President Kaler's testimony to the Senate Higher Education and Workforce Development Committee

Tuesday, January 15, 2013

FileSlides with January_15_2013_testimony.pptx


Thank you, Madam Chair. Thank you, members of the committee. Thank you for this opportunity to discuss the remarkable breadth and depth of the University of Minnesota, and all that we mean and bring to the state of Minnesota. I’d like to acknowledge Regents Chair Linda Cohen and Regents Maureen Ramirez, Tom Devine, and Rick Beeson, who have joined us today.

Thank you, too, for this chance to talk about our administrative costs. As you know, I am a chemical engineer by training and I spent the bulk of my career as a professor and researcher. Correct analysis of good data is very important to me, and, I know, to you, too, Madam Chair.

I am confident that we at the University of Minnesota are a well-run university, with opportunities to do better. I am also confident that our employees and our entire system are more productive than at any time in our history, providing a world-class education for our students.

Do we need to get better? Of course, we do. Since the day I was hired, I have been tackling administrative costs. It has been a priority.

I am not a status quo kind of guy. The status quo around operational costs and organizational efficiency is not acceptable.

More importantly, we must not settle for the status quo when it comes to the unsustainable rise in tuition for our students, and debt for our students and their families. THAT is my NUMBER ONE priority.

Madam Chair, I appreciate and share your concern about ensuring this state’s great public research university is effective, efficient, and excellent in all we do.

I’m very proud to tell OUR story, the University of Minnesota’s story, a great story.


Let me tell you about the University of Minnesota. We are mission driven. Our mission is a noble one, and distinctive. We are the only comprehensive research university in the state. Minnesota’s one land-grant university. We educate the state’s top students and prepare them to be engaged citizens. We prepare and nurture them for the jobs of tomorrow, and the day after tomorrow. We attract talent from the nation and the world.

It is appropriate that the full name of this committee is Higher Education AND Workforce Development. Those are the businesses we’re in. We graduate more than 15,000 students a year from our five campuses. That includes more than 80 percent of physicians; all of the pharmacists, dentists, and veterinarians; most of the civil and electrical engineers who work for your cities and counties; and some of the great social workers, artists, and business and civic leaders to be.

Through research, we solve the state’s most pressing problems, as you have asked us to do for more than 160 years.

Our Humphrey School for Public Affairs serves as a convener for you and your colleagues to prepare for legislative work.

Our College of Food, Agriculture and Natural Resource Sciences has THE expert on invasive species, and we are working to preserve the state’s rivers and lakes.

We discover cures and treatments for diseases.

We invent products and processes that aid, among others, our mining and medical device industries.

Our scientists and entrepreneurs have created mini-robots to protect our police officers in Minneapolis and our soldiers in Iraq.

Our artists, musicians, and writers have made their marks in museums, theaters, and publications around the world.

The third leg of our mission is outreach and public engagement. Our Extension has a presence in all 87 counties. The Urban Research and Outreach Center in North Minneapolis is pioneering community-engaged research to address local community needs. We have health clinics and allied health satellite offices across the state.


Take a look at this map showing you our footprint, from Crookston to Rochester, from Duluth to Morris, and just about everywhere in between.

The Ms are our campuses, each distinctive, each bringing great value to their regions and the state. In many states, the system would have a separate administrative structure and system costs would be attributed to that central system office.

We’re different. System costs—from Crookston, Duluth, Morris, and Rochester—are attributed to the Twin Cities campus. I’m the president of the system and the president of the Twin Cities campus.

That makes our costs more complex. It also makes us more efficient.

I am very proud of our system.

  • UMD is a great regional university with important research aligned with its natural resources, be it mining or fresh water research on Lake Superior.
  • Crookston, a leader in eLearning initiatives, is also—surprisingly to some—attracting students from around the world with a strong international program.
  • Morris, a top-ranked public liberal arts college, is known for its commitment to sustainability and exceptional education.
  • And Rochester, our newest and most entrepreneurial campus, is breaking new ground in healthcare education and job creation.

The squares are our research and outreach centers. The circles our regional Extension offices that anchor our research and service in all 87 counties. Extension helps to sponsor about 71,000 4-H members statewide. Thousands of young people learn leadership, agriculture, robotics, nutrition, and more. That’s engagement!

