These minutes reflect
discussion and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
Tuesday, November 9, 2004
2:30 – 4:15
238A Morrill Hall
Present: Charles Campbell (chair), Kendal
Beer, Rose Blixt, David Chapman, Steve Fitzgerald, Seth Haskell, Thomas Klein, Joseph
Konstan, Michael Korth, Cleon Melsa, Kathleen O'Brien, Richard Pfutzenreuter, Terry
Roe, Charles Speaks, Alfred Sullivan, Kate VandenBosch, Susan Van Voorhis, Warren
Warwick
Absent: Calvin Alexander, Arthur Erdman,
Daniel Feeney, Scott Fine, Joshua Jacobsen,
Guests: Senior Vice President for Academic
Affairs and Provost E. Thomas Sullivan; Associate Vice President Laurie Scheich
(Auxiliary Services), Laurie McLaughlin (Director of Housing and Residential
Life)
[In these minutes: (1) compact planning process; (2) Twin Cities
campus student housing (and vis-à-vis
1. Compact Planning Process
Professor
Campbell convened the meeting at 1:35 and welcomed the Drs. Sullivan to talk
about the compact planning process. [The
minutes will refer to Provost Sullivan and to Dr. (Al) Sullivan.]
Provost
Sullivan said that Dr. Sullivan is the person who directs the compact process
on a day-to-day basis but that he would provide an overview. In early October the deans' council was
provided the timeline for and steps in the compact process. As the University goes through an extensive
strategic planning process, and as the President insists the University do
better in aligning resources with academic priorities, Provost Sullivan said he
could see other alignments also occurring in the compact process, so there
could be significant changes in the process as they try to align resources and
priorities. They want to be in a
position where the budget does not dictate priorities, but vice-versa. He said he believes that strategic planning
will be a transformative process that will have an impact on the compact
process.
Dr.
Sullivan said that the compact process is now in its seventh year. The compacts are not envisioned as strategic
plans but rather a list of the unit's goals.
The idea is that they are to be annually updated, published, and consist
of the result of bilateral negotiations between the unit and the central
officer to which the unit reports. There
is always a tension about how expansive the compacts should be; the
administration wants to help the units but it does not want to interfere with
them. The compacts need to be kept
simple and streamlined, but also ask for things that the unit needs.
Each
unit submits one compact each year that is to include specific elements, Dr.
Sullivan told the Committee, elements that include goals, diversity, outreach,
and enrollment management, among other things.
The goals are the heart of the document, along with action steps on how
to achieve them and how the achievement will be measured. Both he and Provost Sullivan have been deans
and are now on the other side of the process, so they have a realistic view of
how it should work. Once a unit has a
good compact, the annual update should not be difficult. Some units put a lot of work into their
compacts, so the administration must be careful about what it asks be included
so it does not receive more than is needed.
Dr.
Sullivan reviewed the schedule for the compact process, which envisions the
compacts being completed by August, 2005.
Professor
Speaks asked what the size of the compact pool will be this year and if they anticipate
any change in the pool depending on the budget model the University
adopts. Dr. Sullivan said the investment
pool last year was $9 million, which included both compacts and Presidential
initiatives. What they discovered was
how far $9 million does not go. The
investment pool for next year has not been set.
There are a number of things working in parallel, Provost Sullivan
observed; the University will have to see what comes out of the legislative
session and how much private funding is available (especially for the
President's initiatives), so they have not yet talked about a number.
Looking
forward, Professor Speaks said, if the new budget model calls for most of the
state funding to remain with the President to allocate to units, would that
change the nature of the compact pool?
Do they see it growing substantially?
Provost Sullivan said they did.
There will be discussions about the internal budget model, which will be
the major vehicle for allocating resources.
If it is changed, there is the potential to identify a lot more money
for compacts and Presidential initiatives.
He and Dr. Sullivan were both here when the compact process was
initiated; all the changes have been incremental. With the strategic planning process and a
change in the budget model, there could be more money available for
investment. The President has said there
will be significant reallocation—money will come out of the colleges to the
central administration and then go back to the colleges for investment. The compact process will be the vehicle to
effect that reallocation.
