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Kaler shares his thinking on U of M budget and policy proposals

Kaler proposes to freeze undergraduate tuition, pare 5 percent from the U’s state funding allocation, tie an additional 1 percent to performance indicators, and invest in innovation in four arenas.

U president Eric Kaler proposes to freeze undergraduate tuition, pare 5 percent from the U of M’s state funding allocation, tie an additional 1 percent to a series of ambitious performance indicators and invest in innovation in four key economic arenas.
MinnPost photo by John Noltner

In days not so long gone, University of Minnesota administrators would spend the run-up to the first, budget-generating year of each legislative biennium crunching big numbers intended to show that the U of M is a big driver of big economic ripples. And of course this return-on-investment narrative was inevitably punctuated by a big ask.

When President Eric Kaler presented his first full biennial budget request to the University of Minnesota Board of Regents earlier this month, the big numbers came accompanied by something new: policy requests Kaler would like to put before the Legislature this winter.

Kaler proposes to freeze undergraduate tuition, pare 5 percent from the U of M’s state funding allocation, tie an additional 1 percent to a series of ambitious performance indicators and invest in innovation in four key economic arenas.

He also would like lawmakers to create a series of tax credits that will help students and their families pay for their education. The package, he said, will make higher education more affordable and increase its impact on the state’s economy.

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Kaler recently took time to talk to MinnPost about his thinking. An edited transcript of that interview follows.

MinnPost: Let’s talk about the thinking behind your change of strategy in terms of your relationship to the Legislature.

Eric Kaler: This is really an extension of my desire to mitigate our tuition for undergraduate students. Last year we put in place a 3.5 percent tuition increase. That was below what we had projected at the beginning of the biennium, before I arrived, to be a 5 percent tuition increase for the current school year.

To come up with a proposed budget we look at our current expenditures and then we project what our cost-drivers — utilities, insurance premiums compensation, maintenance, etc. — will do in the coming biennium. So that gives you a target. Historically we’ve met that target by cost reductions, tightening our belt, by requesting help from the state and by raising tuition.

As I looked at the numbers, and reflected on the burden that tuition puts on students and their families and the need to mitigate student debt, I asked the team to see what we would need to do to have a zero percent tuition increase over the next two years.

They came back with what we’ve laid out.

It basically involves a reallocation effort, a cost savings of $28 million. That, coincidentally, responds to the governor’s request asking how [state agencies] would manage a 5 percent reduction in their allocation. The gap that’s left is $14.2 million recurring in each of the two years, which we ask the state for. If the state can do that, we will be able to not raise tuition for resident undergraduate students.

MP: You’ve proposed pumping $18 million over the course of the biennium into a research funding program called MnDRIVE, which stands for Minnesota Discovery, Research and InnoVation Economy, which is intended to bolster research in four arenas. Tell us about them.

EK: We identified those four areas in a very strategic way. They are areas in which we already have good research strength, good expertise. They’re areas that are highly resonant with the needs of Minnesota companies, so that we’re responding in a partnership with those companies to drive economic activity.

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The idea that the research we will do will be of use and interest in Minnesota and relevant to the economic and environmental needs of the state and people of Minnesota.

First off, robotics and advanced manufacturing is a theme that cuts across Minnesota industry. It’s one in which the university is strong, and it’s an area in which there’s a great deal of organizing activity around the Twin Cities for robotics. So that’s a good match for us.

The second is managing environmental impacts around water use. That’s particularly relevant to the taconite industry in northeast Minnesota to enable that industry to thrive while helping to manage its environmental footprint. The presence of sulfates, sulfites, in the water impacts wild rice growing regions.

The same is also true for the fracking industry that’s unleashing natural gas. Treating water from that process is important. So that’s a very practical, real-world kind of problem we’re dealing with.

The third is a food initiative with the multinational companies in Minnesota, with the importance of agriculture to the economy of the state and greater Minnesota, and the university’s expertise in food safety, disease control, etc.

Of all of these, this is the no-brainer. This is one that can really move us to be what I’m calling the Silicon Valley of the food industry. We can be leaders in feeding the world, and that’s really exciting.

The fourth is in the medical field, in neuromodulation. In lay terms that means using electrical stimulus to control central nervous system disabilities, from schizophrenia to Alzheimer’s. We have a good base for this funded by the National Institutes of Health.

This is the next frontier for the medical device companies, their next generation. Medtronic, Boston Scientific, St. Jude — there are 15,000 jobs in that industry in the state. We think having academic expertise here will really help that industry. We can be an absolute leader in that field with a little help from the state.

MP: Something your administration has been pretty deliberate about is pointing out the return on investment to the state.

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EK: I believe passionately in the public good of public higher education. I think an educated population is the bedrock of democracy. I’m passionate about that and the role of liberal arts in educating us, but that’s not a broadly accepted view in the Legislature, certainly, and the pressure is continuously on to demonstrate the return on that investment. What does the state, quote-unquote, “get for its money”?

And so you’re right, I am pretty focused on making that case so that even a skeptic about the value of higher education would realize the economic value of what we do and be willing to put state resources there.

Right now our funding from the state is about at the level we had in 1999. If our request is fully funded in fiscal 2015 we would receive precisely the same dollar amount, not adjusted for inflation, we received from the state in 2001: $604 million. So that gives you some perspective on how deep and profound cuts have been over the past decade, and how we’d like to begin to reset that.

MP: Can you talk a little bit about the accountability piece?

EK: That is a response to directionality that the governor has expressed and that I hear in the Legislature. And I get that. The state puts money into the university. It’s a completely legitimate question to ask, what do you get out of it? How are you accountable for the outcomes that those resources provide?

I’m confident that we are able to meet the outcome targets that we set in terms of graduation rate, the number of degrees produced and research funding maintained and we’re willing to put what translates to about 1 percent of our allocation at risk. We achieve those benchmarks in 2014 and the state allocates that money to us in 2015.

The entire exercise is meant to be as clear and transparent as we can be about what the state is getting for its investment.

MP: The final piece is the tax credits.

EK: Tax credits for loans, not taxing scholarship income in excess of tuition and fees, being able to promote philanthropy for donors who want to increase the contributions they’ve made to higher education and also a loan forgiveness program for students who work in greater Minnesota in the health field or the veterinary field to enable them to go out to a part of the state where the income levels might not be what is needed to let them repay their loans. These ideas benefit public and private not-for-profit higher education in Minnesota.

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The tax-policy conversation is a new one. We don’t have the fiscal notes yet on what those would cost, and obviously we would scale the numbers to make the costs reasonable or plausible. So that’s a little bit of a work in progress. But I think the idea of working within the tax code to help people gain access to higher education is a good one.

If the state cooperates with us to hold tuitions fixed for these two years, students entering in 2013 at the Twin Cities campus and graduating in four years would save over that four-year period about $2,500 in tuition.

About a third of our students who graduate, graduate debt-free. For those who graduate with debt, it averages $27,000. So you’d be looking at a way to reduce that load by a little less than 10 percent. That’s a step in the right direction in terms of making the university more accessible.