Minutes*
Faculty Consultative Committee
Thursday, January 20, 1994
1:00 - 3:00
Room 626 Campus Club
Present:
Judith Garrard (chair), Carl Adams, John Adams, Mario Bognanno, Lester Drewes, James
Gremmels, Kenneth Heller, Geoffrey Maruyama, Toni McNaron, Harvey Peterson, Irwin
Rubenstein, Shirley Zimmerman
Regrets:
Karen Seashore Louis
Absent:
Robert Jones
Guests:
Associate Vice President Mark Brenner, Senior Vice President E. F. Infante, Vice President
Anne Petersen
Others:
None
[In these minutes: (With Dr. Infante:) Campus closing, the budget; (With Drs. Brenner and Petersen:)
indirect cost rates]
1.
Discussion with Senior Vice President Infante
CAMPUS CLOSING
Following the adjournment of the Senate Consultative Committee discussion of copyright issues,
Professor Garrard convened the Faculty Consultative Committee at 1:15 and welcomed Senior Vice
President Infante to the meeting.
Dr. Infante began by saying he wanted to talk briefly with the Committee about his decision to
close the campus on Tuesday. He has received a number of contradictory comments, he said, including a
number of calls telling him he was a wimp and that it was a terrible decision and waste of taxpayers
money. He asked the deans, he said; they saw it as reasonable. He said he learned from his experience
three years ago that if a decision to close the campus is to be made, it should be made the evening before,
not in the morning. Committee members voiced strong assent to that proposition.
One Committee member said he was among those who objected. There is a failure to distinguish
between Kandiyohi County and downtown Minneapolis. Over half of the staff would be here if they
knew the campus were open. Closing is a particular problem in CEE; with classes that only meet once
per week, 10% of the instruction is lost when the campus closes--and the same problem arises when the
University closes early for precinct caucuses. Arrangements should be made for those classes. The
*
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
January 20, 1994
2
buses were running, the streets were open; it should be left to the judgment of individual staff members
in the metro area whether or not they could come in. The campus should not be closed just because of
cold weather. 48 inches of snow, he concluded, are another matter.
Other Committee members, however, expressed support for Dr. Infante's decision. One said it IS
dangerous to be out in very cold weather and that the University often looks at things too contractually-there have to be allowances. Another said the decision was sound educationally; even in weather less
bad, classes are smaller. Faculty may not be able to start their cars. Students, however, are more likely
to be angry--having made the effort to come to class--if they come and find no one there--even if the
faculty member has a perfectly legitimate reason.
It was a difficult decision, Dr. Infante related. The decision three years ago was easy--the snow
made travel impossible. This time he had received a staff recommendation that classes should be
cancelled but the campus should remain open. That, he said, did not make sense to him. He asked the
Committee about the option of canceling classes but not closing the campus.
One Committee member expressed ambivalence and said there should be some discretion. In one
college, oral examinations had been scheduled and were held just because it would be so difficult to
move them. People who only come to their offices and could stay in them all day would not be a
problem. In the case of extreme cold, however, eliminating the outdoor portion of campus activities,
such as students walking between classes or waiting for buses, is probably wise.
At Crookston, it was reported--which remained open--the attitude is that if industry can function,
so can the campus. If the campus is to be closed, it should be closed so faculty do not have to re-teach a
course; they had about 50% attendance in classes, which means many will have to taught again. Closing
should be announced as early as possible.
At Morris the decision to close was made in the morning, but since faculty have keys to their
buildings, many worked anyway. It is a myth, it was pointed out, that people do not work when the
University is closed.
It was noted that arrangements exist in the state government for declaring emergencies so
agencies are closed, and bargaining contracts specifically provide for emergency days off with pay. The
state has a 3-person panel that decides. Is there some similar provision at the University? Dr. Infante
said there is. There is a panel of four people: Carol Carrier, Paul Tschida, the Director of Housing, and
himself. The only problem three years ago was that the decision was made later than it should have been
(5:30 in the morning rather than the previous evening); this year, Dr. Infante related, he had decided he
would make the decision no later than 7:00 p.m. It was difficult to decide at one minute to 7:00. There
is no question, said the Committee member who opposed the decision, that it should have been done
when it was.
