Editor’s note: The University faces a multimillion-dollar budget gap between the cost to run the University and incoming revenues. This is the third part of a three-part series that addresses the following issues: why the University’s costs are rising faster than the rate of inflation, where the funding comes from to pay for these costs and how the University plans to resolve the budget issue — a resolution that includes a proposed tuition increase.

The University’s $23 million budget gap must be solved by everyone — administrators, faculty, students, donors, research sponsors and Minnesota citizens — University President Mark Yudof told the Board of Regents earlier this month.
The immediate and ongoing fiscal crunch is caused by changes in revenue and rising costs.
One proposed solution hits students where it counts — in their pocketbooks. Yudof proposed increasing tuition by 5 to 6 percent to meet the rising expenses related to compensation, technology and facilities.
Half of the tuition hike will go toward a 3 percent faculty pay raise. Faculty yearly salaries average $81,000 and hover at the bottom sixth of the nation’s top 30 research universities.
Yudof also proposed taxing individual University colleges, increasing efficiency and improving the University’s budgeting framework.
“We do not have a deficit problem,” Yudof said, noting the budget gets balanced each year and cannot operate in the red.
However, he added, “We do have a distribution problem.”
Pocketbooks of plenty
Yudof said his tuition-hike proposal comes at a time when yearly tuition increases have been “fairly modest.”
Because of recent changes to the tuition structure, this year’s seniors have benefited from the lowest four-year tuition increase in more than 30 years.
However, “it’s real money, and increases really hurt students,” Yudof said of his proposed tuition hike.
Yudof said he was disappointed with last year’s legislative funding decision to give the University two-thirds of its appropriations request — shorting the University by $57.8 million for a two-year period.
“I’m totally astounded that I have to raise $8 million in tuition from students when we have such a great surplus,” Yudof said of Minnesota’s booming economy.
With the Legislature and governor clamoring to give billions back to Minnesotans through rebates and permanent tax cuts, he said the “great tragedy” is the University losing out on much-needed funding.
“By definition, most of that (rebate) money goes back to a broad range of middle-class taxpayers or more affluent taxpayers. Most of our students are self-supporting, are not in high-paying jobs, a lot of them are not receiving, or receiving very little support from their families,” Yudof said.
It is a very regressive tax, he said. All of the state’s taxpayers should bear the burden of University costs instead of making students pay increased tuition, he said.
“It will force us to tax a group, that from the standpoint of income, is one of the least well-off groups in the state … That’s what aggravates the heck out of me,” Yudof said.
Matt Clark, marketing and finance junior and Minnesota Student Association’s president-elect, said Gov. Jesse Ventura’s attitude toward tuition — “if you are smart enough to get into school, you are smart enough to pay for it” — is shortsighted.
“The fact that the state is taking away their end of the bargain of funding means we are going to start losing good students who can’t afford the University,” said Clark, who works part-time jobs to pay for half of his education cost while his parents pay the rest. He has no student loans.
Clark, who sat in with administrators earlier this month to discuss the tuition increases, said he supported a 3 to 4 percent increase.
Students can manage that amount by cutting back on non-mandatory costs, he said. “Students need to be fiscally responsible as well,” Clark said, noting he has little sympathy for students who moan about higher tuition, but are irresponsible with their spending.
However, he said Yudof’s proposed 5 or 6 percent increase goes too far and could force a student to take a second or third job.
Aaron Street, political science junior and student Senate vice chairman, also served on the student tuition advisory task force this month.
He was “shocked and disappointed” to learn the amount of the proposed tuition increase after students had unanimously opposed any increase over 4 percent, he said.
“Students are going to be paying $10,000 not too long from now and won’t be able to afford a public college,” Street said.
This year, undergraduate tuition and required fees cost $4,649.
Street also said the state government’s push for rebates does little to serve students. Students claimed as dependents cannot file for rebates, and rebate dollars could be better spent, he said.
“I think it is too bad when we can’t pay for our art building and have to pay 6 percent tuition instead,” Street added. Minnesota voters, governor and Legislature would rather the state “give a $300 (rebate) check to buy a television” than support the University with their taxes, he said.
The buck stops where?
The budget gap was no surprise to the University.
Scrambling for institutional money is a perpetual problem caused by the chasm between University ambitions and cost realities.
Every year, the University solves the gap with emergency state funding, windfall donations, raising tuition or other sources.
In May, Yudof charged a budget management task force — comprised of faculty, staff and administrators — to recommend solutions for the immediate $23 million gap, as well as study the persistent and structural budget problems that regularly produce such gaps.
To close the immediate shortage, the task force recommended the following solutions:
ù Continue an overhead charge on incremental programmatic legislative funds to cover the costs associated with implementing new programs;
ù Implement a single tax applied to all University units, based on an all-funds framework of nonsponsored resources, to meet shared University responsibilities;
ù Continue with the current 1 percent enterprise systems (which includes PeopleSoft) payroll tax and consider folding this tax into the single tax next year;
ù Make targeted reductions in activities deemed ineffective, inefficient or lower priority.
Some of the money needed for University overhead costs is in the coffers of the colleges, said Yudof. Taxing is one way to get it back.
Longer-term solutions for the University’s fiscal challenges included reducing costs and increasing revenues, which included the tuition hike and the $1.3 billion fund-raising campaign announced last fall.
Recommended cost-cutting measures included establishing more self-service options to lower transaction costs, streamlining the more than 250 official University “forms” and creating incentives for students to take full course loads so they will graduate in four years, to decrease their strain on libraries, computer facilities, laboratories, advisers and administrative services.
“Everyone has to step up and be a part of this,” said Steve Rosenstone, dean of the College of Liberal Arts and the task force’s chairman.

Kristin Gustafson covers University administration and federal government and welcomes comments at [email protected].