President Kaler's Biennial Budget Presentation to the Board of Regents
Thank you, Madam Chair and Regents.
I have built my first biennial budget request as your president thinking first and foremost of our students and their families. And I have built it on a vision: that the University of Minnesota will establish a better partnership with the State of Minnesota.
The request is built with a sharp eye toward our costs and in the context of the Operational Excellence culture change we are undergoing.
This is a prudent request and it enables us to fulfill our land-grant mission for this state and keeps us on our path to excellence. It allows us to continue to recruit and retain some of the world’s great scholars for our faculty. And this request supports and renews our research enterprise. It proposes NEW research initiatives that play to our academic strengths and align with the state’s key industries and talent needs. Finally, this request requires us to meet performance measures in order to earn a portion of our appropriation.
While not part of our budget request, I will also describe innovative tax policy options regarding tuition and philanthropy for higher education.
But—Madam Chair and Regents—this is most important:
This request keeps this University affordable and accessible to qualified students of all economic backgrounds.
In this 2014-2015 budget, I propose a ZERO percent tuition increase for Minnesota resident undergraduate students. Let me emphasize: a ZEROincrease for our Minnesota undergrads.
Let me briefly review how we build our budget and how we set our goals.
SLIDE 2: BUDGET DEVELOPMENT
Like any business that wants to maintain its success and reputation, we have to deal with cost escalators. We need to reward employees and we need to recruit and retain the best teachers and researchers. We need to pay our bills: for instance, our utilities, employee health care, and we have to invest in constant advances in technology. And we need to maintain our aging 28 million square feet of space.
When we look at that, the numbers are clear: Our costs will increase about 2.9 percent annually, or slightly less than the 2011 rate of inflation.
Recently, we have funded our needs by reducing our costs, by asking the state for part and asking our students and families for part. As you know, over the past decade, the state has been unable to meet its obligation, and its support has dipped dramatically.
We want to renew our historical partnership, and it begins with this 2014–2015 budget request.
We seek an incremental $14.2 million annually from the state for tuition relief. That’s so we can have a zero increase for resident undergraduates. In a state biennial budget of about $34 billion, $14 million yearly is a tiny fraction of the state’s budget.
SLIDE 3: HOW DO WE BEST SECURE
We believe stabilizing tuition is the best investment we can make in our future. We believe bright, well-educated students will transform our economy, and are essential to our way of life.
SLIDE 4: WHO IS OUR FUTURE?
This is the story of one of our students. I call her Sarah.
Sarah can be any student, from any one of your communities. She is an excellent student, highly academically qualified. She could have gone to college many places, including out of state. She has boundless aspirations, but only modest resources.
SLIDE 5: HOW DO WE HELP SARAH?
I know we all want to help Sarah, and thousands of other students like her, attend the U. But how do we this? We have a plan.
SLIDE 6: ENABLING SARAH
We reform how we fund higher education with a zero percent increase for Minnesota students like Sarah.
But it’s more than tuition, because the University is also a research engine. We reform how we invest in our research and innovation with new, focused initiatives that play to our strengths. We reform how Sarah and her family pay for her four years here.
SLIDE 7: HOW DO WE KEEP TUITION LOW?
SLIDE 8: REFORM HOW WE FUND
Let me expand on the tuition request. For the 2014–2015 biennium, if the state invests $14.2 million incremental for each of the next two years, then I commit to keeping our Minnesota resident undergraduate tuition where it stands today.
This will save University of Minnesota families money and lower student debt. For an incoming freshman like Sarah, her total tuition burden would be reduced by over $2,500 during her four years on our Twin Cities campus.
SLIDE 9: COMMIT TO OPEX
As the state invests, we will continue to execute our Operational Excellence and cost controls.
This is about reallocating resources and effort across all of our campuses. We will manage risk responsibly and nimbly. And we will respond to the governor’s request to all state agencies and publicly funded entities to reevaluate and refocus 5 percent of our state appropriation, or, in our case, about $28 million worth.
We will target this challenge at our administrative costs, asking central support units, colleges, and campuses to reduce costs.
SLIDE 10: ACCOUNTABILITY
Plus, we are prepared—even eager—to set performance targets to signal just how much we do want to change this conversation and partnership with the state.
