Tuesday, January 12, 2016

Another Fast Shuffle at the University of Minnesota? "Driven to M Health"

Driven to M Health?

On October 9, 2015 the Regents approved a non-binding letter of intent to explore combining University of Minnesota Physicians and Fairview Health Systems into an integrated health system to be called M Health.  The letter of intent provides for Definitive Agreements to be reached by March 2016.  See pp. 63-64 of the Dec 2015 AUD Docket. 

On November 3, 2015 President Kaler sent a letter to four Regents requesting emergency approval to retain Deloitte & Touche LLP to provide consulting services for the proposed integration.  The fees and expenses are estimated at $1,500,000.  The rate is apparently three times the normal rate charged by Deloitte for its separate services as the external auditor for the U of M. The contract with Deloitte will be executed by the U of M General Counsel in order to "preserve attorney client privilege for the work product."  See pp. 61, 63-64 of the Dec 2015 AUD Docket. 

On November 3, 2015 Kaler also sent a letter to three Regents requesting emergency approval to retain Clifton Larson Allen LLP to "facilitate" the process necessary to effectively reach the Definitive Agreements by March 2016.  The fees and expenses are estimated at $425,000.  See p. 67 of the Dec 2015 AUD Docket. 
On November 12, 2015 Brian Steeves, the executive director of the Board of Regents, informed Kaler by letter that emergency approval had been granted.  See pp. 60, 66 of the Dec 2015 AUD Docket 

University policy authorizes emergency approval when delay in obtaining approval poses a significant health, safety or financial risk to the University.  See p. 61 of the Dec 2015 AUD Docket. 

This process raises several questions: 

(1)  Is there an emergency regarding the proposed integration?  If so, was the emergency created by the administration itself in setting March 2016 as the date to execute the Definitive Agreements?  Is this yet another example of the failure of the Regents to provide effective oversight of significant decisions of the administration? 

(2)  Has the process been engineered to produce the result desired by the administration?  If so, why spend $1.9 million on consulting services?  If not, why has the administration already launched an advertising blitz on local television stations and newspapers for M Health?  And how much is the administration spending on the advertising campaign? 

(3)  How can Deloitte maintain independence when it serves as both an external auditor and as a consultant for multi-million dollar University projects?  How effective will Deloitte be as a watchdog (external auditor) of the decisions of the administration when at the same time it seeks large fees from the administration for consulting services?  How many questions  will Deloitte raise as a consultant about the proposed integration when it wants to maintain a lucrative contract to serve as the external auditor and when the administration has already given clear signals that it wants the integration to be accomplished as soon as possible?           

(4)  Why is the administration apparently attempting to prevent disclosure of the terms of the contract with Deloitte by having the General Counsel execute the contract?  How does the administration think that the attorney client privilege prevents disclosure of the terms of the contract (as opposed to any advice it may receive from the General Counsel)?  How does the administration think that the work product doctrine prevents disclosure of the terms of the contract?  (The work product doctrine protects material that has been prepared by the attorney or the client in anticipation of litigation.) 

(5)  Is spending by the U of M administration on outside consultants out of control?  In fiscal year 2015 the administration spent $66,123,000 on administrative consulting and professional services.  Why is this necessary when the U of M has well qualified professors in virtually every field of endeavor and highly paid senior administrators? 

Michael W. McNabb

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

University of Minnesota Alumni Association life member

Monday, January 4, 2016

For the Record: State Legislator responds to Star-Tribune editorial about U of M non-resident Tuition

From today's Star-Tribune

Editorial counterpoint: Moving all U tuition to the Big Ten midpoint is best

Move would be fairer to Minnesotans, align with labor and enrollment trends. 

By Bob Barrett

While I appreciate the Star Tribune Editorial Board’s attention to the very important issue of nonresident college tuition (“Don’t weaken U’s role in drawing talent,” Dec. 22), readers would benefit from a closer examination of all the facts.
Foremost, tuition for Minnesota residents attending the University of Minnesota in the Twin Cities is too high. High school seniors from Chisago Lakes, North Branch or St. Paul Central have to pay 32 percent more to become a Gopher than a Wisconsin high schooler currently pays to become a Badger and 70 percent more than an Iowa student pays to become a Hawkeye.

