Approved by the: Faculty Senate - March 25, 2010
Administration - June 10, 2010
Board of Regents - June 22, 2010


Presidential Faculty Compensation Proposal

In accordance with Section 4.5 of the Regents policy Faculty Tenure, the Faculty Senate approves the President's proposal for a 1.15% reduction in salary for all faculty for the 2010-2011 academic year.  The authority granted by approval of the proposal extends only to the identified 1.15% reduction for 2010-2011. 

FCC MEMBERS:
MELISSA ANDERSON
NANCY CARPENTER
CAROL CHOMSKY
CHRISTOPHER CRAMER
SHAWN CURLEY
JANET FITZAKERLEY
MARTI HOPE GONZALES
KATHRYN HANNA
CAROLINE HAYES
KATHRYN HANNA
EMILY HOOVER
BRIAN ISETTS
WALT JACOBS
JEFFREY KAHN
RUSSELL LUEPKER
JAN MCCULLOCH
J. MICHAEL OAKES
MARTIN SAMPSON
KATHRYN VANDENBOSCH
CATHRINE WAMBACH
BECKY YUST

COMMENT:

The President’s proposal for a temporary reduction in faculty salaries is brought in response to extraordinary reductions in state support. The University of Minnesota’s state-appropriated (operating & management) budget has been cut $191 million in the last two fiscal years, including $36 million as recently as February 15, 2010. As a result of these unprecedented cuts, the University’s estimated budget shortfall—the amount by which projected expenses exceed revenues—for the upcoming fiscal year (FY11) is approximately $132 million.

In response to decreasing state support, the University has solicited increased donations, raised tuition, and cut expenses. Both donations and tuition are at all-time highs, and substantial cuts in expenditures have been made. According to the University’s CFO, Mr. Pfutzenreuter, $95 million in cuts were made across the University in 2009. Since June 2009, $34.5 million has been cut or reallocated from Central Administration’s past and projected budgets, including savings of more than $10 million from the elimination of more than 140 staff positions from central administrative units. Mr. Pfutzenreuter reports that Morrill Hall budget cuts have been proportionally larger than those in academic units.

Unfortunately, the cuts and increased revenues are insufficient to meet the financial demands of FY11. One of the challenges in cutting costs in response to revenue loss is that 70% of the University’s nearly $3 billion annual budget is devoted to employee compensation. It is in response to these circumstances that President Bruininks has proposed a one-time 1.15% cut in pay for all University employees in FY11, with executive officers (deans and above) taking a 2.30% cut, and has brought the proposal to the Senate pursuant to Section 4.5 of the tenure code.

The pay cut is temporary and not a cut in base pay. The associated savings will stay within colleges and no cross-college transfers will take place. Should an extension or alternative cut be needed, the President must return to the Faculty Senate for another vote. It is difficult predict at this time how the University will meet budgetary needs in FY12 and beyond, but any decrease in faculty salaries, temporary or otherwise, will be subject to the provisions of the tenure code requiring the involvement of faculty governance.

Based on the administration’s extensive consultation with the Senate Committee on Finance & Planning, we concluded that there was sufficient understanding of the problem and proposed solution to move forward to approve the President’s proposal. Substantial information on the University’s budget and finances is regularly shared publicly through annual independent audits, reports, and internal audit committee documents presented to the Board of Regents and available on the University’s website. The University has taken and continues to take steps to explore additional cost-cutting opportunities, including the hiring of a consultant to review purchasing reform opportunities. The University already spends considerable funds on regular financial audits (nearly $700,000 to independent auditors in 2009). It is not clear that a massive external evaluation of all University financial decisions is warranted or cost-effective. (We note that the cost of an external evaluation of this kind to be done at UC-Berkeley is $3 million.)

The FCC discussed with the President a variety of ways to allocate salary cuts, including his original proposal for furloughs and the more equitable proposal for a uniform small percentage salary cut. The present proposal spreads the burden across the University, and the flat percentage cut means those with higher salaries will contribute higher dollar amounts. Although we recognize the difference in impact on employees at different salary levels, we also see that the difficulties caused by the 1.15% cut will be mitigated for lower-salaried employees because they will receive a 27th pay check during the same year. Among concerns with instead mandating substantially larger cuts to more highly-paid individuals is that such a plan would likely be divisive and create resentment, and it could cause the departure of some of the University’s most distinguished and productive faculty and staff. Moreover, the President’s plan allows faculty and P&A staff to contribute more by taking up to 10 voluntary furlough days, with the savings remaining in their colleges and therefore helping to prevent further erosion of jobs for others.

The FCC also considered the implications of rejecting the President’s plan. First, the President has stated that if his proposal for cuts to faculty salaries is rejected, he will not reduce wages and compensation for other employee groups and will need to balance the FY11 budget in other ways. The likely result would necessarily include additional substantial cuts to unit budgets, which the FCC believes would harm our core academic mission and cause layoffs of non-faculty employees. Second, the FCC is concerned that many in the legislature and the public will not understand why the faculty, who enjoy the benefit of tenure, would be unwilling to take a 1.15% pay cut in order to balance the University’s budget, while so many in the state suffer more severe cuts in pay and benefits, or the loss of their jobs.

In light of the immediate problem and the enormous financial and strategic challenges that lie just ahead, the FCC believes the President’s plan is a reasonable response to the projected budget shortfall in FY11.

Return to Senate Resolutions Page