These minutes reflect discussion and debate at a meeting of a committee of the University of Minnesota Senate or Twin Cities Campus Assembly; none of the comments, conclusions, or actions reported in these minutes represents the views of, nor are they binding on, the Senate or Assembly, the Administration, or the Board of Regents.

 

Minutes

 

Senate Committee on Finance and Planning

Tuesday, September 10, 2002

2:15 – 4:00

238A Morrill Hall

 

Present:

 

Charles Speaks (chair), Stanley Bonnema, Bruce Brorson, Charles Campbell, David Chapman, Tom Gilson, Gary Jahn, Thomas Klein, Joseph Konstan, Richard Pfutzenreuter, Terry Roe, Thomas Stinson, Susan VanVoorhis, Michael Volna, Susan Carlson Weinberg

 

Absent:

 

Jean Bauer, Robert Cudeck, Michael Korth, Marvin Marshak, Timothy Nantell, Warren Warwick

 

Guests:

 

Vice President-designate Kathleen O'Brien; Associate Vice President Judy Kirk (University of Minnesota Foundation); Professor Arthur Erdman (Advisory Committee on Athletics, FCC), Professor Laura Koch (Faculty Academic Oversight Committee for Intercollegiate Athletics), Mr. Joel Maturi (Director of Athletics)

 

Other:

 

none

 

 

[In these minutes:  (1) the capital campaign results and impact; (2) agenda for the Subcommittee on Twin Cities Facilities and Support Services; (3) update on the football stadium; (4) new financial system]

 

 

1.         The Capital Campaign

 

            Professor Speaks convened the meeting at 2:15 and began by welcoming Vice-President-designate Kathleen O'Brien.  He then turned to Ms. Kirk for a discussion of the capital campaign.

 

            Ms. Kirk said she understood the Committee was interested in the impact of the campaign on the University, so would provide an update on the fund-raising and a review of how the money will be used.

 

            As of July 31, 2002, the campaign had raised $1.399 billion, slightly more than the original goal of $1.3 billion set when the campaign began in 1997.  The final total could reach $1.5 - $1.6 billion by the close of the campaign in July, 2003.  Some of the funds were targeted for Endowment Priorities ($540 million, of which $554 million has been raised) and some for Ongoing Programs Priorities (the goal was $760 million, of which $845 million has been raised).  In terms of gift type, $1.150 billion is current gifts/pledges/grants while $150 million is in bequests.

 

            How much default is there on bequests, Professor Speaks asked?  Not much, Ms. Kirk said.

 

She reviewed the objectives of the campaign and the amount of money that had been raised for each.  (All numbers are millions of dollars.)

 

                                    Goal                 Progress           % of Goal

 

Faculty                         275                   296                   108

Students                        225                   206                   92

Strategic Initiatives        40                     31                     78

Research                      350                   480                   137

Facilities                       50                     115                   232

Libraries                       15                     11                     71

Ongoing Programs         345                   259                   75

Total                             1,300                1,399                108

 

The Facilities goal was purposely set low, after a very successful capital request, so it would not overshadow the other elements of the campaign, Ms. Kirk said.

 

            Ms. Kirk then reviewed the categories of donors by size of gift.  There were no donors who gave $25 million or more but there were 29 donors who gave between $5 million and $24.9 million and 261 who gave between $1 million and $5 million, for a total 290 gifts of over $1 million.  At the beginning of the campaign, the University had about 1200 people who gave more than $25,000; by the end there were  over 4,000. 

           

            At the start of the campaign one goal was to broaden the base of donors; during the 1985-88 campaign, most of the donors were corporations.  This time around there were 76,200 alumni donors (who gave 27% of the funds raised) and 100,077 other individual donors (who gave 20% of the funds raised).  The University has a high number of non-alumni donors, compared to its peers.  Foundations (1,136) gave 14% of the total and corporations (15,679) gave 30%.  Other organizations gave the remaining 9% of the funds donated.  The giving is now more balanced than it has been in the past. 

 

Of the 2002 donors, there were 3,937 faculty and staff who contributed $11.1 million.  To date in the campaign, faculty and staff have contributed over $56 million (the goal was $40 million).  With respect to this last datum, Ms. Kirk said she did not know of any other institution in the country that has received this kind of support from its own faculty and staff.  She related that former Vice President William G. Shepherd, who headed the 1980s campaign, has been delighted with the willingness of faculty and staff to support the University.

