These minutes reflect
discussion and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
238A Morrill Hall
Present:
Charles Speaks (chair), Prince Amattoe, Jean Bauer, Stanley
Bonnema, David Brown, Charles Campbell, Tom Gilson, Gary Jahn, Thomas Klein, Joseph
Konstan, Michael Korth, Brittny McCarthy Barnes, Richard Pfutzenreuter, Thomas
Stinson, Terry Roe, Sue Van Voorhis, Warren Warwick, Susan Carlson Weinberg,
Michael Volna
Absent:
David Chapman, Tim Church, Robert Cudeck, Abu Jalal, Tim
Nantell, Kathleen O'Brien, Daniel O'Connor
Guests:
Michael Berthelsen (University Services), Brian
Swanson (Office of Budget and Finance); President Robert Bruininks, Executive
Vice President and Provost Christine Maziar; Linda Woock, Leslie Koidahl (Office
of the Controller)
[In these minutes: (1) report of the capital projects
subcommittee/discussion of capital budgets; (2) subcommittee appointment on
athletics; (3) congratulations; (4) the budget (at length); (5) summer
meetings; (6) payments/reimbursements to employees]
1. Report of the Capital Projects
Subcommittee
Professor
Speaks convened the meeting and turned to Professor David Brown, Chair of the
Capital Projects Subcommittee, for a report.
Professor
Brown began by saying there are two capital budgets: one is for repairs and maintenance, which is
being presented here; the second the subcommittee will consider in June, which
is the legislative request for major capital improvements across the
University. The capital budget for next
year is about $40 million, the funds are in hand, and the money comes from
local units, retrenchment and reallocation, etc. The subcommittee did not review all the
details of the budget because they are not experts and accepted them as
appropriate and necessary.
The
subcommittee will ask more detailed questions about the second cluster related
to maintenance of buildings, funding of units raising funds for buildings, and
so on.
Mr.
Swanson explained that the administration brings to the Board of Regents each
year, in May and June, the capital budget--the money the University intends to
spend the following year. The funds must
be in hand for the capital budget. This
year's budget is smaller than normal and has dropped since the report to the
subcommittee because some expected gifts did not show up. This budget does not require state approval,
Professor Speaks asked? It does not, Mr.
Swanson said.
The
budget will be amended if the legislature passes a bonding bill before it
adjourns this spring, Mr. Pfutzenreuter added.
The budget also changes during the year as projects need to be funded or
funds become available.
Does
the capital budget involve any debt service, Professor Speaks asked? It is all cash, Mr. Swanson said.
What
is the timeline for the capital request, Professor Speaks asked? There is a draft of the 2004 request, Mr.
Pfutzenreuter said, and is being completed quickly because the preliminary
request will be presented to the Regents in early June. The request, which focuses on repairing what
the University has and on controlling debt costs, will be about $165 million,
of which $141 million will be in Higher Education Asset Preservation and
Renewal (HEAPR) funds. The most the
University has for in HEAPR funds in the past has been $80 million, of which it
has received about $35 million. The
advantage to HEAPR funds is that they carry no debt service for the
University. But the final request is not
due until October/November, so there will be time to discuss it and make
changes, he said.
What
happens when the legislature asks about the consequences of NOT building
something, Professor Brown asked? The
only thing the University can do is give legislators a list. The University provides a list with specific
dollars for each project, Mr. Swanson said.
Mr. Berthelsen said the University still ends up talking about the
programs in the buildings and the amount of money the University will spend, so
it can say a program will remain in substandard facilities if a request is not
funded. The University is also doing a
facilities condition survey, he said; it has had data for roofs, buildings,
windows, etc., in a database, but now is including mechanical systems,
elevators, heating/ventilating/air conditioning, plumbing, and so on for all
buildings on the campus. This
information will help to support the request and provide an idea where the
University should be investing its capital funds. It will also inform the University when costs
will come due.
Professor
Campbell asked about the capital items that were vetoed by Governor
Ventura. Some are in the 2004 request,
Mr. Pfutzenreuter said, and some may be provided if the legislature adopts a
bonding bill this spring. If it does so,
the funding for the Translational Research Facility will be first on the list
because it was the Regents' number one priority. The University is, however, also trying to
have other items included in any bonding bill.
The
capital request will go to the Regents in September, so the Committee will need
to meet early to review and comment on it.
