The University at Buffalo's Jacobs School of Medicine and Biomedical Sciences opened this month with the promise of more students, more faculty and more research – all pumping more revenue into the region's economy and improving health care.
But some faculty and students worry the costs of the medical school's new $375 million home are draining resources from other academic programs and needs across UB.
"We have this wonderful, beautiful, glossy downtown building, while we have teachers in poverty and departments not able to offer high-quality programs that SUNY built its reputation on, and students paying exorbitant fees," said Martha McCluskey, professor of law in the UB Law School. "There is, I think, a sense of a lot of austerity."
The university's enrollment has grown in recent years and tuition has gone up as well, boosting revenue, but there hasn't been a corresponding increase in the number of tenure-track faculty at UB, said English professor James Holstun.
"So where's the money going?" he asked.
The single largest construction project in the university's history exhausted $25 million in medical school cash reserves and added at least $10.3 million in annual debt payments to the school's bottom line.
The extra debt led to a cash crunch that became so acute that the university "loaned" $36 million from its central reserves to help the school pay the bills. University officials also have asked state legislators and State University of New York representatives for help in relieving some or all of the costs of paying down $215 million in debt on the building.
University officials downplayed the significance of the internal loan and disputed the notion that other programs at UB are suffering because of the medical school costs.
UB President Satish K. Tripathi maintained the university's investment in the medical school has not come at the expense of other programs. He pointed to ongoing capital improvements at both the North and South campuses, as well as improvement in graduation rates due to strategic university hiring of new faculty across all academic units.
"There have been new faculty lines everywhere," he said. "Universities nationwide have some strain on finances all the time, so that's not new. We have been planning for it and we're pretty sure we'll take care of it."
Laura Hubbard, vice president of finance and administration, described the loan funds as "non-recurring dollars" from the university's central reserve.
"They're not being reallocated from some other area," she said.
The university's central reserves regularly are used to help units launch new programs, make new hires, do capital improvements, or confront some other budgetary challenge, with the expectation that the money will be repaid over time, she said. The reason for the loans must "align with our strategic priorities." The School of Dental Medicine recently received $10 million through an internal loan agreement to purchase new operatory chairs and other equipment.
"There isn't a school or college that we haven't done this with," Hubbard said. "It's like an internal bank."
"We're fronting money for them at times because maybe they're starting a new program or they have a specific challenge," she added. "It's a challenging situation for the medical school, in part because they have to pay the annual debt service. It is a unique arrangement that does place a substantial financial burden on the medical school."
The medical school recently met a fundraising campaign goal of $200 million, a quarter of which was to be set aside for construction costs and the rest for scholarships, research faculty recruitment and development. But many of the largest gifts are in the form of multi-year pledges, so the actual cash available to the medical school is about $6 million per year. That's not enough to help with all of its bills, including increased rents for UB physicians at the new Oishei Children's Hospital and the new Conventus medical office building adjacent to the medical school.
"It's a cash flow issue, because I'm constantly conflicted with paying for the building, doing things for the students, doing things for our researchers and investing in patient care. But it's a good problem to have," said Michael E. Cain, dean of the medical school and vice president for health sciences at UB.
"We've been able to use internal loans from the university to help front money that lets me pay things when I am in a position of being cash poor and can make a justification that we need to invest in two things at once, rather than paying just one bill," Cain said. "And, using the promises and commitments through our $200 million campaign - that the university has high confidence that someone who has said they would give $5 million over five years, that they in fact will do that - I would then pay the university back."
The internal loan will be paid back at a rate of $2 million per year.
The cash crunch is temporary, Cain said. He expects it to subside by 2020 or 2021 and for the school to break even in 2025. In addition to teaching and research, many medical school faculty members treat patients, and the university has in place a variety of "practice plans" through which payment for those medical and healthcare services is made. The new facility will allow for expanded research, which means that the university will take in more money for overhead on the research. And with more space, student enrollment is growing, giving the school more tuition revenue.
The deal with the state
UB officials have been in "continued conversation" with legislators and State University of New York administrators about the debt service payment, Cain said. But UB officials also acknowledged that the state itself is facing some large fiscal challenges, including a projected budget deficit of $4 billion.
The state ordinarily picks up the debt service on bonds for SUNY academic buildings. But financing for the medical school project was anything but ordinary. Moving the medical school from the South Campus to downtown had been part of the university's long-term planning going back to the early 2000s. So when Gov. Andrew M. Cuomo awarded the university a $35 million "challenge" grant in 2011, Tripathi decided to use it as a down payment on a relocated medical school.
The state already had earmarked $50 million for renovation of several South Campus buildings that were home to the medical school at the time. But Tripathi was sure $50 million wouldn't be enough to bring the old buildings up to the standards of a modern medical school. He convinced state officials to redirect the money instead toward a project that would help transform medical research and healthcare delivery in the region, while also boosting downtown Buffalo.
"There was overwhelming support from our health partners, from the medical community, to move the medical school downtown," said Tripathi. "It made sense from all angles."
The school had $25 million in savings to use for a new building, and school officials planned to raise at least $50 million in donations for the project.
That still left the school nearly 60 percent short of what it needed. In New York, the state typically picks up the tab on construction of educational facilities by using proceeds from the sale of bonds through the Dormitory Authority. The state also pays the debt service on the projects. UB's problem was that the SUNY Construction Fund already had its projects from across the state lined up. It wasn't clear how long it would take to get the money through conventional means.
Traditional funding for the new building "was not on the table," said Tripathi.
So instead, UB worked out a deal with the state, whereby the Empire State Development Corp. took on the bonding responsibility, while the medical school agreed to pay the debt service.
"That was the arrangement," said Tripathi. "At that time, there was no other option."
Tripathi acknowledged that the financing model was a calculated risk at the time – but one that already has paid off with a 25 percent increase in students enrolled at the medical school and a corresponding increase in faculty.
"It was a good kind of risk to take," he said. "It's no longer a risk."
Tripathi said he was confident in the medical school's ability to pay the debt service.
"We have planned for it," he said. "That's how we designed the building. The financial situation always changes and if we need more money, we will get the money. We have raised quite a bit of money as well from philanthropic sources."
The school also plans to raise an additional $100 million in private and corporate gifts, beginning in the spring, in tandem with a university-wide capital campaign, Cain said.
Classes will begin in January inside the airy new medical school building, which has eight floors and 628,000 square feet of space. The university feted its opening earlier this month with a special ribbon cutting that drew 1,000 visitors, including city, county and state officials, as well as Jeremy Jacobs, the Delaware North chairman whose $30 million gift aided the project and led to the school being named in honor of the Jacobs family.
In his remarks at the ribbon cutting, Jacobs described Cuomo's investment in the medical school as the region's "greatest economic development success story."
"It has created jobs, dramatically increased the value of real estate and raised the quality of life for our residents," he said.
But some critics point to the medical school debt and see a university exploited for economic development purposes, at the expense of its teaching and research mission.
Professors McCluskey and Holstun have been among the most vocal critics of what many faculty consider to be lack of financial transparency by the university and the UB Foundation, a private entity that manages private gifts, investments and real estate on behalf of the university.
Holstun ridiculed the university's plans for increasing revenue at the medical school as "magic money."
"What I'm wondering is how much of this is coming from basic operating expenses," he said. "It looks like we're being bled dry for Louis Ciminelli."
In 2014, the LPCiminelli firm won a $52 million contract for the first phase of construction on the medical school. The firm's chief executive officer, Louis P. Ciminelli, was indicted in 2016, along with two other company executives, on federal charges related to bid-rigging on state contracts associated with Cuomo's "Buffalo Billion" initiative, including the $750 million River Bend factory project. Ciminelli donated heavily to Cuomo's gubernatorial campaigns over the years. He and the other executives have pleaded not guilty in the case, which is headed for trial in Manhattan. The UB medical school project has not been linked to the charges.
Nonethless, McCluskey characterized the project as a "reckless and speculative deal."
"Going into debt at this level without a plan for generating revenue that you can publicly stand behind is not responsible," she said
Call for more hires, better pay
The university's own data suggests that there are fewer faculty teaching more students at the university, even as administrators insisted for years that annual tuition increases would allow them to hire more professors, Holstun said.
"We're increasing the student-to-faculty ratio," he said. "This is one of the worst signs for a university."
At the same time, he added, adjunct faculty continued to be paid as little as $2,200 per course - what Holstun described as a poverty wage.
Graduate student teaching and research assistants also have been pushing for UB to raise their stipend levels. Some graduate students say they have to work two and three additional jobs, on top of teaching and doing their doctoral work, just to make ends meet. Some also said they may be forced to drop their studies altogether because they can't afford it.
Leaders of a "living stipend movement" on campus said it would cost far less than the $10 million per year in debt service being paid out for the medical school to boost stipends across the board to at least $21,300, considered a "minimum living wage" amount for the Buffalo-Niagara region.
"I don't know why they don't have money, because they have a lot of students," said Sean Pears, a doctoral student in English.
University officials have said that individual departments are responsible for setting stipend levels, and some departments might need to consider accepting fewer graduate students, so that they can award them higher stipends.
But graduate students and their supporters said the central administration simply could choose to allocate more money for stipends to individual departments
"The administration tells us, 'There's a fixed pot of money. We can't increase that, and if you want to have fewer TAs, you can do that,' " Holstun said.
Graduate students, he added, "are going hungry" because of the university's reluctance to spend more on instructors who teach foundational courses to thousands of undergraduate students.
"It's sad to see these people who are the core of our mission not complete their program," McCluskey said.