These minutes reflect
discussion and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
Tuesday, November 15, 2005
2:30 – 4:15
238A Morrill Hall
Present:
Kate VandenBosch (chair pro tem), Christina Bachmeier,
Rose Blixt, Charles Campbell, Arthur Erdman, Steve Fitzgerald, Lincoln Kallsen,
Thomas Klein, Joseph Konstan, Michael Korth, Judith Martin, Jacob Olson, Richard
Pfutzenreuter, Justin Revenaugh, Karen Seashore, Michael Sertich, Susan Van
Voorhis, Michael Volna, Warren Warwick
Absent:
Calvin Alexander, Daniel Feeney, Dan Hennen, Ian McMillan,
Fred Morrison, Kathleen O'Brien, Kathryn Olson, Charles Speaks, Thomas Stinson,
Alfred Sullivan
Guests:
Dr. Richard Howard, Ron Huesman (Institutional
Research and Reporting)
[In these minutes: (1) faculty salary goal; (2) faculty
promotional increments; (3) annual financial report; (4) new financial system
update]
1. Faculty Salary Goal
Professor
VandenBosch convened the meeting at 2:30 and called for a round of
introductions for the benefit of the new student members. She then turned to Dr. Howard, Director of
Institutional Research and Reporting, for data on the University's faculty
salaries. Dr. Howard introduced Dr.
Huesman, also from Institutional Research and Reporting.
Dr.
Howard related that he had been asked to provide base data in order that the
Committee could begin to discuss potential salary goals related to the
strategic planning effort. He
distributed to Committee members three sets of data: the University's salaries and rank among Big
Ten public institutions, among the top 20 public institutions in the AAU (by
academic rank), and among the 59 members of the AAU (public and private), which
includes the top 30 research universities (by academic rank. In average salaries, all ranks, among the Big
Ten publics the University ranks 5th, among the top 20 publics the
University ranks 17th, and among the 50 members of the AAU the
University ranks 39th. Dr.
Howard cautioned that one must keep in mind that these are institutional ranks
and that there is a lot of dispersion when looks at salaries by
discipline. When measuring the
University against other institutions, it will be necessary to look at
disciplines. He also said that the
University has a relatively good fringe benefit package, so ranking on total
compensation rather than salary alone would put the University in better
standing vis-à-vis its peers.
Ms.
VanVoorhis asked if it were possible to obtain data on compensation
packages. She said, for example, she has
been told that the retention rate at
Mr.
Klein asked if there are studies of patterns of salaries across
disciplines. Are they similar to the
institutional rankings, so that low institutional ranks will also mean low
average salaries in the disciplines? Dr.
Howard, who noted that the salary data does not include the
Professor
VandenBosch noted that in the Big Ten, the University ranks 5th
overall and for salaries of full professors, but for associate professors it
ranks 8th and for assistant professors it ranks 7th. What impact do those rankings have on
recruiting? Dr. Howard said he did not
know and it probably depends on the discipline.
The assistant professor rank would be a concern. He said he did not collect the salaries of
new hires, which tend to bounce around, but the data are available. He also pointed out that while
If
the reach is to be among the top three public research universities in the
world, Professor Konstan said, the question is what level of salaries will be
required before the University stops losing people to other institutions, and
once that point is reached, then what level of salaries will be required for
Minnesota to be successful in recruiting high-quality faculty from other
institutions. He said he was not sure
how to use the data in terms of getting to the goal.
Salary
may not be the only operative question, Mr. Klein said. The Committee may need total compensation
data. Historically, the Committee has
mostly seen compensation data, Professor Campbell said, and historically,
looking at total compensation improved the University's standing. He said that he believed may be less true
now. It was suggested that the
University's advantage in fringe benefits has eroded in recent years so that
looking at total compensation rather than salaries would not significantly
affect the University's standing.
