The University of Minnesota's governing board is pushing back on President Eric Kaler's proposal to raise Twin Cities undergraduate tuition by 2.5%, urging leaders to consider ways to limit that increase.

Regents decried what they deemed an inadequate state funding hike this spring and voiced support for proposed employee pay increases. But some challenged the administration to offer scenarios that would keep tuition increases for Minnesota undergraduates to 2% or less, perhaps by tapping a bump in revenue from investing the U's reserves.

"It's a big deal to students if you can save 1 or 1.5%," Regent Steve Sviggum said.

The regents tackled Kaler's final $4 billion budget proposal Thursday, ahead of a vote slated for Wednesday. The administration has said that after lawmakers granted the U only half the funding increase it sought, tuition hikes of 2.5% in the Twin Cities and 1.5% on the U's four other campuses are needed to pay for key investments, including a slightly more than 2% raise for employees.

Kaler cautioned that a solid rainy day buffer protects the university against a possible economic downturn and gives flexibility to his successor, Joan Gabel, who takes over July 1. But he said the university will give regents those other budget options.

"Our judgment was to hold some additional powder dry in some cash accounts," Kaler said.

University officials say additional revenue will also cover rising benefit costs and allow them to hire more faculty in high-demand programs, campus police officers and student advisers.

This spring, state lawmakers granted the university $43.5 million more in state funding for the biennium, a 3.4% increase over the $673 million a year it now receives. Kaler's proposal, which also raises some fees, anticipates another 2.5% increase for Twin Cities Minnesota undergrads in fall 2020. Minnesota undergraduate students now pay $14,693 a year in tuition and fees on the Twin Cities campus.

"This is a responsible budget that balances the need for investments and compensation increases with the cost incurred by our students," Kaler said, noting that the 2.5 increase comes up to less than $1 a day.

Officials stressed that under the U's Promise Scholarship program, students with the lowest family incomes — generally those of $50,000 or less — will continue to get free tuition, fees and textbooks. They noted the Kaler administration has kept tuition hikes squarely below the rate of inflation in the past eight years.

Regent pushback

Regents such as Rick Beeson said lawmakers this spring continued a trend of underfunding the university, decrying its inability to invest more in improving quality.

"I am reluctant to lower this tuition increase by taking it out on the backs of our employees," he said.

But Regent Thomas Anderson pointed out lowering the proposed increase to 2% would only cost $1.6 million, and he suggested the university could tap new revenue, such as income from a commercial paper facility the U acquired. Then, there is an almost $13 million increase over the past two years in interest the U earns off its reserves.

Regent Kendall Powell, who is slated to become the new board chairman Friday, made the case for an even smaller increase: 1.5%, or the core rate of inflation used by federal agencies.

Mike Kenyanya, one of four new regents who joined the board this spring, also urged the Kaler administration to explore a lower increase, saying that would send a powerful message to lawmakers.

"Bringing [tuition] lower would help us go back and say, 'We're doing our part,' " he said.

Several regents also expressed alarm at a $20 million increase in the U's healthcare costs, which will eat up a chunk of the roughly $70 million more the U is putting into compensation next fall, most of it for merit-based raises. Officials said in recent years the university has seen lower increases compared with other employers thanks to its self-insured plan, but that plan also makes it more vulnerable to fluctuations if even a small number of employees get seriously ill.

This past winter, regents also backed a 10% tuition increase for new out-of-state undergraduates on the Twin Cities campus, the latest in numerous double-digit increases that aim to bring the U from the bottom to the middle of Big Ten pack for nonresident tuition. Regents also approved a $1,000 per semester tuition surcharge for the College of Science and Engineering in the Twin Cities, to be phased in over four years.

Regents on Thursday also backed about $130 million in capital improvement projects, a pared-down list of mostly repairs as the state passed no bonding bill this past session. They approved setting aside $250,000 for president's September inauguration festivities at Northrop auditorium.

Mixed reviews

The regents will host a Friday forum to hear public comments on the proposal at the end of their regular monthly meeting, or around noon at the McNamara Alumni Center. Comments can also be submitted online at regents.umn.edu. The proposal so far has drawn some mixed reviews.

Scott Laderman, the head of the Duluth faculty union, said the pitch is "deeply disappointing." He said an additional $700,000 his campus will receive doesn't make much of a dent after millions of cuts in recent years in a bid to balance UMD's budget, including some for 2019-20.

Cherrene Horazuk, head of the union representing U clerical workers, said the union supports calls for limiting tuition increases. In a recent survey, more than a third of members, who she said make about $40,000 a year on average, reported struggling to keep up with their own student loan payments.

Amy Pittenger, who leads the faculty consultative committee on the Twin Cities campus, said professors welcome the planned compensation increases, which will allow the U to ward off recruitment and retention challenges.

"The administration is trying to be strategic in a difficult situation," she said.

But Mina Kian, the incoming Twin Cities undergraduate student body president, said the tuition hikes come as a disappointment. This academic year, the student government waged a Keep It Low campaign, collecting about 600 student testimonials about struggling to afford the U.

She laid most of the blame on lawmakers for not fully funding the university's request. But she said students had hoped the administration would find a creative way to spare students the increases.

"I know students who go to bed hungry and are on the brink of homelessness," she said. "For so many people around me, this is not a small sum of money."