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 Campbell (chair), Brittny McCarthy Barnes,
Stanley Bonnema, Steve Fitzgerald, Thomas Klein, Joseph Konstan, Michael Korth,
Yi Li, Timothy Nantell, Kathleen O'Brien, Richard Pfutzenreuter, Terry Roe,
Rose Samuel, Charles Speaks, Alfred Sullivan, Kate VandenBosch, Susan Van
Voorhis, Warren Warwick, Susan Carlson Weinberg
Absent:
Calvin Alexander, David Chapman, Daniel Feeney, Thomas
Stinson, Michael Volna, Cleon Melsa
Guests:
none
[In these minutes: (1) stadium update; (2) lease for University
Enterprise Laboratories; (3) finance issues; (4) sustainability policy; (5)
Parking and Transportation budget issues]
1. Stadium Update
Professor Campbell convened
the meeting at
Mr.
Pfutzenreuter reviewed the three elements of the cost of a stadium (site
preparation, district preparation, and the building itself) that total $222.2
million. In response to questions at the
legislature about what "significant" means in terms of the University
making a "significant" contribution to the cost, he has suggested
60%, or $133 million. That
60% would come from fund-raising, sponsorships, and possibly a student
contribution, legal claims, parking revenue, and (as a last resort) game-day
revenues. He testified that for the remaining 40%
(roughly $90 million), the University does not preclude the possibility of
someone paying the cost or the state paying the cost or providing a revenue
stream. (Construction bonds to cover the
40% would cost between $6.5 and $7 million per year.) The University has assumed the state might do
something about stadiums; the University could be part of any decisions made
(e.g., extend existing taxes to cover the cost of the construction bonds).
The
administration is talking with legislators about the stadium, Mr. Pfutzenreuter
said, and it will remain flexible as proposals are made--probably within the
next three weeks.
What
if the legislature says the University can have X million dollars and use it
for a stadium or its capital request, Professor Speaks asked. The President and Board of Regents would say
that the money will be used for the capital request, Mr. Pfutzenreuter responded. But the University will never really know if
any funds for a stadium are supplanting capital request funding, Professor
Speaks commented. That is true, Mr.
Pfutzenreuter agreed, but in part that will depend on how the funds might be
made available. If a direct
appropriation, the funds could supplant the University's request; if the
legislature extends user fees or existing taxes, then it will be less
clear. The University should not fool
itself in thinking that "there is no great scorekeeper in the
sky." Depending on how any funding
is structured, however, the impact of stadium funding on the University can be
minimized. Mr. Klein inquired whether
the Committee might want to deliberate about the question Professor Speaks
raised, rather than be caught facing it later if it arises. If the state provides the 40% and the
University develops some plan to allocate $133 million, Professor Konstan said,
there is time to consult. There are more
optimistic numbers than the Committee has seen before but the University needs
to wait to see what comes out of the legislature. It would not be productive to have a
discussion without real numbers, he maintained.
Professor
Speaks said it was his impression that the process has gone far enough that if
the legislature provides the $90 million, the University has assented to the
proposal to build a stadium. Mr.
Pfutzenreuter said that the provision of state funds would likely contain a
requirement that the University raise its $133 million before the state funds would
be available. Professor Konstan said the
University would be in an awkward position if it could not meet the
requirement. Professor Speaks is right,
he said; there is a point at which the University will request the funds so it
can build the stadium and it must reach the go-no go point before that decision
is made.
There
are big questions about finding the $133 million, Professor Campbell
observed. Given those uncertainties, he
said he believed that consultation with the Committee is still important, but
it is premature to take any action. Mr.
Pfutzenreuter said that if he is made aware of any legislation he will bring it
to the Committee.
2. Lease for University
Professor
Campbell next reported that there had been discussion at the University Senate
about the proposed Regents' policy on the use of royalty income to support
start-up business incubators. There had
not been discussion of the proposed lease with UEL, but the lease has been
discussed in parallel with the policy at meetings of this and other
committees. At a meeting he participated
in last week, a group was shown the draft lease and were
assured that the price would be something the University will receive value
from.
Ms.
Weinberg reported that the lease has been deferred to the May/June Regents'
meetings.
It is
unusual for a governance committee to be consulted on a lease, Professor
Campbell observed, but Vice President Hamilton wanted the Committee to look at
it because of the interest the committees have shown in the issue. He has understood that the lease would
provide space for the Office of Business Development (Office of the Vice
President for Research) and for Carlson Ventures Enterprises of the
What
happens to the space that those organizations now occupy, Professor Konstan
asked? This would amount to the Vice
President for Research paying for their space costs, Professor Campbell said,
and presumably the units would put the vacated space to other use.