Professor
VandenBosch noted that Dr. Howard had mentioned the University is competing
with institutions on the coasts, where the cost of living is higher. Has anyone indexed the salaries for cost of
living? Dr. Howard said there would some
shifting in the rankings, but not at the bottom. The high-salary private institutions are in
high-cost areas, Professor Seashore said; they talk about that issue informally
but the data could be important.
Professor Campbell said the Committee needs to think about more than
that it costs more to live in Boston than Minneapolis; on that scale, the
University's standing probably improves marginally, but cost of living is not
as much of an advantage as many believe and the Committee needs to be truthful
about that.
If
one takes into account cost of living, there are other factors as well that
should be considered, Professor Konstan said.
For example, in his field, it is easy to collaborate with colleagues
when one is in
Professor
Seashore said the Committee needed data to make an argument. Mr. Klein added that unless the Committee is
to do more than walk through hypotheses, it will need data and model the effect
on recruitment and retention on elite faculty.
Otherwise these are just anecdotal perspectives and the Committee will
not know what the real drivers of faculty recruitment and retention are. He suggested that after this conversation,
the Committee identify a small group to identify those drivers.
Professor
Martin reported that there had been a conversation at the FCC about why faculty
leave the University. No one knew for
sure, which is why the Faculty Senate asked for exit interviews of all faculty
who leave for another academic institution.
This Committee can ask for an update, Professor VandenBosch said, in
addition to the questions that Professor Kleiner is asking on behalf of the
Committee on Faculty Affairs (which sponsored the proposal adopted by the
Faculty Senate).
Professor Revenaugh said that exit
interviews were a good idea but it would take 10 years to build up a usable
database; in the meantime, deans and department heads could perhaps provide
useful information, even if it is anecdotal. The Committee on Faculty Affairs concluded
that such information would not be useful.
Professor Seashore disagreed with Professor Revenaugh, saying that
faculty who "up and leave" are not going to talk about why. They will be polite and not say why. They will not talk about their reasons
openly. The concern should also not be
only about superstars; there are people, one notch below that status, who help
the University a great deal and who hold units together. People in that category will leave quietly
and respectfully. Several faculty
members she knows of left the University and were not affected by any retention
offer. That suggests that salary is not
the issue, Professor Revenaugh said.
Professor Seashore again disagreed; she said they leave because they are
honorable people and don't look for a retention offer if they intend to leave
anyway. It is true that salary is
usually not the only factor; it is a multiple regression analysis. If they do not look at salary, it is not
important, Professor Revenaugh maintained.
Professor Seashore did not agree; she said they also look at what has happened
in other retention cases and decided they did not believe an adequate retention
offer would be made.
Professor
Campbell said that this Committee, the Committee on Faculty Affairs, and the
Faculty Consultative Committee are the three key committees on salaries.
Starting a data set could provide
insights while others do interviews, Mr. Klein suggested. For a reasonable amount, perhaps $25,000 a
consulting firm could do 50 completed interviews in a short timeframe of
faculty who have left in the last two years.
The survey could include U of M faculty and faculty from similar
universities to have a large enough pool. Another university might even be
willing to co-fund the work. Or maybe a recruiting firm or an association has
already done a similar study and would share the results with us. It would not
be necessary to go through layers of institutional processes to obtain the
data.
Professor
Erdman said he was not opposed to exit interviews, but if everyone on the
Committee made a list of the reasons faculty leave, it would be possible to
identify 20 valid reasons (include in-laws).
All make a balanced decision when thinking about leaving. The University would be better off spending
time on increasing salaries and improving facilities and the libraries. He said he was not sure what would be
discovered by additional data or interviews.
What
about the reverse, Professor Warwick asked:
interview faculty who have been recruited from the University but who
chose to stay. That would provide more
interesting information.
Professor VandenBosch said that in her field there are
certain windows when faculty leave, such as the time leading up to
promotion. Professor Konstan rejoined
that the one-year terminal appointment is a reason why many faculty feel they
must interview externally during the year they go up for tenure and a two-year
terminal appointment might reduce this pressure, and in the process reduce the
number of faculty who earn tenure but end up leaving anyway to accept a
different offer.
