Finance & Operations Committee
February 2021
February 11, 2021
9:30 a.m.
Videoconference FIN - FEB 2021
1. Systemwide Strategic Plan Implementation: Systemwide Campus Master Planning Principles - Action
Docket Item Summary - Page 4
Resolution - Page 6
Presentation Materials - Page 8
2. Development of the Twin Cities Campus Master Plan: Visioning the Campus' Evolution
Docket Item Summary - Page 12
Presentation Materials - Page 16
3. Overview of UMC, UMD, UMM, and UMR Comparative Tuition Rates and Strategy
Docket Item Summary - Page 40
Presentation Materials - Page 46
4. Annual Report on Workforce and Total Compensation and Discussion
Docket Item Summary - Page 62
Report - Employee Compensation - Page 64
Report - Faculty Compensation - Page 91
Report - Senior Leader Compensation - Page 110
Presentation Materials - Page 135
5. FY 2022 Annual Operating Budget Framework
Docket Item Summary - Page 171
Presentation Materials - Page 178
6. Consent Report - Review/Action
Docket Item Summary - Revised - Page 196
Docket Item Summary - Page 199
Central Reserves General Contingency Allocations - Page 201
Purchase of Goods and Services $1,000,000 and Over - Page 202
Additional Purchase Summary - Google LLC - Page 210
Employment Agreement - Vice President for Student Affairs and Dean of Students
Personnel Appointment Summary - Page 212
Employment Agreement - Page 214
7. Information Items
Docket Item Summary - Page 218
Capital Finance and Debt Management Report - Page 222
Page 2 of 277
Annual Insurance and Risk Management Report - Page 239
State Capital Appropriation Expenditure Report - Page 258
Quarterly Purchasing Report - Page 271
Contamination Remediation of University Land in Rosemount, Minnesota - Page 277
Page 3 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Systemwide Strategic Plan Implementation: Systemwide Campus Master Planning Principles
Review Review + Action X Action Discussion
This is a report required by Board policy.
PRESENTERS: President Joan T. A. Gabel Michael Berthelsen, Vice President, University Services Monique MacKenzie, Director of Campus and Capital Planning
PURPOSE & KEY POINTS
The purpose of this item is to act on the resolution related to Systemwide Campus Master Planning Principles, which will direct the upcoming updates of each campus master plan. No changes to the principles have been made since the committee reviewed them in December.
The 2020 Systemwide Strategic Plan’s Commitment 5, Goal 3 seeks to “[b]uild comprehensive long- range capital facilities and land holding strategies to drive strategic growth.” The action items for the goal includes establishing “new long-term physical master plans for each campus that serves our community and is updated regularly.”
The purpose of a campus master plan is to:
Ensure the University’s academic mission is served by the physical campus. Establish the framework for the long-term evolution of the campus, building upon the physical attributes of each place. Identify the unique qualities of the campus that will be enhanced and areas that are expected to change.
The resolution will provide Board guidance for the future campus master plan updates across the system.
BACKGROUND INFORMATION
Board of Regents Policy: Reservation and Delegation of Authority, Article I, Section VIII, Subd. 5 states: "The Board reserves to itself authority to approve campus master plans and amendments thereto.”
Page 4 of 277 The last campus master planning updates were completed as follows: Morris in 2008, Twin Cities in 2009, Crookston in 2011, Duluth in 2013, and Rochester in 2014.
PRESIDENT’S RECOMMENDATION
The President recommends approval of the resolution related to Systemwide Campus Master Planning Principles.
Page 5 of 277
REGENTS OF THE UNIVERSITY OF MINNESOTA
RESOLUTION RELATED TO
Systemwide Campus Master Planning Principles
WHEREAS, in 1993, the Board of Regents (Board) adopted the following four campus master planning principles to direct the development of campus master plans on each of the University of Minnesota (University) campuses:
The principle of creating and maintaining a distinctive and aspiring vision for the physical development of each campus;
The principle of enriching the experience of all who come to the campus;
The principle of maximizing the value of existing physical assets while responding to emerging/changing physical needs;
The principle of an inclusive, accountable, and timely process for creating and implementing the master plan vision; and
WHEREAS, the 1993 Board resolution included a detailed articulation of how these principles should be used in campus master planning; and
WHEREAS, since that time, the University campuses have used such planning principles to guide the development and updates of campus master plans; and
WHEREAS, the 2020 University of Minnesota Systemwide Strategic Plan identifies the need to update each of the campus master plans, under Commitment 5, Goal 3 action item - “Establish new long-term physical master plans for each campus that serves our community and is updated regularly”; and
WHEREAS, campus master plans are intended to serve as frameworks for the long-term evolution of all University campuses. These plans focus on the interaction between open spaces, existing buildings, and supportive networks and services that enhance the unique qualities of place. Campus master plans are created as a flexible framework to support decision-makers when faced with issues that affect the future evolution of each campus.
Page 6 of 277
NOW, THEREFORE, BE IT RESOLVED that the Board of Regents directs that the process to update each of the University campus master plans be guided by the following updated systemwide campus master planning principles. Each campus will uniquely interpret how these principles are reflected in their planning process and their campus master plans.
Establish a sustainable vision of how the physical setting of each campus will embody its distinctive history, mission, and future.
Create an inclusive and welcoming experience for the increasingly diverse range of people who come to campus.
Optimize existing physical assets to facilitate flexible and innovative solutions toward an enduring future.
Consider the cost of attendance, investment, and operations when planning for each campus’ future.
Integrate each campus’ master plan with the Systemwide Strategic Plan.
Ensure an inclusive, accountable, and forward-looking process for developing and implementing the master plan.
Page 7 of 277 Systemwide Strategic Plan Implementation: Systemwide Campus Master Planning Principles
Joan T. A. Gabel, President Michael Berthelsen, Vice President, University Services Monique MacKenzie, Director, Campus and Capital Planning
Finance & Operations Committee
February 11, 2021
Page 8 of 277 Systemwide Strategic Plan Direction
2 Page 9 of 277 Recommended Principles to Direct Systemwide Campus Planning
1. Establish a sustainable vision of how the physical setting of each campus will embody its distinctive history, mission, and future. 2. Create an inclusive and welcoming experience for the increasingly diverse range of people who come to campus. 3. Optimize existing physical assets to facilitate flexible and innovative solutions toward an enduring future. 4. Consider the cost of attendance, investment, and operations when planning for each campus’ future. 5. Integrate each campus’ master plan with the Systemwide Strategic Plan. 6. Ensure an inclusive, accountable, and forward-looking process for developing and implementing the master plan.
3 Page 10 of 277 Page 11 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Development of the Twin Cities Campus Master Plan: Visioning the Campus’ Evolution
Review Review + Action Action X Discussion
This is a report required by Board policy.
PRESENTERS: Michael Berthelsen, Vice President, University Services Monique MacKenzie, Director of Campus and Capital Planning Greg Havens, Principal, Sasaki
PURPOSE & KEY POINTS
The purpose of this item is to discuss the emerging trends and themes related to the update of the Twin Cities campus master plan and how they relate to the MPact 2025 Systemwide Strategic Plan (MPact 2025).
The new master plan will address the physical organization of the Twin Cities campus and its unique features and conditions. The future horizon for this plan is 10 years, through 2030. Geographically, the scope of this effort will address all three locations of the Twin Cities campus (West Bank, East Bank, and Saint Paul).
Updating the Twin Cities campus master plan will build upon additional planning work that has been done over the past decade, including the 2016 Twin Cities campus Development Framework and the draft 2019 Saint Paul Strategic Facilities Plan, as well as the East Gateway project and other district plans as applicable.
MPact 2025 Systemwide Strategic Plan
One of the key drivers in developing the Twin Cities campus plan is alignment with the MPact 2025 plan. For purposes of visioning efforts now underway, the planning team has begun to match elements of the five commitments in MPact 2025 to specific planning initiatives, noted below.
Page 12 of 277
Source: June 2020 Update on SWSP Part 3, Presentation to Board of Regents, p60
Matching Strategic Commitments to Campus Planning
The committe discussion will focus on the best ways to advance MPact 2025 commitments in the Twin Cities physical space. Included below is a list of questions intended to support the committee’s conversation. Questions in maroon are included in the slides, but all questions listed are intended to support the discussion.
Commitment 1: Student Success
a. Where and how can the student experience and a “holistic approach to wellness” be enhanced on campus? b. What does a “holistic approach to wellness” mean for the campus? Have any physical opportunities already been explored? c. What impacts will new learning models have on the physical campus?
Commitment 2: Discovery, Innovation, and Impact
a. Where are the existing research hubs on campus today? What aspects are/are not working well? What research focus areas would benefit from access to more collaboration space? b. What research activities successfully enhance collaboration today? c. Where are there opportunities for business, tech, and corporate partnership innovation on campus today? d. What does this plan need to consider in order to elevate the University’s national and international profile? e. How should this plan’s outreach and engagement strategy reflect this Strategic Commitment?
Commitment 3: MNtersections
a. What will elevate the University’s leadership in next-generation health? What sorts of collaborations will this entail?
Page 13 of 277 b. What does a “fully sustainable future” look like? What does the campus lack today to advance sustainability and environmental teaching, research, and convening power? c. What opportunities exist on the East Bank, West Bank, and in Saint Paul to advance next-generation health, natural resources, and sustainable agricultural technology?
Commitment 4: Community Belonging
a. What areas of the campus do not cultivate a welcoming and inclusive climate? b. What aspects of the physical campus do you think contribute to the goal of recruiting and retaining diverse talent? c. How can this master plan advance understanding and nurture enduring partnerships with Tribal Nations, underserved local communities, and strategic partners?
Commitment 5: Fiscal Stewardship
a. What innovative financing strategies is the University currently exploring? b. What should be some of the University priorities when establishing a land retention, acquisition, and use strategy and addressing deferred maintenance in the existing buildings? c. How should the master plan incorporate new thinking around risk management and safety?
Themes and Trends
Powerful forces have affected higher education in recent years. Financial challenges for individual students (cost of attendance), the perceived value of higher education, and declining funding to support ongoing activities are important influences as the University makes plans for the future. Under the mantle of the land grant mission, there are factors of equal importance related to outreach, inclusivity and diversity, and maintaining a local and global outlook concurrently.
Beyond these relatively long-standing trends, COVID-19’s swift and profound impact on higher education has prompted thinking about how learning, research, and outreach will be different in the near and mid-term future.
Some of the trends that are expected to drive change on the Twin Cities campus as it creates a clear vision as well as a flexible plan to guide its evolution are:
Continued focus on diversity, equity, and inclusion. Use of central campus for student engagement rather than administrative uses. Hybrid campuses: assignment of remote learning and telework. Rationalization of space: focus on renovation, flexibility, and multi-purpose space. Expanded one-stop services designed for student convenience, for financial aid, advising services, and records. Counseling and telehealth services may have some digital presence.
Page 14 of 277 Faculty offices: potential for more collaborative and shared spaces rather than private offices. Budget challenges demanding a focus on cost reduction, finance, revenue generation, and public/private partnerships.
BACKGROUND INFORMATION
Board of Regents Policy: Reservation and Delegation of Authority, Article I, Section VIII, Subd. 5 states: “The Board reserves to itself authority to approve campus master plans and amendments thereto.”
Consistent with Board policy, the Board will be engaged in these efforts as the work advances on the Twin Cities campus, with visioning conversations expected in winter 2021 and a draft plan concept ready in late spring 2021. A completed plan is expected to be ready for Board review and action in fall 2021.
Page 15 of 277 Development of the Twin Cities Campus Master Plan: Visioning the Campus’ Evolution
Michael Berthelsen, Vice President, University Services Monique MacKenzie, Director, Campus and Capital Planning Greg Havens, Principal, Sasaki
Finance & Operations Committee
February 11, 2021
Page 16 of 277 Agenda
1. Systemwide Strategic Plan Commitments 2. The Post COVID-19 Campus 3. Emerging Trends in Planning 4. Aligning Development Strategy and Strategic Commitments
Page 17 of 277 1 Systemwide Strategic Plan Commitments
Page 18 of 277 MPact 2025 Strategic Commitments
Page 19 of 277 Campus Planning + Strategic Commitments
STRATEGIC COMMITMENTS
1. Student Success
2. Discovery, Innovation, and Impact
core 3. MNtersections
Transit corridor 4. Community Belonging
core
river 5. Fiscal Stewardship (Master Plan)
• Build comprehensive long-range capital facilities and land- holding strategies to drive strategic growth.
East and West Bank, Minneapolis
Page 20 of 277 STRATEGIC COMMITMENTS
1. Student Success
2. Discovery, Innovation, and Impact
3. MNtersections
4. Community Belonging
5. Fiscal Stewardship (Master Plan)
• Build comprehensive long-range capital facilities and land- holding strategies to drive strategic growth.
Saint Paul
Page 21 of 277 2 The Post COVID-19 Campus
Page 22 of 277 The Post COVID-19 Campus
• Continued focus on diversity, equity, and Inclusion • Rationalization of space: focus on renovation, flexibility, and multi- purpose space • Library as central academic success + support service location, especially as more classes move online • Use of central campus for student engagement rather than administrative uses • Continued trend toward Hybrid Campuses - remote learning and telework • Continued trend toward online financial aid, advising, and counseling services • Student Convenience – one-stop services for financial aid, and records • Faculty offices: potential for more collaborative and shared spaces rather than private offices • Budget challenges: a focus on cost reduction, finance, revenue generation, and public/private partnerships Page 23 of 277 3 Emerging Trends + Themes in Campus Planning
Page 24 of 277 Trends + Themes in Campus Planning
1
Diversity, Equity, Student Support Wellbeing Technology The “Blended” The Year-Round and Inclusion Campus Campus
$
The Outdoor Space Optimization Work Sustainability Mobility Financial Campus Environments Resiliency
Page 25 of 277 Draft Trends + Themes for UMTC
1. A Welcoming Inclusive Campus 2. The Hybrid / Blended Campus / space optimization 3. Innovation + Outreach through Partnerships 4. Sustainability 5. Financial Resiliency
Page 26 of 277 Master Planning ‘Starter’ Questions
Where and how Where are there What opportunities What aspects of What should be can the student opportunities for exist on the East the physical priorities when experience and business, tech, Bank, West Bank, campus establishing a land a “holistic and corporate and in Saint Paul to contribute to retention, approach to partnership advance next- the goal of acquisition, and wellness” be innovation on generation health, recruiting and use strategy and enhanced on campus today? natural resources, retaining addressing campus? and sustainable diverse talent? deferred agricultural maintenance in technology? the existing buildings?
Page 27 of 277 4 Aligning Campus Planning + the Strategic Commitments
Page 28 of 277 UMTC Development Strategy Areas, 2016
1 Advance Outreach Mission • Prioritize human scale medium-density 5 development • Improve the pedestrian experience • Connect the AHC and the BDD • Locate clinical and a potential new hospital 2 5 2. Reinvest in the campus core • Prioritize the pedestrian experience • Locate collaboration spaces in ground floors • Maintain density • Improve path and open space connectivity • Design to discourage car use in campus core 1 • Ensure safe paths, open spaces and entries 3 2 3. Reinforce the Transit Corridor • Prioritize mixed-use development • Activate the street edge • Stitch together East and West Banks 5 3 • Design a pedestrian-friendly environment 5 • Create a distinct identity 4 4. Engage the River 2 4 • Create new physical and visual connections • Design riverfront open space sites • Design buildings with dual river and campus faces • Develop housing to support the student 5 experience
5. Integrate Campus and Community Edges • Participate in efforts in joint planning areas • Define land use patterns and density in context • Determine new build sites and decommission/demolition candidates • Improve safe routes to and throughPage campus 29 of 277 1 Advance the outreach mission
Bio-Discovery District
Academic Health Center
East Gateway
New Hospital? 1. Advance Outreach Mission • Prioritize human scale medium-density development • Improve the pedestrian experience • Connect the AHC and the Bio-Discovery District • Locate clinical and a potential new hospital
Page 30 of 277 2 Reinvest in the campus core
2. Reinvest in the campus core • Prioritize the pedestrian experience • Locate collaboration spaces in ground floors • Maintain density • Improve path and open space connectivity • Design to discourage car use in campus core • Ensure safe paths, open spaces and entries
Page 31 of 277 3 Reinforce the transit corridor
3. Reinforce the Transit Corridor • Prioritize mixed-use development • Activate the street edge • Stitch together East and West Banks • Design a pedestrian-friendly environment • Create a distinct identity
Page 32 of 277 4 Engage the River
West Bank Housing
River
4. Engage the River Boathouse • Create new physical and visual connections • Design riverfront open space sites • Design buildings with dual river and campus faces • Develop housing to support the student experience
Page 33 of 277 5 Integrate campus and community edges
Hospital and Clinics
5. Integrate Campus & Community Edges • Participate in efforts in joint planning areas • Define land use patterns and density in context • Determine new build sites and decommission/demolition candidates • Improve safe routes to and through campus 2407
Page 34 of 277 Saint Paul Strategic Facility Plan, 2018
core
Transit corridor • Land grant mission in an urban setting (Food, Agriculture, Environment, Education) • Focused on interactions between managed lands, natural ecosystems, and technology • Building and inviting community engagement • Advancing research partnerships
Page 35 of 277 Research and community outreach hub
Bell Museum Research Labs BioMADE
Vet Med
Student Center Extension Offices
The Lawn
Page 36 of 277 Smart farming, sustainable food, + natural resources
Demonstration Greenhouses gardens Animal Science Student garden Research Lands
Equine Center
Page 37 of 277 Master Planning ‘Starter’ Questions
Where and how Where are there What opportunities What aspects of What should be can the student opportunities for exist on the East the physical priorities when experience and business, tech, Bank, West Bank, campus establishing a land a “holistic and corporate and in Saint Paul to contribute to retention, approach to partnership advance next- the goal of acquisition, and wellness” be innovation on generation health, recruiting and use strategy and enhanced on campus today? natural resources, retaining addressing campus? and sustainable diverse talent? deferred agricultural maintenance in technology? the existing buildings?
Page 38 of 277 Page 39 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Overview of Comparative Tuition Rates and Strategy
Review Review + Action Action X Discussion
This is a report required by Board policy.
PRESENTERS: President Joan T. A. Gabel Julie Tonneson, Associate Vice President and Budget Director Lincoln Kallsen, Assistant Vice President, Institutional Analysis
PURPOSE & KEY POINTS
The purpose of this item is to provide context regarding tuition and pricing strategies for the Crookston, Duluth, Morris, and Rochester campuses, with attention to understanding state and regional institutions where students may choose to enroll instead. The item will focus on undergraduate tuition rates as that population is 90-100 percent of enrollment on each of these campuses.
Factors Affecting Student Choice
Although it is impossible to identify every variable that plays into a student’s decision on which school to attend, and even which variable holds the most weight for every student, in many cases tuition rates have a role in that decision. Previous reviews of the budget development process have included discussions of competing variables the University considers in setting tuition rates, and one of the most important is the impact different rates will have on students and families as they consider their options. It is clear that when viewed in isolation, tuition rates can influence a series of components embedded in those options:
Does school “X” merit a further look – Is the tuition rate even within their range of consideration (before financial aid is even a factor)? Is that school a good value – Is the reputation and/or quality of the desired program or overall institution “worth the price”? Will retention be an issue – Is a second, third and fourth year within reach, especially if any first-year financial aid drops off? Is future debt a factor – Will the tuition rate require debt levels that may not be realistic? Will the cost impact experience – Does it mean work is required or social experiences are necessarily reduced? Other?
Page 40 of 277 However, national surveys and the University’s own analysis suggest there are several factors, including and beyond tuition rates, that students and families consider when choosing a college and University. These include:
Academic reputation Availability of majors Cost of attending the college Cost to the family Job placement (rates and quality) upon graduation Value for the price Offered financial assistance Quality of academic facilities Good reputation for social and extracurricular activities
Rate Comparisons
Current tuition pricing at Crookston, Duluth, Morris, and Rochester
The 2020-21 tuition and fees for these campuses are as follows:
Resident WI/ND/SD Non-Resident MSEP* (Reciprocity) Crookston $12,204 $12,204 $12,204 NA Duluth $13,576 $13,576 $18,776 $14,186 Morris $13,578 $13,578 $15,632 $14,618 Rochester $12,850 $12,850 $12,850 NA
*MSEP stands for the Midwest Student Exchange Program, which is a multi-state tuition reciprocity program, with optional participation for public campuses in Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, and Wisconsin.
Since 2013, the average annual increase of in-state tuition on these campuses has been 0.5 percent, with five of the past eight years being held to a tuition rate freeze. As discussed each year in the budget process, it has been a priority to hold tuition rate increases at these campuses down in recognition of how they compare against schools with which they compete for enrollment (see below).
Illustrative Regional 4-year Institutions Tuition and Fees for Minnesota Residents
2020-21 tuition and mandatory fees for Minnesota residents attending the following campuses:
Minnesota State North Dakota Bemidji State $9,076 U of North Dakota $11,301 MN State – Mankato $8,556 North Dakota State $11,063 MN State – Moorhead $9,008 South Dakota Metro State $8,250 U of South Dakota $9,693 St. Cloud State $8,668 South Dakota State $9,732 Southwest State $8,942 Wisconsin Winona State $8,834 UW - Eau Claire $9,042 UW - La Crosse $9,282 UW - Superior $9,144
Page 41 of 277
Note: Minnesota State universities implemented a 3 percent tuition increase for spring semester 2021, which is not reflected in the table above.
Financial Aid and Average Loan Debt Considerations
The University of Minnesota campuses and the State of Minnesota provide a variety of need-based and merit-based support to students and families. This includes funding from the University’s donors, along with the University’s Promise Scholarship program and the Minnesota State Grant program. This support allows each campus to provide exceptional value to families.
When examining net price (defined as total cost of attendance less all gift aid students and families do not have to repay), all five campuses are among the most affordable options for Minnesota residents with family incomes at $110,000 or under, and are the top five most affordable Minnesota options for MN residents with a family incomes of $75,000 (approximately the state median income). In addition, all five campuses remain below the Minnesota statewide average for average student loan debt among all four-year Minnesota institutions.
Where Do Accepted Students Ultimately Enroll?
Given the potential influence tuition rates have on students’ interest in each campus and their choice to remain through graduation, it is important to understand how the rates compare to institutions within the region (as above) and especially to the institutions these campuses directly compete with for enrollment. As the tables below indicate, not all admitted students choose to ultimately attend a University of Minnesota campus, and price is not always the determining factor. In some cases, the considerations mentioned above combine to result in attendance at schools with higher tuition and fees.
Campus-Specific Top 5 Competitor Institutions Outside UMN System Enrolling Students Admitted Fall 2015 through Fall 2020 (counts of admitted students are duplicated for each campus)
Admitted at Crookston
Non- Institution of UMN Fall Fall Fall Fall Fall Fall Grand Yield Enrollment Enrollment 2015 2016 2017 2018 2019 2020 Total Outside Outside System Campus System Rank
Enrolled in UMC 239 209 206 228 213 198 1293 Campus
Enrolled in UMTC 85 152 125 52 67 154 635 System UMD 42 51 60 16 31 37 237
1 NDSU 16 15 29 24 9 10 103
2 UW – River Falls 17 8 19 18 9 11 82
3 UW - Madison 12 12 16 110 6 19 75
Page 42 of 277 4 MN State 9 17 11 16 9 9 71 University - Mankato
5 University of St. 7 15 12 12 13 12 71 Thomas
Admitted at Duluth
Non- Institution of UMN Fall Fall Fall Fall Fall Fall Grand Yield Enrollment Enrollment 2015 2016 2017 2018 2019 2020 Total Outside Outside System Campus System Rank
Enrolled in UMD 1997 2138 2275 2221 2043 1780 12,454 Campus
Enrolled in UMTC 662 850 867 944 861 1142 5326 System
1 University of St. 149 197 227 306 270 243 1392 Thomas
2 UW – Eau Claire 121 118 165 152 190 160 906
3 MN State 131 149 119 135 65 192 891 University - Mankato
4 NDSU 124 143 188 163 123 135 876
5 UW - Madison 84 105 119 110 120 175 713
Admitted at Morris
Non- Institution of UMN Fall Fall Fall Fall Fall Fall Grand Yield Enrollment Enrollment 2015 2016 2017 2018 2019 2020 Total Outside Outside System Campus System Rank
Enrolled in UMM 416 376 356 369 320 269 2106 Campus
Enrolled in UMTC 252 308 259 192 223 418 1652 System UMD 121 99 117 97 92 58 611
1 University of St. 24 36 33 49 42 32 216 Thomas
Page 43 of 277 2 NDSU 29 30 34 31 16 41 181
3 UW - Madison 27 27 32 14 23 51 174
4 Gustavus 26 27 26 32 29 32 172 Adophus College
5 MN State 24 22 31 31 30 29 167 University - Mankato
Admitted at Rochester
Non- Institution of UMN Fall Fall Fall Fall Fall Fall Grand Yield Enrollment Enrollment 2015 2016 2017 2018 2019 2020 Total Outside Outside System Campus System Rank
Enrolled in UMR 87 145 186 169 164 217 967 Campus
Enrolled in UMTC 33 243 144 77 114 225 836 System UMD 8 50 27 20 21 19 145
1 UW - Madison 5 29 28 13 15 37 127
2 St. Catherine 6 15 15 6 12 21 75 University
3 University of St. 2 17 7 7 10 21 64 Thomas
4 UW – La Crosse 5 16 10 9 6 8 54
5 MN State 6 7 7 7 7 20 54 University - Mankato
Institutional Choices in Pricing
Tuition alone, as one factor in students’ decision-making processes, can be structured or set in ways that potentially influence those decisions. Each year, the University has the opportunity to consider changes in tuition variables and structures: resident and non-resident per-credit rates, banded rates, defined bands, rates that differ per term (summer vs. fall/spring), rates that differ per academic “year” (cohort basis, lower division vs. upper division, 3+2 programs etc.), rates that differ per college or discipline, etc. In addition, the University has the opportunity to implement or change financial aid strategies that combine with tuition in ways that potentially lead to targeted results.
Page 44 of 277 Each modification or change will have an impact on revenues received by the institution, either from the change itself, or from the change in combination with an increase or decrease in enrollment. The most basic components for considering a change are the tuition rate and the revenue amount generated per full time student, so analysis often begins with understanding what each 1 percent change in the tuition rate generates in tuition, given stable enrollment. In very simple math, for all four campuses, each 1 percent increase in the resident undergraduate tuition rate will generate roughly $1.2 million and each 1 percent increase on the nonresident undergraduate tuition rate will generate roughly $100,000. For every other potential change in the tuition structure, the financial analysis will necessarily differ.
BACKGROUND INFORMATION
The Board received initial pricing analysis regarding these campuses three years ago, as part of the February 2018 Finance & Operations docket material on the FY 2018-19 Budget Framework. The recommended tuition rates and any corresponding tuition and financial aid structure changes are included in the President’s Annual Recommended Operating Budgets presented to the Finance & Operations Committee each May and/or June.
Page 45 of 277 Overview of Comparative Tuition Rates and Strategy
Joan T. A. Gabel, President Julie Tonneson, Associate Vice President and Budget Director Lincoln Kallsen, Assistant Vice President, Institutional Analysis
Finance & Operations Committee February 11, 2021
Page 46 of 277 Agenda
• Tuition rates as a decision factor • System campus rate comparisons • General considerations for change
Page 47 of 277 The Crookston, Duluth, Morris, and Rochester campuses are predominantly undergraduate campuses. Crookston Duluth Degree-seeking % undergraduate Degree-seeking % undergraduate undergraduates undergraduates
1754 100% 8351 90% Resident Rate Non-Resident rate Resident Rate Non-Resident rate
$12,204 $12,204 $13,576 $18,776 Morris Rochester Degree-seeking % undergraduate Degree-seeking % undergraduate undergraduates undergraduates
1243 100% 614 100%
Resident Rate Non-Resident rate Resident Rate Non-Resident rate
$13,578 $15,632 $12,850 $12,850
Duluth also has an MSEP rate of $14,186; Morris also has an MSEP rate of $14,618; and Rochester also hosts a variety of baccalaureate and post-baccalaureate partnership programs, for an additional 300 degree-seeking students.