 

Ms. Kirk reviewed the progress of major capital campaigns at other universities (tracked assiduously by The Chronicle of Higher Education).  A couple of those institutions have not reached their goals and are worried, given the state of the economy, that they may be unable to do so.  Minnesota has ranked 6th in private and voluntary support in the nation.  Other institutions get into the top 10 but often because of one "mega-gift" while the University is consistently in the top group.

 

In terms of the cost to raise a dollar, Ms. Kirk told the Committee the University is consistently below national standards in the cost of fund-raising.  During 2002 (a difficult year), the costs have risen to 11.4¢ per dollar (still below the average); in prior years of the campaign the cost has ranged from 6.6¢ to 10.4¢.  In calculating this cost, they look at the costs of the Foundation and fund-raising expenses in the colleges.  Professor Speaks asked if a donation of $1 million to Computer Science, for example, would result in Computer Science receiving $1 million; it would, Ms. Kirk affirmed.  Where do the funds to support fund-raising come from, Professor Konstan asked?  Are units that are not doing much in the way of fund-raising losing money because the University's budget provides support for fund-raising?  To some extent, Ms. Kirk said, but fund-raising budgets are not all central; units that can raise money often have significant unit-level development budgets.

 

Ms. Kirk next reviewed highlights of the changes in University fund-raising.  In 1963 the Foundation had $600,000 in assets; in 2002 that number is $1.014 billion.  Annual gifts in 1963 totalled about $62,000; in 2002 they are $164.5 million.  There were 27 donors in 1962; in 2002 there were over 70,000.  Distributions to the University, in turn, have also grown.  In 1992 a total of $32 million was distributed ($19 million from the Foundation and $13 million from the Minnesota Medical Foundation).  In 2002 the corresponding numbers were $109 million ($74 million UMF and $35 million MMF).

 

In terms of the campaign impact, there have been 98 new endowed chairs created, bringing the University's total to 390; they have a combined endowment value of $578 million.  Endowed fellowships have grown from 117 in 1996 to 333 in 2002; endowed scholarships have increased in the six years from 557 to 925.  What are the guidelines on endowments, Professor Konstan asked?  The University requires $1 million for an endowed chair and $500,000 for a professorship, Ms. Kirk told him; there will be a recommendation to the Regents in the near future that these amounts both be doubled, to go into effect after the capital campaign ends.  [This policy recommendation is being reviewed by the Senate Consultative Committee during September.]  What is the yield from the endowments, Professor Konstan asked?  About 5% per year, Ms. Kirk said.  How much do these endowments provide budget relief for existing expenses versus supporting new activities, he asked?  And do they track these uses?  Ms. Kirk said they do not track the expenditures because the endowments are all so different.

 

Ms. Kirk noted that the "pipeline of deferred gifts" will continue long into the future; 75% of the deferred gifts will probably come after 2012, a projection based on life expectancy tables.  In terms of "legacy gifts" (bequests), the University knows about 62% of them before they are received (but over a third are a surprise, although in many cases the individuals have otherwise donated funds to the University).  From 1985-1996 there was $82 million in bequests, of which the University has thus far received $62 million (and most of the balance has not been paid because the donors have not died).  From 1997-2003 there has been $179 million in bequests, of which the University has received $44 million (again, the balance has not been received because the donors are still living). 

 

            The payout to the University from the Foundation has risen noticeably recently, Ms. Kirk noted.  The estimated pay-out (5% of a five-year trailing average) was estimated at $8 million in 2000, $12 million in 2001, $15 million in 2002, and projected to be $18 million in 2003.

 

            Ms. Kirk concluded her presentation with brief stories of three contributors.  One couple are alumni of the University who met at the University; he is a vice president at Microsoft who donated $1.5 million; in another case, the husband of one couple graduated from the Northwest School of Agriculture before it became the Crookston campus and donated $1 million in a remainder trust to fund scholarships for UMC; in the third case, Professor Emeritus Bettina Blake (Morris) has endowed the first professorship at Morris.