One Committee member noted that snow days are built into some organizations, especially those
that must deal with children, such as the K-12 system. But there are conditions that affect PEOPLE--and
it seems like the University is trying to be macho in staying open.
Several comments were made that the announcement by news organizations could have been
Faculty Consultative Committee
January 20, 1994
3
clearer--initially, it wasn't certain if only classes were cancelled, nor was it evident which campuses were
covered by the announcement. Committee members appeared to agree, however, that canceling classes
but keeping the campus open did not make sense. [Each campus makes the decision separately.]
REGENTS MEETING
Professor Garrard, noting that two Committee members and one other faculty member had been
in attendance (herself and Professors Morrison and Rubenstein), next asked Dr. Infante to present HIS
view of what occurred at the Regents' meeting the previous week.
There were three events of significance at the meeting, he said to the Committee. First, the
Board approved the U2000 directions, which is important because it sets the necessary directions for the
University and brings the necessary improvements. There will be additional costs, some to come through
reallocation and, it was hoped, some through an increase in total funding available.
Second, there was a presentation on facilities--a subject, Dr. Infante warned the Committee, it is
likely to tire of hearing from him about. The presentation dealt only with the Twin Cities, and while
Duluth and Crookston may be in substantially better condition, Morris may be in equally as bad a
condition as the Twin Cities. He said he thought it would be necessary to increase the investment in
facilities by $15 - 20 million, in constant dollars, over the next five to six years--and that may be a
conservative number. The presentation, Dr. Infante said, appears to have had an impact on the Board-some thought funds would be needed this year, even though there are positive balances in Facilities
Management (which is "burning up" its reserves at the rate of $4 - 6 million per year and they will be
gone by next year).
Third, the President made a recommendation to the Board on guidelines: With $16 million
available (of which $4 million are soft funds), acknowledge 3% inflation in non-salary items, provide 6%
salary increases, create the SIP, increase tuition 5%, and deal with the resulting shortfall of $7 million.
The Board considered the scenarios they had requested and challenged the administration on tuition.
There was STRONG support for the salary increases, agreement to the $8.5 million SIP (although some
Regents thought it should be larger, especially after the presentation on facilities), and the 3% increase
on non-salary items elicited no comment but was approved.
What he heard on the tuition challenge, Dr. Infante related, was that the Board was challenging
the University to do things more effectively and efficiently and directed the administration to prepare a
budget plan based on a 3% tuition increase. He emphasized to the Committee that the Board asked the
administration to show it the consequences of the recommendation. The chair of the Board was clear that
this was NOT a final decision.
Over the next several days, Dr. Infante said, he tried to produce a set of budgets for discussions
with units; following the discussion, the budgets will be brought back to the Board of Regents. His view
is that there are activities that the University will no longer be able to engage in with the cuts that may be
proposed.
He said he wanted it clearly understood that much at the University has been done through
reallocation. This Regents' decision to lower the tuition rates represents a loss of total net revenue. With
Faculty Consultative Committee
January 20, 1994
4
so much of the University's budget tied up in people, it implies that some people will be gone. As a
general rule, he told the Committee, 30 people are lost with each $1 million reduction; the average salary
seems low but it takes into account leveraged money.
The budget instructions are going out tomorrow and they contain target numbers. They are only
targets to begin the discussions, he cautioned, and they do not include any of the SIP funds. Those must
be applied for.
The original plan called for fully funded 6% actual salaries; is that still the case? Dr. Infante was
asked. "Yes and no," he replied. It is part of the funding that was calculated for each unit--but there will
also be cuts. The increases, however, will be provided for faculty, staff, and student employees, it was
explicitly noted. Dr. Infante said he expects 6% to be delivered but said he would by lying if he said it
will be fully funded. The allocations to units do not differentiate salary funds; at the University's bottom
line, fully-funded 6% increases total $19 million. There isn't $19 million there.
