Statement to the State Board of Higher Education Don Blair and Henry Lorenzen June 4, 2004

Our purpose today is to propose the direct appointment of Mr. George Pernsteiner as permanent Chief Operations Officer for the Oregon University System. We recognize that such senior level administrative positions are normally filled through an open search process, considering a broad slate of candidates. However, in consideration of current circumstances, we believe this appointment is in the best interests of the Oregon University System and the people of Oregon.

Let me provide you with some background on how wešve reached this conclusion and our reasons for making this recommendation.

Last fall, Governor Kulongoski outlined a bold new direction for higher education in the State of Oregon, focused on four key priorities:

1. Significantly improving access to higher education for all Oregonians;
2. Improving the delivery and productivity of higher education services in Oregon by eliminating barriers to graduation within the public university system and aligning the efforts of public and private universities, community colleges, and the K - 12 public education system;
3. Continuing to deliver academic excellence at Oregonšs public universities and leveraging the higher education system to drive economic development in Oregon, and
4. Building support within the Legislature and across the state for reinvestment in the Oregon University System.

In order to realize this vision for higher education in Oregon, in January, Governor Kulongoski appointed, and the Legislature confirmed, eight new members to the 11- member Board.

As the new members assumed their duties in February, the Board faced other significant challenges. The failure of Measure 30 required that the Oregon University System identify $7.5M in cost reductions for the remainder of the 2003 2005 biennium. Both the Governor and the Legislature indicated their desire to minimize the impact of these reductions on the cost and quality of education delivered to students. In addition, in the course of the 2003 2005 biennial budget process, the Legislature asked the Legislative Budget Office to review the operations of the Oregon University System Chancelloršs Office, with the objective of identifying potential efficiencies. As a result, the Board also undertook a review of the Chancelloršs Office with the objective of streamlining that organization and identifying cost savings to reduce the amount of Measure 30 cost reductions to be absorbed by the universities.

As the Board began its work on this ambitious agenda, the new Board members began to seek advice and counsel from individuals with the knowledge and experience to both understand the current state of the Oregon University System and help develop a vision for the future. One such individual was George Pernsteiner. George had served the Oregon University System for over 13 years, both at the university and the System level. As an Oregon University System Associate Vice Chancellor for Finance and Administration, George developed an understanding of the issues and capabilities of the system as a whole. Later, as Vice Provost and Chief Financial Officer at the University of Oregon and more recently as the Vice President of Finance and Administration at Portland State University, he built a robust base of knowledge and a strong record of accomplishments at the campus level.

As the conversations progressed, it became evident that George was uniquely qualified to provide an objective view of the current state of the Oregon University System and also grasp the possibilities of what the System could become. In February, the Board President began to discuss with Mr. Pernsteiner a more permanent appointment with the Oregon University System.

As you know, on March 30, Chancellor Jarvis announced his resignation. The Board had to consider what kind of transitional leadership was needed in a time of change and great uncertainty for both the Oregon University System and the Chancelloršs Office. n April, the Board formally approved the creation of the position of Chief Operations Officer and appointed Jon Yunker to the position on an interim basis. You will recall that Jon Yunkeršs appointment was a half time appointment, and his intention was to serve no more than six months.

As a result of these events, discussions with Mr. Pernsteiner took on added specificity and urgency. At this point, the Board President arranged for small groups of Board members to meet with Mr. Pernsteiner and assess his qualifications for Chief Operations Officer of the Oregon University System. He also asked Henry Lorenzen and me to negotiate terms under which Mr. Pernsteiner would be willing to accept the position.

We now face a number of extraordinary challenges. Our goals are ambitious: developing and realizing a new vision for higher education in Oregon. Many of us are new to higher education and are working very hard to climb the learning curve while making progress on our agenda of fundamental change. We are in the midst of changes in leadership at the Board level and are currently operating without a permanent Chancellor. And we are about to embark on the budgeting process for the 2005 2007 biennium, a process that will either begin the process of improving higher education in Oregon or contribute to continued decline.

Under these circumstances, we need senior leadership within the Oregon University System that can provide an immediate, positive impact. Ideally, such a leader would:

Have a strong track record of performance at the System and campus levels, in order to demonstrate the ability to effectively lead a large system of universities and earn the confidence of university leaders;
Understand the current strengths and weaknesses of higher education in Oregon, but recognize the need for change and have the ability to develop a vision for the future;
Have a firm grasp of the current administrative and financial operating structure of the Oregon University System and its institutions, as well as an objective perspective on potential alternative approaches to managing these functions; and finally,
Have existing relationships with other key leaders within the Oregon University System, the Executive Branch, and the Legislature.

We believe that George Pernsteiner has these qualifications. We have also discussed his candidacy and qualifications with his current supervisor as well as a number of Oregon leaders, including:

President Dan Bernstine of Portland State University

State Senator Margaret Carter

President Dave Frohnmayer of the University of Oregon

Former State Senator Lenn Hannon, now a member of the State Board of Parole and Post-Prison Supervision

Duncan Wyse, President of the Oregon Business Council

All of these individuals are highly supportive of Mr. Pernsteineršs candidacy for this role.

We recognize that normally the Board would conduct an open search for a leader at this level. However, given Georgešs specific and unique qualifications, we believe that a general search would be misleading for both potential candidates and the public. Moreover, we believe that under current circumstances, the time and money that would be spent on a general search could be better invested elsewhere.

Recommendation

With this as background, we recommend that George Pernsteiner be appointed Chief Operations Officer of the Oregon University System under the following contract terms:

A two-year initial contract term, renewable for additional one year periods
A salary of $219,500 per year (his current employer has offered him this amount as of August 2004);
A housing allowance of $1,500 per month;
A cash payment of $950 per month to be contributed to an Oregon tax deferred retirement plan. Our analysis indicates that the retirement plan offered by the University of California System is significantly more lucrative than current benefits offered by the Oregon University System(this payment will offset just over half of the difference in retirement benefits);
A state vehicle for business use;
OUS unclassified benefit package; and
Moving and storage expenses.

It is our hope, following our discussions and your agreement, that we can finalize a contract with Mr. Pernsteiner.

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