a l, executive or h i g h - s k i l l e d t e c h n i c i a n , three or four weeks should be adequate to determine i f a kitchen helper or c l e r k is capable of doing a good j o b . Since e l i g i b i l i t y f o r b e n e fits and d uration o f b e n e fits is based p a r t l y on length o f employment, i t can be c o s t l y to r e t a i n someone who does not meet job standards and w i l l e v e n t u a l ly be terminated as a r e s u l t t h e r e o f . K e l l e r too advised t h a t outside con­ t r a c t o r s be employed f o r temporary needs and sh ort-term seasonal peaks. With regard to building a sound system o f i n t e r n a l c o n t r o l , K e l l e r emphasized many o f the same points as F o r t in o . Among these, he l i s t e d s e t t i n g up a uniform system o f r e c r u it m e n t , with a l l departments fo llow ing the same standards and coordinated c e n t r a l l y ; r e h i r i n g from l i s t s o f those c u r r e n t l y drawing b e n e fits on the basis o f past employ­ ment with the i n s t i t u t i o n ; e s ta b lis h in g a system o f d e t a i l e d records in which a l l personnel actions t h a t may or do r e s u l t in employee d i s ­ charge or term ination are entered and communicated to the o f f i c e han­ d lin g unemployment compensation; and a formal e x i t i n t e r v ie w procedure. Diedrich W i l l e r s , Cornell U n i v e r s i t y ' s Personnel D i r e c t o r , stressed the importance o f e x i t i n t e r v ie w s ; adoption o f a p o lic y o f fillin g vacancies with those workers re c e iv in g unemployment compensa- t i o n ; and co nsolidati on o f seasonal, casual and temporary job s. 52 " It is absurd to be paying a l a i d - o f f secreta ry $50.00 per week f o r bene­ f i t s , w h ile f i l l i n g a vacant p o s it io n w ith a new a p p l i c a n t , " he emphasized. 52 p. 9. W i l l e r s , "Impact of Extension o f Unemployment Compensation," 70 In l a t e r months, John Adams summed up t h e i r arguments in s t a t in g : I t is v i t a l t h a t each i n s t i t u t i o n seek to r e g u l a r i z e and s t a b i l i z e i t s employment, minimizing both summer l a y o f f s and personnel turnover by c e n t r a l i z i n g the personnel functions so as to assure continuous u t i l i z a t i o n o f persons by s k i l l in d i f f e r e n t contexts , and to discourage l a y o f f s and simultaneous h i r i n g f o r u n s k i l le d and many s k i l l e d fu n c tio n s . To be e f f e c ­ t i v e , a l l h i r i n g should be c e n t r a l i z e d . 53 Adams, however, went one step f u r t h e r in what would appear to be an answer to the questions raised by Fortin o wherein he continued: "and a l l departments, including those using g i f t s and c o n t r a c t s , should be made f u l l y responsible f o r charges r e s u l t i n g from the program." And, with t h i s statement, i t would f u r t h e r appear t h a t Adams has taken a p o s it io n t h a t a d m in is tra to rs whose personnel actions r e s u l t in the pay­ ment o f unemployment compensation to former employees o f an i n s t i t u t i o n of higher education be held accountable f o r t h e i r ac tio n s . A c c o u n t a b i l i t y f o r Unemployment Compensation Costs I n s t i t u t i o n s o f higher ed uca tion, whether p u b l i c l y or p r i ­ v a t e l y c o n t r o l l e d , ar e in the nature o f public t r u s t s and c a r r y inheren t o b l i g a t i o n f o r stewardship and a c c o u n t a b i l i t y . 54 These o b l i g a t io n s are vested in a Board o f Tru stee s, Board o f Governors or Board o f Regents which acts on b eh alf o f the various supporting publics in c o n t r o l l i n g the d i r e c t i o n o f the i n s t i t u t i o n . The r o l e o f the Board is defined by s t a t u t e or by c h a r t e r , wherein i t s r e s p o n s i b i l i t i e s toward the public 53 Adams, Risk Management and Insurance G u i d e l in e s , p. 113. ^ College and U n i v e r s i t y Business Ad m in is tra tio n (Rev. e d . ; Washington, D .C .: American Council on Education, 1 9 6 8 ) , p. 141. 71 i t serves a re set f o r t h . 55 As such, the u lt i m a t e a c c o u n t a b i l i t y f o r the conduct o f the a f f a i r s o f an i n s t i t u t i o n of higher education rests with the Board. Blackwell l i s t s the most important functions o f the governing board as: 1. The determination and establishment o f the fundamental p o l i c i e s o f the i n s t i t u t i o n s ; 2. The s e le c t io n and appointment o f a competent adminis­ t r a t o r , such as the c o lle g e p re s id e n t , and the delega­ t i o n to him o f powers commensurate with his responsi­ b i l i t i e s ; and 3. The preservation o f the c a p it a l assets and f i n a n c i a l i n t e g r i t y o f the i n s t i t u t i o n . 56 The primary r e s p o n s i b i l i t y o f the governing board, as stated in College and U n i v e r s i t y Business A d m i n is t r a t i o n , . . . is to appoint or term inate the se rv ice o f the executive o f f i c e r who is the p r i n c ip a l a d m in is t ra t o r o f the i n s t i t u t i o n , u s u a lly w ith the t i t l e o f "president" or "ch an ce llo r". As c h i e f executive o f f i c e r , he receives from the governing board f u l l r e s p o n s i b i l i t y f o r th e ad m in is tra tio n o f a l l the a f f a i r s of the in stitu tio n . The p r e s i d e n t , in t u r n , delegates a u t h o r i t y to a d m i n is t r a t iv e o f f i c e r s , each responsible f o r one of the p r i n ­ cip a l a r e a s . 57 The Board, th en, through the appointment o f the p rin c ip a l a d m i n is t r a t o r to whom a u t h o r i t y is delegated to conduct the a f f a i r s o f the i n s t i t u t i o n , holds t h a t a d m i n is t r a t o r accountable f o r the manner in which those a f f a i r s are c a r r i e d out. 55 The p r i n c ip a l a d m i n i s t r a t o r , Adams, op. c i t . , p. 10. 56 Thomas Edward B la c k w e ll, College Law, A Guide f o r Adminis­ t r a t o r s (Washington, D .C .: American Council on Education, 19 61 ), pp. 48-49. 57 College and U n i v e r s i t y Business A d m i n is t r a t i o n , op. c i t . , p. 4. 72 l i k e w i s e , through the deleg ation o f a u t h o r i t y to his subordinates, holds them accountable f o r the manner in which t h e i r s p e c i f i c areas o f respon­ s i b i l i t y are c a r r ie d o u t , and so f o r t h to the lowest l e v e l of the organ­ ization structure. But w hile an a d m i n is t r a t o r may delegate to a subordinate a u t h o r i t y to accomplish a task or perform his d u t i e s , and the subordinate, in t u r n , may delegate a portion of the a u t h o r i t y re ceived , n e i t h e r delegates any o f his r e s p o n s i b i l i t y . ® 0 A c c o u n t a b ilit y f o r the conduct o f a subordinate's d u t i e s , l i k e r e s p o n s i b i l i t y , cannot be reduced or avoided through the delegatio n o f a u t h o r i t y . the need f o r managerial control Herein l i e s in the ad m in is tra tio n o f an i n s t i t u ­ tio n o f higher education with regard to action which may r e s u l t in the payment o f unemployment compensation. As the Board, i t s appointed a d m in is tra to rs and t h e i r subordinates each r e t a i n a c c o u n t a b i l i t y f o r costs a t t r i b u t a b l e to unemployment compensation coverage, i t is incumbent upon them to e f f e c t co n tro ls to assure t h a t these costs be held to a minimum. As noted pre v iou sly, control seeks to compel events to conform to plans. 59 The control process involves e s t a b lis h in g standards, measuring performance against these standards, and c o rr e c t in g d e v ia ­ t i o n s from standards and plans.®0 With regard to the payment o f unem­ ployment compensation, the standards and plans, inasmuch as unemployment fil compensation is a nonproductive c o s t , must be structured t o th e 58 Koontz and O'Donnel, op. c i t . , p. 66. 59 See p. 61. ®°Koontz and O'Donnel, op. c i t . , p. 640. Cl K e l l e r , op. c i t . , p. 28 , r e f e r s to unemployment compen­ sation as "your nonworking p a y r o l l . " 73 establishment o f personnel pra ctices to minimize t h e i r incidence and financial impact. In the preceding s e c t i o n , programs and recommenda­ tions addressed to these ends were reviewed. The measurement o f performance against such standards and plans can r e a d i l y be e f f e c t e d through an analysis o f claims f i l e d , b e n e f it s awarded, d uration of b e n e f i t periods, and so f o r t h . The problem, then, becomes one o f c o rr e c tin g d evia tio ns from standards and plans. This stage o f the control process, E tz ion i s t a t e s , requires t h a t d e l i b e r a t e e f f o r t s be made to reward those who conform to the standards and plans and to p en alize those who do not. 62 Such rewards and punishments may be f i n a n c i a l or n o n f i n a n c i a l , and may be e f f e c t u a t e d through budgetary or nonbudgetary c o n t r o ls . Again, tu rn in g to unemployment compensa­ t i o n , the question posed by t h is study i s : Can costs r e s u l t i n g from coverage under t h is program be held to a minimum, i . e . , minimized through nonbudgetary controls? by Fortin o^4 a l l Jersey: fa ll The ten enumerated points advocated i n t o t h i s category. I f they are to work fiP Amitai E t z i o n i , Modern Organizations (Englewood C l i f f s , New P r e n t i c e - H a l l , Inc7, 19 64 ), pp. 58-59. C*) Financial and nonfinan cial incen tiv es may be personal as in the form o f s a l a r y or o ther remunerative adjustments, as an example o f the former, or in the form o f assignment to a p o s itio n o f g r e a t e r or le s s e r p r e s t i g e , working conditions or hours, as examples of the latter. S i m i l a r l y , f i n a n c i a l incentiv es may be impersonal as in the form o f an adjustment in departmental a l l o c a t i o n s , and nonfinancial i n c en tiv es may be impersonal as in d i f f e r e n t i a l treatm ent o f d ep art­ ments in committee assignments, space a l l o c a t i o n and so f o r t h . Within t h i s study, concern is on impersonal i n c e n t iv e s , i . e . , those a f f e c t i n g a department r a t h e r than an i n d i v i d u a l . A d m itt ed ly, the overlap is g r e a t , inasmuch as an a d m i n is t r a t o r may expect to be evaluated and rewarded or punished on the basis o f the performance o f his department. 64See pp. 6 6 - 6 7 . 74 e f f e c t i v e l y to s t a b i l i z e employment and preclude the payment of bene­ f i t s to those no longer in the employ o f the i n s t i t u t i o n , the need f o r cooperation throughout the org an iz atio n s t r u c t u r e , both v e r t i c a l l y and h o r i z o n t a l l y , i . e . , both up and down the chain o f command and across departmental l i n e s , is e s s e n t i a l . Examples o f personnel action which may r e s u l t in the payment o f b e n e fits and which might be avoided w ith interdepartmental cooperation are included in Appendix B. a l t e r n a t i v e question posed by t h i s study is : The Are budgetary c o n t r o ls , in the view o f c h i e f f i s c a l o f f i c e r s o f Michigan i n s t i t u t i o n s o f higher education, more e f f e c t i v e , d e s ir a b le and f e a s i b l e , both from an opera­ t i o n a l and philosophical point o f view, in holding these costs to a minimum? The question may be somewhat rephrased as: Can unemploy­ ment compensation costs be held to a minimum without budgetary sanc­ tions, i . e . , d i s t r i b u t i o n o f incurred costs to the le v e l o f adminis­ t r a t i v e r e s p o n s i b i l i t y a t which personnel actions r e s u l t i n g in t h e i r occurrence is i n i t i a t e d ? The design o f the study, in which the opin­ ions o f the c h i e f f i s c a l o f f i c e r s ar e sought, follows in Chapter IV. CHAPTER IV DESIGN OF THE STUDY Introd uctio n In Chapter I , i t was made e x p l i c i t t h a t the purpose of t h i s study is to i n v e s t i g a t e the opinions and experience o f f i n a n c i a l adm in is tra tors o f Michigan i n s t i t u t i o n s o f higher education with respect to a c c o u n t a b i l i t y in the ad m in is tra tio n o f unemployment com­ pensation. I t was also made e x p l i c i t t h a t the study would be l i m i t e d to public f o u r - y e a r co lle ges and u n i v e r s i t i e s and nonpublic colleges recognized by the Michigan Department o f Education f o r l i s t i n g in the 1972-73 D i r e c t o r y of I n s t i t u t i o n s o f Higher Education,^ and whose f a l l term, 1971, enrollments were l i s t e d as g r e a t e r than 500. c r ite r ia , all Using these 13 public f o u r - y e a r colleges and u n i v e r s i t i e s and 27 o f the 49 nonpublic colle ges l i s t e d in the D i r e c t o r y were selected f o r 2 inclu sio n in the study. Although only 55.1 percent o f the nonpublic colleges were s e le c te d , enrollment a t these i n s t i t u t i o n s accounted f o r 9 1 .6 percent o f the t o t a l nonpublic co lle g e enrollm ent. The i n s t i t u t i o n s selected accounted f o r 98.3 percent o f the combined t o t a l public and nonpublic student enrollment in Michigan. ^1972-73 D i r e c t o r y of I n s t i t u t i o n s o f Higher Education (Lansing, Michigan: Michigan Department o f Education, 1973). 2 See Appendix A f o r a summary o f the i n s t i t u t i o n s selected. 75 76 The data sought were obtained through use o f q uestionnaire s. Follow-up interv iews were held w ith 15 o f the respondents to c l a r i f y incomplete and seemingly inc o n s is te n t answers and to obtain a more in-depth understanding o f the respondents' views. The Questionnaires There are substantive d if f e r e n c e s in the methods o f funding unemployment compensation allow able under the provisions o f the Michigan Employment Se cu rity Act w ith respect to public and p r i v a t e n o n p r o fit 3 i n s t i t u t i o n s o f higher education. A d d i t i o n a l l y , there are technical d if f e r e n c e s in t h e i r accounting s t r u c tu r e s and d if f e re n c e s in t e r m i n o l ­ ogy used in r e l a t i o n t h e r e t o . Accordingly, d i f f e r e n t questionnaires were constructed to survey the experience and opinions o f the c h i e f business o f f i c e r s o f public as opposed to p r i v a t e n o n p r o f it i n s t i t u ­ tion s.^ A l l but th re e {questions t h r e e , fo u r and f i v e ) o f the ten questions, however, were common to both que stionnaire s. The f i r s t f i v e questions o f both questionnaires were designed toward an understanding o f the o rg a n iz a t io n a l and accounting s t r u c t u r e w it h i n which unemployment compensation is administered a t each i n s t i ­ tution. The f i r s t two questions, common to both q ue stion n aire s, seek to learn where w i t h i n the o rg a n iz a t io n a l s t r u c t u r e r e s p o n s i b i l i t y f o r the program has been placed. to the pub lic i n s t i t u t i o n s Questions t h r e e , fo u r and f i v e addressed e lic it responses with regard to the bud­ getary and accounting tre atment o f expenditures atte n d an t to the 3 4 See Chapter I I I , Methods o f Funding. See Appendix C f o r the complete q ue stion n aire . 