Professor
Speaks said that he has sensed there are two different and incompatible
philosophies in the budget model working group (of which he is a member). One is that the budget model is a tool that
should be flexible and accommodate the blueprint now as well as the blueprint
of a president in the future. The other
is that whatever blueprint the University chooses now, the budget model should
support it. Provost Sullivan the
situation is very fluid, given the budget model discussions, the process of
aligning resources and priorities, and the different outcomes possible from the
legislative session both in bonding and operating budgets. His inclination, however, is to favor the
first option, a budget model that will allow the University to be flexible and
nimble. The problem is that such an
approach is hard on predictability and certainty. The model must also do a better job of making
the process transparent, even if it cannot be certain. The model needs to be flexible enough that
the President has adequate resources to shift to meet priorities and respond to
targets of opportunity.
Provost
Sullivan also said that the administration is becoming more and more clear that
the strategic planning process must lead to a prioritizing process so the
University can invest in big ideas and get away from marginal or incremental
funding. There should perhaps be five or
six big research ideas—and $9 million is not enough to support them. In some cases, they had only small amounts of
money to start something and decided not to make the investment because to do
so would be a sham.
Professor
Roe said that if he were a dean, he would see a lot of uncertainty about
compacts. There is no Vice President for
Research (and it will take the new person several months to get settled) and no
Dean of the
Professor
Campbell asked what interplay there is between the President's initiatives and
the compact process. Are they
independent? Do the President's
initiatives truly originate with the President and other things come through
the compact process? Dr. Sullivan said
this was like an ecological system where everything touches everything
else. Almost all of the President's
initiatives arose from earlier compact discussions, not all by themselves out
of nowhere. The compacts provide good
ideas that become presidential initiatives.
The President does not dream them out of thin air. Provost Sullivan recalled that when he took
office on July 1, the compact process was mostly complete, but as he sat in on
conversations, he heard how the President's initiatives were connected to the
compacts and served as a link between many similar projects.
That
is good news, Professor Campbell said, and it would help if that were better
known so that faculty can know the money is well spent and that their ideas can
bubble up through the process.
Mr.
Klein asked if there were any indicators of what a successful "big
idea" project would be. Have there
been any discussions of possible markers?
There have, Dr. Sullivan said; they have asked units to identify some
ideas and how they would know when they are successful. Some of the possible metrics they are hearing
about are increased ICR funds, meeting needs through enrollment management, and
getting their first choices in recruiting faculty and graduate students. Will these be part of the compacts that are
published, Professor Campbell asked?
They will be, Dr. Sullivan said; the compacts should have both the goals
and the measures. They are not where
they want to be with respect to measures yet, however, he said.
Professor
Roe commented that he did not want to appear to be against "big
ideas," but the Nobel Prize in economics went to a person who used to be
at the University and the reasons he left are related to maintaining a strong
department and graduate program.
Supporting big ideas will have costs.
One "big idea" may be to sustain top departments, Dr. Sullivan
said. It is a matter of judgment,
Provost Sullivan added. It will come
down to the process, Professor Roe said.
The University has a number of world-class, highly-ranked departments,
Provost Sullivan said, and the continuum for investment is approximately this: (1) maintain, support, and shore up those
world-class departments; (2) identify near-great departments that can get to
world-class status and support them; (3) identify those departments that may
never achieve greatness but which are essential for the support of other
departments; (4) after that, look for opportunities for new investments that
will take the University into the future.
Professor Roe said this sounded logical and that it would help to make
the priorities clear around the University.
The easiest way to ensure quality ten years from now is to keep the quality
the University has now, Provost Sullivan commented; in addition, there must be
action on targets of opportunity to improve departments.
Professor
Speaks agreed with Provost Sullivan's priorities and asked if there is another
group, units that are lower quality than desired, with low demand, that lack
centrality, and that the University does nothing about. There is rhetoric going back to Commitment to
Focus that the University will focus, but nothing goes. There are those who believe that has been the
history of the University, Provost Sullivan agreed; there are also those who
believe that cannot continue, he said, and that the University cannot be all
things to all people. Can the
administration sell that proposition to the Board of Regents and the
legislature, Professor Speaks asked?