With student debt by all Minnesota college students fifth-highest in the country, this problem cannot continue to be ignored by U leadership and needs to be fixed immediately. There is absolutely no reason to minimize the value of a University of Minnesota degree and penalize in-state students by charging nonresidents $8,000 less than the Big Ten average.

Second, tuition rates charged to nonresidents are at the absolute bottom of the Big Ten. I appreciate university President Eric Kaler responding to the feedback from me and from other legislators who believe this to be an opportunity for improvement. Each year, there’s a waiting list of qualified Minnesota students who are turned away — let’s help those kids instead of worrying about kids from other states.

By moving tuition to the middle of the Big Ten for out-of-state students, we can use these resources to ensure a better deal for Minnesota residents, lower their student debt and put a quality University of Minnesota education in reach for potentially thousands of middle- and lower-income Minnesota families.

Minnesotans support the U with their hard-earned tax dollars each year and should receive the best possible deal when they send their students to our flagship institution of higher learning.

Raising out-of-state tuition could reduce resident tuition by more than $3,000 per year. What a great thing this would be for the Minnesota students and families, and what a positive message it would send to other universities across the country about how U leadership is putting their students first.

Too many news articles from this year have portrayed the University of Minnesota in a bad light. Reducing resident tuition is not only right but would give the U the positivity it needs right now.

Now, to address specifically some of the points made by the Editorial Board:

The editorial stated that “the share of undergrads from Minnesota” has not diminished with the recent increase in nonresidents.

According to U documents, resident undergraduate enrollment has declined at the Twin Cities campus even though there is a waiting list of Minnesota high school seniors. In fact, even though taxpayers from every county in Minnesota contribute their tax dollars to the U, enrollment of students in well more than half of the counties has declined at the Twin Cities campus. The U should be an institution that focuses on being a destination school for Minnesota students first, rather than catering to students from out of state.

The Editorial Board also voiced concern about a future labor shortage in Minnesota, which it feels would be worsened by raising nonresident tuition to the midpoint of the Big Ten.

A closer look at the facts shows that labor studies are actually projecting a glut of college-educated workers (http://tinyurl.com/z8moohk). Minnesota’s projected labor shortage is in jobs requiring a high school degree or less. Instead of concentrating on nonresidents to fill a job void, our colleges should be doing more to graduate students in majors that are marketable, and working to keep them here in Minnesota after graduation.

It’s been my experience that some solutions proposed by government leaders are very elaborate and too complex. This one is very simple. The University of Minnesota should bring both resident and nonresident tuition to the midpoint of the Big Ten by lowering tuition for in-state residents and raising it for out-of-state residents. It’s the reasonable thing to do.

Bob Barrett, R-Taylors Falls, is a member of the Minnesota House.

Friday, January 1, 2016

For the Record: Regent Darrin Rosha on University of Minnesota Non-Resident Tuition

The almost completely irrational cut-rate price of a University of Minnesota education to non-residents has been commented on many times before in the Periodic Table and on the Star-Tribune.

For example:

DECEMBER 30, 2012

For years, Bill Gleason, an associate professor at the U, has been arguing that the strategy causes the university to miss out on tens of millions in revenue each year -- "and that's not chump change."
 "I think it's fair to say the University of Minnesota should be charging at least the average delta in the Big Ten," Gleason said. "Why are we giving this away?"

For further background:

University of Minnesota Has Lowest Out of State Tuition for BigTen Publics
Appeared in the Star-Tribune: October 30, 2010

State Rep Blows Whistle on Out of State Tuition Give Away

And if you are really curious about the reasoning that went into the original tuition giveaway plan, please see:

"Out of state (non-reciprocity) tuition is to be set at $2000 per semester higher than in state tuition. This is a cut of about $8000 per year. It will be interesting to see how much traffic this generates from out of state students. Needless to say the new rate is significantly less than out of state tuition at so-called medallion schools that the U would like to emulate."

Finally, a University of Minnesota Regent wrote in the Star-Tribune on December 24, 2015:


When to make it affordable and when to leave it to the market

The recent editorial “Don’t weaken U’s role in drawing talent” (Dec. 22) calls for facts to illuminate the University of Minnesota nonresident tuition discussion. I agree.