 

            Professor Konstan observed, from the data tables Ms. Kirk presented, that the University spent $18.7 million during fiscal year 2002 (7/1/01-6/30/02) to raise money.  What happens to those expenditures in 2004, after the campaign?  Will it shrink due to budget cuts so the University has fewer fund-raisers?  Ms. Kirk said that the ten-year data show the value of a dedicated Foundation staff.  When she started her current position in 1996 (after many years at the Foundation in other jobs), she said she did not want to make the mistake of devoting a lot of money to fund-raising during the campaign and then lay off a lot of people and let the effort go downhill.  She has worked with the Foundation Board of Trustees and the University on a 10- to 20-year plan.  The University will continue to provide some funds (although will not increase the percentage of support to the Foundation).  At the same time, the Foundation will continue to increase the support for its own budget; at present the University provides only 20% of the funds, down from 50% only a few years ago.

 

            Professor Roe inquired if the Foundation had identified reasons why some of the individual collegiate units have not met their fund-raising goals.  Ms. Kirk said they continue to meet with the units and work on different strategies as well as evaluate the potential for the unit.

 

            Professor Speaks thanked Ms. Kirk for her report.

           

2.         Agenda for the Subcommittee on Twin Cities Facilities and Support Services

 

            Professor Jahn noted that the Subcommittee submitted a report last spring recommending that this year begin with this Committee identifying issues for the Subcommittee to take up.  It would be helpful to receive guidance from the Committee, he said.

 

            Committee members made several suggestions:

 

--          Competitiveness of bids for minor remodeling (with costs under $10,000)

--          Prices and quality at the food service

--          Scrutinize the increase in parking rates more closely than this Committee is able to do

--          FCC may suggest involvement of the Subcommittee in review of support unit compacts

 

            Professor Jahn said there were also two matters left over from last year.  First, he recalled that the Subcommittee prepared a letter to then-Provost Bruininks, which he and Professors Speaks (for this Committee) and Ahern (for the Committee on Educational Policy) signed, asking about budgeting for common goods.  The Subcommittee has received no response to the letter.  Second, the Subcommittee concluded that there is a serious problem with support for classroom management and urged that this Committee take up the matter.  The situation is starting to verge on the dire, he said; equipment is introduced into classrooms without funding for its support in the future. 

 

            Professor Speaks agreed the Committee should again address the problem of funding for classroom upgrades and maintenance.  The letter on common goods budgeting should be sent to Provost Maziar, he suggested.  He also noted that there have two new committees appointed, the Biennial Budget Steering Committee and the Budget Advisory Task Force, both of which may well discuss common goods funding.  Dr. Maziar is chair of both and may well be able to respond to the letter.

 

 

 

3.         Update on the Football Stadium

 

            Professor Speaks next welcomed Mr. Maturi to the meeting.  Professor Speaks noted that he had prepared (and distributed to the Committee) a brief synopsis of the discussions of the football stadium that have taken place at these Committee meetings since 2000.  He reported that more recently, the Faculty Consultative Committee is urging that if there is any possibility that a stadium will be built on the campus, alternative uses for the space in the stadium be considered.  There is now in place an alternative-use space task force which will consider the possibilities.

 

            Mr. Pfutzenreuter took the Committee through a presentation that will be made to the Board of Regents in September.  He reviewed a brief chronology of events, starting with Fall, 2000, when the Vikings approached the University about a joint-use stadium.  The Vikings were told by the political leadership that they would only get a stadium if it were joint with the University, thus solving two problems at once.  Winter-Spring 2001 the University hired a consulting firm to review the proposal to renovate the Metrodome; the Vikings rejected this option and went to the legislature with a proposal.  The University did not want to be left out of the discussions so agreed to work with them.  By December, 2001, a stadium task force issued a report endorsing a new stadium for the Twins and a joint-use stadium for the Vikings and the University.  In May, 2002, the legislature adopted and the Governor signed a stadium bill, primarily for the Twins but which also included language requiring predesign of a joint-use stadium on the University campus (to be owned by the University) and a Memorandum of Understanding (MOU) between the Vikings and the University.  At several points along the way the Board of Regents was provided updates. 

 

The 2002 legislative action provided $500,000 to the University for predesign (covering "all things physical") and the MOU (covering "all things operational").  The deadline for document completion is December 1, 2002, a deadline the University will miss by a few days in order to take the matter to the Regents at their December meeting.