The
long-term goal is to have compensation that reflects the institution's ranking,
Professor Revenaugh said. Salaries will
rise as the University attracts better people.
It is important that there be in place a mechanism so that departments
can offer the required salaries. That is
not happening in the Big Ten, he said; the 5th-place salaries do not
match the University's rank in the Big Ten.
Professor Seashore concurred but pointed out that offering the requisite
high salaries will lead to pain: there
will be salary compression. One
department she knows of has hired an outstanding assistant professor from an
elite institution whose salary will be higher than that of some full professors
in the department. That creates
difficulties internal pressures.
There
were times, during the Yudof administration and before, when the administration
said that faculty salaries were the number one priority at the legislature,
Professor Campbell recalled. This was
when the University was paid more poorly than its peers. Did those efforts succeed? The University has not had any big salary
increases. The priority was often
negotiated off the table, Professor Martin commented. Salary increases across public institutions
generally have been small, Dr. Huesman said.
There were also "cuts" here, with salary freezes in three of
the last 15 years, Professor Martin pointed out.
Professor
VandenBosch asked the Committee what it wished to do. Ask for more data? Reinforce the SCFA resolution about exit
interviews? Index salaries to
ranking? Professor Campbell said he would
like to see a resolution from the Committee saying that if the University
aspires to be among the top three public research universities in the world,
the aspiration should include salaries in the same range. This is an important corollary to the
strategic positioning that is going on.
The Committee needs to ask the question how will the University get to
the top 3 when its rank is 5, 17, and 39 on rankings of some of its peers. Professor Korth said he agreed with Professor
Campbell but said he thought the Committee should also take a more specific
stand, even if this is a complicated matter.
Is the Committee making a claim it cannot back up, Professor Konstan
asked? In his field, he said, the
top-salaried departments are not the top-ranked departments. Professor Campbell said that most would
probably agree that in the
The
Committee voted unanimously in favor of the following resolution (final wording
agreed on by email in the day following the meeting):
If the University aspires to be among the top three
public research universities in the world, the aspiration must include salaries
commensurate with that aspiration.
COMMENT:
The Provost asked the Senate Committee on Finance and
Planning to identify, in the context of the University's strategic positioning
process, an appropriate goal for faculty salaries.
The Committee recognizes that many factors go into
making the University competitive, and that one can look at either salaries or
total compensation as a measure of financial competitiveness for faculty. In the past, the Committee was told,
compensation comparison made the University more competitive than a study of
salaries alone, because the University had a benefits package that was superior
to that offered at peer institutions.
More recently, however, the differences in benefits packages has
lessened, and so, therefore, has the comparative advantage the University held.
At present (fall, 2004) the University ranks 5th
among Big Ten public institutions in average salary for faculty at all
ranks. Among the top 20 public
institutions by academic rank (AAU), it ranks 17th. The AAU has 59 members, which include the top
30 research universities (public and private); in that group,
The Committee intends to return to the Senate with a
more detailed statement in the future, but wished to set the stage for its
efforts with this simple declaration.
2. Faculty
Promotional Increments
Professor VandenBosch recalled that the Committee sent
the issue of promotional increments for faculty to a subcommittee chaired by
Professor Revenaugh. The subcommittee's
proposal had been forwarded to Committee members before the meeting:
Promotion
from assistant professor to associate professor will be accompanied by an
extraordinary recurring increase of $X,XXX in base salary, and promotion from
associate professor to professor will be accompanied by an extraordinary
recurring $X,XXX increase in base salary.
These figures should be interpreted as minimums and should be awarded in
addition to the annual increase given for meritorious performance. The minimums
will be determined by the Provost and adjusted as necessary to reflect
inflation. The Deans (or equivalent unit heads) will set aside funding for
promotional increases separate from funding normally set aside for merit and
retention purposes. Deans may institute higher minimums but are required to use
consistent and equitable procedures when granting these increases.
