Friday, April 28, 2017

The (Almost) Billion Dollar Administration Part II

The (Almost) Billion Dollar Administration Part II

There was some discussion about the January 26 St. Paul Pioneer Press commentary on costs of administration at the meeting of the Board of Regents on March 24, 2017.  The vice president for finance "emphasized that items in mission support are not the same as administration, referring to the cost of facilities as an example."  See p. 32 of the March 2017 BOR Docket.

The calculation of the costs of administration in the January 26 commentary does not include the cost of facilities.  See The Almost Billion Dollar Administration.    Either the vice president did not read the commentary carefully or he intentionally misled the Regents.  Neither action (or omission) is acceptable for a person in that position.

In a February 2 Pioneer Press commentary (written by the vice president) the university administration asserts that the costs of administration are less than 9% of the university budget.  See  U of M Real Administrative Costs Are Not Nearly That High.  This calculation is limited to the personnel and non-personnel expenses in the leadership and oversight category.  Even with this limitation the total amount is a staggering $289,878,000.  See line 24(f) of the Expense Summary in the Administrative Cost Benchmarking Report at p. 32 of the December 2016 FIN Docket.  (The administration did not include any dollar amounts in its February 2 commentary.)

So the administration does not include any expenses in the mission support category when counting spending on costs of administration.  But the administration does include those expenses when counting any reduction in costs of administration:

See pp.41-42 of the December 2016 FIN Docket. The administration uses words the same way as Humpty Dumpty, who said to Alice, "When I use a word, it means just what I choose it to mean--neither more nor less."

In its calculation of the costs of administration the administration omits all the expenses in the mission support category.  That category includes such items as the personnel expense of $186,944,000 for audit/finance/HR/IT/legal and the expense of $47,081,000 for administrative consulting and professional services (which is separate from the expense of $86,511,000 for consulting and professional services in the mission category).  

The rationale of the administration for omitting all the expenses in the mission support category is that these expenses assist in carrying out the direct mission activities of instruction, research, and public service.  The same may be said of the expenses in the leadership and oversight category.  But the administration acknowledges that those expenses are properly classified as costs of administration.  So the classification of an expense as a cost of administration does not depend on whether the expense assists the direct mission activities.

The issue is not whether the expenses in either the mission support category or in the leadership and oversight category assist the direct mission activities.  The issue is the amount of those expenses.

We need to start to imagine a different way to operate and to finance higher education.

The state legislature should establish a task force with members of the higher education committees, university administrators and faculty and staff members, Minnesota Office of Higher Education staff members, and informed students and parents.

The work of the task force should include an analysis of the rise in the costs of administration at the U of M over the past 40 years.  If there has been an increase in the number of administrators that is disproportionate to any increase in the number of students or research, we should ask why.  If there has been a substantial increase (in constant dollars) in the compensation of any administrator, we should ask why. 

We should also compare the compensation paid to University administrators to the compensation of senior administrators in state government who have similar qualifications and duties.  For example, the annual salary of the state commissioner of human rights is $145,000.  The annual salary of the vice president of the U of M Office for Equity & Diversity is more than 50% greater at $241,000.  

Each biennium the citizens of our state now invest more than $1 billion in the U of M in general appropriations.  With that much at stake the legislature should appoint a qualified person to monitor on a continuing basis the operations of the University and the use of state appropriations.  This legislative liaison (or watchdog) should have the responsibility to review information produced by senior administrators, to collect additional information through his or her own independent research, and to meet with all groups at the University so that the perspectives of other well-informed and thoughtful members of the University community are presented to the legislature. 

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