Recent media regarding the U's administrative costs

Thursday, January 3, 2013

Dear Colleagues,

During the holidays you may have seen this front page Wall Street Journal article on Saturday, Dec. 29, followed by a Washington Post editorial published in the print edition on Tuesday, Jan. 1 and republished in today’s Star Tribune. Thank you to everyone who provided information to Journal reporter Doug Belkin. As a result, Belkin developed a deeper understanding of how the University works. We currently are finalizing a response to the Post editorial.

While there wasn’t much new to us in the Journal article, it does remind us how complex the University is, and why we must look forward and operate differently, reducing administrative costs to keep tuition increases low and to continually reinvest in our mission. The Post’s response also is an indication that the scrutiny higher education has been under for some time will continue and intensify. More than ever, we must commit ourselves to working more efficiently in every part of our diverse, decentralized organization.

Creating an accurate baseline

The Journal based many conclusions on its own analysis of data, some of which were provided by us and some of which were publicly available from the U.S. Department of Education’s Integrated Postsecondary Education Data System, or IPEDS. As this table shows, there are enormous variations between institutions of similar size and scope in the number of so-called administrative positions. To me, the data lack face validity and can’t be the basis for a comparison.

Given the weakness of IPEDS reporting, we must have the tools needed to monitor the makeup of our workforce. Vice President for Human Resources Kathy Brown and Vice President and CFO Richard Pfutzenreuter are leading this project. Based on their work, an analysis (PDF) was presented to the Board of Regents in October and we have developed a baseline for understanding which personnel directly support the University’s mission, which provide mission support, and where our administrative costs in personnel lie. This analysis finds that 50 percent of spending systemwide is on direct mission activities, 32 percent is spent on mission support and facilities, and 9 percent on financial aid. Only 9 percent is spent on administrative oversight. With this information, we can sharpen our focus on reducing administrative costs.

Building on our successes

If you receive questions about our ongoing work, here is information we will continue to communicate to stakeholders:

  • The University has become much more productive despite deep cuts in state support. We serve nearly 9,000 more students today than we did in 2000, an increase of nearly 16 percent; the per capita cost of educating and graduating a student is 13 percent lower than it was in 1997; research grants and contracts have increased 40 percent; private philanthropy has grown to record levels; and graduation rates are steadily improving.
  • Operational Excellence is a priority and I am pleased with early successes, which include eliminating the Office of Academic Administration (saving $1.6 million) and the Bursar's Office (reducing the budget by $674,000); consolidating library collections into one Natural Resources Library (saving about $130,000/year); avoiding $5.6 million in energy costs since 2009, thanks to decreasing energy use and decommissioning unusable space; and becoming the first higher ed institution in the country to move faculty, staff, and students to Google email and other applications, thus increasing efficiency and saving more than $15 million a year. Members of the senior leadership team continue to meet weekly to focus on future Op Ex opportunities.
  • We have made significant progress but there is much more to be done.Our leadership team is building on the work of President Robert Bruininks and his administration. Much was done under Bob’s leadership to cut costs and operate more efficiently, especially in University Services. Unfortunately, it also means the low-hanging fruit has been picked. We all need to make tough choices about where to invest and we may have to stop doing some things that do not advance our mission.

These elements are just the beginning of changes that the people of Minnesota expect us to make. It is clear that the challenge for higher education leadership will be to continue to advance academic excellence with limited funding. By continuing to work together, we will make this great University exceptional. I hope the New Year brings wonderful things for you, your families, and our University.


Eric W. Kaler