Minutes*
Special Meeting of the
Faculty Consultative Committee
meeting jointly with the Student Senate Consultative Committee
and the Senate Committee on Finance and Planning
Monday, January 24, 1994
8:30 - 10:00
Room 238 Morrill Hall
Present:
(FCC) Judith Garrard (chair), Carl Adams, John Adams, Kenneth Heller, Robert Jones,
Toni McNaron
(SSCC) Anne Sales (chair)
(SCFP) Mary Askelson, David Berg, David Dahlgren, Karen Karni, Gerald Klement, Fred
Morrison, Richard Pfutzenreuter, Thomas Scott, Dianne Van Tasell
Regrets:
none
Absent:
None were counted absent inasmuch as the meeting was called on two days' notice
Guests:
Senior Vice President Robert Erickson, President Nils Hasselmo, Regent Jean Keffeler
Others:
Executive Director Barbara Muesing (Regents' Office), Robert Super (Budget and Finance
Office), Donna Warren (MSA), a DAILY reporter
[In these minutes: Regents' action on the administration's budget recommendations]
Professor Garrard convened the meeting at 8:35 and welcomed President Hasselmo, Regent
Keffeler, and Senior Vice President Erickson. She explained that the purpose of the meeting was to
obtain information on the thinking of the Board of Regents about the budget guidelines that they adopted,
and specifically the reduction in the recommended tuition increase from 5% to 3%. The meeting is for
information only, she said; she then invited Regent Keffeler to comment.
Regent Keffeler began by explaining that she had called Professor Garrard after the Regents'
meeting because she sensed that there could be misunderstandings and concern about the Board meeting
and that she wanted to be sure that there were common understandings about the action the Board took.
Professor Garrard concurred, Regent Keffeler concluded, because she called this meeting; she said she
was glad to be able to meet with members of the three committees.
Regent Keffeler then said she wished to "take a long run at the context" for the Board actions on
the budget recommendations. The core objectives to be achieved this year set out by the Board and 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.
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President eight months ago. They included the need for a strategic plan and a management structure to
implement it, a resource allocation process to illuminate the choices available to reach that vision, and an
external relations effort to carry that vision to the public and the legislature. The discussion today is
about the resource allocation process used to illuminate the choices available to achieve the vision.
The Board perspective about what is positive about the process now in place is, one, that for the
first time there is a capital process and capital plan in place that is long-term. The University's needs
have begun to be quantified--that is what the deferred maintenance issue is about. The capital budget
process and decisions now await the illumination of the academic priorities to be set out in the planning
process.
Also positive is a management-proposed, Board-endorsed resource allocation process very
different from what has been in place before. One hallmark of the new process is that the resource
allocation guidelines are set forth early. The University's budget process "should lead in the dance with
the legislature" in that it will put priorities in place so that the University can talk about them rather than
simply make exhortations or simply react so late in the decision-making cycle that it is impossible to
have input. Before, the resource allocation guidelines were set one month before the budget; the change
moves the process up to where it is now.
The resource allocation guidelines, Regent Keffeler emphasized, are GUIDELINES. It has been
frustrating and difficult to get the media to understand that; apparently neither the Board nor the
administration has not done a good enough job of explaining the nature of its actions. She recalled that
she had taken pains to explain that the Board was NOT setting a budget, tuition rates, salaries.
Nonetheless, she recalled hearing on MPR after the Board meeting that the University had SET its
budget. This is not media bashing, she commented, but rather a reflection of the fact that the University
had adopted a new process and that it takes time and communication for it to be understood. But there is
a new framework for the budget process.
The Board, she told the Committees, is VERY pleased with what is being accomplished in terms
of the development of the strategic plan and the new resource allocation process. The Board is
enthusiastic about the U2000 plan. Whatever vehicle is used to express concerns--whether Regents'
Professors will teach at night or the adequacy of student financial aid--the Board wants the plan to be real
and wants it to happen. The challenge will be the execution.
