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University of Minnesota Board of Regents, leadership take detailed look at costs and workforce that deliver mission of instruction, research and outreach

June 8, 2012

New analyses provide the deepest look to date into the costs and composition of the workforce involved in delivering the university’s mission of instruction, research and public service.

Three studies, presented to the University of Minnesota Board of Regents by the Offices of Budget and Finance and Human Resources, give university leaders critical information for making future budget and workforce decisions. They also provide a baseline against which to judge the university’s ongoing work to become more efficient and effective with its limited state, tuition and other resources.

“If we don’t measure things, we won’t know how we can improve them,” said U of M President Eric Kaler. “As we continue to focus on operational excellence at the university, these analyses establish a structure for our work. They also provide transparency and accountability about what we do.”

In addition, the studies answer long-standing questions from the board and are the first step in Kaler’s drive toward operational excellence — a long-term commitment to reduce administrative costs to continue to invest in the core academic mission. Each study is U of M specific — the information cannot be used to compare the university to others across the country, because each institution’s methodology is different and few, if any, institutions have done such extensive analysis. The studies reported on the following areas:

The cost of delivering the university’s mission

The study quantifies the direct costs (i.e., instruction, research and public outreach/service costs) and indirect or support costs (i.e., student services, academic support, institutional support and facilities) related to educating university students in fiscal year 2010 — the most recent year for which complete information is available. The university’s general ledger categories provided the basis for the analysis.

The full cost to educate a full-time undergraduate Twin Cities student in FY 2010 ranged from about $9,600 per year to just more than $16,000 per year, according to the analysis. Differences in instructional costs across colleges and campuses occur for multiple reasons, including market-driven faculty salaries, class sizes, varying levels of student services and complexity of classrooms, lab space and equipment/technology.

Other notable findings include:

  • $304.6 million spent on public service; about 66 percent in direct costs such as Extension, grants with a specific public benefit intent, etc.
  • About $1.12 billion spent on instruction for the university’s nearly 70,000 students; about 60 percent in direct costs, such as salary and benefits for faculty/teaching assistants, and supplies and materials
  • $870.8 million spent on research; about 67 percent in direct costs
  • $299.1 million spent on student aid
  • $251.8 million spent on auxiliary services (e.g., intercollegiate athletics, book stores, housing, dining services, parking)

Findings also quantify revenues that support the functions. Tuition is used only to support instruction (92 percent) and student aid (8 percent). Other revenues include state appropriations, foundation support, research grants and income from sales, royalties, affiliated hospitals, endowment earnings and auxiliary services.

The people who deliver the university’s mission

The Human Resources study categorized the university system’s 25,000-plus employees according to what they do, counted the number of people working in various capacities and determined the associated workforce cost.

The university’s workforce has been held to a 3 percent growth rate during the past 11 years, the study reported. However, 11.3 percent more students were served per employee in FY 2012 compared with FY 2002. Also, the number of degrees awarded per employee has increased 28.2 percent since 2003 and the amount of sponsored dollars per employee increased 41.6 percent. In addition:

  • Two-thirds of the university’s total salary and benefits spending supports employees who directly contribute to the U’s academic, research and public outreach mission. These functions are unique to higher education and include teaching faculty; fellows, trainees and students in academic jobs; and other mission support such as student services.
  • One-third of salary and benefits is spent on employees who provide functions typical of any large organization, including facilities jobs (4 percent), organizational support (24 percent) and leadership (6 percent).

Building a calculator for future financial planning

The university’s long-range financial planning model is updated regularly. Using FY 2013 budget and other assumptions, the six-year forecast estimates the U’s financial position by 2018 if it were to generally stay on its current course. It shows university leadership the impacts of:

  • State disinvestment in higher education
  • Limiting tuition rate increases
  • Changing demographics and enrollment
  • National and international competition for talent
  • General cost increase trends

“The long-range financial planning model also sets the table for a full discussion between now and fall, when the university will determine its funding request to the 2013 legislature,” said Richard Pfutzenreuter, vice president and chief financial officer.

The university will update the reports periodically to judge its progress and help determine future financial and workforce needs.

Nobel laureate agrees to advise

During his board report, Kaler announced that Dr. Peter Agre of Johns Hopkins University has agreed to serve as a senior adviser to Kaler. In addition to winning the Nobel Prize, Agre is former president of the American Association for the Advancement of Science.

In the uncompensated role, Agre will help identify strengths and weaknesses in the U’s biomedical research portfolio and how to strengthen it; provide input into the external review of the Academic Health Center, which will occur in August; and help identify new partnerships between university faculty and nationally and internationally recognized experts at other institutions. The one-year appointment begins July 1 and will be reviewed annually and renewed if Agre and the university agree.

The Board of Regents also:

  • Considered the findings of the board’s Special Committee on Executive Compensation and Administrative Transitional Leaves, including a recommendation to eliminate administrative transitional leaves. Current policy allows for an average one-year sabbatical at pay up to the administrator’s salary rate. Under the proposed change, senior leaders who return to tenured faculty positions would be granted six-month sabbaticals with pay at the returning faculty rate. Action on this item will occur at an upcoming meeting.
  • Approved Kaler’s FY 2013 budget, which is committed to affordability for students and families (with a 3.5 percent resident undergraduate tuition increase, offset by increases in financial aid); and invests in the U’s faculty, research infrastructure, technology and student aid; uses state resources responsibly; and holds down administrative costs. One modification was incorporated into the final approved budget: a reduction to the previously recommended Carlson School of Management tuition increase for entering MBA daytime students from 10.4 percent to 4.8 percent.
  • Approved the FY 2013 Annual Capital Improvement Budget totaling $379.8 million, which includes reconstruction of Siebert Field, home of Gopher baseball. All capital improvement projects are estimated to add 8,000 jobs to the marketplace.
  • Heard Kaler’s announcement about reinstituting 100 percent of the Regents Scholarship for U employees seeking their first college degree, and maintaining 75 percent scholarships for employees seeking secondary or advanced degrees.
  • Revised the Student Conduct Code to broaden the definition of learning environment to reflect outside-the-classroom instruction and better define bullying, sexual assault and providing alcohol to minors as disciplinary offenses.

The Board of Regents will meet next on Wednesday, July 11.

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