Page 48 of 277 How tuition rates alone can influence student and family choices:
• “First look” at price (before considering financial aid) • Sense of value • Price of a single year vs. cost over a full four years • Projected debt calculations • Burden on the student experience • Other
Page 49 of 277 Reasons students give for choosing a college
2019 National CIRP Freshman 2019 Admitted Student Survey Survey Twin Cities Campus – MN residents Public 4-Year Colleges College has a very good academic Availability of majors reputation College’s graduates get good jobs Academic reputation Academic reputation of my intended major Cost to family Cost of attending this college Value for the price I was offered financial assistance Quality of academic facilities This college has a good reputation for its Availability of merit scholarships social and extracurricular activities
Page 50 of 277 Tuition Rate and Pricing Comparisons
Page 51 of 277 2020-21 Undergraduate Tuition Rates: Regional Universities
Campus Crookston Duluth Morris Rochester Tuition & Fees $12,204 $13,576 $13,578 $12,850
Minnesota State 4-year Universities – will implement a 3% increase spring semester
Campus Tuition & Fees Campus Tuition & Fees
Bemidji $9,076 St. Cloud $8,668 Moorhead $9,008 Southwest $8,942 Mankato $8,556 Winona $8,834 Metro $8,250 Illustrative regional universities (tuition for MN residents)
Campus Tuition & Fees Campus Tuition & Fees Campus Tuition & Fees
North Dakota $11,301 North Dakota $11,063 UW - Eau7 Claire $9,042 State South Dakota $9,693 South Dakota $9,732 UW – La Crosse $9,282 State St. Thomas $47,383 UW - Superior $9,144
Page 52 of 277 Undergraduate Resident Tuition Rates Have Been Relatively Stable (%)
Campus 2013 through 2015 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Average annual % increase
Flat Twin Cities 1.5% 2.5% 2.0% 2.0% 2.0% Flat 1.3%
Flat Duluth 1.5% Flat 1.0% Flat 1.5% Flat 0.5%
Flat Morris 1.5% Flat 1.0% 1.0% 1.5% Flat 0.6% Flat Rochester 1.5% Flat 1.0% Flat 1.5% Flat 0.5% Flat
Crookston 1.5% Flat 1.0% Flat 1.5% Flat 0.5%
Page 53 of 277 Average Net Price for Fall 2017 New Freshmen From Families Earning $110,000 or Less
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
St Olaf St
Hamline
St Kate's St
UW-Stout
Augsburg
Iowa State Iowa
St Thomas St
St Benedict St
UMN-Morris Johns Saint
UMN-Duluth
UW-Madison
Winona State Winona Bemidji State Bemidji
UW-LaCrosse
MSU-Mankato
St Cloud State Cloud St
UW-Eau Claire UW-Eau
UW-River Falls UW-River
MSU-Moorhead
UMN-Rochester
UMN-Crookston
UMN-Twin Cities UMN-Twin
U of North Dakota North of U
North Dakota State Dakota North
South Dakota State Dakota South
Gustavus Adolphus Gustavus Concordia-Moorhead Under 75K Under 110K
Includes all students receiving Title IV aid at private institutions and only students paying resident tuition and receiving Title IV aid at public institutions. Page 54 of 277 Average Student Loan Debt for 2019 Bachelor’s Degree Recipients at Minnesota Colleges/Universities (only includes New Freshmen entrants) $31,856 Average for MN Statewide
$50,000 $46,315 $46,315
$45,000 $44,561
$41,577 $41,577
$41,500 $41,500
$40,574 $40,574
$39,387 $39,387 $38,642 $38,642
$40,000 $38,286
$36,676 $36,676
$35,145 $35,145
$33,587 $33,587
$32,815 $32,815 $32,152 $32,152
$35,000 $32,109
$31,205 $31,205
$30,984 $30,984
$30,687 $30,687
$30,482 $30,482
$29,580 $29,580
$28,950 $28,950
$28,486 $28,486 $28,287
$30,000 $27,077
$26,107 $23,363 $23,363 $25,000 $23,060 $20,000 $19,405 $15,000 $10,000 $5,000 $0
Source: US News 2020 Page 55 of 277 Top non-U of MN institutions chosen by students admitted to our campuses and their 2020-2021 tuition and fees for MN residents
Admitted to Crookston ($12,204) Admitted to Duluth ($13,576) Institution Tuition & Fees Institution Tuition & Fees North Dakota State $11,063 University of St. Thomas $47,383 UW – River Falls $9,250 UW – Eau Claire $9,042 UW – Madison $14,812 MN State – Mankato $8,676 MN State – Mankato $8,676 North Dakota State $11,063
University of St. Thomas $47,383 UW – Madison $14,812
Admitted to Morris ($13,578) Admitted to Rochester ($12,850) Institution Tuition & Fees Institution Tuition & Fees University of St. Thomas $47,383 UW – Madison $14,812 North Dakota State $11,063 St. Catherine University $44,480 UW – Madison $14,812 University of St. Thomas $47,383 Gustavus Adolphus College $48,250 MN State – Mankato $8,676 MN State – Mankato $8,676 UW – La Crosse $9,282
Page 56 of 277 General Considerations for Change
Page 57 of 277 Illustrative ideas for changes in tuition & pricing approach:
Change the per-credit tuition rate or the banded tuition rate
Broader range of experimentation with institutional financial aid
Summer tuition discounting for degree-seeking students
Expand “3+2” programs through systemwide partnerships
Tuition discounting for structured cohort programs
Other?
Page 58 of 277 Estimated revenue impacts if in-state tuition was lowered
Target Crookston Duluth Morris Rochester Total
Lower tuition by 1% $160K $980K $100K $80K $1.3M (~$120 - $135 per year) Lower tuition by $1000 $1.2M $7.6M $0.8M $0.6M $10.2M Lower tuition to NDSU $1.5M $18.1M $2.2M $1.1M $22.9M Lower tuition to $4.6M $35.4M $4.0M $2.6M $46.6M MN State - Mankato
Page 59 of 277 Your Thoughts Ideas & Questions?
Page 60 of 277 Page 61 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Annual Report on Workforce and Total Compensation and Discussion
Review Review + Action Action X Discussion
X This is a report required by Board policy.
PRESENTERS: Ken Horstman, Interim Vice President of Human Resources
PURPOSE & KEY POINTS
Fundamental to a vibrant and successful organization is the ability to move priorities through the effective utilization of all available resources, and to ensure that expenses match that effort. The University’s talented faculty and staff are absolutely critical to its success in achieving priorities, and the cost of compensating them requires the same care and thought as any other resource conversation.
The purpose of this item is discussion of the Annual Report on Workforce and Total Compensation. The discussion will address the University’s current workforce and the annual compensation reports provided for faculty, staff, and senior leaders, which are included in the docket and provide an overview of how University compensation identifies and compares to the market. The item will also address the incremental value of primary benefits (health and retirement) compared to market benchmarking.
Strategy for benefits, compensation, and workforce management must align to allow the University to realize the commitments of MPact 2025 Systemwide Strategic Plan through responsible stewardship of the University’s human resources. This strategy is visible in the current project work developing for shared and auxiliary administrative services, as well as continued focus on benefits strategy.
Given the compensation benchmarks provided in the report, it is important to understand the intersection with benefits into the total compensation picture and how those benefits may or may not address gaps in employee salary to benchmarked market medians. As important are the “intangibles” that are a significant factor in how prospective faculty and staff and current faculty and staff view their experience at the University.
BACKGROUND INFORMATION
The University employs 26,630 employees, down 569 from the same time in 2019. The estimated full-time equivalent count is currently 21,570. The total employee count has been level over the last five years. The cost of salary and fringe for faculty and staff has also remained stable at 62 percent.
Page 62 of 277 Board of Regents Policy: Employee Compensation and Recognition, Section V requires that the president or delegate “[r]eport annually to the Board of Regents on compensation and recognition programs for all employees, including an annual comprehensive report on compensation provided to senior leaders.”
Page 63 of 277 Annual Report on Employee Compensation
Ken Horstman, Office of Human Resources
Prepared for the February 11, 2021 Board of Regents Finance & Operations Committee Meeting
Page 64 of 277 Introduction • The Office of Human Resources at the University of Minnesota has recently completed the attached annual review of cash compensation for employees who are in the Civil Service and Professional & Administrative employee groups. This review was conducted to assess the degree to which the compensation provided to these individuals is in alignment with the stated objectives of the Board of Regents Policy on Compensation and Recognition.
• Specifically, the Board of Regents policy states that: • The University strives to achieve and maintain a compensation structure that, when combined with benefits and other rewards, is competitive relative to institutional peers and other appropriate labor markets and serves to attract and retain a high-performance workforce. • The University seeks to reward meritorious performance and employee contribution to the success of the University through compensation and other forms of recognition. • In the setting of initial salaries and subsequent pay adjustments, the University considers the work responsibilities, market, internal equity, experience and expertise, performance, and other criteria as appropriate. • The University adheres to compensation and recognition practices that are fair and equitable in design, application, and delivery.
Page 65 of 2772 Overview
• The University’s Civil Service and Professional & Administrative employees are classified within job families. • Covers roughly 11,200 employees, or 49% of the University’s total payroll • Job Families are broad distinct functions that contains a group of sub-specialty jobs engaged in similar work that require similar knowledge, skills and abilities. The current job families include:
Administration Audit Finance IT Recreation
Advancement Business Grants & Legal Research Development Contracts Animal Health Campus Health Care Libraries & Student Operations Museums Services Athletics Education Human Marketing & Resources Communications
Page 66 of 2773 Overview • Each job family contains roughly 10 levels of jobs that represent a continuum of progressively higher levels of responsibility and impact and provide for promotional opportunities over time. • Below, for illustrative purposes, is a picture of the Finance Job Family levels:
Finance Title FIN Dir 2 FIN Dir 1 N / A FIN Analyst 3 / Mgr 3 FIN Analyst 2 / Mgr 2 FIN Analyst 1 / Mgr 1 FIN Pro 4 / Supv 4 FIN Pro 3 / Supv 3 FIN Pro 2 / Supv 2 FIN Pro 1/ Supv 1
Page 67 of 2774 Definition of Market
• The market in which we compete for talented Civil Service and Professional & Administrative employees (excluding Senior Leaders) varies by job family but is most frequently defined as all industries within the Twin Cities metro area.
• Occasionally there are positions where a national or global search is required, with a focus on what is being paid by higher education institutions. An example of this type of position would be a very prestigious and high-level researcher.
Page 68 of 2775 Compa Ratios By Job Family
Page 69 of 2776 Compa Ratios
• Compa ratio: Measure of how closely an individual’s salary, or group of salaries, compares to the market median • Calculated by taking an employee’s actual salary divided by the salary range midpoint • Example: $65,000 salary/$60,000 midpoint = 1.08. The person is paid 8% higher than market median.
• It is important to note that a job family can have a healthy overall compa ratio but have levels within it that are not paid to market. Likewise, a level within a job family can have a healthy overall compa ratio but have jobs or people in that level who are not paid appropriately to market. • To know if a compa ratio is competitive, you need to know the skills and experience of the employee group. Their degree of job mastery is what warrants higher or lower payment relative to market.
Page 70 of 2777 Compa Ratios for Refined Job Families
• The following 14 charts provide a detailed compensation analysis that is possible because of the worked performed through the Market Refinement project. • These job families now have: – Job titles that include the specialty being performed within the family. • For example: HR Professional 1 has become HR Professional 1 – Benefits, HR Professional 1 – Talent Acquisition, HR Professional 1 – Call Center, etc. – Accurate and up-to-date market data that is appropriate for each of these specialties, rather than an overall average that doesn’t accurately reflect the market differences for these jobs. • Data is updated each January 1 • We now have the ability to manage our compensation expenses for these families in a more strategic manner.
Page 71 of 2778 Compa Ratios for Refined Job Families
• All salary data is from October 2020, which is the Fall Snapshot data historically requested by the Board of Regents for salary analysis • The market medians used for this analysis are sourced each fall from over 35 published salary surveys and are the foundation for the University’s calendar year salary structure which is updated each January 1. This data is aged forward to July to provide a lead-lag pay philosophy which is the most common standard used by large institutions nationally.
Page 72 of 2779 University of Minnesota Salaries Compared to Market Median University Compared to Job Family Market Median Average Compa Ratio Market Median Advancement 1.0 0.92 -8% Animal Health 1.0 0.81 -19% Athletics 1.0 0.82 -18% Audit 1.0 0.89 -11% Business Development 1.0 0.81 -19% Campus Operations 1.0 0.86 -14% Finance 1.0 0.86 -14% Grants & Contracts 1.0 0.87 -13% Health Care 1.0 0.87 -13% Human Resources 1.0 0.89 -11% Legal 1.0 0.88 -12% Marketing & Communications 1.0 0.80 -20% Recreation 1.0 0.86 -14% Overall Average 1.0 0.86 -14%
Page 73 of 27710 Advancement Overall Compa Ratio = 0.92
1.25+ AVG = Overall Average for Level 1.20 AO = Advancement Operations Generalist AR = Alumni Relations 1.15 AG = Annual Giving AS = Annual Giving & Stewardship 1.10 AD = Other-Advancement PG = Planned Giving 1.05 AD-1.05 PA = Prospect Development Administration 1.00 AG-1.03 DA = Prospect Development-Data & Analytics PG-1.01 Market AR-1.02 DA-1.01 DA-1.00 AO-1.02 RP = Prospect Development-Research & Prospect Management AVG-1.00 ST = Stewardship Median AO-1.01 AVG-0.99 AO-0.99 AVG-0.99 AO-0.97 Compa Ratio 0.95 RP-0.98 AR-0.96 PA-0.98 AD-0.95 AVG-0.96 ST-0.98 DA-0.95 AVG-0.93 RP-0.94 0.90 RP-0.90 PG-0.94 AS-0.88 ST-0.88 0.85 AO-0.88 AVG-0.87 PG-0.87 AR-0.85 AVG-0.83 0.80 AG-0.83 ST-0.81 0.75- ST-0.74 AG-0.76 AG-0.72 1 2 3 4 5 6 7 9 10 Job Family Level
Page 74 of 27711 Animal Health Overall Compa Ratio = 0.81
1.25+ AVG = Overall Average for Level CV = Clinical Veterinary Care 1.20 LC = Lab Animal Care LM = Lab Animal Medicine 1.15
1.10
1.05
1.00 Market LC-1.04 Median
CompaRatio 0.95 CV-0.97
AVG-0.94 AVG-0.93 0.90 LC-0.90
0.85 LC-0.85 CV-0.87 CV-0.88
AVG-0.81 CV-0.80 CV-0.80 0.80 CV-0.81 CV-0.79 AVG-0.68 AVG-0.78 AVG-0.77 AVG-0.79 0.75- LC-0.62 LC-0.78 LM-0.66 LM-0.79 1 2 3 4 5 6 7 9 10 Job Family Level Page 75 of 27712 Athletics Overall Compa Ratio = 0.82
1.25+
1.20 AVG = Overall Average for Level AA = Athletics Administration & Program Management 1.15 AC = Athletics Compliance AT = Other-Athletics 1.10 TK = Ticket Sales & Services
1.05 AT-1.08
1.00 Market AT-1.03 Median
CompaRatio 0.95 TK-0.99
AVG-0.92 0.90 AT-0.92
AVG-0.89 AVG-0.85 AVG-0.86 0.85 AA-0.86
AVG-0.81 AT-0.82 AC-0.81 0.80 TK-0.81 TK-0.78 AVG-0.71 AVG-0.78 AVG-0.77 AC-0.73 AA-0.69 0.75- AC-0.71 AA-0.78 AC-0.73 1 2 3 4 5 6 7 9 10 Job Family Level Page 76 of 27713 Audit Overall Compa Ratio = 0.89 AVG = Overall Average for Level 1.25+ AG = General Audit IS = Information Systems Audit 1.20
1.15
1.10
1.05
1.00 Market IS-1.03 Median
CompaRatio 0.95
IS-0.94 IS-0.92 AVG-0.91 0.90 AVG-0.90 AG-0.90 AVG-0.89 AG-0.89 0.85 AG-0.86
AVG-0.81 AVG-0.81 0.80 AG-0.81 AG-0.81
0.75-
1 2 3 4 5 6 7 9 10 Job Family Level Page 77 of 27714 Business Development Overall Compa Ratio = 0.81
1.25+ AVG = Overall Average for Level AM = Account Management 1.20 BG = Business Development Generalist
1.15 IP = Intellectual Property & Product Mgmt LC = Licensing 1.10 LA = Licensing & Account Management
SL-1.05 SL-1.05 BG-1.05 MR = Market Research 1.05 AVG-1.05 1.00 BD = Other-Business Development Market BD-1.04 PD = Product Development Median AVG-0.97 PM = Product Management 0.95 SA-0.96 SP-0.95 BG-0.95 IP-0.95 SL = Sales AVG-0.92 0.90 LA-0.93
CompaRatio SL-0.91 SO = Sales Operations AVG-0.89 SA = Strategic Alliances PM-0.86 0.85 AM-0.89 SA-0.86 SP = Strategic Planning IP-0.85
0.80 AVG-0.80
IP-0.76 BD-0.75 SO-0.75 SO-0.71 PD-0.74 AVG-0.69 BD-0.79 AVG-0.71 0.75- SL-0.69 IP-0.77 SP-0.72 BG-0.68 LA-0.74 BG-0.68 AVG-0.63 MR-0.67 SO-0.63 LC-0.49 1 2 3 4 5 6 7 9 10 Job Family Level Page 78 of 27715 Overall Compa Ratio = 0.86 Campus Operations – Services, Maintenance, & Protection
1.25+ AP-1.43 AVG = Overall Average for Level 1.20 SE-1.20 AP = Athletics & Sports Property Management BC = Building Maintenance-Custodial Primary 1.15 BC-1.15 BD = Building Maintenance-Maintenance Primary WM-1.14 BK-1.14 BC-1.10 BG = Building Management PT-1.12 BK-1.14 1.10 BD-1.12 FR-1.10 BK = Bookstore Services BD-1.09 OS-1.08 1.05 CC-1.05 BD-1.05 BK-1.07 OS-1.06 AVG-1.08 CC = Call Center LG-1.05 PT-1.07 1.00 DS = Dining & Food Services MS-1.00 BK-1.02 BK-1.00 Market SD-1.00 AP-1.01 BG-1.01 AVG-1.02 PS-1.00 BC-1.00 EC = Emergency Communications Median AVG-0.99 EV = Event Management OS-0.97 SE-0.97 BG-0.98 AP-0.98 OS-0.95 AVG-0.95 HG-0.96 FR = Farm Management 0.95 OS-0.96 BC-0.95 WM-0.98 PS-0.95 GH-0.97 GH = Greenhouse/Horticulture BC-0.93 DS-0.93 HG = Housing Operations CompaRatio PS-0.94 OS-0.94 BK-0.91 AVG-0.93 SE-0.94 SD-0.91 FR-0.94 AP-0.90 MS-0.93 BD-0.92 DS-0.90 LG = Landscape/Grounds 0.90 LG-0.90 PT-0.90 AVG-0.94 OS-0.90 BG-0.92 OS-0.90 MS = Mailroom Services LG-0.92 SD-0.90 OS-0.91 OS = Other - Campus Ops Services, Maintenance & Protection (SMP) BG-0.89 BK-0.89 BC-0.88 EV-0.87 SD-0.87 PS = Printing Services WM-0.88 PT-0.89 GH-0.87 UC-0.88 AVG-0.87 HG-0.85 FR-0.85 0.85 AVG-0.86 BD-0.88 BG-0.86 PT = Parking/Transportation/Fleet BK-0.87 AVG-0.87 GH-0.86 SD = Shipping & Distribution
0.80 UC-0.82 EC-0.84 DS-0.83 PT-0.82 EC-0.82 SE = Security/Enforcement-Non-Police UC = U Card Services UC-0.79 PS-0.79 HG-0.78 EC-0.79 EV-0.72 WM = Waste Management Services PT-0.75 EV-0.77 EV-0.79 HG-0.74 HG-0.78 0.75- BD-0.71 EV-0.70 GH-0.76 HG-0.78 DS-0.72 1 2 3 4 5 6 7 9 10 Job Family Level Page 79 of 27716 Campus Operations – Planning, Design, & Engineering Overall Compa Ratio = 0.86 1.25+ AVG = Overall Average for Level 1.20 AR = Architecture 1.15 1.10 BA = Business Analysis-Non IT 1.05 CP = Campus & Capital Planning 1.00 Market SU-1.03 AR-1.00 FP-1.01 CE = Civil/Structural Engineering Median CM = Construction Project Management FM-0.98 0.95 PM-0.97 LA-0.98 ID-0.98 FM-0.99 IS-0.97 CA = Contract Administration PE-0.93 PM-0.94 CA-0.92 FP-0.90 BA-0.92 ME-0.91 IS-0.92 AVG-0.90 EE = Electrical Engineering 0.90 IS-0.92 FM-0.92 CM-0.90 RE-0.90 EM = Emergency Management CA-0.87 AVG-0.87 FP-0.89 HS = Environmental Health & Safety FP-0.86 EM-0.86 RE-0.86 0.85 CM-0.88 SP-0.85 FM = Facilities Management WS-0.86 AR-0.84 FP = Facilities, Capital & Space Planning HS-0.84 SP-0.84 IS = Inspectors
CompaRatio AVG-0.84 AVG-0.84 AR-0.82 FP-0.84 CM-0.84 HS-0.83 BA-0.83 ID = Interior Design CM-0.81 EE-0.82 CP-0.83 SU-0.82 WS-0.83 LA-0.84 CE-0.83 CA-0.80 0.80 FM-0.80 ME-0.81 AVG-0.82 EM-0.81 AVG-0.82 CA-0.82 LA = Landscape Architecture SP-0.80 CE-0.80 RE-0.81 RE-0.81 FP-0.82 ME = Mechanical Engineering OP-0.82 FM-0.80 OP = Other - Campus Ops Planning, Design & Engineering (PDE) ME-0.80 CM-0.79 PE = Plan Examiners CA-0.79 FM-0.77 WS-0.79 WS-0.78 PM = Project Management-Non IT CA-0.79 HS-0.74 ME-0.78 FM-0.77 LA-0.77 OP-0.78 FM-0.79 BA-0.73 AVG-0.77 AVG-0.76 FM-0.76 EM-0.77 RE = Real Estate EE-0.77 SP-0.72 HS-0.77 EE-0.75 0.75- FP-0.76 PM-0.76 CM-0.78 HS-0.73 CM-0.75 EM-0.70 EE-0.74 SP = Space Planning & Management CE-0.74 AVG-0.75 PM-0.67 OP-0.71 OP-0.70 OP-0.66 PM-0.73 HS-0.71 EE-0.62 PM-0.63 SU = Sustainability SP-0.71 OP-0.69 WS = Workplace Health & Safety 1 2 3 4 5 6 7 9 10 Job Family Level Page 80 of 27717 Finance Overall Compa Ratio = 0.86 1.25+ AVG = Overall Average for Level
1.20 AA = Accounts Payable and/or Accounts Receivable BA = Budget Analysis & Financial Planning/ Analysis 1.15 BA-1.17 TR-1.17 CL = Call Center 1.10 CL-1.12 CA = Cost Accounting and Pricing CC = Credit and/or Collections 1.05 SF-1.07 FN-1.07 FG = Financial Generalist 1.00 FP = Financial Planning and Analysis Market SF-1.00 PR-1.03 BA-1.02 IP-1.01 Median GR = Grants and Research Financial Administration IR = Ins Risk Mgmt 0.95 AA-0.97 PR-0.98 SF-0.99 IR-0.96 AVG-0.96 IP = Investment/ Portfolio Analysis AA-0.93 AVG-0.92 SF0.92 SC-0.91 FG-0.94 FN-0.93 FN = Other-General 0.90 SF-0.94 TE-0.90 PY-0.92 FN-0.91 PR-0.91 BA-0.91 AVG-0.92 FG-0.91 PY = Payroll GR-0.92 AVG-0.90 PR = Purchasing
Compa Ratio GR-0.87 PY-0.89 SF = Student Financial Services AVG-0.87 FG-0.89 PY-0.87 FG-0.89 FG-0.89 FP-0.86 TE-0.89 SC = Supply Chain & Logistics 0.85 PY-0.86 IR-0.87 FG-0.85 AVG-0.87 FN-0.85 TE-0.87 FG-0.86 AVG-0.87 TA = Tax SC-0.86 CC-0.86 BA-0.86 FN-0.85 FP-0.85 TE = Technical Accounting PY-0.85 TR = Treasury AVG-0.84 PR-0.84 AA-0.83 IP-0.83 AVG-0.83 0.80 FN-0.83 FN-0.82 CA-0.80 IR-0.80 TA-0.82 FG-0.82 TA-0.84 FG-0.83 GR-0.81 TE0.82 TE-0.81 TR-0.80 AA-0.78 FN-0.79 PR-0.79 TE-0.77 0.75- IP-0.76 FP-0.74 SC-0.66 GR-0.74 BA-0.78 GR-0.73 GR-0.62 1 2 3 4 5 6 7 9 10 Job Family Level Page 81 of 27718 Grants & Contracts Overall Compa Ratio = 0.87 1.25+ AVG = Overall Average for Level 1.20 CT = Clinical Trials Administration 1.15 GG = Grants/Contracts Generalist GC = Other-Grants & Contracts 1.10 PE = Pre-Award Administration RC = Research Compliance AVG-1.05 1.05 RP-1.07 SP = Sponsored Project Administration GG-1.05 RP = Research Program Development 1.00 GG-1.04 Market AVG-1.01 Median PE-1.00 0.95 SP-0.95
Compa Ratio GW-0.94 AVG-0.94 0.90 GG-0.94 PE-0.92 RC-0.94 GC-0.90 AVG-0.87 GG-0.88 AVG-0.86 AVG-0.87 0.85 PE-0.89 SP-0.87 PE-0.86 SP-0.85 SP-0.87 RP-0.85 AVG-0.84 AVG-0.82 AVG-0.80 0.80 PE-0.84 GC-0.83 GG-0.84 SP-0.80 SP-0.80 CT-0.76 RP-0.77 0.75- SP-0.73 GC-0.74 CT-0.74 RP-0.66 1 2 3 4 5 6 7 9 10 Job Family Level Page 82 of 27719 Health Care Overall Compa Ratio = 0.87 1.25+ PL-1.27 1.20 1.15 TR-1.15 SP-1.17 1.10 IM-1.13 IM-1.10 AVG = Overall Average for Level MT = Marriage and Family Therapy AI-1.08 CM-1.05 HC-1.08 1.05 HT-1.07 IM-1.05 SP-1.05 AR = Adult Rehabilitative Mental Health MC = Medical Coding 1.00 CH-1.04 Services MI = Mental Health Intake DT-1.04 Market CH-1.01 CC-1.01 HC-1.01 PA-1.02 HC-1.01 AI = Advanced Imaging MN = Mental Health Nursing Median PB-1.00 AV = Advocacy HC = Other-Health Care CI-0.98 DL-0.98 HI-0.97 PN-0.98 AD = Audiology PG = Pathology AV-0.98 AVG-0.99 0.95 DI-0.98 HA-0.97 CN-0.96 AD-0.98 CC = Care Coordination (Non-RN) PN = Pediatric Nursing TR-0.97 HA-0.99 PS-0.96 DI-0.95 MN-0.96 CM = Case Management PH = Pharmacy MN-0.96 CL = Clinical Laboratory Science PT = Physical Therapy PT-0.94 AVG-0.93 CP = Clinical Pharmacy PA = Physician Assistant MT-0.93 CH = Community Health CN = Primary Care Nursing AR-0.92 CN-0.94 AD-0.93 SW-0.93 0.90 CC-0.90 CN-0.91 PS-0.93 CG = Counseling PS = Psychology AVG-0.90 SW-0.92 CN-0.92 CM-0.90
Compa Ratio DL = Dental Laboratory PL = Public Health PA-0.92 HA-0.91 DT = Dental Therapy PB = Public Health Nursing DI-0.90 DI = Dietetics QA = Quality Assurance QA-0.88 CL-0.89 DE = Donor Eligibility SW = Social Work CN-0.87 HA-0.89 MC-0.88 AVG-0.88 CG-0.86 PH-0.88 0.85 HA-0.87 AVG-0.86 AVG-0.85 DE-0.87 AI-0.88 CH-0.86 CP-0.87 HA = Health Care Administration SP = Speech-Language Pathology CL-0.86 HA-0.86 HG = Health Coaching TR = Tissue Recovery HC-0.83 PH-0.82 PT-0.82 HI = Health Information 0.80 DI-0.83 HT-0.84 MI-0.80 CL-0.80 HT = Histotechnology MC-0.81 HT-0.79 IM = Imaging AVG-0.79 DE-0.79 QA-0.78 PH-0.79 CL-0.76 TR-0.76 0.75- CL-0.78 PG-0.69 PG-0.75 PS-0.71 HC-0.75 PS-0.68 HG-0.74 QA-0.71 PG-0.63 CP-0.67 QA-0.56 1 2 3 4 5 6 7 9 10 Job Family Level Page 83 of 27720 Human Resources Overall Compa Ratio = 0.89 1.25+ AVG = Overall Average for Level 1.20 BN = Benefits CC = Call Center 1.15 CP = Compensation 1.10 HR = General GT = Generalist 1.05 LT-1.05 HR-1.05 LT = LTD 1.00 TC = Comp & Ben Market PY-1.02 TR-1.00 PY-1.00 ER = Employee Relations Median IS = HRIS HR-0.97 GT-0.97 CP-0.97 AVG-0.95 0.95 CC-0.99 IS-0.98 TE = Tech Traning CC-0.96 BN-0.95 CC-0.95 GT-0.95 PY = Payroll HR-0.92 TA = Talent Acquisition Compa Ratio CP-0.92 PY-0.94 GT-0.90 0.90 AVG-0.91 AVG-0.92 AVG-0.92 TR = Training BN-0.92 BN-0.91 BN-0.90 GT-0.92 IS-0.90 PY-0.89 CP-0.89 GT-0.88 AVG-0.88 AVG-0.87 AVG-0.88 0.85 HR-0.86 PY-0.86 AVG-0.87 BN-0.85 GT-0.88 GT-0.86 HR-0.87 TE-0.87 TA-0.84 TR-0.82 TR-0.84 LT-0.83 0.80 HR-0.84 LT-0.84 BN-0.82 IS-0.81 ER-0.84 TC-0.81 CP-0.84 0.75- TA-0.79 TA-0.75 LT-0.78 1 2 3 4 5 6 7 9 10 Job Family Level Page 84 of 27721 Legal Overall Compa Ratio = 0.88 1.25+ AVG = Overall Average for Level 1.20 GC = General Counsel SL = Student Legal Services 1.15
1.10
1.05 1.00 Market Median
Compa Ratio GC-0.97 0.95 GC-0.97 GC-0.95 AVG-0.96 0.90 AVG-0.92 SL-0.90 AVG-0.88 0.85 AVG-0.88 SL-0.88 AVG-0.82 0.80 SL-0.84 SL-0.80 GC-0.82 0.75- 1 2 3 4 5 6 7 9 10 Job Family Level Page 85 of 27722 Marketing & Communications Overall Compa Ratio = 0.80 1.25+
1.20 AVG = Overall Average for Level 1.15 CG = Communications Generalist CD = Community Relations 1.10 DM = Digital Marketing 1.05 DG = Digital Media 1.00 ET = Editor Market PR-1.00 Median EW = Editor/Writer 0.95 MK-0.95 WC-0.99 GR = Government Relations ET-0.94 GD = Graphic & Visual Design EW-0.93 MG = Marketing & Communications Generalist 0.90 MG-0.93 MK-0.90 DG-0.93 MK = Marketing Generalist GD-0.91 AVG-0.88 MC = Other-Marketing & Communications MC-0.88 WR-0.87 PR = Public Relations 0.85 DG-0.87 WR-0.87 ET-0.85 MC-0.85 CG-0.86
Compa Ratio EW-0.86 SM = Social Media MK-0.86 WC-0.84 CG-0.83 WC = Web Content ET-0.84 DG-0.84 MG-0.83 WC-0.82 WR-0.84 WR = Writer 0.80 CG-0.83 CG-0.83 CG-0.84 MC-0.83 AVG-0.81 AVG-0.80 DG-0.82 AVG-0.80 EW-0.80 DM-0.81 PR-0.80 EW-0.76 MC-0.74 MG-0.73 AVG-0.79 GD-0.78 MG-0.79 GD-0.71 GD-0.78 MG-0.78 PR-0.76 GD-0.78 AVG-0.71 MK-0.77 AVG-0.76 MC-0.75 DG-0.77 CG-0.69 ET-0.76 0.75- CD-0.73 EW-0.71 PR-0.75 SM-0.72 DM-0.66 SM-0.68 DM-0.76 MC-0.69 WC-0.72 SM-0.63 MK-0.65 MG-0.74 GD-0.58 MK-0.67 CD-0.58 PR-0.62 PR-0.71 ET-0.62 GR-0.68 DM-0.60 GR-0.55 1 2 3 4 5 6 7 9 10 Job Family Level Page 86 of 27723 Recreation Overall Compa Ratio = 0.86 1.25+ AVG = Overall Average for Level 1.20 AQ = Aquatics CS = Competitive Sports 1.15 FW = Fitness / Wellness GO = Golf AVG-1.14 1.10 AQ-1.14 RE = Other-Recreation OP = Outdoor Programming 1.05 OP-1.08 RA = Recreation Administration 1.00 YP = Youth Programs YP-1.04 Market GO-1.01 AVG-1.01 Median AVG-0.99 0.95 YP-0.97 CS-0.97
Compa Ratio AVG-0.93 0.90 RA-0.93
0.85 GO-0.86
GO-0.82 0.80 OP-0.80 YP-0.82
AVG-0.79 AVG-0.78 FW-0.77 CS-0.76 0.75- RE-0.76 RE-0.75 OP-0.76 FW-0.73 AQ-0.72 1 2 3 4 5 6 7 9 10 Job Family Level Page 87 of 27724 Compa Ratios for Unrefined Job Families
• The market data for the job families on the following slide has not yet been refined so is not an accurate reflection of the market. • Because of this, we do not recommend making strategic conclusions regarding compensation for these families. Limitations of the data include: – Each level in a job family has a salary range midpoint which was derived from market data pulled in 2012/2013 and aged by 2% per year thereafter, excluding fiscal year 2021 for which all ranges were frozen. Ranges were not moved in 2021 due to the financial constraints presented by the COVID-19 pandemic. – Each level in a job family currently only has one midpoint, which is shared by jobs across many different specialties that have very different market rates. Therefore, midpoints are aggregate averages and don’t reflect the market for any one job in the level.