For faculty and students, she said, this is a time to be hopeful that the University can get on the
right course--away from nickel-and-diming departments and to making major moves to close the gaps
that have been identified. That is, if one looks at the financial assumptions laid out in the working paper
that appeared before the U2000 plans, one sees that there are significant gaps between projected
resources and projected expenditures that need to be reconciled. Those gaps will be seen again when the
financial implications of U2000 are laid before the Board in March.
One argument is that those financial implications should not be brought into focus because they
will be so daunting that they will drain the initiative of the institution. Her view, and that of the Board, is
that unless they know what the gaps are, there will be no chance to achieve the U2000 goals, the
University will not know what it needs, and it will not be able to make credible arguments in pursuing
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those goals.
As for the action changing the proposed tuition rate increase from 5% to 3%, Regent Keffeler said
she had read the minutes of two recent meetings [FCC and Finance and Planning] held after the Board's
action; Senior Vice President Erickson had been at one and Senior Vice President Infante at the other.
She said she had carefully considered how the two senior officers had characterized the Board's action on
the budget and said they had correctly summarized both its intentions and actions.
These ARE guidelines because the Board wants to see a range of choices and the consequences of
those choices--it wants a larger "planning envelope" than the ultimate decisions will require. If the
consequences of the guidelines are not intelligent things to do, the Board will go back to the guidelines
and reconsider them in the broader context of what the University is trying to accomplish. That may
mean a cut in the Strategic Investment Pool, it may mean more of the reserves will be taken, it may mean
an increase in tuition, it may mean an increase in enrollment.
It is EXCEEDINGLY unlikely, Regent Keffeler emphasized, that there would be any decision to
change the 6% salary increases for faculty and staff. She said the Committees should know that the
Board--along with the President--was VERY uncomfortable with the recommendation last year that there
be no salary increases. The Board knew then that salaries were getting away from the market--but the
Board was not in a position to increase them because its only choice would have been to impose an
across-the-board tax on the units, which both the Board and the faculty opposed.
The process now, she repeated, creates a "planning envelope" larger than the decisions to be
made--the only way that the Board has choices is to have a mix of variables in the envelope that can be
manipulated. That is the rationale for the Board's action, she said.
The Board's action should NOT be interpreted as a statement that there is "fat" in the University
and that units can be squeezed even more, although certainly there is room for productivity improvements
in any organization. There is a conviction on the part of the Board that every lever must be pushed,
including having competitive tuition rates. Student must pay the going rate, but not more, and must have
financial aid. The Board will want to see the new tuition numbers for peer institutions before making any
final decisions.
The Board also wants faculty and staff to be fairly compensated, at market rates.
Nor will the University be moved ahead by squeezing departments rather than setting priorities.
The Board must continue to receive good information on all major parameters of the budget, she
told the Committees. It wants to talk about where the University stands on tuition and the consequences
of adopting a 3% increase. It wants to know where it stands on salaries (not because it believes it has
overshot the mark with 6% increases but rather because it can make better arguments when it has facts).
Regent Keffeler said she would conclude with two concerns. First, she is concerned about the
"almost angry" view that if this administration is going to be asked to propose cuts, the Board had better
be prepared to adopt all the potential cuts that are identified. She stressed that organizations customarily
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evaluate a range of options in setting priorities and that the University should be doing this as well. It
defeats the planning and decision-making process if simply identifying priorities and discussion potential
reductions is interpreted as a final decision that a cut will be made. The Board wants choices; it has not
made decisions. If some packages are identified at an X level of reductions, it must be assumed that they
were prepared on the basis of the criteria that have been set out in the planning process (centrality,
demand, quality, comparative advantage, efficiency and effectiveness). If some or all packages are
spared being cut, it is still to the advantage of any program to know where it was weak to the point of
being at risk for decreased funding. Or, if one of the criteria that led to the recommendation was one that
the department cannot change (e.g., centrality), then it should know that it will not be seeing an increase
in funding in the future.
The second concern is that sometimes these issues are cast as faculty versus students. That
appears in the minutes of the Committees and is also heard in the discussions. If the Board limits the
tuition increase, it is seen as having done something good for students at the expense of programs and
faculty. That is NOT the mindset of the Board members, she said; that is not the way they think about
these issues. They think in terms of what is good for the whole University. It is curious and harmful, she
commented, to see this institutional tendency to divide against itself that way.