The Minnesota Territorial Constitution established the U to educate “the inhabitants of this Territory.” Minnesota residents are roughly twice as likely as nonresidents to stay in Minnesota after graduation. Minnesota’s growing population produces graduates with the highest ACT scores in the nation. The Minnesota Legislature supports the university better than virtually all our peers, yet the U’s resident tuition is among the highest in the Big Ten. Nonresident tuition is the lowest.

Tuition for Minnesota residents should be based on affordable access for rural, urban and suburban residents. Tuition for nonresidents should be market-based. If our university is equal to or better than the University of Michigan, its nonresident tuition should be doubled to the Michigan rate. As Michigan and our other peers increased their nonresident tuition, their nonresident numbers and quality actually increased.

Both DFL and Republican legislators want their constituents to have affordable access to the university. Minnesota’s business community wants a quality workforce. We all want a world-class flagship university. Aligning the university’s nonresident tuition with its peers serves all three purposes.

Darrin Rosha, Independence

The writer is a member of the University of Minnesota Board of Regents.

Wednesday, December 30, 2015

Athletic Accounting Part III

Athletic Accounting Part III 

A December 9, 2015 Star Tribune editorial declares that the recent financial audit of the U of M athletic department reveals "a department whose spending excesses have undermined public trust." See Sense of Privilege at U of M Athletics Department.

This financial audit is just the proverbial tip of the iceberg. It was limited to the financial activities of the administration of the athletic department. The U of M internal auditor is working on an audit of "sports related activities." See p. 711 of the Dec 2015 BOR Special Docket. This next audit should include information on the operations and financing of the teams and facilities.

The public saw the dark gray uniforms that the football team used this year for one game (against Michigan). The public did not see the $2,928,985 expense for uniforms and equipment on line 26 of the 2014 U of M report to the NCAA. Nor did the public see the $3,306,483 for severance benefits on line 23 of the report or the $7,378,442 for guarantees (for visiting teams) on line 18 of the report or the $17,663,000 for "athletically related facilities annual debt service" on p. 2 of the report.

The U of M reports $0 for student fees (line 2) and $0 for direct state government support (line 6). This ignores the student fee for the construction of the football stadium that generates more than $1 million for the University each year and the $10,250,000 that the University receives from the state each year to pay the bonds issued for the stadium. For more detail on the complex (and opaque) financing of the athletic department and its facilities see the March 2013 post on Athletic Accounting.

The principal cost of the construction of the football stadium was $288 million and the principal cost of phase 1 of the "Athletes Village" will be $166 million. Those amounts do not include the interest that will be paid on the bonds issued to pay for part of the costs of construction. In the case of the stadium those bonds will be paid over more than 20 years (adding tens of millions of dollars in interest).

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member

Editor's note:

Mr. McNabb properly notes that the expansion of money going toward athletics departments at universities is a seemingly never-ending business.

Yesterday's Washington Post contains yet another example of this phenomenon:

As college sports revenues spike, coaches aren’t only ones cashing in

This is an outstanding piece and includes much interesting and useful information about university athletics departments and money:

Friday, December 11, 2015

For the Record: Non-resident U of Minnesota tuition to be raised: Better late than never?

This topic has been covered on numerous occasions both on The Periodic Table, as well as the Star-Tribune.

From The  Periodic Table:

State Rep Blows Whistle on Out of State Tuition Giveaway  January 10, 2013
This post contains links to background information

From the Star-Tribune:

University of Minnesota Has Lowest Out of State Tuition for BigTen Publics October 30, 2010

Today the Star-Tribune reported on plans at the University of Minnesota to fix what is obviously another money sink at the U, by finally attempting to set out of state tuition at the median of that charged by BigTen schools, instead of current bargain basement prices, e.g.

What follows are some selected quotations from the Star-Tribune.  Please see the complete article for more information.

After years with the lowest rates in the Big Ten, the University of Minnesota is considering raising tuition for nonresident students by $12,800, more than 60 percent, by the end of the decade.
Kaler has been under increasing pressure from lawmakers and other critics who say the current rates favor nonresidents at the expense of students from Minnesota. At the U, in-state students pay $13,380 a year in tuition and fees, a higher rate than half the Big Ten schools.

State Rep. Bob Barrett, who has called for a significant increase in the rate for out-of-state students, said that Kaler’s proposal is a start. “Nonresident tuition has been and currently is way too low,” said Barrett, a Republican from Lindstrom who sits on the House higher education committee.