We will use this new outcome-based funding from the state to invest in programs that directly benefit students, research, and technology transfer. We propose to set aside 1 percent or $11.5 million of our biennial allocation until we meet three of these five benchmarks.
- We will increase University-funded financial aid for low- and middle-income students.
- We will award at least 15,000 degrees systemwide in 2014.
- We will increase undergraduate four-year and/or six-year graduation rates on the Twin Cities campus.
- We will maintain our 2011 level of total National Science Foundation-recorded R&D expenditures.
- And we will increase invention disclosures, which is a clear indicator of the commercializable intellectual property we have in our pipeline.
We will be better in just about everything we do.
I am so confident and committed to executing high standards of performance and accountability that I am willing to put some of our request at risk. And if we meet three of those five standards, we will receive the final portion of our allocation.
SLIDE 11: RESEARCH
On our campuses we will continue to grow our robust research and innovation enterprise in a highly focused way.
They are opportunities for Sarah, too.
Remember, among the nation’s public universities, we are ranked 8th in external research funding although our state is 21st in population. Sarah and her classmates will benefit from a new, comprehensive vision for discovery, research, innovation and economic development in this state.
SLIDE 12: MnDRIVE
We call it the Minnesota Discovery, Research and InnoVation Economy funding program, or MnDRIVE.
MnDRIVE is a new, ongoing partnership with the State to discover new knowledge through scientific research to:
- Advance Minnesota’s economy
- Seize opportunities to leverage Minnesota’s strengths and comparative advantages
- Improve Minnesotans’ health and quality of life
- Advance the capacity and competitiveness of Minnesota industries
- Position our state as a national leader in key industries.
See those icons on your screens?
They represent areas of exceptional scholarly and educational strength that we already possess at the University, and areas of strength for Minnesota’s economy.
We asked our scholars, our faculty, and our researchers: In what directions should we head? How can we be a leader in areas important to our students and our industries? We intend to leverage these strengths to improve the state’s economic vitality and prosperity.
The little robot stands for our study of robotics and its growing impact, especially on our manufacturing community.
That wheat stalk is a symbol of our tremendous power in agribusiness, food production, and food safety.
The drop of liquid is about our national leadership in clean water and sustainable energy.
That brain translates into our great tradition in the health sciences and our future as a leader in brain science. Together, to fund MnDRIVE, we request a state investment of $18 million over the biennium. It will add faculty, research dollars, and enhanced partnerships with businesses across the state.
I am convinced the long-term return on innovation and the return on investment—that dual ROI—will be spectacular, driving prosperity and growing talent in Minnesota for years to come.
SLIDE 13: ROBOTICS
MnDRIVE will support the emerging world of robotics and sensors as needed by our manufacturing sector in Minnesota. We have a vision: We will build on our traditional strengths in engineering, materials sciences, computer science and robotics.
As we become a hub for research and education, we will focus on three areas:
- Miniature robots and vehicles
- Industrial applications
- And human-robot interfaces
With the outcomes of our robotics research—and as part of the larger robotics work already underway in Minnesota—a new industry will flourish, and we will become fully engaged in the national robotics initiative. A new cohort of master’s degrees and Ph.Ds. will be granted. More high-paying jobs in a cutting-edge technology will be created.
SLIDE 14: FOOD
Let’s move on to food, another plank in the MnDRIVE platform, another strength of ours. From our historic roots in the Green Revolution to our partnerships with some of the best global food corporations based in Minnesota, we are perfectly positioned to develop an integrated approach to researching and producing a safe and sustainable food system. The outcomes of MnDRIVE’s work will position us to be the Silicon Valley of food technology, food safety, and food supply management.
By that I mean we will be the center of research, discovery, innovation, startups and economic vitality around food…plus a magnet for talent and ideas.
We already have more than 200 food company headquarters in the state and thousands of other food-related enterprises. Food has been one our state’s trademarks. In the coming decades, it must continue to be. We can lead that effort.
SLIDE 15: ENVIRONMENT
MnDRIVE will advance industry by conserving our environment.
We aim to solve environmental challenges, such as water contamination, from mining, agriculture, and natural gas exploration. We want to deliver technology to start-ups and key industrial partners…and this will build on a record year we just completed of triggering and nurturing start-ups.