Sometimes, people don’t realize just how complex the University of Minnesota is and the many ways we serve the state every day.

  • Our Twin Cities campus is the fourth single largest campus in the nation.
  • We have a veterinary diagnostic lab and farms in St. Paul.
  • We have sophisticated physics labs on the Iron Range and a state-of-the-art biology lab near the headwaters of the Mississippi.
  • We have a research vessel on Lake Superior.
  • Our clinics and hospitals receive more than a half million visits a year, to treat and cure illnesses.

And that’s just the humans! For the other members of your family, our Veterinary Clinic sees more than 35,000 animals per year, making us the largest vet teaching hospital in the nation.

And we:

  • are home to 10,000 students,
  • prepare 40,000 meals a day,
  • run bookstores,
  • field basketball teams,
  • cheer for hockey national champions,
  • provide a world-class art museum, and
  • tap our toes to the Pride of Minnesota—our 320-member student marching band.

We’ve been asked to do a lot to serve this state and our students.

And we respond proudly for the common good of the state of Minnesota, our students, and their families.


As we impact the state, we have proven ourselves to be accountable to you and your fellow legislators. We exceeded all five of the performance measures you established for us in 2011. You asked us to hit three of five. We hit home runs on all five.

We increased institutional financial aid, awarding $210.5 million of aid in FY2012, an increase of $41 million from FY2010, as you asked.

We produced at least 13,500 total degrees system-wide in FY2012, as you asked.

We, in fact, awarded 15,568 degrees in FY2012, including more than 10,000 undergraduate, 4,400 graduate, and 800 professional degrees, as you asked.

And we increased four- and six-year graduation rates for Twin Cities undergraduates, as you asked.

In fact, four-year graduation rates increased to 57.9 percent in 2011–12, up 7.7 percent from 2010–11.

Six-year graduation rates increased 2.5 percent, to 72.9 percent.

We not only maintained 2010 levels of research and development expenditures, as you asked, we actually increased that research effort by $106 million.

Finally, we not only maintained sponsored research funding from business and industry at 2010 levels, as you asked, we increased it $10 million —to about $45 million.

Our report card earned an A-plus.

And at your hearing on Thursday, our Provost Karen Hanson will share our detailed Plan, Performance, and Accountability Report with you.


As you see, our economic impact is profound. We are a great investment, with an ROI of $13.20 to every one dollar you invest in us, our students, our faculty, and researchers. We create smart workers for important jobs. We create entrepreneurs who start up companies. We attract talent to our state, and that talent stays.


One of the magnets that pulls students and innovators to Minnesota is our remarkable research enterprise. We are the eighth most active public research university in the nation, in a state that is 21st in population. We have a deep history of discovery: from Nobel Laureate Norman Borlaug’s launching of the Green Revolution to feed the world, to the first portable pacemaker, to more recent inventions like life-saving anti-AIDS drugs.

This center of curiosity benefits our undergraduate students who are learning from worldwide experts, from the scholars who write the textbooks for other professors around the country.

And, speaking of the Nobel Prize, this year’s chemistry winner is our own Brian Kobilka, a proud UMD alum.


We are a very good institution. And that’s one of the major reasons our enrollment has soared over the past 12 years, growing from about 59,000 to now more than 68,000. Students who used to go elsewhere are staying home and graduating from the University of Minnesota now. Our reputation and the value of a University of Minnesota degree have grown.


As students stay, they are graduating at increasingly rapid rates. As this slide shows, our four-year graduation rates have doubled over the past dozen years. Moving students to graduation in four years means fewer years of tuition, less debt for them and their families, and entry into the state’s workforce sooner. It’s also good for the University, allowing us to serve more students.

One other thing: This spike in graduation rates is testament to the value of our investment in student services that provide the support students need to succeed, be it advising, counseling, or tutoring.


The students we serve are among the state’s and the nation’s best, improving the academic environment. I’m especially proud of the bar at the far left of this chart of ACT scores. The average ACT scores on the Twin Cities campus of the 572 entering freshmen in our Honors Program exceeded those of students at the University of California-Berkeley, and Minnesota’s top private colleges: Carleton and Macalester.

