… in the Minneapolis Star Tribune notes that the most charitable description of what’s been going on at the clubby University of Minnesota medical school would be “bizarre.”
Thursday, April 21, 2011
On the cost of Administration
at the University, Part II
Introduction:
Minutes from a recent University of Minnesota committee meeting are quite disturbing. The lack of facts, ad hominem arguments, and simple denial are appalling for a first class state university, let alone one that has aspirations for greatness.
For some pertinent background concerning this situation, please see these earlier posts:
I also note, with some pride, the characterization of material that has appeared on the Periodic Table by one of the MinnPost essayists:
"Lest you think this is bloggish bloviating, Periodic Table seems to have a minor obsession with getting hold of and archiving public records that support its case."
Unfortunately the Morrill Hall Gang and fellow travelers seem unwilling to engage in a true dialog about our priorities at the University. People who have honest disagreements are characterized as "doubters" by the current administration or most recently described, by a faculty committee, as "full of beans" not worthy of engagement.
This attitude and these words are not worthy of a great university that would encourage differences of opinion and free discussion. That the only response has been third grade name calling is telling.
Guest Post by Michael McNabb
Previous essays included a table illustrating how costs of administration at the University have increased from $108.9 million for fiscal year 2005 to $234.3 million for fiscal year 2010. See Skyrocketing Administrative Costs at http://ptable.blogspot.com/2011/03/on-skyrocketing-administrative-costs-at.html#links and Section 3 of University Inc. Part II at http://ptable.blogspot.com/2011/02/draft-as-university-transforms-itself.html#links. The amounts in the table are taken directly from the annual financial statements published by the University.
The administration takes exception to the use of the table. See the remarks of vice president Richard Pfutzenreuter at the April 5, 2011 meeting of the Senate Committee on Finance & Planning. He asserts that $80.3 million of the total $125.4 million increase should be excluded.
Let us look at the $80.3 million that Fitz wants to exclude as increases in costs of administration:
(1) $5.1 million in salaries for personnel in the Office of Information Technology. Fitz gives no reason to exclude this additional cost other than to say that the U adopted a new system. The relevant fact is that the adoption of the new system increased the cost of administration.
(2) $19.1 million in fringe benefits. Fitz claims that this increase is due to an accounting change.
(3) $11.0 million in early retirement pay. Fitz gives no reason to exclude this additional cost.
(4) $29.0 million for expenditures related to the drug Ziagen for which the University receives royalties from Glaxo. Fitz explains that these expenses had previously been subtracted from the gross income from royalties. If the explanation is accurate, it raises different questions. Why is the University incurring $29 million in expenses for a drug that was licensed to Glaxo for manufacture and sale years ago?
(5) $3.4 million in fees for the consolidated endowment fund. Why should this cost of administration be excluded? (Fitz claims that this increase is due to an accounting change.)
(6) $2.1 million for mailing service. Why should this cost of administration be excluded? (Fitz claims that this increase is due to an accounting change.)
(7) $3.7 million for new software license fees. Why should this cost of administration be excluded?
(8) $8.9 million for "all other" items. Why should these costs of administration be excluded?
Fitz does not dispute that the annual financial statements show an increase in costs in administration from $108.9 million in 2005 to $234.3 million in 2010. The general description of the increase (by the use of the table) does not contain all the details that Fitz wants to add to the information in the financial statements, but he is also attempting to exclude expenses that are properly classified as costs of administration in those statements.
Even if the major "accounting changes" claimed by Fitz are excluded, there still has been a huge increase in the costs of administration since 2005. For fiscal year 2011 the Regents approved an operating budget with the staggering amount of $310 million for institutional support (costs of administration). See pp. 33 and 38 of the report of the June 22, 2010 meeting of the Regents at http://www1.umn.edu/regents/docket/2010/june/boardjune22.pdf.
During the committee meeting Provost Thomas Sullivan asserted that there are 74 persons in executive positions (deans, vice presidents, etc.), the same number as when President Bruininks took office in 2002. In fact, there are now 9 provosts, 18 chancellors, 40 vice presidents, and 112 deans. See On the Cost of Administration at http://ptable.blogspot.com/2011/03/on-cost-of-administration-at-university.html#links .
Fitz also reported to the committee that " his office is working on what pays for research, education, public service, financial aid, and so on, based on the attribution of both direct and indirect costs, in order to determine the 'fully loaded' cost of instruction and other mission activities."
Previous posts have called upon the administration to disclose the cost of education and the methods used to determine and to allocate tuition. These calls were prompted in part by the 2009 Report of the Future Financial Resources Task Force. The Report declares that "tuition is the revenue stream with the highest potential for significant, long term growth" and asks, "what should tuition pay for when tution revenue exceeds the cost of instruction?" See the link to the Report in On The Hidden Cost of Research at http://ptable.blogspot.com/2010/12/on-hidden-cost-of-research-michael.html#links.
The analysis that the Budget Office is now preparing should provide a rational basis to determine the amount of tuition and a method to track the allocation of tuition, general state appropriations, and other funds.
At least some of the members of the committee seem to think that the examination of the costs of administration is motivated by ill will toward the University. We all support the University. We all want the University to thrive. This is going to be a challenge with substantial reductions in state and federal appropriations. A savings in costs of administration can be used for education, research and public service--the reasons for the existence of the University.
Michael W. McNabb
University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member
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