These minutes reflect
discussion and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
Tuesday, October 17, 2006
2:30 – 4:15
238A Morrill Hall
Present:
Judith Martin (chair), Daniel Feeney, Steve
Fitzgerald, Marcie Jefferys, Lincoln Kallsen, Joseph Konstan, Michael Korth, Mikael
Moseley, Kathleen O'Brien, Richard Pfutzenreuter, Karen Seashore, Charles
Speaks, John Ziegenhagen
Absent:
Rose Blixt, Thomas Klein, Ian Macmillan, Kathryn
Olson, Justin Revenaugh, Terry Roe, Thomas Stinson, Michael Volna, Warren
Warwick, George Wilcox, Aks Zaheer
Guests:
Associate Vice Presidents Michael Berthelsen and
Michael Perkins (University Services); Associate Vice President Robert Kvavik
(System Academic Administration); Senior Vice President Robert Jones
[In these minutes: (1) the biennial request revisited; (2) the
2007 capital request; (3) update on HEAPR fund expenditures; (4) update on
Rochester; (5) the North Side initiative]
1. The Biennial Budget Request Revisited
Professor
Martin convened the meeting at 2:35 and welcomed Vice President Pfutzenreuter
to discuss the biennial budget request, this time with numbers.
Vice
President Pfutzenreuter distributed a one-page summary of the 2007-09 biennial budget
request. The increment in funding
requested for 2007-08 is $92.8 million, of which $58.9 million will come from
the state, $22.4 million from a 4.5% tuition increase, and $11.5 million from
reallocation (1% of the current state-funds-and-tuition revenue). The additional increment for 2008-09 is $99.5
million, of which $64.5 million is to come from the state, $23.5 million from
tuition (again 4.5%), and $11.5 million from reallocation (same as
2007-08). The request represents a 9.5%
increase in state appropriations.
The
request, as he noted at the last meeting, is divided into two parts, Sustaining
Quality and Competitiveness ($67 million and $67.6 million increments over the
two years) and Creating Minnesota's Future ($25.8 million and $31.9 million
over the two years). The latter would be
funded entirely with state money; the former would be funded through a
combination of the state funds, tuition, and reallocation. The budget assumes, for both years of the
biennium, a 3.25% general wage and salary increase, a .5% increase in fringe
benefit costs, and an additional 2.0% increase for competitive faculty
salaries. The salary increase funds, Mr.
Pfutzenreuter noted, are planning estimates, because the University will
negotiate and honor labor contracts with unions.
Professor
Konstan noted that the budget plan assumes recurring funds; he asked if there
are items that are non-recurring but that do not rise to the level of a capital
project? Mr. Pfutzenreuter said there
are not; the University prefers recurring funds. Professor Korth asked if the funds for
competitive faculty salaries would be distributed by special request or in a
broader way to colleges and departments.
Mr. Pfutzenreuter said in the past these funds have gone to about one in
five faculty members; they are highly targeted and delivered through the
compact process.
The Committee
had a discussion of the politics of the request and how it would be presented.
2. 2007 Capital Request
Mr.
Pfutzenreuter reviewed again the capital request, which consists of two
items: the Biomedical Sciences Research
Facilities Authority and HEAPR funds (Higher Education Asset Preservation and
Replacement). The BSRFA requests $310
million over ten years, of which $31 million would come from the University and
the remainder from the state. There is
staff concern at the Capitol that if this is approved, what similar requests
for other funding authorities will be made?
The President has been clear that the state must decide if it wants the
University to go in the direction of biomedical research and remain
competitive. Sometimes the state needs
to make a decision; if it does not want to provide the funding for the BSRFA,
the University will not move as heavily in the direction of biomedical
sciences. With the way that state
capital appropriations are typically divided, it is difficult for the
University to obtain the level of funding necessary for these kinds of
buildings.
The
proposal includes a jump-start on the process:
if the Authority is approved, the University would move immediately to
renovate
The
second part of the request is for HEAPR funds, Vice President O'Brien
explained. She noted again that the
University has about 28 million gross square feet of space, which she would not
rebuild, and about 70% of that space is more than 30 years old. That means that certain things must be done
(roofs, windows), so there is an extensive need for HEAPR funds. Even though the University has received more
HEAPR funds in recent years than it did in the 1990s, there was still a compelling
need to return to the legislature this year (not a normal capital
appropriations year) for additional funding.