And the average ACT score of all of our Twin Cities campus first-years is now 27.5. There are a lot of smart kids roaming the walkways and classrooms of the University of Minnesota, young people who will change this state and this world.


Just look at the trajectory over the past decade of our incoming students’ high school ranking and ACT scores. The red line shows our increase over that period by three points. I think that’s impressive.


Not surprisingly, look at the correlation between retention and graduation rates. Excellent students now enter the University highly prepared to succeed. They stay here at a rate higher than most private colleges. They like it here. They learn here. They graduate from here.

And let me emphasize: about 63 percent of our incoming class on the Twin Cities campus are Minnesota high school kids. And, with all the transfer students we get from MnSCU and elsewhere, about 70 percent of our total student body is comprised of Minnesotans.


Of course, Minnesota young people are becoming more diverse. Diversity is critical to achieving excellence at the U. By 2035, almost half of the citizens of the Twin Cities metro area are expected to be people of color. Minnesota faces one of the nation’s largest K through 12 educational achievement gaps between white students and students of color.

As you may know, I’m the co-chair of Generation Next, a new, exciting and broad partnership of metro-area schools, businesses and non-profits working together to solve this pressing problem. Our partnership with K-12 leaders will help to close that unacceptable gap. The University is uniquely positioned to bring its resources and research to this challenge.


We are especially gratified that high-achieving students of color are choosing the U for their education. While about 16 percent of Minnesota high school graduates are students of color, more than 22 percent of our freshmen are students of color, as the chart shows. Education is the pathway to success and prosperity.


But that pathway can be travelled only if all of our students can afford the University. We must keep the University accessible and affordable for low- and middle-income families, and we are. In 2010, we provided $490 million dollars in all kinds of aid to students. Our University of Minnesota Foundation has made student support a priority, too,—AS HAVE I—with private giving adding much to the financial aid pool.

And the impact of that aid is illustrated on the bottom half of this slide. The University is highly competitive when it comes to keeping the net price low for lower- and middle-income students and families. We are, in fact, among the lowest in net price among the nation’s top research universities.


All of this progress, all of these accomplishments, all of this improvement of the University—which began under previous leaders—occurred against a backdrop of severe budget challenges for us, and for you.

I know the budget crunch that you’re facing here at the legislature.

I know the demands on you and the needs of others in the state.

I appreciate that.

But let me briefly touch upon our state appropriations in recent years, and how much that’s affected the rise in tuition.

Over time, there has been a dramatic reset of the University’s revenues. As this slide shows, nearly a quarter-century ago, in 1989, state appropriations accounted for almost 40 percent of our revenue. In Fiscal Year 2012, the state’s investment was less than 19 percent. So, as we produce more and better-prepared graduates more quickly, we are receiving dramatically less state aid.


If you go back to 1999 and follow the plummet to 2011, we have seen a reduction of state support for the University, in 2010 constant dollars, of about 48 percent.

That is more than twice the national average among other states.

That, Madam Chair, is a disinvestment that is not sustainable. Our funding levels per capita are below Louisiana and Mississippi. And there is a direct correlation between the state’s reduction in support and the rise of tuition.

The state of Minnesota and the University of Minnesota must renew our partnership for the sake of our students and their families—for the sake of your constituents.


Now, I’d like to turn to our administrative costs and an initiative I’ve been leading since I became president in 2011. It’s called Operational Excellence. I’ve met just about every week with my senior leadership team to find ways to invest more in our core missions of teaching, learning, and public outreach.

Amid all this work, the Wall Street Journal began examining the costs of higher education. They were attracted to us after reviewing so-called “IPEDS” data. IPEDS is an acronym for the Integrated Post-Secondary Education Data System, and it is a national database for college and university statistics. But there are not standard definitions.

Schools categorize employees in vastly different ways. We worked closely with theWall Street Journal to get them the data they requested and provide analysis. Our staff spent days with their reporters. We were as open and transparent as any institution could be to a media outlet.

That’s why I am dismayed about the Wall Street Journal’s characterization of the University of Minnesota, about how they conflated some of the data and, ultimately, how they misreported some of our administrative costs.


