Sunday, August 30, 2015

For the Record: U of M President Kaler chides Strib's DJ Tice



President Kaler complains about the Strib:

it’s bad when comments I’ve made are taken woefully out of context "


From the Strib Letters to the Editor Section:

UNIVERSITY OF MINNESOTA

We are an enduring institution, but also one of useful change

It is good when the Star Tribune drives the community discussion around issues in higher education, but it’s bad when comments I’ve made are taken woefully out of context. In his Aug. 23 column (“The ungrounding of the institution of higher ed”), D.J. Tice chided me for my “medieval attitude” as he cited a recent Minnesota Monthly magazine article in which I said that, unlike many thriving modern institutions, world universities have been in existence since the 1500s, and “I just don’t think the business is going to change very much.”

That historical fact — and I’ve said it many times — comes in the context of that same article’s mention of the many changes underway at the U as we need to “retool in the face of international competition.”

While I do disagree with some prognosticators who are predicting the end of place-based education, a much more accurate description of what I think comes from my State of the University address last spring: “Yes, universities are remarkable for their historic continuity, but they and we do change. We change because of the needs and demands of technology. We change because our faculty uncovers and gives birth to new ideas and new discoveries. We change because students lift their voices.”

I’m proud that we are one of Minnesota’s oldest and most enduring institutions. I’m also proud that through distance and active learning, flipped classrooms, electronic textbooks, interdisciplinary courses and a commitment to diversity, the University of Minnesota is always in the process of changing for the benefit of our students and the prosperity of our state. Medieval? Not so much.

Eric W. Kaler, president, University of Minnesota


Out of context?  Let me explain what I really meant when I said ...
Measure twice, cut once? 




Monday, August 24, 2015

For the Record: Letter from Robbins lawyer on behalf of Parker Search to U of M President Kaler




The buck stops where?




To download the original document in pdf format, click the download symbol above.

For background and information about the letter please see: Search firm: Teague properly vetted for U athletics job.

Tuesday, August 18, 2015

University of Minnesota Athletic Debt on Steroids


                 
 Athletic Accounting Part II

From the 2014 U of M annual report to the NCAA:

The "athletically related facilities annual debt service" for fiscal year 2014 was $17,663,000.

The "athletically related outstanding debt balance" for fiscal year 2014 was $201,395,000.  See p. 2 of the 2014 annual report. 

Part of that debt is for the $137 million in special purpose bonds issued by the University in 2006 to pay a portion of the cost of construction of TCF Bank Stadium.  The principal and interest on those bonds will be paid by the citizens of Minnesota to the tune of $10,250,00 per year for more than 20 years.

It appears that the Regents are poised to approve the plans to construct a $150 million "athletic village." (The scope of the project has been temporarily reduced from the original plan at a cost of $190 million.)  The cost of financing the project will increase the already staggering amount of athletic department debt.

The policy of the University is that 80% of the cost of a project must be raised before starting construction.  See the statement of policy by U of M CFO Richard Pfutzenreuter in the February 8, 2015 Star Tribune report on U's Athletics Project. So the Regents will have to disregard the policy of the University to approve the start of construction as the athletic department is far short of raising 80% ($120 million) of the current cost of the project.

Why should the athletic department get a pass on compliance with University policy?  Especially when it already has athletic debt on steroids?

There is a solution that would enable the University to disentangle itself from the big business of the major revenue sports while allowing the games to continue.  The football and basketball teams should be organized as separate corporations.  The University would grant a license to those corporations to use the University name for the teams.  The license fee would be a percentage of the revenues generated from ticket sales, broadcasting rights, advertising, etc.  The license fee would be used to support the non-revenue sports the University decides to retain, such as track and swimming.

This is a solution that would enable the sports fans (including the U of M president and the Regents) to continue to enjoy the games.  Of much greater significance, it would enable the University to focus on education, research, and public service--the reasons for its existence.



Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974

University of Minnesota Alumni Association life member

Friday, August 7, 2015

Student Debt: Fiction v. Fact Part II




Student Debt: Fiction v. Fact Part II



In response to Part I, a U of M professor sent a link to the June 24, 2014 New York Times report on The Reality of Student Debt
. The Brookings Institution analysis of student debt nationwide described in the report shows that in 2010 58% of young adult households in the United States with student debt had outstanding student loans of less than $10,000. The Brookings Institution analysis is based on 2010 data. So the analysis does not include the hundreds of millions of dollars in student loan debt incurred over the past five years.

A more recent analysis shows that the financial reality for college graduates in Minnesota is much bleaker. Minnesota ranks 5th in the nation in student loan debt. In 2013 66% of U of M graduates had student debt. The median debt was $25,080, and the average debt was $27,599. See p. 17 of the June 2014 Minnesota Office of Higher Education report on Cumulative Student Loan Debt in Minnesota. See also the November 13, 2014 Star Tribune report on Minnesota Ranks High in Student Debt  and the June 1, 2013 Star Tribune report on Minnesota Grads Carry Heavy Student Debt Burden.


Then there is the unconscionable economic burden placed on students in the professional schools. In 2013 91% of the graduates from the U of M professional schools had student loan debt. The median debt was $157,671. See p. 23 of the June 2014 Minnesota Office of Higher Education report .

The high tuition high financial aid experiment has failed a vast majority of students and their parents. It has vaulted many U of M students into the top tier for student loan debt notwithstanding the ballyhoo by the U of M administration about the Promise Scholarship program. (This was a predictable result of the experiment as college administrators classify student loans as "financial aid." )

Tone deaf remarks about student loan debt ("less than a new car") by the U of M president and the 2014 chair of the Board of Regents demonstrate a failure to acknowledge the overall cost of a college education and a remarkable lack of empathy for the students and parents struggling to pay that cost. The senior administrators and the Regents responsible for a decade of skyrocketing tuition in 2002--2012 never had to deal with that financial burden when they were starting their careers and their families after graduation. How much different would their lives have been if they had been shackled by student debt?

