QUESTIONS OF VALUE

"The real issue is increasing the value that we the University bring to the State of Minnesota, to its stakeholders and to our students.  Increasing that value, communicating it and demonstrating it will be the major goal of my presidency."

President Eric Kaler in the July 7, 2011 issue of the Pioneer Press.  (Emphasis added.)

The financial analysis by Eastern Michigan University accounting professor Howard Bunsis raises questions about determining the value that the U of M provides to its current students and to the citizens of our state:

(1)  What is the cost to the University of providing undergraduate education for one year? 

(2) How did the administration determine the amount of undergraduate tuition increases over the past 10 years?

(3) What is the percentage increase in undergraduate tuition over the past 10 years adjusted for inflation?

Annual undergraduate tuition rose from $5,720 in 2002 to $11,650 in 2011, an increase of 133% (not adjusted for inflation).  See p. 53 of the analysis.

The administration claims that the Net Price for undergraduate education has increased an average of 3.4% over the past 10 years.  The calculation of Net Price does not reflect the economic reality facing students (and their parents) because it subtracts the amount of student loans that the students and their parents will be paying off for years to come.  See section (2) of $tate of the University--A Parent's Perspective .

(4)  What are the amounts of operating costs for research that have not been paid by grants over the past 10 years?  What are the capital costs related to that research?  See On The Hidden Cost of Research .

(5)  What pays for research, education, public service, and financial aid?

This is the question proposed by U of M chief financial officer Richard Pfutzenreuter at the April 5, 2011 meeting of the Senate Finance & Planning Committee.  See the final paragraph of Rube Goldberg Administration.

Students (and their parents) should know how tuition is used.  State legislators should know how state appropriations are used.

(6)  On what did the administration spend capital reserves funds over the past 10 years? 

The projected balance for the central reserves fund was $10.3 million by the end of fiscal year 2011 (ending June 30, 2011).  The balance should have been $24.7 million to comply with the policy of the Board of Regents.  See section (1) of University Inc. Part II.

(7)  How does the administration use the profit accumulated by the University?

The U of M Operating Budget for fiscal year 2012 adopted in June 2011 shows total revenues of $3.7 billion and total expenditures of just over $3 billion leaving a net balance of $674 million for ?  See p.33 of the June 20, 2011 report of the Board of Regents. (The University received an additional $25 million for its general fund in the final state appropriations.  See pp. 102-103 of the September 9, 2011 report of the Board of Regents).

The administration continues to carry forward from year to year this accumulated surplus of more than half a billion dollars rather than using these funds to pay expenses.  Instead, the administration chooses to increase tuition, which it describes as "the revenue stream with the highest potential for significant, long term growth."  See section (1) of $tate of the University--A Parent's Perspective.

(8) How does the administration decide on the amount of state appropriations to allocate to the separate colleges in the University?

In fiscal year 2012 the University will receive $484 million in state appropriations for its general fund (the Operations & Maintenance fund).  See p. 103 of the September 9, 2011 report of the Board of Regents. The administration allocated $3.3 million to the business school and $3.6 million to the law school.  See p. 81 of the June 20, 2011 report of the Board of Regents.

The senior administrators at the business school and the law school claim that state appropriations pay for less than 10% of the operating budgets of those schools.  The fact is that the central administration makes those allocations, not the state legislature.

(9) How much will the administration spend in fiscal year 2012 on the separate categories of expenses that are classified as institutional support?  Where is that information published?

 Chief financial officer Pfutzenreuter described those categories at the April 5, 2011 meeting of the Senate Finance & Planning Committee.  See pp. 3-4 of the report of the committee.

(10) What are the separate categories of expenses that are classified as research? instruction? academic support? student services? public service?  How much will the administration spend on those separate categories in fiscal year 2012?  Where is that information published?

(11)  How does the administration determine the amount of the subsidy that it will provide to the athletic department each year from the general fund of the University? 

In fiscal year 2010 the subsidy was $8 million; in fiscal year 2011 the subsidy was $7.8 million.  See the link to the U of M budget in Expensive Icing.

Note that the subsidy is more than twice the amount that the administration allocates from the general fund to either the business school or the law school.

(12) How does the administration determine the priorities for HEAPR funds used to repair existing buildings?  See Academic Facilities.

(13) How much did the administration spend on the Office of General Counsel over the past 10 years? How much did the administration spend on outside legal representation over the past 10 years?

In fiscal year 2011 the administration allocated $4.3 million to its Office of General Counsel. See p. 76 of the June 20, 2011 report of the Board of Regents. Of that amount the General Counsel paid $1.8 million to outside law firms. The administration paid an additional $4.4 million to outside law firms. See p. 15 of the 2011 annual report of the General Counsel.

The General Counsel states that a majority of the $6.2 million paid to outside counsel was for insurance defense and patent and technology commercialization. What are the most expensive claims against the University? Does the University have insurance to cover such claims? Does the insurance also cover the cost of defense?

(14)  How many administrators receive annual compensation and benefits in excess of $100,000?  How many receive annual compensation and benefits in excess of $200,000?  See On The Cost of Administration.

 (15)  How much has the administration spent on advertising since 2007?  What has the University received for this multi-million dollar expenditure?  See section (2) of University Inc. Part II.

(16) Should the administration be engaged in non-academic business ventures?  See section (1) of University Inc. Part II and Rethinking MoreU Park.

Michael W. McNabb

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

University of Minnesota Alumni Association life member
 .