Page 88 of 27725 Compa Ratios for Unrefined Job Families
Comparisons to market are inconclusive until Market Refinements can be completed.
Job Family Average Compa Ratio Administration 0.97 Education 0.97 Information Technology 0.94 Libraries & Museums 0.82 Research 0.85 Student Services 0.92
Page 89 of 27726 Page 90 of 27727 Annual Report on Faculty Compensation
Ken Horstman, Office of Human Resources
Prepared for the February 11, 2021 Board of Regents Finance & Operations Committee Meeting
Page 91 of 277 Introduction The Office of Human Resources has recently completed the attached annual review of cash compensation for faculty positions within the University of Minnesota. This review was conducted to ensure the compensation provided to these individuals is in alignment with the stated objectives of the Board of Regents Policy on Compensation and Recognition.
Specifically, the Board of Regents policy states that: • The University strives to achieve and maintain a compensation structure that, when combined with benefits and other rewards, is competitive relative to institutional peers and other appropriate labor markets and serves to attract and retain a high-performance workforce. • The University seeks to reward meritorious performance and employee contribution to the success of the University through compensation and other forms of recognition. • In the setting of initial salaries and subsequent pay adjustments, the University considers the work responsibilities, market, internal equity, experience and expertise, performance, and other criteria as appropriate. • The University adheres to compensation and recognition practices that are fair and equitable in design, application, and delivery.
Page 92 of 2772 Definition of Market
The market in which we compete for talented faculty varies by campus but includes national higher education institutions of comparable size and scope. The institutions selected for comparison are referred to as peer institutions.
The list of peer institutions for each college campus, and the logic for selection, are included in the appendix of this document.
Market data is not geographically adjusted. Previous efforts at adjusting did not significantly impact the U of M’s rank ordering and were best estimations due to limited cost statistics for rural areas.
Page 93 of 2773 Faculty Compensation
• As a result of data collected by the American Association of University Professors (AAUP), we can see how we are paying our entire faculty population relative to our peer institutions. • The limitation of this data and attached charts is that illustrations are based on overall faculty salaries rather than comparisons within each area of academic study. • Professors are given salary offers by their college that are competitive for their unique discipline at the time of hire. Ongoing efforts to ensure market competitive pay by discipline are also conducted at the college level. • Compa ratios tell you how you are paying an employee, or group of employees, compared to the market. They are calculated by taking the actual salary of an employee, or group of employees, and dividing it by the market or salary range midpoint. • Example: $65,000 salary/$60,000 midpoint = 1.08. The person is paid 8% higher than market median.
Page 94 of 2774 Twin Cities Ranking of 2019 Faculty Salaries
Twin Cities Average = $121.3 Market Median = $127.7 Compa Ratio = 0.95
Source: American Association of University Professors (AAUP) Peer Institutions not providing data: 0
Page 95 of 2775 Duluth Ranking of 2019 Faculty Salaries
Duluth Average = $81.7 Market Median = $84.5 Compa Ratio = 0.97
Source: American Association of University Professors (AAUP) Peer Institutions not providing data: 3
Page 96 of 2776 Change in Duluth’s Compa Ratio
• Duluth’s compa ratio increased from 0.85 in last year’s report (2018 data) to 0.97 in this year’s report (2019 data). The reason for the significant change is as follows: The peer institution with the median salary from last year was once again the institution reporting the median salary for this year. However, this institution reported overall salaries that were roughly $10,000 lower than last year, thereby increasing Duluth’s compa ratio.
Data 2018 2019
Duluth Average $80.3 $81.7
Market Median $94.0 $84.5
Compa Ratio 0.85 0.97
Page 97 of 2777 Morris Ranking of 2019 Faculty Salaries
Morris Average = $71.9 Market Median = $74.4 Compa Ratio = 0.97
Source: American Association of University Professors (AAUP) Peer Institutions not providing data: 1
Page 98 of 2778 Crookston Ranking of 2019 Faculty Salaries
Crookston Average = $78.4 Market Median = $72.5 Compa Ratio = 1.08
Source: American Association of University Professors (AAUP) Peer Institutions not providing data: 5
Page 99 of 2779 Appendix
Page 100 of 27710 Guiding Principles Used by the Office of Institutional Research for Selection of Peer Institutions
• The list of peer institutions should remain very stable from year to year. • Consistency in peer selection demonstrates that we have carefully identified the market for our faculty positions. This leads to reliability, validity, and transparency of our percentile rankings. • The number of peer institutions should be large enough to ensure an adequate sampling of salaries in the marketplace. • Each campus can have its own unique peer group. • The same list of peer institutions should be used for the majority of faculty positions on the Twin Cities campus. • This will lead to greater equity, less volatility, and less administrative burden.
Page 101 of 27711 Peer Institutions Used for Twin Cities Faculty Benchmarking The peer institutions identified by the Office of Institutional Research for the UMN Twin Cities campus are listed on the next page and include:
Public U.S. universities who are members of the Association of American Universities (AAU) The AAU is composed of 62 leading public and private research universities in the United States and Canada. Membership in AAU is by invitation and is based on the high quality of programs of academic research and scholarship and education in a number of fields, as well as general recognition that a university is outstanding by reason of the excellence of its research and educational programs. Currently there are 62 schools in this organization, including both public and private universities. We choose not to compare ourselves to private universities within the AAU as this would include Ivy League schools for which the market is much more competitive for top talent. We also removed Canadian universities as comparisons. That leaves the 33 public universities who are AAU members to which we will be comparing faculty compensation.
Big 10 institutions (13 comparison universities) Twelve of the Big 10 schools are already included in the list of public AAU institutions. Northwestern and the University of Nebraska are the other members of the Big 10 that could be considered for comparison. Northwestern is a private university, so it is not included on the comparison list. Since the University of Nebraska is a public Big 10 school that is not part of the AAU, we decided to include it in our list of peer institutions. This brings our total of comparison universities to 34.
A fair number of the UMTC peer institutions are of similar mission, Carnegie classification, and size. These organizations are noted on the chart with the code “UMTC.”
Page 102 of 27712 Peer Institutions Used for Twin Cities Faculty Benchmarking
Page 103 of 27713 Peer Institutions Used for Morris Faculty Benchmarking
The institutions identified by the Office of Institutional Research and Morris leadership as Morris peer institutions are featured on the next page. In identifying its peers list, UMM designated schools as “true peers” if they had very similar profiles to UMM (size, programming, etc.) or “aspirational peers” if they had profiles and characteristics to which Morris aspires to be in direct comparison in the future. This list includes:
• Five institutions that are part of the Council of Public Liberal Arts Colleges (COPLAC) and are true peers to Morris • Five institutions that are not part of the Council of Public Liberal Arts Colleges (COPLAC) but are currently true peers to Morris • Five institutions that are aspirational peers
Page 104 of 27714 Peer Institutions Used for Morris Faculty Benchmarking
Page 105 of 27715 Peer Institutions Used for Crookston Faculty Benchmarking The following universities have been identified by the Crookston campus, in partnership with the Office of Institutional Research, as peer institutions. These selections include institutions that they view as most similar to themselves.
Peer Comparison Institution Groups Indiana University-Kokomo True Peer Lake Superior State University True Peer Northern State University - South Dakota True Peer Northwest Missouri State University True Peer Northwestern Oklahoma State University True Peer Southwest Minnesota State University True Peer SUNY College of Agriculture and Technology at Cobleskill True Peer The University of Tennessee-Martin True Peer University of Pittsburgh-Johnstown True Peer University of Wisconsin-Platteville True Peer University of Wisconsin-River Falls True Peer
Page 106 of 27716 Peer Institutions Used for Duluth Faculty Benchmarking
The following universities have been identified by the Duluth campus, in partnership with the Office of Institutional Research, as peer institutions. These selections include institutions that they view as most similar to themselves.
Page 107 of 27717 Peer Institutions Used for Rochester Faculty Benchmarking
• Rochester is a very unique campus, which has made it difficult to identify true peers.
Page 108 of 27718 Page 109 of 27719 Annual Report on Senior Leader Compensation
Ken Horstman, Office of Human Resources
Prepared for February 11, 2021 Board of Regents Finance & Operations Committee Meeting
Page 110 of 277 Introduction
The Office of Human Resources has recently completed the attached annual review of cash compensation for executive leadership positions within the University of Minnesota. This review was conducted to ensure the compensation provided to these individuals is in alignment with the stated objectives of the Board of Regents Policy on Compensation and Recognition.
Specifically, the Board of Regents policy states that: • The University strives to achieve and maintain a compensation structure that, when combined with benefits and other rewards, is competitive relative to institutional peers and other appropriate labor markets and serves to attract and retain a high-performance workforce. • The University seeks to reward meritorious performance and employee contribution to the success of the University through compensation and other forms of recognition. • In the setting of initial salaries and subsequent pay adjustments, the University considers the work responsibilities, market, internal equity, experience and expertise, performance, and other criteria as appropriate. • The University adheres to compensation and recognition practices that are fair and equitable in design, application, and delivery.
Page 111 of 2772 Definition of Market
The market in which we compete for talented senior leaders varies by campus but includes national higher education institutions of comparable size and scope. The institutions selected for comparison are referred to as peer institutions.
The list of peer institutions for each college campus, and the logic for selection, are included in the appendix of this document.
Private sector businesses, MNSCU, and the state of Minnesota are not considered our comparison market for senior leader talent: • Successful candidates generally have a wealth of knowledge about the unique nature of business in higher education, including our tripartite mission, the research we conduct , the role of faculty, and the culture of shared governance. • Although we may occasionally hire a senior leader from, or lose them to, the private sector, we do not seek to match the pay of our senior leaders to the private sector, given the private sector’s ability to offer a wider array of compensation offerings.
Page 112 of 2773 Senior Leader Compensation Strategy and Scope
The total compensation strategy for senior leaders should be: • Competitive • Equitable • Market driven • Transparent • Performance based
The board reserves to itself the authority to appoint all individuals in the following positions and approve the terms of their employment:
• Chancellor • Senior Vice President for Finance and Operations • Chief Auditor • University Librarian and Dean of Libraries • Dean • Vice Chancellor for Academic Affairs • Division I Director Of Intercollegiate Athletics • Vice President • Executive Vice President and Provost • Such other administrative positions as the Board • General Counsel may specify from time to time
Page 113 of 2774 Senior Leader Positions Included in the 2020 Study
The following positions have been included in the 2020 analysis of senior leader compensation:
Title Incumbent Associate Vice President & Dean International Programs Meredith Mc Quaid Chancellor Crookston Mary Holz-Clause Chancellor Duluth Lendley Black Chancellor Morris Michelle Behr Chancellor Rochester Lori Carrell Chief Auditor Gail Klatt Dean and Vice Provost Graduate Education Scott Lanyon Dean and Vice Provost Undergraduate Education Robert Mc Master Dean, Carlson School of Management Sri Zaheer Dean, College of Biological Sciences Valery Forbes Dean, College of Continuing and Professional Studies (Interim) Robert Stine Dean, College of Design Carol Strohecker Dean, College of Education and Human Development (Interim) Michael Rodriguez Dean, College of Liberal Arts John Coleman Dean, College of Science and Engineering Mostafa Kaveh Dean, Hubert H. Humphrey School of Public Affairs Laura Bloomberg Dean, Law School Garry Jenkins Dean, School of Dentistry (Interim) Keith Mays Dean, School of Nursing Connie Delaney Dean, School of Pharmacy Lynda Welage (Continued on next page)
Page 114 of 2775 Title Incumbent Dean, School of Public Health John Finnegan Dean, School of Veterinary Medicine Laura Molgaard Dean, UMD College of Education and Human Service Professions Jill Pinkney Pastrana Dean, UMD College of Liberal Arts Jeremy Youde Dean, UMD Labovitz School of Business and Economics Amy Hietapelto Dean, UMD Swenson College of Science and Engineering Wendy Reed Dean, University Extension Beverly Durgan Dean, College of Food, Agricultural & Natural Resource Sciences Brian Buhr Division I Director of Intercollegiate Athletics Mark Coyle Executive Vice Chancellor for Academic Affairs, UMD Fernando Delgado Executive Vice President & Provost Rachel Croson General Counsel Douglas Peterson President Joan Gabel Senior Vice President Finance & Operations Myron Frans University Librarian and Dean of Libraries Lisa German Vice Chancellor for Academic Affairs and Dean, UMM Janet Ericksen Vice Chancellor for Academic Affairs and Innovation, UMR Jeffrey Ratliff-Crain Vice Chancellor for Academic and Student Affairs, UMC John Hoffman Vice President and Chief Information Officer Bernard Gulachek Vice President for Clinical Affairs & Dean of the Medical School Jakub Tolar Vice President for Equity & Diversity Michael Goh Vice President for Student Affairs and Dean of Students (Interim) Maggie Towle Vice President Human Resources (Interim) Kenneth Horstman Vice President Research Chris Cramer Vice President University and Government Relations Matt Kramer Vice President University Services Michael Berthelsen
Page 115 of 2776 Senior Leader Compensation Surveys Used
Surveys are selected based on the following criteria: • Professional and timely survey methodology leading to data integrity: Standard definitions, controlled data collection, thorough analysis of market data • Adequate matches for the majority of our positions • Comprehensive participant list, including our peer institutions • Strong knowledge of the higher education industry and consistent presence allowing for year-over- year comparison of results
Data for our 2020 analysis was pulled from the following formal surveys: • CUPA-HR Administrators in Higher Education Salary Survey • CUPA-HR Executive Compensation and Benefits in Higher Education
Data sources considered that did not meet the criteria above: Chronicle of Higher Education, university websites.
Page 116 of 2777 Senior Leader Compensation Surveys Used
Limitations of this year’s data set: • Total Remuneration, which typically includes retirement and deferred compensation in addition to the standard components of base and incentive compensation, is not available in the CUPA-HR surveys.
All external market data was aged to 7/1/2021 using an aging assumption of 2.4%. This percentage represents the annual merit pool anticipated by higher education institutions nationally, and all industries locally and nationally, for calendar year 2021. Applying this aging factor to the external survey data represents the best estimate of salaries that will be paid in the market as of 7/1/2021.
Page 117 of 2778 Definition of Survey Terms
To ensure accurate comparisons of University of Minnesota data against the published salary surveys, we arrived at the following definitions of base salary, total cash compensation, and total remuneration. These definitions are consistent with how these terms are defined and reported by the published salary surveys.
Base salary: The annual base salary paid to incumbents. • Base salaries reported for University of Minnesota senior leaders were taken from the Fall Snapshot (9th payroll of FY2021) and also include augments paid during calendar year 2020.
Total cash compensation: The sum of base salary and bonus/incentive compensation. Does not include housing allowances or other perquisites (such as travel reimbursements, moving expenses, season tickets, etc.). • Incentives and bonuses reported for University of Minnesota senior leaders reflect payments made in calendar year 2020. Housing allowances for campus presidents or chancellors and perquisites are excluded from total cash.
Total remuneration: The sum of total cash compensation and retirement and deferred compensation. • Retirement contributions and deferred compensation for University of Minnesota leaders reflect contributions made in calendar year 2020.
Page 118 of 2779 Senior Leader Compensation - Overall Distribution & Findings
• Our stated strategy is to be market competitive for senior leader compensation. • Our senior leaders are paid, on average, at the 32nd percentile of the market for base compensation.
% of Leaders with Insufficient Market Distribution of Percentile Rankings Data Overall Average <25 25-44 45-55 56-74 >75 Percentile Ranking Base Salary 32nd 44% 15% 17% 10% 2% 12% Total Cash 35th 32% 10% 5% 12% 5% 37% Total Remuneration not reported by CUPA 100%
Page 119 of 27710 Senior Leader Compensation - Change in Overall Distribution & Findings
Base Salary Total Cash 2019 2020 2019 2020
Overall Average Overall Average Percentile Ranking Percentile Ranking 34th 32nd 36th 35th <25 41% 44% <25 30% 32% 25-44 18% 15% 25-44 11% 10% 45-55 9% 17% 45-55 11% 5% 56-74 16% 10% 56-74 9% 12% >75 2% 2% >75 5% 5% ISD 14% 12% ISD 34% 37%
Overall percentile rankings for base salary and total cash compensation are slightly lower than 2019.
Page 120 of 27711 Senior Leader Compensation - Findings by Individual Leader
Base Salary from Surveys Incumbent Data Total Cash Comp from Surveys Incumbent Data Base + Incentive + Retirement + Deferred Incumbent Data
Base+ Incent+ Percentile Total Percentile Retire + Percentile U of MN Working Title 10th% 25th% 50th% 75th% 90th% Base Ranking 10th% 25th% 50th% 75th% 90th% Cash Ranking 10th% 25th% 50th% 75th% 90th% Deferred Ranking Associate Vice President & Dean International Programs $119.9 $165.7 $207.6 $268.8 $301.7 $241.8 64.0 ISD ISD ISD ISD ISD $241.8 ISD ISD ISD ISD ISD ISD $273.2 ISD
Chancellor Crookston $260.7 $263.1 $269.9 $289.4 $318.1 $260.7 <10th ISD ISD ISD ISD ISD $260.7 ISD ISD ISD ISD ISD ISD $286.8 ISD
Chancellor Duluth $349.2 $366.2 $410.6 $460.5 $485.9 $311.0 <10th ISD ISD ISD ISD ISD $311.0 ISD ISD ISD ISD ISD ISD $378.0 ISD
Chancellor Morris $341.0 $351.7 $375.3 $448.6 $512.5 $260.7 <10th ISD ISD ISD ISD ISD $260.7 ISD ISD ISD ISD ISD ISD $286.8 ISD
Chancellor Rochester ISD ISD ISD ISD ISD $255.6 ISD ISD ISD ISD ISD ISD $255.6 ISD ISD ISD ISD ISD ISD $281.2 ISD
Chief Auditor $167.8 $188.4 $211.7 $257.7 $293.0 $221.9 55.5 $167.8 $196.3 $211.0 $252.7 $293.0 $221.9 56.5 ISD ISD ISD ISD ISD $250.7 ISD Dean and Vice Provost Graduate Education $221.4 $252.9 $284.0 $311.3 $336.2 $218.6 <10th $215.6 $258.3 $287.0 $323.1 $357.1 $218.6 11.1 ISD ISD ISD ISD ISD $247.0 ISD
(Continued on next page)
Page 121 of 27712 Base Salary from Surveys Incumbent Data Total Cash Comp from Surveys Incumbent Data Base + Incentive + Retirement + Deferred Incumbent Data Base+ Incent+ Percentile Total Percentile Retire + Percentile U of MN Working Title 10th% 25th% 50th% 75th% 90th% Base Ranking 10th% 25th% 50th% 75th% 90th% Cash Ranking 10th% 25th% 50th% 75th% 90th% Deferred Ranking Dean and Vice Provost Undergraduate Education $180.4 $218.3 $247.4 $283.7 $340.2 $255.1 55.3 $182.7 $211.6 $225.0 $291.4 $371.0 $255.1 61.3 ISD ISD ISD ISD ISD $288.2 ISD Dean, Carlson School of Management $393.0 $431.0 $464.7 $503.3 $609.9 $572.6 84.7 $404.8 $422.2 $451.7 $481.2 $621.5 $572.6 84.8 ISD ISD ISD ISD ISD $609.6 ISD Dean, College of Biological Sciences ISD ISD ISD ISD ISD $284.8 ISD ISD ISD ISD ISD ISD $284.8 ISD ISD ISD ISD ISD ISD $313.2 ISD
Dean, College of Design $241.2 $288.0 $299.7 $334.8 $345.4 $251.5 13.3 $233.2 $291.4 $299.4 $335.0 $344.0 $251.5 14.7 ISD ISD ISD ISD ISD $276.7 ISD
Dean, College of Liberal Arts $294.8 $321.4 $361.4 $400.8 $415.2 $296.0 10.7 $264.2 $302.9 $348.9 $415.2 $419.3 $296.0 22.3 ISD ISD ISD ISD ISD $324.5 ISD Dean, College of Science and Engineering $348.8 $379.0 $395.7 $436.0 $482.0 $363.9 17.5 $329.6 $373.1 $384.7 $419.9 $450.2 $363.9 21.8 ISD ISD ISD ISD ISD $400.9 ISD Dean, Hubert H. Humphrey School of Public Affairs $270.6 $298.7 $339.5 $365.4 $391.1 $251.5 <10th $254.8 $279.4 $321.0 $358.8 $391.8 $251.5 <10th ISD ISD ISD ISD ISD $284.2 ISD
Dean, Law School $347.0 $359.6 $383.4 $424.2 $494.5 $390.6 54.4 $350.9 $356.5 $371.5 $404.3 $513.0 $390.6 64.5 ISD ISD ISD ISD ISD $419.1 ISD
Dean, School of Nursing $290.7 $335.7 $367.9 $386.2 $434.7 $339.1 27.7 $312.7 $341.7 $364.7 $380.2 $428.2 $339.1 23.7 ISD ISD ISD ISD ISD $376.2 ISD
Dean, School of Pharmacy $292.8 $333.8 $369.3 $414.2 $464.2 $313.7 17.6 $300.5 $332.8 $372.6 $467.4 $497.2 $313.7 16.1 ISD ISD ISD ISD ISD $342.2 ISD
Dean, School of Public Health $330.3 $360.9 $389.6 $436.0 $474.9 $368.1 31.3 $332.2 $366.2 $383.6 $459.4 $516.3 $368.1 27.8 ISD ISD ISD ISD ISD $405.2 ISD Dean, School of Veterinary Medicine $300.4 $333.8 $341.8 $366.8 $402.4 $240.1 <10th $325.9 $332.2 $337.9 $351.7 $358.7 $240.1 <10th ISD ISD ISD ISD ISD $271.3 ISD Dean, UMD College of Education and Human Service Professions ISD ISD ISD ISD ISD $154.0 ISD ISD ISD ISD ISD ISD $154.0 ISD ISD ISD ISD ISD ISD $169.4 ISD
Dean, UMD College of Liberal Arts $193.3 $203.8 $231.7 $248.7 $261.8 $156.0 <10th ISD ISD ISD ISD ISD $156.0 ISD ISD ISD ISD ISD ISD $176.3 ISD
(Continued on next page) Page 122 of 27713 Base Salary from Surveys Incumbent Data Total Cash Comp from Surveys Incumbent Data Base + Incentive + Retirement + Deferred Incumbent Data Base+ Incent+ Percentile Total Percentile Retire + Percentile U of MN Working Title 10th% 25th% 50th% 75th% 90th% Base Ranking 10th% 25th% 50th% 75th% 90th% Cash Ranking 10th% 25th% 50th% 75th% 90th% Deferred Ranking Dean, UMD Labovitz School of Business and Economics $206.4 $215.6 $226.0 $290.3 $308.5 $229.3 51.3 ISD ISD ISD ISD ISD $229.3 ISD ISD ISD ISD ISD ISD $252.2 ISD Dean, UMD Swenson College of Science and Engineering $214.0 $226.1 $249.6 $281.6 $297.1 $219.9 17.3 ISD ISD ISD ISD ISD $219.9 ISD ISD ISD ISD ISD ISD $241.9 ISD
Dean, University Extension ISD ISD ISD ISD ISD $258.2 ISD ISD ISD ISD ISD ISD $258.2 ISD ISD ISD ISD ISD ISD $291.7 ISD Dean, College of Food, Agricultural & Natural Resource Sciences $272.0 $320.3 $353.9 $373.9 $400.1 $284.4 13.8 $270.6 $331.1 $360.0 $376.3 $384.8 $284.4 13.4 ISD ISD ISD ISD ISD $321.3 ISD Division 1 Director of Intercollegiate Athletics - Big 10 Comparison (2) $619.9 $668.8 $864.9 $1,091.2 $1,195.2 $975.0 62.2 $669.2 $702.3 $757.2 $1,027.6 $1,125.0 $1,053.0 78.9 ISD ISD ISD ISD ISD $1,481.5 ISD Executive Vice Chancellor for Academic Affairs, UMD $230.4 $263.4 $290.9 $334.1 $345.2 $244.4 16.3 ISD ISD ISD ISD ISD $244.4 ISD ISD ISD ISD ISD ISD $268.8 ISD
Executive Vice President & Provost $382.7 $431.0 $480.2 $520.4 $589.0 $495.0 59.2 $390.0 $423.9 $465.3 $529.0 $589.7 $495.0 61.7 ISD ISD ISD ISD ISD $553.5 ISD
General Counsel $218.3 $288.2 $354.0 $424.8 $449.3 $367.2 54.7 $191.6 $272.6 $354.0 $424.8 $494.6 $367.2 54.7 ISD ISD ISD ISD ISD $395.7 ISD
President (1) $615.4 $685.9 $811.7 $854.9 $912.5 $640.0 15.2 $580.8 $696.4 $798.6 $938.7 $1,029.4 $640.0 17.7 ISD ISD ISD ISD ISD $818.5 ISD Senior Vice President Finance & Operations $320.3 $352.5 $399.0 $456.8 $561.4 $399.0 50.0 $300.9 $343.0 $389.2 $516.9 $598.7 $399.0 51.9 ISD ISD ISD ISD ISD $447.5 ISD University Librarian and Dean of Libraries $214.2 $242.9 $264.2 $296.3 $318.8 $274.0 57.6 $225.1 $243.9 $261.1 $286.5 $316.9 $274.0 62.7 ISD ISD ISD ISD ISD $301.4 ISD Vice Chancellor for Academic Affairs and Dean, UMM $155.9 $197.0 $208.1 $238.7 $257.0 $160.0 11.5 ISD ISD ISD ISD ISD $160.0 ISD ISD ISD ISD ISD ISD $180.8 ISD Vice Chancellor for Academic Affairs and Innovation, UMR ISD ISD ISD ISD ISD $172.8 ISD ISD ISD ISD ISD ISD $172.8 ISD ISD ISD ISD ISD ISD $195.3 ISD Vice Chancellor for Academic and Student Affairs, UMC $174.4 $179.1 $182.2 $193.6 $206.5 $184.5 55.1 ISD ISD ISD ISD ISD $184.5 ISD ISD ISD ISD ISD ISD $203.0 ISD
(Continued on next page) Page 123 of 27714 Base + Incentive + Retirement + Base Salary from Surveys Incumbent Data Total Cash Comp from Surveys Incumbent Data Deferred Incumbent Data Base+ Incent+ Percentile Total Percentile Retire + Percentile U of MN Working Title 10th% 25th% 50th% 75th% 90th% Base Ranking 10th% 25th% 50th% 75th% 90th% Cash Ranking 10th% 25th% 50th% 75th% 90th% Deferred Ranking Vice President and Chief Information Officer $251.0 $305.8 $328.6 $367.7 $429.2 $279.2 17.7 $303.4 $336.3 $329.2 $377.0 $413.1 $279.2 <10th ISD ISD ISD ISD ISD $315.5 ISD Vice President for Clinical Affairs & Dean of the Medical School $428.1 $570.7 $864.8 $968.6 $1,203.6 $730.1 38.5 $297.8 $386.4 $875.0 $1,212.2 $1,513.4 $730.1 42.6 ISD ISD ISD ISD ISD $817.1 ISD
Vice President for Equity & Diversity $204.8 $232.2 $259.2 $331.7 $353.2 $245.4 37.2 $211.4 $238.3 $259.5 $342.5 $356.8 $245.4 33.4 ISD ISD ISD ISD ISD $277.3 ISD
Vice President Research $287.0 $346.2 $382.2 $410.8 $436.7 $329.9 20.9 $328.3 $358.1 $391.3 $413.8 $434.9 $329.9 10.8 ISD ISD ISD ISD ISD $366.9 ISD Vice President University and Government Relations $179.5 $227.1 $286.4 $330.9 $397.7 $235.8 28.7 $227.8 $263.6 $286.3 $360.1 $432.1 $235.8 13.4 ISD ISD ISD ISD ISD $266.5 ISD
Vice President University Services $256.1 $274.9 $315.5 $371.2 $388.1 $282.4 29.6 $256.1 $274.9 $315.5 $371.2 $388.1 $282.4 29.6 ISD ISD ISD ISD ISD $319.1 ISD Dean, College of Continuing and Professional Studies ISD ISD ISD ISD ISD N/A N/A ISD ISD ISD ISD ISD N/A N/A ISD ISD ISD ISD ISD N/A N/A Dean, College of Education and Human Development $248.4 $274.1 $302.7 $337.2 $375.0 N/A N/A $243.3 $270.8 $305.1 $339.5 $360.3 N/A N/A ISD ISD ISD ISD ISD N/A N/A
Dean, School of Dentistry $339.3 $347.2 $405.0 $463.0 $581.8 N/A N/A $339.8 $354.3 $405.0 $501.2 $589.9 N/A N/A ISD ISD ISD ISD ISD N/A N/A
Vice President Human Resources $216.2 $233.7 $276.2 $317.0 $356.9 N/A N/A $218.9 $233.8 $281.5 $327.9 $378.8 N/A N/A ISD ISD ISD ISD ISD N/A N/A Vice President for Student Affairs and Dean of Students $199.3 $258.9 $296.8 $331.2 $385.0 N/A N/A $244.9 $277.2 $299.4 $330.7 $375.7 N/A N/A ISD ISD ISD ISD ISD N/A N/A
Notes: Refer to the Appendix for the list of universities used for benchmark data. ISD indicates when insufficient data existed within the salary surveys. For the purpose of calculating summary data, when percentile ranking was <10, 10% was used, and when it was >90, 90 was used. Incumbent data is not displayed for interim roles, which are highlighted in grey. President market data: One data source, CUPA-Admin, reported insufficient data for 2020, therefore 2019 data was aged forward.