 

The University's approach to the stadium has included a lot of consultation, Mr. Pfutzenreuter  reported, including with alumni, the neighborhoods, and the faculty (including through this Committee).  It has retained a number of consulting firms to provide advice on facility planning and urban design, transportation and public works infrastructure, environmental & geotechnical & utilities, cost estimating and "constructability," and a general stadium facility consulting firm.  In addition, it has retained a law firm to assist in negotiating the MOU.  The lawyers from both sides met last week and will likely begin doing so more frequently as the deadline approaches, Mr. Pfutzenreuter surmised.

 

Mr. Pfutzenreuter itemized the issues that the MOU will be expected to address, including parking and infrastructure, allocation of revenues, lease/management agreement, design and construction management, restrictions on the Vikings, and other matters.  While the MOU will likely not resolve all the issues, the goal is to try to hammer out as many as possible in order to avoid the necessity of legislative intervention.  It is also hoped that the MOU agreements will be embodied in any legislative action. 

 

Mr. Pfutzenreuter also pointed out, but did not elaborate on, the proposed principles guiding the University's negotiations.  They include respect for the University's fundamental academic mission, ensure a financial benefit to the University, promote physical and programmatic integration with the Twin Cities campus community and adjacent neighborhoods, enhance the Gopher game-day experience and increase community enthusiasm for Gopher football, and assure project design and construction meet the highest standards of fairness, integrity, and sound business practices.  Mr. Pfutzenreuter said there has been no public discussion of these principles but such discussion is needed because this is too big a project for staff to work without guidance from the Board of Regents.

 

Professor Speaks asked if the original 10 principles enunciated earlier are embedded in these new principles.  Mr. Pfutzenreuter said he thought they were and he has set up a matrix to identify where each of the 10 fits in the new set. 

 

Professor Chapman said that given the state budget situation and the subsidy of intercollegiate athletics, he is surprised that this project continues to move forward.  Mr. Pfutzenreuter pointed out that there was legislation passed, with funds for predesign and the MOU, so the University is obligated to meet the legislative request.  What will happen after that he could not predict.  If this is driven by the legislative process, Professor Chapman asked, will the University have a voice?  It will, Mr. Pfutzenreuter affirmed, although ultimately the legislature will do as it wishes.  The Vikings intend to press hard this legislative session to get a stadium approved.

 

Professor Speaks recalled that one of the original 10 principles was that the University would not be responsible for any project costs, and he had the impression from the President that the principles were "deal-breakers."  Now, however, ten months later, the University will apparently be responsible for a $60-million parking ramp that is projected to lose $3 million per year.  What happened?  The legislature drafted proposals, Mr. Pfutzenreuter said, and the University subsequently made statements to the effect that "maybe that would be OK."  So the principles are NOT deal-breakers, Professor Campbell observed.

 

One of the principles was that the limit to the University's risk would be that a new stadium would not cost the University more than what it cost to play football in the Metrodome, Professor Konstan said.  Is that a realistic expectation if the Vikings were to leave after 10-15 years?  The Vikings must sign a long-term lease, Mr. Pfutzenreuter said, and the lawyers believe such a lease can be made enforceable.  The team must be around long enough to help pay for the parking, he said.  But he agreed there is some risk that the University might be stuck with something; when the deal is being made in the last two hours of the legislative session, will the University blink?

 

Professor Speaks noted that this Committee has had stadium discussions since 2000, focused primarily on the financial aspects.  He said he had developed the impression that former President Yudof wanted the Committee to keep relatively quiet about the University's donation of $25 million in land, $60 million to construct a parking ramp, and $3 million per year to support the ramp.  The Faculty Consultative Committee, however, has told Interim President Bruininks that it believes this is a sensitive enough issue that it is time for public discussions, on the record.  He said he did not find any compelling issue that would warrant the Committee preparing a statement on the stadium at this time, but that it should remain vigilant and be prepared to issue a statement, pro or con, on stadium issues when and if it seems appropriate.

 

Mr. Pfutzenreuter said the Board of Regents will NOT be asked to take a position on the stadium at their September meeting.  The Board will not take a position until it can see the predesign and the MOU.  There is also the larger question, does the University want a joint-use stadium with a professional entertainment business on the campus?  He said he did not know what the Regents would do in December, when they have predesign and MOU, but neither will be sent to the state without action by the Board, so the December statement will be important.