77 program. Questions three and fo u r in s titu tio n s are addressed to the p r i v a t e n o n p r o f it s im ila r ly directed. Question f i v e o f the question­ n aire f o r p r i v a t e i n s t i t u t i o n s r e l a t e s to the optional funding t r e a t ­ ment accorded these i n s t i t u t i o n s under the provisions o f the Act. Whereas the f i r s t f i v e questions may be regarded as f a c tu a l questions, the second f i v e ( s i x through ten) may be regarded as opinion questions. Question six seeks to learn whether, in the view o f the c h i e f business o f f i c e r s responding, expenditures, i . e . , c o n trib u tio n s or reimbursements to the Michigan Employment S e cu rity Commission, can be c o n t r o ll e d with out budgetary sanctions. I f in t h e i r view they can, the question is asked as to whether budgetary co n tro ls would: to the e f f e c t i v e n e s s o f nonbudgetary c o n t r o l s , (a ) add { b) be o f questionable or l i t t l e value in a d d it i o n to nonbudgetary c o n t r o l s , or (c ) be d i f f i ­ c u l t to adminis te r and may have a negative impact on the e f f e c t iv e n e s s o f nonbudgetary c o n t ro ls . This question is the essence o f the account­ a b i l i t y issue posed by t h i s study. Questions seven, e i g h t and nine seek to lea rn whether or not the f e a r s o f the c h i e f business o f f i c e r s w ith regard to the budgetary impact o f t h i s coverage m a t e r i a l i z e d during the f i r s t two years o f coverage, whether or not these expenditures c o n s t i t u t e d a s i g n i f i c a n t cost burden during the same p e rio d , and whether or not in t h e i r judg­ ment these expenditures w i l l be a s i g n i f i c a n t f a c t o r to reckon w ith in f u t u r e years. In the period preceding the e f f e c t i v e date o f unemployment compensation coverage f o r i n s t i t u t i o n s o f higher education, business o f f i c e r s voiced concern t h a t t h i s coverage would impose an added cost 78 burden on t h e i r i n s t i t u t i o n s with out any apparent b e n e f i t . Question te n , the l a s t question, was included ( 1 ) to e l i c i t any favorable response or b e n e f i c i a l a t t r i b u t e s concomitant with t h i s coverage, from an i n s t i t u t i o n a l p ers p ec tiv e, which may subsequently have come to l i g h t ; and ( 2 ) to learn whether s p e c i f i c nonbudgetary co ntro ls have been in e f f e c t or developed in response to demands imposed by th is coverage. Inasmuch as the survey population was l i m i t e d to the c h i e f business o f f i c e r s o f 40 i n s t i t u t i o n s o f higher education in Michigan, a p i l o t or t e s t study u t i l i z i n g others was not possible. Consideration o f a p i l o t or t e s t study w it h i n the survey group was set aside in the b e l i e f t h a t ( 1 ) those responding to the p i l o t study might be less l i k e l y to respond to a second i n q u i r y , i . e . , the f i n a l survey q uestionnaire ; and ( 2 ) those responding to both the p i l o t and the f i n a l survey ques­ t i o n n a i r e might be influenced by changes r e f l e c t e d in the l a t t e r i n s t r u ­ ment. The decision not to conduct a p i l o t study was also influenced by the f a c t t h a t the i n v e s t i g a t o r has been charged w ith the develop­ ment and a d m in is t ra t io n o f the program a t Michigan S tate U n i v e r s i t y since i t s inc ep tio n and has been a c t i v e l y involved in programs f o r the i n t e r p r e t a t i o n and dissemination o f information r e l a t i n g to t h i s cover­ age to o th er i n s t i t u t i o n s o f higher education since e a r l y 1971. Addi­ t i o n a l l y , those to whom the questionnaires were addressed were presumed to be knowledgeable about the program. Concern over the decision not t o conduct a p i l o t study, t h e r e f o r e , w a s l i m i t e d more to possible lack o f c l a r i t y or ambiguity o f the questions asked r a t h e r than to an 79 understanding o f t h e i r i m p li c a t i o n s , a p p l i c a b i l i t y or to technical flaws. In response to t h i s concern, the questionnaires were submitted to f i v e associates a t Michigan S tate U n i v e r s i t y who possess adequate f a m i l i a r i t y w ith the program to serve as a t e s t panel. In t h e i r view, the questions were c l e a r , concise and s t r a i g h t f o r w a r d . D i s t r i b u t i o n o f the Questionnaires The questionnaires were mailed during the f i r s t week o f May, 1974, p ersonally addressed to the 40 c h i e f business o f f i c e r s in the survey group, and under cover o f a personalized l e t t e r (see Appendix C). Recognizing t h a t in a l l cases the c h i e f business o f f i c e r may not choose to pers onally complete the q u e s tio n n a ire , a space was provided thereon f o r the name o f the person completing the form. An assumption is made, in such cases, t h a t the views o f those completing the ques­ t i o n n a i r e are r e f l e c t i v e o f t h e i r c h i e f business o f f i c e r s . For iden­ t i f i c a t i o n purposes and f o ll o w - u p , the name of the i n s t i t u t i o n to which each question n aire was sent was typed p l a i n l y thereon p r i o r to m a ilin g . Inte rv ie ws With Respondents F if t e e n o f the respondents were interviewed by telephone f o l ­ lowing r e t u r n o f a l l que stionnaire s. was t h r e e f o l d : The purpose o f the inte rv ie w s ( 1) to obtain answers to questions l e f t blank or an understanding o f the reason t h e r e f o r , ( 2 ) to c l a r i f y seemingly incon­ s i s t e n t answers, and ( 3 ) to obtain a d d it i o n a l information about methods o f funding and control a t variance w it h a general trend or which may appear to have unique aspects. Accordingly, these interv ie ws could 80 not be scheduled p r i o r to the re turn o f the questionnaires and s e lec­ tio n of those to be interviewed was l e f t to chance. Summary This study proposes to f i n d out how unemployment compensation is being administered w it h i n Michigan i n s t i t u t i o n s o f higher education; whether or not i t is o f s u f f i c i e n t concern to c h i e f business o f f i c e r s to warrant and j u s t i f y the development and implementation o f models which e s t a b lis h a c c o u n t a b i l i t y a t the departmental lev e l with budgetary c o n tro ls ; whether such contro ls are viewed as necessary, advantageous or d e t r i m e n t a l ; and whether or not coverage has brought in some bene­ f i c i a l changes from an i n s t i t u t i o n a l perspective. The answers to these questions are to be found in the responses contained in two separate q uesti onnaire s, one sent to c h i e f business o f f i c e r s of 13 public i n s t i t u t i o n s and the o ther to c h i e f business o f f i c e r s o f 27 p r i v a t e in s titu tio n s. CHAPTER V THE ANALYSIS OF RESULTS Intro d u c tio n To r e c a p i t u l a t e b r i e f l y , t h is chapter w i l l describe the re s u lts o f the questionnaires and interv iews which were designed to e l i c i t inform ation about: ( 1) the o rg a n iza tio n a l s tru c tu re w i t h i n which unemployment compensation is administered in Michigan i n s t i t u t i o n s of higher education, ( 2 ) the opinions of c h i e f business o f f i c e r s with regard to a c c o u n t a b i l i t y f o r expenditures r e l a t e d t h e r e t o , (3) the s i g n i f i c a n c e o f these expenditures, and (4) the changes in employment p rac tice s which are a t t r i b u t a b l e to t h i s coverage. The questionnaires were sent to 40 c h i e f business o f f i c e r s of Michigan i n s t i t u t i o n s o f higher education, 13 in the p u b li c sector and 27 in the p r i v a t e se ctor. Although d i f f e r e n t questionnaires were sent t o those in the p u b lic as opposed to the p r i v a t e s e c t o r , seven o f the ten questions contained in each were common to both question­ n aire s . Only questions t h r e e , f o u r and f i v e d i f f e r e d , these being str uc tured toward d i f f e r e n t treatment accorded under the Act and the d if f e r e n c e s in accounting s t r u c t u r e u t i l i z e d by public and p r i v a t e In s titu tio n s. A d d i t i o n a l l y , fo llo w-up interv ie ws were conducted w ith 15 o f the respondents to e l i c i t e i t h e r a c l a r i f i c a t i o n or g r e a t e r under­ standing of t h e i r responses. Information and opinions obtained in the 81 82 interviews is interspersed with the commentary r e l a t i n g to each question. A n a l y ti c Design As indicate d previously in Chapter I V , the survey group con­ tained 13 public and 27 p r i v a t e i n s t i t u t i o n s o f higher education. Differences in treatment under the a p p lic a b le law have been des­ cribed. Other d if f e re n c e s may e x i s t which are not r e a d i l y apparent. Accordingly, the r e s u l t s have been tabulated by public i n s t i t u t i o n s and p r i v a t e i n s t i t u t i o n s . Size may also make a d i f f e r e n c e . The re fo re , the i n s t i t u t i o n s have been c l a s s i f i e d w it h i n fo u r s i z e groupings: those w ith e n r o l l ­ ments o f 5 0 0 - 1 ,0 0 0 , those with enrollments of 1 , 0 0 1 - 3 , 0 0 0 , those with enrollments o f 3 ,0 0 1 - 1 0 ,0 0 0 and those w ith enrollments o f g r e a t e r than 10,000. The d i s t r i b u t i o n of the respondents t h e re in i s 9 , 16, 9 and 6 , respectively. There are no public i n s t i t u t i o n s with enrollments of less than 1,000 nor are there any p r i v a t e i n s t i t u t i o n s with e n r o l l ­ ments o f g r e a t e r than 10,000. The d i s t r i b u t i o n o f i n s t i t u t i o n s by enrollment according to t h i s c l a s s i f i c a t i o n s t r u c t u r e is i l l u s t r a t e d in Table 1. Questionnaire Returns The questionnaires were mailed Hay 3 , 1974. Within two weeks, a 60 percent return had been r e a l i z e d ; w i t h i n f o u r weeks a 75 percent re t u r n ; w it h i n s ix weeks a 90 percent r e t u r n and in j u s t over e i g h t weeks a 100 percent re t u r n . a Table 1,.—Summary of the number of questionnaires sent and returned. Enrollment Fall Term 1971 500- 1,000 Public Institutions • * 2 3,001-10,000 5 Greater than 10,000 6 13 Totals 9 9 14 16 • 1,001- 3,000 Totals Private Institutions 4b 4 * 27 * 9 6 40 a Responses were received from a ll 40 chief business officers to whom the questionnaires were sent, a 100 percent return. ^General Motors Institute was found to be owned and supported by General Motors Corpora­ tion and not operated as a nonprofit organization. Subsequent tables do not include data from the questionnaire returned therefrom. 84 Twenty-six o f the 40 questionnaires {65 percent) were signed by the c h i e f business o f f i c e r to whom the questionnaire was maile d, 4 in the public sector ( 3 0 . 8 percent) and 22 in the p r i v a t e sector (81 .5 p e rc e n t ) . T h irte e n o f the questionnaires {3 2.5 p e r c e n t ) , nine in the pub lic sector ( 6 9 . 2 percent) and fo u r in the p r i v a t e sector ( 1 4 .8 p e r c e n t ) , were signed by someone o ther than the person to whom the question n aire was addressed. One que stionnaire in the p r i v a t e sector ( 3 . 7 percent) was not signed. The g r e a t e r incidence of such d eleg ation in the public as opposed to the p r i v a t e se ctor is probably r e f l e c t i v e o f the more complex o rg a n iza tio n a l s t r u c t u r e o f those i n s t i t u t i o n s which f o r the most p a rt are l a r g e r than the p r i v a t e in stitu tio n s. In conversation with the Resident Comptroller o f General Motors I n s t i t u t e , i t was discovered t h a t GMI is owned and supported by General Motors Corporation. As such, i t is not operated as a non­ p r o f i t o rg a n iz a t io n and has been subject to the provisions o f the Michigan Employment S e c u rit y Act f o r many ye ars. Accordingly, data r e l a t i n g to GMI are not included in the fin d in g s which f o l l o w . Analysis o f the Questionnaires Responses to each o f the questi onnaire items are presented in t a b u la r form in t h i s chapter. In the design o f the q u e s t io n n a ire , how ev e r , several o f the questions were arranged in a d e f i n i t e sequence to e l i c i t responses toward a p ro gres sive ly g r e a t e r understanding o f some aspect o f the study. In the analysis which f o l l o w s , t h e r e f o r e , responses to these questions are reviewed to g e th e r. 85 Questions One and Two These questions taken to geth er are a s tr a ig h tfo rw a r d attempt to learn where w i t h i n the o rg a n iz a tio n a l s t r u c t u r e o f each i n s t i t u t i o n r e s p o n s i b i l i t y f o r the i n t e r n a l ad m in is tra tio n o f unemployment com­ pensation has been placed. Question one is d ir e c t e d to an i d e n t i f i c a ­ tio n o f the ex ecutive or a d m i n is t r a t iv e o f f i c e r charged w ith t h i s resp o nsib ility. Question two is d ir e c t e d to an i d e n t i f i c a t i o n o f the fu nctio nal placement w i t h i n t h a t l i n e o f a u t h o r i t y . Question one asked, "Within the o rg an iz a tio n al s t r u c t u r e o f your i n s t i t u t i o n , where does the primary r e s p o n s i b i l i t y f o r the i n t e r n a l a d m in is tra tio n o f unemployment compensation f a l l ? " Table 2 summarizes the responses. A l l but f i v e o f the respondents indicate d t h a t t h i s responsi­ b i l i t y f a l l s upon the c h i e f business and/or f i n a n c i a l o f f i c e r . these f i v e , f o u r are in the p u b lic se cto r. Of They in d ica te d t h a t p r i ­ mary r e s p o n s i b i l i t y f o r the i n t e r n a l a d m in is tra tio n o f unemployment compensation f a l l s upon: (!) p resident f o r a d m i n is t r a t io n , the personnel o f f i c e r , ( 2 ) an a s s i s t a n t (3) a vice-president fo r adm inistration, and (4 ) a v i c e - p r e s i d e n t f o r u n i v e r s i t y r e l a t i o n s . In each case, to the second question, which asked, "To what s p e c i f i c o f f i c e is author­ i t y delegated?" they ind icate d "Personnel," a function g e n e r a l ly con­ sidered a r e s p o n s i b i l i t y o f the c h i e f business and/or f i n a n c i a l o f f i c e r . The s i n g l e p r i v a t e i n s t i t u t i o n wherein another l i n e of authort i y was in d ica te d does not have a separate corporate o f f i c e r f o r business and/or fi n a n c e , a l l a u t h o r it y *b e in g delegated to an academic Table 2 .—Summary of Question 1: "Within the organizational structure of your institution, where does the primary responsibility for the internal administration of unemployment compensation fall?" Public Institutions o QJ JT S- U ^ .4 - 0*04- JZ CO P ro 4 -P O C O o*o U-c ■i* 10 <4- O) 4- sOQ. O U)'r u (HO) U ucc r— rt3 4- 10 C 4- 3*1•r“ ' OCQLl. Private Institutions Totals 4- 4O O •I- S-C QJ jz (J •o r— o 04- JZ -C4- p P O *r“ oE uo • i-tj 4 - re 4- u o< 500- 1,000 S- >1- s- o -C p o 4- P O C QJ O T3 U ■!— •I- 4_ QJ 4 - 5O Q- Q J i- u (_J O -r* ^4- 0 *0 4 JZ C O P fT3 o UVr^ O O U U C C *i—'(—(O 4 - V) C 4 - 3 *p O CQ Ll_ 9 O •r- (J O O-r- \4 - 0 1 *0 4 - -C p 04- JZ C O P P O 4- o< O o JC 4- • i- - D 4 - (O 4- U SQ J rs-u -C Q J O*u r“ OE uo 4- 4- Q J • i- S- 4 -P O C o S- o JZ p o 0*0 (O -C o o u • I — O 4.c 4— p 4- o« 10 tO-ro o o U -r *r— tO ucc •r— *r— rQ 4- O 4 - S- 4 - to C 4 - 3 -rO O L l_ OQ. QJ •r- S- O O •r— o E o QJ ■I— T3 4- iO o O< 4- S- o JZ p o 9 03 cn 1.001- 3,000 2 3.001-10,000 3 13 15 2 Greater than 10,000 25 Totals 34 Personnel; Assistant President for Administration. ^Vice-President for Administration; Vice-President for University Relations. Executive Vice-President. 1 87 dean and an ex ecutive v i c e - p r e s i d e n t , with re sp o ns ib i1i t y f o r the a d m in is tra tio n of unemployment compensation being with the l a t t e r . Question two, as noted above, asked, o f f i c e is a u t h o r i t y delegated?" Table 3. "To what s p e c i f i c The responses are summarized in Nineteen ( 4 8 . 7 percent) of a l l respondents indicated "Personnel," six ( 1 5 .4 percent) " P a y r o l l , " f i v e ( 1 2 .8 percent) "Employee or S t a f f B e n e f it s , " three ( 7 . 7 percent) "Comptroller," and nine (23.1 percent) "Business O f f i c e (G eneral)."