The focus of the request is where a system has failed or will fail
within a year, where there has been a code citation or order from an outside
regulator, or immediate action is required to avoid financial or legal
liability. Given those foci, there are
three kinds of projects that need funding:
health and safety (imminent risk to building occupants), water
infiltration (especially in the case of plazas that are roofs), and building
systems (which have failed or are expected to fail in the near future).
The
total HEAPR request is $22 million.
Professor
Konstan asked what it would cost in total to bring the University's physical
plant to modern and safe conditions. Ms.
O'Brien said it would be more useful to think about what it would cost on an
annual basis to keep buildings in good repair; Mr. Berthelsen estimated the
University spends about $55 million per year in a combination of HEAPR funds,
building Repair and Replacement funds, and other building renewal. Ms. O'Brien surmised the University would
need about three times that amount annually to fully take care of facilities. The problem will not be solved by money
alone, she said; the University must remove buildings and use space
differently. But in general the
University has about 1/3 of the HEAPR funds it needs to improve major
facilities.
For
many years the University was falling behind on building maintenance, Professor
Hendel recalled; is it now staying even or making progress? Vice President O'Brien said the University is
making progress staying even. There has
been tremendous progress in some buildings (e.g., Jones and Nicholson Halls),
and they have plans to demolish the
When
the University developed a set of critical measures some years ago, Professor
Hendel said, there were comparisons of facility conditions with comparable
research universities. Do they have any
sense where those comparisons are now?
Vice President O'Brien said the Facilities Condition Assessment has been
completed for all buildings; the University has about a .4 result (a ratio of
two items; .4 suggests the University should be spending about 40% of
replacement costs on its facilities); a lower number is better. Some universities have a better number, some
have worse. Dr. Kvavik reported that
there are institutions that have a lot more recurring money for facility
maintenance than
Dr.
Kvavik also pointed out that the University re-programs space and programs
faster than in the past, which changes the calculus. Boston Scientific built a facility with
utility floors in between each story so that they can reshape space, sometimes
within three days. That suggests the
University should build more flexibly, Vice President O'Brien said; Mr. Berthelsen
said that there is interstitial space in several new buildings as well as
open-landscape labs, so the space can be configured very quickly.
3. Update on HEAPR Funds
Vice
President O'Brien next noted that there have been questions raised about the
University's rate of and process for spending HEAPR funds, so she wished to
provide the Committee an update. She
said that Messrs. Berthelsen and Perkins had prepared information; she
introduced the two of them.
Mr.
Berthelsen led the discussion by asking Committee members to follow along on a
one-page handout. He reminded the
Committee of what HEAPR funds are ("a category of state capital
appropriation language . . . to support the continuing operation of University
facilities and programs, specifically capital projects with a 20-year expected
life due to the funds coming from State bonds.
These funds come without the 1/3 debt service expectation and are issued
for: Health, Safety, and Accessibility;
Building Systems; [and] Utility Infrastructure."
In contrast, Repair and Replacement
funds ($13 million system-wide, $10 million for the Twin Cities) are from
University funds (now known as the Facilities Cost Pool) "available for
"Repair and Replacement" of existing building components, though because
of its funding source can finance projects with a shorter expected
life." These funds can cover, for
example, painting and carpeting in the public spaces of buildings; they are not
used for classrooms, for example. The
money goes for things that Facilities Management takes care of—usually not programmatic
improvements, Mr. Perkins clarified. Mr.
Fitzgerald commented that HEAPR funds have been used for classrooms, however,
and they have made significant gains in accessibility as a result.
Professor
Konstan asked about the line between what Facilities Management is responsible
for versus funding to come specific colleges and units. In particular, he
asked, how recently was the level of service negotiated and when would that
discussion happen again? They are
starting those discussions, Mr. Berthelsen said. The Brenner committee report standards lasted
13 years; with the new budget model they will identify what Facilities
Management will do and what the dividing line is. There will be University-wide service level
agreements. Vice President Pfutzenreuter
said that Dean Rosenstone, for example, has made some investments in Johnston
Hall that he determined made good financial sense for CLA. Professor Konstan responded that there appear
to be two models: a dean decides what is
urgent and spends the money, and the mass of faculty and staff say what would
make the place better. There will likely
always be items in both categories. Mr.
