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The 2013 Legislature marks University of Minnesota President Eric Kaler’s first chance to negotiate a budget request at the State Capitol.

Kaler’s first U of M budget breaks new ground

Jason Rohloff, the University of Minnesota’s chief lobbyist at the Capitol, is hoping to convince the Legislature to grant the U a budget increase in 2014-15 following years of cuts to higher education spending. (Staff photo: Peter Bartz-Gallagher)

U of M offers tuition freeze plan, asks for $91M budget hike in new biennium

The 2013 Legislature marks University of Minnesota President Eric Kaler’s first chance to negotiate a budget request at the State Capitol. On the other end of those discussions, several of the key legislators hearing Kaler’s pitch will also be new, either thanks to retirements, redistricting or committee vacancies.

Even the conversation itself will be new, thanks to a bold budget request designed by Kaler and approved by the University’s Board of Regents last week. The University is seeking a $91 million increase in state funding for the 2014-15 biennium, which, if granted, would bring the state’s total contribution to $1.18 billion over the two years.

The request includes a series of distinctive features that legislators and University administrators say could change the discussion about higher education. Among the innovations is a plan to freeze tuition rates for in-state undergraduates if the state grants a $14.2 million-per-year “tuition relief” fund. Another $11.5 million of the proposal is tied to performance, and would reward the University if it meets certain “accountability” goals.

Republican higher education leaders in the Legislature generally approve of the University’s attempt to take a new direction. At the same time, GOP leaders are hesitant to embrace any proposed spending increase.

On the University side, key figures are cautiously optimistic about convincing lawmakers to buy into the budget request.

“It’s going to be a challenge,” said University Chief Financial Officer Richard Pfutzenreuter. Referring to the direct appeal for money in exchange for a tuition freeze, Pfutzenreuter added: “I’ll be honest, we’ve not gone into the Legislature with that kind of request in my 20 years here.”

Legislative survey

Earlier this month, the University of Minnesota Alumni Association released its first-ever survey of legislative candidates. Of 396 candidate recipients, 104 responded to the five-part query, which asked candidates whether they would support legislation that would favor the University. The vast majority of respondents were Democratic candidates, who, with rare exceptions, pledged their support to increase state spending levels on higher education.

But one prominent Republican legislator also chose to fill out and return his survey. Like nearly all of the DFL respondents, Sen. Majority Leader Dave Senjem, R-Rochester, answered in the affirmative on the survey’s first question: “Will you work for increased state financial support for higher education?”

Senjem explains his answer by pointing to a budget outlook better than the ones the state has faced in recent years. Last week, Minnesota Management and Budget announced that the state was $145 million, or 4 percent, above the February revenue forecast through the first quarter of the 2013 fiscal year. If those numbers carry forward into 2013, Senjem said, higher education should be “one of the top areas of reconsidering and moving back into a more normal budget cycle.” Senjem, who said he had not reviewed the University’s budget request and did not want to speculate, said he was looking forward to reassessing spending priorities next year.

“I don’t think many of us were really fond of taking over $300 million worth of funding out of higher education [in 2011],” Senjem said. “We’re looking at budget surpluses now, in the neighborhood of $1.4 billion, so I think we have some opportunities at reinstating some of the cuts that were made.”

As University advocates see it, even full approval of the 2014-15 budget request would only be the first step toward restoring state support. In the wake of the financial crisis of 2008, the state’s funding has fallen from a peak of $708 million in fiscal year 2008 to $569 million in fiscal year 2013. The current year’s funding level is the lowest since 1998, a fact stressed by Todd Iverson, the University’s assistant director for government relations.

Iverson said the “difficult couple of bienniums” brought on by the financial crisis follow a pattern that dates back decades. Charting the historical figures, he said, would produce “a little more of a roller coaster than a straight line.”

“If you look at the historical data, the University has been whacked hard when the [state] budget has gotten tight,” Iverson said.

To combat that trend, chief government relations officer Jason Rohloff, who replaced longtime University lobbyist Donna Peterson in 2011, will continue to press the argument that funding for higher education leads to innovations in technology, new businesses and increased revenues for the state. As part of the budget request, Kaler is pushing the creation of MNDrive, a new program seeking $18 million a year from the state to support increased focus on four targeted areas of scientific research, including food and robotics.
“We feel like these areas, specifically, with just a little bit of a boost from the state, can really pay big dividends,” Iverson said.

Legislators praise direction, question spending

Members of both legislative higher education committees said they were taking the University’s plan into consideration. Forest Lake-area Rep. Bob Dettmer, vice-chair of the House Higher Education Policy and Finance Committee, said any proposed spending increases will have to be assessed when a fuller budget picture emerges, but he added that he likes the broad strokes of the University’s plan, including its pledge to cut administrative costs by a total of $28 million.

“They recognize and admit that they still have a long way to go in reducing administrative costs,” Dettmer wrote in an email. “They are also attempting to restrain tuition growth for undergraduate Minnesota residents, which is positive.”

On the Senate side, Senate Higher Education Committee Chair Michelle Fischbach expressed reservations about the bottom line numbers in the University’s request.

“Generally,” Fischbach said, “it’s very high. They’re asking for quite a bit of money, and we don’t know what the state’s budget is going to look like.”

Fischbach had been privy to the outlines of the budget request, thanks to a meeting with Rohloff over the summer, one of several that he and other government relations staffers held with key lawmakers. One feature of the proposal that Fischbach likes, at least in theory, is the notion of slowing the growth of tuition costs. This year, in-state tuition runs $12,040 per student, an increase of nearly 50 percent since 2006. Without a complete budget forecast, Fischbach wasn’t ready to commit the necessary $28 million toward holding tuition rates, even if it might be a winning issue politically.

“[The tuition freeze] is going to be a very popular item, with parents and students,” Fischbach said, adding, “It’s hard to say how much money we’re going to have available. They put a very specific price tag on that tuition freeze.”

If the GOP holds on to its majority in one or both chambers of the Legislature, the University might find a powerful resource in Regent Laura Brod. Brod, who voted in favor of the budget request, served four terms in the Minnesota House, representing New Prague as a Republican. Brod thinks the combination of belt-tightening measures and new ideas is, if nothing else, a welcome new approach to higher education funding in the state.

“President Kaler is putting forward a budget request that has a new tone,” Brod said. “It’s going to be a very different conversation than we had in the past.”

Correction: This story has been amended to correct a misstatement regarding the University’s request for the MNDrive initiative, which would require $18 million per year in state funding, not $14 million as originally reported. The story has also been corrected to properly attribute quotes which were initially credited to Jason Rohloff, but should have been attributed to Todd Iverson. Rohloff and Iverson were interviewed simultaneously via phone, and the reporter misidentified their voices.

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