Minutes*
Faculty Consultative Committee
Thursday, June 23, 1994
10:00 - 12:00
Room 238 Morrill Hall
Present:
Judith Garrard (chair), Carl Adams, Virginia Gray, James Gremmels, Kenneth Heller,
Robert Jones, Morris Kleiner, Geoffrey Maruyama, Irwin Rubenstein, Shirley Zimmerman
Regrets:
John Adams, Lester Drewes, Dan Feeney, Karen Seashore Louis, Toni McNaron, Michael
Steffes
Guests:
Senior Vice President Robert Erickson, President Nils Hasselmo, Associate Vice President
Richard Pfutzenreuter
Others:
Rich Broderick (University Relations), Liz Eull (Office of Budget and Finance), Martha
Kvanbeck (University Senate)
--------------------------------------------------------------------------------------------------------------------REMINDER: These minutes are available electronically to those on a campus of the University; send a
message to garye@mailbox.mail.umn.edu if you wish to receive them electronically.
--------------------------------------------------------------------------------------------------------------------[In these minutes: Biennial request; reorganization]
Professor Garrard convened the meeting at 10:10 and welcomed Associate Vice President
Pfutzenreuter to discuss the 1995-97 biennial request. Mr. Pfutzenreuter distributed materials that had
been prepared for the President's Retreat two days earlier.
He began by outlining data on the national and state economy and how they translate into a
revenue and expenditure forecast and the budget target that faces the University. The numbers are
provided by Data Resources Incorporated (DRI), a national consulting firm retained by the (State of
Minnesota) Department of Finance, and the indices are used to predict the state's economy. The
prediction is for a slowdown in economic growth for 1995 and 1996. The "blue chip" consensus for
1995, however, is more positive, so the DRI numbers are conservative. Those are the numbers the state
uses, however.
In terms of inflation, DRI is predicting an increase, and predicting a downturn in disposable
income. The upshot is predictions of slower growth, increased inflation, and declining personal income.
It is unlikely, Mr. Pfutzenreuter commented in response to a query, that DRI has had an opportunity to
revise their numbers in light of the continued weakness of the dollar. They do, however, take such
factors into account in their predictions.
*
These minutes reflect discussion and debate at a meeting of a committee of the University of Minnesota
Senate or Twin Cities Campus Assembly; none of the comments, conclusions, or actions reported in these minutes
represent the views of, nor are they binding on, the Senate or Assembly, the Administration, or the Board of Regents.
Faculty Consultative Committee
June 23, 1994
2
Mr. Pfutzenreuter then turned to the revenue forecasts for the State of Minnesota for 1996-97.
Planning estimates from the Department of Finance include consideration of "tails" and structural
imbalances in the budget. The Governor's vetoes of many spending bills at the end of the last legislative
session were based on a concern about the next biennium, both in terms of the "carryforward" balance as
well as the recurring expenditures. Mr. Pfutzenreuter reviewed estimates of state revenues and
expenditure for the next biennium, which predict a reserve of $242 million at the end of the 1995-97
biennium. That amount is insufficient for the State to meet its cash flow requirements without engaging
in short-term borrowing. He observed again that these numbers are likely conservative. No matter who
is Governor after November, however, these will be the numbers used, by law, and any increase in tax
revenues is likely to end up in the reserves rather than in the expenditures.
Highlights from the budget instructions from the Department of Finance were considered next.
Mr. Pfutzenreuter noted the implications for higher education and the University. The budget target will
be the 1994-95 spending level; the instructions call for providing services without raising taxes. Unlike
the previous budget, the directions call for continuing salaries at July, 1994 levels and note that increases
will be considered in a separate salary supplement; this seems to suggest that the Governor is not taking
the position that salaries will be frozen (although where funds for salary increases will be found is not
clear, at this point). The instructions also allow for the possibility of requests for new initiatives, from
which, presumably, the Governor will choose to support some.
Mr. Pfutzenreuter then reviewed the financial outlook for the University's state funds through
1996-97. The Department of Finance planning estimate calls for virtually no growth in state funds
(currently $907 million); an inflationary increase of 3% would increase revenues by $59 million while
inflation plus real growth (envisioned by U2000) would lead to an increase of about $93 million.