Provost Sullivan said the President believes he has the support of the
Board; the Governor and legislature have perhaps been implicitly sending the
message for some time that the University should make changes. Commitment to Focus cost the President and
the Provost their jobs more than the problems at Eastcliff, Professor Speaks
observed; the Regents were in an uproar and that the University would make
major changes. Provost Sullivan repeated
that the President believes he has the support of the Board and the
legislature.
Professor
Warwick suggested that the lines on Northrop Auditorium be brought to every
proposed change and question; if the proposals or units do not support
education and research, they do not belong here.
Vice
President O'Brien responded to Professor Speaks. She said that some dramatic changes have
occurred: the University closed a campus
and significantly reorganized the Extension Service. The legislature has questioned some of the
changes, but the greatest sensitivity to change has been from within the
University. As leaders, they need to
think about how to mobilize support for change.
Mr. Klein reported a conversation that he heard from greater
One
question that came up often in discussions about the compact process is that
there were to be instructions about consultation in the colleges, Professor
Campbell said. This meeting is a good
example of consultation with the governance system; is there a mechanism to
ensure that the compact process starts with the faculty and comes up through
the dean? Units are asked to describe
the process and how they developed their compacts, Dr. Sullivan said. That description will be on the web for all
to read.
Provost Sullivan said he asked all deans for strategic
plans by December 1 and asked four questions.
What is the core mission, what is essential for support for that
mission, what forms of civic engagement connected to the teaching and research
missions are included, and what other things are they doing? In the instructions, they were asked to share
information about the process that gave rise to the report. Morrill Hall will not dictate the process, he
said, but they do expect to see a description of the dialogue and the process.
Professor
Campbell thanked Dr. and Provost Sullivan for the report.
2. Twin Cities Campus Student Housing
Professor
Campbell next turned to Vice President O'Brien, Associate Vice President Laurie
Scheich, and Director of Housing and Residential Life Laurie McLaughlin to
present a report on student housing on the Twin Cities campus.
Vice
President O'Brien said the Committee may be aware that for about ten years the
University has been committed to expanding housing and residential life
opportunities for students because living on campus can enhance the student
experience by making them more a part of the academic community and increasing
their understanding of University life—as well as increase retention and
graduation rates. The study that they
have recently completed would have been done in about a year, but with the
plans for clinics being developed by the
Vice
President O’Brien established the working group chaired by Mss. McLaughlin and
Scheich that prepared the report being presented today. It was provided to the undergraduate deans in
late October and will be presented to various groups, including students, over
the next few weeks, and to the Regents in December.
Ms.
McLaughlin walked the Committee through the report, "An Assessment of the
Current Demand and Future Need for On-Campus Housing." She identified on-campus housing principles
and reported the current status of on-campus housing. (Capacity is 6,293; occupancy is 6,702, with
464 students in "expanded housing" such as lounges and making doubles
into triples; 4,374 first-year students are in on-campus housing.) The campus has added 1,754 new on-campus beds
since 1995 and there have been 3,300 off-campus beds added since 1996
(privately-owned facilities). Housing's
role in supporting the academic mission (statistics show that it) increases
academic success, retention, and graduation rates, aids in recruitment (per the
admissions office), and increases overall student satisfaction.
Professor Speaks asked if they
considered whether students who live in residence halls are more likely to
graduate, rather than that living in residence halls increases the likelihood
of graduation. Ms. McLaughlin said that
may be the case; they simply compared data for students in on- and off-campus
housing; off-campus includes the private dorm-like facilities around the
campus. She reviewed the data, which,
she said, suggest that those who live on-campus will be more academically
successful. The off-campus facilities
vary in whether they have the added programs that University housing offers;
some are developing them while others are really simply traditional apartment
buildings. Her office does share
information with the private facilities about providing support for students.
Ms. McLaughlin described the impact of
the design of housing environments on student learning (e.g., human scale,
including recreational and green space, support of a critical mass, and close
proximity to classrooms and activity centers).
The superblock has nearly 2800 students, which has much more effect than
would residence halls of 200 students dispersed across the campus.