Professor Garrard then turned to the President for comments; he was perforce limited in what he
said because he had a severe case of laryngitis. He nonetheless whispered a few comments. He said it is
important to keep the decisions within the perspective of the broader framework of the University's
agenda that had been endorsed by the Board of Regents.
As for the lack of salary increases last year, the President said, that decision was as much because
of the political situation in the state as because of the University's inability to carve out the funds that
would have been required. Regent Keffeler said she did not disagree; she said her point was that even
had the Board been inclined to fly in the face of the situation in the state, it would not have had the
ability to do so because there was no range of choices available.
Regent Keffeler then offered another observation. From time to time, she said, the Board will
disagree with the President. If that happens frequently, there is a major problem. The Board must,
however, have the ability to make policy judgments and may occasionally set different priorities. It is
possible the Board may change administrative recommendations (although, in her four and one-half years
on the Board, she recalled, she had seen no major issue where the administration had not been
supported). In critical times, if the Board re-orders priorities, it should not be seen as a signal of serious
division between the Board and the administration.
The President agreed, noting that the administration had received solid support from the Board.
He said it viewed it as a sign of a healthy institution that spirited discussion occurred at the Board and
among faculty, staff, and students. There is the continuing problem that discussions are misinterpreted as
decisions, but perhaps the University is reaching a point where that misunderstanding can be managed.
Professor Garrard summarized the points she believed Regent Keffeler had made:
--
This is not business as usual. We are "in a planning mode" and the budget levels have not
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yet been made final.
--
That the planning envelope must be larger than the decisions to be made and must include
multiple variables;
--
That there is a 90-day period to plan before the final budget decisions will be made by the
Board.
Regent Keffeler concurred. Mr. Erickson observed that the budget will be presented to the Regents for
information in April and for action in May. He also reported that there have been discussions about the
Board having forums in April, when the actual budget proposal has been prepared, so that it can hear
from those who wish to comment on it.
The process, Mr. Erickson said, is one that means massive change at the University; it is being
established so that oversight can be exercised--something that could not be accomplished before because
the University lacked the necessary information systems. The process is VERY different but there must
be debate and discussion. This will not be fun, and it will be painful, he said. His job is to play the
devil's advocate about allocations to units; the academic side of the house must say that these are the
allocations that should be made.
One Committee member then said that Regent Keffeler's comments had been very helpful.
Following up on Mr. Erickson's remarks, it was said, one can understand the scale of the changes being
attempted. But it is difficult to bring all groups to a level of understanding that permits the dialogue he
spoke of as necessary. For many groups, "there is not a prayer" they will understand that an early
decision does not mean the budget has been set; the perception is that the budget has been set early and
without must consultation. It is helpful to know that is not the case, but knowing the University, the
budget numbers WILL be seen as set in stone and most will not understand this change in process. It was
then said, in response to a comment that the PROCESS has not changed, only the timing, that a change in
timing IS a change in the process.
Regent Keffeler agreed, noting that the Board should indicate soon what its timetable for public
hearings would be.
The timing of the new process, Professor Garrard commented, puts more reliance on the
governance system than had been previously the case. It may not be that the entire population will
understand the changes, but the governance system--and its committee that specializes in budget matters,
the Finance and Planning Committee--can.
One Committee member then spoke at some length. He related that he had been at the University
for 25 years and had attended Regents' meetings off and on for that entire period. Never, he said, had he
been so discouraged as after the most recent Board meeting. In reflecting on the directions the University
is going--and as one enthusiastic about change--one sees the same thing happening to the academic
infrastructure as has happened over the last two decades to the physical infrastructure of the University:
We can always squeeze another 1% out and the roof won't leak yet. As a result, the University has a
$200+ million deferred maintenance bill. One can be afraid the University will get into the same position
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in the deferred maintenance of its academic programs.