Professor Revenaugh noted there were several concerns
about the current language of the Faculty Compensation Policy, including the
problem that it does not reflect the need for inflationary increases and
inappropriately identifies the source of funds for the increases (the general
merit pool). The recommended changes
call for funding the promotional increments from a pool other than the general
faculty salary merit pool (so that a large number of promotions in a department
or college does not reduce or eliminate the merit pool).
Professor VandenBosch reported that Dr. Howard provided
the data on inflationary increases in the promotional increments for the period
1993-94 (when they were first implemented) and the present. The increment for promotion from assistant to
associate professor is $1500; for associate to full professor it is $2000.
CPI: $1500 à 2055; 2000 à 2740
HEPI: $1500 à 2275; 2000 à 3034.
The figure could also be
indexed to University salary increases over the same period, Professor Campbell
observed.
Before the Committee settles on a number, Professor
Martin suggested it should find out what the practices are at UCLA,
Professor Erdman said the subcommittee did a good
job. Setting aside the amounts, there
are important new principles in the draft that he hoped the deans would
adopt. He said he also hoped that the
deans would not reject the policy because of whatever amounts might be inserted
in the XXXXs; the Committee needs to be clear that while it cares about the
XXXX, it also cares about the source of the funds and in emphasizing that they
amounts are minima. Ms. Blixt agreed
with Professor Erdman; putting the minima in today's dollars should expedite
the policy change. The point is to
emphasize the increases should not be taken from the salary pool, not to
propose increases that no one will pay any attention to.
Professor Konstan asked why the Provost gets off the hook
and make the deans set aside the money. To the extent there are funds from central
administration to the colleges for salaries, at least that percentage of the
funds should have an amount also set aside for increments. The Committee can't recommend the
administration tell the dean of a small college that he or she must deliver the
promotional increments and not reduce the merit funds. There needs to be a principle: whoever is responsible for salaries should be
responsible for the promotional increases.
The deans are responsible for salaries, Mr. Kallsen said. There have been no central funds to colleges
for salaries for 5-6 years. And in the
new budget model, all salary costs will be covered by a mix of revenue sources,
not any single central allocation.
The Committee discussed briefly the status of funds for
Regents' Professors, for members of the
It was agreed that the HEPI rather than the CPI should be
used, because the HEPI more accurately reflects changes in salaries in higher
education.
Professor Korth asked about setting a percentage of
salary rather than fixed amounts for the promotional increments. Professor Seashore said that was what some
units wanted, but the Faculty Consultative Committee at the time (which she
served on) concluded that most faculty did not.
The subcommittee tried to reflect the intent of FCC on the point and did
not try to retool the policy. The deans
could do more, or could use a percentage if the amounts met the policy minima,
Mr. Pfutzenreuter pointed out. If the
intent is to protect faculty who are being promoted, Mr. Kallsen observed, the
protection comes in the fixed amount.
The Committee unanimously agreed on the following
language for the Faculty Senate:
Beginning
with the 1993-94 salary year, p
Promotion from assistant professor to associate professor will be accompanied
by an extraordinary recurring $1,500 $2250 increase in
base salary and promotion from associate professor to professor will be
accompanied by an extraordinary recurring $2,000 $3000
increase in base salary. These
figures should be interpreted as minima and are It is intended that these promotional
increments will be in addition to
the annual salary increase award related to given for
meritorious performance. The minima will be adjusted annually to reflect
inflation using the Higher Education Price Index.[1] It will be the responsibility of the Provost
to identify the amounts each year and to communicate those amounts to the deans
(or equivalent unit heads). The deans
will set aside funding for promotional increases separate from funding
normally set aside for merit and retention purposes. Deans may institute higher minima but are
required to use consistent and equitable procedures when granting these
increases. , from those funds provided to his/her unit for salary
increase distribution, sufficient funds to cover these promotional increments.
