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, David Chapman, Steve Fitzgerald, Thomas Klein, Joseph Konstan,
Michael Korth, Yi Li, Cleon Melsa, Kathleen O'Brien, Richard Pfutzenreuter,
Alfred Sullivan, Kate VandenBosch, Susan Van Voorhis, Susan Carlson Weinberg
Absent:
Calvin Alexander, Daniel Feeney, Yi Li, Timothy
Nantell, Terry Roe, Charles Speaks, Thomas Stinson, Michael Volna, Warren
Warwick
Guests:
Julie Tonneson (Office of Budget and Finance),
Professor Carol Wells (
[In these minutes:
(1) subcommittee charges; (2) biennial request working group, the
University's financial structure, and proposed principles for the financial
structure from the AHC Finance and Planning Committee; (3) campus master
planning working group]
1. Changes in Subcommittee Charges
Professor
Campbell convened the meeting at
The
Committee approved the changes unanimously.
2. Biennial Request Working Group and the
University's Budget Structure
Professor
Campbell asked Vice President Pfutzenreuter to assist the Committee in starting
a discussion about the biennial request working group that the President has
proposed to create.
The
biennial request process gets rolling IN EARNEST once the University has a
sense of the Governor's thinking, usually in June. The President, however, wants to start the
process earlier. The 2004-05 budget will go to the Regents in May; in the meantime, a
small staff group will meet later this week about putting together working
groups to brainstorm about and conceptualize the 2005-07 biennial request. The President wants the working group to
think about general principles. There
are two issues, Mr. Pfutzenreuter said:
Given that the budget forecast shows a sizeable problem in the next
biennium, and the mood is apparently not to raise taxes, how should the request
be positioned so that the University can not only ask for additional funds but
also protect the existing base? The
working group will be asked to articulate how to do that.
There
will need to be two additional working groups appointed after the first one,
Mr. Pfutzenreuter told the Committee.
One will develop the details of the request; the other will develop
support around the request, the communication strategy. He said he will talk soon with the President
about identifying groups and getting charge letters drafted. The first working group needs to work fairly
quickly, because in June the President and Regents need to begin talking to the
community about the request. In
September/October the Regents review/approve the request; it goes to the
Governor after that and to the legislature in January.
Professor
Campbell noted that the President has asked this Committee for questions to be
included in the charge to the first working group as well as suggestions for
members. Committee members had no
immediate suggestions either for questions or members. Professor Campbell said that the people on
the working group should be willing to challenge the operating assumptions that
are usually made (and those assumptions, to be sure, are based on what the
University typically knows about the situation and what the legislature might
be willing to do or not do). For
example, there is a long list of items for which the University needs more and
more dollars (e.g., fuel, infrastructure) that the legislature has declined to
fund. The working group should not
assume too readily that those items cannot be funded.
It
does not look like the next biennial budget will be rosy, Professor Chapman
commented. What is his sense, he asked
Mr. Pfutzenreuter? Will it be another
tough round? Mr. Pfutzenreuter said he
believes there will be three tough years:
2004-05 and the following two.
The University could find itself taking additional cuts, Professor
Chapman commented. Or stay flat, Mr.
Pfutzenreuter added.
Mr.
Klein said he recalled earlier committee discussions about decision-making in
times of budget difficulties; it is described as bringing together vested
interests, people put together to try to make decisions for the common good but
with their own interests to protect.
There is no guiding principle formed or much agreement, so the financial
problem is usually passed into the lap of the administration without much
useful guidance or prioritization. The
likelihood of several years of difficult financial conditions may make this the
time for a new way of financial decision-making, based on the University's
priorities, but he said he does not see a willingness to define a new way of
decision-making and go in that direction.
Professor
Chapman said that the issues with teeth do not come up at this level. He said he can think of a number of questions
that will arise when the working groups get into the work. In his view, the working group should just be
appointed, without a lot of questions posed to it. There was also talk about bringing in outside
people, Ms. McCarthy Barnes recalled; could those people deal with vested
interests? When there is scarcity, it
might help to bring in outside voices.
