Friday, April 20, 2012

The Rest of the Story 

President Kaler was the speaker at the March 23 meeting of the Civic Caucus.  See his Vision of the University.   Here is additional information on the issues he discussed.

1.  "When people complain about tuition, I tell them to talk to legislators."
During the past 10 years the administration has increased spending on operations by 50% to $3 billion per year.  The senior administrators have financed their billion dollar increase primarily through skyrocketing tuition that has more than offset the reduction in state appropriations.
The administration has declared that "tuition is the revenue stream with the highest potential for significant, long term growth."  See New Fiscal Reality No. 2 at p. 8 of the 2009 Report of the Future Financial Resources Task Force; see also Recommendation No. 2 (Grow Tuition Revenue) at pp. 7, 51-52 of the 2011  Financing the Future Report.
The billion dollar increase in spending by the administration over the past 10 years compels it to now do everything it can to increase the "revenue stream" of tuition in order to maintain a $3 billion (and growing) annual budget.  As Professor Chris Cramer, chair of the Faculty Consultative Committee, recently observed:
The broader problem is that the vision should be that this is a university where the best courses are taught, but it is moving to teaching courses that instead make the most money.
See p. 6 of the December 22, 2011 FCC report.

2.  The Regents recently approved a differential tuition structure that will enable the business school to thrive financially and to compete in recruiting faculty.
In fiscal year 2012 the University received $484 million in state appropriations for its general fund.  The administration allocated $3.3 million (0.7%) to the business school.  The amount that the business school collects for tuition, fees, and executive education tuition increased from $54.9 million in fiscal year 2007 to $72 million in fiscal year 2011.  The amount that the business school receives from endowment earnings and gifts increased from $8.3 million in fiscal year 2007 to $10.5 million in fiscal year 2011. 
If the business school truly needs additional funds to hire faculty, then the administration should increase the minuscule percentage of state appropriations that it now allocates to the school--not impose an even greater financial burden on the undergraduate students and their parents.  See Going To Market Part II.

3. " We are the Silicon Valley of the food industry."
As the senior administrators at the U of M looked for ways to increase profits, they decided to transform UMore Park into a unique combination of a commercial gravel pit and a utopian residential community.  They told the Regents that this new business model would generate from $3 million to $10 million in revenues each year.  This projection turned out to be wildly unrealistic.  See section 1 in University Inc. Part II.
The gravel pit will be located on land that has been used for agricultural research that has produced hundreds of millions of dollars for the economy of Minnesota.  It appears that the senior administrators and the Regents made the decision on UMore Park without consulting with either the professors who are engaged in the research or any agricultural economist.  See Rethinking MoreU Park.
President Kaler has asked for a "reassessment" of the plans for UMore Park.  See Return To Sanity?   The practical obstacle to any reassessment is the 40 year lease for mining that the Regents approved in November 2010.

4.  The University of Minnesota does particularly well in its research efforts and comes in eighth in the nation among public universities for the amount of sponsored research it performs.
Federal grants cover only part of the hundreds of millions of dollars that the U of M spends on research each year.  Only a few universities realize sufficient revenues to make a profit on research.  See On The Hidden Cost of Research.
As costs have mounted and federal grants for research have declined, the universities have looked more and more to corporate sponsors.  See the December 10, 2011 Pioneer Press report on U Open for Business Research.  This has produced a blurring of the priorities of non-profit institutions of higher education and the priorities of for profit corporate sponsors.  See The Markinson Files and Continuing Disgrace.
The increasing reliance on corporate funds can also cause senior administrators to attempt to block the public presentation of research that might offend major corporate donors.  See The Troubled Waters of Big Ags Influence.

5.  "I'm less concerned about salary levels because the market is usually pretty clear about that."
On March 6 President Kaler made a similar remark to state legislators when he told them that the current compensation of senior administrators is necessary "in a highly competitive global market for top talent."  See the March 7 Star Tribune report.  See also The Cost of "Top Talent" Part III.  
This is the same justification used to pay extravagant compensation to Wall Street executives.  The "Masters of the Universe" who are the chief executive officers of those Wall Street firms have an unwavering confidence that the market always makes the correct determination in economic matters.  Their misplaced confidence combined with greed to bring our national economy to the brink of chaos.
A laissez faire reliance on "the market" is an abdication of personal responsibility.  Yet on March 9 the Regents issued a news release in which they expressed "confidence in President Kaler's responsiveness to this issue and his careful, watchful and prudent approach to financial management."  See the University News Release.
Non-profit institutions of higher education are not Wall Street firms.  The law restricts the pursuit of personal wealth by the leaders of tax-exempt organizations (such as non-profit universities).  See Section 3 and the Postscript to $tate of the University--A Parent's Perspective.
Lavish compensation is not necessary to attract qualified persons to public service.  The compensation of senior administrators at the U of M far exceeds the compensation of senior administrators in state government who have similar qualifications and duties.  See On The Cost of Administration.
Michael W. McNabb
University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member

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