2. Subcommittee Appointment
Professor
Campbell next reported that he and Professor Speaks had been informed by
Professor Art Erdman, Chair of the Advisory Committee on Athletics (ACA), that ACA intended to form a subcommittee on funding and
strategic issues for the Twin Cities athletic program. Professor Erdman suggested that this
Committee (Finance and Planning) should have a representative. Professor Campbell said that the Committee
could recommend someone who, in turn, could also be ex officio on this
Committee. He said he would like to
nominate Professor Speaks to serve.
Professor
Speaks left the room while the Committee discussed the appointment. The Committee voted unanimously in favor of
asking Professor Speaks to serve on the subcommittee. When Professor Speaks returned to the room,
Professor Campbell congratulated him and thanked him for agreeing to serve.
3. Congratulations
Professor
Campbell then said he would find it difficult to imagine any committee chair
doing a better job than Professor Speaks has done, and noted that the Committee
is losing him because of Senate rules that do not permit continued
service. Professor Speaks has made
tremendous contributions to this and other committees and the Committee thanks
him for his work. The Committee gave
Professor Speaks a round of applause.
Professor Speaks thanked Committee members for their support, noted that
this was his 12th year on the Committee, and said he had enjoyed
serving as chair for the past three years.
4. The Budget
Professor
Speaks turned now to Mr. Pfutzenreuter to begin presenting data on the
University's budget. Mr. Pfutzenreuter
distributed two handouts with columns of data.
The
first handout divided costs and revenues into three tiers: required/critical financial obligations,
necessary investments, and base appropriation reduction. The "Required/Critical Financial
Obligations" included such items as fringe benefit cost increases, utility
inflation, new building operations, debt/leases, data network/financial system,
and so on. "Necessary
Investments" included investment in academic directions, investment in
student goals, and a 2.5% general compensation increase. The "Base Appropriation Reduction" reflect the reduction in the state's appropriation
(including the provisions in the final bill that improved the University's
position by about $6 million per year).
[The numbers presented at this meeting were subsequently revised and
presented to the Faculty Consultative Committee; the revised figures and the
discussion will appear in the May 22 FCC minutes. These minutes contain only the discussion of
the general budget issues.]
The
President and the Executive Vice President joined the meeting at this point.
The
second handout showed how the University would deal with the "budget
challenge."
-- One
item was a re-estimation of costs including fringe benefit rate changes, debt,
utilities, and new building operations.
The reduction in debt and new building operations reflects refinancing
some debt, the fact that the University has not sold as much debt as had been
predicted, and some buildings are not open.
-- The
data table will reflect faculty/staff contributions (by higher health care
payments and frozen salaries) to the budget problem; it also reflects student
contributions through increased tuition.
There will be a limit on the increased amount of money any individual is
required to contribute to health care, Dr. Maziar reported; no one will be asked
to pay more than 2% of their salary.
-- For
central and support units, the proposed 2.5% salary increase will have to be
funded from unit resources through retrenchment.
-- One
of the items that accomplishes savings is a reduction
in travel and related costs. Professor
Speaks cautioned that the University must protect the ability of younger
faculty to travel to conferences, searches, and guest speakers. The President agreed and acknowledged that
department supply and expense budgets have been whittled away, but he said he
believed it an important public statement and the reductions remind people to
look at those budgets to see if travel can be reduced. He promised he would try to ensure that
academic interests are not damaged by the reductions. The University arranges travel on an ad hoc
basis and has not used the potential leverage of its large purchasing power,
Dr. Maziar added.
-- The
"wage thaw" in 2004-05 assumes a 2.5% salary increase. The President said he told the legislature he
would not support a two-year freeze and that he will try hard to avoid it. Dr. Maziar related that when she testified
before the legislature, she made the point that when the economy and market
improves, the private institutions will be in a position to move fast and will
pick off faculty members. Professor
Speaks recalled that he did an analysis after one of the salary freezes in the
early 1990s; the time it takes to catch up from a salary freeze is anywhere
from seven to ten years. Four out of the
ten public institutions in the Big Ten plan a salary freeze for next year, Dr.
Maziar reported. While it appears there
has been a "thaw" at the state for next year, that was to protect the
collective bargaining process--but there is no money to negotiate salary
increases, Mr. Pfutzenreuter said.
-- The
standard increases for a promotion will continue, the President said. In most fields, faculty who are promoted are
given an extraordinary merit increase as well, so if one is promoted in the
wrong year they are caught. That
recognition needs to be made up in a future year. The annual review is MORE important in a year
when there are no salary increases, Dr. Maziar said,
so there is a written record to go back to when future salary increases are
delivered. The teaching award salary
increments will also be continued, the President said.