One way of looking at the President's budget recommendation, argued one Committee member, is
that it was a balanced proposition: faculty and staff gave up $7.5 million in retrenchments, with a chance
to recover some for improvements through the SIP; students were asked to invest 5%, of which 2%
would be to improve their education. When the Board changed that recommendation, it went back on a
neatly balanced proposition wherein everyone was investing in the University. In this view, the SIP
cannot remain at $8.5 million--it must be reduced to about $5 million in order to retain the balance.
Another Committee member said that additional 2% of tuition revenue is needed in the
University's base budget. If the faculty must draw a line and fight, it was said, it should be drawn here; if
the students are unwilling to contribute an additional 2%, the faculty and staff should not be expected to
acquiesce in programmatic and personnel reductions to balance the budget.
The agreement on tuition with the legislature was for the biennium, Dr. Infante pointed out; 5%
plus 5% equals 10.25%. Last year, tuition increased about 4%, so the University could have honored the
legislative agreement and still raised tuition by about 6%.
This issue needs to be sharpened, contended one Committee member; this is a complex system of
adjustments and accommodations, but when people take action, the rationale should be specific. One has
the impression that the Board rationale was that there are efficiency improvements that can be made that
the University has not accomplished--and that the savings should be applied to tuition. IF that was their
rationale, then it should be addressed. If not, then there is whole different set of problems to confront.
The Board wanted to challenge the system to get dollars out of the units, said one Committee
member. That is a different proposition, it was said; one can get dollars out of the units for a variety of
reasons. What has been said at this meeting suggests the Board wants the money obtained by
efficiencies. If so, that proposition must be demonstrated to be faulty--if it is. On the other hand, the
Board may have decided that it was simply politically impossible for them to raise tuition more than 3%.
Dr. Infante said he heard from the Regents that they want the University to be more effective and
efficient and that there are areas where the University needs to increase its level of economy. The Board
is challenging the University to accomplish those efficiencies rather than increasing total revenues
Faculty Consultative Committee
January 20, 1994
5
through tuition. That is what the administration will respond to. There ARE parts of the University that
are under-utilized, he said. He has held meetings with unit heads in those units that need to increase their
efficiency; the reactions have not been positive. The budget targets have been constructed so that they
deliver a message, he said. In units that are being under-utilized, for example, they will be permitted to
retain 70 cents on every increased dollar of tuition revenue they generate. Few units, he added, have said
they are under-utilized.
If that is the issue, it was then said, for the Committee to talk about the SIP and other things does
not address the concerns of the Board. Either the Regents' rationale is right or it is not; either the
University should accomplish the efficiencies or it should say the rationale is not right.
One point that is not clear is whether the discussion is about tuition rates or tuition revenues (it
was clarified to be revenues). That, it was then said, can be dealt with by enrollment, changing rates, and
so on. Under-utilization has been talked about for some time as a policy matter; the translation from the
Board of Regents to the department level does not make it clear what can be done to make a difference to
the departments. Much is lost in the translation and it often turns out to be a scolding. There are some
things the units cannot control (such as tuition rates) and some things it can (such as class size and advice
it provides to students). Have there been things identified that units can do?
There are a number of answers and they vary with the unit, Dr. Infante responded. Almost ANY
unit can increase effectiveness and efficiency in the way they do things. In some instances, the
curriculum has been atomized so classes are very small. In others, popular courses that could attract
students are not offered. Past decisions made--such as eliminating undergraduate degrees in Education-have not been accompanied by a reduction in costs, only by a reduction in income. But in institutions
with tenure, they cannot "turn on a dime." Some units could increase the number of students; others
cannot. In one, where undergraduate enrollment has been reduced but will now be increased, there will
be no net change for the University because the students will come from other colleges.