The strategy for the request was then presented: "To prepare a 1996 - 1997 biennial request that
reflects the values of the institution and long term strategic directions, is built on shared effort, clearly
communicates the unique cost structure of University programs and services, is easily understood, highly
marketable and recognizes reasonable limits on state funds."
Mr. Pfutzenreuter then discussed with the Committee a schematic diagram balancing the state
budget instructions against general institution needs plus specific initiatives that might follow from the
1994 supplemental request and U2000 planning. He also noted that the University's investment plan
needed to be linked to the U2000 plans.
A number of points were made in the ensuing discussion.
--
Rather than focusing on institutional needs and initiatives, on the one hand, and only one
possible source of revenues (the state) on the other, it might be wiser to talk about the full
set of resources. Mr. Pfutzenreuter agreed that the University may identify $100 million in
needs but only ask the State for part of the money; the rest, it was suggested, might come
from a variety of groups--students, donors, business, etc.
--
The documents appear to suggest that all the current uses of funds will remain and what is
needed are add-ons. That is another item up for discussion.
Faculty Consultative Committee
June 23, 1994
--
3
Does it not make sense, if the University moves to an all-funds budget, to include both
resources and expenditures? Mr. Pfutzenreuter thought it would. Mr. Erickson affirmed
that the University is moving to an all-funds budget. One Committee member pointed out
that there are three components to it: expenditures, planning, and generation of revenues.
All resources and expenditures will be included, Mr. Erickson affirmed, including space
costs, so the total costs of a unit can be identified. Discussions have been held with units
about the non-state income they generate and what additional possibilities might exist.
Some initiatives the University wants, it was noted, may be intimately connected to
revenue opportunities. Rather than identifying initiatives, and seeking generally to
increase revenue, some of them may be paired. Some donations, however, come with tails,
it was noted, such as the contribution for the Weisman Art Museum (a generous donation,
without doubt, but one that carries with it long-term University obligations); is anyone
keeping track of these obligations? Mr. Erickson said those commitments are being kept
track of, although there remains room for improvement in that tracking. He noted that he
has repeatedly made the point that the decision to construct a building is two decisions,
one about the funds for construction and the other is about the funds for its maintenance.
--
Asked if anyone is coordinating requests for funds, Mr. Erickson said he was not satisfied
with gift reporting and accounting.
--
The increased expenses of operating new buildings (e.g., the Basic Sciences Building and
the Carlson School of Management) was noted; where are the funds coming from? Those
issues have been put squarely on the table in discussions of facilities and the implications
of these costs for the operating budget, Mr. Erickson said. Between the Brenner
Committee recommendations with respect to maintenance, and other issues, significant
funds for facilities will be required, and they have been discussed. It is to be hoped that
multi-year projections and plans can be developed so the impact on the operating budget
can be better understood.
Facilities were a big part of the equation in the U2000 financial strategies, because there
are some large costs on the horizon--the steam plant, other new buildings, and increases in
maintenance costs. The extent to which those expenses will find their way into the request
remains an open question, as does the question of the expenses will be paid.
This focuses on the state funds; there are five categories of revenue, however, including
tuition, donors, other income--and a fifth that will have to come from continued
restructuring and reallocation. Mr. Pfutzenreuter agreed, noting that the U2000 financial
strategy called for a minimum of $10 million per year from the last source (as part of a
package of financial assumptions).
The administration recognizes the need to be more comprehensive, although there is a
ways to go to get there. Mr. Erickson said he is not satisfied with what has been done to
this point; there remains more.
--
In terms of the division between that which the University is committed to and that which
Faculty Consultative Committee
June 23, 1994
4
is discretionary, it was said, salaries become discretionary. Other things are fixed
obligations that must be met, while salaries need not be increased. If faculty were thought
of as a resource like buildings, however, the priorities might be different. The Board of
Regents is concerned about the state of facilities, Mr. Pfutzenreuter noted, and the backlog
may never be made up; the question is whether or not the University can stem the tide.