The retrenchment next year will be 1.9%; the year before, it was 2.6%; the year before it was
3.8%, the year before that included closing Waseca so is not comparable, and the year before that it was
1.6%. Each of these made academic programs leaner. To the credit of the administration and the
President, the 1.9% retrenchments are not being proposed across-the-board, but even with differential
allocations, even strong academic programs will need to pare down--which means not repairing the
intellectual roof.
One would not hesitate to say, when strategic planning is in place, that dramatic changes will be
needed. If changes are made before then, the result is the same slow strangulation as has occurred over
the last several years.
Despite the appearance of the division being faculty versus student, he then said, it is not. It is
short-term versus long-term vision. He came away from the Regents' meeting with a sense that the
discussion was about holding down tuition, not the impact of that decision on programs for students,
assistantships, and so on--which is a short-term vision about the need to hold tuition down. There was no
discussion about the impact of increased retrenchment and what its cost would be.
He was comforted, he said, and he hoped he could be reassured, by Regent Keffeler's statement
about the planning envelope. What he saw, and what others have perceived, is that the doors have been
closed, even if not locked, and that certain budget levels will not be considered. The University could be
operated at ANY budget level--all classes could be 500-student lectures. The administration worked to
come up with a balanced plan that caused less retrenchment; to obtain lower tuition, the Board had to
increase retrenchment.
With all due respect to the budget process that has been developed, one does not see in that
process a way to articulate the impact of cuts.
About the core objectives, he then said, U2000 will cost money. Thus far, only the questions
about resources have been identified; in March, presumably, there will be some "cold reality" numbers.
One sense taken from the Board meeting was that when the cold reality comes, and the question about
paying for U2000 is asked, the answer from the Board will not be positive. There is a sense that tuition
must be held and that the Strategic Investment Pool will not be supported by the legislature. If all of
U2000 must be accomplished by internal reallocation, that may be the choice the University wants to
make--but it will be very difficult.
As a procedural point about planning envelopes, he concluded, motions should perhaps be drafted
with set ranges rather than specific numbers. Then it does not appear that doors are being closed.
The administration could do that when proposing revenue and expenditure increments, Regent
Keffeler replied. All groups commenting on the budget would then have an array of choices to talk
about. Proceeding that way would be consistent with what the Board is trying to get at with expanding
the number of choices before it.
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It is disturbing, Regent Keffeler continued, to hear it said that the actions of the Board are viewed
as closing doors, because this new resource allocation process is precisely what is needed to OPEN doors
and to make choices.
It is correct to say, she agreed, that when the Board amended the guidelines there was no
discussion of the impact. The Board understood, of course, that it would increase the gap between
revenues and expenditures, but not the impact. It is precisely that impact that the Board DOES want to
understand. She said she did not know how it could do so without a management process that looks at
alternatives and their implications. If the planning process needs to be strengthened to accomplish that,
then it should be.
If the April budget proposal penalizes programs in which the University wants to make an
investment, then the Board and administration should all be removed. It is exactly that outcome that the
process is trying to avoid.
As the University goes through a period of change in decision-making processes, people must be
willing to extend "idiosyncratic credit." The comments of one individual Board member should not be
taken as an expression of Board sentiment. It is very difficult, she told the Committees, to be in a public
setting where even before one has formulated a thought, the media are commenting on it! One must read
the overall pattern of what the Board is trying to do--as it has read the overall pattern of what the
administration is trying to do.
One piece of the institution that cannot change easily and is part of the culture, observed one
Committee member, is that the Board is seen as a political body and its actions as more symbolic than
substantive. People read more into what Board members say, if it is said at the table, than perhaps is
warranted. Her plea to not do so is understandable, but she must understand that that will not change
fast. Regent Keffeler said the point was well taken.
It was then said, apropos penalizing programs in which the University wishes to invest, the
Graduate School has given this issue more attention than most units and held long discussions about the
attributes of good programs--and even it has been unable to develop a process for making judgments, has
come to no agreement on who will participate in making the decisions. But these will be critical if the
Board is to make judgments.