You can see the variable reporting on this slide. We pulled historical IPEDs data from a few research universities. The University of Minnesota Twin Cities is the red box.

First, note that there was an IPEDs definitional change in the middle part of the decade. As we implemented the change see what happened to our counts between 2006 and 2007? From 818 to 2,239.

I can assure you, we did NOT add 1,400 administrators in one year.

Instead, given the definitional change, we added job codes to this category that we previously did not count here.

When we think about measurement, we worry about validity—are we truly measuring what we intend to measure?

And we worry about reliability—are we consistently measuring the same thing when we replicate the study?

I contend that these data fail on both counts. They lack face validity.

Given that the size and structure of research universities are not radically different, it is hard to imagine that we have a valid measure of this employee category when the results vary by a factor of five.

More concerning is the reliability of this measure. Look at the swings at Wisconsin, Michigan, Berkeley, and Johns Hopkins—our peers, all large and leading research institutions.

I ask you to remember again that large increase from 2006 to 2007. Where did those numbers come from?


IPEDs has a second category of “other professionals,” which you see on this slide. The Wall Street Journal did not consider this category.

However, as you see, from 2006 to 2007 is when our “administrative” staffing figures went up as our other professionals went down.

In the same time frame, Florida’s and Washington’s “administrative” folks stayed flat, but they added over 2,000 “other professionals” at each institution.

Madam Chair, members of the committee, with all due respect, if we are going to get beat up on one category, I think it’s only fair to give us credit on the other one. But the reporter didn’t do that.

Also, note that in this category we are now magically twice as efficient as Wisconsin, Washington, and Michigan.

And, finally, when you add up all of the professionals—those categorized as “Executive/administrative” and those categorized as “other professionals,” we are the lowest in headcount among Wisconsin, Washington, or Michigan.


One of the most referenced alleged facts in the Journal’s report was the assertion that we had added more than 1,000 QUOTE-UNQUOTE “administrators” to our work force since 2001.

But, Madam Chair, that is simply not true.

I don’t want to get us into the weeds on these categories, but I do want to show how efficient we are.

Within every department, there are various ways to record expenses. There is an expense category called “academic support.” When faculty members are entered into our budget system, a few of our units paid them from accounts labeled as “academic support.”

These faculty were subsequently picked up as “administrators” in our HR reporting. Needless to say, that screws up our reporting of data. Of those 1,000 or so additional employees that the Wall Street Journal called “administrators,” 354 were faculty.

That was our fault in reporting. We won’t make that same mistake again.

But there’s a second important point.

Of the remaining in that group, more than half were administrators who are notsupported by state or tuition funds, but rather from other funds such as federal grants and contracts, auxiliary funds, or other funds. The reporter didn’t ask or write about the source of their salaries. A director of patient care services in our clinics or the director of the Institute on the Environment would be examples of these types of employees.

The remaining 340 or so—not 1,000—were hired over the course of a decade. That’s 34 a year.

They are, in fact, our administrators, who perform critical support roles that have led to our increased graduation rates, retention rates, and research increases. They include coordinators in the Clinical Trials Research Office, coordinators in the Office of Disability Services, classroom technology professionals, Study Abroad advisers, the program director for the Human Rights Institute, and coordinators for Minitex (state library system).

And these important contributors to our mission were hired as our enrollment grew by 9,000 students, our research spending increased by 40 percent, and we added a completely new campus in Rochester.


As I said earlier, by almost every measure, the University of Minnesota is more productive than ever. That includes our employees.

We have thousands of wonderful, hard-working, dedicated employees, who are driven by our mission to serve students, produce valuable research, and work with our community partners across the state. Employee headcount has remained relatively flat even as our enrollment, our research enterprise, and our responsibilities have grown.


Look here: Our ratio of students to employees is up nearly 11 percent over the past decade.


And look here: Because of our increased graduation rates, our degrees per employee rate is up more than 28 percent.


Finally, by our other important mission-connected measure, our sponsored research dollars per employee rate has climbed more than 41 percent over the past decade.


Madam Chair, members of the committee: I am not here to bury you in statistics. I am here to tell you that the University of Minnesota is changing. And I am not standing for the status quo.

