2007 IFO Legislative Goals
MnSCU Operating Budget Request (in priority order)
MnSCU has not had an inflation adjustment since 2001. In FY02 the appropriation for MnSCU was $601 million. Last year the appropriation was $600 million—one million dollars less than four years earlier, even though inflation during that period was 11.82% and enrollment at MnSCU institutions grew by 8,005 FYE students (the equivalent of a good-sized university). The governor again proposed no inflation adjustment for MnSCU or the U of M for the next two years. The IFO hopes the legislature will provide an adjustment.
The failure to recognize inflation has had two important impacts. First, the costs associated with inflation were pushed on to students, forcing the share of operating costs borne by students up from 33% of the total costs to 50%. Student tuition increased 54% in just four years! This is reducing access, forcing students to stretch out their times to degree completion, and is driving students deeply into debt.
Second, the failure to recognize inflation has meant that faculty salaries have not kept up with inflation and are no longer competitive with peer institutions nationally. State university faculty members are recruited nationally. State university faculty salaries are below average at all ranks, meaning universities are forced to hire from a labor pool that is 50% picked over by better paying institutions; one in five faculty searches fail. This is an important quality issue.
The MnSCU new initiatives are fine, but maintaining the quality of the 3,500 current academic programs in MnSCU—the programs that produce half the state’s teachers, 84% of the nurses, 92% of law enforcement officers, etc., is even more important. MnSCU needs an inflation adjustment.
In the mid-1980s, Minnesota state university faculty ranked near the 80th percentile among peer institutions (Carnegie Category IIA) nationally. Universities were able to hire some of the best and brightest faculty available. According to the most recent survey, Minnesota state university faculty salaries rank between the 40th and 50th percentile nationally.
In addition to an inflation adjustment, IFO supports bringing salaries above average at all ranks—at a cost of approximately $26 million. The governor’s budget calls for $28 million to attract and retain faculty at the U of M—we hope the legislature will do the same for MnSCU faculty. Some of the funding for attracting and retaining faculty could come from the legislature reallocating the $12 million MnSCU received for competitive compensation last session (but which they used for one-time IPESL grants) into a base appropriation for raising faculty salaries to competitive levels.
An equity study in 2002 revealed significant salary equity problems at state universities, and these inequities were only partially remedied at that time because of limited resources. A consultant has been hired and a comprehensive equity study is now underway. The results should be available by this fall. This appropriation request is to provide funds to remedy salary inequities.
IFO supports the MnSCU requests for funding for new initiatives, but only after funding an inflation adjustment for current programs. MnSCU’s $10 million “Management Innovations” initiative should be funded from reallocations within the Office of the Chancellor.
The $25 million one-time “performance bonus” money proposed by the governor was not requested by MnSCU or any of the MnSCU constituencies. MnSCU cannot give permanent salary adjustments based on one-time money. It is not clear who would get the performance money if the performance objectives are met, nor is it clear how it is supposed to motivate faculty. Nevertheless, the money could be put to good use if it was used for one-time faculty development grants thereby freeing up base competitive compensation money for faculty salary adjustments.
IFO supports legislation to give high school students a financial incentive (a tuition grant) for taking challenging coursework in high school through programs like AP, IB, and PSEO. Hopefully the program will encourage students to challenge themselves more in high school and be better prepared when they reach college. The program could also make college slightly more affordable for students of modest means. The program is not the answer for all students—some students struggle to master high school coursework in high school. Also, a drawback of the program is it deprives students of part of their “college experience.”
In the near future, some of MnSCU’s basic computing infrastructure will be outdated and no longer supported by vendors. IFO supports funding to upgrade to a new and better infrastructure, but believes that MnSCU should do the conversion-utilizing outsourcing and contracting rather than adding a lot of expensive permanent staff positions. IFO also believes the request needs to be carefully scrutinized by the legislature to make sure the investment supports academic activities. Only $4.5 million of the current $70 million request would support academic technology systems. Also, only $10 million of the $70 million would go to colleges and universities—the remainder would be spent through the system office.
Funding Policy
Currently, 87% of the appropriation received by MnSCU is allocated out to colleges and universities via the MnSCU Internal Allocation Formula approved by the Trustees. Another 4% is directed to campuses through specific line items. The remainder of the budget (about $59 million) stays in the system office to support the Office of the Chancellor and systemwide set-asides. Even though MnSCU institutions are primarily teaching institutions, only about 45% of MnSCU’s budget goes toward instruction. IFO believes more money should be directed by the legislature straight to colleges and universities to support academic instruction.
The core mission of MnSCU institutions is instruction. A greater percentage of MnSCU’s resources should be directed to that activity.
The statute on funding higher education reads:
135A.01 FUNDING POLICY.
It is the policy of the legislature to provide stable funding, including
recognition of the effects of inflation, for instructional services at public
postsecondary institutions and that the state and students share the cost of
those services. The legislature intends to provide at least 67 percent of the
instructional services costs for each postsecondary system. It is also the
policy of the legislature that the budgetary process serves to support high
quality public postsecondary education.