The last capital session was successful, and the University will seek additional funds next
year if they are available. But the emphasis in the request will be on the core. It appears,
it was said, that one cannot pull out and sell the human elements of the institution. Mr.
Pfutzenreuter agreed but noted that this is a phenomenon not unique to higher education.
Even if the legislature cannot be convinced, the priority should exist internally, so that
when various resources are considered, HUMAN resources are the ones that receive
priority. Buildings may be what the legislature wants to fund, but that does not mean
human resources can be ignored.
The next step is to bring to the Regents, in July, a "conceptual framework," Mr. Pfutzenreuter told
the Committee, most of which will likely be U2000, and will involve attaching numbers to those plans.
What will require spending time on is descriptions of what will happen if the University's general and
specific needs are not taken care of. The University also needs to provide a clearer description of U2000,
which is something the legislature expects. One way to do so may be to describe the critical measures
and benchmarks.
--
One thing worrisome about an all-funds budget is that the state appropriation, including
tuition, is only 40 or 50% of the budget. The legislature may say they will make up part of
a shortfall and ask the University to make up the rest--not understanding that the non-state
funds are all dedicated. Mr. Pfutzenreuter said the budget process this year made it
apparent that in some parts of the University there are no other significant sources of
income--and that point was made with the legislature. He agreed that if the TRENDS (i.e.,
down) in those other revenues are not explained, the probability of legislative
misunderstanding would be greater. It must also be made clear, said one Committee
member, that those funds are dedicated and cannot be diverted to offset shortfalls or meet
needs elsewhere.
At this point President Hasselmo joined the meeting. Professor Garrard summarized the
discussions that had taken place thus far at the meeting and recalled that he had explored biennial request
strategy with the Committee earlier. Asked if questions about strategy had been resolved, the President
replied that they had not but that a recent retreat with deans and the administration had dwelled on the
subject. He reviewed the deliberations that had occurred. One issue is how to support the core budget of
the University--salaries, inflationary increases for equipment and maintenance, and so on. Ideally, the
University would receive increases in the various categories and then allocate the money, through
internal processes, where it would do the most good. The question is whether or not the University can
make the case for those funds in those terms. It may be that the leverage the state receives from
expending the money on the University--in cultural, economic, and social development--will be one way
to do so, and in concrete ways so the University's contributions can be understood. Tying those
contributions to the request for increases can be tricky, he observed.
Faculty Consultative Committee
June 23, 1994
5
The administration is determined about two things. First, it will make a major effort to enlist all
the resources and networks it has (alumni, faculty, staff, student) to get basic messages about the
University's needs and contributions to the state. Second, the request will be framed in terms of U2000
objectives. These matters will be reviewed very generally with the Board of Regents in July. The
specifics of the message will not be developed but the themes will be identified. The President amplified
on the means by which specifics in the request might be emphasized, noting at the same time the risks
that attach to the approach. One leading piece of the request will probably be the supplemental request
that the legislature supported this year; the University received considerable positive response to that
request.
The caps established by the Finance Department will be problematic, but the budget instructions
do provide for requests for initiatives. One point made at the retreat was that the University might offer
the state a contract; it would make certain investments and the University would deliver certain outcomes
in return. The challenge, the President repeated, is how to weave salary and inflationary increases into
the request.
Much of this is attractive, commented one Committee member. The missing piece is the strategies.
One is what the strategy will be for going to the legislature to obtain as much support as can reasonably
be obtained. The second is what the strategy will be for financing the University as a whole--of which
the state piece is one portion. The two strategies are different, although closely related. If discussion of
other sources of income is highlighted too much, it may minimize the state's sense of responsibility. But
if the state funds are NOT put in the context of the larger picture, the request will not be credible--it will
appear the University expects the state to do everything and that it is not doing enough for itself. The
strategy discussions thus far are encouraging, in terms of encouraging maximum state support, but it is
not clear where that approach fits in the larger context of University funding.