^ Note t h a t only one public and two p r i v a t e i n s t i t u t i o n s place t h i s r e s p o n s i b i l i t y d i r e c t l y under the c o m p t ro lle r, although six o t h e rs , one public and f i v e p r i v a t e , place i t under p a y r o l l — a probable function of the c o m p t ro lle r's o f f i c e . The terminology used to describe the o rg a n iza tio n a l s t r u c t u r e of i n s t i t u t i o n s o f higher education, as w ell as the o rg an iz atio n al s t r u c t u r e i t s e l f , va rie s considerably e s p e c i a l l y with the wide range o f enrollm ent encompassed by t h i s study (610 to 4 3 , 8 8 8 ) . t i o n s , t h e r e f o r e , must be made w ith extreme caution. G en eraliz a­ I t i s apparent, however, t h a t r e s p o n s i b i l i t y f o r the i n t e r n a l ad m in is tra tio n of unem­ ployment compensation is g e n e r a l ly a r e s p o n s i b i l i t y o f the c h i e f busi­ ness and/or f i n a n c i a l o f f i c e r . Furthermore, where a u t h o r i t y to adminis ter the program i s delegated to a f u nc tio na l u n i t , i t is gen­ e r a l l y delegated to e i t h e r personnel (6 3 .3 p e r c e n t ) , p a y r o ll ( 2 0 .0 percent) or employee or s t a f f b e n e f it s ( 1 6 . 6 p e r c e n t ) , functions which have considerable ove rlap. Only 10 percent o f these i n s t i t u t i o n s V h r e e respondents checked m u l t i p l e answers so t h a t the t o t a l response to t h i s question is 107.7 percent. "To what specific office is authority delegated?" Greater than 10,000 l b .. Totals 2 .. 1 ** 1 5a .. .. 1 4 1 .. 10 1 .. .. 1 5 1 1 2 .. 5 3 1 5 7 1 2 2 .. 1 3 5 9 2 9 5 Payrol 1 .. Employee or Staff Benefits 6C «• Business O ffice (General) la 4C 1 Comptroller 3.001-10,000 2 Personnel 1 1 Business O ffice (General) ■« 1 Totals Comptroller 1.001- 3,000 Personnel 500-1,000 Private Institutions Payrol1 Business O ffice (General) Comptroller Personnel Payrol1 Student Enrollment Fall Term 1971 ; Employee or Staff Benefits Public Institutions Employee or Staff Benefits Table 3 .—Summary of Question 2: 2 6 .. 6 3 1 4 1 19 3 .. 9 a0ne respondent indicated both Employee or Staff Benefits and Personnel. bNoted "Part of Personnel." °lvio respondents indicated both Payroll and Personnel: as a jo in t, cooperative responsibility. one as a single department; one 89 indicate d t h a t a u t h o r i t y was delegated to the c o m p t ro lle r's o f f i c e , the o f f i c e p r i m a r i l y concerned with the control fu n c tio n . Questions Three, Four and Fiv e— Public I n s t i t u t i o n s These questions taken in sequence are structu red to e l i c i t information about the accounting treatment accorded to expenditures f o r unemployment compensation. While each question provides in s ig h t in to a s p e c i f i c aspect o f the accounting s t r u c t u r e , viewed together they provide a f a r more comprehensive understanding. To question t h r e e , "Has an expenditure account been estab lished in the General Fund f o r unemployment compensation?" which is summar­ ized in Table 4, ten o f the respondents in d ica te d "yes." Of these, three in d ica te d such an account has been establis hed in the fu nctional c l a s s i f i c a t i o n "Business Operations" and seven in "Retirement and o Other Fringe B e n e f i t s . " T h e re fo re , 5 3 .8 percent o f the public i n s t i ­ tu tio n s t r e a t t h i s expenditure f o r budgetary purposes as a f r i n g e benefit. Note t h a t o f the ten i n s t i t u t i o n s which have estab lished an expenditure account in the General Fund f o r unemployment compensation, only one o f these i n s t i t u t i o n s charges a l l 2 reimbursements to the The Manual f o r Uniform Financial Reporting, S t a te o f Michigan Colleges and U n i v e r s i t i e s (re vised June 2 7 , 1969) . s t i p u l a t e s t h a t expenditures o f the General Fund are to be recorded in f u nc tio na l and o bject c l a s s i f i c a t i o n s : ( 1 ) I n s t r u c t i o n and departmental research; (2) Other educational se rvices; ( 3 ) L i b r a r i e s ; (4) Organized research; ( 5 ) Extension and off-campus education; ( 6 ) Student se rv ic e s ; (7) Student a i d ; ( 8 ) Pu blic se rv ices ; (9) General a d m i n is t r a t io n ; (10) Business opera tions; (11) Operation and maintenance o f p l a n t ; and (12) P lan t improvement and extension (p. 11). For budgetary purposes, these i n s t i t u t i o n s u t i l i z e an a d d it i o n a l c l a s s i f i c a t i o n , Retirement and Other Fringe B e n e f i t s , which is r e a l l o c a t e d to the prescribed fu n c tio n a l c l a s s i f i c a t i o n s . Table 4 .—Summary of Question 3—public institutions: "Has an expenditure account been established in the General Fund for unemployment compensation?" (A)Yes (1) In what (2) Are all claims, i . e . , reimburse­ functional ments to the Michigan Employment Security Commission, charged to classification? this account? (ft c o 4J ia S(D Q. O Student Enrollment Fall Term 1971 1.001- 3,000 1 3.001-10,000 3 Greater than Totals 10 {b)No, only those claims attributable to operations of the: T3 E VI V) CD £ *r(ft 3 CO (ft<4— e o o ■r~ CD +> U to C U rtJ 0) e Q.0J O -P V) T3-P E -rf04QJ •M E E CD ajto E CD (D S- Cl ■p- E +J-iCD SQCLL. i. tu .e +j o •• •• 1 * 1 • 2 • 3 1 2 10,000 1 £ •1—+J ITS C E CO (a}Yes t. cu .c +j o osa. 4 (3) Are administra­ tive expenses charged to this account? ■a e 3 Ll_ 3 Ll_ TJ r— (13 SCD E CD (0 O 1 c 3 U. QJTD i—0) -Q+J E a> •r~ (ft , U c ia> Q> cn < +-> o • * * 1 1 3 5 1 1 Table 4.—Continued. (B) No (1) Expenditures (Reimburse­ ments to the Michigan Employment Security Com­ mission) are charged to: Student Enrollment Fall Term 1971 "O oj & i— ra +j O +J I c + J O C ID 3 C S --0 CL C CLGJ > Oi oe 3= fEl rf13 O U E ■i- CD o 0 *r* ra <0*0 +j +j x : 0) u ra si — *r~ ■*- = 2 s- o ra w o ra i/> c l c qj t- U (8 ra qj o + j fO Q. 4«i ■(— ^ 03 "O‘i- T+J-C c u 2 2 o Qj-f- ra ra + J .r**i- O a> rojc i_ 0 X 3 IA E S*f— i— S. 3+J c « E(A ra tu*i— > ra U QJ C O ) CL O +J 0 .0 o a; 0) U C 0*4- ra eC+J-O O 1 ■r- QJ ra C U D . SOS­ es: 0 .0 3 i r-* Q) ra u<— C 3 QJ E ■i— iw S- o QJSQ. XX! QJ G) +J c ra < s- O" UJ ■T— V3 ra xi o 0) .c +J o 1.001- 3,000 3.001-10,000 Greater than * f • * 10,000 Totals a" If monies were not available from other sources ( i . e . , expendable restricted account), the General Fund would be charged. Has not happened to date." ^"Proportionate share attributable to General Fund operations only." cOne respondent indicated "except small outside service consulting fee." ^"10 percent of claim costs are charged directly to the departments for whom the claimants worked." 92 Michigan Employment S e c u rit y Commission to t h is account without regard to the fund from which claimants had been paid. T h i s , in e f f e c t , tr e a t s expenditures f o r unemployment compensation as i n s t i t u t i o n a l overhead. One i n s t i t u t i o n also charges reimbursements to the Commission a t t r i b u t a b l e to operations in the Expendable R e stric ted Fund account. 3 to t h i s One other i n s t i t u t i o n charges reimbursements to the Commis­ sion a t t r i b u t a b l e t o operations in both the Expendable R e s tric te d Fund and the Designated Fund 4 to the General Fund expenditure account. Only one of these i n s t i t u t i o n s also charges a pro portionate share o f a d m i n is t r a t iv e expenses to a General Fund expenditure account, the others apparently absorbing such costs w it h i n the department charged with ad m in is tra tio n of the program. I t is noteworthy t h a t t h i s i n s t i ­ t u tio n is the only one which has es tablis hed a separate o f f i c e to handle unemployment compensation, a f a c t o r which makes i d e n t i f i c a t i o n of a d m i n is t r a t iv e expenses f e a s i b l e and probably accounts f o r i t s unique p o s itio n among the pub lic i n s t i t u t i o n s in t h i s regard. One o f the remaining i n s t i t u t i o n s which have not es tablis he d an expenditure account in the General Fund charges a l l reimbursements 3 The Expendable R e s t r ic t e d Fund, as defined in the Manual f o r Uniform F in an cial Reporting, "is to be maintained to account f o r a l l special programs financed by separate special-purpose s t a t e ap p ro p r ia tio n s , income from endowment funds, f e d e r a l contracts and g ra n ts , and othe r g i f t s and g ran ts. In a l l cases, the use of the funds is r e s t r i c t e d f o r s p e c i f i c purposes stated by the supporting agencies or donors except f o r the balance r e t a in e d f o r working cap­ i t a l (p. 12) . ^The Designated Fund, according to the Manual f o r Uniform Financial Reporting, " i s to be maintained to account f o r funds f o r . s p e c i f i c purposes which are not r e s t r i c t e d by donors or supporting agencies" (p. 12) . 93 a ttrib u ta b le to General Fund operations to an account w ithin the department or division in which claimants were employed. The other two in s titu tio n s charge reimbursements to a clearing account to which departmental contributions, assessed on a uniform percentage o f p a y ro ll, have been credited. One of these in s titu tio n s also charges 10 percent of a ll claim costs d ire c tly to the departments forw hichthe claimants worked. Question four is directed to the accounting treatment accorded unemployment compensation a ttrib u ta b le to operations of the Designated Fund and question f iv e , in essence, a ll other funds. Question fo u r, which is summarized in Table 5, asked, "Are reimbursements to the Commission a ttrib u ta b le to operations in the Designated Fund d is trib u ted as a d ire c t charge to the account from which the claimant had been paid?" Seven (53.8 percent) of the respondents indicated that they were. Of the six th a t indicated these reimbursements are charged elsewhere, two previously indicated in response to question three that they are charged to the General Fund expenditure account, one to an account w ithin the department or division in which claimants were employed, and two to a clearing account operating as a "pool" to which departmental contributions assessed on a uniform percentage of payroll have been credited. One of the la t t e r again indicated that 10 percent of claim costs are charged d ire c tly to the departments fo r which claimants worked. The answers given by these fiv e respondents are consistent with those given to question three. In the only .v a ria tio n , one respondent indicated th a t reimbursements a ttrib u ta b le to operations Table 5 .—Summary of Question 4—public in s titu tio n s : "Are reimbursements to the Commission attrib u ta b le to operations in the Designated Fund distributed as a d irect charge to the account from which the claimant had been paid?" (A) Yes (8) No (1) Where are they charged? I E •f" -O-P c c 3 3 Student Enrollment Fall Term 1971 Li- O O r— ( J c ra •f— -c i— u -a p p jz oj •r- o u > , 5 -r- O P rr- P= <— Cr—ra 3 O-P O O CO) U ClQJ> U= Era rO P.C rd P CT rawo £ in p-g~ qj • r ra 0) O -P P T>(—-I— PT3 tn+j U A C S. QJ C C D CL) ra 0.0 >—-r- OJ3 P +-> o x O-C'r- C O 0.00 0) f— ■LU h-P*0 fO h- OP 0X1 1.001- 3,000 1 1 3.001-10,000 3 2 (2) I f charges are made to a clearing account operating as a "pool," were departmental accounts assessed on: a ir — a»— E ra o oP P p QJ JO p O 4- C >j ■r- QJ ra COO. 3 P QJ4— < 0.0 I oQJra Ur— C3 QJE •r- P PO 014a. x~a QJQJ P C ra

O < *T3 s- U. fa •r-U Xc 33 ) u S- a) -C c CT) < Allocated percentage-wise at a predetermined rate of general administrative overhead. P >1 O Sd) qj 1- > -r- O 13 U C O J i— i q; • P T C he 3 t; oj O CSOJ u ra u rJ-Q u * i- u C W.C.— Q J ra 3 ra > cn p ra C 0 )0 c c •i- C P Q J TJ i- -r— E WQ J ra p = p cp Q J n j r - i— O*rr- s_ c ra*r--o O DO Q-P O J D.Q.O) 3 S< 0= 13J3 U 1 V) P P S- C C ra o ra Q.-I—e oj w *i—"O c -o •<- ra oj 3 > -— >> o O J *1- u o U .C -O 1 — u p r a < s- U E C O -I- Q J C *r£1 ra .c p 3 oj PC SO *r O JC O J ( - 3 E -r- 3 p 2 1 Designated Fund 2 7 1 2 1 Expendable Restricted Fund 3 5 1 3 1 Auxiliary Activities Fund 1 7 Agency Fund 2 8 * • 2 1 • • 2 1 Allocated percentage-wise at a predetermined rate of general administrative overhead; charged to a reserve account to which budget amounts have been transferred from principal operating accounts. sO J .c p o Table 8 .—Summary of Question 3—private institutions: "Has an expenditure account been established in the Current Fund for unemployment compensation?" (A) Yes (1) In what functional classification? (2) Are a ll contributions or reim­ bursements to the Michigan Employment Security Commission charged to this account? (3} Are adminis­ trative expen­ ses charged to this account? (a) Yes (a) Yes ro C o Student Enrollment Fall Term 1971 CP •1- c ro fO E f CL o3 4C O O •r* QJ P U (O C p m Cl c O.OJ O P 500-1,000 7 1.001-3,000 12 3.001-10,000 3 Totals 22 •r* P c o ■r* p ro P P i — V) (O'rP c 'I— P l/l i/i >, •r— 'I— c X P 0) Cl 3 L) C3 < < i— ra Ci— o ro •r- P P O J ro c u tu 3 0 •a LUoQ i/i p c 01 01 E UP •r- s_ > ro P Cl (U OJ 1/1CD 6 1 1 3 4 10 2 2 4 8 3 1 2 19 8 14 Table 8 .—Continued. (B) No (1) Expenditures (Contributions or reimbursements to the Michigan Employment Security Commission) are charged to: >> U V) Student Enrollment Fall Term 1971 (0 +-> »—c *0 3 tf) O O <—o (0 ra p c tn a) a> E Ol p «a Jra 3 CLTJ CUC a ra tn +-> tn = >,+-» 3 S- C a ra 3 O U r- o (J ro U r- rd tn U rO ra P<—C c ra ra tn qj c r qj £ OP Ol P 'r ra i. tn s- 3 rd-r* aj 3= E <0 O P£ U (OJU ro t/)-Q m ro tn OlC Q) 3 ra QJOP O Ol *0 *r-'f— a; c C Ol PT3 •i- CSI 3 QJ ra S-*r- O.Q J- «—QJ (OP’ r ' r - U i— tn OJro.3 Saj c f—I- 3 P C U 0J u oj ecu tn o. 0.0 O QJ •r~ X < OP OJD S QJ (2) Were departmen­ tal allocations increased in con­ sideration of such expenditures? (a) Yes (3) I f charges are made to a clearing account operating as a "pool," were departmental accounts assessed on: (b) No E C O P •rC 3 < 500- 1,000 2 1.001- 3,000 1 QJr— o* 1 ro O P c >, QJ ro O O . SQ JP 0 .0 QJ ra U r— C 3 0J E *i— C s- o QJ4CL X "O QJ OJ P c ra < s- 3.001-10,000 Totals a0ne respondent indicated both General Administration and General Institutional. ^One respondent indicated a ll three categories. directly. Commercial enterprises are charged tn ■r— tn ra -Q SQJ JC P o 101 Nineteen of those responding a ffirm a tiv e ly indicated th a t a ll contributions or reimbursements to the Commission are charged to the expenditure account established in the Current Fund, only two in d ic a t­ ing d iffe re n tia l treatment to service departments and one to comnercial enterprises. Four respondents indicated an expenditure account for unem­ ployment compensation had not been established in the Current Fund. Two of these stated th a t such expenditures are charged to departmental salary and wage accounts, one to departmental or divisional accounts other than salary and wages accounts, and one to "Miscellaneous Expense." In only one instance were departmental allocations increased in consideration of such expenditures. The responses to this question are summarized in Table 8. In response to question fo u r, "Are contributions or reimburse­ ments to the Commission a ttrib u ta b le to operations in a ll other funds treated in the same manner as the Current Fund?" summarized in Table 9, 21 responded a ffirm a tiv e ly and the remaining 5 indicated th a t they do not have payroll in other funds. Thus, while 9 of the 13 public in s titu tio n s accord a d iffe re n t treatment in d iffe re n t funds to expenditures fo r unemployment Research, (2) Organized A c tiv itie s Related to Educational Departments, (3) Sponsored Research, (4) Other Separately Budgeted Research, (5) Other Sponsored Programs, (6) Extension and Public Service, (7) L ib ra rie s , (8) Student Services, (9) Operation and Maintenance of Physical P lan t, (10) General Adm inistration, (11) S ta ff B enefits, and (12) General In s titu tio n a l Expense (pp. 234-235). Note th a t College and U niversity Business Administration c la s s ifie s s ta ff benefits as a function whereas the Manual fo r Uniform Financial Reporting, through omission of any mention of such, prescribes that such expenditures be charged to other functional categories. Table 9 .