  • We have saved:
    • $16.8 million by modernizing our purchasing procedures;
    • $5.6 million in energy costs;
    • $2.2 million by closing two major administrative offices and eliminating a senior vice president position;
    • $130,000 annually by consolidating libraries on our St. Paul campus.
  • We pioneered Google apps—among the first universities in the nation to do this—a move valued at more than $15 million a year.
  • We’re closing 9 percent of our 241 centers and institutes.
  • We completed an external review of our Academic Health Center and are launching a strategic planning process in the Medical School.
  • We partnered with the Board of Regents and adopted new executive compensation policies and oversight.

We have done much in such a complex organization. We have still a long road to travel, a long way to go.

I pledge to you that I will aggressively lead that effort to make us even more efficient and drive down costs.

But, Madam Chair, members of the committee, I hope you can see that we are committed to doing our part, to hold up our end of the bargain. Frankly, we need the state to better do its part, to better support all of our remarkable work.


Our work isn’t done. There will be many next steps. We are in the process of launching a so-called “spans and layers” analysis.

I know you, Madam Chair, and Leader Bakk have asked us to do that. And we are pleased that you have. It will show you how well we’re doing. And it’s already bearing some results.


We’ve had an initial reorganization within our libraries. The University of Minnesota Libraries are among the best in the nation, and a real state asset, as well, with 7 million volumes that we share with colleges and public libraries around the state.

Our libraries have more than 270 employees—but under my administration we have reduced the number of supervisors by 22 percent and increased the number of employees who report to each supervisor dramatically.

Unfortunately I have to get into the weeds in this category, just a little bit. And in fact, the data file we gave the Wall Street Journal had an error. The problem is, within every department is allocated a budget. Some budget for faculty, some budget for travel, some budget for supplies, some budget for academic support. In some of our units, faculty members—in fact 354 faculty members across the institution—were coded for salary purposes as academic support.

Doesn’t affect the budget, bottom line. Does reflect that somebody should have moved money out of academic support category into faculty salary category and then coded the faculty member correctly. They didn’t do that.

Again it doesn’t affect our budget bottom line, and our HR reporting system doesn’t use this data. Unfortunately, as it turns out, the Wall Street Journal does. So, of the so-called “1,000 administrators” we added, 354 are faculty, with titles assistant professor, associate professor, and professor. That was our fault in reporting and we clearly won’t do that again.

Of those remaining in the group, more than half were not supported by state or tuition funds, but rather by other funds such as federal grants and contracts, auxiliary funds, those from our business operations, etc.

The reporter didn’t ask or write about the source of those funds. For example, those job titles included coordinators in our clinical trial research office, coordinators in the office of disability services, a fair number of classroom technology professionals. As we move classrooms into the 21st century, we need to hire professionals to bring that technology into the classroom. It’s good for students, it’s good for the faculty, it’s good for the University. Those people show up in this category. Study abroad advisers, the program director for our world-famous Human Rights Institute, and you may know we maintain the state library system called Minitex, and we hire librarians who provide better service for Minnesotans—this is the category in which you find them.

And these important contributors in our mission were hired, remember, as our enrollment grew by 9,000 students and we added a completely new campus in Rochester.

So as I said earlier, by every measure, the University of Minnesota is more productive than others, than ever. It includes our employees. We have thousands of wonderful, hardworking, and dedicated employees driven by a mission to serve students, produce research, and work with community partners.


So, why does this matter? It matters—we matter—because an investment in the University is an investment in this state.

What’s at stake here?

Nothing less than the preparation of the next generation of Minnesota’s leaders.

Nothing less than the development of jobs and technologies for your children and grandchildren, for your nieces and nephews, and translating that all to make this a better Minnesota in which to live, work and prosper.

I have a vision and priorities of where I’d like to take the University. I know later this month I will get a chance to more fully detail our biennial budget request.

We must remain vigilant stewards of public and tuition dollars. And we will.

Please, don’t lose sight of all the University of Minnesota does to prepare the next generation of leaders, to keep this state prosperous and to keep Minnesota moving forward.

As the weeks unfold this legislative session, I’m eager to work with you. I’m happy to take your questions.

Thank you.