The University is trying to demonstrate that the state investment is necessary in order for it to
leverage the other funds, the President replied. The point to be made is that the state funds make the
other funds possible, and those other funds are a benefit to the state and they enhance the University's
ability to serve the state. He recited a number of examples that can be used, instances where private or
federal funds come to the University as a result of the state investment. The money must be seen as a
state investment rather than a subsidy.
The possibility of a contract with the state is something occurring elsewhere in society, it was said.
Just as the University has a responsibility to the citizens, so does the state have a responsibility to the
University.
All politics are local, observed one Committee member, and a tricky part to the request is putting
in front of the legislature those items that are most likely to engender support. That must be carefully
calculated. There may be a parallel with the sophistication of campaigns for political office. The
President recalled the response to the specials that were vetoed; there were different constituencies that
approached the legislature for each of them, lobbying for the veto to be overturned. What occurred,
however, was not that those constituencies lobbied only for their own special--they lobbied for all of the
vetoes to be overturned. The University must somehow leverage those same kinds of interest in the
future--special interests harnessed in support of the general University.
Faculty Consultative Committee
June 23, 1994
6
The leveraging concept can be explicit, in terms of obtaining funding. At the institutional level,
the legislature may tell the University to find $25 million of a $100 million shortfall, because the
University can generate funds by doing certain things. That is the kind of contract that the University
might propose, to give the leveraging concept credibility for the institution as a whole. Without doing so
at the institutional level, however, the approach will NOT be credible. The President concurred, and
repeated that it must be done in the context of protecting the base budget. The University may have to
point out that a loss of state funds will have a multiplier effect because other funds will also be lost.
What must be developed, it was said, is not only the concept but also a strategy for how this will work.
The President agreed that this is a critical point.
One problem is that money leveraged may not be available for general institutional uses. Raising
$25 million as part of a $100 million shortfall will not necessarily mean $25 million in unrestricted
funds.
There are two fallacies involved here, said one Committee member. One, how much can the
University continue to promise to add on while still continuing to do its job. Two, the University is not
an economic engine--it is here to educate people. Doesn't that count for something?
Tuition feeds into the argument, the President noted, and is the only source that goes to the heart of
the institution; the rest is designated and is program-specific. The University will have to make a strong
argument about tuition as well. Any contract with the state will have to be explicit about the tuition as
well as the state investment. There is agreement, he said, that the University should not have a tuition
policy driven solely by how much money the state provides (and, moreover, only about 25% of the lost
state funding has been made up by increased tuition revenues--despite the fact that tuition increases have
been high for several years).
Tuition is less a matter of leveraging money, suggested one Committee member, than it is a
consequence of the legislature moving to philosophy of lower subsidies and a greater emphasis on fees
for those who benefit from the education. That is a public policy issue, not a leveraging argument, that
needs to be laid on the table.
This recalls the point that has been made about the G.I. Bill, and the calculation that the country
gained perhaps four or five times what it invested. The University needs to do a better job of informing
the state that when it educates people, the state benefits several times over.
Another important point that needs to be made, in talking about the University and higher
education, that frequently is NOT made, is about the character of the University. One can say, apropos
the University and the rest of higher education in the state, that the University is different, not better.
Each element has a job to do, and each should be doing it well. One of the ways in which the University
is different, it should be argued, is that the University is ESSENTIAL to the economic welfare of the
state and its economy. One could get rid of the other units of higher education--with significant impact
on the local economies--but if the University were to be gotten rid of, or its effectiveness reduced, its
economic effect is reduced. The essential character of a university, and its centrality to the future of the
state, must be better communicated.
But it must be brought to the local level, the President pointed out, because there are 201
Faculty Consultative Committee
June 23, 1994
7
legislators who must ultimately see the wisdom of the contract the University may propose. Many think
in terms of the state, but they must also think about their particular districts and constituencies. The
University must attend to those local constituencies and concerns.
One way to avoid the perception that the University has deep pockets might be to explain to
legislators exactly what the other sources of income might be--what an increase in auxiliary services
charges would mean and where it would come from. There is a danger that the University could shoot
itself by going to an all-funds budget, if doing so creates the impression of deep pockets. The President
said that that is why it is critical that the state funds be looked upon as the investment--with the other
resources leveraged BY that investment, rather than being substitutable for the state funds.