Rather than attempting to minimize the effect of such debt the U of M president could begin an effort to find a better way to operate and to finance higher education. He could establish a task force with members of the administration, legislators from the higher education committees, staff from the Minnesota Office on Higher Education, and informed students and parents. Someone like Jay Kiedrowski of the Humphrey Institute (a former state commissioner of finance) could serve as the chair.

The work of the task force should include an analysis of the rise in the costs of administration over the past 40 years. If there has been a increase in the number of administrators that is disproportionate to any increase in the number of students or the level of research, we should ask why. If there has been a substantial increase (in constant dollars) in the compensation of any administrator, we should ask why.

Each biennium the citizens of our state now invest more than $1 billion in the U of M in general appropriations. With that much at stake the legislature should appoint a qualified person to monitor on a continuing basis the operations of the University and the use of state appropriations. This legislative liaison (or watchdog) should have the responsibility to review the information produced by senior administrators, to collect additional information through his or her independent research, and to meet with all groups at the University so that the perspectives of other well-informed and thoughtful members of the University community are presented to the legislature.

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974

University of Minnesota Alumni Association life member


Friday, July 31, 2015



Student Debt: Fiction v. Fact


Exhibit A: "You can spend a lot more than that for a new car if you want to."

Remark of President Kaler (referring to the $30,000 average student debt in Minnesota among the two-thirds who graduate with student loans) at p. 58 of the August 2015 issue of Minnesota Monthly.

This remark fails to recognize that the cost of an undergraduate degree is not limited to the debt incurred. That debt is incurred only after students and their parents have exhausted their savings and student earnings. It also fails to recognize that the debt incurred by students in the graduate and professional schools is far greater than any car those students will ever be able to afford (in the range of $150,000 to $200,000 for many).

What this remark does demonstrate is that the senior administrators and the Regents are so far removed from the economic lives of students and their parents and the public at large that they are seemingly oblivious to the financial hardship that results from their decisions to spend other people's money.

Exhibit B: "When people complain about tuition, I tell them to talk to legislators."

Remark of President Kaler at the March 23, 2012 meeting of the Civic Caucus.

It is not accurate to simply blame the state legislature. Skyrocketing tuition during the decade from 2002 to 2012 far exceeded reductions in state appropriations as the annual budget for the U of M exploded from $2 billion to $3 billion. See:

Whose Fault--Crushing Student Debt 


 and

Devouring Our Children


Exhibit C: "I promise to reduce administrative costs by $90 million over the next six years."

Pledge of President Kaler to the state legislature.

Such a reduction will simply slow the rate of increase in the costs of administration. The fact is that the costs of administration now consume 29% of the operating budget of the University, and those costs continue to rise despite the reduction of certain administrative expenses. See section 4 and section 5 in:


The Management of the University

Moreover, the reduction of $90 million in certain administrative expenses over the six year period will not reduce the U of M budget by a single penny. President Kaler intends instead to simply spend the $90 million on "mission" and "mission support." See:

The Phantom Reduction


Michael W. McNabb

University of Minnesota B.A.1971; J.D. 1974

University of Minnesota Alumni Association life member







Tuesday, June 9, 2015

For the Record: Kaler's compensation: He is not the CEO of a commercial business





From the Star-Tribune
(emphasis mine)


KALER’S COMPENSATION 

He’s overpaid, and attention to this has been underpaid. 
The University of Minnesota president receives an annual salary of $610,000 plus an annual contribution of more than $75,000 to his retirement plan, plus other benefits, including free housing (“6-figure pay to run a public college,” June 8). In 2013, the IRS released its final report on its compliance project on tax-exempt colleges and universities. The average total compensation of presidents of large universities was $399,723, and the median amount was $337,881. 
The U president is not the CEO of a commercial business. He is the head of a nonprofit institution of higher education. The law restricts the pursuit of personal wealth by the leaders of private, tax-exempt organizations. Section 4958 of the Internal Revenue Code imposes an excise tax on excessive compensation paid to senior administrators at private colleges. The section does not apply to public universities, as those institutions are classified as units of government. But we must be concerned with the reasonableness of the compensation of senior administrators at the U — and not simply by comparison to compensation levels at other large public universities. Until recently, no one has been watching the store anywhere in higher education. 
Michael W. McNabb, Lakeville 
• • • 
It’s not U President Eric Kaler’s fault that he measures success by the salary he deserves as the CEO of a $3.5 billion business. He’s been taught, like the rest of us, that money is the barometer of achievement. And it’s not his fault that a tuition hike is needed at the U to cover things such as his $610,000 salary. He runs a large corporation, not a kitchen table where a student and his parents are working out their budget for the fall. And, after all, Kaler is competing with the U’s sports coaches, whose salaries are double and triple his. 
But true success isn’t about money. It’s about assuring that the CEO doesn’t earn more than 20 times the salary of the lowest-paid employee (see Ben & Jerry’s CEOs). It’s about paying your employees for a year when your mill burns down, as Aaron Feuerstein did in 1996 in Massachusetts. Success is about knowing that raising tuition may mean that some students will have to leave college, about knowing that $610,000 is more than you will even need to live well on. Success is about caring more for the world around you than for your ranking in the Big Ten pay scale. 
But then we don’t teach executives to distinguish between success and true success, even in the business ethics courses now springing up in most M.B.A. programs. Shame on us. 
Elaine Frankowski, Minneapolis