 

Professor Speaks recalled Mr. Pfutzenreuter's comment at the last meeting that if he were a wealthy betting man, he would bet on when, not if, the University would be playing in a new stadium.  When the idea that the new stadium was a foregone conclusion was presented to the chair of the Board of Regents, she responded that the train has not left the station.  What does he say about that, Professor Speaks asked Mr. Pfutzenreuter?  "Reasonable people can disagree," Mr. Pfutzenreuter replied.

 

Professor Konstan said he hoped that any stadium design would allow other intercollegiate athletic or University events as well and that it would not sit vacant if there are no football games being played.  He asked whether the designers were instructed to pursue designs with low marginal operating costs so such events could afford to use the stadium.  Mr. Pfutzenreuter said those working on it are aware it will be there 365 days a year and should be used appropriately, in ways that need to be identified.  It is possible the legislature will issue a mandate for such use, as it did with the Twins' stadium.  He agreed the University must find a way to leverage the use of the stadium; it is an open question what those other uses should be.  He affirmed that such planning is explicit in the directions to those working with the project.

 

At the same time, Professor Campbell observed, this Committee was concerned BECAUSE there might be 365-day-a-year use of a stadium with the concomitant impact on University activities.  The more one hears about this, the more one has reason to worry, he said.  This will not be like Ohio State, which does NOT have daily year-round uses of its stadium.  The University would be losing control of a big part of the East Bank if it accepts the notion that there should be 365-day-a-year use.  At the same time, however, one can suppose that is how the stadium might be paid for, in part.  There could be significant damage to programs as result of such use, he said.

 

His worry, Mr. Pfutzenreuter said, is that the legislature will fund part of the capital cost of the stadium but provide no funds for operating costs.  That would be a deal-breaker as far as he is concerned, Mr. Pfutzenreuter told the Committee; he said he would walk away from any deal that did not include operating funds, because the University could be forced to allow tractor-pulls and other such events in the stadium in order to pay maintenance costs.

 

Professor Speaks recalled that former Vice President Kruse said his worst nightmare was that the Vikings would leave the Twin Cities and the University would inherit the Metrodome, which has an operating cost of about $7-8 million per year.  Now, however, the University is talking about participating in a stadium that includes, at the outset, a parking ramp that will cost $3 million per year.  How can these be reconciled?  Mr. Pfutzenreuter said that the "pro forma" on the parking ramp was very conservative, such as keeping costs down for students.  And all ramps lose money, given what the University charges, he pointed out.

 

Professor Speaks turned now to Mr. Maturi to ask his perspective on how the stadium would benefit intercollegiate athletics financially and programmatically.  Mr. Maturi thanked him for the opportunity to join the Committee. 

 

Mr. Maturi related that when he took the position of athletic director, he was surprised to learn how far along the planning for a new football stadium was.  As one who inherited a program that is not fiscally solvent but who wants to be fiscally responsible, he was startled at the talk about the numbers involved with a new stadium.  He said he has told Coach Glen Mason that the Metrodome is a good place to play and that the coach should say the same to any players he is recruiting--because anyone being recruited now will not be playing anywhere other than the Metrodome.

 

At the same time, he said, if athletics are a part of the academic mission of the University--which he believes they should be--then football games should be on campus.  Whether there is need for a $500-million stadium is not a decision he will make, he told the Committee, nor could he justify it.  There will be a time in the future when the Metrodome will not be a place the University can play football so another site will have to be found (and that time is not far off).  He said he doubted any new stadium would be built unless it were joint-use.

 

A new stadium would assist in recruiting in football but it would not cause the Gophers to win the Rose Bowl.  It would benefit the program to have a stadium that students can get to, it would benefit Recreational Sports as well as academic programs.  Would those benefits justify the costs?  That is not a decision he has to make, Mr. Maturi said.  What the department will do is say what it needs in a stadium to run a Division I-A program and so is involved in the discussions for that reason.  Mr. Maturi said he was concerned about the capital costs, the operating costs, and the activities that might go on all year.  He commented that the playing surface likely to be installed would not lend itself to tractor pulls (it may not be real grass but instead the most advanced version of artificial turf that is much safer than earlier versions and that also requires no maintenance, unlike live grass).  The new turf does allow multiple uses, which grass does not, but it cannot be easily removed for activities that would damage it, so there are limits to what can be scheduled (such as tractor pulls).