Even though MN Statutes 135A provides a funding formula for higher education that calls for recognition of inflation and for the state to pay 2/3 of the cost of instruction, the statute has been ignored for the last four years. Two years ago the funding formula was changed so it no longer recognized enrollment. The state now operates on a system of just funding new initiatives, ignoring the maintenance of the funding base. IFO believes it is time for the state to redesign the funding formula for higher education. We believe the legislature should establish a joint task force of representatives appointed by the Governor, the House and the Senate. The task force should present recommendations to the 2008 legislature, and if adopted, the new funding formula should be implemented next biennium.
Tuition
Due to a court interpretation of Minnesota law, corporations are able to escape taxation on what they define as off-shore earnings. If Minnesota adopted the same definitions and treatment of off-shore earnings as the Federal law, the state would collect about $95 million per year in revenue. Last election cycle, many candidates supported closing this loophole and using the revenue to buy-down tuition rates for students. IFO supports such a move. We believe it is better to close a corporate tax loophole than to raise tuition rates on students.
Capital Budget (Bonding)
As part of the bonding bill, legislature approves appropriations for Higher Education Asset Preservation and Repair (HEAPR) projects. These funds are used to maintain the existing infrastructure by replacing roofs, exterior doors, windows, mechanical systems, etc., and to remove hazardous materials and improve life safety systems. MnSCU has a huge backlog of HEAPR projects, and is trying to catch up with this need over time. Last session MnSCU’s number one request was for $110 million in HEAPR funds; the legislature appropriated $40 million. We believe that this session the legislature should use available bonding authority and one-time money to fund the remaining $70 million. Before we build new buildings, we need to maintain what we have.
Retirement Issues
The Roth Tax Sheltered Annuity is similar to a Roth IRA, but the amount that can be contributed to the Roth TSA is much higher--$15,000 per year. Making the Roth TSA available to MnSCU employees would not cost the state money, but would make a valuable tax-break available to faculty, staff and administrators.
Currently new faculty are placed in the Individual Retirement Account Plan (IRAP) and have up to one year to switch to the Teachers Retirement Plan (TRA) if they want to. The vast majority of faculty stay in the IRAP plan because it is more portable in case they change jobs, however, many of these faculty members may prefer the predictability of the TRA defined benefit plan in the long run. Allowing faculty to wait until they reach tenured status before making a choice would give them a better idea which plan is likely to best fit their needs.
MnSCU is currently holding in excess of $1.25 million in “abandoned” pension funds, where the owners have moved away, and even after extensive efforts to locate them, they cannot be found. In TRA, MSRS, and PERA, the abandoned funds are used to offset costs of the fund—benefiting members and employers alike. IFO believes a similar system should be created for the IRAP and Supplemental Retirement funds.
TRA benefits are not very portable—if a TRA participant loses their job or changes jobs prior to vesting, they loose the employer contributions—they can only take their own money with them. IRAP is very portable—if a member loses their job or changes jobs they can take both their own contributions and the employer contributions on their behalf with them. Therefore, IFO believes that IRAP is the appropriate default for faculty members. Currently all members who want TRA can switch to TRA within one year of employment.
Miscellaneous
The current method of selecting MnSCU Trustees has led to a very partisan Board of Trustees who are more concerned with advocating the Governor’s views than advocating for the system and its constituencies. IFO believes the method used in selecting U of M Regents has lead to a far less partisan board, focused on the best interests of students.
The state has set up a vetting process to recommend the best qualified individuals for MnSCU Trustees. Unfortunately, the governor has circumvented that process in appointing candidates. We believe that the Senate should establish a practice of not confirming the Governor’s appointees who have not been recommended through the statutory screening process.
Faculty members who are in domestic partner relationships do the same work, and pay the same taxes and union dues as their married colleagues. IFO believes they deserve the same employee benefits.
Current statutes cover this matter—there is no need for a constitutional amendment. The words “or its equivalent” in the proposed constitutional amendment could be interpreted as outlawing domestic partner benefits in collective bargaining contracts—even benefits such as using sick leave to care for a partner, or bereavement leave in the case of the death of a partner.
There are young people in Minnesota who were brought here illegally by their parents when they were very young—they didn’t have a say in the matter. They completed high school and now want to go to college to better themselves. IFO believes these young people deserve a chance to get an education and become productive members of our society. They should be allowed to attend Minnesota public colleges and universities at the same tuition rates as Minnesota born students.
Financial Aid
Raising the cap on state grants only helps students who choose to attend expensive institutions—not a single MnSCU student would benefit from raising the grant.
All students benefit equally by raising the LME allowance under the state grant program—IFO believes it is the fairest way to improve state grants.
The IFO supports financial incentives to encourage students to enter fields where significant shortages exist, such as nursing and certain teaching fields.
Collective Bargaining
Last biennium the legislature appropriated $12 million “to pay competitive compensation to faculty and staff for initiatives that promote excellence in student learning.” MnSCU interpreted this language to mean performance pay, and tried to use the language in bargaining to say the legislature wanted performance pay. The appropriation did not lead to competitive compensation, and faculty salaries are less competitive than ever. If the legislature passes future competitive compensation appropriations for MnSCU faculty, the IFO encourages the legislature to use the rider language that was used for the U of M competitive compensation rider: “This appropriation includes $13 million of competitive compensation to enable the university to attract and retain quality faculty members.”
Academic Issues