The Board of Regents is right that things can be done more efficiently--but those changes take
time. Intelligent changes can be made at the rate of perhaps 1 to 2% per year; he said he did not believe
they could be made at 3% per year. In looking at the budgets, Dr. Infante related, he spent a lot of time
trying to identify units to be closed or major areas of inefficiency and did not find them. The Board is
right that changes can be made--but not at this pace.
In the budget instructions, the deans have been asked to make arguments about the things that
they will not be able to do--although no Washington Monument propositions will be accepted. (Dr.
Infante explained that every time Congress tried to reduce funding for the national parks, the department
proposed to close the Washington Monument.) The collection of activities to be discontinued will then
be provided to the Board of Regents. He said he has had discussions in his own units because he wants
to make the deepest cut in administrative units--student affairs, academic affairs, the Graduate School-and has met with considerable opposition.
The administration will try to prepare a budget, Dr. Infante told the Committee. But there are
two points to be made. First, he does not like these guidelines. The administration tried to put together a
plan that was nicely balanced. But it should not be said the sky is falling; one's credibility is undermined
if one says that, because the sky is NOT falling. In comparison with other institutions, this is a difficult
Faculty Consultative Committee
January 20, 1994
6
budget, but the sky is not falling.
One concern is the libraries; they still face 8% inflation in their purchases and will be given
about a 4% increase, so they will have a net loss of 4%. Even there, however, efficiencies can be
achieved--that is why the archive facility is so important. It also illustrates the problem that to make
efficiency improvements, one needs to make an investment first.
The second point, he said, is not to forget facilities.
One Committee member commented that FCC and the faculty had no problem with the idea that
there are areas in which efficiencies can be accomplished and that increasing utilization of resources in
some areas could produce additional revenues. That is why FCC supported a budget that produced a $7.5
million shortfall. There was no disagreement on that. What is troubling is that the Board of Regents has
decided to increase the shortfall by $2.5 million more than has been thought through. "It is my sense," it
was said, that the balance of the covenant has changed. Much though one might support the libraries,
and agreed that facilities must be dealt with, the size of the SIP needs to be reconsidered--even though it
would be the source for providing additional library support or making facilities improvements.
This is a dynamic issue, the Committee member continued. This is--depending on where one
starts counting--the fifth year of big changes. There have been heavy losses over the last two biennia--in
excess of $50 million in real terms, with some made up by tuition. When the Board of Regents chooses
to second-guess what the faculty and administration had come to agreement on, one wonders if this is not
a signal of things to come in the legislature. Is the Board setting up the University for a difficult task for
the 1995-97 biennium by advancing the notion that "more can be wrung out"? To say $10.5 million
rather than $7.5 million gets to the bone and disregards quality. Maybe there is $10 million that can be
cut--but it cannot all be found next year when the University has lost $50 million over the last four years.
Dr. Infante said it was his sense that these numbers are not fixed; he said he heard "reach" a
number of times during the Board meeting. The Board said it was a challenge that they would rethink if
it seemed not to be reasonable.
There will be an opportunity to address that issue, Dr. Garrard interjected, because the
Committee will have a joint meeting with the Finance and Planning Committee with the President and
Regent Jean Keffeler on Monday. That is a tricky business, one Committee member observed. If it is an
information session, that can be a nice exchange. If the Committee is trying to lobby, it is getting things
mixed up. The administration is the body to do that for the faculty. If they do not do it, the faculty need
to identify the problem. If those roles are not clarified and kept in mind, there will be difficulties. The
purpose, Professor Garrard said, is to clarify the thinking of the Board on the decrease in tuition rate.
The faculty have always said that balance was involved, repeated one Committee member.
Students must show faculty and staff that they are also willing to make commitments. Faculty and staff
have made commitments to the tune of over $50 million in reductions and frozen salaries for two years.
If the students are not willing to put in an additional $60 per year--which is what the 2% amounts to--that
sends a message to faculty and staff about how much THEY should sacrifice. The quality of the
University, moreover, should be more important to students than $60 per year.