—Summary of Question 4—private in s titu tio n s : "Are contributions or reimbursements to the Commission attrib u tab le to operations in a ll other funds treated in the same manner as the Current Fund?" Student Enrollment Fall Term 1971 (A) Yes 500- 1,000 6 1,001- 3,000 13 3,001-10,000 2 Totals 21 (B) No « • • * * « • * Please explain how these are handled: Five respondents, three in the 500-1,000 classification and one each in the 1,0013,000 and 3,001-10,000 classifications, indicated that they do not have payroll in other funds. 103 compensation, the private in s titu tio n s a ll tre a t such expenditures in a uniform manner regardless of fund. Inasmuch as transactions of the General Fund, Designated Fund, Expendable Restricted Fund and A u xiliary A c tiv itie s Fund used by the public in s titu tio n s are a ll processed w ithin the Current Fund used by the private in s titu tio n s , this d if f e r ­ ence is probably more r e fle c tiv e of a general difference in accounting philosophy between the two sectors than to a difference s p e c ific a lly applied to the accounting treatment of expenditures for unemployment compensation. Question Five—Private In s titu tio n s Designed to learn whether or not the p rivate in s titu tio n s exer­ cised the funding option availab le to them under the nonprofit organi­ zation provisions of the Act, th is question asked, "Did your in s titu tio n e lec t to reimburse the Michigan Employment Security Commission fo r benefits paid a ttrib u ta b le to your status as a covered employer in lieu of contributions?" The responses are summarized in Table 10. Twenty-four (92.3 percent) of the 26 in s titu tio n s responded th a t they had elected the optional method of funding. Although 22 of these in s titu tio n s made the election e ffe c tiv e January 1, 1972, and therefore could have terminated the election e ffe c tiv e January 1, 1974, none did so nor did any indicate an intention to do so. Of the two in s titu tio n s that did not exercise the option, neither indicated th a t they would do so on the next possible date. Table 10.—Summary of Question 5—private in s titu tio n s : "Did your in s titu tio n elect to reimburse the Michigan Employment Security Commission fo r benefits paid a ttrib u tab le to your status as a covered employer in lieu of contributions?" (A) Yes (B) No (1) When did the election become effective? Student Enrollment Fall Term 1971 OJ f'". Ol <— * r- >» u rO 3 C rO rp ro r-~ Ol *3* 1'Ol r— >1 sm 3 C rO * >>_> s +» *1— O in POJ V c CD<0 I—u +J"!— +14- cn 4 -*i— O in pOJ OJ (J +l c rd *.+> 4- QJ4S--IOIC •i—*i— 4—4r— 4 - *i— p* CD QJU +1 c rd rd i- u QJ*r- *0 4 - 01 i—C Ol O in o tn O-iEc Ol 4—•!O tn 21 17 p. OJ u c rd +> u fd * r- 0 )4 - %- T - OIC Ol 4 -* r* O 1/1 500- 1,000 1.001- 3,000 1 3.001-10,000 2 8 Greater than 10,000 Totals g 8 16 One respondent indicated "Of l i t t l e significance" for General Fund; "Of great significance" for housing. 112 nine {3 4 .6 p ercent) in the p r iv a t e secto r were o f the opinion t h a t these expenditures were o f moderate s ig n if ic a n c e . Note th a t those in the p u b lic s e c to r, who f o r the most p a rt represent la r g e r i n s t i t u t i o n s , tend to place g re a te r s ig n ific a n c e on these expenditures than those in the p r iv a t e se cto r. One respondent from the p ub lic s e c to r commented t h a t "As a percentage o f t o t a l i t is in s ig n ific a n t--H o w e v e r , as an a d d itio n a l cost element i t e lim in a te s o ther budget choices we would r a th e r fund." Question Nine " In r e l a t i o n to your i n s t i t u t i o n ' s t o t a l operating exp en ditures, do you a n t ic ip a t e these costs in f u tu r e years w i l l be: ( a ) of less s ig n if ic a n c e , (b ) o f about the same s ig n if ic a n c e , or ( c) o f g re a te r s ig n ific a n c e ? " The responses are summarized in Table 14. Note th a t only fo u r respondents (1 0 .3 p e rc e n t), a l l from the p r iv a te s e c to r, expressed the opinion t h a t those expenditures would be o f less s ig n ific a n c e in fu tu r e years whereas e ig h t (2 0 .5 percent) o f a l l respondents a n t ic ip a t e these costs w i l l be g r e a te r . Again, those in the p u b lic se cto r tend to place g r e a t e r s ig n ific a n c e on these expen­ d itu re s than do those in the p r iv a t e s e c to r. However, 8 4 .6 percent in the p u b lic , 6 5 .4 percent in the p r iv a t e and 7 1 .8 percent o v e r a ll expressed the opinion th a t these expenditures w i l l be o f about the same s ig n ific a n c e in fu tu r e years as they have been during the f i r s t two years o f coverage. Table 14.--Summary of Question 9: "In relation to your institution's total operating expenditures, do you anticipate these costs in future years w ill be:" Student Enrollment Fall Term 1971 500- 1,000 Public Institutions (U E pp>. 10pQJ w QJ OJ U QJU u SZ C s- c c P QJ tp*r“ 44-*.O u ) O W O V) C-ai u c QJ l/l•U rl/l 4QJ.rI—c Ol 4—'r— O i/l Totals O) E 0) OJu .c c P QJ p—*1 u 3 u_•° c ®o» 4-vO tn OJ u S- c OJQJ Pu Q5t~ QJ4J--.Ol C Ol 4- •>O tn * 2 5 2 2 5 2 1 1 2 10 2 2 11 3 5a la *• 2 1 *• 7 2 c O I\ * C □ il 28 8 • li « * * * * 17 3 • • 5 ■ 4 4 a0ne respondent indicated "Of about the same significance" for General Fund; "Of great significance" for housing. 114 Question Ten This question was s tru c tu re d to le a r n , in the opinion o f the c h ie f business o f f i c e r responding, whether employment p ra c tic e s have been modified in view o f th is coverage and whether some b e n e fic ia l aspects may now be apparent. The responses are summarized in Table 15. Eigh t (6 1 .5 percent) o f those responding from the p ub lic sec­ t o r and 12 (4 6 .2 percent) from the p r iv a t e s e cto r were o f the opinion th a t coverage under the Michigan Employment S e c u rity Act has re s u lte d in b e t t e r employment p ra c tic e s a t t h e i r i n s t i t u t i o n s . Six (4 6 .2 per­ cent) in the p u b lic sector and f i v e (1 9 .2 p ercent) in the p riv a te s e cto r f e l t th a t coverage has brought about g r e a te r interd ep artm en tal cooperation in scheduling employees to meet the needs o f varying or seasonal workloads. While only one in the p u b lic s e cto r (7 .7 percent) f e l t t h a t coverage helped to e lim in a te substandard employees through s h o rte r probationary periods or e a r l i e r term in a tio n o f u n s a tis fa c to ry p robationary employees, seven (2 6 .9 percent) in the p r iv a t e sector expressed th is opinion. Seventeen ( 4 3 .6 percent) o f a l l respondents, 5 (3 8 .5 percent) representing p u b lic i n s t i t u t i o n s and 12 (4 6 .2 percent) representing p r iv a t e i n s t i t u t i o n s , expressed the opinion t h a t coverage has given employees a g r e a te r sense o f s e c u r ity . Five from the p u b lic secto r ( 3 8 .5 percent) and seven from the p r iv a te s e cto r (2 6 .9 p e r c e n t), how­ e v e r, in d ic a te d a s h i f t in employment through increased use o f exempt student employees to f i l l p a r t -t im e employment needs and fo u r (1 0 .3 p ercen t) of a l l respondents were o f the opinion t h a t coverage has 3 _1 o o —J 1 CD CO w CD CD CD o o o OJ r\s ■n m W 3 W — 1 -I r+ .o c US — ' O. -O — 1 — ' fD — > 0 3 3 3 ID rt1 3 3 <-+ \A o o 1 ro 00 cn co ro Resulted in b e t t e r employment practices? ro Given employees a g re a te r sense o f secu rity? Resulted in a reduction o f your w orkforce, e . g . , through use o f more outside con­ tra c to rs ? Helped to e lim in a te substandard employees through s h o rte r probationary periods o r e a r l i e r term in a tio n o f u n s a tis fa c to ry probationary employees? 01 cn co co ro ro —> Brought about g re a te r i nterdepartmental cooperation in scheduling employees to meet the needs o f varying or seasonal workloads? Increased use o f exempt student employees to f i l l p a r t-tim e employment needs? SLL "O c O" C/1 c+ O Table 15.--Summary of Question 10: "In your opinion, has coverage under the Michigan Employment Security Act at your institution (Please check all that apply):*1 —1 o c+ PJ —j CD T — > ID O tu ■* r+ CD ID CD -J O r+ zr Hi P> m 1 1 1 O 0 CD CD CO s. 0 0 0 0. to — * 0 CO "O —I — > ro 3 r+ C Ort> 3 ro r+ —j V CD CD O O 0 r+ Resulted in b e t t e r employment practices? ro ro ■n m o> 3 C/1 cn O CD 1 15.--Continued. ct- —1 V CD O •—1 Table H O CO * 0 0 00 ro —1 to Given employees a g re a te r sense o f secu rity? ro Resulted in a reduction o f your w orkforce, e . g . , through use o f more outside con­ tra c to rs ? "O "5 < PJ r+ ft) to cn to Helped to e lim in a te substandard employees through sh o rte r probationary periods o r e a r l i e r term in a tio n o f u n s a tis fa c to ry probationary employees? ro Brought about g re a te r interdepartm ental cooperation in scheduling employees to meet the needs o f varying or seasonal workloads? to Increased use of exempt student employees to f i l l p a r t-tim e employment needs? 9LL Z3 tn i/i cr ro OJ o t. o CD CO * CD CD CO 13 — * ro C D Cl o cr n> o o o —i o3 3o 3 3 3 £ (t (D (1 O (O CD ro -h 3 3 3 3 ft) ro ro ro in l/l fD i/> o 3 t/> in -a *o 3 -a T3 -a O ro o o o o 3 3 3 3 3 3 CL CL CL CL C l ro fD ro ro ro ro 3 3 3 3 •a r+ — • in CL *< CL OJ ro ->• CL ro cl ro * a> 3 o O 3 O 3* r+ O CtID O c+ o> C OJ CL 3 3 3 O J in o> i/i in 3in OJ in £ 3 l/> ro r+ £ in ro J ro 3 3 O £ -h 3 n> 3 n OJ t/i in fD X) C QJ in ro in r+ <-+ OJ CL o ro ro c. in ro ro ro CD O O __ , o CD CD Resulted in b e t t e r employment practices? co Given employees a g r e a te r sense o f s e cu rity ? ro Resulted in a reduction of your w orkforce, e . g . , through use o f more outside con­ tra c to rs ? _o cf- O 3 o in tn —<• in 3 -O o> c — ■ro — > in O c+ OJ —< in r+ 3* OJ c+ 3 O 3 ro ro in o 3 co 03 o in r+ OJ ro CL ro ro in co ro Helped to e lim in a te substandard employees through s h o rte r probationary periods o r e a r l i e r te rm in a tio n o f u n s a tis fa c to ry probationary employees? ro Brought about g re a te r i nterdepartm enta1 cooperation in scheduling employees to meet the needs o f varying or seasonal workloads? co Increased use of exempt student employees to f i l l p a r t-tim e employment needs? OJ T3 TD *t ) m OJ 3 tn — > 3 r+ — * — ’ O C, 13 — • CL VI — 1 — t ro —>ro 3 3 3 ro C+ 3 3 r+ OJ < ro TOJ D cr ro 3 ro ro to ro 15.—Continued. OJ cd 3 Table o CO 1. * CD CD tn CD CD O - . - - » CD 1 1 t tn o 3 in a l o r+ Q> in 113 re s u lte d in a reduction o f t h e i r workforce through, f o r example, the use o f more outside c o n tra c to rs . Summary From the an alysis o f the questionnaires and data obtained in the in te rv ie w s , a number o f s i m i l a r i t i e s as w ell as d iffe re n c e s are apparent w ith regard to the o rg a n iz a tio n a l s tr u c tu r e w ith in which the in te r n a l a d m in is tra tio n o f unemployment compensation is placed and the accounting treatm ent accorded expenditures th e r e f o r . Aside from those which are a t t r i b u t a b l e to d iffe re n c e s in treatm ent under the p ro v i­ sions o f the Michigan Employment S e c u rity Act or d iffe re n c e s in the accounting s tr u c tu r e used by p ub lic and p r iv a t e i n s t i t u t i o n s o f higher education in M ichigan, however, n e ith e r s ize nor the p u b lic - p r iv a t e d is t in c t i o n appears to be a c o n trib u tin g f a c t o r . The a d m in is tra tio n o f unemployment compensation is a respon­ s i b i l i t y o f the c h ie f business and/or f in a n c ia l o f f i c e r a t a l l but 5 o f the 39 i n s t i t u t i o n s in the study. Of those f i v e , fo u r are large p u b lic i n s t i t u t i o n s in which the personnel fu n c tio n has been placed under a d i f f e r e n t l i n e o f a u t h o r it y . The f i f t h , a small p r iv a t e i n s t i t u t i o n , has no c h ie f business o f f i c e r per se. R e s p o n s ib ility f o r these a f f a i r s is placed under an execu tive o f f i c e r charged w ith a l l nonacademic a d m in is tra tio n . Where the a d m in is tra tio n o f unemployment compensation is d e le ­ gated to a fu n c tio n a l u n i t , i t is most o fte n to the personnel o f f i c e . Employee or s t a f f b e n e fits and p a y r o l l , functions which are commonly administered a t many i n s t i t u t i o n s and which o verlap co n sid e ra b ly , 119 are the o ffic e s to which a u th o r ity is delegated a t a l l but th ree o f the remaining i n s t i t u t i o n s . At those three i n s t i t u t i o n s , a u th o r ity has been delegated to the c o m p tro lle r's o f f i c e , an o f f i c e in h e r e n tly concerned w ith c o n tro l. At the p u b lic i n s t i t u t i o n s , a dual system w ith regard to the accounting treatm ent o f unemployment compensation expenditures predomi­ nates. Expenditures a t t r i b u t a b l e to operations o f the General Fund are charged to a General Fund expenditure account whereas expendi­ tures a t t r i b u t a b l e to operations o f o ther funds are charged d i r e c t l y to the account from which claimants had been paid. The cost burden re s u ltin g from unemployment compensation claims a t t r i b u t a b l e to opera­ tio n s in the General Fund, th e r e f o r e , are absorbed as an u n d is trib u te d operating expense o f the i n s t i t u t i o n whereas f o r other funds the burden is passed on to the lowest le v e l o f a d m in is tra tiv e a u t h o r it y r e f le c t e d in the accounting s t r u c t u r e , i . e . , the account from which claimants had been p aid . Thus, w ith in the context o f t h is study, these admin­ i s t r a t o r s are not held accountable f o r personnel actions r e s u lt in g in the payment o f unemployment compensation to claimants who were paid from the General Fund whereas they are held accountable f o r such actions r e s u ltin g in the payment o f unemployment compensation to claimants who were paid from o ther funds. Four o f the p u b lic i n s t i t u t i o n s accord uniform accounting treatm ent to a l l funds. T h e ir procedures d i f f e r s i g n i f i c a n t l y , how­ e v e r , providing models a t what may be viewed as both extremes o f the a c c o u n ta b ility continuum. 