(1) Eligible for 415(m) supplemental retirement contribution as noted below: (2) Eligible for 415(m) supplemental retirement contribution as noted below: $150,000 on 6/30/2021 $100,000 415(m) contribution 6/30/2021 $155,000 on 6/30/2022 $160,000 on 6/30/2023 $165,000 on 6/30/2024 Page 124 of 27715 Appendix
Page 125 of 27716 Guiding Principles Used by the Office of Institutional Research for Selection of Peer Institutions
• The list of peer institutions should remain very stable from year to year. – Consistency in peer selection demonstrates that we have carefully identified the market for our senior leader positions. This leads to reliability, validity, and transparency of our percentile rankings. • The number of peer institutions should be large enough to ensure an adequate sampling of salaries in the marketplace. • Each campus can have its own unique peer group. • The same list of peer institutions should be used for the majority of senior leader positions on the Twin Cities campus, with exceptions being made for only one or two roles at most. – This will lead to greater equity, less volatility, and less administrative burden.
Page 126 of 27717 Peer Institutions Used for Twin Cities Senior Leader Benchmarking
The peer institutions identified by the Office of Institutional Research for the UMN Twin Cities campus are listed on the next page and include:
Public U.S. universities that are members of the Association of American Universities (AAU) The AAU is composed of 62 leading public and private research universities in the United States and Canada. Membership in AAU is by invitation and is based on the high quality of programs of academic research and scholarship and education in a number of fields, as well as general recognition that a university is outstanding by reason of the excellence of its research and educational programs. Currently there are 62 schools in this organization, including both public and private universities. We choose not to compare ourselves to private universities within the AAU as this would include Ivy League schools for which the market is much more competitive for top talent. We also removed Canadian universities as comparisons. That leaves the 33 public universities that are AAU members to which we will be comparing senior leader compensation. Big 10 institutions (13 comparison universities) Twelve of the Big 10 schools are already included in the list of public AAU institutions. Northwestern and the University of Nebraska are the other members of the Big 10 that could be considered for comparison. Northwestern is a private university, so it is not included in the comparison list. Since the University of Nebraska is a public Big 10 school that is not part of the AAU, we decided to include it in our list of peer institutions. This brings our total of comparison universities to 34. A fair number of the UMTC peer institutions are of similar mission, Carnegie classification, and size. These organizations are noted on the chart with the code “UMTC.”
Page 127 of 27718 Peer Institutions Used for Twin Cities Senior Leader Benchmarking
Page 128 of 27719 Peer Institutions Used for Crookston Senior Leader Benchmarking
The following universities have been identified by the Crookston campus, in partnership with the Office of Institutional Research, as peer institutions. These selections include institutions that they view as most similar to themselves.
Institution Peer Comparison Groups Indiana University-Kokomo True Peer Lake Superior State University True Peer Northern State University - South Dakota True Peer Northwest Missouri State University True Peer Northwestern Oklahoma State University True Peer Southwest Minnesota State University True Peer SUNY College of Agriculture and Technology at Cobleskill True Peer The University of Tennessee-Martin True Peer University of Pittsburgh-Johnstown True Peer University of Wisconsin-Platteville True Peer University of Wisconsin-River Falls True Peer
Page 129 of 27720 Peer Institutions Used for Duluth Senior Leader Benchmarking The following universities have been identified by the Duluth campus, in partnership with the Office of Institutional Research, as peer institutions. These selections include institutions that they view as most similar to themselves.
Page 130 of 27721 Peer Institutions Used for Morris Senior Leader Benchmarking
The 15 institutions identified by the Office of Institutional Research and Morris leadership as Morris peer institutions are featured on the next page. In identifying its peers list, UMM designated schools as “true peers” if they had very similar profiles to UMM (size, programming, etc.) or “aspirational peers” if they had profiles and characteristics to which Morris aspires to be in direct comparison in the future. This list includes:
• Five institutions that are part of the Council of Public Liberal Arts Colleges (COPLAC) and are true peers to Morris. • Five institutions that are not part of the Council of Public Liberal Arts Colleges (COPLAC) but are currently true peers to Morris. • Five institutions that are aspirational peers.
Page 131 of 27722 Peer Institutions Used for Morris Senior Leader Benchmarking
Page 132 of 27723 Peer Institutions Used for Rochester Senior Leader Benchmarking
• Rochester is a young and unique campus, which has made it difficult to identify true peers. • A preliminary set of comparison institutions is in development but was not yet available for this analysis. • Rochester senior leader salaries are outlined within this annual report but without percentile ranking statistics.
Page 133 of 27724 Page 134 of 27725 Report on Total Compensation
Kenneth E. Horstman, Interim Vice President, Office of Human Resources
Finance & Operations Committee February 11, 2021
Page 135 of 277 Report on Total Compensation
• Annual compensation report provides the following: – Compensation assessment for senior leaders, faculty, staff (P&A and Civil Service) • Compensation for labor represented groups is negotiated as are some benefits • We have been asked today to provide a picture of how our total compensation compares to the market
Page 136 of 277 The scope of the compensation structure is written in Regents’ Policy “…a compensation structure that, when combined with benefits and other rewards, is competitive relative to institutional peers and other appropriate labor markets and serves to attract and retain a high-performance workforce.”
Board Policy: Employee Compensation and Recognition, Section III (a)
Page 137 of 277 Workforce and Total Compensation Statistics
• The University employees 26,630 employees, or 21,570 full-time equivalents* • Salary and fringe represent 62% of the spend of total non- sponsored expenditures for FY21 and has been stable at 60%–63% for several years • Salaries are estimated to account for $1.6 billion for FY21 • Benefits are estimated to account for another $560 million (including FICA and Medicare taxes)
*Fall Snapshot, October 2020
Page 138 of 277 What do we know about our workforce? Enterprise data dashboard: Workforce distribution
Headcount Distribution by Employee Group Headcount Distribution by Organizational Role 50,000 40,000 - 20,000 -
Civil Service Faculty Graduate Assistants Labor Represented Leadership and Oversight Mission Leadership P&A Professionals in Training Mission Support and Facilities
Diversity Headcount Distribution Average Age by Employee Group 60% 60
40% 40 20 20% - 0%
Female Staff Female Faculty Civil Service Faculty Faculty of Color Staff of Color Graduate Assistants Labor Represented Leadership P&A Professionals in Training Page 139 of 277 Dashboard: Retirement Risk
Page 140 of 277 2020 Annual Report Summary • Senior leader percentile rankings for base salary and total cash compensation are slightly lower than prior year • Faculty compa ratios were steady in comparison to the prior year • Average compa ratios for refined job families are in a range of 8 to 20% below market median • The 2020 annual reports are for 2019 data • Analysis excludes impact of the FY21 unpaid furlough and pay reduction program
Page 141 of 277 Total Compensation Data Sources • Benchmarking reports are not conducted on total compensation nationally or regionally • Organizations typically purchase salary surveys and separate benefit benchmarking reports • Selected surveys should: – Use professional and valid methodologies – Focus on markets in which the U of M competes for talent – Be conducted periodically for year-over-year comparisons
Page 142 of 277 Data Sources, continued • The University utilizes over 30 formal, third-party salary surveys to benchmark salaries – Purchased from groups such as Mercer, Willis Towers Watson, CUPA, Culpepper, and others • Benefit benchmarking data for today’s presentation is taken from three reports: – Willis Towers Watson 2019 Large MN Employers Benefits Benchmark Study – Includes data from 28 large MN employers – Willis Towers Watson 2020 Medical Benefits Benchmarking Analysis – LHD Benefit Advisors 2019 custom survey hosted by Purdue – includes data from 26 higher education institutions
Page 143 of 277 To determine the relevant market, understand:
Where do Where do we hire departing from? employees go?
Employee Group Market
Labor Twin Cities Metro, All Employers
Civil Service & P&A Twin Cities Metro, All Employers
Faculty Higher Education Peer Institutions
46 Senior Leaders Higher Education Peer Institutions
Page 144 of 277 Pay: Assessment of Competitiveness • Compa ratio (CR): measures how an individual’s salary, or a group of salaries, compares to the market $62,954 This employee is paid 3% $65,000 1.03 above market Salary Compa Salary Range Midpoint ratio
Compa Ratio Relation to Market 1.0 Exactly matches market median 0.75 25% below market median 1.25 25% above market median
• An organization can have a healthy overall compa ratio but have pockets of employees or positions that are not paid to market • To know if a compa ratio is competitive, you need to know the skills and experience of the employee group; the degree of job mastery determines higher or lower payment relative to market • For this analysis we are assuming normal distribution of performance which would support an overall CR of 1.0
Page 145 of 277 Senior Leader Compensation—overall distribution and findings
• Our stated strategy is to be market competitive for Senior Leader compensation • Our Senior Leaders are paid, on average, at the 32nd percentile of the market for base compensation (Note: the 50th percentile is market median)
% of Leaders with Distribution of Percentile Rankings Insufficient Market Data Overall Average <25 25-44 45-55 56-74 >75 Percentile Ranking Base Salary 32nd 44% 15% 17% 10% 2% 12% Total Cash 35th 32% 10% 5% 12% 5% 37%
Total Remuneration not reported by CUPA 100%
Page 146 of 277 Senior Leader Compensation—change in overall distribution and findings
Base Salary Total Cash 2019 2020 2019 2020
Overall Average Overall Average Percentile Ranking Percentile Ranking 34th 32nd 36th 35th <25 41% 44% <25 30% 32% 25-44 18% 15% 25-44 11% 10% 45-55 9% 17% 45-55 11% 5% 56-74 16% 10% 56-74 9% 12% >75 2% 2% >75 5% 5% ISD 14% 12% ISD 34% 37%
Overall percentile rankings for base salary and total cash compensation are slightly lower than in 2019
Page 147 of 277 Faculty Compensation • Using data collected by the American Association of University Professors (AAUP), we can see how the entire U of M faculty population is paid relative to peer institutions • The limitation of this data and attached charts is that illustrations are based on overall faculty salaries rather than comparisons within each area of academic study
U of M Average Peer Institutions’ Compa Campus Faculty Salary Median Faculty Salary Ratio Twin Cities $121.3 $127.7 .95 Duluth $81.7 $84.5 .97 Morris $71.9 $74.4 .97 Crookston $78.4 $72.5 1.08 Rochester Excluded from analysis due to unspecified peer institutions Overall .99
Page 148 of 277 University salaries for refined job families compared to the market Salary Compared Percent of to Market Median Employees > 20% + .7% 5.6% 16%–20% + .5% above 11%–15% + 1.2% market 6%–10% + 3.3% 1%–5% + 4.1% 15.6% 4%–0% -/= 11.4% at market 9%–5% - 12.3% 14%–10% - 15.8% 78.8% 19%–15% - 18.3% below market >20% - 32.5%
Page 149 of 277 Dashboard: Salary Increases
U of M Base Salary Increases Compared to Benchmarks
National Education
3.50% Mpls / St. Paul All Industries National All Industries 3.00% U of MN Base Salary Increase
2.50%
2.00% The University’s cumulative merit pool across 1.50% these 5 years is: • 2.06% lower than national education 1.00% • 3.63% lower than Mpls/St. Paul • 3.71% lower than all industries nationally 0.50%
0.00% Results of the current merit pool freeze will be FY16 FY17 FY18 FY19 FY20 reflected in data for FY21
Page 150 of 277 Focus of this report
• Total compensation includes pay and benefits (inclusive of medical, dental, life insurance, retirement, and vacation) • Total compensation can be assessed from multiple angles, including cost, efficiency, and effectiveness • We will explore the value to the employee of medical and retirement benefits given that they represent the largest portion of benefits costs
Page 151 of 277 Pay: Comparisons to benchmarks 50% = market 1.0 = market median 35% median
Senior Leaders 35th percentile
We need to ask if our other offerings lead the market, and by how much, to determine if we close gaps in total compensation.
Page 152 of 277 Components of employer value as a percent of total benefit value
University of Minnesota Study Average
Retirement Retirement 23% 23% Vacations & Vacations & holidays holidays 30% 33%
Protection 10% Medical & Medical & Protection dental dental 10% 37% 34%
© 2019 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. Page 153 of 277 Benefits are a key part of Total Compensation
FY 2020 Fringe Rate—Detail by Fringe Component The components of Partial Benefits/ Academic Non-Academic Civil Trades/Temp & Casual/ fringe cover more Faculty/P&A/ Service Residents/Fellows/ Fringe Component Police AFSCME/Teamsters Federal Employees
than benefits, but the Retirement 11.2% 5.2% largest components Income Disability 0.5% are the costs for Unemployment 0.3% 0.3% 0.3% Worker’s Comp 0.4% 0.4% 0.4%
retirement and FICA 5.5% 5.5% 5.5% medical Medicare 1.4% 1.4% 1.4% Medical 14.2% 14.2%
Dental 0.6% 0.6%
Life 0.1% 0.1%
Tuition .4% .4%
Internal Admin .6% .6% .6%
Vacation 0.8% 0.8%
Fringe Rate by Employee 36.0% 29.5% 8.2% Class
Page 154 of 277 Medical benefits compared to large employers in Minnesota Employer Employee U of M Total Benefit Value – Medical (active) – All organizations
140%
120.1 119.9
120% 111.4
110.7
107.0
105.7
104.0
103.3
102.2
102.0
101.6
101.6
99.9
100.0
99.2
99.1 97.9
97.2
97.7
96.0
95.5
95.3 95.0
100% 94.4
91.7
88.3
88.2
88.0 85.8 80%
60%
40%
20%
0%
© 2019 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. Page 155 of 277 Estimating medical benefit value
Based on this data, a University employee earning the average U of M salary of $71,412 receives a benefit equivalent of 3.29% of their annual salary through the University medical benefit above what the average Minnesota employer provides
Average Employer- Percentage Provided Value U of M U of M Difference U of M Difference in Across MN Employer- Average in Average Average Average Large Provided Annual Cost Annual Salary for Annual Employers Value Per Employee Value CS and P&A Salary Medical 100.0 119.9 $14,171 $2,352 $71,412 3.29% Plans
Page 156 of 277 Retirement benefit: Defined contribution
The University provides 2.7% more than companies that provide both a matching and non-matching component to their DC plan
Twin Cities Large Employers Retirement Contributions
Average Non-match Employer Contribution 3.70%
Average Employer Match Contribution 4.40%
Average DC Employer Contribution (match and non-match) 7.40%
University of MN Employer Contribution (Actual) 10%
0% 2% 4% 6% 8% 10% 12%
• Willis Towers Watson surveyed 28 large MN employers and compared data for newly hired employees – 27 of the 28 employers provide a matching contribution – 18 of the 28 employers provide a non-matching contribution (may be based on company profits for the year)
Page 157 of 277 DC Comparisons: Peer institutions A Purdue survey of core retirement plan data found the average and median employer contribution rates are 10%, which is the same provided at the University of Minnesota for new employees.
Core Plan Employer Contributions 3.5
3
2.5
2
1.5
1
0.5
0 3% 7% 8% 10% 13% 13.52% 14% Variable No Response Page 158 of 277 Rationale for incremental compa ratio for health and retirement • Medical benefit – Assuming the average U of M salary of $71k and using the medical plan representing the average employee utilization, an employee would receive an incremental benefit equivalent of 3.29% of their annual salary through the University medical benefit, compared to large private employers – There is a minimal incremental difference favoring the University health plan in comparison with large Minnesota public employers and almost no difference compared to peer institutions nationally • Retirement benefit – The University provides 2.7% more than large private MN employers – There is no discernable difference in comparison to peer institutions
Page 159 of 277 Civil Service/P&A comparison to market
Adjusted CR = .92
1.0 = Market Median
Staff Salary Compa Ratio = .86
Medical Plan = .033 Retirement = .027
Page 160 of 277 Faculty Comparison to Market
Adjusted CR = .99
1.0 = Market Median
Faculty Salary Compa Ratio = .99
Medical Plan = no Retirement = .00 discernable difference
Page 161 of 277 Senior Leader Comparison to Market
Adjusted percentile = 35th
50% = Market Median
Senior Leader Salary = 35th Percentile
Medical Plan = Retirement = .00 no discernable difference
Page 162 of 277 Limitations to this analysis
• The compa ratios for each employee group are high-level averages; many of our employees are paid far lower to market while others are higher • Broad comparisons of benefits require assumptions about intricate aspects of these plans that can be significant – Health plan utilization policies – Retirement plan design for loans, distributions • Several Twin Cities employers offer bonuses or stock options to senior managers and higher-level roles. This is not included in the Civil Service and P&A analysis
Page 163 of 277 A holistic view • Compensation is part of the employee value proposition which supports recruitment and retention
True Differentiators–Hard or Impossible to Replicate
Mission, Pride In Purpose,
Work. With Purpose. EmployeeEngagement
Environment & Culture–Harder to Replicate
Wellbeing, Life Balance, Relationships
Total Rewards–Must be Competitive–Easy to Replicate
Foundational Performance-Based Professional Development
Base Pay Merit Increases Training Benefits Incentives & Bonuses Leadership Development Time Away Recognition Mentoring
Page 164 of 277 Compensation combined with other rewards
Tangible Rewards Pay Benefits
Other Rewards Career More Coaching, Training Meaningful Opportunities Responsibility & Support Assignments
Work-Life Compelling Flexibility Collaboration Balance Mission
Page 165 of 277 U of M compared to Minnesota employers
Compensation Recommend to Code Company Glassdoor Ratings and Benefits a friend 100% A Allina Health 3.7 78% B Ameriprise Financial, Inc. 3.5 72% C Andersen Corporation 3.9 73% D Best Buy Company, Inc,. 3.7 80% 90% AA X V U E Blue Cross and Blue Shield of Minnesota 3.9 46% L F Bremer Financial Corporation, Inc. 3.7 74% Y G C.H. Robinson Worldwide, Inc. 3.4 65% 80% D H P A R H Cargill, Incorporated 3.8 80% I M Q I Donaldson Company, Inc. 3.6 76% F J Ecolab Inc. 3.5 72% BJ C K Educational Credit Management Corporation 4.1 65% 70% AVE N O W L General Mills, Inc. 3.8 85% S T K M Hazelden Betty Ford Foundation 3.8 76% AB 60% N HealthPartners Care Services and Hospitals 3.9 69% O Hormel Foods Corporation 4.2 70% P Land O'Lakes, Inc. 4.1 80% Q Mayo Clinic 4.0 75% 50% R Medtronic plc 3.9 79%
Recommend to a Friend a to Recommend E S Park Nicollet Health Services 3.7 64% T Polaris Industries, Inc. 3.8 65% 40% U Regions Hospital 4.2 87%
Percentage of respondents answering “Yes” as of January5, 2021as “Yes” of answering respondentsPercentageof V Securian Financial 3.7 87% W Target Corporation 3.5 67% X The Toro Company 3.7 90% 30% Y Thomson Reuters 4.0 82% 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 Z U.S. Bank 3.4 65% AA University of Minnesota 3.7 89% Compensation and Benefits AB Xcel Energy Inc. 3.5 62% Star rating 1-5 as of January 5, 2021 AVE 3.8 74% Page 166 of 277 Compensation Recommend to Code Company and Benefits a friend A Georgia Institute of Technology 3.5 89% Compared to peer institutions B Indiana University-Bloomington 3.8 88% C Iowa State University 3.8 90% D Michigan State University 3.7 87% Glassdoor Ratings E Ohio State University-Main Campus 3.6 88% 100% F Purdue University-Main Campus 3.6 90% G Rutgers University-New Brunswick 3.6 88% H State University of New York-Buffalo 3.5 88% R I State University of New York-Stony Brook 3.5 84% 95% T J Texas A&M University 3.7 91% K University of Colorado-Boulder 3.9 85% AF O L University of Arizona 3.5 84% J M University of California-Berkeley 3.5 84% 90% F S CP UX N University of California-Davis 3.8 87% AAC YAH Y O University of California-Irvine 3.8 93% H G E AVEWQ B V AE AGD N P University of California-Los Angeles 3.8 90% Q University of California-San Diego 3.7 88% 85% AA AD K R University of California-Santa Barbara 3.8 96% IL M S University of Florida 3.7 90% AB T University of Illinois at Urbana-Champaign 3.8 95% U University of Iowa 3.9 90% 80% V University of Kansas 3.3 87% W University of Maryland-College Park 3.7 88%
Recommend to a Friend a to Recommend X University of Michigan-Ann Arbor 3.9 90% Y University of Minnesota 3.7 89% 75% Z University of Missouri-Columbia 3.4 72%
AA University of Nebraska-Lincoln 3.2 85% Percentage of respondents answering “Yes” as of January5, 2021as “Yes” of answering respondentsPercentageof AB University of North Carolina-Chapel Hill 3.5 83% Z AC University of Oregon 3.5 89% 70% AD University of Pittsburgh-Main Campus 3.5 85% AE University of Texas-Austin 3.6 87% 3 3.2 3.4 3.6 3.8 4 AF University of Virginia 3.7 93% AG University of Washington-Seattle 3.7 87% Compensation and Benefits AH University of Wisconsin-Madison 3.6 89% Star rating 1-5 as of January 5, 2021 AVE AVE 3.6 88% Page 167 of 277 Where do we go from here?
• Optimize administrative work at the University • Communicate the value of total rewards to faculty and staff • Consider merit pool for FY22 based on current benchmarking and anticipation of a higher market median post pandemic. – We estimate a 2 to 3% drop in University compa ratios during 2021 without a merit pool • Continuous benefits stewardship • Development and implementation of post pandemic remote work strategy • Continue to enhance data analytics capabilities in regard to meaningful internal metrics and external benchmarking
Page 168 of 277 Discussion
Page 169 of 277 Page 170 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: FY 2022 Annual Operating Budget Framework
Review Review + Action Action X Discussion
This is a report required by Board policy.
PRESENTERS: Myron Frans, Senior Vice President Julie Tonneson, Associate Vice President and Budget Director
PURPOSE & KEY POINTS
The purpose of this item is discussion of the FY 2022 annual operating budget framework. This item will advance information presented at the December 2020 meeting related to the budget framework revenue and expense categories and will provide current estimates of incremental changes for FY 2022 related to those categories. This will be the final committee discussion on the FY 2022 budget variables prior to the presentation of the President’s Recommended Operating Budget for FY 2022 at the June meeting.
Budget Development
Budget planning starts each year with development of the budget framework: a very high-level set of assumptions regarding changes in revenues and expenditures that summarize plans for achieving a balanced budget. It focuses on the significant unrestricted funds available to support the maintenance and operations of the University’s core missions: state appropriation and tuition. The other funds of the institution (fees, auxiliary and other unrestricted sales, restricted grants, contracts, gifts, etc.) are incorporated into detailed budget planning for each relevant unit and are included in the President’s Recommended Annual Operating Budget, but they are only a very small component of the Budget Framework.
In developing the Budget Framework, two fundamental areas of emphasis guide planning:
1. Maintain the Core 2. Expand and Enhance Program/Service
There are annual cost increases within any budget related to inflation, maintenance, compliance, vendor contracts, etc. that must be addressed simply to continue current levels of operation. Examples of these types of costs include:
salary and fringe benefit costs for existing employees; regulatory requirements and fees; software licensing/maintenance agreements; accommodations for students and employees;
Page 171 of 277 insurance; facility maintenance; and utilities.
Addressing these cost increases each year allows the University to “maintain the core” of operations necessary to continue current work in support of the instruction, research, and outreach missions. Particularly unique to the FY22 budget process, special consideration will need to be given to any recurring financial impacts of the COVID-19 pandemic and its resulting revenue losses. This will also be necessary to maintain core operations.
A second goal in any budget is to move beyond maintenance to investment: allocating available resources to expand, enhance, and strengthen existing programs and services. These investments often represent implementation of strategic plans as well as opportunities to implement best practices or program improvements that will improve quality and reputation and increase ranking.
Budget development is a process of asking and answering questions about what to plan as the incremental changes for each major resource and each major expenditure category. For example, answering questions about the goals for tuition rate changes and internal reallocations, coupled with goals for salary increases and addressing initiatives of the MPact 2025 Systemwide Strategic Plan (MPact 2025) may first lead to an imbalanced budget. If so, that will require going back to each question and adjusting the answers until the final plans balance the budget in a way that addresses University goals in the best way possible.
Expense and Resource Categories – Summary
Expenditure Categories
Compensation
Over the past 20 years, compensation has accounted for a steady 60-65 percent of University annual spending. Consistent with Board policy, compensation must be competitive relative to institutional peers and relevant labor markets, reward meritorious performance, and consider a faculty or staff member’s work responsibilities, experience, and expertise. Compensation must be delivered in a fair and equitable manner, and internal equity must be considered. These principles guide the setting of an initial salary for a faculty or staff member, and guide their compensation increases thereafter. The annual percentage change in the general compensation pool for planning purposes represents an average increase across all employees and is established by the University as part of the budgeting process. The “pool” increase is determined by a variety of factors: the national/regional cost of living, average projected compensation increases in competitive industries or institutions, and the balance between available resources (including required internal reallocations), other framework costs and strategic investment plans.
For FY22 budget planning, the cost related to fringe benefits and each one percent increase in the general salary pool would be as follows:
Fringe with no salary increase framework funds = $0 One percent salary increase framework funds = $12.5 million Fringe with no salary increase all funds = $0 One percent salary increase all funds = $24.0 million
Page 172 of 277 Note: the cost for fringe benefits with no salary increase for FY22 is $0 due to the required methodology largely basing fringe rates charged to departments on actual costs for FY20, and FY20 experience included a downturn in health care costs due to the pandemic.
Facilities/Operations/Strategic Choices
In all other categories of spending for FY22 there are costs the University must address and there are choices to be made from a longer-term, strategic perspective that will have immediate budgetary implications. Funding for items such as utilities, debt service, vendor licensing and maintenance contracts, hazardous material disposal, disability resources, etc. will be incorporated into the recommended budget based on known or estimated cost increases. In addition, as mentioned previously, efforts will be made to estimate the ongoing financial implications of the pandemic and its impact on enrollment and other revenue generating activities of the University.
Recent experience in these costs has been as follows:
Facilities Expenses = $3.0 - $7.0 million ($5.8m known for FY22) Technology Licensing/Maintenance = $1.0 - $3.0 million ($1.7m known for FY22) Other Core Operations = $5.0 - $10.0 million Special Pandemic Recurring Impacts – new for FY22 (range of $15-$30m – TBD) Strategic Choices = $10.0 - $20.0 million
Resource Categories
The resource assumptions discussed in prior committee meetings for the framework include:
Assumed or known changes in state appropriations. Planned changes in tuition revenue based on recommended rates and enrollment. Planned internal reallocations.
State Appropriation
The University’s biennial request to the State of Minnesota includes an incremental increase to the University’s base appropriation of $15.5 million in FY22 (a 2.3 percent increase above the FY21 appropriation). The year two request (FY23) is for an additional 2.3 percent increase, or $15.5 million, resulting in a two-year (biennial) recurring increase of $46.5 million (year 1 increase X 2 plus the year 2 increase). The recurring increase available for ongoing operations by the end of FY23 would be $31.0 million: $15.5m plus $15.5m over and above the appropriation available this fiscal year.
As indicated in the biennial request materials, the increased appropriation would allow the University to achieve goals consistent with the priorities of the Board. The specific allocation of dollars across the institution will be implemented consistent with systemwide strategic priorities and determined through the internal annual budget development process as directed by the President and approved by the Board. The most pressing priorities are to retain world class faculty and staff, manage quality facility and classroom environments, ensure regulatory compliance, and strategically invest in targeted program enhancements in support of MPact 2025. The requested level of funding will improve the University’s ability to avoid significant tuition rate increases, maintain current levels of basic services, respond to emerging areas of student need, and advance the goals of MPact 2025.
Page 173 of 277
Given the volatility in the state’s resources because of the pandemic, it is likely that the University’s appropriation for next year will not be known until late May at the earliest. The regular touchpoints along the way will still exist and will give some indication of the range of possibilities (Governor’s recommendation end of January, February forecast in late February, and House and Senate communicated committee targets in the spring) but the final outcome will likely be set in late May. As a result of the uncertainty, contingency planning is a necessary part of the process and modeling for different funding levels will continue through the changing messages during the legislative process.
Tuition
The decision for resident undergraduate rates in FY22 will consider a variety of factors: the trade-offs between stable or minimally increased rates and projected cost increases plus desired investments in excellence, the rank by campus in their various comparison groups, the availability of need-based financial aid for students, and the financial burden placed on all students and families.
For FY22, each one percent increase in resident undergraduate tuition is equivalent to the following in estimated incremental new tuition revenue:
Twin Cities campus = $3.2 million Other System campuses = $1.2 million
In recent years, questions have been raised around the current pricing of tuition on the Crookston, Duluth, Morris, and Rochester campuses. Concerns about tuition levels for these campuses in comparison to competitor schools has contributed to the decisions to implement very minimal increases in the resident undergraduate tuition rates on these campuses in recent years. The nonresident/non-reciprocity rates (NRNR) on these campuses, where they exist, have been stable or have increased very little over the last seven years.
The situation has been slightly different for the Twin Cities campus, where high demand and a mid-level position in the resident undergraduate tuition rate compared to peers has led to more frequent and sometimes slightly higher tuition rate increases. In addition, to be more consistent with the resident rate in reflecting the high-quality academic experience for students, relatively significant increases in the Twin Cities undergraduate NRNR tuition rate for incoming freshmen, ranging from seven percent to 15 percent have been implemented since FY16 (FY21 being the exception with a 0 percent rate change). Discounting strategies, lower rates of increase for continuing students, and enhanced national recruiting efforts have been necessary and will need to continue into the future to maintain enrollment for this group. In addition, the lingering impacts of the pandemic on the ability and desire of students to travel for school has had a significant impact on enrollment, which will likely continue into the next biennium. The strategy for NRNR tuition rates will be revisited each year in order to make adjustments as necessary based on enrollment patterns.
For FY22, each one percent increase in nonresident undergraduate tuition is equivalent to the following in estimated incremental new tuition revenue:
Twin Cities campus = $1.4 million Other System campuses = $0.1 million
Page 174 of 277
The graduate and professional tuition rates vary by school and program, often reflecting rates in their individual markets, unique program rankings, student demand, earnings potential for students, and student debt load at graduation. These rates have generally increased in the zero percent to three percent range over the last several years. Each one percent increase in these tuition rates (if all were to be increased at the same rate) is equivalent to an estimated $3.5 million in new tuition revenue.
Reallocation
Reallocation in the budget planning context means that decisions are made to reduce spending in some areas/activities to pay for cost increases and investments in other areas/activities – on a recurring basis. In each of the last seven years, planned reallocations have been incorporated into the budget framework at one to two percent of total unit allocations (state appropriation and tuition for academic units and general O&M for support units). The amount of reallocation required by a unit has not been implemented across-the- board; it has varied based on the unique financial circumstances and needs of each unit. The total amount incorporated into the budget has been calculated as needed to balance the budget in combination with the planned revenue increases and priority costs and investments.