Faculty Consultative Committee
January 20, 1994
7
There is a problem with the efficiency argument, said another Committee member. Everyone
knows what they mean by efficiency--it takes six people to put in a light bulb, and you find that out and
stop it. But people do not understand that there are better ways to do things with the funds they have; to
accomplish that, in many cases, requires MORE funds and one acquires efficiency over time (e.g., the
Saturn plant). Strategic investment is important in achieving efficiency. At the University one cannot
any longer achieve efficiencies by CUTTING the budget.
Asked if there was or would be consultation on the budget targets, Dr. Infante said the
consultation would come during the budget process. They will be provided to the Finance and Planning
Committee for its meeting next Tuesday; copies will also be sent to FCC.
Dr. Infante was then asked a series of questions about whether or not the budget targets (a
combination of cuts and revenue increases) were intended to distribute the $10.2 million shortfall among
the units. Dr. Infante explained finally, in several answers, that they would--but that they would also
produce a total budget that reflects the administration's view on where units are and send messages to
them, that a big part of the process will be the discussions of the budgets and the SIP, that units will be
asked to set priorities in what they want to do and what they will no longer do, and that they also
included the Restructuring and Reallocation changes. The targets that the Committees should be
interested in, he cautioned, are those that exclude transfers, which are uninteresting.
Professor Garrard reported that at the strategic planning advisory committee meeting, Dr. Infante
said the intent would be to give priority to infrastructure issues. The committee members had inquired
what the components of infrastructure were and were looking forward to the answer from Dr. Infante. He
replied that it became clear that what he saw as infrastructure others saw as waste (i.e., his office)!
Professor Garrard reviewed for the Committee the FCC members on two key steering
committees:
--
The Strategic Planning Steering Committee, chaired by Dr. Infante, includes Professors
Carl Adams, Garrard, Heller, and Rubenstein
--
The Operations Steering Committee, chaired by Mike O'Connor in Mr. Erickson's office,
includes Professors John Adams, Bognanno, and Garrard.
Professor Garrard thanked Dr. Infante for joining the meeting.
2. Discussion with Vice President Petersen
Professor Garrard then welcomed Vice President Petersen and Associate Vice President Brenner
to discuss issues associated with indirect cost rates.
Dr. Petersen began by saying that indirect costs are real costs for doing research and the federal
government is willing to pay at least some of these costs. She said she believes the University should
have a consistent indirect cost rate it should charge everyone--something it is currently not doing. Thus
far, for example, the State has not paid indirect costs for research grants because of other funding
provided by the State.
Faculty Consultative Committee
January 20, 1994
8
Indirect cost returns (ICR) are the funds paid by the granting sponsor, typically the federal
government, to cover the activities necessary to provide the support structure to permit the research
activity to occur. Because the University only recently began to receive most of the ICR funds, it has had
a different history than most other institutions. The State still retains $6.5 million as an offset to other
funds. Some say the University can use the funds any way it wishes. This is technically true, Dr.
Petersen said, but the disadvantage is the way the University spends the money can affect its ICR rate.
For example, when the University provides funds to reduce direct costs for specific activities, that
activity is viewed as cost sharing, and the University's contribution cannot be recovered as an indirect
expense. Examples include the University offset for animal care and faculty computing.
In addition to being bad fiscal policy, our current approach to distributing ICR funds only adds to
the confusion. As long as ICR funds are used as discretionary money, people will be confused about
them, Dr. Petersen observed. Her view, she said, is that if there are overhead costs, that is what ICR
funds should be spent for. Not spending the funds on research overhead conveys the impression that they
are not really needed for this purpose. Congress, for example, has gotten this impression and has made
several attempts to delete or reduce indirect cost returns.