Concern was expressed about any biennial request strategy that would focus on specifics and
examples; this conjures up strategies that have been used in the past, which have contributed to a decline
in the core--even though that is not what the administration intends. As educators, the University ought
to be able to explain the value of core departments just as well as the value of a center. It should be
possible to explain why a leading English department is required--and the University is selling legislators
and itself short if it does not make the case for the core arts and sciences. There should be greater
reliance on letting some of the best educators talk with legislators, rather than relying on "jazzy"
examples. The President agreed that the cases and examples should come from the core as well as more
applied areas--such as the role of the English department in literacy. He also commented that the
University must make the case that liberal education is fundamental--a proposition bolstered by what
employers tell the University they want in employees.
2.
Announcement
Professor Garrard pointed out that the concerns associated with the Minnesota Supercomputer
Center have largely been allayed with the report of the legislative auditor. At the time, the President
noted, that the organization itself may be changed.
The President also reported that the legislative auditor had informed the Board of Regents that
recent increases in tuition had been almost exclusively because of the loss of state funds.
The President commented that Senior Vice President Erickson and his staff deserved credit for the
good working relationship that now exists with the legislative auditor. That hasn't always been the case
in the past, and the fault has been partly the University's. The auditor also complimented the President,
Mr. Erickson pointed out.
3.
Reorganization
Professor Garrard asked the President if he had any additional comments on the reorganization he
planned to present to the Regents. The President said it is one of the most difficult things he has done,
and wished he did not have to, but believes there are compelling reasons that require it. The intent is to
clarify structures.
The President thanked the Committee for nominees for the transition advisory committee and
reported that the two senior vice presidents have nominated members of an administrative transition team
Faculty Consultative Committee
June 23, 1994
8
to look at the fine structure of reorganization (e.g., function, organization, staffing, interaction). This
will require intensive work over the next several months; some issues will be addressed soon while
others may need to await the appointment of the provosts. The faculty/staff/student advisory committee
will be asked to consider how the governance system should interact with the new administrative
structure and to be available for interaction with the administrative transition group. He also said he
expected the administrative group to consult regularly with the advisory transition committee.
Asked about the study of the biological sciences, the President said there are a number of issues
like that that are very important. He said he has been wrestling with the extent to which he should
express a preference for a solution versus leaving it open. He has lately become inclined to take the bull
by the horns, he related, because he has had a lot of discussions about it. Any decision would be subject
to further review. The President added that he has tried to stay with existing structures and relationships
unless he believes there are compelling reasons to make changes.
There are two different issues. One is the extent to which the existing College of Biological
Sciences is located somewhere administratively. The other is, no matter what happens to CBS, there
remains a long-term issue of the structure and oversight of the biological sciences at the University. The
President may have a proposal for both, or one. There is a primary reporting relationship, President
Hasselmo replied--a dean should report to a provost. Which one should be primary, in this case, is the
question. It is clear that several colleges should have membership on the deans' councils of EACH of the
three provosts. Biological Sciences is a case in point. Those are secondary relationships, however.
Asked if cluster planning would proceed, the President said it will in some form or another,
because there must be an intellectual debate in the University that cuts across departmental and collegiate
lines. Faculty members must sort out those agendas in less parochial terms than might be normal-something between the generalized discussions at the level of this Committee and the local discussions in
departments and colleges. There needs to be an intermediate level of discussion--such as about the future
of the biological sciences.
Professor Garrard thanked the President for joining the meeting.
She then noted that this is her last scheduled meeting as chair of the Consultative Committee, said
she enjoyed working with Committee members, and thanked everyone for their help. One Committee
member thanked Professor Garrard for her leadership and expressed the hope that her insistence that this
Committee's business come through the committees of the Senate would be continued. The discipline is
beneficial.
Committee members gave Professor Garrard a round of applause.
The meeting concluded at 12:00.
-- Gary Engstrand
University of Minnesota