Berthelsen said that Facilities Management is prepared to help inform the
University about choices and costs for a variety of service levels.
The
University received $40 million in HEAPR funding in 2005 and $30 million in
2006. Of those amounts, 78% of the 2005
funds are spent or under contract and 51% of the 2006 funds are spent or under
contract. Mr. Berthelsen explained the
reasons why the percentages stand as they do.
The actual progress in spending is line with past practice, but there
has been more review of projects because of subsequent bonding bills; it has
been the practice not to design HEAPR projects in advance because of
uncertainty about the size of the appropriation (it would not be wise to spend
money on project design when the project won't be funded); there was no 2004
HEAPR appropriation, so funding was delayed until 2005; several large HEAPR
projects (Northrop, Folwell, St. Paul utilities) needed attention so other
projects were put on hold until decisions about those major projects were made;
and organizational change in Facilities Management and Capital Planning and
Project Management (CPPM) has restructured responsibilities.
Professor
Martin inquired if the University would be in danger of not receiving the $22
million in HEAPR funds being requested in 2007 because only 51% of the 2006
funds have been committed or spent. Vice
President O'Brien said that the percentage would go up quite a bit by
January—and pointed out that the 2006 funds were only appropriated in May, so
the University has had the funds available for only a little over four months. Mr. Berthelsen said it is his personal goal
to have the funds 100% committed by January; he also said that Facilities
Management and CPPM will have a better partnership in the future.
Professor
Martin asked what percentage of building maintenance funds were spent on
emergencies or imminent emergencies. How
strategic can one be with the funds when there is much that must be done
immediately? Vice President O'Brien said
that perhaps 15 years ago more of the money went to emergencies; now more goes
to projects that fall in the 2-3-5-year category. She guessed that perhaps 10-15% of the funds
go to emergencies. Mr. Berthelsen added
that there was a large commitment to roofs in the recent past, which means
reduced water infiltration. The
Professor
Konstan asked how long it would be before the Facilities Condition Assessment
would get rid of surprises. Mr.
Berthelsen speculated that there would never be a point where there are no
surprises, but the situation has gotten better.
There is no way, for example, to find all the possible pockets of water
that might have seeped into a building without doing much greater and more
destructive testing—that would cost a lot more money as well. Vice President O'Brien recited an example of
water damage in one building due to a particularly heavy summer storm; there
will always be events they cannot predict, she said.
4. The Six-Year Capital Plan
Vice
President Pfutzenreuter reported that the six-year capital plan will go to the
Regents in February or sometime in the spring.
Dr. Kvavik said they are developing the schedule now and will figure out
when things have to be done.
Professor
Konstan asked if items on years 5 or 6 of the six-year plan ever get to the top
of the list, or if they are always supplanted by other projects. Or do projects get promoted? Dr. Kvavik said it is some of both. Vice President O'Brien said that most items
on the list do get built, but there can be changes in the journey along the
way. And some projects not on the list
also get built, Professor Martin observed.
Big donors can affect the list, Dr. Kvavik agreed, and sometimes the University
may not receive the capital funding it expects, which changes what it can
accomplish. A new president can also
change the priorities.
5. Update on
Professor
Martin welcomed Senior Vice President Jones to the meeting to provide an update
on the University's engagement with the
Dr.
Jones related that the University has had a presence in
Dr. Jones noted that the University has
concluded it cannot expand programs in its current space (in RCTC). The
University right now has no physical presence in
The
President has appointed an executive committee to manage the day-to-day process
of moving the
Professor
Konstan asked if there are comparable universities trying to fill the same kind
of niche. Dr. Jones said it would difficult
to find another city that looks like
5. North Side Initiative
Senior
Vice President Jones asked that the Committee go off the record for a
discussion of the North Side initiative, a collaborative project between the
University, the community, the city and the county. Dr. Jones discussed how the initiative is
related to strategic positioning and the land-grant mission, how it will be
funded, and the timeline. He commented
that in the case of both the North Side initiative as well as
Professor
Martin thanked Dr. Jones for joining the meeting and adjourned it at 4:45.
--
Gary Engstrand