Mr. Pfutzenreuter pointed out that the University does not use the
biennial request process as a way to make budget cuts; he said he would like to
see the biennial request and the annual budget processes kept separate. Even though, Professor Chapman observed, the
State does use the biennial request as a way to cut budgets.
At
every meeting, the working group should read aloud the University's priorities
and mission, Professor Konstan suggested, or the inscription on Northrop
Auditorium (Founded in the faith that men are ennobled by understanding,
Dedicated to the advancement of learning and the search for truth, Devoted to
the instruction of youth and the welfare of the state). Too often, these groups do not identify the
paths the University wants to follow. Is
there a document that could be provided to the working group--a presidential
document, or a broad mission/vision statement, and not a set of
initiatives? This Committee consistently
raises the question about whether budgets and biennial requests are consistent
with the University's mission, Professor Campbell pointed out, a position that sometimes conflicts with what the University
believes will be supported by the legislature.
Professor Chapman said he would just as soon the working group got about
its work; he said he trusts the President and the administration to be able to
make quick position shifts between what the University seeks and what it
believes it can obtain support for.
In
terms of the overhead model, Professor Chapman asked how faculty participation
would work. It is his sense, he said,
that people who know what they are doing should develop something and then test
it out on the faculty (e.g., this Committee).
What works effectively, he asked?
Mr. Pfutzenreuter said that the people in Morrill Hall may not know what
impact a proposal will have, especially within the colleges; committees can
help in that way. Representation from
outside Morrill Hall also helps shape the outcome, he said. So participation later is more helpful,
Professor Chapman asked? Earlier is also
useful, Mr. Pfutzenreuter said, because it helps to define what should be in
and out of the scope of proposals.
There have been earlier reports and groups, Professor
Campbell recalled. The Budget Advisory
Task Force, chaired by Dean Rosenstone, turned out a very good report; the
President at the time was uninterested in it.
He said he would like to see that process repeated, with people from
different walks of the University brought together to provide their
perspectives. The value is that average
faculty can provide the view of how these higher-level principles actually
filter down to the departments and faculty after being implemented (in various
ways) by the deans. That perspective is very difficult to obtain inside
Morrill Hall.
Mr.
Pfutzenreuter said he was worried about taking on the structure of the
University's budget, and the overhead model, right on the heels of the large
budget cuts from the state. There have
been some mechanisms put in place to deal with the large budget cuts that
people could be reacting to. Professor
Campbell reported that there is a book by the National Association of College
and University Business Officers (NACUBO) about 25 years of lessons from
Responsibility Center Management (what is called IMG or Incentives for Managed
Growth at the
There
are reasons to throw out a whole system, Professor Konstan observed; there are
ample studies showing that any time one makes a change, people's performance
improves, just because someone is paying attention. Keeping the existing model does not force
people to think about what they value most; that is harder to do when one
tinkers with the existing model. But he
agreed that this is not a good time to throw out the current budget structure,
unless there are new funds on the horizon.
One argument, Professor Konstan said,
is that at public universities across the country (there are probably no data
on this) are taking on many more administrative responsibilities because they
have lost a lot of administrative support.
It is not clear this is a problem, but if it is, it cannot be addressed
except from the top. Professor Campbell
said that different units, in the face of budget cuts, have taken diametrically
opposite steps in that regard. Mr.
Pfutzenreuter reported that in comparing the second half of 2001-02 with the
second half of 2002-03, spending on academic support was down almost $25
million. Units did not cut instruction,
research, libraries, etc. They cut
academic support.
Some colleges allocate funds
differently, Professor VandenBosch observed.
ICR funds may be distributed formulaically or on a case-by-case
basis. Faculty perceptions have less to
do with how funds are allocated to colleges than they do with how colleges
allocate funds internally. Part of the
mission of the working group should be to look at local experiments to see what
has worked. Mr. Pfutzenreuter said that
everything done in Morrill Hall stops at the colleges; it is up to the deans to
make decisions within the colleges.