It is understood that the dean may also set aside funds from this overall pool
to address special merit or retention purposes. It is intended that this
promotion increment will receive inflation-related increases in future years.
COMMENT:
The
Provost asked the Senate Committee on Finance and Planning to review the policy
on promotional increases awarded to faculty.
The Committee recommends to the Faculty Senate that the changes to the
policy be approved.
The
amounts were increased by the HEPI (Higher Education Price Index) from 1993-94
to 2005-06. The Committee was informed
that HEPI is a better measure than the CPI because HEPI is geared largely to
college and university costs, in particular salaries.
The
Committee also recommends that the funding for promotion increases not
come from the general salary increase pool.
Especially for smaller colleges or campuses, but for all colleges and
campuses in general, if a larger-than-usual number of faculty are promoted in
one year, and if the promotion increases must come from the general salary
increase pool, there could be little left over for those faculty who are not
being promoted that year. The Committee
thus recommends the policy required the deans and chancellors to fund promotion
increases form other sources.
Finally,
the Committee recommends, in the amendments, that the Provost be responsible
for adjusting the promotion increase amounts each year, by the increase in the
HEPI, and that he or she notify the deans of the promotion amounts to be
awarded that year.
3. Annual
Financial Report
Professor VandenBosch turned next to Mr. Volna for a
discussion of the University's Annual Financial Report.
Mr. Volna began by noting that the annual report is now
62 pages; it was 28 pages when he began at the University. The increase is partly because of changes in
the accounting profession and partly due to changes resulting from
Sarbanes-Oxley. The University changed
from an international accounting firm to a regional firm but the fee to prepare
the report still went up about $100,000 because of increased work and increased
liability in preparing the report.
Mr. Volna summarized the highlights of the annual report.
-- The
University balance sheet continues to be strong. The debt rating is Aa2; the University could
have increased the rating but decided not to because maintaining such a rating
would mean less flexibility.
-- Revenues
and expenses resulted in an increase in net assets of $223 million.
-- The
University experienced very favorable returns on investments made during fiscal
year 2005.
-- Future
financial strength is dependent on new sources of revenue, cost containment,
state support, and focusing the University's financial resources on its core
mission. As state support becomes a
smaller percentage of the University's budget, the other sources become more
important.
Mr. Volna reviewed the assets and liabilities;
liabilities stayed flat, which is good when assets increase. The increase in assets, he pointed out, are
not all in cash, so can't be spent on salaries or a football stadium. He also reviewed the total revenues of $2.4
billion, of which tuition & fees and state appropriations account for 43%
of the total. However, compared to other
Big Ten schools, the University has a more diverse set of revenues so not everything
is in one basket. Mr. Volna was asked if
he could provide comparable revenue data for the University's peer
institution.
As
for operating expenses, instruction amounts to 27% and research 21%, public
service 8%, academic support 12%, scholarships/fellowships 3%, and various
other activities comprise the balance.
Mr.
Volna explained that the financial report includes seven other "component
units," including the Foundation, the Medical Foundation, Arboretum, etc.,
as required by federal rules. These
organizations exist primarily for the benefit of the University and would not
exist without it, so they must be included.
Professor Martin looked at the data for the component organizations and
noted that two of them showed losses for the year; are they cause for
concern? They are not, Mr. Volna said;
the Landscape Arboretum spent money on a capital project in advance of
revenues; the Gateway Corporation is a subsidiary of three of the other
organizations, all of which are in good financial shape.
The
pace of regulation of accounting is increasing, Mr. Volna told the
Committee. The University will need to
adopt four more new accounting standards next year; it will need to disclose
more and report more. But the reports
are getting so large that one has to be a professional accountant to understand
them, he commented. The new standards
will not take more people, Mr. Kallsen asked?