Is it a Board responsibility, asked one Committee member, to decide how to decide and who
should participate? It is the administration's problem, it was agreed, but the Board must endorse the
results.
The Board endorsed the strategic planning priorities, Regent Keffeler pointed out, and the criteria
upon which the decisions will be made. Everyone is learning as this new process evolves, she said, and
presumably it had a rudimentary impact on the budget. It will, she assumed, have more of an impact next
year.
The 1994-95 budget, the President said, will be driven more by existing priorities than by new
plans. There is a huge backlog of priorities and a lot of information available about them. For example,
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Vice President Petersen has recently been responsible for the production of a report by a committee on
four priorities in research development. The mechanisms are in place, he said, to set the priorities in the
future.
Mr. Erickson then commented that the administration is trying to develop linkages between
strategic planning and budgeting. Associate Vice Presidents Paschke and Pfutzenreuter have been
serving on the Strategic Planning Advisory Committee, which is trying to strength those links. The idea
is that strategic planning is the umbrella under which the budget will be formed, but much work is
needed.
In the discussion about the Strategic Investment Pool at the Finance and Planning Committee
meeting last week, Mr. Erickson said he described it as vehicle to foster long-term thinking. He
emphasized, he recalled, that Drs. Hasselmo and Infante agree that if a long-term effort is already
identified, but one that needs bridge funding, the decision to be made is if the University WANTS to
fund it. The SIP will be key to moving forward, he said, and people should look at it in the broadest way.
If funding for a project is not now available, if it important it may be supported later. Whatever is done
this first time will not be perfect, he concluded, but the process is iterative--and unless there is a strong
link between the strategic planning and budgeting processes, the effort will have failed.
One Committee member then recounted that the purpose of the meeting was to clarify the thinking
of the Board of Regents, rather than to bash Regents or lobby for a particular view. Given that, it was
asked, how does the Board, in setting the agenda and thinking about the University's future, divide its
efforts between day-to-day management decisions and the kind of place the University should be in 20
years? Now one sees the consequences of what was not done in the 1960s and 70s and the efforts of the
University to fix the situation (i.e., physical infrastructure). At the same time the University is setting in
place processes so that the same thing will not be said 20 years from now. If that is what the Board takes
responsibility for, as one reads the minutes of Board meetings, it seems that a lot of time is spent on dayto-day stuff, not long-term issues. When one talks about the need to be sensitive in an open forum with
the press present, how does the Board balance the day-to-day with the need to stridently defend the need
to build the University of the future--how does it ensure that it defines the long-term interests of the
University? That seems to be a crucial Regent responsibility; it would be helpful to hear how the Board
accomplishes it. As the earlier comments about the academic and physical infrastructure pointed out,
there are consequences to temporizing for 20 years.
Regent Keffeler said that the key functions of the Board are to set overall University policy, to see
that it is equipped to deliver on that policy by matching resources to policy, and to ensure that there is an
effective management in place to do so (i.e., to select the President). Globally, it has the responsibility to
plan, obtain resources, and pick the President.
If one looks at the objectives set last spring, it reflects a clear articulation of what the Board
believed was most important this year--strategic planning, the budget, and the management.
As one looks over Board agendas, Regent Keffeler observed, it is apparent that the Board has done
a lot to streamline its activities. The President would likely agree, she said, that the Board has not in
recent years pushed itself more into operating decisions; it has, however, pushed for better information so
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that it could make the big decisions. It has eliminated much that earlier required Board approval in areas
such as purchasing and faculty appointments, for example, and it is often THE BOARD that has taken
the initiative to divest itself of inappropriate decisions.
The Board now does have the unhappy task, however, of dealing with long-neglected
administrative and academic structures. As one focuses on infrastructure reform (as opposed to the
vision), the Board is engaged where it needs to be, Regent Keffeler maintained. CUFS consumed Board
attention, in oversight, not design, but that was appropriate for a $20 million investment. The Board
attended to the Medical School practice plan, which involves $80 million, as a place where the
University was at risk. The Board has dealt with the top levels of the structure of the health sciences and
how they relate to the overall University mission.