 

Professor Speaks noted Mr. Maturi's surmisal that the only way a new stadium will be built is if it is a joint-use facility.  How does he really feel about that arrangement, Professor Speaks asked Mr. Maturi--is it a good idea?  Mr. Maturi said he thought it could work.  The University has a terrible deal at the Metrodome, he said; it does not receive the revenue that other Big Ten schools do from their stadia.  The University can get a much better deal with its own on-campus stadium, although it is not clear that greatly increased revenues would result.

 

Is there likely to be any change in the policy providing that all parking revenues go into the general parking and transportation fund, Professor Speaks asked Mr. Pfutzenreuter.  There is no contemplation of any such change, Mr. Pfutzenreuter told him.  Mr. Maturi added that if the money goes to parking or to the University that is fine with him, although he would like to see intercollegiate athletics given credit for producing the income--his only concern is that parking revenues not go to the Vikings.  If intercollegiate athletics receives the parking revenues from football games but parking must then make up the money from elsewhere, that makes no sense.  He said he has no interest in stealing money from other units.  He said he is also very concerned about the community and the traffic implications of a stadium; he said he does not want a stadium to be so disruptive people cannot continue to live where they do.

 

Professor Konstan inquired about the advertising that might be in the stadium.  That will be dealt with in the protocols in the MOU, Mr. Pfutzenreuter said.  The Board of Regents will retain naming rights, he added.  There could be more money for the University in advertising and naming--because now the University gets nothing from these sources.  He also cautioned that anything anyone has written about the stadium, on any computer, is likely to be requested by the press.

 

Professor Speaks noted that this item would be back on the Committee's agenda twice more this fall, before it goes to the Regents in December.  He thanked Mr. Maturi for joining the meeting, and asked Mr. Pfutzenreuter and Mr. Maturi to come back to the Committee as needed if as events unfold it appears things may be moving in a different direction; the agenda will be shifted to accommodate them, if need be.

 

Mr. Klein said he liked what he was hearing about the relationship with the Vikings.  He recalled the metaphor LBJ used about having the camel inside the tent rather than outside.  It is better that the University discuss these issues than have them decided by a legislative group.

 

Mr. Pfutzenreuter reviewed the timeline of events for the next six months.  They will have the MOU and predesign done by the end of November, in order to meet the docket deadline for the Board of Regents. 

 

Where will be the discussion about whether this is the best use of the land on which the stadium will sit, considering the University's mission, Professor Campbell asked?  Mr. Pfutzenreuter said that is a question the Board of Regents will take up.  Should this also be on the FCC agenda, Professor Speaks asked?

 

4.         New Financial System

 

            Professor Speaks welcomed Mr. Volna to discuss plans for a new financial system for the University.

 

            As he reported previously, Mr. Volna explained, the University continues to pursue two options for replacement of the financial system:  purchase from a vendor currently marketing to higher education and participation in a multi-school consortium exploring rewriting a system currently running at two large research universities.  The University issued a Request for Proposals and received four responses (in addition to three concerning assistance with implementation).  He discussed the four companies that submitted proposals and said, in response to a query from Professor Speaks, that the University has dealt with three of them.  There is a core team now evaluating the proposals using a number of criteria.

 

            Professor Konstan asked if the new system would replace just CUFS or both CUFS and EGMS.  Mr. Volna said it would replace CUFS and parts of EGMS, but not EGMS itself.  In terms of budget approvals, it will be up to the Vice President for Research to decide whether to keep EGMS independent or not; they can structure the financial system either way.  This is an important question, Professor Campbell said; is the Vice President's office involved?  Interim Vice President David Hamilton is on the steering committee, Mr. Volna said, and there are other representatives from that office involved in different elements of the planning and evaluation.

 

            Mr. Volna also reported on the pursuit of the consortium option.  Consortia are always slow and difficult to make work, and there are challenges to working with seven schools, but they are even further behind than he thought they would be.  Neither Mr. Volna nor Committee members could identify any consortia that had been successful, and members of the Board of Regents share this concern, but they also thought it was too early to decide not to pursue the option.  The Regents are concerned about financial viability and want a system that is AAA-rated.  They are worried about the small vendor involved in the consortium--but since this is such a low-cost option for the University to pursue, it makes no sense to get out before there is enough information.  The consortium option also serves as a bargaining chip with vendors, Mr. Klein suggested.

