Friday, November 25, 2011

Administrators v. Students

My friend and fellow alum, Michael McNabb writes another of his timely and important analyses of financial matters at the University of Minnesota. In the absence of full and transparent disclosure at the U, these essays have been widely read by those interested in returning to the U's original land grant priorities and in making it an institution of which all Minnesotans can be proud.

During the past 10 years the administration has increased spending on the costs of operations at the University by 50% to $3 billion per year.  This is due, in part, to the explosion in the costs of administration since 2005.  See section 3 of University Inc. Part II and Rube Goldberg Administration.  This explosion includes the extravagant compensation of senior administrators that now far exceeds the compensation of their fellow public servants in state government who have similar qualifications and duties.  See On The Cost of Administration.
The senior administrators have financed their billion dollar increase primarily through skyrocketing tuition that has more than offset the reduction in state appropriations.  See section 1 of $tate of the University--A Parent's Perspective. This skyrocketing tuition is creating a generation of indentured students who are also confronted with a dismal job market.  See the October 14, 2011 report in the Star Tribune on Generation Debt.
So the senior administrators have now created a financial conflict of interest with students (and their parents).  Scores of senior administrators now collect hundreds of thousands of dollars in compensation and benefits each year.  The administration defends this lavish compensation as within market range for the positions.  This economic justification--straight from the Wall Street executives who gave us the Great Recession--fails to provide an ethical justification for the pursuit of personal wealth by the leaders of a non-profit institution dedicated to public service.  See the dedication engraved above the entrance to Northrop Auditorium.  See also section 3 and the Postscript to $tate of the University--A Parent's Perspective.
The Code of [Ethical] Conduct for the University proscribes conflicts of interest.  See Section III, subd. 8 of the Code.   Recall that the Regents demanded that Steve Sviggum resign from his position in the School of Public Affairs so that he would avoid any conflict of interest with his duties as a Regent.  See  First the Sentence Then the Verdict.
The financial conflict of interest of senior administrators is not removed by requiring the Regents to approve the budget.  The Regents are part-time volunteers.  They rely on the senior administrators to sift through the volumes of information about the operations of the University, so they see only the information selected by the administrators. 
Nor do the Regents have much time to listen to other members of the University community with different perspectives.  The Regents develop a bond with the senior administrators with whom they spend most of their time and thus have a tendency to dismiss other viewpoints.  They should ask Questions of Value.  Instead, each year the Regents approve the budget proposed by the administration, almost always by unanimous vote.
So what is the remedy for this financial conflict of interest?  Perhaps the senior administrators should be barred from participating in the development of the budget on the compensation of administrators whose annual compensation and benefits exceed $200,000.
Or perhaps the state legislature should enact a student and parent version of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  That federal legislation requires the approval of shareholders for executive compensation.  See the summary of Title IX, Subtitle E  of the Act.  The state version would require the approval of a majority of all 67,000+ students for the compensation of the most highly paid administrators at the University.
Or perhaps the state legislature should set certain conditions on the allocation of state appropriations.  This solution would recognize both the constitutional autonomy of the University and the constitutional power of the legislature to allocate state funds.  Congress often imposes conditions on the allocation of federal funds to the states.
Legislative conditions may be necessary course corrections for a land grant institution whose leaders are transforming it into a quasi-private corporation at the expense of the students, their parents and the citizens of our state.  See Off Course in Higher Education and Going to Market.
If nothing is done about the skyrocketing tuition, then the students will vote with their feet by going to colleges that provide better value.  Because even with the billion dollar increase  in annual spending on operations the administration is planning to continue to eliminate academic programs and to replace professors with part-time instructors (or, cheaper yet for the University, with online instruction).  See section 1 of  $tate of the University--A Parent's Perspectice.  Not even the "Because" advertising campaign on which the administration is wasting millions of dollars will convince the students and their parents that such actions increase the value of education available at the University.  See section 2 of  University Inc. Part II.

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 report of the St. Paul Pioneer Press (emphasis added).

To the best of my recollection, no great scientific discoveries, no insightful social science tracts, and no novels have been produced in Morrill Hall.  No classes are taught in Morrill Hall.  No patients are made well in Morrill Hall. . . .  Without authority invested where the real work of this University is done, the light of excellence will only grow dimmer
President Mark Yudof in his 1997 Inaugural Address (emphasis added).  See Tenth Anniversary of Inauguration.

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

No comments: