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Regents approve provisional 2012 budget


On June 20, the Board of Regents approved the provisional FY2012 budget

By Adam Overland

Board of Regents June 2010 165x165


June 21, 2011

The Board of Regents approved the president’s provisional operating budget on June 20, by a vote of 9–2, with Regents Steve Sviggum and Laura Brod voting no, and Regent Dean Johnson out of the country and unable to participate in the vote. The budget plan takes into consideration the projected worst-case scenario represented by House File 1101, as the governor and legislature have been unable to agree on a balanced state budget. Should the worst-case scenario not come to pass, the budget includes a framework to allocate any additional resources appropriated beyond the current legislative proposal: one-third would go to reduce tuition, one-third to reduce budget cuts to academic units and one-third to minimize impacts expected in the second year of the biennium.

Many of the Regents who voted yes on the budget did so with reservations directed at the state allocation to the U. Regent Patricia Simmons said that development of the budget was a painful and painstaking task, saying, “I have not heard, nor am I able to offer a better option in the face of this severe cut in state financial support.”

Regent Venora Hung echoed the sentiment, saying “I think with the budget the way it is, that we don’t have many options, but I empathize with the economic hardships many of our employees face.”

President Bruininks responded that the U is taking action to protect lower-paid employees from increased premium costs related to restructuring of the health care plan. “I asked our people to find roughly $15 million in health care savings per year going forward, and they produced that plan, but I also indicated that I did not want to price health care out of reach for our lowest paid employees,” said Bruininks.

Planned changes to salary and fringe benefit planning in 2012 will include (subject to collective bargaining) a wage freeze; UPlan health changes that include adjustment of medical premiums, copays, and plan administration costs; and changes to the academic retirement program that will increase retirement contributions of new employees. The planned changes are subject to collective bargaining, and numbers are based on projections.

benefit changes
*Note:
The planned changes below are subject to collective bargaining and numbers are based on projections.

Health benefitS
The U will reduce health benefit costs by an estimated 5 percent by shifting approximately $11 million per year in costs to employees. Medical premiums will increase as follows:

--Employee-only biweekly rate increases from $25.40 in 2011 to $36.00 in 2012.
--Full-family biweekly rate increases from $109.30 in 2011 to $155.00 in 2012.
--Copayments will also increase.

More savings will be found by moving to one administrator: MEDICA, which will save more than $14 million over six years.

Faculty Retirement Plan
The budget scales back the U’s contribution to the Faculty Retirement Plan (FRP) for new employees from 13 percent to 10 percent. The overall FRP program will remain at 15.5 percent for new employees, but the contribution by the University will be reduced by 3 percent while the new employee's contribution will be increased by 3 percent. The savings will increase over time, with $3 million projected in the first year and approaching $10 million in the fourth year.
 

The budget plan also includes more than $40 million in unit reductions, including elimination of staff positions (largely through voluntary strategies), reduced expenses, reduced reserves, restructured operations, and elimination of programs. In addition, more than $23 million will be found in productivity gains, including current year tuition revenue from growth in student credit hours and enrollment. The U would also freeze wages and salaries for the year, which would result in a savings of $21.4 million.

President Bruininks expressed regret about the size of the budget cut to the U, which he says rolls the University back to 1998 state funding levels, and which, over the past five years, shows an accelerated decline in state support at a pace that puts Minnesota’s support of higher education in the lowest 40 percent of states in terms of annual reductions to the U’s base budget. “If we model what is on the table for the next two years we’ll be in the bottom 20 percent,” said Bruininks. “I don’t think that’s the kind of trend we should expect from the state.”

Bruininks described the proposed cuts as disproportional to the U’s representation in the overall state budget.

“The U is clearly doing its part to address the state’s budget challenge,” said Bruininks. “I’ve been talking about it for two years. We’ve been aggressive in reducing costs, we’ve increased non-state revenues at accelerated rates, and we have worked very hard to protect our students. Reductions to the programs and support units at the U have been targeted and differential. In the academic area they’ve ranged from 0 to 6 percent, and in respect to support units, largely administrative units, reductions range from 2 to 55 percent.”

Regent Larson said he would vote for the budget, but warned that he sees the state of Minnesota disinvesting in higher education. “One of the reasons this state has been so successful comparatively over the years is the fact that we did invest heavily in higher education. I believe that for the future...we must make a priority of higher education, and reinvest more significantly than today, or our society, our culture, and our economy is headed for trouble.”

Regent Laura Brod, who voted no on the budget, thanked the president for what she called a very honest budget. “There aren’t smoke and mirrors around it, and I think that honesty in terms of how it is put forth is really important to the state...and the University. Thank you for that,” said Brod. But she took issue with the relationship between tuition and legislative appropriations, saying that the correlation wasn’t as strong as it is portrayed in the budget materials provided to the board. The president cited a lag between legislative appropriation and implementation of tuition changes as part of the correlation issue, which he encouraged board members to investigate further.

In response to comments about higher administrative costs at the U, the president emphasized that the issue was about more than numbers. “If you look at this so-called administrative category (P&A), you’ll see some fairly large numbers. But you should take a look at what these people do. What they do is more important than the title they hold. For example, people who will be active on the $51 million Clinical and Translational Science Award are really driving a research agenda. They’re not people with green eyeshades just moving paper around. These people are driving a research agenda—many are directing labs and they’re principal investigators of major studies...I think we need to be careful,” said Bruininks.

“There are a lot of statistics flying around right now and many of them are not anchored in reality,” added the president. Calling the numbers the most conservative available in measuring U workforce productivity, the president said that total employee headcount is up 6.9 percent from FY2001 to FY2010. “State appropriation in the same period per full-year equivalent (FYE) student is down 11.5 percent. FYE students per employee is up 11.9 percent. Degrees per employee are up 31.8 percent. Sponsored research funding per employee, up 50.2 percent. In any context that I could imagine, this record represents a very significant gain in productivity,” said Bruininks.