On top of this, the Star Tribune has revealed the enormous costs of particular retirement packages.
At the height of the deep economic slump from 2007-12, while the middle class was losing some 40 percent of its total net worth and students were buckling under the weight of sharp tuition increases, some top university administrators were helping themselves to unprecedented retirement riches.
For instance, the chancellor of the University of Minnesota Duluth was granted a $535,700 bonus package by retiring President Robert Bruininks. Other top administrators were also benefactors, sharing the $2.8 million made available by the university.
The enrichment package that caught everyone’s attention was that of Bruininks. Upon leaving the presidency, he received $455,000 for the purpose of preparing himself to return to the academic world. He also funneled some $355,000 to his newly created Center for Integrative Leadership, where he teaches at a salary over $340,000.
This excess directly translates into higher administrative costs, which are then charged to the university’s various colleges. For instance, the medical school pays more than $66 million a year for overall administration services, ranging from utilities to a variety of student services as well as technology, library, etc. No one specific item identifies administrative overhead. Rather, these costs are blended in with the overall figures.
But the bottom-line result is that our medical students pay the highest or near the highest tuition among public universities, and this affects our ability to attract the highest-quality students.
Further, most management employees are under contract rather than serving at-will. This means they can be fired only for cause. This has created some highly expensive and inefficient practices, including lawsuits. It is not uncommon for an outgoing president to extend the contracts of his favorite managers, thereby limiting the flexibility of the incoming president.
It has also created an environment resistant to dismissal and supportive of transferring less-productive employees.
A failure of oversight
Good management learns from past mistakes and uses that learning to make meaningful long-term reforms. Large public universities, including North Carolina and California, Berkeley, have engaged a well-respected management-consulting firm that laid out a path to savings of $66 million at UNC and $75 million at Berkeley. The same firm created savings of $85 million at Cornell.
In many ways, the most intriguing and far-reaching reforms occurred at the University of Maryland, which achieved savings of $136 million over a period of six years. In 2008, Maryland’s governor, university chancellor and Board of Regents agreed that the existing financial model of student debt, rising tuition and unpredictable government funding was not sustainable. Rather than kicking the can into the future, they launched an ambitious reform effort and got buy-in from the public as well as the faculty. It was bold and painful but yielded good results.
The same level of bold leadership is needed here. If done properly, it can create the university of tomorrow that utilizes all the tools at hand, including technology, to create an affordable, high-quality educational experience.
Toward that end, it is imperative that the Legislature recognize that it has the ultimate responsibility for the decisions of the Board of Regents, which selects the president and oversees the budget as well as the personnel and management systems.
Clearly, the oversight function has failed. If lawmakers resist initiating cost savings and reform, and continue to place the financial burden on the taxpayer, they run the real risk of losing elections in 2014. They can expect opposition campaigns to feature what the Star Tribune refers to as “eye-popping” salaries, the inefficiencies of management, along with the hefty “transition” packages and generous pensions. It is not likely that voters struggling to afford educational opportunities for their children will consider these practices prudent or acceptable.
The Legislature would be well-advised to consider the following:
1. Put into effect in the pending budget a realistic savings target that compels the university president and regents to overhaul the administrative systems and achieve reductions now.
2. Request that the legislative auditor review two critical parts of the university’s enterprise system, which is the central information system. The quality of that system is vital to good decisionmaking. The two parts in question and in need of outside review are the Human Resources Management System and the Enterprise Financial System. Both systems were costly (more than $100 million just for the financial part) and were designed to “provide accurate, timely, comprehensive and accessible information” according to the university’s chief financial officer.
Yet all too often it seems impossible to obtain answers to the most basic questions about human resources and finances. The solution seems be to hire another consultant. Why? I agree with state Rep. Gene Pelowoski, DFL-Winona, an educator, who declared: “You’re going to spend half a million dollars more to tell you something you should already know.”
The Opinion section is produced by the Editorial Department to foster discussion about key issues. The Editorial Board represents the institutional voice of the Star Tribune and operates independently of the newsroom.