The newest issue is the change in the OMB's guidelines--published as the Circular A21. They
now require certain items not be charged as direct costs. The biggest and immediate impact is on clerical
and administrative staff. The intent of OMB apparently is not to permit direct charging on activities that
in the view of the government are general activities that support multiple programs. These changes are
"killers" and create a problem that is estimated in the worst case scenario to be $13 million. While we
know this is an overestimate of the extent of the problem, the actual cost to the University is still being
determined, but may well be closer to $8 million. [Since the meeting, Dr. Brenner reports that the
problem is probably less than $6 million.] As a result, Dr. Petersen and Tony Potami have appointed a
committee with Dr. Mark Brenner and Ms. Marilyn Surbey as co-chairs to look at both the immediate
and long-term issues of indirect costs. The immediate concern is that grants are being returned with
unallowable costs; this problem must be quickly addressed.
The School of Public Health is disproportionately affected by the rule changes; it accounts for
one-third of the problem. The Medical School and Institute of Technology are also significantly affected,
although not to the extent that Public Health is. The projected $8 million cost to the University is
because of the clerical and administrative change from direct charging to indirect charging, Dr. Petersen
clarified. The first efforts of the committee have been focused on labor, Dr. Brenner added, because the
University is so personnel-intensive. Other affected items are journals and any expense not directly
needed for research, such as copying, mailing costs, or telephone. One way to summarize the exclusion
is that the federal government will support specific research projects but will not pay for, as direct
expenses, functions that do not have a direct connection to the specific objectives of the research project.
Dr. Petersen confirmed that these provisions are not retroactive and there is no past University
liability.
Is there any evidence that the Federal government wishes to disallow expenses in order to cut the
bill down rather than categorize expenses correctly? Dr. Petersen said it was both. In the presidential
Faculty Consultative Committee
January 20, 1994
9
campaign, Bill Clinton had said indirect costs should be eliminated. That has changed, but there are
caps. Administrative expenses are limited to 26% (this does not hurt the University, as our administrative
cost rate now totals 19%). There have been proposals for an overall cap at 50%, but this was withdrawn.
This too would not hurt the University, at least at this time, because the University rate is 40%. It is
important to know if the intent is to put them in the right category versus cutting the budget, said one
Committee member; this represents the federal compromise, Dr. Petersen replied, between those who
want to get rid of ICR and those who want to retain it. The revised A21 represents a few "kinks" put into
current practices.
The University has contracted with Coopers and Lybrand to identify what it needs to do to be
able to recover more overhead costs. The total project for the indirect cost rate study has been budgeted
at $3 million. Coopers and Lybrand have guaranteed that they will be able to help raise the rates. It is
estimated that the University now recovers only 60% of our actual costs. Dr. Brenner also explained that
the study was necessary now because it had been pointed out that the data used to establish the indirect
cost rate were so "soft" that the University was actually at risk that the rate might actually DECREASE.
It is unlikely that the University will ever have a rate as high as 50%, but it is hoped that it can be moved
up 3 - 5 percentage points.
This is actually good news for the University, one Committee member maintained, because its
ICR rate is too low. He has been told, in applying for grants, that the University is such a bargain--and
that is because it does not account for expenses it should be reimbursed for. It should be good news that
the University will negotiate to get better rates.
One Committee member asked if the University would differentiate between laboratory and nonlaboratory rates. Dr. Petersen said that it may have only one rate unless it chooses to identify distinct
entities to receive federal grants. For most federal grants, the variations can be evened out in the return
process. With grants from other sources, it is even more important to have a single rate. And there are
costs to having different rates, Dr. Petersen pointed out: for example, if there are different rates for
federal grants and industry, the federal government will inquire about the differences. The University
really needs to have a single overhead rate.
Private foundation funds are trickier; they usually carry a flat indirect rate of 10-15%, and the
University could turn down the funds if we think we cannot afford to do the work. (It has not done so, to
Dr. Petersen's knowledge.) These funds are usually less of a problem, however, because they make up
only a small part of the institution's grant portfolio.