There will be significant outcomes from this University-led environmental strategy. Among them: freeing up stalled industrial and agricultural processes, improving water quality throughout the Iron Range, and improvements in energy grids. The outcomes will help drive Minnesota’s economy.
SLIDE 16: DISCOVERIES FOR BRAIN CONDITIONS
Let’s move to the fourth piece of MnDRIVE. They are life-changing discoveries for critical brain conditions.
The field is called neuromodulation. It is a field we can pioneer and lead. We will use our expertise in deep brain stimulation to address disorders such as Parkinson’s, Alzheimer’s and schizophrenia. And we want to make sure our discoveries are translated into clinical care for patients afflicted with such disorders.
We are hard at work on these brain conditions already, but I want us to advance that work, to treat and cure. We have faculty and researchers already deep into this area, with about $45 million of NIH funding received. But it’s a growing field, and it can be ours to own. The outcomes are very promising.
With new technologies, we will extend our leadership in neuromodulation through partnerships with some of our great, local Fortune 500 companies, such as Medtronic, St. Jude Medical, and Boston Scientific, among others.
And our patient care will be nation leading. MnDRIVE will boost Minnesota’s economy, our state’s prosperity and an innovation agenda led by the University of Minnesota.
SLIDE 17: HOW DO WE HELP SARAH PAY?
Which leads us back to our student Sarah.
She will be a part of this dynamic ecosystem of innovation, scholarship, and research. As you know, we have some of the most advanced undergraduate research programs in the nation. Sarah can take advantage of that.
She and her family can take advantage of our ZERO tuition increase. We also propose other ways for Sarah’s family to save and Sarah to limit her debt.
SLIDE 18: TAX AND LOAN
It involves tax credits.
That pool will offset part of a student loan if the student lives and works in Minnesota after she graduates.
And the state will forgive a part of Sarah’s loan if she becomes a health care professional in high-demand underserved areas, be it in rural areas or the inner cities.
We also propose reducing a family’s tax burden by no longer taxing the portion of a student’s scholarship beyond the amount used to pay tuition and required fees.
SLIDE 19: HOW DO WE ENABLE?
But there is another path to help Sarah, and other students who receive financial aid from the University.
We propose a two-year pilot program to incentivize donors to contribute scholarship money to students at all public and private non-profit higher education institutions in the state. Under this proposal, the state would create a new “Higher Education Scholarship Incentive Credit.”
The state would set aside $20 million in tax credit certificates for each of the next two years to be awarded to public and private not-for-profit higher education institutions. Those institutions, including the University, would then award the credits to individuals who make contributions to merit-based scholarships.
SLIDE 20: SUMMARY
Let’s summarize Sarah’s story and our biennial request.
The best way to secure Minnesota’s future is to invest in Sarah, and the thousands of students like her. It is to invest in our Top Ten research enterprise, and to focus on key industries and growth so that Sarah will have a high-paying job when she graduates.
The best way to secure Sarah’s future is to invest with thoughtful tax policy to help her family and some of our donors. It is to solidify our partnership with the state by our commitment to Operational Excellence and to meeting measurable goals of success.
Here are the numbers for you to see.
SLIDE 22: HOW DO WE BEST SECURE?
In closing, this biennial budget request is about changing the conversation around funding higher education at the Legislature and in the homes of families across the state. It is about renewing and reviving our historic partnership with the state of Minnesota. And I must put this request in a historic context.
Our fully funded request for fiscal year 2015 will be $604 million. That is EXACTLY the number the state provided us in… 2001…14 years ago! Needless to say, inflation, technology, health care costs, compensation, infrastructure maintenance, and energy costs have risen dramatically since then.
So how do we best secure Minnesota’s future?
We invest in Sarah.
We reduce her student debt with a zero increase in tuition. We prepare her for a life of innovation and productivity in Minnesota. We do our part to be as efficient, effective and entrepreneurial as any university in the nation.
That is a deal I am ready to make, and a renewed partnership I will work to forge.
Madam Chair and Regents, I hope you will join me in this important and bold effort. Now, allow me direct you to the resolution that has been handed out. Next month, I will be seeking your approval of this request.
For now, I am eager to hear from you and answer your questions.