120 In co n trast to the p u b lic i n s t i t u t i o n s , the 26 p r iv a te i n s t i ­ tu tio n s a l l accord uniform treatm ent to expenditures a t t r i b u t a b l e to operations o f a l l funds w ith only three i n s t i t u t i o n s in d ic a tin g a d i f ­ f e r e n t treatm ent to c e r t a in operations w ith in the cu rre n t fund. A ll but th ree o f these i n s t i t u t i o n s charge a l l expenditures f o r reimburse­ ments o r c o n trib u tio n s to a Current Fund expenditure account, except as noted above, thereby absorbing such costs as an u n d is trib u te d i n s t i t u ­ tio n a l expense. Twenty-four o f the p r iv a te i n s t i t u t i o n s have ele cte d to reim­ burse the Commission in l i e u of paying c o n trib u tio n s , w ith only two opting to pay c o n trib u tio n s as provided f o r in the A ct. A ll 26 appear s a t i s f i e d w ith t h e i r d e c is io n , none in d ic a tin g an in te n tio n to change t h e i r method o f funding. Although 13 o f the respondents from a l l i n s t i t u t i o n s expressed the opinion th a t budgetary c o n tro ls , i . e . , d i s t r i b u t i o n o f costs in c u rre n t to the lev el o f a d m in is tra tiv e r e s p o n s ib i li t y a t which per­ sonnel ac tion s g iv in g r i s e to them took p la c e , and nine more i n d i ­ cated t h a t budgetary c o n tro ls would add to the e ffe c tiv e n e s s o f o ther measures, only f i v e i n s t i t u t i o n s apply them uniform ly to a l l operations w ith in funds. Eigh t o th e rs , a l l funds and in the p u b lic s e c to r, u t i l i z e budgetary c o n tro ls w ith regard to one o r more fund groups and th re e others in the p r iv a t e sector apply them to selected opera­ tio n s w ith in the c u rre n t fund. Approximately h a l f o f a l l respondents expressed the opinion th a t expenditures during the f i r s t two years o f coverage were less 121 than a n t ic ip a t e d , a l l but fo u r o f the remainder in d ic a tin g about as a n tic ip a te d . Again, approximately h a l f o f the respondents were of the opinion th a t these expenditures were o f l i t t l e s ig n ific a n c e in r e l a ­ tio n to t h e i r i n s t i t u t i o n ' s t o t a l operatin g co sts, w ith a l l but two o f the remainder in d ic a tin g them to be o f moderate s ig n ific a n c e . Eight o f the respondents, however, expressed the opinion th a t these expenditures w i l l be o f g re a te r s ig n ific a n c e in fu tu r e years whereas only fo u r ind icated t h a t they w i l l be o f less s ig n ific a n c e . Coverage has, in the opinion o f the respondents, been accom­ panied by some b e n e fic ia l aspects from an i n s t i t u t i o n a l viewpoint. Over h a l f b e lie v e th a t coverage has re s u lte d in b e t t e r employment p ra c tic e s . Nearly as many are o f the opinion th a t coverage has given employees a g re a te r sense of s e c u rity w ith le s s e r numbers expressing o ther d ir e c t and i n d ir e c t b e n e fits to t h e i r i n s t i t u t i o n s . CHAPTER VI SUMMARY, CONCLUSIONS AND RECOMMENDATIONS Introduction The purpose of th is study, as stated in Chapter I , was to inves­ tig a t e the opinions and experience o f fin a n c ia l administrators of Michigan i n s t it u t io n s of higher education w ith respect to ac c o u n ta b ility in the adm inistration o f unemployment compensation two years a f t e r coverage has been in e f f e c t . The underlying thesis was th a t an e f fe c ­ t iv e method can be developed to minimize the incidence and duration o f unemployment b en efits paid to former employees o f Michigan i n s t i t u ­ tions o f higher education through an i d e n t i f i c a t i o n of the actions r e s u ltin g in the payment o f b en efits and a d is t r ib u t io n o f costs r e s u ltin g therefrom to the lev el o f a u th o r ity a t which they were incurred. The general question investig ated was: In the opinion of fin a n c ia l ad m in is tra to rs , should departmental adm inistrators be held accountable f o r personnel actions which r e s u lt in the payment o f unem­ ployment benefits? study. Four underlying premises formed the basis of the They were: 1. Sound personnel practices can serve to minimize the incidence and duration of unemployment b e n e fits paid to former employees; 2. Financial in c e n tiv e s , e it h e r p o s itiv e or negative, are a re q u is ite p a rt o f any model designed to e n l i s t and assure the cooperation 122 123 of those whose personnel actions may lead to the payment of unem­ ployment b e n e fits ; 3. The costs of unemployment compensation are of s u f f i c i e n t concern to fin a n c ia l adm inistrators to j u s t i f y the development o f an a c c o u n ta b ility model whereby costs of unemployment compensation may be d is trib u te d to the a d m in is tra tiv e u n it whose actions resulted in the payment of b e n e fits ; and 4. That such an a c c o u n ta b ility model can be developed with d e f i n i t i v e , concise c r i t e r i a . The population under study consisted o f 39 Michigan i n s t i t u ­ tions o f higher education with f a l l term enrollments o f g re a te r than 500. Included were a l l 13 public fo u r-y e a r colleges and u n iv e r s itie s and 26 nonpublic, n o n p ro fit colleges. The data sought were obtained through use of questionnaires sent to the c h ie f business and/or fin a n c ia l o f f i c e r s , a l l of whom responded. A s l i g h t l y d i f f e r e n t questionnaire was used fo r the public i n s t it u t io n s than f o r the p riv a te i n s t i t u t i o n s , to take in to consid­ e ra tio n d iffe ren c es in t h e i r accounting s tru c tu re and with regard to d iffe ren c es in coverage under the Michigan Employment Security Act. Interviews w ith 15 of the respondents were used to supplement the data obtained from the questionnaires. The data and opinions expressed in the interview s were tabulated by both s ize and the p u b lic -p r iv a te nature of the in s t it u t io n s in the study. The s ig n ific a n c e of the f i n d ­ ings was re la te d in terms of percentage d is tr ib u tio n s with the p u b lic p riv a te d is t in c tio n and in t o t a l . 124 In th is c h a p te r, the fin d in g s presented p revio u sly in Chapter V are r e la t e d s p e c i f i c a l l y to the fo u r premises, conclusions are drawn therefrom w ith regard to the general question posed in the study, and recommendations are made. Premise One Sound personnel p rac tice s can serve to minimize the incidence and d uration o f unemployment b e n e fits paid to former employees. In the l i t e r a t u r e reviewed in Chapter I I I , a number o f recom­ mendations were made toward development o f programs to hold the costs o f unemployment compensation coverage to a minimum through implementation o f m o d ific a tio n s in the personnel p rac tice s o f i n s t i t u t i o n s o f higher education. Among these recommendations were t h a t a l l h ir in g should be c e n tr a liz e d to provide b e t t e r pre-employment screening. Those respon­ s i b le f o r the control o f workmen's compensation costs have long recog­ nized the value o f pre-employment physical examinations to assure th a t persons w ith d i s a b i l i t i e s are not unknowingly h ire d and given inap­ p ro p r ia te work assignments which may give r i s e to w o rk -re la te d (com­ pensable) i n j u r i e s . S i m i l a r l y , prudence in the control o f unemploy­ ment compensation costs d ic ta te s t h a t caution p r e v a il in the h ir in g o f persons w ith poor employment h is t o r ie s in order to g iv e reasonable assurance t h a t they may succeed in the work to which they are assigned, thereby reducing the r i s k o f actions which may g iv e r is e to term in a tio n o f employment follow ed by unemployment compensation claim s. Along the same l i n e , b e t t e r use of probationary periods was recommended. Nonproducers and less than s a t is f a c t o r y employees should be term inated before they have accumulated s u f f i c i e n t c r e d i t weeks 125 upon which to base an unemployment compensation claim . While sound personnel p ra c tic e s may always have d ic ta te d th a t such u n s a tis fa c to ry or marginal employees be terminated w ith o u t undue d e la y , the added costs o f unemployment compensation must be taken in to co n sideratio n in any d ecisio n to prolong or extend a probationary period or postpone employee e v a lu a tio n f o r continued employment. B e tte r scheduling of employees to meet the demands o f seasonal or peak workloads was also advocated. Both i n t r a - and interdepartm ental cooperation to u t i l i z e the workforce toward maximum e f f i c i e n c y , which again must always be acknowledged as sound personnel p r a c t ic e , has become even more e s s e n tia l in l i g h t o f the costs o f unemployment com­ pensation. I t makes l i t t l e sense to furlough or term inate a lab o rato ry te c h n ic ia n a t the conclusion of one grant w hile h ir in g someone o f com­ parable s k i l l to work on another; to replace summer groundskeepers w ith w in te r snow removal crews where the same persons might have been continuously employed; o r to h ir e c l e r i c a l help to r e g is t e r incoming students w h ile a t the same time re le a s in g persons o f s i m il a r s k i l l s in the admissions o f f i c e where the peak workload has subsided and who are no longer needed. The added costs o f unemployment compensation to those so furloughed or term inated make such p ra c tic e s even less d e fe n s ib le . In th e survey, each o f the 39 c h ie f business o f f i c e r s was asked in question ten whether unemployment compensation coverage has, a t his or her i n s t i t u t i o n , re s u lte d in b e t t e r employment p r a c t ic e s , helped to e lim in a te substandard employees through s h o rte r probationary periods o r e a r l i e r te rm in a tio n o f u n s a tis fa c to ry p ro batio nary employees, 126 and/or brought about g re a te r interd ep artm en tal cooperation in scheduling employees to meet the needs o f varying o r seasonal workloads. I t is s i g n i f i c a n t t h a t 20 (over h a l f of those responding to th is question) in d ic a te d th a t coverage has re s u lte d in b e t t e r employment p rac tice s g e n e ra lly whereas 8 (approxim ately o n e - f i f t h ) and 11 (approxim ately o n e -th ir d ) in d ica te d the l a t t e r two e f f e c t s , r e s p e c tiv e ly . The question also asked whether unemployment coverage has re su lted in a reduction o f w orkforce, e . g . , through use o f more outside contractors and/or increased use o f exempt student employees to f i l l p a rt-tim e employment needs. As the former tra n s fe rs p o te n tia l l i a b i l ­ i t y f o r unemployment compensation to others and the l a t t e r c a rr ie s no p o te n tia l l i a b i l i t y , they a r e , from an unemployment compensation control p e rs p e c tiv e , sound personnel p ra c tic e s . While only fo ur o f the respon­ dents in d ic a te d a reduction o f t h e i r workforces through use o f more o utside c o n tra c to rs , again i t is s i g n i f i c a n t t h a t 12 in d ic a te d g re a te r use o f exempt student employees. The s ix th q u e stio n , although addressed p r im a r ily to the issue of budgetary c o n tro ls , asked whether such personnel p rac tice s can func­ tio n e f f e c t i v e l y to minimize the incidence and duration o f unemployment compensation claim s. T w e n ty -fiv e o f the f in a n c ia l ad m in is tra to rs (64 .1 percent) expressed the opinion th a t these measures can fu nctio n e f f e c t i v e l y independently o f o th e r (budgetary) c o n tro ls . In the opinion o f a m a jo r ity o f the c h ie f business o f f i c e r s , th en , sound personnel p ra c tic e s can serve to minimize the incidence and duration o f unemployment b e n e fits paid to former employees. 127 Premise Two F in an cial in c e n tiv e s , e i t h e r p o s itiv e o r n e g a tiv e , are a r e q u is it e p a rt o f any model designed to e n l i s t and assure the cooperation o f those whose personnel actions may lead to the payment o f unemployment b e n e fits . W ithin the o rg a n iz a tio n a l s tr u c tu r e o f i n s t it u t io n s o f higher education th ere is a g rea t deal of v a r ia t io n w ith regard to the au th or­ i t y delegated through the chain o f command to c a rry out the d e c is io n ­ making process as i t r e la t e s to personnel a c tio n s . At one of the sm alles t i n s t i t u t i o n s in the study, a l l h ir in g and p e rs o n n e l-re la te d actions are handled v ic e -p r e s id e n t. by e i t h e r the academic dean or the executive In o th e r l a r g e r in s t it u t io n s a u th o r ity f o r these m atters is delegated to the p r in c ip a l a d m in is tra tiv e u n its and sub­ u n its th e re o f. Thus, in the form er, sound personnel p o l i c i e s , be they e i t h e r formal p o lic ie s o f the i n s t i t u t i o n s o r simply fo llo w in g the tenets o f a d m in is tra tiv e p r a c t ic e , can be c e n t r a l l y administered and c o n t r o lle d . In the l a t t e r , however, w h ile th ere may be a formal cen­ t r a l i z e d s tr u c tu r e f o r processing employment-related actions and a formal body o f p o lic y to which such actions must adhere, d is c r e tio n a r y action s a t the departmental o r supervisory le v e l as to who s h a ll be employed, promoted, tr a n s fe r r e d o r term inated weaken the control by c e n tra l a d m in is tra tio n . Cooperation, as w ell as compliance, w ith p o lic ie s and g u id e lin e s promulgated by c e n tra l a d m in is tra tio n is essen­ tia l to preclude unnecessary and avoidable costs r e s u ltin g from cover­ age under th is program. O n e -th ird o f a l l respondents in the survey expressed the opinion t h a t f in a n c ia l in c e n tiv e s were necessary to assure such cooperation. Nearly o ne-fourth expressed the opinion th a t they would add to the 128 e ffe c tiv e n e s s o f nonbudgetary co n tro ls whereas only s l i g h t l y more than o n e - f i f t h expressed an opinion in opposition to fin a n c ia l in c e n tiv e s . Thus, w h ile i t cannot be concluded th a t the c h ie f business o f f i c e r s o f Michigan i n s t i t u t i o n s o f higher education b e lie v e t h a t fin a n c ia l in cen tives are a r e q u is it e p a rt o f any model designed to e n l i s t and assure the cooperation o f those whose personnel actions may lead to the payment o f unemployment b e n e f it s , more than h a l f (5 6 .4 p ercent) expressed an opinion fa v o ra b le to such. Premise Three The costs o f unemployment compensation are o f s u f f i c i e n t concern to j u s t i f y the development o f an a c c o u n ta b ility model whereby costs o f unemployment compensation may be d is t r ib u t e d to the a d m in is tra tiv e u n it whose actions re s u lte d in the payment o f b e n e f it s . A ca rd in a l p r in c ip le o f control theory is th a t the cost o f implementing the co n tro ls in r e l a t i o n to any given concern should not exceed the p o te n tia l loss. Even the sim plest model whereby costs are d is t r ib u t e d to the a d m in is tra tiv e u n it whose actions re s u lte d in the payment o f b e n e fits would re q u ire the expenditure o f a d m in is tra tiv e time and/or funds, both costs to the i n s t i t u t i o n which might not otherw ise have been incurred were i t not f o r the model. The costs o f implementing more s o p h is tic a te d models are in h e r e n tly g re a te r . Thus, in the development o f any a c c o u n ta b ilit y model, the costs o f implementation must bear a fa v o ra b le r e l a t i o n to the cost savings i t may e f f e c t . A d d it i o n a l l y , the costs atte n d an t to a course o f in a c tio n must be o f s u f f i c i e n t magnitude and concern to command the a t t e n t io n o f those upon whom r e s p o n s ib i li t y f o r development o f a l t e r ­ n a tiv e courses f a l l s . 