 

            The schools are having an easier time working together than they are with the vendor, Mr. Volna reported.  The vendor wants to be the next PeopleSoft and want to control the product so they can market it to other schools.  (The intellectual property involved is owned by AMS, the company that produced CUFS, but the marketing rights are held by individuals who used to work for AMS.)  Mr. Volna noted that the schools involved in the consortium proposal are the only ones looking at this product, so the vendor has nowhere else to go at the moment.  The reason it is attractive is that the system has been adapted at two institutions, including Indiana, and worked extremely well.  Indiana bought the package, customized it, and has been running it for five or six years--and likes it very much.  Of the Big Ten schools, Michigan, Ohio State, and Wisconsin selected (very expensive) PeopleSoft financial systems, Penn State has its own system and is not in the market for a financial system, and all the rest are in the consortium.

 

            How unique are the programs--how different is Minnesota's system from other Big Ten schools, Professor Roe asked?  To what extent are there spillovers from Michigan/Ohio State/Wisconsin?  There should be economies of scale, he said, depending on how unique each institution is.  PeopleSoft could have an advantage in this respect, Mr. Volna said. 

 

It is important to emphasize that the three institutions using PeopleSoft each have different version numbers, Professor Jahn pointed out.  A separate consortium holds out the possibility of avoiding mandatory upgrades backed by a vendor threat not to support the version the institution has, thus requiring an upgrade.  Mr. Volna said the universities want to purchase the software and run their own system, rather than rely on a vendor for support, maintenance, and so on.  That is what is being negotiated. 

 

            Ms. Weinberg asked about the impact on departments apart from the Enterprise tax.  When the University moved to the current system, departments took on a lot more work.  Should they expect to have to take on a lot more work with a new financial system?  Mr. Volna said that most of the financial work has already gone to departments.  He said he did not know that much more would be transferred.  He affirmed that a new system would replicate the current process rather than shift more responsibilities to departments.  Nothing, he said, that would have any volume impact.

 

            Two things make financial systems more of a problem for universities, compared to non-universities, Professor Konstan said:  they have more rules to follow and they are remarkably inflexible.  Will the University have any guarantee vendors will keep up to date with government regulations?  And how flexible will the University be--does it do things because of government regulation or because that is the way things have been done before?  Often the way universities do things is because that is the way they have done them for 20 years, not because they want to or because that is a good way to do them, Professor Konstan maintained.  In his view, the University will do what it needs to comply with regulations, Mr. Volna said; the vendors will say that compliance will depend on how the University uses the system.  Businesses are much more pyramidal while universities rely more on consensus and consultation and do not measure success by dollars per share.  Those differences do make it more difficult for universities.  But they intend to find out what the vendor products can do through scripted demonstrations.

 

            These comments lead him to worry that costs are often more than what is actually budgeted, Professor Campbell said.  Shifting tasks to departments costs the departments a lot.  He said he wanted to see an assessment of department impact as part of the decision about what system to buy; he told Mr. Volna he hoped that they would talk to people must deal with what may come.  Mr. Volna said they are including 35-40 people from academic departments in the planning and will include the same number in the scripted demonstrations to see if the packages meet department needs.  More such individuals will be included as the final decision is made.

 

            Professor Roe asked about changing the rules rather than trying to fit everything into an old shoe.  A consensus should be arrived at as to what the basic needs are.  Then, if colleges have special needs, (because perhaps the Medical School has different needs than the College of Agriculture, Food, and Environmental Science) consideration should be given for these units to pay for additions to the basic software.  Otherwise, the attributes of the software are "free goods" and it is rational for each unit to request all possible attributes as it incurs no cost.  Mr. Volna said he was not opposed to this idea and would give some thought to baseline requirements.  Professor Speaks suggested Mr. Volna also think about the structure of the Enterprise tax in the future:  every unit might pay the same percentage tax for the basic system and units that require additional special features might be charged an additional amount.

 

            Professor Speaks adjourned the meeting at 4:20.

 

                                                                        -- Gary Engstrand

 

University of Minnesota