University of Minnesota President Eric Kaler said Friday that the U will cut administrative costs by $15 million a year over the next six years to assure taxpayers that their dollars are well spent.
Kaler said the $90 million in total cuts are part of an ambitious plan to “work smarter” at a time when many people believe the university is “fat and bloated.” He told the Board of Regents that he’s committed to shifting money away from administration toward teaching, research and other programs.
“We must continue to lower our administrative costs,” he said.
Kaler’s announcement came on the same day the U released a study that appears to confirm what officials have been saying for months: that the University of Minnesota is not particularly top-heavy with administrators.
The U has been on the defensive since the Wall Street Journal singled it out in a 2012 report on runaway administrative costs, claiming that the Twin Cities campus had the “largest share”of management and administrative employees of 72 major public research universities.
University officials say that the numbers were misleading and partly due to reporting errors.
The newspaper report triggered a wave of concern among state politicians.
Gov. Mark Dayton tied his funding for the U last session to an analysis of administrative costs.
Legislators demanded that the university submit reports on its administrative spending and analyze how it compares to other big research universities.
A preliminary analysis in March, covering only a small part of the university, found few problems but said that some areas could be improved.
On Friday, the full report by Sibson Consulting found that the university is “well within” reasonable levels of administration.
It said that, on average, five to nine layers of management are typical for most “medium-sized to large enterprises,” and that the university average was just 5.2.
“Indeed, for the size of institution of the University of Minnesota, the number of layers is remarkably low,” said the report, which was commissioned by the university. Overall, the analysis showed, the U “appears to have an economical organizational structure.”
‘Ambitious but achievable’
Still, Kaler said that cutting administrative costs has always been a high priority for him and that carving out $90 million in savings is “an ambitious but achievable goal.” He did not spell out any details.
The initial cut — $15 million in 2014 — amounts to slightly more than 1 percent of the nearly $1.3 billion budget for administrative and support services, Vice President Richard Pfutzenreuter said. The plan calls for shifting an additional $15 million a year for five years away from administration to other expenses.
Asked whether the cuts would include layoffs, he said, “Not at this point.”
He said they would use attrition and other cost-saving measures first but would not rule out possible staff cuts.
Pfutzenreuter, the university’s chief financial officer, said the university needs to centralize a lot of its services, be shrewder in how it buys supplies and equipment, and cut paperwork through computerization.
In a separate, internal report released Thursday, university officials said the salaries of its senior leaders are at or below the level of peers at other schools.
University officials say the school has reduced administrative costs by $32 million a year over the past couple of years.
The U is paying Sibson $48,000 for its work. It paid Chicago-based Huron Consulting Group $495,000 to compare the U’s costs and operations with other public and private organizations.
That analysis found that staffing within four of the U’s administrative offices is “within a broad range of responding peers.”