There is a need to attribute costs
where they are incurred, Professor Campbell said. There is a lot of myth floating around; the
working group (and this Committee) needs good data on which to base
decisions. The working group should help
devise ways to accomplish the appropriate data collection.
At this point Professor Campbell
welcomed Professor Wells, representing the Academic Health Center Finance and
Planning Committee, a group that has been working to develop a set of
recommended budget principles for the University. Professor Wells said the AHC F&P
committee has been looking at budget principles for a number of years; since it
may be that IMG will be revisited, the committee thought it would suggest some
principles the administration might use in evaluating it. Nothing is set in concrete; they simply
thought these would be good areas of discussion as IMG is evaluated. The principles they suggest are these.
Budgetary Principles for a Changing Economic
Environment
The University’s budget model
should . . .
Principle 1: Be accessible, predictable,
and transparent
Proposed Actions
-- use a one-year lag to determine
central assessment base
-- keep assessment rates stable
-- eliminate multiple assessments on the same dollars
-- use reasonable and well-understood measures to assess
central costs
-- ensure that data from which these measures are derived are
available to units
-- aim for administrative ease at the
unit level
-- make academic program subsidies explicit rather than
implicit
Principle 2: Ensure the most efficient use
of resources (e.g., staff, space, technology, equipment) at all organizational
levels and avoid duplication of services
Proposed Actions
-- align
assessments with consumption of services (e.g. cost of student services based
on number of students utilizing services; cost of HR, payroll, benefits based
on number of employees; cost of accounting, budget and finance, SPA based on
dollar expenditures; cost of facilities management services based on square
footage of occupancy, etc.)
-- provide
incentives and demand accountability for centralized services to be cost
efficient and cost effective and protect against the inappropriate shift of
effort or fees to local units
-- on an annual basis, align and
justify increases in central service costs to demand for services
-- provide
cost/benefit analyses, at both the central and unit level, of proposed business
practices and policies before they are implemented
-- require
local units that choose to do business in non-standard ways to pay the full
cost of such choices (conversely, provide central financial support for only
standard ways of doing business)
-- provide
incentives at the local level to support the generation of revenue and
coordinate those incentives centrally to avoid duplication costly to the
institution
Principle 3: Eliminate financial barriers
that inhibit collaboration and interdisciplinary activities between academic
units and create financial incentives to foster such activities
Proposed Actions
-- develop alternative funding models for interdisciplinary
education
-- develop
principled models for sharing ICR resulting from collaborative research across
colleges and centers
Principle 4: Continue
to allow for reallocation and investment in strategic priorities
Proposed Actions
-- avoid across-the board reductions
that erode the overall quality of the institution
-- selectively
reallocate funds to and expand investments in programs that are consistent with
institutional priorities, even if other programs must be reduced or eliminated
in scope
-- resist historical practice of keeping units “whole” in a
period of budget transition
-- develop
a rationale for use of state appropriation dollars and allocate based on
defined institutional priorities
Principle 5: Fully attribute revenues to
units generating them and allocate costs to units incurring them
Proposed Actions
-- attribute all forms of revenue to units where generated,
including 100% of ICR
-- directly and explicitly recover overhead costs for each of
the mission based programs: research, education, and service & outreach
-- assess actual fringe benefit costs to units where they are
incurred
-- define space costs equitably, including debt service, and
allocate to units occupying
Committee members brought different issues to their
discussion, Professor Wells reported, but it does appear that IMG has benefited
tuition-generating units more than those units that do not generate large
amounts of tuition. The AHC, for
example, does not generate a large amount of tuition; it has only a small
number of students compared to the rest of the campus. AHC sees ICR as a problem (that is, the
amount the AHC receives versus the amount it generates,
and the amount on which it is taxed).
Taxes seem to be spiraling upward and departments are worrying whether
they can sustain themselves. That is one
reason it is important to keep the rates stable; it is difficult to determine a
budget when the rates keep changing.