-- There
is need to see the cumulative impact of the cuts, Dr. Bruininks said; the
numbers are very large in some units.
Dr. Maziar added that the University will have done a lot of work to
meet the budget challenge without falling apart.
-- It
has been a challenge to get to July 1, the President said. The University must also rethink its strategy
with respect to the state and state funding.
He said he is already out making the case that the University is not
like just any college or university and that it has a unique profile and makes
unique contributions to the state. It is
possible to model what the University would look like with declining state
funds; the model could follow that of Michigan or Virginia--but that will not
work at Minnesota, the President emphasized.
That would put the University in the middle of the pack among research
universities and it would sink out of the top group. The University has to take its licks now and
be in a position, in the future, to make stronger arguments and talk about
tradeoffs. Those arguments could be made
now but they will not change the outcome, the President said; they must be made
going forward.
-- Dr.
Maziar said that it is her impression that in contrast to the last time the
University suffered from a budget problem like this one, the University is in a
good position to argue for its distinctive mission in providing research and
graduate and professional education. The
last time it could not really make those arguments because it had let the
quality of its undergraduate program slip.
Now it can talk about that program.
The different mission also makes both the cost profile and the values of
the institution different from other places.
-- Professor
Konstan said it was difficult, in the numbers provided, to find the percentage
of cuts that were not across the board.
Some cuts were pushed down to the units, which IN THEORY were not across the board, but it would be helpful to have
data. He also said he worried that each
year the University says there will be tremendous pain--and then it
manages. It does too good a job, he
said; there are no cries of pain, so no one will listen to it. The program cuts hurt, Professor Roe said;
the administrative cuts are seen as fluff.
Nor does anyone outside care about the wage freeze or the increased cost
of health care for employees, Professor Speaks pointed out. There also does not seem to be much concern
about increased tuition costs for students, Mr. Pfutzenreuter added. And not about program cuts, either, Dr.
Maziar said--until it hits a program important to THEM. Once the cuts are described it will be
recognized that the $25 million rescission caused a lot of pain, Professor
Campbell said, because there will be increased class sizes and decreased
attention to students. Dr. Maziar said
she prefers to talk about lost opportunities--the University missed the
opportunity to pick up some of the best new faculty.
This
general subject needs a longer conversation, Dr. Bruininks said. There will be targeting in the budget. He said he wants to be careful about
describing the impacts while at the same time not having an alarmist effect on
students at the same time the University is raising prices. There is need for a discussion about what to
do over the long term and at the same time the University must manage its
communication dilemmas.
-- Professor
Speaks said he wanted to be on record about one concern. Of the NEW tuition revenues, the new IRS
money will be subtracted from the total and then the remainder will be split
85% to central administration and 15% to the college. The amount of anticipated increased tuition
revenue has been set, however, so if a college were to increase enrollment by
10-15%, it would keep 100% of the additional tuition income. There would be an educational cost paid for
increasing enrollment that way. How will
this be monitored, he asked?
The
cost depends on capacity, Dr. Maziar replied.
The administration has set enrollment targets for all colleges and will
be watching enrollments (although there is always an error rate in achieving
the target). If they see an increase in
enrollment beyond the error margins, they will have a talk with the college. This is also not a zero-sum game, the President
pointed out; admission of additional students in one college has an effect on
other colleges. Dr. Maziar added that
they have refused to permit increased enrollment in some colleges because of
lack of capacity; in other colleges they have allowed it because there is
capacity. One worries that there could
be non-random error, Professor Speaks said.
-- Will
there be a summary provided internally about program changes, Mr. Klein
asked? Absolutely, the President said;
there must be. The list is in his office,
Mr. Pfutzenreuter said, and they are sorting through the information; it is not
public yet because there are ongoing discussions about the changes. The result will be shared broadly when they
are complete. The President said that
some actions had to be taken when they were (e.g., the Extension Service
changes reported in the media) because of contractual obligations. Had the University taken this step last year
at this time there might have been legislative riders; this year he lobbied
hard against riders and the Governor supported the University's position and
made sure that legislative leaders knew of his position.
-- On
the one hand, the University needs to keep tuition rate high in order to
balance its budget and keep the institution strong and avoid even deeper cuts
in the second year of the biennium, the President said. At the same time, the University needs a
budget strategy that makes sense in the new environment--and that is something
that should be talked over during the summer and fall. At the same time that tuition is increasing,
the University is budgeting an additional $1.5 million in the financial aid
pool for low-income students.
When
the University finishes the capital campaign, the President told the Committee,
he wants to make fund-raising for scholarships and financial aid a high
priority. The University will also
provide matching money.
