A tighter belt/Inefficient 'U'? Don't believe it—from the Minneapolis Star Tribune

The Minneapolis Star Tribune's lead editorial on Sunday, November 21, 2004, praised the U for its fiscal responsibility. Read the full text below.

Reprinted with permission from the Minneapolis Star Tribune

"A tighter belt/Inefficient 'U'? Don't believe it"

Neophyte Minnesota legislators (and occasionally, governors who should know better) are given to regarding the University of Minnesota as a bureaucratic behemoth that must be loaded with inefficiency and ripe for budget-cutting.
Legislators, meet Cliff Hoffman of Deloitte Touche LLP’s Minneapolis office. He has been auditing the university’s books for seven years. He just finished this year’s audit, and he wants you to know his findings: “The university has really tightened itself up. It is an excellent example of an organization that is very focused and very efficient. I’d call it a model of fiscal responsibility.”

That’s high praise for any $2 billion per year operation, let alone one as decentralized and stratified as a research university. It’s especially important that his message register at the Capitol this year. This state’s flagship university shouldn’t sustain further losses in state appropriations out of a mistaken notion that better business practices could easily bring it additional cost savings. Hoffman attests that better business practices are already in force on campus.

The auditor was impressed by the university’s management of the difficult financial hand dealt it by the 2003 Legislature. It coped with a 9 percent cut in its state appropriation in part by rigorously controlling expenses. Salaries were frozen and 500 positions eliminated, saving $3 million; changes in health insurance and other benefits resulted in another $5 million in savings. Permanent expense reductions totaled $20 million; “and that’s actual results. Usually, in these situations, there’s cost creep,” Hoffman said.

He also drew attention to a $62 million increase in revenue from grants and contracts, the bulk of them funding research. Total receipts for research at the University of Minnesota last year came to $509 million, topping the larger University of Wisconsin system and belying the claim that Minnesota’s flagship is not sufficiently focused on research.

The less positive part of the university’s financial story was the 14.7 percent increase in tuition for the 2003-04 academic year. It generated $60 million in needed new revenue, but did so in a way that imperiled access to the university by students of moderate means – especially when seen in the context of four straight years of double-digit cost hikes.

Last year, the books balanced nicely, with assets and operating cash both up, Hoffman said. “But obviously, this raises concerns going forward,” he added. Salaries cannot be frozen again, not if the university wants to keep its best and most mobile faculty on the job. Health care costs cannot be expected to go down again while they are going up for everybody else. Tuition increases are already pricing the university beyond the reach of too many students.

Meanwhile, Minnesota now ranks 21st among the 50 states in what state government spends per $1,000 of its citizens’ personal incomes on higher education. Higher ed spending my that measure has been cut in half since 1978 – even as Minnesota’s need for a highly educated workforce and industry-spawning research has soared. It’s time the Legislature stop asking its university for more efficiency and start asking what the state should do to keep its university strong.

Posted by smit3431 at November 22, 2004 11:24 AM