129 A t the o u ts e t, the c h i e f business o f f i c e r s o f Michigan i n s t i t u ­ tio n s o f h ig h e r education were f e a r f u l t h a t the costs o f unemploy­ ment compensation coverage would pose a s i g n i f i c a n t burden on t h e i r l im it e d resources during a p erio d o f s p i r a l i n g e x p e n d itu re s . surveyed, however, i t Of those is e v id e n t t h a t n e a rly o n e -h a lf found expendi­ tu res a t t r i b u t a b l e to t h i s coverage, during the f i r s t two y e a r s , to be less than a n t i c i p a t e d . Only 10 percent o f those surveyed expressed the opinio n t h a t these expenditures were g r e a t e r than a n t i c i p a t e d . Furtherm ore, over h a l f o f those surveyed s ta te d t h a t these expendi­ tu res were o f l i t t l e s i g n if ic a n c e in r e l a t i o n to t h e i r i n s t i t u t i o n ' s t o t a l o p e ra tin g ex p en d itu res . I t cannot be concluded, t h e r e f o r e , t h a t these costs have been a major cause o f concern a t most i n s t i t u t i o n s . Yet almost as many s ta te d these expenditures were o f moderate s i g n if ic a n c e (4 3 .6 p e rc e n t) w h ile 5 percent f e l t they were o f g re a t s i g n if ic a n c e in r e l a t i o n to t h e i r i n s t i t u t i o n ' s t o t a l o p e ra tin g expen­ d itu re s . costs w i l l A d d i t i o n a l l y , 21 p erc en t expressed the o p in io n t h a t these be o f g r e a t e r s ig n if ic a n c e in f u t u r e years as opposed to 10 p ercent who a n t i c i p a t e t h a t they w i l l be o f le s s s i g n i f i c a n c e . Tak­ ing t h e i r views in t o c o n s id e r a tio n , o p inio n is n e a r ly even ly d iv id e d as to whether costs a t t r i b u t a b l e to t h is coverage w i l l be o f l i t t l e n if ic a n c e o r o f moderate to g r e a t s ig n ific a n c e in f u t u r e y e a r s . s ig ­ It is p ro b a b le , t h e r e f o r e , t h a t a t some i n s t i t u t i o n s th e costs o f unemployment compensation are o f s u f f i c i e n t concern to j u s t i f y the development o f an a c c o u n t a b i l it y model whereby costs o f unemployment compensation may be d i s t r i b u t e d to the a d m in is t r a t iv e u n i t whose a c tio n s re s u lte d in the payment o f b e n e f i t s . n o ta b ly la c k in g . At o th e r i n s t i t u t i o n s , s u f f i c i e n t concern is 130 Premise Four An a c c o u n ta b ility model can be developed w ith d e f i n i t i v e , concise c r i t e r i a . An a c c o u n ta b ility model, as defined in th is study, is one whereby the costs ( e f f e c t s ) t h a t r e s u lt o r evolve from an i d e n t i f i a b l e a c tio n (cause) are borne by the u n it responsible fo r th a t action as a cost o f o peratio n. Unemployment compensation b e n e fits paid to former employees are i d e n t i f i a b l e costs. An i n s t i t u t i o n does not incur these costs u n t i l a former employee f i l e s a claim a lle g in g t h a t he or she is no longer employed by the i n s t i t u t i o n and is otherwise e n t i t l e d to bene­ fits . Any b e n e fits paid chargeable to the i n s t i t u t i o n are based d i r e c t l y upon the c la im a n t's former employment w ith the i n s t i t u t i o n . T h is , in tu r n , can be pinpointed to a s p e c if ic department o r u n i t w ith in the i n s t i t u t i o n f o r which the claim ant had performed services and from whose funds the c la im a n t's wages had been p aid . The a c tio n g iv in g r i s e to the payment o f b e n e fits can s i m i l a r l y be pinpo inted. The c la im a n t's employment w ith the i n s t i t u t i o n may e i t h e r have been term inated v o l u n t a r il y by his or her own action or i n v o l u n t a r i ly by a c tio n of the i n s t i t u t i o n . The import o f th is d is ­ t i n c t i o n is th a t departmental a d m in is tra to rs may j u s t i f i a b l y argue th a t they can not be held accountable f o r b e n e f it payments r e s u ltin g from actions beyond t h e i r c o n t r o l, i . e . , employee i n i t i a t e d w ith ou t good cause a t t r i b u t a b l e to departmental a c tio n s , o r where the d e p a rt­ ment i n i t i a t e d the a c tio n in re a c tio n to the c la im a n t's conduct. N e verth eless, fo u r i n s t i t u t i o n s in the survey in d ic a te d th a t a l l b e n e fit costs are d is t r ib u t e d to the departments in which claimants 131 had been employed w ith ou t d i s t i n c t i o n . At two o f these i n s t i t u t i o n s , a l l b e n e fits paid are charged d i r e c t l y to the s a la ry and wages account from which the c la im a n t, w hile employed by the i n s t i t u t i o n , had been paid. At the o ther two i n s t i t u t i o n s a l l b e n e fits paid are charged to some other account w ith in the department or d iv is io n in which the claim ant had been employed. Eight o ther i n s t i t u t i o n s , a l l in the p u b lic s e c to r, charge a l l b e n e fits paid to the account from which the claim ant had been paid f o r one or more fund groups. From the d a ta , however, i t cannot be d e te r ­ mined as to whether t h is p r a c tic e represents a d e lib e r a t e e f f o r t to hold such departmental a d m in is tra to rs accountable or whether i t has been implemented in accordance w ith d ic t a t e s o f the A u d ito r General which may be in te r p r e te d to re q u ire such d i f f e r e n t i a l tre atm en t. One o th e r i n s t i t u t i o n charges 10 percent o f a l l b e n e fits paid to the account from which the c la im a n t, w h ile employed, had been paid. The remaining 90 percent is charged to a c le a r in g account to which a l l departments have c o n trib u ted a t a uniform r a t e . Thus, th is method o f cost d i s t r i b u t i o n may be viewed as a middle ground whereby departmen­ t a l a d m in is tra to rs are held accountable f o r a p o rtio n of the cost o f a l l b e n e fits paid a t t r i b u t a b l e to t h e i r operations but not so much as is deemed to be s in g u la r ly d etrim e n ta l to t h e i r programs. From the study, th en , i t is ev id e n t th a t an a c c o u n ta b ility model which meets the sta te d c r i t e r i a not only can be developed but has been implemented a t several i n s t i t u t i o n s . A d d itio n a lly , v a ria ­ tio n s in the design and e x te n t o f the operations to which th e model 132 is ap p lied suggest t h a t such a model may be m odified and adapted to s u i t the needs and demands o f d i f f e r e n t i n s t i t u t i o n s . The General Question In the opinion o f f in a n c ia l a d m in is tra to r s , should d ep art­ mental a d m in is tra to rs be held accountable f o r personnel actions which r e s u l t in the payment o f unemployment b en efits? From an an alysis o f the d a ta , several fin d in g s have become e v id e n t. Sound personnel p ra c tic e s can serve to minimize the i n c i ­ dence and d uration o f unemployment b e n e fits paid to former employees. The degree to which f in a n c ia l in c en tiv es may s tim u la te development and adherence to such p r a c tic e s , as perceived by the f in a n c ia l admin­ is tra to rs included in the survey, however, is not so c l e a r l y d e lim ite d . While over h a l f expressed a leaning toward u t i l i z a t i o n o f f in a n c ia l in c e n tiv e s , opinion is n e a rly e q u a lly d ivid ed as to whether such in c en tiv es are e s s e n tia l or indeed may have a d etrim e n ta l e f f e c t in th is regard. Were the costs o f unemployment compensation, as per­ ceived and p ro je cte d on the basis o f t h e i r i n s t i t u t i o n ' s experience during the f i r s t two years o f coverage, to be o f g re a t s ig n if ic a n c e , perhaps a g r e a te r number would fa v o r f in a n c ia l in c e n tiv e s . Less than h a l f o f the f i n a n c ia l a d m in is tra to rs in the survey, however, f e l t these expenditures were o f moderate or g re a t s ig n ific a n c e in r e l a t i o n to t h e i r i n s t i t u t i o n ' s t o t a l operatin g expenditures. S l i g h t l y more fe e l they w i l l increase in s ig n ific a n c e in fu tu r e y e a rs . Thus, i t may be in fe r r e d th a t f in a n c ia l a d m in is tra to rs fa v o r a system whereby departmental a d m in is tra to rs should be held accountable f o r personnel actions which r e s u l t in the payment of unemployment b e n e f i t s , but do not fe e l these costs to be o f s u f f i c i e n t concern to w arrant development 133 and implementation o f such a system. f a c t th a t only fiv e i n s t it u t io n s T h is , then, may account f o r the in the survey u t i l i z e a system whereby unemployment compensation costs which evolve from an i d e n t i ­ f i a b l e personnel ac tio n are d is t r ib u t e d to the department responsible f o r t h a t ac tio n as a cost of o p e ra tio n , i . e . , an a c c o u n ta b ility model, w ith o u t regard to the nature or funding o f the department. Recommendations and Im p lic a tio n s f o r Future Research E a r l i e r in t h is ch a p te r, i t was acknowledged th a t departmental ad m in is tra to rs may j u s t i f i a b l y argue t h a t they can not be held acountable f o r b e n e f it payments r e s u lt in g from actions beyond t h e i r c o n t r o l, i.e., as the r e s u lt o f e m p lo y e e -in itia te d term inations or as the r e s u l t o f d e p a r tm e n t a l- in itia t e d term inations p r e c ip ita t e d by actions of the employee. An employee, as an example o f the form er, may have term inated his or her employment to accompany his or her spouse to another l o c a l i t y , where s u ita b le employment may be u n a v a ila b le , and f i l e a claim f o r b e n e f it s . As an example of the l a t t e r , a record o f ta rd in e s s and absenteeism may have forced the ac tio n by the employer. In both cases, where the record is not in d is p u te , on r u lin g by the Commission the claim ant w i l l be precluded from re c e iv in g b e n e fits f o r a period o f a t le a s t s ix weeks and the period o f e l i g i b i l i t y f o r b e n e fits w i l l be commensurately reduced. On the o ther hand, the claim ant may have v o l u n t a r i l y te r m i­ nated h is or her employment because working conditions were deemed to have become i n t o l e r a b l e , or be term inated by the department sum­ m a rily w ith ou t apparent cause a t t r i b u t a b l e to the c la im a n t. The 134 former may r e s u l t from s u b tle acts o f in v id io u s d is c rim in a tio n or harassment by supervisory personnel, assignment to degrading tasks not normally a p a rt o f the jo b d u tie s , or reassignment to work lo c a tio n . a d is t a n t The l a t t e r may r e s u lt from a reduction o f workload, term ination o f a p r o je c t , or to provide an opening f o r someone deemed more d e s ira b le o r q u a l i f i e d to perform the jo b . In these cases, the claim ant may draw b e n e fits im m ediately, assuming a l l o th e r e l i g i b i l i t y conditions are met. Thus, the Commission, operating in accordance w ith a body o f law, issues a d eterm in atio n r e l a t i v e to each claim in which the m erits of the claim are evaluated. In those cases where the claim ant is held to have co n trib u ted to his or her te r m in a tio n , a d i s q u a l i f i c a t i o n period is imposed. have a c te d , i . e . , In those cases where the department is held to term inated the c la im a n t, w ith ou t good cause a t t r i b ­ u ta b le to the c la im a n t, no such d i s q u a l i f i c a t i o n period is imposed and b e n e f it payments may commence immediately. The Commission's ru lin g s are made on the basis of a l l a v a i l ­ able evidence submitted by both the claim ant and the former employer and may be appealed by e i t h e r p a rty to a r e f e r e e , an appeal board and to the co u rts. W ithin the s tr u c tu r e o f the program, th en , is a b u i l t - i n mechanism whereby the i n s t i t u t i o n may u t i l i z e the fin d in g s o f the Commission as an im p a r tia l a r b i t r a t o r . In those cases where a d is ­ q u a l i f i c a t i o n period is imposed, the department may be considered w ith ou t f a u l t . Where, however, the Commission awards b e n e fits to a claim ant im m ediately, departmental actions may be considered to have 135 contributed to the claim and the departmental a d m i n is t r a to r may be held accountable f o r the costs o f b e n e fits paid* Recommendation One. In a l l cases where a d i s q u a l i f i c a t i o n period is not imposed, a review o f the circumstances leading to the claim should be conducted. This review should focus on the events and causes leading to the employee ter mination upon which the claim f o r b e n e f it s was awarded, an i d e n t i f i c a t i o n of employment practices which might be modified in the l i g h t t h e r e o f , and development o f a l t e r n a t i v e courses of action structured to preclude a recurrence. In those cases where a s p e c i f i c course o f acti on is d e s i r a b l e , i t should be implemented. In o ther cases, data should be accumulated upon which a decision can be based once s u f f i c i e n t data are a v a i l a b l e . Consideration should also be given to holding departmental adminis­ t r a t o r s accountable f o r t h e i r actions r e s u l t i n g in the payment o f b e n e f i t s through a d i s t r i b u t i o n o f b e n e f i t costs to an account w i t h i n th e ir control. The costs o f unemployment compensation coverage to i n s t i t u ­ t ion s o f higher education may increase or decrease as the r e s u l t o f actions taken by the Federal or s t a t e l e g i s l a t u r e s and the courts. They may als o be a f f e c t e d by economic conditions over which these i n s t i t u t i o n s may have l i t t l e or no c o n t r o l . Accordingly, these costs should be considered as n e i t h e r s t a t i c nor f i x e d . They may f l u c t u a t e d r a m a t i c a l l y or tend to increase or decrease over time. The costs during the f i r s t two years o f coverage, t h e r e f o r e , may not be r e p r e s e n t a t i v e o f f u t u r e ye ars. As such, the f i n a n c i a l adminis­ t r a t o r s o f these i n s t i t u t i o n s where costs during t h i s i n i t i a l two 136 year period were considered to be o f l i t t l e s i g n i f i c a n c e can not a f f o r d to become complacent or to set aside t h e i r i n i t i a l concerns regarding the p o t e n t i a l costs o f unemployment compensation coverage. Recommendation Two. Procedures should be i n i t i a t e d and such modifications as may be necessary in the acco u nting /re po rting s t r u c ­ tu re so t h a t , w i t h i n each i n s t i t u t i o n , the causes leading to unem­ ployment compensation payments and the costs t h e r e o f can be monitored on an ongoing basis. A l t e r n a t i v e procedures should be developed and placed in readiness so t h a t should the costs r i s e to a le v e l of con­ cern, they may be implemented without undue, c o s t l y delay. In Chapter V, i t was noted t h a t a dual system w ith regard to the accounting treatment o f unemployment compensation expenditures predominates a t the p u b lic i n s t i t u t i o n s . Expenditures a t t r i b u t a b l e to operations o f the General Fund are charged to a General Fund expendi­ ture account whereas expenditures a t t r i b u t a b l e to operations o f other funds ar e charged d i r e c t l y to accounts from which claimants had been paid. The cost burden r e s u l t i n g from unemployment compensation claims a t t r i b u t a b l e to operations o f the General Fund, t h e r e f o r e , is absorbed as an u n d is trib u te d operating expense o f the i n s t i t u t i o n whereas f o r other funds the burden is passed on to the lowest lev el o f adminis­ t r a t i v e a u t h o r i t y r e f l e c t e d in the accounting s t r u c t u r e , i . e . , the accounts from which the claimants had been paid. Thus, w it h i n the context o f t h i s study, these ad m in is tra tors are not held accountable f o r personnel actions r e s u l t i n g in the payment o f unemployment compen­ sation to claimants who were paid from the General Fund whereas they. 137 are held accountable f o r such actions r e s u l t i n g in the payment, of unemployment compensations to claimants who were paid from other funds. Thus, these i n s t i t u t i o n s have in operation a system t h a t lends i t s e l f to a d d it i o n a l study and assessment of the e ffe c tiv e n e s s of f i n a n c i a l incentives as a means o f c o n t r o l l i n g the costs o f unemploy­ ment. The incidence and duration o f claims a t t r i b u t a b l e to operations of the General Fund, f o r which departmental ad m in is tra tors are not held accountable through the d i s t r i b u t i o n o f costs to t h e i r operating funds, may be compared w ith s i m i l a r data r e l a t i n g to other funds f o r which departmental ad m in is tra tors are held accountable. Recommendation Thr ee. Each i n s t i t u t i o n in which a dual system with regard to the accounting treatment o f unemployment compensation expenditures is now in operation should engage in a s e l f study s t r u c ­ tured toward an assessment of the e f f e c t iv e n e s s o f f i n a n c i a l incentiv es in c o n t r o l l i n g unemployment compensation costs. The other i n s t i t u t i o n s should consider the f e a s i b i l i t y o f e s t a b l is h i n g a dual system, w i t h i n t h e i r i n s t i t u t i o n s , so t h a t a s i m i l a r study can be conducted. \ APPENDICES 138 APPENDIX A ELIGIBILITY FOR LISTING 1972-73 DIRECTORY OF INSTITUTIONS OF HIGHER EDUCATION 139 APPENDIX A ELIGIBILITY FOR LISTING 1972-73 DIRECTORY OF INSTITUTIONS OF HIGHER EDUCATION To be e l i g i b l e f o r l i s t i n g in the d i r e c t o r y , an i n s t i t u t i o n must meet the fo llo w in g f o u r requirements estab lis hed by the State Board o f Education: (1) I t sh a ll be incorporated under Act 327 o f the Public Acts o f 1931, as amended, or organized and operated in accordance with Act 142 o f the P u blic Acts o f 1964, as amended or p u b l i c l y operated. (2) I t sh a ll o f f e r programs leading to a degree, or o f f e r two or more years o f a co lle ge lev el program f o r t r a n s f e r to a degree granting i n s t i t u t i o n o f higher lea rning l i s t e d in the d i r e c t o r y . (3) I t sh a ll be in operation and e n r o l l ­ ing students f o r classes f o r the academic ye a r in which the d i r e c ­ t o ry is published. (4) I t sh a ll not be licensed under Act 148 of the Public Acts of 1943, as amended.