Once in a while the Board gets into something it does not want to be, such as faculty retirement,
where a simple attempt to bring University policy into accord with federal law led into a quagmire.
There are occasionally other issues that are basically management concerns but where Board
involvement is necessary because of public interest or potential political impact. The President must
have Board support, she told the Committees, for issues such as these; the management cannot be left out
on a limb by itself.
There is much in the Board minutes, it was said by one Committee member, but one sees little
about aggressive Board attempts to defend University interests at the legislature.
That is an area where the Board wishes to be involved, Regent Keffeler responded, and to
participate vigorously--but what is needed is a well-crafted external relations program.
But if any group at the University is connected to the legislature, began one Committee member-to which Regent Keffeler responded that this was singing to the choir. The Board is frustrated, she said,
that it has not had the means to unleash the assistance its members could provide to the legislative effort.
She and the President met recently with the Governor and meetings with legislative leaders are
scheduled; this is the first time she has ever been asked to make contact with legislators, she recounted.
The Board will make progress, she promised, because it feels strong about the issue--and the
administration agrees--and the effort has not been well-handled in the past.
In response to a query about why the Board decreased the tuition increase from 5% to 3%, Regent
Keffeler explained that they ended up with a yes-or-no vote on a discrete issue and she could not
necessarily interpret how individual Board members arrived at their decisions. The collective mindset
appeared to be that many board members, in an intelligent and rational way, would say that ANY
organization can come up with new efficiencies and increase productivity--any organization can deliver
its product at decreased cost. That is just a revenue issue. And to put the vote in context again, she
reminded the Committees, they are guidelines intended to test limits and illuminate consequences.
There is a concern that tuition be kept at market rates; the Board has not seen a lot of information
that tells it where the University is on that issue. The last time the Board discussed it, it appeared that
Minnesota's rates were creeping up in the comparisons.
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Faculty, staff, and student salaries have not kept up with inflation, pointed out one Committee
member. Tuition, Regent Keffeler rejoined, has far outstripped inflation in recent years. What has
happened, maintained one Committee member, is that society has determined it wishes to shift the way it
subsidizes higher education so that the student--the perceived beneficiary--pays more. That is a political
change.
If so, Regent Keffeler said, the change should be made with an understanding of market
conditions; if tuition rates here are increasing faster than at Michigan or Wisconsin or Iowa, the Board
wants to know about it. That makes sense, it was said--the Board does not want to price University
activities in a way that disadvantages the institution. That helps clarify what the Board is doing. Regent
Keffeler agreed; she said she did not know the right number but that the Board wants information about
the numbers.
Another Committee member expressed appreciation for the discussion. It was said that there had
been a scarcity model at the University which produces a sense of division between faculty and students.
Faculty members, moreover, have not received salary increases in two of the last three years. This is, as
a result, a group of people who, temperamentally, want to be supportive, but who distinguish between
rhetoric and action. That causes distrust, because people believed the rhetoric of the administration and
now see it happening again. Regent Keffeler asked for credit between groups; if nothing new happens,
that credit declines.
Another dangerous vacuum these days, it was said, is the difference between labor and
management, and that could be helped by communication. There is much new technology available but
people must still rely on the newspaper to learn what has happened. One wishes this entire meeting
could been on video for all faculty to see. One feels like Sisyphus, pushing the rock all the way to the top
of the hill and then having it pushed back down again. What is needed, responded one Committee
member, is C-SPAN for Regents meetings.
One Committee member thanked the administration and Board for moving the process up and
echoed the comments earlier that if the planning envelope is to be expanded, they should be worded as
choices--that would send a message as much as anything else.
A big issue, it was then said, is who decides the nickel-and-dime stuff? What bodies will look at
the numbers and make recommendations; will the Board asked who decided? That is one way to enforce
a community dialogue. The most important signature on the recommendations to the Board, Regent
Keffeler replied, is that of the President.
Professor Garrard thanked Regent Keffeler for volunteering to meet with the Committees to
discuss the budget; she then adjourned the meeting at 10:10.
-- Gary Engstrand
University of Minnesota