Four years ago this month we were wrapping up our cover story about incoming University of Minnesota president Eric Kaler. Our lead said he was inheriting “a punishing budget, a legacy of top-down management, intense demands to grow research, and a sports and marketing machine on a Big 10 scale he’s never seen before.”
Talking about the story with a local business leader with ties to the university, I said that I hoped Kaler could find a way to operate the U more like a business. She surprised me when she said, “That’s the last thing we need. Universities should be operated like universities, not businesses.”
Such a way of thinking was perhaps a propos as recently as 30 years ago, back when the governor of Minnesota was touting us as “the brain-power state,” and enough taxpayer support was going toward public colleges and universities. Those times are gone—and with them, quite a bit of the U’s state-provided revenue.
“The university receives roughly the same funding from the state as was appropriated in FY01, while serving 15 percent more students, adding the Rochester campus (2006) and increasing sponsored research activity (as measured by annual direct expenditures) by over 70 percent, or $200 million annually. According to Minnesota Management and Budget, prior to the 2014-2015 biennium, the state spent $569 million less per year in real dollars on higher education that it did 17 years earlier,” Kaler wrote in his budget summary for the 2014-15 year. Only about 20 percent of the U’s funding now comes from taxpayers.
The U president and his administration have, for more than a decade, needed to figure out how to bring in the majority of its revenue. This has included increasing ways the U can partner with businesses in teaching, research, philanthropy and lobbying. And it’s involved a multi-year campaign of more selectivity in who can attend.
The thinking goes that better-educated freshmen who also can pay more in tuition are more likely to finish college, do so with higher grade-point averages and find higher-paying jobs afterward—all improving the U’s performance metrics. In turn, even-better professors will want to teach there, even more high-quality students will want to attend and revenue will continue to grow.
The downside has been that in-state students have faced steadily growing tuition rates, while out-of-state students have paid among the lowest tuition rates in the country.
Ranked by U.S. News & World Report as No. 72 among national private and public universities, the University of Minnesota-Twin Cities is the 11th-most expensive for in-state tuition and runs 9 percent above average among the 29 schools on the list that ranked higher and also provided out-of-state versus in-state tuition figures. It is by far the cheapest on the list for out-of-state students, coming in 35 percent below average among the 29 schools that provided such information.
Every dollar invested in the University of Minnesota generates $13.20 in the statewide economy.
Research funds awarded to the U of M create $1.5 billion in economic impact and support 15,193 jobs annually.
The U of M supports 79,497 jobs statewide, 19,157 as faculty and staff.
U of M alumni have founded nearly 10,000 companies employing 500,000 people and producing $100 billion in annual revenue.
Among the seven major Upper Midwest universities that ranked within the top 75 on U.S. News’ list, the U of M’s ratio of out-of-state tuition to in-state tuition is 1.5 to 1—the lowest among them. Madison’s ratio is 2.6 to 1; University of Michigan’s is 3 to 1.
Out-of-state students still pay much more in tuition than in-state students do. And by catering to the more expensive tuition payers by offering them attractive prices, the U, over the course of 10 years, has grown its more lucrative out-of-state student population by 8 percentage points, to where it now accounts for 34 percent of all students.
Given that such selectivity has paid off (and some have started to criticize the U for high in-state tuition rates) Kaler this year announced tuition will increase only for out-of-state students. They’ll still find the U’s rates to be among the lowest, but they’ll pay a little more.
Months ago we decided to look into this and along the way, we found there’s much more going on when it comes to the U’s efforts to increase its revenues. “Inside The U's Reinvention Of Undergrad Education,” by Adam Platt, takes us through what it has accomplished thus far, and what more needs to be done.
It doesn’t matter whether you have kids thinking about college (or any kids at all)—for a healthier state economy, what happens to the U matters to each of us.
It’s the state’s ninth-largest employer with 19,157 employees (faculty and staff). It’s even larger when you consider it also supports 8,666 fellows and students, 8,017 jobs at the University of Minnesota Medical Center, Fairview and University of Minnesota Physicians; and 6,279 assistants, post-doctorates and residents. The U also generates $8.6 billion in total economic impact and more than $512 million in tax revenue annually. And it serves as a crucial springboard for innovation, entrepreneurship and leadership.
There’s more to be accomplished, but I, for one, am happy to see that something so important to our economy is acting more like a business.