^ I n s t i t u t i o n s L is ted w ith F all Term 1971 Enrollment in Parenthesis Public Four-Year Colleges and U n i v e r s i t i e s 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Central Michigan U n i v e r s i t y , Mt. Pleasant (16 ,96 1) Eastern Michigan U n i v e r s i t y , Y p s i l a n t i ( 2 1 ,4 6 6 ) F e r r i s S t a te C o lle g e , Big Rapids ( 9,1 62 ) Grand V a ll e y S tate C o lle g e , A lle n d a le ( 4 , 1 7 4 ) Lake Superior S tate C o lle g e , S a u l t Ste. Marie (1 , 7 1 2 ) Michigan S ta te U n i v e r s i t y , East Lansing (43 ,88 8) Michigan Technological U n i v e r s i t y , Houghton ( 5 ,0 0 2 ) Northern Michigan U n i v e r s i t y , Marquette ( 8 , 1 6 7 ) Oakland U n i v e r s i t y , Rochester ( 7 , 0 8 8 ) Saginaw V a l l e y C o lle g e , U n i v e r s i t y Center ( 2 ,1 2 4 ) U n i v e r s i t y of Michigan, Ann Arbor (39 ,98 6) Wayne S tate U n i v e r s i t y , D e t r o i t (36 ,76 5) Western Michigan U n i v e r s i t y , Kalamazoo ( 2 2 ,9 7 1 ) ^1972-73 D i r e c t o r y o f I n s t i t u t i o n s o f Higher Education (Lansing, Michigan: Michigan Department o f Education, 1973y, p. 140 1. 141 Nonpublic Colleges w ith E n r o l l ­ ments o f More Than 500 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. Adrian C o lle ge , Adrian {1 ,447} Albion Co llege, Albion ( 1 ,7 8 2 ) Alma C o lle ge , Alma ( 1 ,3 2 8 ) Andrews U n i v e r s i t y , Berrien Springs (2 , 1 9 1 ) Aquinas College,. Grand Rapids (1 ,422) Calvin College and Theological Seminary, Grand Rapids( 3 , 4 5 0 ) Cleary C o lle ge , Y p s i l a n t i (610) Davenport College of Business, Grand Rapids ( 1,3 50 ) D e t r o i t College o f Business, Dearborn ( 1 ,2 6 2 ) D e t r o i t College o f Law, D e t r o i t (835) D e t r o i t I n s t i t u t e of Technology, D e t r o i t ( 1 ,1 3 9 ) General Motors I n s t i t u t e , F l i n t ( 3 , 0 7 5 ) 2 Grand Rapids B a p t i s t College and Seminary, Grand Rapids (694) H i l l s d a l e Co lle ge , H i l l s d a l e ( 1 ,1 9 2 ) Hope Colle ge, Holland ( 2 ,1 1 1 ) Kalamazoo C o lle g e , Kalamazoo ( 1 ,3 6 0 ) Lawrence I n s t i t u t e o f Technology, S o u th fie ld (4 , 1 0 7 ) Madonna C o lle g e , Livonia (727) Mary Grove C o lle g e , D e t r o i t ( 1 ,6 4 1 ) Mercy College o f D e t r o i t , D e t r o i t ( 1 ,6 2 0 ) Northwood I n s t i t u t e , Midland ( 2 , 8 3 9 ) O l i v e t C o lle ge , O l i v e t (832) Shaw College a t D e t r o i t , D e t r o i t (810) Siena Heights C o lle g e , Adrian (647) Society o f Arts and C r a f t s , D e t r o i t (738) Spring Arbor C o lle ge , Spring Arbor (721) U n i v e r s i t y o f D e t r o i t , D e t r o i t ( 9 ,5 9 7 ) Nonpublic Colleges with E n r o l l ­ ments of 500 or Less 1. 2. 3. 4. 5. 6. 7. Concordia Lutheran Ju n io r C o lle ge , Ann Arbor (468) Cranbrook Academy of A r t , Bloomfield H i l l s (154) D e t r o i t B ib le C o lle g e , D e t r o i t (295) Duns Scotus C o lle ge , S o u t h f ie l d (313) Grace B ib le C o lle ge , Grand Rapids (154) Great Lakes B ib le C o lle g e , Lansing (140) John Wesley C o lle ge , Owosso (196) 2 General Motors I n s t i t u t e is owned and supported by General Motors Corporation. I t is not exempt as a n o n p r o f i t o rg a n iz a tio n and was su b je ct to coverage under both the Federal Unemployment Tax Act and the Michigan Employment S e c u rit y Act p r i o r to the amendments of 1970 and 1971, r e s p e c t i v e l y . Accordingly, i t has not been included in t h i s study. 142 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. Mackinac C o lle ge , Mackinac Island (enrollm ent not l i s t e d ) Maryglade C o lle ge , Memphis (14) Merri11-Palmer I n s t i t u t e , D e t r o i t (84) Michigan C h r i s t i a n Junio r C o lle ge , Rochester (219) Midrasha— College of Jewish St udies, S o uth fie ld (313) Muskegon Business C o lle ge , Kalamazoo (429) Nazareth C o lle ge , Kalamazoo (400) Reformed Bible College A s so cia tio n, Grand Rapids (108) Sacred Heart Seminary, D e t r o i t (113) St. John P ro v in c ia l Seminary, Plymouth ( 88 ) S. S. C y r i l and Methodius Seminary and S t . Mary's Co llege, Orchard Lake (156) Suomi C o lle ge , Hancock (399) Walsh College o f Accountancy and BusinessA d m in is t ra tio n , Troy (347) Western Theological Seminary, Holland (114) Yeshivath Beth Yehudah, S o u th fie ld (26) APPENDIX B SELECTED EXAMPLES OF PERSONNEL ACTIONS WHICH MAY RESULT IN THE PAYMENT OF BENEFITS 143 APPENDIX B SELECTED EXAMPLES OF PERSONNEL ACTIONS WHICH MAY RESULT IN THE PAYMENT OF BENEFITS Example I An i n d i v i d u a l employed in an i n s t r u c t i o n a l , research or p r i n ­ cip al a d m i n is t r a t iv e capac ity f o r the academic ye a r may not be reap­ pointed f o r the ensuing term or y e a r . Such an i n d i v i d u a l i s thereupon e l i g i b l e f o r b e n e f i t s (assuming a l l other e l i g i b i l i t y c r i t e r i a are met) unless he or she contracts to serve in a s i m i l a r capac ity a t another i n s t i t u t i o n o f higher education f o r the ensuing term or y e a r . Upon entering i n t o such a c o n t r a c t , the i n d i v i d u a l i s no longer e l i g i b l e f o r b e n e f i t s , even though the e f f e c t i v e date of employment under the contrac t may be several weeks d i s t a n t . Although i t is l i k e l y t h a t the a d m i n is t r a t o r o f the department in which the i n d iv id u a l had been employed may know of these circumstances, unless the Commission is n o t i f i e d ac co rd in g ly, b e n e f i t payments w i l l continue so long as the i n d i v i d u a l claims to be unemployed. I t is e s s e n t i a l , t h e r e f o r e , t h a t such information be communicated to the o f f i c e charged w ith responding to claims so t h a t th ey, in t u r n , can f o rm a lly n o t i f y the Commission and request t h a t b e n e f i t payments be terminated. Example I I I t is not uncommon f o r a new departmental a d m i n is t r a t o r t o ■ reorganize his or her department along l in e s t h a t may dis place some 144 145 personnel. Should such personnel be unable to r e l o c a t e w i t h i n the i n s t i t u t i o n or to f i n d s u i t a b l e employment elsewhere, they w i l l be e l i g i b l e f o r b e n e f it s immediately upon te r m in a tio n . The p o t e n t i a l cost o f these b e n e f i t s , t h e r e f o r e , should be considered i n any re o r­ g a n iz a t io n , and communication w ith the employment o f f i c e is e s s e n tia l so t h a t i t may work to r e l o c a t e such displaced personnel. Example I I I An employee may be discharged f o r an ac t of a s s a u l t , t h e f t or sabotage connected w ith his or her work. vidual may s t i l l In such cases, the i n d i ­ be e l i g i b l e f o r b e n e f i t s a f t e r a twelve week d i s ­ q u a l i f i c a t i o n perio d. The former employee in f i l i n g a c l a im , however, may a l l e g e t h a t he q u i t , was l a i d o f f , or discharged f o r some other reason and seek t o draw b e n e f i ts immediately or a f t e r a s ix week d i s ­ q u a l i f i c a t i o n perio d. At t h i s j u n c t u r e , the burden o f proof rests upon the i n s t i t u t i o n to n o t i f y the Commission of the f a c t s leading to d i s ­ mis sa l. T h e re fo re , i t i s e s s e n tia l t h a t term in a tio n records s t a t e ac cu ra tely the reason f o r dismissal and t h a t these records be t r a n s ­ m itted to the o f f i c e responding to claims so t h a t appro pria te n o t i f i ­ ca tion to the Commission may f o l l o w . Example IV S i m i l a r l y , an employee may be terminated f o r misconduct in connection with his or her work, i n t o x i c a t i o n w h ile a t work, absence from work which r e s u lt e d from a v i o l a t i o n o f law f o r which he or she was convicted and sentenced to j a i l , or f o r p a r t i c i p a t i o n in a s t r i k e 146 or o th er concerted ac tio n contrary to the provisions o f an a p p lic ab le c o l l e c t i v e bargaining c o n t r a c t . s till In these cases, the i n d i v i d u a l may be e l i g i b l e f o r b e n e fits a f t e r a s ix week d i s q u a l i f i c a t i o n . Again, term ina tion records must be precise and include documentation to support the action so t h a t , in the event o f a d is p u te , the o f f i c e responding to the claim may draw thereupon. APPENDIX C COVER LETTER FOR THE QUESTIONNAIRE--PUBLIC INSTITUTIONS QUESTIONNAIRE— PUBLIC INSTITUTIONS COVER LETTER FOR THE QUESTIONNAIRE— PRIVATE INSTITUTIONS QUESTIONNAIRE— PRIVATE INSTITUTIONS 147 APPENDIX C COVER LETTER FOR THE QUESTIONNAIRE--PUBLIC INSTITUTIONS QUESTIONNAIRE— PUBLIC INSTITUTIONS COVER LETTER FOR THE QUESTIONNAIRE— PRIVATE INSTITUTIONS QUESTIONNAIRE— PRIVATE INSTITUTIONS M IC H IG A N S T A T E U N I V E R S I T Y a m a* t k i coMFrmoun • m io h m a eatt la n u n c •kkh k an m u j . h a n n a h A m a x ir n t A n o r ' »o il m n g • n m w r a h it j jt t - w o M a y 3 , 1974 I t h a s now b een o v e r two y e a r s s in c e w e b e c a m e s u b je c t to th e p ro v is io n s o f th e M ic h ig a n E m p lo y m e n t S e c u rity A c t . June 3 0 th w il l m a r k the end o f the second f u l l f is c a l y e a r in w h ic h w e h av e h ad to c o n s id e r th e costs o f U n e m p lo y m e n t C o m p e n s a tio n in b u d g e ta ry p la n n in g . A c c o rd in g ly , i t s e e m s an a p p ro p ria te t im e to r e v ie w o u r e x p e r ie n c e , e v a lu a te o u r in te r n a l p r o g r a m in t e r m s o f its e ffe c tiv e n e s s in h o ld in g th e s e costs to a m in im u m , and m a k e such m o d ific a tio n s as m a y a p p e a r d e s ir a b le . O f c o u rs e , e ve n a f t e r tw o y e a r s o u r e x p e r ie n c e m a y y e t be lim it e d in som e a r e a s . I t is o u r th o u g h t, th e r e fo r e , th a t b y a ls o d ra w in g upon th e e x p e rie n c e o f the o th e r tw e lv e State in s titu tio n s w e m a y b ro a d e n the d a ta b as e upon w h ich changes in o u r p r o g r a m m a y be f o r m u la te d . Y o u r a s s is ta n c e in c o m p le tio n o f th e e n c lo s ed q u e s tio n n a ire w il l be m o s t h e lp fu l. A r e tu r n a d d re s s e d , p o stag e p a id e n v elo p e Is e n c lo s e d f o r y o u r c o n v en ie n ce . In th e b e lie f th a t o u r fin d in g s w i l l b e o f in t e r e s t to y o u as w e ll, a s u m m a r y th e r e o f w il l be m a ile d to you s h o r tly a f t e r a l l re s p o n s e s a r e ta b u la te d . H o p e fu lly , th is w i l l be in e a r ly June so th a t th e r e m a y be so m e b e n e fit in p la n n in g f o r th e n ew f is c a l y e a r . M y a s s is ta n t, R o b e r t L o c k h a rt, who m o d e ra te d th e w o rksh o p h e r e a t M S U tw o y e a r s ago , w i l l ta b u la te and s u m m a r iz e th e re s p o n s e s . Should any q u e s tio n a r is e , t h e r e fo r e , i t should be a d d re s s e d d ir e c t ly to h im . B o b 's telep h o n e n u m b e r is (5 1 7 ) 3 5 5 -5 0 2 2 . A s som e o f th e q u estio n s s o lic it y o u r o p in io n , c o m p le te c o n fid e n tia lity is a s s u re d to e n c o u rag e you to resp o n d as o p en ly and f r a n k ly as p o s s ib le . T h e q u e s tio n n a ire la b r ie f and should not ta k e b u t a fe w m in u te s o f y o u r t im e . T h a n k s f o r y o u r h e lp . S in c e re ly , P a u l V . R um psa C o m p t r o lle r E n c lo s u re 148 149 U N E M P L O Y M E N T COM PENSATION QUESTIONNAIRE M IC HIG AN STATE U N IV E R S ITY M A Y 1974 There are ten p rincipal questions in this questionnaire, a few of which r e ­ quire mutiple responses. It is structured to fa c ilita te direct responses reflectin g what we believe is the pattern at most institutions. It may be that there are unique aspects to the program as administered at your in ­ stitution to which the questionnaire does not lend its e lf. Should this be the case, additional comments would be welcomed. 1. W ithin the organizational structure of your institution, where does the p rim a ry responsibility fo r the in tern al adm inistration of Unemployment Compensation fa ll? a )______ Office of the President b) Office of the Chief Business an d /o r Financial O fficer c )______ Office of the Chief Academic O fficer d )______ Other. Please indicate:_____________________________________ 2. To what specific office is authority delegated? a )______ Employee or Staff Benefits b )______ P a y ro ll c )______ Personnel d )______ Other. Please indicate:_____________________________________ 3. Has an expenditure account been established in the General Fund fo r Unemployment Compensation? A) Yes 1) In what functional classification? a )______ Business Operations b )______ Operation & Maintenance ofPlant c )______ R etirem ent and other Frin ge Benefits ( Reallocated to functions ) d )______ Other. Please specify:____________ 150 2) A r e a l l c la im s , i . e . , re im b u rs e m e n ts to the M ic h ig a n E m p lo y m e n t S e c u rity C o m m is s io n , c h a rg ed to th is account? a )______Yes b )______No, only those claims attributable to op­ erations of (Please check all that apply): 1}_____ General Fund 2 >_____ Designated Fund 3 )______Expendable Restricted Fund 4 )______Agency Fund 5 )______Others, Please specify: 3) Are administrative expenses charged to this account? a )______Yes b )______No No 1) Expenditures (Reimbursements to the Michigan Employment Commission) are charged to: a )______Departmental accounts from which claimants were paid b )______An account within the department or divi­ sion in which claimants were employed c )______A clearing account operating as a "pool" to which departmental contributions have been credited d) Other. Please explain:_________________ 2) Were departmental allocations increased in consideration of such expenditures? a )_____ Yes b )______No 3) If charges are made to a clearing account oper­ ating as a 'pool, " were departmental accounts assessed on: a) A uniform percentage of payroll b )______An experience rated formula c )______Other basis. Please explain: 151 4. A r e r e im b u r s e m e n t s to th e C o m m is s io n a t t r ib u t a b le to o p e r a tio n s i n th e D e s ig n a te d F u n d d is t r ib u t e d a s a d i r e c t c h a r g e to th e a c c o u n t f r o m w h ic h th e c la im a n t h a d b e e n p a id ? A) B) Yes No 1) W here are they charged? a )______ To the General Fund Expenditure account b )______ To an account within the department or division in which claim ants were employed c )______ To a clearing account operating as a "pool" to which departm ental contributions have been credited d )______ Other. Please explain: ____________ ____ 2) If charges a re made to a clearing account operating as a "pool, " were departmental accounts assessed on: a )______ A Uniform percentage of payroll b )______ An experience rated form ula c )______ Other basis. Please explain: 5. A re reim bursem ents to the Commission attributable to operations in a ll other funds (excluding the General Fund) treated in the same manner as the Designated Fund? A )_____Yes B )_____No 1) Which funds are accorded different treatm ent? a )______Expendable Restricted Fund b )______ A u x ilia ry A ctivities Fund c )______ Agency Fund d )______ Other. Please specify___________________ 2) Please explain how these are handled: 152 6. C entralized h irin g of a ll personnel; measures to stabilize employment through interdepartm ental cooperation in scheduling employees to meet the needs of varying and seasonal workloads; b etter use of probationary periods; increased u tilizatio n of outside contractors; exit interview s with dismissed or term inated employees; and an aggressive centralized follow-up program to find suitable work fo r fo rm e r employees who have filed claim s have a ll been mentioned as ways to m in im ize the incidence and duration of unemployment compensation claim s. Do you believe these measures can function effectively without budgetary controls, i . e . , distribution of costs incurred to the level of adm inistrative responsibility at which personnel actions giving ris e to them took place? A) Yes Would budgetary controls 1 )______ Add to the effectiveness of these measures? 