The working group developed evaluation
criteria for on-campus housing sites that included location, critical mass, and
availability. The Committee discussed
briefly land acquisition for future residence hall sites, should the AHC plan
require demolition of existing facilities.
Ms. McLaughlin agreed with an inquiry from Mr. Klein about the
possibility of exploring University-private partnerships in housing as well.
The findings of the working group were
that on-campus housing has a positive impact on students and that the
superblock provides an excellent location.
Students have multiple housing options and many seek the most affordable
and conveniently-located. Of the 6,700
students who live in on-campus housing, slightly fewer than half come from the
7-country metro area, so they could live at home and attend the University if
on-campus housing were not attractive (so they need to watch the price). They also found that the Greek community has
problems attracting and retaining students; of the 35 chapter houses, many need
repairs and are unable to house the number of students they need to be
financially viable. The housing office
is working with them to develop plans for the future.
In terms of supply and demand, the size
of the first-year class defines the demand for on-campus housing. At present they can meet the demands of most
first-year and returning students (this year they had 178 first-year students
who remained on the waiting list because the incoming class was larger than the
initial target and because they impose no limit on the number of students who
can re-apply for housing). The situation
has usually worked out, but that may not always be the case. Ms. McLaughlin concurred with Professor
Speaks's observation that if a college makes a major change in the size of its
first-year class, there are ripple effects that include an affect on
housing. If the
In terms of financial and University
impact, the working group reported that on-campus housing has contributed to
the financial health of the University by aiding in meeting enrollment targets,
the University faces major land-use pressures, the residential life program is
dependent on high occupancy levels, and single student-housing rates are comparable
with other Big Ten and comparable facilities in the area.
The working group had several
recommendations. First, the University
should consider building an additional 200-300 on-campus spaces if the
first-year enrollment target increases beyond 5,400 students. Second, the superblock residence halls should
not be relocated—and if relocation is necessary, the superblock should be
replicated in terms of critical mass and proximity to campus facilities. Ms. McLaughlin noted locations on the Twin
Cities campus where new housing could be constructed. Third, the University should continue to
investigate housing options for under-served student populations (additional
one-two bedroom units for family/"partnered" students, housing for
graduate/professional/transfer students, and assist in revitalizing Greek
housing). Fourth, the University should
continue to manage cost of attendance, which includes housing, so it is not
priced out of the market and thus force students to seek off-campus (cheaper)
housing.
Professor Speaks asked if all planning
is predicated on the assumption that the current superblock might need to be
demolished to accommodate the needs of the
Professor Warwick asked if the AHC
could expand using the river flats. Ms.
O'Brien said that land is owned by the Minneapolis Park Board and the sale of
Park Board land would be improbable and expensive.
Could the housing on the
Professor Campbell, noting that time
for the discussion had been used up, urged Committee members to review the full
report and formulate questions. He said
the issue should come back at a future meeting because it is too important to
rush. He thanked Vice President O'Brien
and Mss. McLaughlin and Scheich for joining the meeting.
3. Report on the Budget Model Working
Group
Professor
Campbell turned finally to Vice President Pfutzenreuter to report on the work
of the budget model working group. Mr.
Pfutzenreuter distributed a handout consisting of two tables identifying four
different possible budget models, in addition to the current one, and how the
models were ranked on various criteria.
There were two additional charts showing how two of the models would
work.
In
addition to the current model, the working group is looking at four
alternatives (only two of which it has discussed thus far, and it is those two
that the discussion at this Committee meeting focused on). One alternative is tweaking the current model
(treating tuition and the University Fee the same and attributing 80% to the
colleges and the administration retaining 20% but with no change in ICR or
state fund allocation, charging units for facilities—utilities, custodial, and
debt service only—but no direct charges of fringe costs, retaining the current
IRS charge but at a slower growth rate, keeping the current 3.75% sales and
service assessment, recapturing money for academic investments, and retention
of the enterprise tax).
The second alternative is "earned
income/full cost," which calls for distributing all revenues, eliminating
the IRS except for a small percentage for the compact investment pool, and
distributing central costs to the units (100% of tuition, ICR, University Fee,
and state funds would be distributed to units; they would be charged for all
support unit overhead costs, there would be direct charges for fringe benefits,
and the enterprise tax would be retained).
