The phantom reduction

It is now clear that President Eric Kaler’s promise to reduce the cost of administration by $90 million over six years will not produce any reduction in the University of Minnesota budget. The president intends instead to spend the $90 million on “mission and mission support.” See his remarks to the faculty in the Sept. 26 Faculty Consultative Committee.

So instead of making a decision to even slightly trim the more than $3 billion University annual budget, the administration will quite literally continue to pass the buck to beleagued students — and their parents — and to the citizens of our state.

Moreover, there is no easy way to monitor whether the administration will even fulfill its promise to reduce spending on itself. Over six long years, who will even remember the promise? The administration should be required to provide the baseline of the current cost of administration and then to provide annual reports to verify the specific expenditures that have been reduced.

There were variations in the level of state appropriations between 2002 and 2011. When state appropriations declined, the administration increased tuition by far more than the reduction in appropriations. When state appropriations increased, the administration still increased tuition. The total cost of operations at the University soared from $2 billion per year to nearly $3 billion per year, as tuition skyrocketed. The administration accepted the current two-year tuition freeze — limited to undergraduate tuition for residents — only on the condition that the state increase appropriations.

The total cost of administration now consumes about $850 million per year, or 28 percent of the cost of operations. This demonstrates a long-term failure on the part of the administration to exercise any restraint on spending on itself.

This also demonstrates a long-term failure on the part of the Board of Regents to exercise any effective oversight. The regents are part-time volunteers who rely on the administration to provide information for their decisions. The chair of Minnesota’s House Higher Education Finance Committee recently referred to the regents as “the House of Lords — they have nice titles, a nice place to meet and don’t do anything.”

Like real estate developers, such as the owner of the Minnesota Vikings, University leaders spend other people’s money (OPM in real estate terminology). The highly paid senior administrators and the Board of Regents are so far removed from the economic lives of students, parents and the public that they are seemingly oblivious to the financial hardship that results from their decisions to spend other people’s money.

In the absence of any self-restraint on spending by the University administration, it may be necessary for the state Legislature to begin marking most of the state appropriations as special appropriations in which it designates the specific uses for the funds.

Each biennium, the citizens of our state now invest more than $1 billion in the University 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 its use of state appropriations.

This legislative liaison — or watchdog — should have the responsibility to review the 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.