The President informed several people that they would be
on a committee to develop principles and measures for the use of University
funds for the incubators, Professor Campbell said. They had the meeting to review Page: 2
a draft of a support agreement with UEL, but this seems to be moving
very fast and they have raised questions.
He said he would try to stay on top of things and to keep the Committee
informed.
3. Finance Issues
Professor
Campbell reported that at the
The
Committee will have at its next meeting a representative from the Academic
Health Center Finance and Planning Committee, which has been focusing on IMG
and what has been done at other institutions.
They have developed a set of proposed budget principles for discussion.
What
is the timing of the biennial request process, Professor Campbell asked? The work starts in earnest in June, Mr.
Pfutzenreuter said, when the University is given parameters by the Department of
Finance and the Governor's office.
Although the University is autonomous, it does try to respond to the
guidelines and it considers the themes in the Governor's recommendations. The President has urged the University to get
ahead of the game and to think conceptually about how to frame the
request. How much of the framing is
marketing rather than a conceptual process, Professor Konstan asked? The University has flexibility with the
recurring funds and increases are for the University to fund initiatives; how
much of the request is the University deciding where the money should go versus
where the state tells the University the money must go? The University will try to achieve consensus
on where it should go in the next two years (e.g., spend money on faculty
salaries, technology costs, or areas of emphasis) and then provide that
information to the legislature and Governor.
The legislature, unfortunately, sometimes appears to be less interested
in continued funding for University operations (e.g., the libraries,
technology, etc.) than it is in new projects.
If
this Committee has a role in setting the charge for the biennial request
working group, Ms. McCarthy Barnes said, it should call for an integrated
approach because many in the University do not understand what it is seeking
funds for (for example, students and alumni).
The University could do a better job of getting people involved with a
common message.
Mr.
Pfutzenreuter said that in the last ten years or so the University has paid
virtually all of its attention to the incremental gain on the base. The environment has changed; the state had a
budget problem, and will again, so the University must fight not only for an
increase but also for its base budget.
Is there legislation the University should include with its request that
would help keep costs down but not cost the state money (e.g., change the open
records law to match the federal law) that would mean repealing unfunded
mandates, Professor Konstan asked?
Professor
Roe inquired if anyone had asked the University to define what should be
considered its core costs, things that should have first claim on revenue streams, that should receive first priority. Other things would have to take care of
themselves, perhaps via the market, he said.
That is a question for the long-term financial model of the University,
Professor Campbell suggested. Professor
Roe suggested that for the financial model discussion, the Committee obtain the
views of the administration on what is broken and get a sense of what it
believes to be important. Much has
changed but much remains the same, Mr. Fitzgerald commented; the need to fund
common goods remains and the Committee need not reinvent the wheel on that
point.
It
was agreed that Professor Campbell would also get in touch with the Council of
Deans, who are also working on a set of budget principles.
Professor Konstan observed
that the challenge here is more one of planning than one of finances. Any
model can be set with initial parameters to achieve the status quo; the
question is how things react when changes occur. As part of that
challenge, the committee will need to understand enough about academic
administration to make reasonable choices about the burdens to place on Deans
and on the President. He recalled that this was part of an early RCM/IMG
discussion--the question of whether Deans were likely to have the skills,
information, and resources to really manage their own budgets as envisioned in
this model.
Ms. O'Brien, who said she was speaking not as Vice President
for University Services but as someone with 20+ years experience in public
budgeting, said she agreed that there had to be alignment in the institution
and that the University needs to be a team as it thinks about how to make financial
decisions. She also agreed on the
importance of programmatic planning and observed that a programmatic plan
should be developed first and then a financial plan, rather than doing them in
reverse. Professor Speaks said he agreed
with Vice Presidents O'Brien and Pfutzenreuter--but said that the integrated
approach has not worked. That was the
idea behind the Budget Advisory Task Force, which had an incredibly detailed
charge and a deadline--but it never did what it was charged to do. The integrated approach should work but it
did not. It may work when it is more
urgent, Mr. Pfutzenreuter said. People
outside Morrill Hall do not believe it is more urgent, Professor Konstan
said. The question is not the whole
University, it is faculty governance, Professor Speaks said; when the President
issues a charge and the task force does not address it, and if the governance
structure does not feel a sense of urgency, who will? The average faculty
member may not sense any
urgency, Professor Van den Bosch said, but department heads do. The
current status of IMG makes planning difficult, and heads and chairs will therefore be interested in participating in
the discussion; the erosion of IMG by the various taxes, and the
prospect of continued change, make it difficult to know what to expect. One financial model does not work for all
colleges, she added.