"Of course," Mr. Volna said his first response would be, but
the challenge is that there is a narrow window at the end of the fiscal year
when the reports must be prepared. Even
with 3-5 more people, it is difficult to coordinate the work. If the regulatory environment makes the
situation too difficult, his office may move to more regular rhythms of
reporting and simply do updates when a report is due.
Professor
Martin thanked Mr. Volna for making the financial report comprehensible.
4.
Mr. Volna next provided the Committee with an update on
the installation of the new financial system.
He provided background on the project; phase 2 (implementation) will run
from August 1, 2005 through July 1, 2007) and it will cost a total of about $28.6
million (with an additional $3.4 million sequestered for follow-on sponsored
projects enhancements).
After a study last summer led by the Office of the Vice
President for Research, they have decided to revise the project plan to include
the PeopleSoft grants, projects, and contracts software. With a new version of the software, it no
longer made sense to defer incorporation of grants in the new system. EGMS will be retained; EGMSi and JD Edwards
will be replaced. So the EFS team has
recommended that sponsored projects be added to the scope of the project, which
will add a year to the timeline and increase the cost by about $11.5 million. Because $3.4 million of funding is sequestered
for this effort, the unfunded portion of this new cost is about $8.1 million.
This is a reasonable investment to get things right, Mr. Volna told the
Committee. Professor Martin asked where
the money would come from; Mr. Volna said that under the new budget model, it
would come from funds charged to units that incur research costs, since they
would be the units benefiting from the new grants features. It will not be charged to sponsored projects
but it will be charged to those who use the service. He also assured the Committee that they are
carefully evaluating the project risks and taking steps to mitigate those
risks.
They are incorporating strategic positioning into their
planning and "deliverables," Mr. Volna said. They are working on best practices,
administrative policy redesign, and small-college clustering—supporting a lot
of work of strategic positioning on the administrative side.
Professor Konstan asked about the communication
strategy. He said he has heard from
three people in three different departments that the project is a year behind
and more expensive. Do they plan to get
word out about the changes to the University community so confidence in the
result will not be undermined? They have
made a lot of changes in recent weeks and have put the working teams on hold
because of the changes, Mr. Volna said.
They have sent out communications so that people know what is going
on. The project is not a year behind and
everyone who has learned about the proposed changes say they make sense. Professor Konstan told Mr. Volna that his
(Mr. Volna's) credibility is important and he should get messages out in BRIEF,
etc.
Professor Konstan also asked about the use of
consultants, something Mr. Volna had touched on briefly. Mr. Volna reported that they had decided to
use a few consultants in specific areas over a longer period; Professor Konstan
wonder if they had considered hiring people from elsewhere so that there would
be expertise on the staff when the project is completed in order to keep up
with the changes that seem to be constantly occurring in accounting and
audits. Mr. Volna said the University's
peers are split in what they do; they decided not to bring in permanent staff. They are using consultants with whom the
staff works so that there will be in-house expertise; they have also hired some
ex-PeopleSoft employees.
Professor Martin wondered if there could be a big problem
if CUFS were to go down before the new system is in place. Mr. Volna pointed out the University has not
received (CUFS) vendor support since 1994; the University has been patching the
system itself. Custom support can be
purchased if needed. He noted that the
added scope of the new financial system is not a done deal; the President,
Provost, and Board of Regents need to approve it. The final proposal will be ready by February,
at which point the senior officers and Board will have to make a decision.
This addition is not lengthening the project, Mr. Klein
inquired? It is over time and over
budget if one looks only at the original estimates, Mr. Volna said. In the meantime, there are 30% more modules. They could also possibly complete the
additional sponsored project modules with the original project schedule of two
years, but for a number of good reasons it makes sense to add one year in order
to bring the project on line at the end of a fiscal year in order to avoid the
need for patches.
Professor VandenBosch adjourned the meeting at 4:40.
--
Gary Engstrand
[1] The Senate assumes the Provost's office will, after calculating the increases, round the results to the nearest $50 or $100. The Senate does not presume that any particular ratio between the two promotion increments will be maintained.