Examples of the support unit overhead costs might include utilities,
custodial/facilities operations, debt, libraries, Vice President for Research,
information technology, student services, and central executive units. The bases for attribution of costs (again,
examples) might include metered square footage, square footage, actual costs,
number of students/faculty, sponsored fund expenditures, and so on. Students might be weighted differently (e.g.,
undergraduate versus graduate/professional).
The goal, Mr. Pfutzenreuter said, is not create dozens of ways to
attribute costs (classrooms, General Counsel, Registrar, etc.) that would be so
complicated it would tie the University in knots.
Mr. Pfutzenreuter pointed out the
evaluation his office had done of the current model and the two proposed
alternatives on several measures:
supports the ability of the President to steer the ship, ease of
transition to the new model, supports a renewed emphasis on all funds, supports
transparency of decisions, encourages central unit efficiency, clarifies what
things cost, supports risk and reward at the local level, and provides simple
and predictable budget rules. The
current budget system is generally rated a failure except in allowing the
President to steer the ship and supporting risk and reward at the local
level. Mr. Pfutzenreuter said that their
assessment does not lead one to think much of the current model. The "tweaking" alternative would
have ease of transition and perhaps provide a slightly more predictable and
simple model, but otherwise would not improve much. The "earned income/full cost" model
would, in their judgment, improve the President's ability to steer the ship and
represent a marked improvement on all the other measures; it would not,
however, provide ease of transition.
If the University moved to either
model, would it get rid of the University Fee, Professor Speaks asked? It would not, Mr. Pfutzenreuter said, for
reasons related to reciprocity agreements.
Professor Konstan asked why there is a
high score in the "earned income/full cost" model for the ability of
the President to steer the ship when it does not provide for a lot of
discretionary dollars in the President's hands.
Professor Speaks noted that the working group did not do the scoring;
Mr. Pfutzenreuter agreed, noting that his office did the scoring/evaluation,
but said he has not heard a lot of disagreement about the evaluation. He said that the President would hold the
state appropriation (about $540 million) plus the academic compact funds at his
disposal. Another tool the President has
is the attribution of costs, which basically means setting prices (using the
bases for attribution and the attributed costs that are established).
Professor Speaks asked if there has
been any thought given to an algorithm for charging for the libraries
(no). If the charge is by headcount,
usage, or headcount times usage, could that be interpreted as an incentive not
to use the libraries, he asked? Mr.
Klein suggested that units would be charged by headcount whether they used the
libraries or not, so it should not matter. That depends on the algorithm, Professor
Speaks pointed out.
Professor
Roe said he was not sure what Mr. Pfutzenreuter meant when he suggested that
the "earned income/full cost" model would be more transparent. He also said that if the only value in the
system is cost, not output, the least-cost model could emphasize the
least-valuable output as well. Professor
Konstan agreed that the focus seems to be on keeping costs down but the devil
will be in the details. There may be quite different costs for libraries
to acquire journals and books, depending on whether one is in history or
nuclear medicine. The Vice President for Research office spends a lot
more time and money on grants that involve animal or human subjects, and on
small grants (if measured per dollar). If they use simple bases for
attribution, they eliminate the incentive to minimize costs-if units are
charged by the number of students, there is no incentive to control library
costs, just as if units are charged for energy by square foot rather than
metering, there is no incentive to turn off the lights.
Ms. VanVoorhis asked who is serving on
the budget model working group.
Professor Campbell said it includes many members of this Committee
(himself as well as Professors Feeney and Speaks, Vice Presidents O'Brien and
Pfutzenreuter, Mr. Kallsen; it is co-chaired by Senior Vice President Cerra and
Vice President Pfutzenreuter).
Mr. Fitzgerald asked how the models
would deal with the issue of the need to fund common goods. What is the problem, Mr. Pfutzenreuter asked;
not enough money? Mr. Fitzgerald said
that in charging for what is used, there is a failure to differentiate between
benefits and usage. Mr. Pfutzenreuter
repeated his caution that it would be a mistake to make the system really complicated. Mr. Fitzgerald agreed but asked how, in
developing the models, common goods such as student services, custodial
services in public spaces, and so on would be recognized and the costs
attributed. Mr. Pfutzenreuter said he
was not sure he could address that problem today. The budget model, he pointed out, will not
solve the problem of a dollar shortage, but the deans will know—when they get
the bills—that if they add 500 students, it will cost them. That is not true now.