2 )______ Be of questionable or little value in addition to these measures? 3 )______ Be difficult to adm inister fa ir ly and m ay have a negative impact on the effectiveness of these measures ? B )______No 7. Have expenditures fo r unemployment compensation during the fir s t two years of coverage been a )______ Less than anticipated b )______ About as anticipated c) G reater than anticipated 8. In relatio n to your institution's total operating expenditures, were these expenditures a )______ Of little significance b )______ Of moderate significance c )______ Of great significance 9. In relatio n to your institution's to tal operating expenditures, do you anticipate these costs in future years w ill be a )_______ Of less significance b )_______ Of about the same significance c )_______ Of great significance 153 10. In your opinion, has coverage under the Michigan Employment Security A ct at your institution (Please check a ll that apply) a )_____ Resulted in better employment practices ? b )______Given employees a g reater sense of security? c )______Resulted in a reduction of your workforce, e. g . , through use of m ore outside contractors ? d )______ Helped to elim inate sub-standard employees through shorter probationary periods or e a r lie r term ination of unsatisfactory probationary employees ? e )______Brought about g reater interdepartm ental cooperation in scheduling employees to m eet the needs of varying or seasonal workloads ? f )______ Increased use of exempt student employees to f i l l part tim e employment needs? Completed by: Telephone No. Please re tu rn the completed questionnaire to: Robert M . Lockhart, Assistant C om ptroller 305 Hannah A dm inistration Building Michigan State U n iversity East Lansing, Michigan 48824 A re tu rn addressed, postage paid envelope is enclosed fo r your convenience. M IC H IG A N STATE U N IV E R S IT Y iu t l a n s in u ■ M ic h ig a n OFFICE OF T H E C O M P n tO L L E H • 301 J O H N A . H A N N A H A D M IN IS T R A T IO N BUILDING • T E L E P H O N E (317) 355-5070 It has now been over two years since we became subject to the provisions of the Michigan Employment Security Act. June 30th will mark the end of the second full fiscal year in which we have had to consider the costs of Unemployment Compensation in budgetary planning. Accordingly, it seems an appropriate time to review our experience, evaluate our internal program in terms of its effectiveness in holding these costs to a minimum, and make such modifications as may appear desirable. Of course, even after two years our experience may yet be limited in some areas. It is our thought, therefore, that by also drawing upon the experience of the other Michigan Institutions of Higher Education we may broaden the data base upon which changes in our program may be formulated. Your assistance in completion of the enclosed questionnaire will be most helpful. A return addressed, postage paid envelope is enclosed for your convenience. One or two of the questions may seem a bit complex, especially for the smaller institutions which may not be faced with the problems of decentralized budgetary controls. We do feel, however, that we may benefit from the experiences of even the smallest institution. In the belief that our findings w ill be of interest to you as well, a summary thereof will be mailed to you shortly after all r e ­ sponses are tabulated. Hopefully, this w ill be in early June so that there may be some benefit in planning for the new fiscal year. As some of the questions solicit your opinion, complete confidentiality is assured to encourage you to respond as openly and frankly as possible. The questionnaire is brief and should not take but a few minutes of your time. Thanks for your help. Sincerely, Robert M. Lockhart Assistant Comptroller Enclosure 155 U N E M P L O Y M E N T COM PENSATION QUESTIONNAIRE M IC H IG A N STA TE U N IV E R S IT Y M A Y 1974 There are ten p rin cip al questions in this questionnaire, a few of which r e ­ quire mutiple responses. It is structured to fac ilita te d irect responses reflectin g what we believe is the pattern at most institutions. It may be that there are unique aspects to the program as administered at your in ­ stitution to which the questionnaire does not lend its e lf. Should this be the case, additional comments would be welcomed. 1. W ithin the organizational structure of your institution, where does the p rim a ry responsibility fo r the internal adm inistration of Unemployment Compensation fall? a )______ Office of the President b )______ Office of the Chief Business and /o r Financial O fficer c )______ Office of the Chief Academic O fficer d )______ Other, Please indicate: _ 2. To what specific office is authority delegated? a )______ Employee or Staff Benefits b )______ P a y ro ll c )______ Personnel d)______ Other, Please indicate:_____________________________________ 3. Has an expenditure account been established in the C urrent Fund fo r Unemployment Compensation ? A) Yes 1) In what functional classification? a )______ Operation & Maintenance of Plant b )______ General A dm inistration c )______ Staff Benefits d )______ Other. Please specify:_________________ 156. 2) A re a ll contributions or reim bursem ents to the M ichigan Employment Security Commission i '.-t V > •chargedto (this.^NN AUt E a )— U 4 -J J X e ?-' STATE 1 VIV TV b )______No, only those expenditures attributable to operations .of the C urren t Fund (Please check a ll that apply): 1) ,i . .. , : 3) , Educational and General . A u x i l i a r y , A fitivitieg ( ; . .Service D ep artm e n ts , . .. . . ..... ,, 2 ) . 3) *J : i ■ ; ' - ■ ■t , ; I I I i ’ ■ 1 ' . - I ; ■ A re administrative, expenses chaxgeid tq.this r , account? ,i;. ( a )______ Yes b) No B) No 1) Expenditures (Contributions or reim bursem ents to the Michigan Employment Commission) are charged to: a) b) c) d) 2) Departm ental salary and wages accounts Departm ental o r divisional accounts other than salary and wages accounts A clearing account operating as a "pool” to which departmental contributions have been credited Other. Please explain:___________________ W ere departmental allocations increased in consideration of such expenditures? a) Yes b )______ No 3) , If charges are made to a clearing account oper­ ating as a "pool, ” were departm ental accounts^ assessed on: a )______ A uniform percentage of p ayro ll b )______ An experience rated form ula c )______ Other basis. Please explain: 157 4. A re contributions o r reim bursem ents to the Commission attributable to operations in a ll other funds treated in the same manner as the C urrent Fund? A )______ Yes B )______ No Please explain how these are handled: Did your institution elect to reim burse the Michigan Employment Security Commission fo r benefits paid attributable to your status as a covered employer in lieu of contributions ? A) Yes 1) When did the election become effective? a )________ January 1, 1972 b )________ January 1» 1973 c )________ January 1, 1974 2) Have you term inated the election? a) Yes b )______ No B) No 1) Do you believe it lik e ly that you w ill exercise this option effective January 1, 1975? a) b) Yes No 158 6. Centralized hiring of all personnel; measures to stabilize employment through interdepartmental cooperation in scheduling employees to meet the needs of varying and seasonal workloads; better use of probationary periods; increased utilization of outside contractors; exit interviews with dismissed or terminated employees; and an aggressive centralized follow-up program to find suitable work for form er employees who have filed claims have all been mentioned as ways to minimize the incidence and duration of unemployment compensation claims. Do you believe these measures can function effectively without budgetary controls, i . e . , distribution of costs incurred to the level of administrative responsibility at which personnel actions giving rise to them took place ? A )_____ Yes Would budgetary controls 1)______Add to the effectiveness of these measures? 2)_____ Be of questionable or little value in addition to these measures? 3 )______Be difficult to administer fairly and may have a negative impact on the effectiveness of these measures ? B )______ No 7. Have expenditures for unemployment compensation during the first two years of coverage been a )______Less than anticipated b)______About as anticipated c) Greater than anticipated B. In relation to your institution's total operating expenditures, were these expenditures a )______Of little significance b)______Of moderate significance c )______Of great significance 9. In relation to your institution’s total operating expenditures, do you anticipate these costs in future years w ill be a) b)' c )' Of less significance Of about the same significance Of great significance 159 10. In your opinion, has coverage under the Michigan Employment Security Act at your institution (Please check a ll that apply) a )______Resulted in better employment practices? b )______Given employees a greater sense of security? c )______Resulted in a reduction of your workforce, e. g ., through use of m ore outside contractors ? d )______ Helped to elim inate sub-standard employees through shorter probationary periods or e a rlie r term ination of unsatisfactory probationary employees? e )______Brought about greater interdepartm ental cooperation in scheduling employees to meet the needs of varying or seasonal workloads? f )______ Increased use of exempt student employees to f i l l p a rt tim e employment needs? Completed by: Telephone No. Please return the completed questionnaire to: Robert M . Lockhart, Assistant C om ptroller 305 Hannah A dm inistration Building Michigan State U niversity East Lansing, Michigan 48824 A re tu rn addressed, postage paid envelope is enclosed for your convenience. BIBLIOGRAPHY 160 BIBLIOGRAPHY Adams, John F. Risk Management and Insurance Guidelines f o r Higher Education. Washington, D.C .: National Association of College and U n i v e r s i t y Business O f f i c e r s , 1972. American Council on Education. College and U n i v e r s i t y Business Admin­ i s t r a t i o n . Washington, D.C.: ACE, 1968. B lac kw e ll, Thomas Edward. College Law, A Guide f o r A d m i n is t r a to r s . Washington, D.C.: American Council on Education, 1961. Employment S e c u rit y Amendments o f 1970, Public Law 91 -37 3, 91st Congress, H.R. 14705, August 10, 1970. E t z i o n i , Am itai. Modern O rg a n iz a t io n s . P r e n t i c e - H a l l , I n c . , 1964. Englewood C l i f f s , New Jersey: F o r t in o , Ray T. "Unemployment Insurance: How to Get Ready f o r Coverage in 1972." The College and U n i v e r s i t y Business O f f i c e r , IV (June, 197iy! Haber, W il l i a m , and Murray, M e r r i l l G. Unemployment Insurance in the American Economy. Homewood, I l l i n o i s : Richard D. I r w i n , I n c . , 1966. H a r t n e t t , Rodney T. A c c o u n t a b i l i t y in Higher Education. Prin ce ton , New Jersey: College Entrance Examination Board, 1971. I n t e r n a l Revenue Code, 26 U.S.C. ( 19 70 ). The J o i n t Committee o f the Pennsylvania S t a t e - R e la t e d I n s t i t u t i o n s of Higher Education. "Unemployment Insurance: 1971 Is the Year f o r Plan ning." College and U n i v e r s i t y Business O f f i c e r , IV (February, 1971). K e l l e r , Harold. "Unemployment Insurance— A New Cost Burden f o r Colleges and U n i v e r s i t i e s . " Journal o f the College and U n i v e r s i t y Personnel A s s o c i a t i o n , March, 1971. Koontz, Harold, and O'Donnel, C y r i l . P r i n c i p le s o f Management. York: McGraw-Hill Book Company, I n c . , 1968. 161 New 162 M a l i s o f f , Harry. The Insurance Character of Unemployment Insurance. Kalamazoo, Michigan: W. E. Upjohn I n s t i t u t e f o r Employment Research, 1961. McConnel, T. R. "Accountabi1i t y and Autonomy." Education, X L II (June, 1971). Journal of Higher Michigan Department o f Education. 1972-73 D i r e c t o r y of I n s t i t u t i o n s o f Higher Education. Lansing, Michigan: Michigan Department o f Education, 1973. Michigan Employment Se cu rity A c t, Act No. 1 of the Public Acts o f the Extra Session o f 1936, as amended. Michigan Employment S e c u rity Act Amendments of 1971, Act No. 231 of the Pu blic Acts o f 1971, House B i l l No. 5528, January 3 , 1972. Michigan Employment S e cu rity Act Amendments o f 1974, Act No. 11 of the Public Acts o f 1974, House B i l l No. 4143, February 15, 1974. Michigan Employment S ecu rity Act Amendments o f 1974, Act No. 104 of the Public Acts o f 1974, Senate B i l l No. 741, May 16, 1974. Michigan Employment S e c u r i t y Commission. Year 1973. Annual Report f o r Fiscal Mortimer, Kenneth P. A c c o u n t a b i li t y in Higher Education. Washington, D.C.: American Association f o r Higher Education, 1972. National Association o f College and U n i v e r s i t y Business O f f i c e r s . College and U n i v e r s i t y Business A d m i n is t r a t i o n . Washington, D.C .: NACUBO, 1974. N e f f , Charles B. "Toward a D e f i n i t i o n o f Academic R e s p o n s i b i l i t y . " Journal of Higher Education, LX (January, 1969). O s ie r, Robert W., and B r i c k l e y , John S. Glossary o f Insurance Terms. Santa Monica, C a l i f o r n i a : Insurors Press, 1972. Pe rk ins, James. The U n i v e r s i t y and Due Process. American Council on Education, 1967. Washington, D.C .: Simon, Herbert A . i Smithburg, Donald W.; and Thompson, V i c t o r A. Public A d m i n i s t r a t i o n . New York: A l f r e d A. Knopf, 1964. S p ir o , Herbert S. R e s p o n s ib i li t y in Government. Nostrand Reinhold Company, 1969. State o f Michigan. Journal o f the Senate. August 13, 1971. New York: Van Lansing, Michigan, 163 State of Michigan Colleges and U n i v e r s i t i e s . "Manual f o r Uniform Financial Reporting." Unpublished authorized study by Michigan Council of S tate College Presidents. Revised June 27 , 1969. "Impact o f Extension of Unemployment Compensation Wi T i e r s , Died ric h K. Coverage to Colleges and U n i v e r s i t i e s . " The Journal o f t he College and U n i v e r s i t y Personnel A s s o c ia tio n , December, 1970.