It is important to understand that throughout the final months of FY20 and all of FY21, units have also been tasked with finding savings to help offset the negative financial impacts of COVID-19. Many of those savings have been one-time in nature, or planned to be nonrecurring: a downturn in purchases due to reduced activity, a delay in travel while restrictions are in place are examples of expenditure reductions that will not necessarily be built into ongoing budget plans in departments, but have been necessary to balance the budget in the short term. Other savings units have implemented will (or could be) converted into recurring savings and used to balance the budget going forward: reductions in employee headcount through the retirement incentive offer (RIO), natural attrition and/or layoffs and non-renewals; organizational and process redesigns to reduce future purchasing requirements, etc. These examples provide savings in the short run but can also permanently reduce base spending levels going forward.
As the University plans the budget for FY22 and beyond, planned spending reductions and reallocations will continue to be an important part of balancing the budget. The focus or goals may shift from year to year. It may be necessary to offset scenarios envisioning reductions to state appropriations, but even with stable or growing state support, the need to reprioritize the use of resources will remain. There will always be opportunities to gain efficiencies and lower costs, or at least the growth in some costs, so the expectation for managers across the system to find and implement those opportunities will continue as a part of the budget process. The budget development instructions this year asked units to propose actions necessary to address reallocations of up to nine percent, significantly greater than what has been implemented in past years. While some amount of re- prioritization can be done without significant negative impact, expenditure reductions at the top end of the target range cannot occur without an impact to programs and services. In some cases, implementation of such plans will jeopardize the University’s ability to maintain quality and remain competitive. However, due to the uncertainty in budget outcomes for next year, having a robust menu of options for addressing budget needs overall is necessary. Each one percent on the traditional reallocation base yields approximately $20 million in available resources for the state and tuition funded activities.
Page 175 of 277 It should be noted that the University’s plans to engage a consultant on a service “modernization” initiative might offer opportunities for immediate savings in isolated instances, but it is not currently being factored into the budget development process for next year. Units are being asked to suggest ideas within their units, and through review and analysis of additional cross-unit opportunities for savings, that may also yield immediate savings. The broader scope of the modernization initiative will most significantly impact the budgets for FY23 and after.
Scenarios for the FY 2021 Budget
The act of building a budget framework for FY22 involves making choices among all the variables described above. It is a successful exercise to the extent it results in a budget that:
1. Reflects the priorities of University leadership; 2. Makes each unit as successful as possible given resource constraints; and 3. Is responsible and balanced.
Estimated increases in revenues and expenditures for each variable (in the framework funds of state appropriation and tuition only as relevant) are summarized below to aid in thinking about different framework scenarios.
INCREMENTAL RESOURCES – EXAMPLES
Tuition 0% 1% 1.5%
TC Resident Undergraduate $0 $3.2m $4.8m Greater MN Campuses Undergraduate $0 $1.2m $1.8m TC NRNR Undergraduate $0 $1.4m $2.1m Greater MN Campuses NRNR Undergraduate $0 $0.1m $0.2m Resident Graduate & Professional $0 $1.9m $2.9m NRNR Graduate & Professional $0 $1.6m $2.4m
Request State Appropriation -5.0% 0.0% 2.3%
($34.0m) $0 $15.5m
1.0% 3.0% 6.0%
Internal Reallocation $20.0m $60.0m $120.0m
INCREMENTAL EXPENDITURES – EXAMPLES
Compensation 0% 1.0% 1.5%
Fringe Alone $0 $0 $0 Salary Increase (+ associated fringe) $0 $12.5m $18.8m
Page 176 of 277
Other Costs Low End Mid High End
Facilities $5.8m $8.5m $10.0m+ Technology $1.7m $4.0m $8.0m+ Maintain/Strengthen Core $7.5m $12.0m $20.0m+ Strategic Program Pool $0 $7.0m $15.0m+ Pandemic Response $15.0m $22.0m $30.0m
BACKGROUND INFORMATION
The Board previously discussed aspects of the FY 2022 framework topic at three Finance & Operations Committee meetings:
September 2020 - President’s Recommended FY 2022-2023 Biennial Budget Request October 2020 - President’s Recommended FY 2022-2023 Biennial Budget Request December 2020 – FY 2021 Operating Budget Update & FY 2022 Budget Variables and Levers
In the last five years, discussion on the upcoming fiscal year budget assumptions were held in September or October (prior to the budgets for FY 2017 through FY 2021). For this cycle, to discuss an update of the FY 2021 budget at the October meeting, the early review of budget variables for FY 2022 was delayed until December.
The Board will review the President’s Recommended FY22 Annual Operating Budget at the June meeting and will take action on the budget at a later meeting in June 2021.
Page 177 of 277 FY 2022 Annual Operating Budget Framework
Myron Frans, Senior Vice President for Finance and Operations Julie Tonneson, Associate Vice President and Budget Director
Finance & Operations Committee
February 11, 2021
Page 178 of 277 Discussion – FY22 Framework
• Framework as Part of the Normal Process • Expenditure Estimates and Planning • Resource Options and Planning • Pulling it All Together
Page 179 of 277 Current Funds – “Not All Money is Green”
Fees, ICR, Sales & Services, Clinical State Specials, Income, Central Reserves, Federal Generates ICR Unrestricted Gifts Charges to Appropriations, Restricted Gifts & “the public” Endowment Income Sponsored State O&M Appropriation and for services Awards Tuition
Auxiliary Directed to Research & Operations Self Specific Public Supporting Areas or Service Programs Grants Public Instruction Research Housing Service Direct Food Donor or Costs Only Service Gov’t – Budgets Support Parking Directed Approved Student Services, Facilities, Libraries, Books Purposes by Research Infrastructure, Leadership, Finance, Athletics Sponsors HR, Public Safety, Compliance, etc.
Least Externally Constrained Most Externally ConstrainedPage 180 of 277 Nonsponsored With University of Minnesota Budget Plan Estimated FY21 Sponsored RESOURCES FY21 a Carry Forward $1,039,194,711 $1,039,194,711 Current Revenue - Total Revenue by Fund State O&M Appropriation $602,818,000 41% Tuition $1,023,279,127 Budget State Special $92,995,000 2% Sales, Fees, and Misc $374,229,514 10% Indirect Cost Recovery $166,218,904 4% Auxiliary Enterprises $354,687,765 9% Plan: Internal Sales [$237,478,934] Private Practice $123,414,359 3% Federal Appropriations $17,565,000 0% Gifts & Endowment Income $273,300,000 7% Framework Restricted Grants, Contracts & Misc $305,500,382 $600,000,000 23% b Total Revenues $3,334,008,051 $3,934,008,051 c TOTAL NET RESOURCES (a+b) $4,373,202,762 $4,973,202,762 Funds EXPENDITURES Salaries $1,558,929,118 Fringe Benefits $559,293,988 Student Aid $359,170,819 Highlighted Supplies, Services, Miscellaneous $391,201,799 Consulting & Professional Services $120,000,000 Materials for Resale $49,016,560 Spread Capital Assets/Equipment $30,570,309 Throughout Noncapital Equipment $46,606,903 Rents & Leases $42,123,235 Repairs, Maintenance, Supplies $72,754,098 ICR, Subcontracts, Participant Expense $982,449 Utilities $160,011,020 d Total Expenditures $3,390,660,299 $3,990,660,299
TRANSFERS & ADJUSTMENTS e Transfers ($190,000,000) ($190,000,000) ENDING BALANCE (c-d+e) $792,542,464 $792,542,464 Page 181 of 277 In building the budget we have to answer a series of questions, all beginning with: “Do we want to plan…….” • for a change in state appropriations? • for a change in tuition rates at each level and for each campus? • for a targeted reallocation across all units? • for growth in other resources to apply to framework costs?
• for a general salary increase (applying known fringe rate changes)? • for “must-do” cost increases related to facilities, technology, safety, compliance • for the layer of investment beyond “must do” – priorities that we should address
Page 182 of 277 Expenditure Estimates and Planning
Page 183 of 277 Estimate/Potential Maintain the Core for FY22 Framework Funds • Base compensation (benefits alone) $1.8m • Base compensation (salary) $12.5m for each 1% • Facility operations and maintenance $5.8m • Technology maintenance $1.7m
• Recurring Pandemic Impact to Revenues (tuition and other) ~$20.0m
Page 184 of 277 Address Strategic Goals
Academic and Support Units – Enhance/strengthen programs and services statewide – Take advantage of opportunities – Move in new directions
“Typical” investment pool goal = $10.0m to $20.0m Less when resources are constrained or core needs are larger than in a “typical” year
Page 185 of 277 Resource Options and Planning: Constrained by Available Resources
State $$
Tuition
Reallocations
Page 186 of 277 Budget Request
Incremental over prior year Total FY22 FY23 Biennial Math (yr 1 x 2) + yr 2 FY22-23 Request-Incremental Over Base $ 15,500,000 $ 15,500,000 $ 46,500,000 General Fund Growth % Annual 2.3% 2.3% Biennial over base 3.5% of Current Biennium Recurring GF Appropriation Base FY21 O&M $ 602,818,000 St. Specials $ 68,438,000 $ 671,256,000 x 2 = $ 1,342,512,000
Page 187 of 277 Tuition Goals Estimate/Potential for FY22 • Resident undergraduate TC – keep within inflation $3.2m per 1%
• NRNR undergraduate TC – increase but recognize $1.4m per 1% unique recruiting season • Resident and NRNR undergraduate system $1.3m per 1% campuses – differential from TC?
• Graduate and professional – keep within inflation $3.6m per 1%
Page 188 of 277 Repurposing Existing Resources “Reallocations” approved in the budget (state and tuition funds):
% of reallocation base – varies $ in millions from 0.9% to 1.7%
$35 2.0% $30 $25 1.5% $20 1.0% = ~ $20m $15 $10 0.5% $5 $0 0.0% FY15 FY16 FY17 FY18 FY19 FY20 FY21
Note: FY16 included an $8m separate reallocation pool for the TC campus to fund strategic plan initiatives; FY20 and FY21 do not include one-time reductions in response to COVID-19 Goal – continue responsible efforts to reduce costs where possible and gain efficiencies, while remaining competitive nationally and internationally.
Page 189 of 277 Pulling it all together:
Page 190 of 277 It is possible to bring the budget together in different ways based on overarching goals Framework Funds Incremental Resources - Examples Incremental Expenditures - Examples
Tuition 0.0% 1.0% 1.5% Compensation 0.0% 1.0% 1.5% TC Resident Undergrad $0 $3.2m $4.8m Fringe Alone $0 $0 $0 System Campus Res Undergrad $0 $1.2m $1.8m Salary Increase (assoc. fringe) $0 $12.5m $18.8m TC NRNR Undergrad $0 $1.4m $2.1m System Campus NRNR Undergrad $0 $0.1m $0.2m Other Costs Minimum Invest Advance Resident Grad & Professional $0 $1.9m $2.9m NRNR Grad & Professional $0 $1.6m $2.4m Facilities $5.8m $8.5m $10.0m+ Technology $1.7m $4.0m $8.0m+ Request Maintain/Strengthen Support Core $1.5m $4.0m $8.0m+ -5.0% 0.0% 2.3% Maintain/Strengthen Academic Core $6.0m $8.0m $12.0m+ State Appropriation (from FY21) ($34.0m) $0 $15.5m Strategic Program Pool $0 $7.0m $15.0m+
1.0% 3.0% 6.0% Low End Mid High End Internal Reallocation $20.0m $60.0m $120.0m Pandemic Response $15.0m $22.0m $30.0m
Page 191 of 277 Possible Scenarios: Primary Decision FY22 Example Frameworks for Incremental Budget Changes Points Biennial Request Stable Approp 7% Approp Cut * Resources Framework Framework Framework
1 Tuition-Res Undergrad 8,800,000 2.0% 4,400,000 1.0% 11,000,000 2.5% 2 Tuition-Nonres 3,000,000 2.0% 1,500,000 1.0% 4,500,000 2.5-3% 3 Tuition-Grad & Professional 7,000,000 2.0% 3,500,000 1.0% 8,800,000 2.5% 4 5 New State Appropriation 15,500,000 - (45,000,000) 6 7 Reallocation - General 35,000,000 1.7% 47,000,000 2.3% 55,000,000 2.7% 8 9 Other Revenues-TBD - 1,500,000 2,000,000 10 11 Total Resources 69,300,000 57,900,000 36,300,000 12 13 14 Costs 15 16 Compensation - Fringe (no salary increase) - - 0 17 Compensation - Salary Increase 18,750,000 1.5% 25,000,000 2.0% 0 0.0% 18 Facilities - Minimum 5,800,000 5,800,000 5,800,000 19 Tech Licenses/Maint. Minimum 1,700,000 1,700,000 1,700,000 20 FY21 Recurring Shortfalls (Tuition +) 25,000,000 20,000,000 22,000,000 21 Program/Service Investments (Core +) 18,000,000 5,000,000 6,500,000 22 23 Total Challenge/Spend 69,250,000 57,500,000 36,000,000 24 25 Balance - Resources over Challenge 50,000 400,000 300,000 26 27 *From the FY21 appropriation
Page 192 of 277 Questions • Is the reallocation amount appropriate? • Can “inflation” costs be trimmed? when faced • Are there required/desired programmatic investments? with • What is the appropriate compensation plan? • Should tuition rate increases be less or frameworks more? • DOES THE FRAMEWORK REFLECT like these: PRIORITIES? Tweak and Repeat
Page 193 of 277 Questions Thoughts Input
Page 194 of 277 Page 195 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Consent Report - REVISED
Review X Review + Action Action Discussion
This is a report required by Board policy.
PRESENTERS: Myron Frans, Senior Vice President
PURPOSE & KEY POINTS
Central Reserves General Contingency Allocations
The purpose of this item is to seek approval for allocations from General Contingency greater than $250,000. There are no items requiring approval this period since the two items listed exceeding the approval threshold of $250,000 were officially approved with the FY 2021 Operating Budget - Attachment 2 (which listed individual items to be funded and the sources, including the General Contingency). The second half of the approved transfer for the Twin Cities Campus Master Plan development is included here, below the line for full information connected to line 5, but it will be reported again when the transfer is made in FY22.
Purchase of Goods and Services $1,000,000 and Over
The purpose of this item is to seek approval for purchases of goods and services of $1,000,000 and over.
To ExamOne for an additional estimated $2,452,000 for home blood collection for the Institute for Social Research and Data Innovation, Twin Cities campus, for the period of March 1, 2021 through September 30, 2023. The funds for this purchase are coming from the sponsored project’s budget. ExamOne, a new supplier, was selected as the result of a competitive Request for Proposal (RFP) conducted by Purchasing Services. On Budget Framework e supplier responded to the RFP; see further discussion of selection process on enclosed documentation.
To Paciolan, LLC for an additional estimated $2,030,000 for ticketing services for the Intercollegiate Athletic Department, Twin Cities campus, for the period of July 2021 to June 2026. The fees will be paid from the Athletics operating budget which is made up of auxiliary funds. The ticket revenue will cover these fees. Paciolan, LLC, a new supplier, was selected as the result of a competitive Request for Proposal (RFP) conducted by Purchasing Services. Three suppliers responded to the RFP.
Page 196 of 277 To Siemens Medical Solutions for $2,900,000 for a 3T Prisma Plus MRI scanner for Masonic Institute for the Developing Brain/Center for Magnetic Resonance Research (CMRR), Twin Cities campus. The MRI scanner will be part of CMRR’s Internal/External Sales organization. The cost will be covered via internal sales to University units, external sales, or from departmental funds. Siemens was selected through a competitive bidding process. Siemens Medical Solutions, a new supplier, was selected as the result of a competitive Request for Proposal (RFP) conducted by Purchasing Services. Three suppliers responded to the RFP.
To ThermoFisher Scientific for an estimated $1,133,100 for a Model Talos F200C G2 Analytical Scanning and Transmission Electron Microscope with a 2-year service contract for the departments of Mechanical Engineering and Chemical Engineering and Materials Science, and the College of Science and Engineering, Twin Cities campus. This analytical scanning and transmission electron microscope and 2-year service contract will be purchased with sponsored project funds from the Department of Defense (Army Research Office) budget. See enclosed documentation for basis of supplier selection.
To Raytheon BBN Technologies for an estimated $1,370,180 for the construction of a suitable video dataset that requires the use of multiple methodologies (classroom, on-site, on-site leave behind) for the Department of Mechanical Engineering, Twin Cities campus, for the period March 1, 2021 through December 20, 2025. This purchase if for a sponsored project, and the funds for this purchase are coming from the sponsored project’s budget. See enclosed documentation for basis of supplier selection.
To Google LLC for $2,356,000 for the design, development, and implementation of a cutting- edge digital platform to enhance student learning and provide analytics for educational research beginning May 1, 2021 with a completion of August 31, 2024 for the Rochester campus. The cost of the contract with Google will be paid using some combination of University level balances, external support, a portion of state funds designated for enhancing health education, and Central Reserves. See enclosed documentation for basis for supplier selection.
Employment Agreements
The purpose of this item is to seek approval for the following employment agreement:
Calvin Phillips as Vice President for Student Affairs and Dean of Students
BACKGROUND INFORMATION
Approvals are sought in compliance with Board of Regents Policy as follows:
General Contingency: Reservation and Delegation of Authority, Article I, Section VII, Subd. 1. Purchase of Goods and Services $1,000,000 and Over: Reservation and Delegation of Authority, Article I, Section VII, Subd. 6. Employment Agreements: Reservation and Delegation of Authority, Article I, Section IV, Subd. 1.
Page 197 of 277 PRESIDENT’S RECOMMENDATION
The President recommends approval of the Consent Report.
Page 198 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Consent Report
Review X Review + Action Action Discussion
This is a report required by Board policy.
PRESENTERS: Myron Frans, Senior Vice President
PURPOSE & KEY POINTS
Central Reserves General Contingency Allocations
The purpose of this item is to seek approval for allocations from General Contingency greater than $250,000. There are no items requiring approval this period since the two items listed exceeding the approval threshold of $250,000 were officially approved with the FY 2021 Operating Budget - Attachment 2 (which listed individual items to be funded and the sources, including the General Contingency). The second half of the approved transfer for the Twin Cities Campus Master Plan development is included here, below the line for full information connected to line 5, but it will be reported again when the transfer is made in FY22.
Purchase of Goods and Services $1,000,000 and Over
The purpose of this item is to seek approval for purchases of goods and services of $1,000,000 and over.
To ExamOne for an additional estimated $2,452,000 for home blood collection for the Institute for Social Research and Data Innovation, Twin Cities campus, for the period of March 1, 2021 through September 30, 2023. The funds for this purchase are coming from the sponsored project’s budget. ExamOne, a new supplier, was selected as the result of a competitive Request for Proposal (RFP) conducted by Purchasing Services. On Budget Framework e supplier responded to the RFP; see further discussion of selection process on enclosed documentation.
To Paciolan, LLC for an additional estimated $2,030,000 for ticketing services for the Intercollegiate Athletic Department, Twin Cities campus, for the period of July 2021 to June 2026. The fees will be paid from the Athletics operating budget which is made up of auxiliary funds. The ticket revenue will cover these fees. Paciolan, LLC, a new supplier, was selected as the result of a competitive Request for Proposal (RFP) conducted by Purchasing Services. Three suppliers responded to the RFP.
Page 199 of 277 To Siemens Medical Solutions for $2,900,000 for a 3T Prisma Plus MRI scanner for Masonic Institute for the Developing Brain/Center for Magnetic Resonance Research (CMRR), Twin Cities campus. The MRI scanner will be part of CMRR’s Internal/External Sales organization. The cost will be covered via internal sales to University units, external sales, or from departmental funds. Siemens was selected through a competitive bidding process. Siemens Medical Solutions, a new supplier, was selected as the result of a competitive Request for Proposal (RFP) conducted by Purchasing Services. Three suppliers responded to the RFP.
To ThermoFisher Scientific for an estimated $1,133,100 for a Model Talos F200C G2 Analytical Scanning and Transmission Electron Microscope with a 2-year service contract for the departments of Mechanical Engineering and Chemical Engineering and Materials Science, and the College of Science and Engineering, Twin Cities campus. This analytical scanning and transmission electron microscope and 2-year service contract will be purchased with sponsored project funds from the Department of Defense (Army Research Office) budget. See enclosed documentation for basis of supplier selection.
To Raytheon BBN Technologies for an estimated $1,370,180 for the construction of a suitable video dataset that requires the use of multiple methodologies (classroom, on-site, on-site leave behind) for the Department of Mechanical Engineering, Twin Cities campus, for the period March 1, 2021 through December 20, 2025. This purchase if for a sponsored project, and the funds for this purchase are coming from the sponsored project’s budget. See enclosed documentation for basis of supplier selection.
Employment Agreements
The purpose of this item is to seek approval for the following employment agreement:
Calvin Phillips as Vice President for Student Affairs and Dean of Students
BACKGROUND INFORMATION
Approvals are sought in compliance with Board of Regents Policy as follows:
General Contingency: Reservation and Delegation of Authority, Article I, Section VII, Subd. 1. Purchase of Goods and Services $1,000,000 and Over: Reservation and Delegation of Authority, Article I, Section VII, Subd. 6. Employment Agreements: Reservation and Delegation of Authority, Article I, Section IV, Subd. 1.
PRESIDENT’S RECOMMENDATION
The President recommends approval of the Consent Report.
Page 200 of 277 General Contingency
Fiscal Year 2021 (7/1/2020-6/30/2021)
Recipient Amount Balance Purpose
1 FY21 General Contingency Allocation $1,000,000
2 Carryforward from FY20 to FY21 $2,055,475 $3,055,475 Closeout Eastcliff generator, chimney and patio repairs 3 Capital Project Management ($74,578) $2,980,897 (committed FY18).
4 New items this reporting period:
Support for the Twin Cities Campus Master Plan per the FY21 5 University Services ($500,000) $2,480,897 approved budget. $500,000 FY21; $500,000 FY22.
Partial year end support for UM Morris core operations and 6 UM Morris ($580,000) $1,900,897 services per the FY21 approved budget. Stanton Adjustment support for TC Police Department per the 7 Public Safety (TC) ($80,000) $1,820,897 FY21 approved budget. Support for Immigration Response Team per the FY21 8 Global Programs and Strategy Alliance ($120,000) $1,700,897 approved budget.
9 College of Veterinary Medicine ($20,000) $1,680,897 Support for wellness program per the FY21 approved budget.
Support for system mental health per the FY21 approved 10 UM Morris ($80,000) $1,600,897 budget. Support for "I am UMC" marketing program per the FY21 11 UM Crookston ($125,000) $1,475,897 approved budget.
12 Office of the President ($150,000) $1,325,897 Support for 2020 virtual commencement activities.
13 Current Balance $1,325,897
14
15 Board Approved Commitments*:
16 Recipient Amount Purpose
Support for the Twin Cities Campus Master Plan. 17 University Services - FY22 (500,000) 825,897.05 Commitment of $1,000,000. $500,000 tranferred FY21 (above); $500,000 will be transferred in FY22.
18 Projected Balance 825,897
* Items $250,000 or more subject to Board approval.
FY21 - Feb 2020
Page 201 of 277 Purchase of Goods and Services $1,000,000 and over
To ExamOne for an additional estimated $2,452,000 for home blood collection for the Institute for Social Research and Data Innovation for the period of March 1, 2021 through September 30, 2023.
The contract for professional services with ExamOne is for home blood collection from individuals participating in the nationwide project during an at home visit, with 10,500 participants expected. The samples will then be sent back to the Advanced Research and Diagnostics Laboratory (ARDL) at the University of Minnesota for processing.
ExamOne was selected as the result of a competitive Request for Proposal (RFP) conducted in June 2020. As part of the contract, ExamOne helped to develop the home collection protocol for an initial cohort of 200 participants. Approval was recently granted to expand the project for the larger study of 10,500 participants.
The funds for this purchase are coming from the sponsored project’s budget.
Submitted by: Seth Goldberg 50 Willey Hall (612) 624-5212 (612) 626-8375
Approval for this item requested by:
1/19/21 Christopher J. Cramer Date Vice President for Research
Page 202 of 277 Rationale for Exception to Competitive Bidding
Prior to an RFP being issued, the department researched the market to search for suppliers, understand current market rates, and received quotes from several suppliers. Once the department realized the expected cost would require a competitive process, they worked with Purchasing Services to issue an RFP. Through the RFP, ExamOne was the only supplier to respond. However, Purchasing Services was able to use the prior quotes to confirm that the rates provided by ExamOne were competitive. Additionally, at no time was ExamOne aware that they were the sole respondent, and the process was conducted under the same expectations as would apply to any competitive RFP.
The Director of Purchasing and the University Controller concluded that the process used resulted in a fair and reasonable price to the University.
Page 203 of 277 Purchase of Goods and Services $1,000,000 and over
To Paciolan, LLC for an additional estimated $2,030,000 for ticketing services for the Intercollegiate Athletic Department for the period of July 2021 to June 2026.
Ticketing services include but are not limited to digital ticketing, customer relationship management and secondary ticket marketplace integration. The University has contracted with Paciolan since 2019 and is looking to amend and extend the contract to enable a successful contract for both parties in order to offset the impact from the inability to sell tickets, and for both parties to fully realize the investment made in the original agreement.
Through a Request for Proposal process for ticketing services, Paciolan was one of three qualified suppliers to respond and is the current provider of the software and services for which the department is very satisfied.
Under this amended agreement, the University will also receive 15% of Net Sales Revenue from StubHub (an opt-in feature of the Paciolan agreement) revenue instead of the current $6/transaction that comes with a $100,000 annual guarantee. Paciolan will also provide the University with 2 additional Personal URL services and 1 additional Ballena 3D Seat Upgrade Process. We estimate that these changes will result in a net $86,000 increase in revenue to Athletic generated from these fees over the course of the amended term compared with the original term. Additionally, Athletics will receive value added services at an estimated $24, 706-$32,612 annually. The fees will be paid from the Athletics operating budget which is made up of auxiliary funds. The ticket revenue will cover these fees.
Submitted by: Tim McCleary Associate Athletic Director/CFO 270 Bierman Athletic Field Building 612-625-2524
Approval forthis item requested by: c"l 1/20/21 MarkH-'? Coyle Date Director of Athletics
Page 204 of 277 Purchase of Goods and Services $1,000,000 and over
To Siemens Medical Solutions for $2,900,000 fora 3T Prisma Plus MRI scanner for Masonic Institute forthe Developing Brain/Center forMagnetic Resonance Research (CMRR).
The Masonic Institute for the Developing Brain (MiDB) is a new program that will require a 3Tesla MRI machine to complete imaging of the developing brain.
Through the competitive bid process Siemens was selected as the supplier due to compatibility with other MRI scanners currently in use at the Center for Magnetic Resonance Research as well as price. Protocols from the scanners currently in use at the University will be transferred to the new machine.
The MRI scanner will be part of CMRR's Internal/External Sales organization. The asset will be purchased on plant funds and depreciated over the useful life. The depreciation expense is included in the rate development for internal/external sales MRI rates. Costs will be covered by increasing rates or subsidizing from departmental funds.
Submitted by: Jeramy Kulesa Center forMagnetic Resonance Research 612-625-8847 612-625-1733
Approval forthis item requested by: I'� Jakub Tolar Vice President for Clinical Affairs
Page 205 of 277 Purchase of Goods and Services $1,000,000 and over
To Raytheon BBN Technologies for an estimated $1,370,180 for construction of a suitable video dataset that require the use of multiple methodologies (classroom, on-site, on-site leave behind) for Department of Mechanical Engineering for the period of March 1, 2021 through December 20, 2025.
Raytheon BBN Technologies (BBN) is best known for its Defense Advanced Research Project (DARPA)-sponsored research. It has made notable advances in a wide variety of fields, including acoustics, computer technologies, quantum information, and synthetic biology.
The scope of this effort involves BBN supporting the University of Minnesota (UMN) in the collection of a set of annotated video and audio data of emergency medical personnel performing skills and tasks in simulated environments. The dataset is intended to be used in the construction of machine learning systems to assist in the training and assessment of combat medics. It is anticipated that the construction of a suitable dataset will require the use multiple methodologies (classroom, on-site, on-site leave behind) to meet program needs and objectives. The acquisition efficiency, characteristics, and cost of video data is expected to vary depending on the methodology. This work has both civilian and military applications, including the training of first responders.
The funds for this purchase are coming from the sponsored project’s budget.
Submitted by: Nichole Morris, Ph.D. Department of Mechanical Engineering 111 Church Street SE Minneapolis, MN 55455 612-624-4614 [email protected]
Approval for this item requested by:
January 27, 2021 Christopher J. Cramer Date Vice President for Research
Page 206 of 277 Rationale for Exception to Competitive Bidding
This purchase has not been competitively bid by the University of Minnesota because the funding source, the Department of Defense, named Raytheon BBN Technologies to perform this work.
Raytheon BBN Technologies was awarded a cost-plus-fixed-fee contract for a research project under the Fast Network Interface Cards (FastNICs) program with the Department of Defense. This contract was a competitive acquisition under an open broad agency announcement, conducted by the Defense Advanced Research Projects Agency, and eight offers were received.
The Director of Purchasing and the University Controller concluded that the process used resulted in a fair and reasonable price to the University.
Page 207 of 277 Purchase of Goods and Services $1,000,000 and over
To ThermoFisher Scientific for an estimated $1,133,100 for a Model Talos F200C G2 Analytical Scanning and Transmission Electron Microscope with a 2-year service contract for Departments of Mechanical Engineering and Chemical Engineering and Materials Science, and the College of Science and Engineering.
The acquisition of a new generation, analytical high-resolution scanning and transmission electron microscope (HR-(S)TEM) with cryo capability will fill a critical need for a first-class electron microscopy facility at the University of Minnesota and will allow to conduct pushing-boundary experiments with plasmas.
This purchase is planned to be an upgrade of existing equipment, which will be phased out in 2-3 years. ThermoFisher Scientific (formerly FEI) is the manufacturer of the existing equipment, which is a FEI F30 cryo-TEM.
This analytical scanning and transmission electron microscope and 2-year service contract will be purchased with funds from the Department of Defense (Army Research Office) budget.
Submitted by: Peter Bruggeman Department of Mechanical Engineering 111 Church St., SE, Room 1100A Phone: 612-626-8391 Email: [email protected]
Approval for this item requested by:
January 15, 2021 Christopher J. Cramer Date Vice President for Research
Page 208 of 277 Rationale for Exception to Competitive Bidding
This purchase has not been competitively bid because this is an upgrade to existing equipment that must be done with the same manufacturer, which is essential for the compatibility of the existing equipment.