The major reason to straighten this out is so the University can know what it is spending on
research. It is her position, Dr. Petersen said, that the institutional matching funds will have to be made
available in situations where we want to be more competitive. Matching funds should be reserved,
though, for situations where it would be in our interest to win the grant and the area is one in which we
have strength.
Another consequence of an inconsistent ICR rate, Dr. Brenner commented, is that as costs are
shifted from direct to indirect support, the University will recover only 60% of what it would have
received as direct costs. This is way down compared to other institutions. The reason is that sponsored
research--that is, research that pays full indirect costs--is only roughly 60% of the total research-
Faculty Consultative Committee
January 20, 1994
10
supported activities at the University. Research is supported by the state, by the private sector--both of
which do not always pay indirect costs--by gifts, and by cost-sharing from within the institution
(matching funds and effort). The institutional contribution to research has been identified in the planning
process, Dr. Petersen said; much of the increase in the University's research budget over the past decade
has come from institutional funds.
How will those who do not receive a lot of grant money be affected by these changes? asked one
Committee member. They will be affected much less, Dr. Petersen replied, but there will be a couple of
effects. If the Brenner-Surbey committee helps to identify costs more clearly, changing the way the
University operates in the future, some units may have to begin paying more of their costs. Second, If
ICR funds are used to address the A21 changes, there will be less money for the rest of the University.
In response to a question about paying clerical costs, Dr. Brenner said those people with multiple
grants will be asked to transfer the costs for their clerical staff as much as possible to those grants that
will allow them to charge direct costs. There will not be enough money available in the ICR funds if they
are the only source to pay for clerical costs. Even that is not a cure, pointed out one Committee member,
because of the limits on who can be appropriately assigned to other grants.
One Committee member asked how this issue was related to the statement from Dr. Infante about
the need to address facilities problems since facilities are part of the overhead. How does the University
effort to repair them over the next ten years, after decades of neglect, connect with the overhead charges?
The facilities problem needs to be resolved with both ICR and O&M funds, Dr. Petersen replied.
Moreover, the University has been returning too little for facilities with its ICR funds, so the additional
costs for Facilities Management will represent another legitimate draw on ICR funds.
If facilities are worn out and old, it makes sense that the rate would be low, began one
Committee member. Dr. Brenner pointed out that facilities account for one-half of the ICR rate
(depreciation, maintenance, and rent). The Coopers and Lybrand study will help the University make its
facilities data more defensible than they have been--and will possibly allow it to obtain greater recovery
for this category. There are also new buildings for which ICR funds are being used to pay part of the
debt service, something that did not occur before 1990. $1 million has been added to the Facilities
Management budget for operation and maintenance, and that amount will likely increase, he said. Dr.
Petersen pointed out that private institutions have to bear the full cost of buildings, whereas public
institutions have had state support; this is one of the reasons for the higher indirect cost rates at private
institutions.
Why would not clerical staff seen as a "free good"? asked one Committee member. Who decides
the number of staff a faculty member needs for a grant if those individuals are not considered direct
costs? That is a tough issue, Dr. Petersen said, especially in places like Public Health, which are so
dependent on soft money. For them, this shift is devastating. But the point is a valid one: why should
they get help from the University? That has to do with the historical development of units; when state
funds were provided, or when grant funds became available in a major way, units could grow. One could
say they are not important units to the University and their funds will not be used that way--but that is a
difficult argument to make, in part because if the units are closed, the ICR funds to the University will
decline.
Faculty Consultative Committee
January 20, 1994
11
The question is "who controls the rationing of support staff?" it was said. Dr. Petersen asked if
there were any institutional guidelines for ratios of faculty to support staff. The answer appeared to be
"no." Both she and Dr. Brenner agreed, however, that the point is a good one and thought it would be
addressed with some rough guidelines for appropriate ratios in the committee's report.