But he said raising that rate is just the first step. “They need to use that money to lower resident tuition,” he said. “They have an opportunity with these millions and millions of dollars they’ll receive from nonresidents, and they need to apply it to resident tuition.”

University spokesman Steve Henneberry said that “any extra funds would be used to minimize in-state tuition increases.”

“I think being at the bottom, in terms of sticker price, hurts us,” said Regent Michael Hsu. “We’ve got to be concerned with our brand. … Otherwise, we’re talking about Lexus and Toyota. And we’re Toyota.”

Monday, December 7, 2015

For the Record: Governor Arne Carlson - Maybe the enemy is us?

What follows are selections. Please see the entire post for more information.

From former Governor Arne Carlson's post in Minnpost:

When I was in college, the most popular commentary on the human condition was a cartoon character named Pogo. And his most memorable line was, “We have met the enemy and he is Us.”

We [The University of Minnesota] have a most competent faculty, excellence in research, and an eager-to-learn student body. But this commitment to excellence does not extend to Morrill Hall.

For instance, we have learned that in the area of testing drugs for large pharmaceutical companies, the oversight process was corrupted by the presence of university professionals who were on the payroll of the very companies whose drugs were being tested. We also know that the former chief counsel of the university wrote the language claiming exhaustive investigations by entities that never engaged in such endeavors. Further, we know that President Eric Kaler, his management team, and the Board of Regents used those false claims to beat down critics, including faculty members who called for an independent review. They simply buried the truth.

Now, we have a growing scandal in the athletic department where Kaler and the Board of Regents hired an athletic director and associate without proper review and the result has been a very public sex scandal and the usual cries of shock from the appointing authorities. This was followed by the revelation of extraordinary misspending and waste in the athletic department.

There is a reason for this and that is there is no oversight of university management. The sad reality is that the Board of Regents is little more than a band of cheerleaders for the president and regents are content as long as they are accorded praise from the administration and receive a variety of perks including box seats at the football games, etc.

And then we have the Minnesota Legislature, which appoints the Regents but fails to conduct any meaningful public oversight.

... it is time for all of us to recognize our responsibility to speak out and insist on a thorough housecleaning at Morrill Hall. If we fail to do so, then Pogo’s truth becomes our reality and we fail our children.

Monday, November 9, 2015

For the Record: The Rochester campus of the University of Minnesota is a failed experiment.

A letter to the editor has appeared in the Star-Tribune today:

(Emphasis added)

When the Rochester campus of the University of Minnesota was established in 1998, it was a worthwhile endeavor. Today, that campus — at least as it has evolved — is a failed experiment that deserves to be terminated.

The university’s presence in Rochester began as a cooperative relationship with the local community college and Winona State University. In 1998, it was designated as a branch of the university’s Twin Cities campus. And in 2006, it became a coordinate campus in the University of Minnesota system. In that year, there were 21 employees at the Rochester campus. By 2014, the number of employees had ballooned to 104. This number includes a chancellor, a vice chancellor, an associate vice chancellor and an assistant vice chancellor. The combined “chancellorian” salaries equal $624,000. I have no doubt that these are talented and hardworking individuals. I can even accept that there are plausible reasons why their lofty salaries are merited. But they represent an unaffordable administrative burden.

The recently released enrollment figures for Rochester reveal that the entire student body this fall is 416 students. The ratio of non-faculty staff members to students at Rochester (1 to 5) is nearly twice as high as the national average for public colleges. The university did not plan on creating this bureaucratic monster. The vision for this campus was one with a student population about double its present size. This goal has shown itself to be unobtainable. The highest that enrollment has ever reached was 495 in 2013, and it has been trending downward.

Nationwide, the huge increases in the cost of higher education are among the most dire challenges facing universities. An inordinate expansion of administrative and support staff has been identified as the major driver of these increases. And a Wall Street Journal article in 2012 identified the University of Minnesota as the leader in the growth of this bureaucratic burden. We now see that within the university system, the Rochester campus is the “heart of darkness.”

At this point, the Rochester experiment can be characterized as the height of bureaucratic self-interest, or the nadir of rational management. In either case, it stands as a test case for the competence of the administration of the university as a whole. Successful enterprises encourage risk-taking. Viable organizations acknowledge failures.

Robert Katz, Minneapolis