No
one can shake off their parochial interests when they get involved in the
budget structure, Professor Konstan said, and each side is right. If one could use John Rawls's veil of
ignorance, that would be wonderful, but that is not possible. With small groups involved in discussions,
the result will be parochial compromises that all can live with. It is perhaps not a bad idea that each should
identify its position and then there could be an effort to craft a compromise.
Asked
whether a new model might change the way tuition is dealt with, Mr.
Pfutzenreuter said that it could, but he said the Committee should not think of
this only as an overhead model. President
Yudof adopted the model he did because no one wanted to cut the Operations and
Maintenance or tuition allocations; that is also why he imposed the Internal
Revenue Sharing tax; that is why the
The
Committee must identify a way to proceed, Professor Campbell said, and it needs
to do so by the next meeting. He said he
assumed he would receive suggestions about what to do.
In
terms of the model, Mr. Pfutzenreuter reported that if one adds the University
fee and tuition, the administration now attributes to the colleges about 90% of
the revenue from students; before the fee, it was 100%. The original premise of the system has
already been broken, he pointed out; it has been "modified to death and it
is too complicated." With respect
to space, Vice President O'Brien said, if the institution were starting over,
it would not build 24 million square feet.
It needs to figure out how to aggregate space and put in place
incentives for the use of space, which could save a lot of money.
Vice
President Pfutzenreuter spoke about the state's financial condition. The Department of Finance revenue forecast is
not too bad, and the Governor may release his recommendations later this week. He cannot unallot because the projected
deficit is smaller than the state reserves, which must be used first. If the Governor and legislature do not act,
the reserves will be used. The forecast
is a little optimistic, some say (e.g., it predicts U.S. GDP growth to be the
strongest in 25 years). In addition,
2006-07 has a projected deficit of $441 million (which is calculated by
inflating revenues but projecting no increase in spending; it is more likely
that the deficit will be about $1.6 billion).
Professor Konstan wondered if they should be worried about the projected
drop in state revenues during 04-05; the state has cut spending but there
appears to be no sustainable path to growth.
Mr. Pfutzenreuter said he believed the next three years would be very
tough and this report confirms that view.
The state is not seeing new jobs being created, and until it does, the
financial picture will be bad because the state relies heavily on taxes from
jobs.
4. Sustainability Policy
Vice
President O'Brien now explained that a sustainability policy was one of eight
academic initiatives: the environment
and renewable energy. There are three
components to the effort: IREE, the
initiative on renewable energy and the environment, headed by Dean Elde, that will use money from Xcel Energy; curriculum
development; and development of a Regents' policy on the environment and energy
conservation. The origins of the latter
are a committee report issued in the summer of 2002; the committee was chaired
by then-Dean Al Sullivan.
The
Commission on Environmental Science and Policy that reported in 2002 was a
large group of people working in the environmental area, Dr. Sullivan told the Committee, that had been charged by then-Executive Vice
President Bruininks. One
"eureka" for him, he said, was discovering the passion and enthusiasm
that already existed in the University in the units that are now led by Vice
President O'Brien. As they have tried to
implement the Commission's recommendations, they have used funds in the compact
process to charge three deans to pursue program opportunities.
The
charge to the new Sustainability and Energy Conservation Policy Work Group,
which Vice President O'Brien distributed (which she and Dr. Sullivan co-chair),
envisions the University as a leader, as a model and as an educator, using the
University as a lab and to leverage research funding. If 50,000 students can learn about
environmental and energy conservation issues, and live up to them after they
leave the University, there could be a large impact. They have looked at current University
policies and what other universities are doing to develop a vision of a
desirable end state, Ms. O'Brien said, and have started working on drafting a
report. They expect to consult on it in
late March or April and prior to bringing the policy to the Board of Regents. Where does the Committee believe the Working
Group should go, she asked?
What
will be the groups' recommendations, Professor Campbell asked? They are trying to craft a document as
Regents' policy, Vice President O'Brien said, which will describe where the
University wants to go rather than how to get there. They will also include models of
administrative implementation and proposed guidelines.