Professor Speaks said he believed there
are two things the working group should accomplish. One, last week Provost Sullivan talked about
strategic positioning for the University—the mission, goals, vision,
academically, and said it was imperative that the working group produce a model
that supports the academic blueprint.
The table that Mr. Pfutzenreuter prepared assessing the various models
is missing a column, the academic priorities of the University. A budget model might be extremely
cost-effective, but what impact would it have on undergraduate education or
research and scholarship? If it would
have no effect, it would not be worth having.
There need to be additional columns that the Provost's office fills out
(he said he would not expect Mr. Pfutzenreuter to guess at the academic impact
of budget models).
Two, Professor Speaks said, the working
group should narrow down the options to two or three and then run careful
simulations to see what the outcomes are for colleges and non-collegiate
units. Who gets hit? Moreover, there should be a simulation run
for a catastrophic event (a sharp decline in federal dollars, a cut of $100
million from the state, no tuition increases, etc.). Mr. Pfutzenreuter said he did not know what
Professor Speaks was talking about. He
can model costs and revenues, but he cannot model who will be cut if revenues
decline. He said he could not do a
simulation of a decline of $100 million in state funds. If ICR declined there would be differential
effects, Professor Speaks said. That is
an exercise separate from attributing costs and revenues, Mr. Pfutzenreuter
said. Mr. Klein commented that
historically speaking, whenever there is catastrophic change, all bets are off. A huge decline in revenue would mean
revisiting budget assumptions made earlier.
The budget model, he said, does not deal with catastrophic events. Professor Speaks insisted, however, that
there needs to be a simulation in order to identify the effects of different
budget models.
Professor Speaks also asked if the
current budget model is not transparent because of the budget model or because
the people in charge are not making it transparent—or if they are prevented
from doing so. Mr. Klein said he has
recently assumed a new position and was surprised by the layers of complexity
in the budget details—and wondered if the current system could ever be
transparent to the University community.
Professor Roe said he agreed with
Professor Speaks; will the budget model provide incentives that are consistent
with the academic mission? Attributing
100% of tuition to the college could create perverse incentives in offering
courses, for example. There need to be
control mechanisms. He also commented
that transparency is desirable, but it cannot be only at the level of the
central administration. Professor
Konstan said that transparency is a real issue with the current model, but he
said he did not believe that transparency would be improved much with the
"earned income/full cost" model.
With
respect to catastrophic change, Professor Konstan said, the question is
probably less whether the state will cut $100 million than substantial internal
reallocation, such as a trend to practical education that redistributes
enrollment between colleges, or a cut in Medicare reimbursement. One
question is how to build in the insurance costs, because everyone knows the
administration will bail out a college that gets stuck with an unforeseen
change. How can the system build in mechanisms to encourage colleges to
diversify and to manage risks?
The budget model provides the rules of
engagement, not inputs, Vice President O'Brien said. The "earned income/full cost" model
does add transparency for support and service areas so that one can understand
the real costs. It allows the units to
ask if they doing the right thing and how well they are doing it. But there is a lot of work to be done on what
measures will be used to evaluate success.
The budget model is only one part of the process, she said.
Professor Warwick said he heard the
word "assumption" being used.
They need to look at the assumptions behind all of the models and
provide them to the Committee for consideration. Is it possible to define the assumptions, he
asked?
Mr. Pfutzenreuter said he did not know
what the President thinks about the alternatives. If the University goes in the direction of
making a change, one assumption has been that the change would occur on July 1,
2005. That will not happen; it will take
another year and the new system might run parallel to the existing one to see
how it shakes out.
Professor Speaks reported he has been
reading a book on responsibility center management, and one thing that stands
out from the authors' 25 years experience with the system: One cannot lose site of the fact that strong
leadership matters much more than the budget model. The budget model is not a decision-making
model.
Professor Campbell adjourned the
meeting at 4:35.
--
Gary Engstrand