A ‘jigsaw puzzle’ of funds

Getting bonding funds can be tricky, and some are unsure of the U’s strategy for doing so.

by Blair Emerson

Editor’s note: This is the third installment in a three-part series examining the University of Minnesota’s efforts to garner state funds for building maintenance. The previous pieces were published Oct. 1 and Oct. 8.


For years, the University of Minnesota has waged careful battles with the state Legislature to ensure it has funding for building maintenance and repair needs.

And this year, administrators are testing a new strategy to make up for lost ground.

The school is planning to capture state support for building projects by shifting how it requests funding from the
Legislature, but some lawmakers are unsure of the strategy. Instead, the legislators are discussing a new method of dividing costs between the University and the state.

Administrators ask for state funding each year to cover some of the institution’s largest facility projects, and they have often received far less than requested. Some policymakers argue it’s difficult to pass bonding bills, which allocate these state dollars, especially because requests from the University and the Minnesota State Colleges and Universities system are substantial.

“[The bonding bill] is always controversial,” said Rep. Alice Hausman, DFL-St. Paul, who chairs the House’s Capital Investment Committee.

In the last legislative session, the University received just over half of its capital request. And in 2013, no funding was awarded, because lawmakers only agreed on a small bonding bill before the session was up.

Legislators can’t always give University officials the amount they want, Hausman said, because of the sheer size of the bill and the limited amount of resources they have to pass out.

And lawmakers have to tend to other groups with public infrastructure needs, she said, like the penitentiary system and the Minnesota Department of Natural Resources.

“We just don’t have enough money,” she said.

Divvying up the costs

For each of the University’s capital request projects, it foots one-third of the bill, and the Legislature supplies two-thirds of the building request by issuing state bonds.

Lawmakers are discussing whether to change this formula, Hausman said. Specifically, they’re considering a model in which the state would cover the costs of new higher education buildings, while the University would bear the expenses to operate and maintain them.

“The University president has one suggestion. We have another,” she said.

But at least one University official said he’s unsure of legislators’ idea and its financial implications.

“It probably shifts more of the costs [to] the University because we don’t build that many new buildings,” said Richard Pfutzenreuter, the University’s chief financial officer.

The original one-third, two-third arrangement materialized in the 1990s, he said, to ensure that higher education institutions had “a higher stake” in projects.

The University currently draws its one-third portion of capital project funding from three sources: department savings, donations or debt, Pfutzenreuter said. Debt puts pressure on the operating budget, he said, which in turn can affect tuition.

‘Further and further behind’

On the Twin Cities campus, nearly $3 billion worth of projects are listed in renewal backlogs, or estimated facility needs, over the next decade.

President Eric Kaler previously told the Minnesota Daily that the school is falling behind in its building maintenance — especially in Higher Education Asset Preservation and Renovation funds, which the University requests each year.

In response, he proposed that the school request millions of dollars fewer in HEAPR funds next year, while asking for an equivalent amount in the operating budget. The Board of Regents formally accepted this plan on Friday.

But some state legislators are skeptical of the new method.

“[The University] could end up getting less in both [requests],” Hausman said. “Each committee thinks, ‘Well, the other committee is taking care of it.’”

Sen. Richard Cohen, DFL-St. Paul, said it’s often easy for the state to deny HEAPR funding as officials debate over the “jigsaw puzzle” that is a bonding bill.

Cohen, the chair of the Senate’s Finance Committee and its Subcommittee on Legacy, said that while the University’s new ploy has some merit, lawmakers’ response could set a precedent for dealings with other institutions like MnSCU.

“It always seems to be easier to drop the HEAPR requests,” he said. “And so, in the process, we get further and further behind on some of the maintenance for the higher education systems.”

A widespread issue

Across the nation, there’s a growing need for financial support to repair and maintain colleges’ and universities’ decades-old buildings.

Many of Ohio’s public colleges and universities are in need of funding for building maintenance, said Tom Walsh, who works in government affairs at Ohio State University.

“It’s a constant state of flux,” he said. “There’s always an ongoing need for maintenance and repair.”

But a new budget approach streamlines how the state’s institutions acquire funding from the Legislature.

In 2011, Ohio Gov. John Kasich started the Ohio Higher Education Funding Commission, a group that brings the public colleges and universities together to create a single capital budget request every two years.

Before that, capital money was distributed based on an algorithm, Walsh said, so each campus received a formulaic funding amount.

“You’d have all the universities competing with each other for a handful of limited dollars,” he said.

The commission changed that method, he said, adding that in recent years the new process has boosted collaboration between the colleges and universities in requesting limited resources.

In Minnesota, Hausman said, it’s ultimately difficult to pass higher education capital funding because the University isn’t as active as it could be in telling lawmakers why projects deserve funding.

“[The University] could help us by changing the discussion behind bonding,” Hausman said, “to use their lobbying power to contact legislators all over the state to say, ‘Don’t be afraid to vote for a bonding bill.’”