These principles echo much of what this Committee has
talked about over the years, Professor Konstan said. As an amplification
on #1, he noted that departments train large numbers of graduate students; it is
not just assessment rates but also other expenses that change so that one
cannot predict costs. For someone hiring
a graduate student on a grant, it is hard to predict the tuition and overall
fringe benefit expense for five years, and the University cannot or will not
offer an "up front guaranteed" price to allow effective planning.
There is a tension in the University's current budget
model between (1) allocating, measuring, and billing for everything and (2)
funding common goods that all receive and which are provided because it is not
worth the effort of measuring and allocating costs. The University is split on this. It is not clear which works best, the
micro-billing approach or the global approach.
The Committee should look at this tension, but at the same time not
eliminate incentives to be efficient.
Professor Wells observed that it is more difficult to
hoard teaching space than research space.
She said she has also just learned that the cost to hire a graduate
student may go from $33,000 to $37,000 next year. She has just hired a junior scientist for
$33,000 (which includes fringe benefit costs) who will work 40 hours per week
and do what she needs to have done.
Professor Wells said she believes graduate education at the University
is heading for a big fall and she is quite fearful about its future.
With respect to stable assessments, Professor Campbell
said, he was an administrator a number of years ago and agrees that unstable
assessments play havoc with setting budgets.
But the University is in an environment where costs are going up; the
administration will have to be very conservative if it is to promise not to
make any quick changes in assessments--it will have to build reserves so that
it is not caught short. The Budget
Advisory Task Force was struck by how the University seems to be insuring at every level
against every possible problem; there could be too much money in reserves and a
way needs to be identified to get that money into circulation. Mr. Pfutzenreuter said the administration
will move accumulated vacation and sick leave to a common good so that
departments do not have to budget reserves for them. This change will, however, slightly increase
fringe benefit rates.
Dr. Sullivan related that he also had served on the
Budget Advisory Task Force and had also been an administrator for a number of
years. As an administrator, he favored
predictable budgets, but the world is not predictable. Who five years ago would have predicted
double-digit tuition increases at the University for several years
running? No one. That is an example of how the University
tries to respond to an unpredictable world.
What is needed is transparency and predictability, but the world does
not always permit the latter.
Another challenge is that the models are lousy at
predicting outcomes, Professor Konstan said.
At present colleges are rewarded on the basis of inflow (tuition, ICR
funds). If the University is serious
about efficiency, it should not measure success by dollars brought in (in fact,
colleges would make more money if students took more time to graduate because
part-time students generate more income).
What if one turned the evaluation around, so colleges did not receive
money for bringing in more students or research but for outcomes (students
graduating, research). It would be
difficult to identify the measures, if one is to do it right, but units would
not receive money for getting money but instead for advancing the University's
mission. Professor Konstan said he did
not know how to do this, but it is awkward to reward deans for bringing in
money rather than producing outcomes that effect the mission--and to fire them
if they do not bring in money. The
University attributes tuition based on the number of students, Mr. Pfutzenreuter
said; it could attribute the money based on the number of students who
graduate. Vice President O'Brien
commented that when they reviewed the support and service units, they tried to
make the same point--they had been measuring inputs, not output or
productivity.
Professor VandenBosch said she can see the rationale for
Professor Konstan's idea but it would be difficult to implement across
units. ICR and tuition are treated
differently and there is a lot of tension across colleges (some bring in more
ICR funds, some bring in more tuition).
Can ICR and tuition be treated similarly to help dissipate that
tension? They are not treated as
differently as may appear because of the University fee, Professor Konstan
maintained. ICR funds are divided 50/50
while tuition is attributed 90/10, Mr. Pfutzenreuter said.
One outcome of attributing tuition and the loss of state
dollars means that CLA's dependence on O&M funds
has declined from 22% to 17%, Mr. Pfutzenreuter reported. It is VERY heavily dependent on tuition. The
Professor Campbell said the Committee would return to
this topic in two weeks in order to respond to the President's request and to
discuss the issues raised by the AHC Finance and Planning Committee.