This
is an excellent idea that it is difficult to get one's hands around, Professor
Speaks said. What might work its way
into policy recommendations? First they
have to define sustainability, Ms. O'Brien said. Does it apply only to operations? To teaching, research,
service, and operations? They
have been helped by what has been done at the
This
Committee could lend support to the call for quantification of benefits, Mr.
Klein said, and support efforts to measure the implications and results of
policies. Ms. O'Brien suggested
considering the University Plan, Performance, and Accountability report to help
identify measures that might be used.
Professor
Van den Bosch asked about the relationship of this effort to teaching,
research, and service. She also said it
is not clear that there is a consensus on what sustainable means, especially in
agriculture. Dr. Sullivan said he
believes that the word "sustainability" creates more confusion and
arguments in agriculture than in the rest of society. He said he did not see why it was a problem
to favor a policy that will not compromise the future. Professor Van den Bosch responded that there
is debate whether a practice is sustainable and there may be problems with
academic freedom in research. Dr.
Sullivan disagreed; this is to be science-based, he said, not a matter of
theology.
Vice
President O'Brien said the Working Group recognizes that it must balance
several goods--resources, the environment, the economy, and social/cultural
factors. They have debated within the
group what the University as a community is doing and how its activities can be
integrated in teaching, research, and service.
Vice
President O'Brien promised that the policy would be brought back to the
Committee for review. Professor Campbell
suggested that she also take it to the Senate Research Committee.
5. Parking and Transportation
Recommendations
Professor Campbell noted that the
Committee had received information from Parking and Transportation at its last
meeting about its budget planning for 2004-05.
In the past, Mr. Baker has come to the Committee with an already-well-developed
plan; the Committee asked for an opportunity to consult earlier. Mr. Klein recalled a memo from Professor
Feeney last year that described the need to complete the communication
cycle. The process has been that the
Committee makes recommendations, goes through the math, and then is not informed
why the recommendations are not followed.
It would strengthen communication to report back the decision and
rationale before the new rates and service decisions are announced. Vice
President O'Brien said that last year the consultation happened in April, when
the budget was due; what the Committee has received this year are ideas; the
department does not have a budget target yet.
Professor
Roe said that the projected increases will be very small and there is not much
of a decision this year, with capacity well-used, not a lot of extra spaces,
costs under control, and the department facing a small increase in costs.
The
Committee debated a number of the options for revenue increases and service
reductions. Committee members were
reluctant to endorse service cuts that impaired the ability of students to get
around the campus, especially between
Something
is out of whack, Professor Speaks said, when University buildings depreciate
and the University tries to obtain HEAPR funds from the state for maintenance
and repairs--and if the funds are not made available, the buildings go down
hill. Parking is required to be
self-sustaining, and identifies what it needs to do, which includes setting
aside depreciation reserves. These are
different ways of addressing the problem of structures that need repair. The rest of the University should adopt the
parking practices, Professor Warwick commented.
The idea is that parking should not compete with other buildings for
repair and maintenance funds, Vice President O'Brien said. But when they sense that something needs
repair, they eliminate something to obtain the money or they raise fees,
Professor Speaks responded. Ms. O'Brien
said that is not really true; parking must go through a budget process and must
defend their recommendations. Their
plans are included in the University's six-year capital plan, and auxiliary services
at the University also pay taxes, she said.
The money still comes from faculty, staff, and students, Professor
Speaks observed. Mr. Klein said he did
not see this as a heavy-handed decision by Parking and Transportation; parking
is a matter of convenience and choice.
Committee
members discussed the proposed service reductions (eliminate late night and
weekend bus service, eliminate service between
The Senate Committee on Finance and Planning suggests
to Parking and Transportation, as it prepares its budget recommendations for
2004-05, that it make cost reductions and revenue enhancement decisions that
not reduce services that are important for student safety and access between
campuses. The Committee also recommends that it not charge contract
parkers for event parking because it will disadvantage the many faculty and
staff who work evenings, and in particular those with
official functions such as evening classes, irrespective of whether there is an
event on campus.
Vice
President O'Brien promised to bring the Committee's comments back to Mr. Baker.
Professor
Speaks inquired if all revenue generated by events is credited to parking, not
the unit that held the event. Vice
President O'Brien said she believed it is.
Professor Speaks said that was also his understanding, unless the
practice had been changed in the last couple of years without any
consultation. He asked, he said, because
Mr. Pfutzenreuter had mentioned the possibility of parking revenues from
game-day events to help pay for a new football stadium. He said he was disturbed by that possibility,
if no other events are permitted to receive the parking revenues.
Professor
Campbell adjourned the meeting at
--
Gary Engstrand