Procedures undertaken to ensure the reasonableness of price include negotiations with the supplier that resulted in over 50% savings on the cost of the microscope and over 30% savings for the service contract.
The Director of Purchasing and the University Controller concluded that the process used resulted in a fair and reasonable price to the University.
Page 209 of 277 Purchase of Goods and Services $1,000,000 and over
To Google LLC for $2,356,000 for the design, development, and implementation of a cutting-edge digital platform to enhance student learning and provide analytics for educational research beginning May 1, 2021 with a completion of August 31, 2024 for the University of Minnesota Rochester campus.
This project is a central component of the System’s broader strategy for distributed learning, as per previous conversations with the Board of Regents. Google will create a digital learning platform like-no-other and the Rochester campus will pilot that platform for the University with an academic program that addresses one of Minnesota’s highest workforce demand areas - health sciences.. This project is also a key component of the University’s overall health strategy, in accordance with the aims of MPact 2025, the University’s System Strategic Plan, and its MNtersections Goal to enhance health education.
The cost of the contract with Google will be paid using some combination of University level balances, external support, a portion of state funds designated for enhancing health education, and Central Reserves.
Submitted by: Virginia Wright-Peterson UMN Rochester 507-258-8001
Approval for this item requested by:
2/11/2021 Lori J. Carrell Date Chancellor, University of Minnesota - Rochester
Page 210 of 277 Rationale for Exception to Bid Process
This purchase has not been competitively bid by the University of Minnesota because the goal and outcomes for the project require synergy between the Google products the University currently owns and the products proposed in combination with Google’s expertise uniquely positions the University to create “first of its kind” functionality. This project intends to leverage the University's current Google technology platform by enabling Google's Big Query (a highly scalable data repository) in combination with Google's Looker (advanced analytics and visualization capability). Combined with the Google Cloud Platform -- currently installed at the University -- these tools provide query processing speed and functionality unavailable in the University's technology portfolio, and unavailable from other suppliers.
Google has offered a discount off their standard professional service rates, and the rates quoted are considered comparable to other professional services available from suppliers in the marketplace.
The Director of Purchasing and the University Controller concluded that the process used resulted in a fair and reasonable price to the University.
Page 211 of 277 Finance & Operations Committee Consent Report February 11, 2020
Personnel Appointment
Pending approval by the Board of Regents, Dr. Calvin D. Phillips will be appointed Vice President for Student Affairs and Dean of Students at the University of Minnesota, effective March 1, 2021.
Position Overview
The Vice President for Student Affairs and Dean of Students reports directly to the President and serves on the President’s Cabinet. The position has systemwide responsibility, providing visionary leadership and administrative oversight of and accountability for the student development programs in the Office for Student Affairs on the Twin Cities campus. The Vice President also serves as the chief student affairs officer for the University of Minnesota system, coordinating and collaborating with the other system campus student affairs leaders to ensure that programs throughout the University support and advance the system strategic plan and student success. The position works with and represent the interests of a diverse student body to ensure a mutually reinforcing relationship between the academic and non- academic life of students, promoting the intellectual, cultural, personal, educational and social development of all students. Finally, the Vice President also oversees the responsible planning, stewardship, management and accountability of fiscal, capital, and human resources of direct reporting units.
Appointee’s Background and Qualifications
Dr. Phillips comes to the University from Eastern Michigan University where he has served as Associate Vice President of Student Affairs since 2014. In this role, he has provided leadership and management of several offices that plan and administer non-academic and co-curricular aspects of the student experience. These efforts focused on engaging and advancing student development, learning, retention and overall success at Eastern Michigan. Prior to joining Eastern Michigan, Dr. Phillips served as Vice President for Student Affairs at Northern State University in Aberdeen, South Dakota. He also held positions at the University of Texas-Pan American, Winston-Salem State University, the University of Northern Iowa, Shippensburg University, and Slippery Rock University. Dr. Phillips earned a Bachelor of Science in Secondary Education Social Studies from Oklahoma State University, a Master of Arts in Student Personnel from Slippery Rock University, and a Doctorate of Education in Administration and Leadership Studies from Indiana University of Pennsylvania.
Dr. Phillips brings to this role deep experience and impressive accomplishments across his career, including demonstrated commitments to student well-being, success, equity, diversity, and inclusion. He works with a high degree of integrity, is highly visible and accessible to students, listens authentically to understand ideas and perspectives, and fosters a shared vision across a broad range of stakeholders. Dr. Phillips has built effective relationships with students, faculty and staff, and frequently seeks to collaborate with academic departments to ensure alignment between student and academic affairs.
Page 212 of 277
Recommended Salary and Appointment Type
Dr. Phillips’ annual base salary will be $270,000 (subject to the 10% pay reduction of his peers on the President’s Cabinet). His appointment as Vice President for Student Affairs and Dean of Students is a 100%-time, A-term (12-month), L-type (limited) appointment, reporting to and serving at the pleasure of the President. The full employment agreement between the University of Minnesota and Dr. Phillips is attached as an exhibit.
Individually Negotiated Terms of Employment or Separation Agreements
There are no individually negotiated terms of employment or separation agreements.
Comparable Market Data
Benchmarking with the CUPA-HR Administrators in Higher Education and CUPA-HR Executive Compensation and Benefits in Higher Education salary surveys for the position of chief student affairs/student life officer for the University of Minnesota peer group (aged to July 1, 2021):
$199,266 – 10th percentile $258,942 – 25th percentile $296,754 – 50th percentile $331,198 – 75th percentile $385,022 – 90th percentile
Recommendation
The President recommends the appointment of Dr. Calvin D. Phillips as Vice President for Student Affairs and Dean of Students at the University of Minnesota.
Page 213 of 277 Page 214 of 277 Page 215 of 277 Page 216 of 277 Page 217 of 277 BOARD OF REGENTS DOCKET ITEM SUMMARY
Finance & Operations February 11, 2021
AGENDA ITEM: Information Items
Review Review + Action Action X Discussion
X This is a report required by Board policy.
PRESENTERS: Myron Frans, Senior Vice President
PURPOSE & KEY POINTS
A. Capital Finance and Debt Management Report
The purpose of this item is to provide the Annual Capital Finance and Debt Management Report for FY 2020. The University is rated Aa1 by Moody’s Investors Service and AA by S&P. The overall debt portfolio totals approximately $1.6 billion in outstanding debt, with about 81 percent of that being fixed rate and about 19 percent representing variable rate instruments. The weighted average cost of capital is approximately 2.6 percent.
This report is prepared and provided to the Finance & Operations Committee annually as required by Board of Regents Policy: Board Operations and Agenda Guidelines. Board of Regents Policy: Debt Transactions, last updated in October 2020, outlines the University’s goals when issuing debt.
B. Annual Insurance and Risk Management Report
The purpose of this report is to provide an overview of the University’s property, liability, and workers’ compensation insurance programs for FY 2020, along with key metrics. The University’s total cost of risk for FY 2020 (the sum of captive insurance costs, self-insurance costs, and the cost of commercially purchased insurance) was $15.4 million, a 6.9 percent increase over FY 2020. During FY 2020 the Risk Management office laid the groundwork for remarketing of the property insurance program and received approval of a plan to transfer management of property insurance deductible claims to RUMINCO, the University’s captive insurance program. Goals for FY 2021 including completion of the property insurance remarking and placement of coverage, and participation in an enterprise risk management initiative (a goal in the MPact 2025 Systemwide Strategic Plan).
C. Central Reserves Fund Report
The purpose of this item is to report on the status of the University’s central reserves fund.
The central reserves fund refers to a defined set of institution-level resources that are recorded in a central account in the University’s general ledger, and then generally used in three ways:
Page 218 of 277 1. as targeted, set amounts allocated out to specific units as part of the annual budget (identified on the annual Fund Forecast); 2. as a transfer-in to the general O&M fund, co-mingled with the O&M state appropriation to support allocations in the annual budget (identified on the annual Fund Forecast); 3. or held as a reserve.
The primary revenue sources for the central reserves fund include investment earnings and realized gains or losses in market value from the Temporary Investment Pool (TIP), realized gains in market value related to TIP funds invested in the Consolidated Endowment Fund, legal settlements, and other miscellaneous revenues.
The purpose of the central reserves fund is to insulate the University from potential major financial risks, including unanticipated or uninsured catastrophic events, temporary institutional revenue declines or expenditure gaps, unforeseen legal obligations and costs, failures in central infrastructure or failures of major business systems. Under normal circumstances, Board policy requires that the central reserves fund should not fall below 4 percent of state appropriations, or $25,000,000, whichever is greater. For FY21 the desired balance in the fund based on actual appropriations would be $27,832,520.
The approved budget plan for FY21, included a planned beginning balance of $23,577,687; net revenues and transfers in totaling $20,758,000; a transfer to O&M of $6,932,000, and transfers/payments out of $23,390,962, resulting in an ending balance of $14,012,725. At this point in the year, those estimates have been updated as follows:
The beginning balance has increased to reflect the actual amount carried forward from FY20: it is now $26,068,542 or $2,490,855 more than the approved budget. The carry- forward from FY20 is more than anticipated due to: o final carryforward from FY19 to FY20 was $199 more than estimated; o final FY20 investment income, net of changes in fees, was $4,870,723 less than estimated largely due to changes in manager distributions as a result of overall volatility in the market and a decline in interest rates in the first quarter of 2020; o miscellaneous income was $1,230,737 more than estimated due to an unbudgeted return of unspent allocations from past years, a reimbursement of an allocation in previous years, and several very small legal settlements offset by increased payments for interest earned to various sponsored balances; and o transfers/allocations were $6,130,642 less than estimated due to a delay in two items planned in the budget: the optional capital contribution to RUMINCO, and approximately $3,000,000 of the approved $25,000,000 for COVID-19 support to units (which could flow into FY21 activity – see below).
Net revenues for the year are currently projected to be $14,623,176, which is $6,134,824 less than the approved budget due to the following changes: o Net revenue into the fund from investment earnings and changes in capital gains is projected to be $5,697,500 less than anticipated primarily due to continued volatility in the market and a significant reduction in the projected average yield on the estimated average TIP balance (0.75 percent to 0.30 percent) driven by a deep decline in interest rates. o Total fees and expenses related to managing the investment activity (bank and custody fees plus operating expenses of the Office of Investments and Banking) are projected to be $500,000 more than anticipated largely due to filling open positions and overall increased compensation expenditures.
Page 219 of 277 o “Other Income” increased $62,676 due to interest earned and paid on a settlement due from GT Biopharma.
Total allocations and transfers out increased $3,000,000 due to a movement of spending authorization from FY20 into FY21. The approved budget for FY21 included $35 million in allocations of central reserves for transfer to units to offset negative financial impacts of COVID-19: $25 million estimated for use in FY20 and $10 million estimated for use in FY21. Prior to June 30, 2020, roughly $22 million was transferred to units, leaving $3 million of authorized allocation available to add to the $10 million available for FY21. Final plans for addressing FY21 shortfalls associated with the pandemic, and thus the use of this $3 million authorization carried forward from FY20, will be reported to the Board prior to June 30, 2021. Any authorized funds not needed to offset COVID-19 impacts will revert back to the general central reserves fund balance.
The combined impact of these updated estimates decreases the projected balance in the central reserves fund for June 30, 2021 by $6,643,969 to $7,368,756. The approved FY21 budget for the central reserves fund and the updated estimates for FY21, with variances, are displayed below.
Approved FY21 Updated FY21 Updated Estimates vs. Budget Estimates Approved Budget
Carryforward $23,577,687 $26,068,542 $2,490,855
Net Investment Earnings $20,758,000 $14,560,500 ($6,197,500) Legal Settlements/Misc. Income $0 $62,676 $62,676 Transfers to O&M ($6,932,000) ($6,932,000) $0 Total Net Revenues $39,894,542 $33,759,718 ($3,643,969)
Operating Allocations $23,390,962 $26,390,962 $3,000,000 Legal Settlement Transfers $0 $0 $0 Total Allocations/Transfers $23,390,962 $26,390,962 $3,000,000
Ending Balance $14,012,725 $7,368,756 ($6,643,969)
The annual report on Central Reserves is submitted as an information item to the Finance & Operations Committee every February. Estimated revenues, transfers, and allocations in the central reserves fund for the current and coming fiscal years are included in the President’s Annual Operating Budget.
D. Learfield IMG College Contract Execution Update
The purpose of this item is to update the Board on the execution of the amended and restated marketing and broadcast agreements between the Gopher Sports entities and the University, through its Department of Intercollegiate Athletics, Twin Cities campus, which agreements are guaranteed by Learfield Communications, LLC. The Finance Committee of the Board recommended approval of the terms of the agreement extensions as part of the May 12, 2016 consent report, which was subsequently approved by the Board on May 13, 2016. While the effective date of the proposed agreement extensions included in the docket materials was July 1, 2016, the amended and restated agreements were not fully executed until March 9, 2020 and are retroactive to July 1, 2016. A number of challenges contributed to the lengthy negotiation of the amended and restated agreements, including the Athletic Department’s desire to comprehensively address the items highlighted by the Office of Internal Audit in a 2016 report; changes to tax law related to charitable contributions and Unrelated Business Income Tax; clarifications requested by the University’s Tax
Page 220 of 277 Management Office related to the parties’ sales tax responsibilities; documentation of assets not clearly defined in the then-current agreements; and numerous contractual language changes proposed by Learfield. Although the May 2016 docket materials contemplated an amendment to the agreements, OGC ultimately advised that the agreements be amended and restated in their entirety for purposes of clarity due to the extent of the foregoing changes and clarifications. During the contract negotiation period, Learfield performed its obligations under the terms of the May 2016 materials approved by the Board, in particular making the increased payments to Athletics as called for in the amended contract. Since the May 2016 materials preceded the current Athletics Department administration, staff reconciled the 2016 financial terms and those included in the final executed amended and restated agreements. That review confirmed that the additional guaranteed revenue total described in the docket materials matched the guaranteed revenue total in the executed contracts. During the contract negotiations, some changes were made to specific revenue line items, but the overall increase in guaranteed revenue generated by the amended and restated agreements aligns with the total additional guaranteed revenue as approved by the Board in May 2016. E. State Capital Appropriation Expenditure Report
The purpose of this item is to provide the committee with a report that has been submitted to the Minnesota Legislature as required by Minnesota State Statute.
Capital Appropriations Expenditure Report
F. Quarterly Purchasing Report
The purpose of this item is to provide a quarterly report of purchasing activity, including detailed reports with brief discussion on the following activity:
Summary of Purchasing Activity Purchases made as Approved Exceptions to Competitive Process Purchases made as Preapproved Exceptions to Competitive Process Violations of Board of Regents Policy: Purchasing
G. Contamination Remediation of University Land in Rosemount, Minnesota
The purpose of this item is to provide the committee with a report that has been submitted to the Minnesota Legislature as required by Minnesota State Statute. The report outlines the efforts to remedy contamination of the University land caused by activities occurring prior to the University acquiring it.
Contamination Remediation of University Land in Rosemount, Minnesota
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Annual Capital Financing and Debt Management Report Fiscal Year 2020
Executive Summary and Highlights
The University of Minnesota enjoys a very favorable debt profile which results in low borrowing costs to finance capital projects. The University’s debt is highly rated by two rating agencies – Aa1 by Moody’s Investors Service (“Moody’s”) and AA by S&P Global Ratings (“S&P”) – which provides strong demand and competitive pricing in the marketplace for University bonds.
Key debt-related metrics at June 30, 2020 include:
The University’s total long-term debt outstanding was approximately $1.6 billion.
The weighted average cost of capital was approximately 2.6%.
The ratio of tax-exempt to taxable debt was approximately 85% tax-exempt/15% taxable.
The mix of fixed-rate and variable rate debt was approximately 81% fixed and 19% variable.
The University’s debt is rated Aa1 by Moody’s Investors Service and AA by S&P Global.
Debt service paid (principal and interest) has been approximately $155 million in each of the last two years, of which approximately $95 million was applied to paying down principal.
The University has realized net present value savings of approximately $47 million since 2015 by refinancing previously issued debt on or before optional redemption dates. In addition, another approximate $27 million is expected to be realized with the refinancing of the Special Purpose Revenue Bonds in the summer of 2021.
Fiscal 2020 debt activity included: Issuance of $48 million in commercial paper (CP) under the revolving CP facility to pay for certain property purchases
Receipt of a $4.5 million loan from the Otto Bremer Trust, with interest only payments for four years and the final year’s interest plus the total principal due in year five
Long-Term Debt Debt financing allows the University to pay for an asset over a period of time, rather than pay for it at the time of purchase. Per Board of Regents (“Board”) policy, Debt Transactions, updated in October 2020, debt shall be used to finance the purchase of land and buildings, construction of and remodeling projects to University facilities, and acquisition of and installation of equipment. Debt may not be used to fund University operating purposes without Board approval. Each debt transaction of the University is completed in the most effective and professional manner, in accordance with the highest standards of the industry, laws and governmental practices, guided by the following principles:
Minimize borrowing costs at acceptable levels of risk over the life of the debt;
Maintain key financial metrics to assure continued access to capital markets and manage credit-related risks;
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Exhibit a maturity profile that meets liquidity requirements and manages the balance sheet of the institution; and
Provide financial and budgetary stability.
The majority of the University’s outstanding debt can be categorized in one of the following three designations:
General Obligation (GO) Bonds – long-term fixed rate bonds secured by the full faith and credit of the University. Bonds have been issued as either tax-exempt or taxable with 20, 25, or 30-year maturities. Each series has been structured with approximately equal annual debt service payments over its life. The tax-exempt bonds are issued with a 10-year optional redemption at par.
Special Purpose Revenue Bonds (State Supported Debt) – long-term fixed rate bonds that are special limited obligations of the University. These bonds were issued by the University for TCF Bank Stadium and the Biomedical Science Research Facilities, but Minnesota law provides for an annual appropriation to reimburse the University for the annual debt service on these bonds. No other revenues or assets of the University, nor the full faith and credit of the University, is pledged for the payment of the principal or interest on these bonds.
Commercial Paper (CP) Notes – short-term obligations that are backed by the full faith and credit of the University and supported by the University’s self-liquidity. With maturities of 1 to 270 days, the CP is classified as current liabilities in the financial statements. However, the University currently treats the outstanding CP as a long-term financing vehicle by renewing the notes for extended periods as they come due, with annual required “pay-downs” established in the original offering memorandums.
In addition, long-term debt contains a small outstanding balance of State of Minnesota Infrastructure Development Bonds (IDB), a note payable, capital leases, and the unamortized premiums and discounts on the bonds.
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The table below reflects the beginning and ending fiscal year balances and fiscal 2020 activity of the various debt series summarized in major categories:
Final Beginning Ending (000s omitted) payment Balance Additions Reductions Balance due in June 30, June 30, FY 2019 2020
General Obligation Bonds - Series 2044 $ 805,470 $ 0 $ 36 ,865 $ 768,605 2019A, 2019B, 2017A, 2017B, 2016A, 2014B, 2013A, 2011D, 2011A, and 2010C (tax-exempt)
General Obligation Taxable Bonds - 2044 51,010 2,460 48,550 Series 2019C, 2017C, 2015B, and 2013B
General Obligation Taxable Bonds – 2039 58,215 2,420 55,795 Series 2013D, 2011C, and 2010B (University Supported Biomedical Science Research Facilities Funding Program)
Special Purpose Revenue Refunding 2032 75,750 5,245 70,505 Bonds – Series 2015A (State Supported Stadium Debt)
Special Purpose Revenue Bonds – 2039 165,860 6,090 159,770 Series 2013C, 2011B, 2010A (State Supported Biomedical Science Research Facilities Funding Program)
Commercial Paper Notes Series A, B, C, 2022 – 249,920 48,000 34,825 263,095 D, F, G and H (tax-exempt) and E and I 2044 (taxable)
Note Payable 2025 0 4,500 0 4,500
Obligations to the State of Minnesota 2025 6,142 2,095 4,047 pursuant to Infrastructure Development Bonds (IDB)
Balance – at par 1,412,367 52,500 90,000 1,374,867
Unamortized premiums and discounts 2044 157,138 8,553 148,585
Capital leases and other 2025 43,977 2,091 7,180 38,888
TOTAL PER FINANCIALS $ 1,613,482 $ 54,591 $ 105,733 $ 1,562,340
No hedging transactions exist in the debt portfolio at June 30, 2020.
The University’s weighted average cost of capital at June 30, 2020 approximates 2.6%.
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Commercial Paper Facility
On October 12, 2017, the Board authorized a revolving commercial paper facility (the “Facility”) through which the University may issue tax-exempt and taxable variable rate debt from time to time as general obligation indebtedness for the short or long-term financing of capital projects. The aggregate principal amount outstanding of the notes issued in 2005 through 2017 (Series A, B, C, D, E and F) and the additional notes to be issued (Series G, H and I) shall not exceed $400 million. Since the Facility is considered revolving in nature, CP can be issued for approved projects, paid off, and then re-issued for new approved projects, so long as the total amount of CP issued and outstanding does not exceed the Board’s maximum authorization of $400 million. The capacity to issue increases as paydowns occur.
Counter-party risk is an inherent risk in a program of this type. This is the risk that our dealer with whom the University contracts to remarket the CP will default on its obligations under that contract. We have mitigated this risk by utilizing a second dealer for the sale and remarketing of new notes to spread counter-party risk across dealers.
CP is an effective and efficient method to maintain an acceptable percentage of variable rate debt within an overall debt portfolio, with the goal of lowering overall cost of capital. It can be restructured to long-term debt quickly and efficiently since it is short-term in duration. The weighted average rate of the CP outstanding at June 30, 2020 was approximately 0.22%.
External rating agencies rate the entire CP program based on the maximum amount authorized by the Board, as opposed to previous CP financing issued under a single debt offering and rated as an individual series of CP. The current rating of the $400 million facility is P-1 by Moody’s Investors Service (“Moody’s”) and A-1+ by S&P Global Ratings (“S&P”), both the highest short-term rating possible from each rating agency.
Long-Term Bond Credit Ratings
The University’s debt is highly rated by two rating agencies – Aa1 by Moody’s and AA by S&P – which provides strong demand and competitive pricing in the marketplace for University bonds. Both rating agencies have their own methodologies that weight a number of factors to arrive at a letter rating.
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Moody’s uses the broad weighting factors of market profile, leverage, wealth and liquidity, and operating performance, with subsets of each. Other credit considerations include multi-year trends, governance & management, debt structure, liquidity quality, government relationship, pension and other post-employment obligations, and healthcare operations. This methodology does not include an exhaustive treatment of all factors that might be relevant when evaluating an individual university’s credit attributes. As stated in the most recent rating report for the University of Minnesota:
“The Aa1 rating assigned by Moody’s reflects strong student and research market positions and ample financial resources, all incorporated in the University’s excellent strategic position.
The stable outlook reflects Moody’s expectations that “UM will manage through challenging conditions related to the corona virus and related economic recession, mitigating fiscal impacts through appropriate budgetary responses. Over the next several years we expect continued favorable student demand, tuition revenue and sponsored research trends. The outlook also incorporates longer term stable to improving operating cash flow and debt service coverage.”
S&P’s methodology results in a convergence of a detailed analysis of a university’s “Enterprise Profile” and “Financial Profile” with qualitative adjustments for compelling factors or qualifiers. The “enterprise profile” includes market position and demand, management and governance, industry risk, and economic fundamentals. The “financial profile” includes debt and contingent liabilities, financial resources, financial performance, and financial management policies. As reported by S&P:
“The AA rating assigned by S&P reflects our view of the University’s, 1) position as Minnesota’s flagship research university and land-grant institution, 2) slightly declining enrollment since fall 2017, although it has been relatively stable over a longer time horizon, with some decline in freshman applicants for the past three years, 3) manageable pro forma maximum annual debt service burden, and 4) favorable philanthropic support.”
The stable outlook reflects S&P's view that "over the next two years, UM’s enrollment will stabilize in fall 2021 after declining slightly in fall 2020, while other demand metrics remain firm and its adjusted full- accrual financial operating performance will improve in fiscal 2021 as the full effects of management’s cost-cutting initiatives begun in the second half of fiscal 2020 are realized, and there are no diminution in available resources relative to operations and debt, while total debt outstanding remains relatively constant."
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Debt Management Oversight
Debt management is the responsibility of the Treasurer, with day-to-day oversight assigned to the Director of Debt Management as designee. The Director, in turn, relies on various individuals in certain University departments for the expertise needed to ensure compliance with policy, laws and regulations, and to handle specific tasks. The University also utilizes a structure of three committees in its debt management oversight – the Debt Process Team (DPT), the Debt Oversight Group (DOG) and the Debt Management Advisory Committee (DMAC). Each of the committees and their respective responsibilities are summarized below:
Debt Process Team (DPT) DPT acts in the capacity of the University’s trustee to approve the draws on unspent bond proceeds to reimburse expenditures incurred on eligible projects. In addition, the group establishes and ensures that appropriate accounting and compliance procedures are in place and working properly.
Debt Oversight Group (DOG) DOG supports and advises the Treasurer and Director of Debt Management in decisions regarding policy, capital financing strategies, and debt capacity analysis. In addition, the committee periodically reviews the debt management processes to insure compliance with University and tax requirements.
Debt Management Advisory Committee (DMAC) DMAC advises the Finance & Operations Committee of the Board and the University’s Treasurer on the issuance and ongoing management of debt. In doing so, the group evaluates, recommends, and monitors debt management policies, strategies, and guidelines and provides advice on their implementation so as to best serve the financial objectives of the University.
In addition, the University has retained an independent registered municipal advisor (IRMA). The University is represented by and relies on its municipal advisor, PFM Financial Advisors LLC (PFM) to provide advice on proposals from financial services firms concerning the issuance of municipal securities and transactions involving municipal financial products. PFM has represented to the University that it is an “independent registered municipal advisor” within the meaning of Section 15Ba1-1(d)(3)(vi) of the Securities Exchange Act of 1934.
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Taxable vs. Tax-Exempt Debt
Financings generally are on a tax-exempt interest rate basis, unless there are risks that private business use (“PBU”) of the financed asset may exceed the University’s allowable threshold, or when other financial considerations indicate the use of taxable debt is in the best interest of the University.
Situations where taxable debt may be more advantageous than tax-exempt debt include: PBU limitations are expected to be exceeded; Unknown future use of the property; Longer or unknown construction time; Market rates for both tax-exempt and taxable debt are similar or taxable debt has a lower interest rate; The rate difference between taxable debt and tax-exempt debt is so small as to make the costs of post- issuance compliance on tax-exempt debt an overly burdensome requirement.
Taxable debt may take the form of CP, variable rate debt or fixed rate debt.
The ratio of tax-exempt to taxable debt outstanding as of June 30, 2020 is approximately 85% tax-exempt/15% taxable. Included in the taxable debt is one outstanding series that was issued as Build America Bonds-Direct Payment to Issuer, whereby the University expects to receive a 35 percent annual interest subsidy from the federal government for the life of the bonds. Due to the implementation of federal sequestration effective with the subsidy payment received beginning June 2, 2013, the subsidy payments received have been reduced by 5.9% - 6.2% for fiscal 2020.
2.2% 12.4%
85.4%
Tax-exempt Taxable Taxable (BAB)
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Fixed Rate vs. Variable Rate
Long-term fixed-rate tax-exempt debt is the most common form of debt issued by institutions of higher education, in which interest rates are fixed for a single or multiple maturities. This type of debt allows institutions to lock into certain debt service obligations at tax-advantaged interest rates over a long period of time. Long-term fixed rate debt generally includes a call option by the University within 0-10 years after the issuance date to allow for refinancing opportunities – i.e., either reduce interest rates (subject to market conditions) or restructure principal payments.
Variable rate financings can lower overall cost of capital. Financings of all maturities can carry a variable rate. Bonds are callable at any interest payment date (daily, weekly, monthly, etc.) with no premium. Risks include interest rate risk, credit risk, tax law risk and remarketing risk. All of the University’s variable rate debt is currently in the form of commercial paper.
The mix of fixed rate to variable rate as of June 30, 2020 is approximately 81% fixed to 19% variable.
19.1%
80.9%
Fixed Rate Variable Rate
Refinancing Savings
The University has taken advantage of the optional par call feature that is part of the structure when tax-exempt debt is issued. This allows us to refinance the individual bond series prior to its final maturity date and defease the existing bonds.
Refunding of bonds is the issuance of a new bond for the purpose of retiring an already outstanding bond issue. Outstanding debt may be refunded to achieve interest rate savings, restructure principal and/or interest payments, or eliminate burdensome covenants with bondholders. The refunding is considered an advance refunding when done prior to the optional redemption date (call date). Until December 31, 2017, bonds could only be advance refunded once. The tax law changes enacted in December 2017 eliminated the tax-exempt advance refunding option entirely, but still allows us to do a taxable advance refunding.
A legal defeasance occurs when the proceeds of new bonds that are sufficient to pay all principal and interest on the outstanding bonds up to and including the call date are deposited in escrow at a bank. The escrow is irrevocably pledged to the retirement of such debt and thus the escrow and the refunded debt do not appear on the University’s balance sheet.
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The University has realized savings of approximately $47 million on debt that has been refunded and defeased since 2015, and expects to realize savings of approximately $27 million on the planned summer 2021 refunding of the state supported revenue bonds related to the Biomedical Science Research Facilities.
Amortization Structure
The debt service structure for each bond issue is determined on a case-by-case basis. The University has typically structured its debt so that the annual debt service payments on each bond issue are somewhat equal. The following graph reflects the amortization structure of the bonds and commercial paper outstanding as of June 30, 2020.
The maroon bar reflects the University supported debt, the gold bar reflects the state supported bonds, and the green bar represents the debt of Gateway Corporation. Since Gateway Corporation is a component unit of the University, its debt is included as part of the University’s “total debt” for ratio calculation purposes and therefore is shown in the table below.
Scheduled Debt Amortization, Balances at June 30, 2020-2025 (at par, in millions)
1400
1200
1000
800
600
400
200
0 2020 2021 2022 2023 2024 2025
General Obligation Special Purpose Revenue Bonds Gateway
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Debt Activity Subsequent to June 30, 2020
State Capital Bonding Bill On October 12, 2020, during the fifth special session of the 2020 Legislative year, the Minnesota Legislature passed a capital infrastructure bill that contains more than $75 million in funding for the University. Included in the bill was funding for the following projects: HEAPR – asset repair and maintenance across the system - $38.5 million Child Development Building replacement, Twin Cities – $29.2 million AB Anderson Hall renovation, Duluth - $4.4 million Chemistry Undergraduate Teaching Laboratory, Twin Cities - $3.3 million
In addition, Minnesota Statutes 137.61 through 137.65 were amended to: 1) allow the University to refinance the special purpose revenue bonds, State Supported Biomedical Science Research Facilities Funding Program Bonds, and 2) allow the University to keep the annual appropriation savings and use the savings to support additional new debt which would be issued to finance the Clinical Research Facility design phase.