Professor Wells commented that there is a huge cultural
difference between the Committees in the Senate and those in the
Things are very screwed up, Mr. Pfutzenreuter agreed.
3. Master
Planning Working Group
Professor Campbell turned next to Vice President O'Brien
to report on Master Planning Working Group.
Vice President O'Brien distributed a handout identifying
the charge to and workplan of the Working Group. This is a work in progress, she said, and she
will want to return to the Committee later in the spring or in the fall with an
update.
The current Twin Cities campus master plan was developed
1994-96 and the Regents approved the plan in 1996. It has been used ever since, although there
has not been much reference to it in the last four or five years and there has
been no master planning advisory committee.
The President asked her, as Vice President for University Services, to
assess where master planning stands and how it should be used. They are charged to consult with those who
were involved before, to examine how other colleges and universities develop a
master plan, assess the elements of the current plan, and develop recommendations
for revising the plan.
The Working Group members are Judith Martin (Geography,
FCC chair), Jan Morlock (Community Relations), Lance Neckar (Architecture and
Landscape Architecture), Al Sullivan (Vice Provost for Academic Programs and
Facilities), Harvey Turner (Director, University Planning), and Lori-Anne
Williams (Communications Director, University Services). Capital Planning and Project Management, led
by Michael Perkins, will also be a part of the process, because Mr. Perkins is
responsible for administration of the master plan.
Ms. O'Brien said she wanted the Committee to know that
the process is under way and to obtain its views about it. She said she envisions an updated plan being
adopted during 2005-06 and that it should be reviewed every ten years. With the
What is the underlying model to deal with priorities in
the plan, Professor Konstan asked? Economic? The idea that open space has value? Or is it more ad hoc, developing consensus
around development? The best way to
describe the master plan is as a land-use plan that balances factors related to
best use and design principles, Vice President O'Brien said; it deals with how
a campus works, not just the building structures, and how academic needs and
programs can be accommodated. When one
looks at placement of the teaching and technology building, for example, one
looks at programs that should be close to it.
The fundamental principles underlying the campus master plan are like
those of the six-year capital plan; the question is how to balance various
factors.
The emphasis on supporting academic programs is
important, Mr. Fitzgerald said. In some
plans, there are competing factors in a resource-constrained environment. Space is among the most constrained factors,
and tying it to academic programs is vital.
Ms. O'Brien said she has been gratified to have the
participation of Professors Martin and
One question is whether the master plan contributes
anything, Professor Campbell commented.
Does it do any good? They intend
to look at how much the current plan has actually guided decisions. The Morris campus is a good example of how
the plan helped understand the value of an historic campus and the recommitment
to that campus.
The master plan does not deal with the Minnesota
Facilities Model, Ms. O'Brien said in response to a question. That is more a matter of implementation.
Ms. O'Brien said that they are just beginning discussions
of the light-rail transit central corridor and the North Star commuter rail,
both of which could have an impact on the definition of the campus.
One
important function of master planning is the definition of the campus
boundaries, Ms. Weinberg said, which is a concern of the University's
neighbors. The University has huge land holdings, especially at the
agricultural research centers. She said she has long thought it would be
helpful if there were a review of academic and research needs for land at the
University's research centers in addition to its campuses, and how it is
needed, or whether what the University has is in excess of what it needs. Vice President O'Brien noted that the process
which she is presenting is about the Twin Cities campus; Ms. Weinberg raises
the issue of how to review programs and property all over the state. Is
there such a process, Professor Campbell inquired? Not that she knows of,
Ms. O'Brien said, but the questions being raised could lead to establishing one.
Professor Korth said that his experience with the Morris
plan, finished in 1995, was not as much a product as a process. A lot of people gained a lot of ideas and
information, which provided great stimulation to the process. The historical designation was not planned as
part of the process, but the master planning process started the
discussion. The master plan is not just
a book; the process is important. Ms.
O'Brien agreed. The question is how, on
a campus the size of the Twin Cities, to engage the community in that process.
Professor Campbell thanked Vice President O'Brien for her
report, and adjourned the meeting at
--
Gary Engstrand