A Complete Accounting

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A Complete Accounting

President Kaler calculates that his administration has reduced the annual cost of administration by $32 million.  See his interview in the November 22, 2013 issue of Twin Cities Business magazine.  But his calculation includes only the administrative costs that have been reduced.  It omits the administrative costs that have increased. 

For the last two fiscal years the administration has presented an expense summary for cost benchmarking to the Regents.  The summary divides expenses into three broad categories:  direct mission activities (instruction, research, and public service), mission support and facilities, and leadership.  See the fiscal year 2013 summary at Presentation Slide FIN Item 1. 

The total expenses for direct mission activities increased $33 million (from $1,484,823,216 in fiscal year 2012 to $1,518,062,538 in fiscal year 2013).  See the comparison at p. 9 of the 2013 summary.  

There were reductions of certain expenses in the other two categories (mission support and facilities and leadership) of approximately $32 million.  But there were increases in other expenditures in those two categories that were even greater.  Some of the increases were for compensation for administrators and staff and other increases were for non-personnel expenses such as administrative supplies, administrative equipment, repairs, and maintenance.  

There was a net increase of $41.7 million in expenditures for mission support and facilities (from $956,896,120 in fiscal year 2012 to $998,643,697 in fiscal year 2013).  There was a net increase of $7.9  million in expenditures for leadership (from $263,801,546 in fiscal year 2012 to $271,699,441 in fiscal year 2013).  See the comparisons at pp. 11, 13 of the 2013 summary.  

The one expense that is most symbolic of the cost of administration is the compensation for leadership. The highly paid senior administrators, deans, and directors collected an additional $2,250,198 in compensation for fiscal year 2013.  (The total compensation for those leaders in fiscal year 2013 was $104,088,093.)  

The administration spent an additional $560,773 on administrative consulting and professional services.  (The total expenditure for such services in fiscal year 2013 was $35,376,469.)   

Note that the total expenditures for mission support and facilities and leadership ($1.27 billion) are almost as much as the total expenditures for the direct mission activities of instruction, research, and public service ($1.52 billion).  

The president deserves credit for recognizing that excessive costs of administration are a financial burden on students, parents, and the citizens of our state.  But if the president is to be true to his pledge of transparency and accountability, then he should not be publicizing a partial calculation of the cost of administration.  We need and deserve complete candor (and a complete calculation) rather than a public relations campaign.    

The president has promised to reduce the cost of administration by an additional $90 million over the next six years.  That total amount is only 7% of the total expenses in fiscal year 2013 for mission support and facilities and leadership.  We can and should reduce those costs by a substantially greater percentage.  

A former interim U of M president recently observed that "with real productivity gains, tuition could actually be reduced, assuming that state funding for the U holds where it is at currently."  See A Question of Productivity. 

Reducing tuition is an objective that can be realized.  Last year Concordia University (St. Paul) demonstrated that tuition can be slashed (by $10,000 per year) when it recognized that the "high tuition high financial aid" experiment has failed.  See the September 12, 2012 front page report in the Pioneer Press on Concordia Slashes Cost.  We must once again make higher education affordable for all our children (just as it was for the senior administrators and Regents who set tuition today).

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