The Board approved refunding of the state supported bonds in December 2019, assuming the State legislation would be amended. Refunding is expected to occur during the summer of 2021.
Issuance of GO Bonds Series 2020A and Series 2020B (Taxable) The University closed on the issuance of GO Bonds, Series 2020A and GO Taxable Bonds, Series 2020B on November 3, 2020. Pricing occurred October 14, 2020 through competitive sales.
The Series 2020A was issued in the par amount of $31.3 million with a premium of $9.1 million for total proceeds of $40.4 million and true interest cost (TIC) of 2.65%. The proceeds are being used to fund a portion of the costs of the following projects, plus finance the costs of issuance:
Rehabilitation of Pillsbury Hall (Twin Cities); Renovation and space addition to the Center for Magnetic Resonance Research Building (Twin Cities); Expansion of the Child Development Center Lab School (Twin Cities); Reconfiguration of existing space in Owen Hall and Dowell Hall on the Crookston campus; Classroom improvements in Blakely Hall on the Morris campus; Purchase of a spare turbine for the Main Energy Plant (Twin Cities)
The Series 2020B was issued in the par amount of $84.7 million with a TIC of 2.31% to finance a portion of the costs of land and buildings near the Minneapolis campus to be used for University operations, including the refunding of the CP Notes Series I outstanding in the amount of $53.0 million that was originally issued for the same purposes, plus finance the costs of issuance.
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Key Financial Indicators
As indicated earlier, debt capacity and credit ratings are not a function of ratios alone. However, the University annually calculates certain ratios as outlined by the ratings agencies based on the financial information contained in the audited yearend financial statements. The University uses three ratios to calculate the debt capacity of the University:
Total Cash & Investments to Total Debt – measures coverage of total debt by assets that generate investment return
Spendable Cash & Investments to Total Debt – measures the university’s ability to repay bondholders from wealth that can be accessed over time or for a specific purposes.
Debt Service to Operating Expenses – measures annual debt service burden on the annual operating budget
Ratios calculated by the rating agencies are based on the par amount of the debt outstanding plus capital leases, but excluding the net unamortized premium or discount on the bonds.
Definitions for the numerators and denominators in these three ratios as calculated by Moody’s are provided below.
Total cash & investments – total cash and cash equivalents plus short-term investments plus noncurrent investments of the University, UMF and UMP (does not include the restricted cash and cash equivalents)
Spendable cash and investments – total cash and investments as computed above less restricted, nonexpendable net assets of the University, less the permanently restricted net assets of UMF and UMP
Total debt – the sum of the University’s outstanding debt as shown on the financials, less net unamortized premium/discount on the bonds, plus UMF bonds payable
Debt service – the sum of the principal paid and interest expense on capital debt by the University
Operations – University operating expenses less scholarships & fellowships, plus interest on capital asset-related debt
In addition, the University performs a second calculation of the ratios modifying the Total Debt amount by subtracting out the University’s special purpose debt, and modifying the Debt Service and Operations amounts by subtracting the principal and interest on the special purpose debt.
The following graphs reflect these ratios for the last five years for the University of Minnesota, the University of Minnesota, as modified, and the median of the 14 public universities rated Aa1 by Moody’s. The blue lines on each graph represent the highest and lowest ratio as calculated for fiscal year-end 2019 for the public institutions rated Aa1.
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Total Cash and Investments to Total Debt
600%
280%
DESIRED TREND
Total Cash and Cash Equivalents, (excluding restricted), and Investments,
+ UMF’s & UMP’s Cash and Cash Equivalents, and Investments
Divided by Total Debt
As shown above, the University is solidly in the middle of the range for Aa1-rated public institutions and above the median for this group of institutions. In addition, when the state-supported debt is taken out of the calculations, the calculated ratio is even better.
The two blue lines represent the 2019 minimum and maximum values for this ratio for Aa-1 rated institutions reflecting the total range of values.
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Spendable Cash and Investments to Total Debt
470%
190%
DESIRED TREND
Total Cash and Investments of the University, UMF & UMP, less restricted, nonexpendable
net assets of the University, less the permanently restricted net assets of UMF & UMP
Divided by Total Debt
Similar to the first ratio, the University is again solidly in the middle of the range for Aa1-rated public institutions and above the median for this group of institutions. In addition, when the state-supported debt is taken out of the calculations, the calculated ratio is even better.
The two blue lines represent the 2019 minimum and maximum values for this ratio for Aa-1 rated institutions reflecting the total range of values.
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Debt Service to Operations
5.2%
1.9%
DESIRED TREND
Annual Debt Service
Divided by Total Operations
The University is above the median for this ratio, but is fairly consistent from year-to-year. In addition, as also shown in the previous two ratios, when the state-supported debt is removed from the calculation, the ratio improves – by decreasing – which is the desired direction for this ratio.
The two blue lines represent the 2019 minimum and maximum values for this ratio for Aa-1 rated institutions reflecting the total range of values.
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Peer Analysis
The University annually compares selected financial ratios, consistent with major credit rating agency criteria, to other Big 10 institutions and to other public institutions with the same rating. This peer group consists of highly rated preeminent public research universities. The following charts provide the comparisons as of June 30, 2019, the most recent year-end that is available for all institutions. The different colors of the bars represent the University of Minnesota (maroon), Aaa-rated institutions (black), Aa1-rated institutions (gold), and one Aa2-rated institution (green).
Measures the wealth of a university and its affiliated foundation(s)
Measures direct obligations of a university and its affiliated foundation(s)
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Measures coverage of total debt by assets that generate investment return. Higher percentages are more desirable.
Measures the university’s ability to repay bondholders from wealth than can be accessed over time or for a specific purpose. Higher percentages are more desirable.
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Measures annual debt service burden on the annual operating budget. Lower percentages are more desirable.
Measures the extent to which a university can rely on wealth than can be accessed over time or for a specific purpose to operate without earning any additional revenue. Higher percentages are more desirable.
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UNIVERSITY OF MINNESOTA
Annual Report of the Office of Risk Management and Insurance as of Fiscal Year Ended 30 June 2020
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Table of Contents
I. Overview…………………………………………………………………………………………….3
Mission of the Office of Risk Management and Insurance………………………………….…...3
Organizational Structure…………………………………………………………………...... ……..4
II. Total Cost of Risk…………………………………………..……………………………………..5
Total Cost of Risk Summary…………………..…………………………………………………….6
III. Risk Finance Programs…………….………...…………………………………………………..7
General Approaches to Risk Finance…………………..………………………………………….7
University Structures…………………………………………………………………………………8
Captive Insurance………………………………………………………………………………..9
Retained (Self-Insured)…………………...…………………………………………………...13
Commercial Insurance…………………………………………………………………………15
IV. Workplan…………………………………………………………………………………………..19
Fiscal Year 20 Workplan Status; Fiscal Year 21 Workplan..……………………..……….19
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I. Overview
Mission of the Office of Risk Management and Insurance
The Office of Risk Management and Insurance (‘Risk Management’) accepts as principle that assuming some risk is integral to being productive. The University must take risks and Risk Management must find ways to minimize the financial impact of adverse outcomes.
The Risk Management Team:
. Advises the University community regarding the risk naturally encountered in the course of Research, Teaching and Outreach; . Minimizes the frequency and severity of physical injury and property damage through consultation and specific loss control measures; and . Protects and preserves University human and financial resources. Risk Management uses commercial insurance, captive insurance, and self-insurance to transfer, or budget for, monetary loss arising from risk. It is responsible for the design, procurement, implementation, and maintenance of these programs. Risk Management routinely consults with the Office of General Counsel with respect to risk and insurance provisions of the contracts the University seeks to enter.
This report summarizes the scope of operations of the University’s Office of Risk Management and Insurance as of fiscal year end June 30, 2020.
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Organizational Structure
The Office of Risk Management:
. Acts at the direction of University Finance; . Maintains dotted line relationships with many University entities and resources; and . Controls the activities of several insurance vendors and suppliers.
University Finance Internal Partners External Partners
University at Large Insurance Broker
RUMINCO Board Captive Manager
Office of the General Counsel Office of Risk Actuaries Management
FM
Workers’ Compensation & Casualty Claims Administrator Disability Resources
University Health & Property Program Safety Administrator & Broker
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Total Cost of Risk Summary
University of Minnesota
Total Cost of Risk: Fiscal Years 2015 – 2019
The University’s Total Cost of Risk is the sum of:
. Self-Insured costs; . Captive costs; and . Commercial Insurance premiums.
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0 FY16 FY17 FY18 FY19 FY20
Self-insurance (WC; Property Ded.) Captive (Liability) Commercial Insurance (Property; Excess Liability)
. Over the past five years, Total Cost of Risk (‘TCOR’) averaged $14.5 million The cost to transfer risk to outside entities (Insurers) has averaged 30% of our TCOR; the remaining 70% arises from cost-effective internal structures.
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Total Cost of Risk Summary
COST ITEM FY16 FY17 FY18 FY19 FY20 Captive Liability Ultimate Loss (EST.) $ 5,430,895 $ 1,820,535 $ 608,581 $ 1,110,542 $ 2,759,742 Liability Claims Administrator $ 56,045 $ 44,428 $ 37,875 $ 55,023 $ 20,522 Captive Administrative Expenses [1] $ 105,510 $ 109,793 $ 242,716 $ 186,354 $ 179,156 OGC Expenses $ 1,010,487 $ 1,070,267 $ 1,216,563 $ 1,314,998 $ 1,365,762 Total Captive $6,602,937 $3,045,023 $2,105,735 $2,666,917 $4,325,182 Self-Insurance Workers' Compensation Ultimate Loss (EST.) $ 2,992,215 $ 2,667,846 $ 4,238,423 $ 4,462,101 $ 3,727,375 WC Reinsurance Association $ 177,439 $ 200,430 $ 162,744 $ 124,598 $ 164,751 Special Compensation Fund $ 339,746 $ 272,944 $ 231,580 $ 194,858 $ 203,434 WC Claims Administrator $ 317,449 $ 333,468 $ 386,366 $ 398,305 $ 339,272 Litigation Cost $ 455,100 $ 341,339 $ 248,438 $ 262,958 $ 384,185 Bill Review Service $ 32,281 $ 31,652 $ 46,552 $ 32,059 $ 36,897 WC Actuarial $ 9,402 $ 8,243 $ 7,899 $ 5,050 $ 4,511 WC Total $ 4,323,632 $ 3,855,922 $ 5,322,002 $ 5,479,929 $ 4,860,424 Retained Property Losses [2] $ 875,304 $ 1,422,571 $ 1,734,126 $ 1,605,465 $ 964,101 Electronic Data Processing [3] $ 35,975 $ 5,311 $ 12,631 $ 30,262 $ 9,627 Total Self-insurance $5,234,911 $5,283,804 $7,068,759 $7,115,656 $5,834,153 Commercial Insurance All Risk Property $3,578,633 $3,139,232 $3,020,524 $3,177,378 $3,463,724 1st Excess General/Auto Liability - Extra MN 262,012 261,296 269,441 269,441 295,846 High Excess General/Auto Liability-Extra MN - - - 267,831 530,386 Educators Legal Liability - - - 314,393 303,358 Cyber Security Liability - 18,193 218,314 221,871 214,000 Excess Clinical Trials Liability - Extra MN 135,000 119,286 119,286 118,000 132,000 Intercollegiate Athletics 33,500 33,500 33,500 44,788 57,788 Hull, Liability, Pollution (Blue Heron Ship) 27,494 27,494 27,494 28,299 29,813 Other States Workers Compensation 26,383 14,864 26,129 8,987 23,457 Fidelity & Crime 22,015 22,015 23,059 23,061 20,500 Fine Arts 20,934 20,934 20,934 20,934 19,869 Nonowned Aircraft Liability 20,900 20,900 20,900 20,900 21,945 Showboat [4] 6,480 - - - - Broadcaster's Liability 5,594 5,412 5,412 5,412 5,575 Child Care Center AD&D 1,704 1,687 1,687 1,687 1,687 Upward Bound AD&D 406 406 406 424 406 Brokerage 38,337 37,869 40,685 41,905 125,000 Total Commercial Insurance $4,179,392 $3,723,088 $3,827,771 $4,565,311 $5,245,354 GRAND TOTAL COST OF RISK $16,017,240 $12,051,915 $13,002,266 $14,347,884 $15,404,689
[1] Captive Administrative Expenses includes U-wide harassment training. [2] Amount of Insurable property losses between $10,000 and deductible. [3] EDP coverage is self-insured; figure shows losses excess $500. [4} Showboat management agreement w/Padelford ended 9/30/16. CLA transferred ownership of the boat after the final performance season (July-Aug 2016).
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II. Risk Finance Programs
General Approaches to Risk Finance
The financial consequences of risk may be Retained or Transferred.
. Risk retention (often called “self-insurance”) is characterized by the assumption (retention) of financial risk consequences. This retention ranges from a deductible to carrying no insurance whatsoever. Optimally, risk retention is the result of pre-considered choice.
. Risk transfer is characterized by the passing of the financial consequences of risk to a third party (typically an insurer) via purchase of a contract (typically an insurance policy) that specifies the terms and conditions of the transfer.
Broadly, the University treats its risk as follows:
. Liability – Transferred to captive insurer (RUMINCO, Ltd.) . Workers’ Compensation; Property Deductible – Retained; Self-insured . Property and Miscellaneous Insurance – Transferred to commercial insurers
There are specific rationales behind the decision to transfer or retain a specific risk. Because retaining one’s own risk (within limits) tends to be more economical in the long run than paying a third party to assume it, the guiding principle has been for the University to retain risk, to the extent that it is financially possible and reasonable to do so.
Generally, this principle is not useful when the University is exposed to truly catastrophic loss potential. A good example of this is the property associated with the University’s campuses. The University owns over $16 billion in property, and carries a $2 billion property insurance limit. We cannot fund losses at that level internally, so we purchase an insurance contract to transfer the exposure to a third party.
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University Structures
Much activity of the Office of Risk Management centers on the establishment, maintenance and continuing refinement of risk finance mechanisms.
The University finances its Property and Casualty risk using three general strategies:
Captive Insurance Retained (Risk Transfer) (Self-Insured)
Workers’ Professional Liability General Liability Property Deductible Compensation
Non-profit Auto Liability Organization Liability
Commercial Insurance (Risk Transfer)
Property Other Exposures
FM Global Insurance Miscellaneous Insurance Company Companies
The Office of Risk Management monitors the University’s loss trends and the insurance marketplace to determine the optimal risk financing strategy. This process includes ongoing reviews of the University’s loss exposures, claim frequency and severity, and trends in each.
The following sections describe the University’s Captive, Retained, and Commercially Insured risk financing programs.
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CAPTIVE INSURANCE
Captive Insurance (Risk Transfer )
Professional Liability General Liability
Non-profit Auto Liability Organization Liability
RUMINCO, Ltd.
RUMINCO Ltd. (Regents of the University of Minnesota INsurance COmpany) is a captive insurance company, a wholly owned subsidiary of the University of Minnesota. It was incorporated in 1978 during a nationwide crisis in the medical malpractice insurance market. At that time, the University Hospitals and Clinics and the Medical School faced 400% increases in premiums. After exploring various risk financing options, the University decided to form RUMINCO Ltd. to fund its primary layer of protection for:
. General Liability; and
. Professional Liability (Medical Malpractice) The University purchased excess limits from commercial insurance companies until 1986, when the Office of the General Counsel advised that the State of Minnesota’s Tort Statute effectively and reliably limits the University’s exposure to Tort Liabilities incurred within Minnesota jurisdiction.
As RUMINCO matured and its surplus (i.e., net worth) grew, the RUMINCO Board added other lines of coverage:
. Automobile Liability; and
. Non-Profit Organization Liability (Employment Claims) Over one-third of a century, RUMINCO has proven itself to be a useful funding tool for the University. It is a formalized, disciplined way to finance risk, yet retains flexibility, and provides long-term stability.
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RUMINCO, Ltd. Coverage Overview
A. General Liability insures the University’s legal liability for third party bodily injury or property damage.
Principal Exposures:
Frequency: Premises injuries to third parties (slip-and-falls)
Severity: Population concentrations in dormitories, stadiums, and arenas exposed to fire, collapse, explosion, etc.
B. Professional Liability covers damages arising out of professional services, including:
. Medical, surgical, dental or nursing treatment . Furnishing or dispensing of drugs or medical, dental, or surgical supplies or appliances . Services by any person as a member of a formal accreditation or similar professional board or committee of the University, or as a person charged with the duty of executing directives of any such board or committee . Service by accountants, architects, engineers, lawyers, and teachers acting within the scope of their duties as employees of the University Principal Exposure:
Frequency and Severity: Medical Malpractice
C. Auto Liability covers legal liability for bodily injury and property damage arising out of the use of over 800 owned vehicles, as well as hired and non-owned autos operated on behalf of and with the permission of the University.
Principal Exposures:
Frequency: Collision damage to third parties’ vehicles
Severity: Vehicle accidents involving multiple-passenger vehicles
D. Non-Profit Organization Liability covers liability claims not triggered by Bodily Injury or Property Damage, including:
. Directors’ and Officers’ Liability . Employment Practices Liability . Personal Injury e.g., libel, slander, defamation, emotional distress Principal Exposure:
Frequency and Severity: Employment-related claims such as allegations of sexual harassment, failure to grant tenure, discrimination, etc.
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Summary of RUMINCO Ltd. Limits
RUMINCO limits are in the same range as the maximum payout prescribed by the Minnesota Tort Cap statutes; buying more limit than required effectively waives the Statute’s protection, with the new limit becoming the de facto tort cap.
$1 Million Each Loss $5 Million Aggregate
$3 Million $3 Million Each Occurrence Aggregate
$500,000 excess of $500,000 RUMINCO Each Claim (Out-of-State)
$1,000,000 $1.5 Million $500,000 Each Claim Each Occurrence Each Claim $1.5 Million RUMINCO Each Loss (In-State) $500,000 Each Claim
General / Automobile Non-Profit Professional Liability Organization Liability Liability
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RUMINCO Ltd. Claims Experience
Claim Count by Fiscal Year
50
45
40
35
30
25
20
15
10
5
0 FY16 FY17 FY18 FY19 FY20
GL PL AL NPOL Total
Claim frequency for the four RUMINCO lines of liability coverage over the past five years. Total RUMINCO Claim Count has been steady.
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RETAINED (SELF-INSURED)
Retained (Self-Insured)
Workers’ Property Deductible Compensation
Workers’ Compensation Overview
Workers’ Compensation benefits are mandated and governed by Minnesota statute. Benefits include medical costs, wage loss and retraining costs for University employees who are injured while acting in the scope of their duties.
The University is a qualified self-insurer under Minnesota law, assuming liability up to $2,000,000 in any one Workers’ Compensation occurrence. The Workers’ Compensation Reinsurance Association (WCRA), an excess insurer for catastrophic claims created by the State of Minnesota, provides excess protection.
Beginning in FY09, Risk Management began a continuing initiative to make the statutory Workers’ Compensation benefit system more transparent, accessible, and easy to use for all parties. That initiative formed the basis for positive trends that continue today.
Workers’ Compensation Program Costs
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$- FY16 FY17 FY18 FY19 FY20
Reinsurance, Administrative and Legal Ultimate Cost of Benefits
Most of the cost volatility arises from the Ultimate Cost of Benefits.
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Workers’ Compensation Workers’ Compensation Claim Count
900 800 700 600 500 400 300 200 100 0 FY16 FY17 FY18 FY19 FY20
Lost Time Medical Only Total
Claim count has been stable, with some evidence of a COVID shutdown decline in FY20.
Workers’ Compensation Legal Expense 500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0 FY16 FY17 FY18 FY19 FY20
Although claim count is down, legal expenses are up. Legal work often arises from old claims; the expense tail is multi-year.
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COMMERCIAL INSURANCE
Commercial Insurance ( Risk Transfer )
Property Other Exposures
Miscellaneous FM Global Insurance Companies Insurance Company
Through the purchase of commercial insurance, the University transfers certain loss exposures to commercial insurance companies.
Reasons to commercially transfer risk include:
• High limits that would be difficult or impossible to self-fund ($40 million Extra MN General/Auto Liability; $10 million Extra MN Clinical Trial Liability; $2 billion Property Insurance) and
• Customer/public relations, low price of transfer, or demands by third parties (NCAA Athletic Injury Primary Coverage; Daycare Accident; Fine Art loans)
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Property Insurance
Property Insurance covers risks of direct physical loss or damage to the “covered property” as defined in the policy, subject to sublimits and specifically excluded perils. Property Insurance represents 66 percent of the University’s commercial insurance premium outlay.
Premium and Insured Value History
$18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- FY16 FY17 FY18 FY19 FY20
Insured Value (000s) Insurance Premium
A fixed rate and policy holder dividends have caused insured value growth and premium to positively diverge since FY16.
Property Claim Count by Fiscal Year
45 40 35 30 25 20 15 10 5 0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Property claim count is 20 for FY20, under the 10 year average of 23 claims per year.
Page 254 of 277 Page 17
Excess General, Automobile, Employment Practices and Educator’s Liability In response to the litigation environment around Sexual Molestation, Traumatic Brain Injury and Employment Claims, and the potential for large awards, we purchased more limits in FY19 to cover events that may fall outside tort cap protections.
General and Auto Liability $140MM Liberty Sexual Molestation incl. New Layer as of FY19 through this GL layer
$115MM
American Insurance Co.
$90MM
AWAC
$65MM Ironshore Traumatic Brain Injury incl. through this GL layer Employment and Educators Legal Liability
$40MM $40MM
United Educators United Educators
$1MM RUMINCO $500,000 RUMINCO
Page 255 of 277 Page 18
Miscellaneous Commercial Insurance Coverage
Here is a brief overview of other purchased policies with premiums exceeding $25,000.
CYBER SECURITY LIABILITY – EXTRA MN: $10 million in coverage excess a $250,000 Self- insured Retention (Deductible) for Cyber Security liabilities the University may incur outside the jurisdiction, and Tort Cap protection, of Minnesota law.
EXCESS CLINICAL TRIALS LIABILITY – EXTRA MN: $10 million in coverage excess a $1 million Self-insured Retention (Deductible) for Clinical Trials liabilities the University may incur outside the jurisdiction, and Tort Cap protection, of Minnesota law.
INTERCOLLEGIATE ATHLETICS: This policy insures medical costs arising from injuries sustained by University intercollegiate athletes during play, practice or travel.
HULL & LIABILITY (Primary & Excess): Physical Damage and Liability coverage up to $1 million of primary liability, plus $14 million of excess liability, arising out of our ownership and use of the 86-foot Blue Heron research vessel in Duluth.
OTHER STATES WORKERS COMPENSATION: To comply with local statutes, we purchase Workers Compensation to cover workers permanently stationed in states other than Minnesota.
Property vs. Miiscellaneous Commercial Insurance
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0 FY16 FY17 FY18 FY19 FY20
Misc. Comm'l. Insurance Property Insurance
Property insurance drives the commercial Insurance cost. Formerly volatile property insurance premiums have stabilized since moving to a new carrier in FY16. Adding high excess Liability insurance layers in FY19 drove up the Miscellaneous Commercial Insurance cost.
Page 256 of 277 Page 19
Fiscal Year 20 Workplan Status
FY20 and COVID 19
COVID related uncertainty in the first quarter of calendar 2020 prompted many questions from units and departments that required immediate resolution. At the same time, Risk Management experienced a staff vacancy that has gone unfilled due to the COVID-related hiring freeze. These factors impacted progress on our FY20 Workplan. We expect to resume full staffing and full function by June 2021.
Property Insurance Effective 07/01/21
Our property insurer has guaranteed a fixed rate on our insurance program since 07/01/16. That guarantee will end effective 07/01/21; the program renewal will then be subject to market forces. We did the groundwork for an optimally priced property program renewal.
Claim Reporting
We worked with insurance broker Willis to establish a general framework of which key personnel at the University would, upon knowing of a claim event, toll various insurers deadlines for notice of claim.
Transfer of Property Insurance Deductible to RUMINCO
During the FY 2020 the Office of Risk Management and Insurance presented a proposal to transfer handling the University’s property insurance deductible claims through wholly owned-captive RUMINCO to the RUMINCO Board. The proposal was approved by the Board. This will be a more robust structure during adverse loss years, and will additionally enable the University to combine and invest deductible reserves in higher-yield investments, along with the rest of RUMINCO”s reserves.
Fiscal Year 21 Work Plan
Property Insurance Effective 07/01/21
We have requested our incumbent broker (Willis Towers Watson) take our property program out to market for proposals. The program they assemble will be this year’s competition to five-year incumbent FM Global Insurance Company.
Enterprise Risk Management
Goal 5.4 of MPACT 2020, the new systemwide strategic plan, calls for a re-envisioning of risk management and safety. Under the direction of the Senior Vice President’s Office, the Office of Risk Management will participate in an initiative to develop an Enterprise Risk Management program. This will likely be a multi-year initiative.
Claim Reporting
A system of focused, regular follow-up inquiries with key personnel for their knowledge of potential claim events will be needed to maximize our likelihood of compliance with the claim notification requirements of outside insurers. This dovetails with a program of Enterprise Risk Management, so we will combine it into that framework.
Page 257 of 277
TO: Regent David McMillan, Chair, Finance and Operations Committee Regent Richard Beeson, Vice Chair, Finance and Operations Committee
FROM: Myron Frans, Senior Vice President for Finance and Operations
DATE: January 12, 2021
RE: State Capital Appropriations Expenditure Report
Attached please find the State Capital Appropriations Expenditure Report, as required by state statute. This report includes all expenditures during calendar year 2020 and is forwarded to you in this fashion due to the short turn-around in order to meet the state’s deadline. (Statute requires a January 15 submission on expenditures through the preceding December 31, which do not fully post to University systems until January 10.) Staff in Government Relations forward this report to the State and a copy will be included as an information item in the February committee docket.
Please contact me with any questions.
cc: Joan T.A. Gabel, President Mike Berthelsen, Vice President, University Services JD Burton, Chief Government Relations Officer, University Relations Brian Steeves, Executive Director and Corporate Secretary, Board of Regents
Page 258 of 277
TO: Representative Fue Lee, Chair, Capital Investment Committee Representative Connie Bernardy, Chair, Higher Education Finance and Policy Committee Representative Rena Moran, Chair, Ways and Means Committee Senator Thomas Bakk, Chair, Capital Investment Committee Senator Julie Rosen, Chair, Finance Committee Senator David Tomassoni, Chair, Higher Education Finance and Policy Committee Commissioner Jim Schowalter, Minnesota Management and Budget
FROM: Myron Frans, Senior Vice President for Finance and Operations
DATE: January 12, 2021
RE: Capital Appropriation Expenditure Report
Per Minnesota Statute 135A.046, the University’s annual report of progress on projects funded by the State of Minnesota through the HEAPR statute is attached. As has been the University’s practice, this report also provides you information about our progress on all capital projects funded by the State.
We are pleased with the projects that have been completed and the progress toward finishing those remaining. The financial support provided by the people of the State is critical to the University’s success, and we are grateful for the funding that has made the work in this report possible.
If you have any specific questions, please call Brian Swanson in University Services Finance at 612-625-6665.
cc: Joan T.A. Gabel, President Michael Berthelsen, Vice President, University Services Brian Steeves, Executive Director and Corporate Secretary, Board of Regents
Page 259 of 277 Capital Appropriations Expenditure Report In fulfillment of MN 135A.046 subd. 3
January 2021
Page 260 of 277 Major Projects - Spending Status
% Spent, Encumbered or Major Projects % Spent or Encumbered Under Year Otherwise Obligated to Complete Comments Allocation Contract a Project
$4,193,323 converted to 2017 2017 $ 95,140,677 96% 96% HEAPR
2018 $ 34,400,000 77% 98%
2019 $ ‐ na na No appropriation
2020 $ 36,886,000 71% 100%
Definitions
Allocation: The State appropriation for each project. Spent: The amount the University has paid to contractors from signed contracts. Encumbered: This includes: a. Project amount specifically under contract with a general contractor, architect, engineer, or other vendor. b. Internal project where work has begun and/or internal purchase order/work has been completed. Obligated: Funds required to complete the project that are not yet under contract.
Note: percentages are rounded.
Page 261 of 277 HEAPR - Spending Status
% Spent, Encumbered or % Spent or Encumbered Under Year HEAPR Allocation Otherwise Obligated to Complete Comments Contract a Project
$4,193,323 converted to 2017 2017 $ 24,793,323 83% 96% HEAPR
2018 $ 45,000,000 94% 97%
2019 $ ‐ na na No appropriation
2020 $ 38,495,000 36% 78%
Definitions
Allocation: The State appropriation for each project. Spent: The amount the University has paid to contractors from signed contracts. Encumbered: This includes: a. Project amount specifically under contract with a general contractor, architect, engineer, or other vendor. b. Internal project where work has begun and/or internal purchase order/work has been completed. Obligated: Funds required to complete the project that are not yet under contract.
Note: percentages are rounded.
Page 262 of 277 Applicable Statutes
135A.046 ASSET PRESERVATION AND REPLACEMENT. Subdivision 1.Purpose. The legislature recognizes that postsecondary governing boards operate campus physical plants that in number, size, and programmatic use differ significantly from the physical plants operated by state departments and agencies. However, the legislature recognizes the need for standards to aid in categorizing and funding capital projects. The purpose of this section is to provide standards for those higher education projects that are intended to preserve and replace existing campus facilities.
Subd. 2.Standards. Capital budget expenditures for Higher Education Asset Preservation and Replacement (HEAPR) projects must be for one or more of the following: code compliance including health and safety, Americans with Disabilities Act requirements, hazardous material abatement, access improvement, or air quality improvement; building energy efficiency improvements using current best practices; or building or infrastructure repairs necessary to preserve the interior and exterior of existing buildings; or renewal to support the existing programmatic mission of the campuses. Up to ten percent of an appropriation awarded under this section may be used for design costs for projects eligible to be funded from this account in anticipation of future funding from the account.
Subd. 3.Reporting priorities. Each postsecondary governing board shall establish priorities within its Higher Education Asset Preservation and Replacement projects. By January 15 of each year, it shall submit to the commissioner of management and budget and to the chairs of the higher education finance divisions, the senate Finance Committee, and the house of representatives Capital Investment Committee a list of the projects that have been paid for with money from a higher education asset preservation and replacement appropriation during the preceding calendar year as well as a list of those priority projects for which Higher Education Asset Preservation and Replacement appropriations will be sought in that year's legislative session.
------3.197 REQUIRED REPORTS. A report to the legislature must contain, at the beginning of the report, the cost of preparing the report, including any costs incurred by another agency or another level of government.
