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Weary of unreliable public funding, two of the University of Minnesota's premier schools are planning for a future without it.
The U Law School and the Carlson School of Management are both looking at trading what little is left of their state funding for private fundraising that could give them more control over how they operate.
The two are poised to join a handful of elite schools nationwide in seeking self-sufficiency instead of state support. It might happen in a year, or longer. But already, the U is assessing the idea's merits. Being self-reliant could accelerate the schools' fundraising. But some university leaders, students and alumni worry that it could also weaken their commitment to Minnesota.
The final word will rest with new President Eric Kaler, who took charge of the U Friday along with its $3.7 billion budget, millions of dollars in budget cuts and public pressure to tamp down tuition increases.
Newly departed President Robert Bruininks lamented the privatization trend but considers it "inevitable" that a few of the U's schools will break from state funding.
"By having some state funding in each of our colleges, it encourages all of us to be more self-conscious about our public mission, our public responsibilities, our public commitments," he said in a recent interview. "When you get in a strictly revenue-driven model, there could be temptation to think of yourself as something separate from the whole of the university."
Deans of the Law School and the Carlson School of Management say they have not sought this change and that their schools would remain as committed to the public as they are now.
"We will be, in every respect, a public law school," Law School Dean David Wippman said. "Our tuition plan has to be approved by the regents. We are not opting out of our financial obligations to the university. Nothing really changes -- except where your revenue comes from."
Turning to tuition, alums
More of that revenue could come from tuition, which worries some students.
In 2006-07, state money constituted about 17.6 percent of Carlson's operating budget. This year, under a budget approved in June, it will account for just 3.6 percent. The Law School's share will drop from 22 percent as recently as 2008-09 to single digits.
For the coming year, first-year resident tuition for law students is $32,928 -- about 20 percent less than the nonresident rate of $41,496. But the school plans to shrink that discount to 10 percent in coming years, documents show.
"We want to maintain the advantage for Minnesota residents," Wippman said. "But given the decline in state support, we thought it should not be as large as it was."
While students might not notice much change in the classroom or on their ID cards, they will in their tuition bills, said Sanjiv Laud, a third-year law student and president of the Law Council.
Making the school more expensive for Minnesotans "fades the purpose of being a state school," said Kelly McNabb, a third-year law student who also earned her bachelor's degree at the U. The law school previously focused on training students who would practice law in Minnesota. Now, without state money and with a greater focus on national rankings, "we don't really care if we're going to throw the residents under the bus," she said.
Laud put it this way: "If the state doesn't pay the law school to train Minnesota lawyers, the school can only train lawyers."
Wippman said that switching to a private-funding model could actually help more students pay for law school -- through scholarships. This spring, the school launched a fundraising campaign called Generations. Of the $70 million goal, $30 million would go toward scholarships, internships and stipends.
Schools that have shifted to a private-funding model have had more luck fundraising. The Law School is expecting the same.
"If we get to a very small amount of state funding, it's actually better for us to have none," Laud said. "That would maybe get a few more people to donate."
'Everything we hoped for'
It's been done elsewhere.
The University of Virginia School of Law gained financial autonomy in 2005 under an agreement that eliminated state funding in exchange for freedom to operate with minimal state and university oversight.
"It's been everything we hoped for,'' said Terry Ross, a Washington, D.C., lawyer who helped spearhead the change as an alumnus and former university Board of Visitors member.
Self-sufficiency has led to lower expenses and reduced bureaucracy, he said. Tuition has risen, but increases are still approved by the Board of Visitors. In-state students receive a discount of about $5,000. Loan forgiveness programs and scholarship aid keep the school open to students of lesser means -- which was key to getting people to accept self-sufficiency, Ross said.
The law school now receives greater private support from patrons. In the past, there was a perception among some alumni that gifts would somehow be consumed by the greater university or the Commonwealth of Virginia, he said.
"You go to the donors and they are more responsive,'' Ross said. "You are saying to your constituency: 'It's ours now, we have to take care of it.'"
Virginia's Darden School of Business also has become self-supporting, as has the business school at the University of Michigan.
UCLA's Anderson School of Management is debating a plan to do the same. Under that plan, the school would still be governed by broad university policies. But it would have greater freedom to raise faculty salaries -- without approval from the UCLA administration.
Experts don't expect privatization to become an overwhelming trend.
Moving to this model is "an entrepreneurial venture," said Jerry Trapnell, executive vice president and chief accreditation officer of the Association to Advance Collegiate Schools of Business. "Few schools, a small number, in my personal opinion, have the capacity, brand and clout to go that direction."
But he sees the U's Carlson School of Management as a likely candidate.
A clear trend line
For several years, the Carlson School has analyzed and cut costs to educate more students with less state money, while focusing on fundraising.
"The trend line has been very, very clear," said Sri Zaheer, Carlson's interim dean, who holds the Elmer L. Andersen Chair in Global Corporate Social Responsibility. State funding for the school went from $13.7 million in 2006-07 to a planned $3.1 million this year, or about 3.6 percent of the total budget.
In comparison, going "from 3 percent to zero seems very simple," she said. "For all practical purposes, we are like a private school." Yet even as public funding has dropped, the school has remained committed to the state, Zaheer said.
Over several years, Carlson has admitted a steady proportion of undergraduates from Minnesota. Annual reports show that 75 percent of the 2004-05 freshman class was from Minnesota. That number dropped to 68 percent in 2008-09 but rebounded to 70 percent in 2009-10.
So far, state funding for these schools has shrunk organically, as part of yearly decisions about which of the U's units can sustain cuts, said Richard Pfutzenreuter, the U's chief financial officer. Although a number of small institutes and centers at the U are self-supporting, colleges are not. If Carlson or the Law School were to break from state funding, it would be a first.
As state funding approaches zero, Pfutzenreuter said, it has raised the question: "What does it mean for a college to be off state money?
"They're not going to give up the instruction. That's their bread and butter," he said. "But does research then become too expensive? Or does the public service mission suffer?
"Or not? We just don't know."
Staff writer Tony Kennedy contributed to this report. Jenna Ross • 612-673-7168