-- The
President said he had no problem with the statement the Committee submitted
about the Twin Cities intercollegiate athletics program. He said he wanted to reduce the institutional
commitment even more than planned. They
will try to endow athletic scholarships, which would help to make
intercollegiate athletics more self-supporting (and all of the money from those
scholarships go into academic programs as tuition
income, he noted).
-- The
University needs to try to grow the dollar supply, the President said. It is in a HIGHER tuition/HIGHER aid
environment, and he said he was not sure the state could thrive if it adopted a
HIGH tuition/HIGH aid approach to funding higher education.
-- With
respect to program cuts, the University must also focus on the impact on
access, the President told the Committee.
The state is not expressing great concern about the cuts in the
Extension Service or about the wage freeze, but the necessary tuition increases
are the University's strongest argument for public support, along with the
research mission.
-- The
University needs to think about its inventory of assets and using them wisely,
the President said. The Regents are not
interested in selling land, for example, or assets that might increase in value
in the future. That is fine, he said,
but there can still be a conversation about using those assets more
productively (e.g., the land in Rosemount).
-- The
President thanked the Committee for its work.
He said it has been a tough year but that he felt good about the
University focusing on the right issues and having civil conversations. Professor Speaks said the President should
feel good because there was no uproar and there seems to be an understanding of
the wage freeze and other changes--if what he is hearing is correct. The University will have to work hard to
create the future it needs and deserves, the President said. The respect for the University in the state
is very high because it is managed well; it is in a good position to argue for
its future. In the face of the salary
freeze, creative units must find ways to help support faculty work, Professor
Speaks told the President. The President
promised he would talk a lot with the faculty about these issues over the
summer.
Professor
Speaks thanked the President and Executive Vice President for joining the
meeting.
-- Mr.
Pfutzenreuter next reviewed the projected revenue increases from tuition and
University fee increases. He said the
University would hold harmless students with need.
-- The Committee discussed non-resident tuition
increases. If non-resident rates
continue to increase at a double digit levels, the number of non-resident
students may decline. Has the tuition
committee contemplated a flat rate increase for both resident and non-resident
undergraduate students, rather than percentages? For example, the tuition increase could be
$1200 per year for resident and non-resident undergraduate students, instead of
14.8%.
-- The
budget will be balanced at the end of the first year of the biennium through
the use of one-time dollars in order to avoid doing greater harm to units. The second year will see additional
reductions as well as revenue increases so the University budget will be in
balance at the end of the biennium.
-- There
is no proposal to increase the IRS tax for units that are not
tuition-generating, Mr. Pfutzenreuter told the Committee. He noted that there are two IRS taxes: one for academic units and one for auxiliary
units; the rate for the latter will not change.
Professor
Speaks thanked Mr. Pfutzenreuter for reviewing the numbers with the Committee.
5. Summer Meetings
Professor
Speaks warned Committee members that there may be a need to convene during the
summer; either he or Professor Campbell, the incoming chair, will keep people
informed.
6. Payments to Employees
Professor
Speaks next welcomed Michael Volna, Linda Woock, and Leslie Koidahl to the meeting
to discuss a change in how employees are reimbursed or paid, including for
travel. Mr. Volna recalled that he has
spoken in the past with the Committee about systems automation; the University
has put a lot of financial transactions on Financial Forms Nirvana. Up until now travel reimbursement could not
be, but it will be converted to FFN and the change will affect a broad
cross-section of employees.
Ms.
Koidahl explained why the form for reimbursement is being converted to FFN,
including the fact that it will allow one person "up the ladder" to
approval travel and entertainment expenses.
Individuals
must still print and sign a form, however, unless one is also a preparer, who
has authority to sign electronically.
Professor Konstan pointed out that in research, one can do most things
electronically; the University could follow the same process here. The difference in the routing process for
travel documents is because of the IRS requirements in relation to payroll, the
Committee was told; the University must have a signature on a paper document
before it can process reimbursements or else there may be tax consequences to
both the University and the employee.
The technological advantage is lost if people must print, sign, and mail
something, Professor Konstan said. Ms.
Weinberg agreed and questioned Mr. Volna about what advantage there is to the
FFN process if a department must ALSO prepare a document and send receipts to
his office. Departments are being asked
to take on additional steps, she maintained.
The
Committee was unable to finish the discussion of this item because it had to
vacate the room; Professor Speaks apologized to Mr. Volna and said the item
would be placed on the agenda at a future meeting. He promptly adjourned the meeting at
--
Gary Engstrand