Dr. Brenner then reported that his committee has only met twice and is unsure about which
faculty committees it should share its work with. It is not their intent to develop policy privately but
something needs to be put on the table as soon as possible for discussion--this needs to be settled quickly
for faculty who are writing grants. Dr. Brenner clarified, in response to a query, that the rules do allow
direct charging of publication costs, although they will now bar the support of journal subscriptions and
memberships to professional societies. This rule will apply to grants being written for renewal and those
submitted for continuation of funding. He further explained that 100% compliance will be required by
July 1, 1995, and implementation must commence on all those activities whose budgets go into effect
after July 1, 1994. When there is a three-year grant with a 40% ICR rate, that rate stays with the life of
the grant even if the University's rate increases; if the University's rate should decline, then the decline
would occur at the next anniversary date of the grant.
A few years ago the University's rate was 44%, which was then viewed as way too low, observed
one Committee member. Now, as new expenses need to be covered, there is discussion that it may rise to
45% from the current rate of 40%. This doesn't add up, it was said. The reason is that the University rate
is so low because it does so much cost-sharing, Dr. Brenner explained. The University has been #3 and
now #5 in the country in total research funding, but it has been only 14th in sponsored research funding.
The difference is it is not collecting indirect costs on all the other sources of research support besides that
which comes from sponsoring agencies such as the federal government and some industrial sources.
Asked how that will change, Dr. Brenner said the University needs to begin to collect indirect
costs from all sources. The state probably will never pay indirect costs, noted one Committee member; it
says it is paying full costs now.
One thing that needs to change is the attitude about ICR, Dr. Brenner said; attempts should not
be made to lower the rate. If there is direct link to their activities, investigators then will see it as
important. If they do not, Dr. Petersen added, they will do nothing about it or will oppose any change.
If the University has always charged indirect costs for facilities, then the funds have been misallocated, one Committee member contended. The state was covering facilities expenses initially, Dr.
Petersen pointed out, so when the University first started receiving the indirect cost recovery funds, it
was viewed differently. Dr. Brenner recalled that the state always paid the facilities bills so there was no
incentive to increase the rate. The state then gave the ICR funds to the University as seed money for
research, and more recently, use of the funds to cover costs for facilities has been permitted. The
legislature now does understand that some of the ICR funds must go to cover infrastructure expenses.
The reduction of direct costs by $13 million will also mean a smaller indirect cost recovery
amount, observed one Committee member. How will those funds be replaced? "Not easily," replied Dr.
Petersen.
It was suggested, and agreed to by Drs. Brenner and Petersen, that the effect of the A21 changes
Faculty Consultative Committee
January 20, 1994
12
should be widely publicized. People should not be asking for things that cannot be funded when they
could instead be requesting grant funds for other things, it was said. Dr. Brenner said the committee is
working on publicizing the changes. There is a question of things that investigators could do now to put
legitimate charges on grants in order to free up O&M funds to help cover other expenses to be incurred
when the A21 changes must be implemented. These might include shifting shop people from O&M
support to a direct charge on grants. Reminding investigators of allowable expenses would be helpful,
said another Committee member.
Professor Garrard reported that she has been receiving calls about this issue and that action must
come quickly. Dr. Petersen suggested that a "warning box" in Research Review might be used to alert
faculty; a presentation to Twin Cities deans would also help. Dr. Brenner said that Coopers and Lybrand
has obtained copies of policies from other institutions so the University will not have to start de novo in
writing its own. He said he hoped to have a draft out within a couple of weeks.
Dr. Petersen was asked if any policy will address the problem of agencies that are trying to get
institutions to waive or reduce their indirect charges. She said that she and her counterparts in the CIC
have discussed the possibility of the AAU presidents working on it. Even though agencies are not
supposed to do so, she noted, many put pressure on institutions to get their indirect cost rates down.
Smaller institutions are really being hurt by these changes; larger ones, such as the University, have a
little more flexibility but are still harmed.
Professor Garrard thanked Drs. Brenner and Petersen for talking with the FCC about indirect
costs; she then adjourned the meeting at 3:15.
-- Gary Engstrand
University of Minnesota