Per the requirements set forth in Minnesota Statue 3.197, the cost to prepare this report was $300.
Page 263 of 277 Page 264 of 277 University of Minnesota Status Report: Total Capital Appropriations 2017 to 2020 Projected 01/31/2021 - Definitions on last page
(A) (B) (C) (D) (E) (F) (G) (H) Appropriation Spent and/or (B-C-D) Estimated Project Name Amount Encumbered Obligated Unencumbered Status Occupancy Comments 2020 State Capital Appropriations: Major Projects Institute of Child Development Bldg Replacement 29,200,000.00 24,000,000.00 5,200,000.00 0.00 Design Development 9/30/2022 Construction to start January 2021
Fraser Hall Chemistry Undergraduate Teaching Facility 3,286,000.00 2,023,670.35 1,262,329.65 0.00 Design Development 9/30/2023 Construction to start June 2021
A.B. Anderson Hall Renovation 4,400,000.00 0.00 4,400,000.00 0.00 Design Development 6/1/2022 Construction to start August 2021
Subtotal - '20 Appropriations: Major Projects 36,886,000.00 26,023,670.35 10,862,329.65 0.00
2020 State Capital Appropriations: HEAPR Projects Campuswide Emergency Renewal 5,780,208.43 0.00 0.00 5,780,208.43 Programming Unknown Campuswide Elevator Renewal 1,000,000.00 0.00 0.00 1,000,000.00 Programming Unknown Campuswide Infrastructure Renewal for Smart Labs 500,000.00 0.00 0.00 500,000.00 Programming Unknown Elliott Hall Accessible Restroom 100,000.00 0.00 100,000.00 0.00 Programming Unknown VCRC Roof Repairs 692,000.00 0.00 692,000.00 0.00 Programming Unknown Children's Rehab Roof Replacement 1,200,000.00 0.00 1,200,000.00 0.00 Construction Documents 7/31/2021 Mech Eng Phase III Renewal 12,679,163.57 12,679,163.57 0.00 0.00 Construction 1/31/2022 Ted Mann Roof Replacement 2,175,000.00 469.48 2,174,530.52 0.00 Design Development 8/31/2021 Biosystems & Ag Eng Roof Replacement 1,300,000.00 0.00 1,300,000.00 0.00 Programming 5/1/2022 Haecker Hall Roof Replacement 1,750,000.00 0.00 1,750,000.00 0.00 Design Development 12/31/2022 Animal Sci/Vet Med Accessible Restroom 150,000.00 0.00 0.00 150,000.00 Programming Unknown UMD Chemistry Hazardous Materials Abatement 535,890.00 0.00 535,890.00 0.00 Programming 6/30/2021 Construction to start January 2021 UMD Sports & Health Ctr HVAC Phase II 1,000,000.00 0.00 1,000,000.00 0.00 Programming 10/29/2021 Construction to start May 2021 UMD Sports & Health Ctr Fire Alarm 500,000.00 0.00 500,000.00 0.00 Procurement 6/1/2021 Construction to start February 2021 UMD Humanities Lower Level HVAC Renewal 1,000,000.00 0.00 1,000,000.00 0.00 Programming 10/29/2021 Construction to start May 2021 UMD Voss Kovach Hall Roof Replacement 375,000.00 0.00 375,000.00 0.00 Programming 8/6/2021 Construction to start May 2021 UMD Darland Fire Sprinkler Extension 350,000.00 0.00 350,000.00 0.00 Programming 6/18/2021 Construction to start February 2021 UMD NRRI Elevator Modernization 900,000.00 0.00 900,000.00 0.00 Construction Documents 6/1/2021 Construction to start March 2021 UMD NRRI Roof Replacement 1,200,000.00 0.00 1,200,000.00 0.00 Construction Documents 9/3/2021 Construction to start April 2021 UMD NRRI Chiller Replacement 200,000.00 0.00 200,000.00 0.00 Design Development 4/30/2021 Construction to start January 2021 UMM Campuswide Controls Renewal Phase II 150,000.00 0.00 150,000.00 0.00 Construction 8/20/2021 UMM Electronic Door Access/Security 110,000.00 15,000.00 95,000.00 0.00 Design Development 8/20/2021 UMM Electrical Infrastructure 150,000.00 0.00 150,000.00 0.00 Design Development 8/20/2021 UMM Sewer Replacement & Water Service Repairs 80,000.00 0.00 80,000.00 0.00 Design Development 8/20/2021 UMM HVAC and Chiller Renewal 50,000.00 49,000.00 1,000.00 0.00 Construction 8/20/2021 UMM Multi-Ethnic Res Ctr Elev Installation-Design 75,000.00 0.00 75,000.00 0.00 Design Development 12/20/2021 UMM Behmler Hall Water Infiltration Corrections 90,000.00 0.00 90,000.00 0.00 Design Development 8/20/2021 UMM Student Ctr Sprinkler/Fire Panel/Pump Repairs 385,000.00 0.00 385,000.00 0.00 Construction Documents 8/20/2021 UMM Science Building HVAC Repairs 75,000.00 73,000.00 2,000.00 0.00 Procurement 8/20/2021 UMM Briggs Library HVAC Controls 127,000.00 0.00 127,000.00 0.00 Design Development 8/20/2021 UMM Briggs Library Elevator Repairs 8,000.00 6,950.00 1,050.00 0.00 Construction 3/1/2021 UMM Cougar Sport Ctr Accessibility Improvements 320,000.00 0.00 320,000.00 0.00 Design Development 8/20/2021 UMM Cougar Sport Ctr Safety Improvements 10,000.00 0.00 10,000.00 0.00 Design Development 8/20/2021 UMM Heating Plant Chiller Control Panel 206,448.00 203,448.00 3,000.00 0.00 Design Development 8/20/2021 UMM Humanities Fine Arts Membrane Roof Replc 120,000.00 0.00 120,000.00 0.00 Design Development 8/20/2021 UMM Humanities Fine Arts Light Controls 20,000.00 18,000.00 2,000.00 0.00 Procurement 8/20/2021 UMM Humanities Fine Arts Fire Pump 30,000.00 27,938.24 2,061.76 0.00 Construction 1/15/2021 UMC Campus Wide Electrical Distribution Phase 3 700,000.00 700,000.00 0.00 0.00 Construction 7/30/2022 Phase 3 construction to start May 2021
Page 1 of 6 1/10/2021 Page 265 of 277 University of Minnesota Status Report: Total Capital Appropriations 2017 to 2020 Projected 01/31/2021 - Definitions on last page
(A) (B) (C) (D) (E) (F) (G) (H) Appropriation Spent and/or (B-C-D) Estimated Project Name Amount Encumbered Obligated Unencumbered Status Occupancy Comments UMC Central Mall/North Quadrant Watermain Imprvmnts 255,337.00 0.00 255,337.00 0.00 Programming 10/31/2021 UMC Owen Hall Exterior Façade, Window/Door Replc 185,000.00 0.00 185,000.00 0.00 Programming 10/31/2021 UMC Owen Hall Fire Suppression & Code Imprvmnts 125,000.00 0.00 125,000.00 0.00 Programming 10/31/2021 UMC Bergland Lab Building Controls Replacement 85,000.00 0.00 85,000.00 0.00 Programming 10/31/2021 Cedar Creek Crane House Window Replacement 18,000.00 0.00 0.00 18,000.00 Programming 5/1/2021 Cedar Creek Burr Oak House Window Replacement 20,301.00 0.00 0.00 20,301.00 Programming 5/1/2021 Cedar Creek Lodging Electrical Replacement 18,000.00 0.00 0.00 18,000.00 Programming 7/31/2021 Itasca Lodging Thermal Pane Windows 110,000.00 0.00 0.00 110,000.00 Programming Unknown Itasca Lodging Foundation Rebuild for Reuse 77,500.00 0.00 0.00 77,500.00 Programming Unknown Arboretum Oswald Visitor Ctr Roof Replacement 160,000.00 0.00 160,000.00 0.00 Programming 5/1/2021 Construction to start sprin 2021 Cloquet Critical Infrastructure Renewal 30,000.00 0.00 30,000.00 0.00 Programming 9/30/2021 Design to start February 2021 Horticulture Res Ctr Well Utility Rebuild 120,000.00 0.00 120,000.00 0.00 Programming 5/31/2021 Hubachek Well Corrections for Reliability 361,693.00 0.00 361,693.00 0.00 Programming 9/30/2022 Construction to start February 2021 Hubachek Critical Infrastructure Renewal 35,000.00 0.00 0.00 35,000.00 Programming 9/30/2021 Construction to start February 2021 NCROC Admin Bldg HVAC Unit Replcmnt 7,000.00 0.00 0.00 7,000.00 Programming 3/1/2021 NCROC Water Heater & Valve Replacements 20,000.00 0.00 0.00 20,000.00 Programming 4/15/2021 NCROC Hog Barn Boiler & Plumbing Replcmnt 100,000.00 0.00 0.00 100,000.00 Programming 8/1/2021 NCROC Admin Bldg Envelope Renewal 50,000.00 0.00 0.00 50,000.00 Programming 8/15/2021 NWROC Ag Res Ctr HVAC Controls Replcmnt 42,000.00 0.00 0.00 42,000.00 Programming 7/31/2021 NWROC Window Replacement 75,000.00 0.00 0.00 75,000.00 Programming 8/31/2021 NWROC Farm Shop HVAC Controls Replcmnt 50,000.00 0.00 0.00 50,000.00 Programming 7/31/2021 SROC Replace Underground Fuel Tanks 180,000.00 0.00 0.00 180,000.00 Programming 10/1/2021 Construction to start May 2021 SWROC Critical Infrastructure Renewal 17,500.00 0.00 0.00 17,500.00 Programming 6/30/2021 SWROC Cont Ed Bldg Window/Door Replcmnt 35,000.00 0.00 0.00 35,000.00 Programming 6/30/2021 SWROC Res Office Bldg Window Replacement 40,000.00 0.00 40,000.00 0.00 Programming 6/30/2021 WCROC Admin Bldg HVAC Controls Replcmnt 25,000.00 0.00 0.00 25,000.00 Programming 6/30/2021 WCROC Replace Underground Fuel Tanks 100,000.00 0.00 0.00 100,000.00 Programming 6/30/2021 WCROC Feed Ctr Rollup Door Replacement 10,000.00 0.00 0.00 10,000.00 Programming 5/31/2021 WCROC Maintenance Shop Infrastructure Imprv 48,959.00 0.00 48,959.00 0.00 Programming 9/30/2021 Subtotal - '20 Appropriations: HEAPR Projects 38,495,000.00 13,772,969.29 16,301,521.28 8,420,509.43
Total - 2020 State Capital Appropriations 75,381,000.00 39,796,639.64 27,163,850.93 8,420,509.43
2018 State Capital Appropriations: Major Projects Pillsbury Hall Rehabilitation 24,000,000.00 20,842,974.31 3,157,025.69 0.00 Construction 8/27/2021
UMD Glensheen Renewal 4,000,000.00 0.00 4,000,000.00 0.00 Programming Unknown
Morris Teaching and Learning Spaces 3,200,000.00 2,489,290.68 40,788.40 669,920.92 Construction/Sub Comp Occupied
Crookston Teaching and Learning Spaces 3,200,000.00 3,062,275.22 137,724.78 0.00 Procurement 2/15/2021
Subtotal - '18 Appropriations: Major Projects 34,400,000.00 26,394,540.21 7,335,538.87 669,920.92
2018 State Capital Appropriations: HEAPR Projects Completed Projects 20,456,238.01 20,456,238.01 0.00 (0.00) ADA Projects 104,737.45 0.00 0.00 104,737.45 Programming Unknown Page 2 of 6 1/10/2021 Page 266 of 277 University of Minnesota Status Report: Total Capital Appropriations 2017 to 2020 Projected 01/31/2021 - Definitions on last page
(A) (B) (C) (D) (E) (F) (G) (H) Appropriation Spent and/or (B-C-D) Estimated Project Name Amount Encumbered Obligated Unencumbered Status Occupancy Comments Health Sciences Elevator Modernization 814,028.04 129,223.36 684,804.68 0.00 Design Development 4/26/2021 Appleby Hall Roof Replacement 1,101,928.94 728,140.11 0.00 373,788.83 Substantial Completion Occupied Cooke Heat Recovery Unit Replacement 750,000.00 285,985.36 464,014.64 0.00 Construction Documents 12/1/2021 PWB Fire Alarm System Upgrade 5,511,432.24 5,511,432.24 0.00 0.00 PA Closeout Occupied Humphrey Partial Roof, Skylight & Tuckpointing 3,000,000.00 2,650,446.96 0.00 349,553.04 PA Closeout Occupied Biological Sciences Heat Recovery 521,000.00 359,585.36 0.00 161,414.64 PA Closeout Occupied Mech Eng Phase II Renewal-Mech/Elec/Plumbing 945,719.93 945,719.93 0.00 0.00 Construction 1/31/2022 Andrew Boss Lab HVAC, Life Safety, & Accessibility 10,049,722.40 9,985,976.49 0.00 63,745.91 Substantial Completion Occupied UMD NRRI Elevator Modernization 95,000.00 85,606.00 9,394.00 0.00 Construction Documents 6/1/2021 UMM Campus Wide Controls Upgrade 125,858.86 82,793.38 43,065.48 0.00 Construction 8/20/2021 UMM HFA Fire Pump Replacement 18,000.00 18,000.00 0.00 0.00 Construction 1/15/2021 UMM HFA Gantry Lift Safety Upgrade 21,176.01 21,176.01 0.00 0.00 Construction 1/15/2021 UMC Campus Wide Electrical Distribution 597,631.00 383,973.59 213,657.41 0.00 Construction 7/30/2022 Cedar Creek Lindeman Ctr AC Unit 8,979.22 0.00 8,979.22 0.00 Procurement 3/31/2021 NWROC Dust Emission Mitigation 200,000.00 138,385.68 0.00 61,614.32 PA Closeout Occupied Itasca HEAPR Projects 12,317.90 0.00 0.00 12,317.90 Programming Unknown Itasca Sewer Line to Existing Building 12,230.00 3,604.72 0.00 8,625.28 PA Closeout Occupied Itasca Classroom Lab HVAC Replacement 14,000.00 6,500.00 7,500.00 0.00 Construction 3/31/2021 Cloquet Septic System Renewal 640,000.00 639,097.61 902.39 0.00 Construction 3/31/2021 Currently only 45K has been transferred Subtotal - '18 Appropriations: HEAPR Projects 45,000,000.00 42,431,884.81 1,432,317.82 1,135,797.37
Total - 2018 State Capital Appropriations 79,400,000.00 68,826,425.02 8,767,856.69 1,805,718.29
2017 State Capital Appropriations: Major Projects UMD Chemical Science & Advanced Materials Building 24,073,677.28 24,073,677.28 0.00 0.00 PA Closeout Occupied 4,193,322.72 converted to 2017 HEAPR
Health Sciences Education Center 66,667,000.00 62,934,680.49 0.00 3,732,319.51 Substantial Completion Occupied
Plant Growth Facility Biological Sciences Conservatory 4,400,000.00 4,313,838.33 3,333.67 82,828.00 3/1/2021
Subtotal - '17 Appropriations: Major Projects 95,140,677.28 91,322,196.10 3,333.67 3,815,147.51
2017 State Capital Appropriations: HEAPR Projects Completed Projects 19,756,354.71 19,756,354.71 0.00 0.00 Moos Tower Remove Revolving Doors 196,523.00 174,875.44 21,647.56 0.00 Construction 1/1/2021 KE Emergency ATS Replacement 65,000.00 65,000.00 0.00 0.00 Construction 2/15/2021 PWB Generator & Fire Pump Replacement 385,000.00 376,011.72 8,988.28 0.00 Design Development 1/15/2022 Mech Eng Phase II Renewal-Mech/Elec/Plumbing 83,487.02 83,487.02 0.00 0.00 Construction 1/31/2022 UMD Kirby Roof Replacement 1,750,000.00 0.00 1,750,000.00 0.00 Programming 8/31/2021 Converted HEAPR - October 2020 UMD SPHC Pool Mechanical Replacement 1,500,000.00 0.00 1,500,000.00 0.00 Construction Documents 10/31/2021 Converted HEAPR - October 2020 UMD NRRI Coleraine HVAC 380,000.00 0.00 0.00 380,000.00 Programming 10/31/2021 Converted HEAPR - October 2020 UMD NRRI Coleraine Hazardous Abatement 120,000.00 0.00 0.00 120,000.00 Programming 10/31/2021 Converted HEAPR - October 2020 UMD MWAH Patio Roof Replacement (Partial) 443,322.72 0.00 0.00 443,322.72 Programming 8/31/2021 Converted HEAPR - October 2020 SWROC HEAPR Projects 3,458.09 0.00 0.00 3,458.09 Programming 6/30/2021 HRC Offices Mound Septic System 75,177.18 68,316.58 6,860.60 0.00 Construction 5/31/2021 NWROC Septic System Renewal 35,000.00 2,649.43 32,350.57 0.00 Construction 5/31/2021 Subtotal - '17 Appropriations: HEAPR Projects 24,793,322.72 20,526,694.90 3,319,847.01 946,780.81 Page 3 of 6 1/10/2021 Page 267 of 277 University of Minnesota Status Report: Total Capital Appropriations 2017 to 2020 Projected 01/31/2021 - Definitions on last page
(A) (B) (C) (D) (E) (F) (G) (H) Appropriation Spent and/or (B-C-D) Estimated Project Name Amount Encumbered Obligated Unencumbered Status Occupancy Comments
Total - 2017 State Capital Appropriations 119,934,000.00 111,848,891.00 3,323,180.68 4,761,928.32
Grand Totals - 2017 to 2020 274,715,000.00 220,471,955.66 39,254,888.30 14,988,156.04
Page 4 of 6 1/10/2021 Page 268 of 277 University of Minnesota Status Report: Total Capital Appropriations 2017 to 2020 Projected 01/31/2021 - Definitions on last page
(A) (B) (C) (D) (E) (F) (G) (H) Appropriation Spent and/or (B-C-D) Estimated Project Name Amount Encumbered Obligated Unencumbered Status Occupancy Comments Notes:
1) Definitions of columns: B. Appropriation Amount: The state appropriation for each project. Although HEAPR funds are appropriated in a block of funds, they are detailed in this report by the University's allocation. C. Spent or Encumbered: This includes three categories. a. Amount the University has paid to contractors from signed contracts. b. Project amount specifically under contract with a general contractor, architect, engineer, or other vendor. c. Internal project where work has begun and/or internal purchase order/work has been completed. D. Obligated: Funds required to complete the project that are not yet under contract. E. Unencumbered: Contingency funds remaining in the project after the construction phase.
2) Definitions of project phases: a. Programming: Defining in detail the scope of the project , describing the facility components required to accommodate the academic/operational program, and establishing the functional and physical relationships of those components. b. Schematic Design Development: Evaluating alternatives for meeting the project program and establishing the general size, shape, and massing of building elements; exterior finishes; and Design Development criteria for structural, mechanical, and electrical systems. c. Design Development: Developing the preliminary Design Development into a detailed Design Development that establishes final floor plans, building elevations, interior and exterior materials, room finishes, building systems, furnishings, and equipment. d. Construction Documents: Preparing detailed drawings and specifications required to obtain bids and to describe and direct the construction work. e. Procurement: Soliciting bids from contractors for completing the work described in the construction documents. f. Construction: Mobilizing of the contractor's equipment, purchasing of building materials, and implementing the work described in the construction documents. g. Substantial Completion: Completing work on the project to a point that the Owner can occupy and use the facility for its intended use. h. Pacloseout: Making final payments to contractors and vendors, closing all contracts, and preparing the final project accounting.
Page 5 of 6 1/10/2021 Page 269 of 277 University of Minnesota Status Report: Total Capital Appropriations 2017 to 2020 Projected 01/31/2021 - Definitions on last page
(A) (B) (C) (D) (E) (F) (G) (H) Appropriation Spent and/or (B-C-D) Estimated Project Name Amount Encumbered Obligated Unencumbered Status Occupancy Comments Summary of University State Capital Appropriations
Total Dollars by Status 2020 Appropriations Major Projects 36,886,000.00 26,023,670.35 10,862,329.65 0.00 HEAPR Projects 38,495,000.00 13,772,969.29 16,301,521.28 8,420,509.43 Subtotal 75,381,000.00 39,796,639.64 27,163,850.93 8,420,509.43
2018 Appropriations Major Projects 34,400,000.00 26,394,540.21 7,335,538.87 669,920.92 HEAPR Projects 45,000,000.00 42,431,884.81 1,432,317.82 1,135,797.37 Subtotal 79,400,000.00 68,826,425.02 8,767,856.69 1,805,718.29
2017 Appropriations Major Projects 95,140,677.28 91,322,196.10 3,333.67 3,815,147.51 HEAPR Projects 24,793,322.72 20,526,694.90 3,319,847.01 946,780.81 Subtotal 119,934,000.00 111,848,891.00 3,323,180.68 4,761,928.32
Major Projects 204,921,677.28 157,513,375.95 34,502,723.47 12,905,577.86 HEAPR Projects Only 108,288,322.72 76,731,549.00 21,053,686.11 10,503,087.61 Grand Total: 2017-2020 Appropriations 274,715,000.00 220,471,955.66 39,254,888.30 14,988,156.04
Total Percent by Status 2020 Appropriations Major Projects 36,886,000.00 71% 29% 0% HEAPR Projects 38,495,000.00 36% 42% 22% Subtotal 75,381,000.00 53% 36% 11%
2018 Appropriations Major Projects 34,400,000.00 77% 21% 2% HEAPR Projects 45,000,000.00 94% 3% 3% Subtotal 79,400,000.00 87% 11% 2%
2017 Appropriations Major Projects 95,140,677.28 96% 0% 4% HEAPR Projects 24,793,322.72 83% 13% 4% Subtotal 119,934,000.00 93% 3% 4%
Major Projects 204,921,677.28 77% 17% 6% HEAPR Projects Only 108,288,322.72 71% 19% 10% Grand Total: 2017-2020 Appropriations 274,715,000.00 80% 14% 5%
Page 6 of 6 1/10/2021 Page 270 of 277
February 11, 2021
The Honorable David McMillan, Chair, Finance & Operations Committee The Honorable Richard Beeson, Vice Chair, Finance & Operations Committee The Honorable Tom Anderson The Honorable Mary Davenport The Honorable Kao Ly Llean Her The Honorable Michael Hsu The Honorable Mike Kenyanya The Honorable Janie Mayeron The Honorable Kendall Powell The Honorable Darrin Rosha The Honorable Randy Simonson The Honorable Steven Sviggum
Committee Members:
Enclosed are Purchasing Services’ reports on purchasing activity for the second quarter, fiscal year ‘21. Regents policy requires that purchasing activity, including exceptions to competitive purchases, be reported to the Board of Regents. This letter provides explanatory background and brief analysis of the report and attachments that follow.
Background The enclosed reports and attachments provide statistics, graphics and some detail on four categories of purchasing activity for the one quarter:
• Summary of Purchasing Activity • Purchases made as Approved Exceptions to the competitive purchasing process • Purchases made as Preapproved Exceptions to the competitive purchasing process • Regents Purchasing Policy Violations
“Total Purchasing Activity” represents the total amount of goods and services purchased for the quarter and year-to-date across all funding sources, including construction projects.
“Approved Exceptions” refers to purchases where, following proper protocol, the vendor was not selected through a Request for Bid or Request for Proposal process. All of the approved exceptions were justified in writing by the requisitioning department, with the justification reviewed and approved by the Director of Purchasing before the purchase took place. Additionally, the appropriate Vice President and the University Controller approved all exceptions of $250,000 and over, except pre-approved exceptions. Section II provides a listing of the transactions that followed this process and were approved as exceptions.
“Pre-approved Exceptions” are also purchases where the vendor has not been selected through a competitive process. However, they are exceptions that occur routinely with consistent reasons, so that the approval of the justification has become standardized. Refer to Section III of the report for a listing of transactions processed as pre-approved exceptions during the quarter.
Page 271 of 277 “Regents Purchasing Policy Violations” refers to purchase transactions which bypassed the competitive process without following proper protocol and without the necessary approvals. Section IV provides a listing of purchasing violations.
The reports compare dollars spent on purchases in the respective quarter of the current year to dollars spent on purchases in same quarter of the previous year. The same quarter-to-quarter comparison is made for approved exceptions and for preapproved exceptions. With that in mind, the following observations are worth noting:
Summary:
• Purchasing Activity for Q2 slightly below Q1 and is still below pre-pandemic levels.
• Q2 Approved and Pre-Approved Exception Dollars are significantly below previous quarters.
• Q2 Exception Transactions are also significantly below previous quarters.
• There were no Regents Purchasing Policy Violations in the second quarter of FY21.
If you have any questions on the report, please do not hesitate to contact Beth Tapp, Director of Purchasing, or me.
Sincerely,
Suzanne Paulson Controller
Cc: Michael Volna, Associate Vice President and Assistant Chief Financial Officer Brian Steeves, Executive Director and Corporate Secretary, Board of Regents Beth Tapp, Director, Purchasing Services
Page 272 of 277 I. Summary of Purchasing Activity for Q2 FY21
Q2 Purchasing Activity 140,000 $250,000,000 120,000 $200,000,000 100,000 Spent 80,000 $150,000,000 60,000 Dollars
Transactions $100,000,000
of
40,000 #
$50,000,000 Total 20,000 ‐ $0 Q2 FY19 Q2 FY20 Q2 FY21 # of Transactions 116,632 96,573 70,888 Total Dollars Spent $195,297,019 $206,247,770 $168,581,124
Q2 Approved Exceptions 70 $25,000,000 65 $20,000,000 60 Spent 55 $15,000,000 50 Dollars
Transactions $10,000,000
45 of
# 40
$5,000,000 Total 35 30 $0 Q2 FY19 Q2 FY20 Q2 FY21 # of Transactions 67 67 42 Total Dollars Spent $19,447,062 $12,596,716 $7,800,438
Q2 Pre‐Approved Exceptions 70 $25,000,000 60 $20,000,000 50 Spent 40 $15,000,000 30 Dollars
Transactions $10,000,000
of
20 #
$5,000,000 Total 10 ‐ $0 Q2 FY19 Q2 FY20 Q2 FY21 # of Transactions 60 52 27 Total Dollars Spent $7,182,301 $22,356,253 $3,638,018
Q2 Exceptions 127 119 69 Q2 Exception Dollars $26,629,363 $34,952,969 $11,438,456
Page 273 of 277 Summary of Purchasing Activity YTD FY21 Total YTD Purchasing Activity 250,000 $500,000,000 $450,000,000 200,000 $400,000,000 $350,000,000 150,000 $300,000,000 Dollars
$250,000,000
Transactions 100,000 $200,000,000
Total of $150,000,000 # 50,000 $100,000,000 $50,000,000 ‐ $0 Q1 + Q2 FY19 Q1 + Q2 FY20 Q1 + Q2 FY21 # of Transactions 236,938 195,489 140,131 Total Dollars Spent $436,886,469 $453,489,831 $347,903,909 YTD Approved Exceptions 180 $60,000,000 175 170 $50,000,000 165 $40,000,000 160 Dollars
155 $30,000,000
Transactions 150
$20,000,000 Total of
145 # 140 $10,000,000 135 130 $0 Q1 + Q2 FY19 Q1 + Q2 FY20 Q1 + Q2 FY21 # of Transactions 161 174 145 Total Dollars Spent $50,424,703 $27,659,678 $24,979,863 YTD Pre‐Approved Exceptions 140 $40,000,000
120 $35,000,000 $30,000,000 100 $25,000,000 80 Dollars
$20,000,000 60 Transactions $15,000,000 Total of
# 40 $10,000,000 20 $5,000,000 ‐ $0 Q1 + Q2 FY19 Q1 + Q2 FY20 Q1 + Q2 FY21 # of Transactions 117 123 75 Total Dollars Spent $25,333,600 $34,189,656 $9,815,167
YTD Exceptions 278 297 220 YTD Exception Dollars $75,758,303 $61,849,334 $34,795,030
Page 274 of 277 II. Purchases made as Approved Exceptions to Competitive Purchasing Process Q2FY21
Exception #1: Total # of Exceptions Total Dollars Purchasing of research products (animal feed, serum, test equipment/supplies) for clinical trials. Also purchasing from a 8 $2,077,997 previous supplier to ensure consistency of research results.
Exception #2: Total # of Exceptions Total Dollars Equipment that requires brand compatibility with existing equipment and is available only from manufacturer or sole source 10 $2,197,550 authorized distributor.
Exception #3: Total # of Exceptions Total Dollars Funding source or granting agency specified a single supplier. 4 $627,331
Exception #4: Total # of Exceptions Total Dollars Other 18 $2,562,560
Emergency Exception #1: Total # of Exceptions Total Dollars A threat to health, welfare, safety. 2 $335,000
Emergency Exception #2: Total # of Exceptions Total Dollars A significant loss to the University.
Emergency Exception #3: Total # of Exceptions Total Dollars A failure to provide core services to University students/faculty/staff.
Emergency Exception #4: Total # of Exceptions Total Dollars Emergency equipment repairs and parts or emergency facility repairs and parts under $100,000.
TOTAL Approved Exceptions 42 $7,800,438
Page 275 of 277 III. Pre‐Approved Exceptions to Competitive Purchasing Q2FY21
Exception #2: Total # of Exceptions Total Dollars Media advertising, purchase or access to uniquely compiled 1 $64,773 database information.
Exception #4: Total # of Exceptions Total Dollars Closeout of used items which requestor or Purchasing has verified to be at least 30% below comparable new equipment (does not 3 $277,645 include refurbished or remanufactured furniture).
Exception #6: Total # of Exceptions Total Dollars Service (1) available only from another governmental agency or public entity or (2) required by law to be provided by another 4 $329,173 governmental entity.
Exception #7: Total # of Exceptions Total Dollars Service/maintenance agreements with the original manufacturer/ 7 $885,657 developer for equipment and software.
Exception #8: Total # of Exceptions Total Dollars Unique specification research animals purchased under guidelines 2 $268,365 of the Institutional Animal Care and Use Committee (IACUC).
Exception #9: Total # of Exceptions Total Dollars Software license renewals and software upgrades available only from developer. This includes adding licenses to an existing 3 $363,407 license agreement.
Exception #11: Total # of Exceptions Total Dollars Fairview purchases related to research projects. 2 $299,148
Exception #12: Total # of Exceptions Total Dollars Entertainers, lecturers, speakers and honoraria. 2 $179,500
Exception #13: Total # of Exceptions Total Dollars Purchases from University Physicians that are not part of 1 $762,000 sponsored research activities.
Exception #16: Total # of Exceptions Total Dollars Search Firms that have met pre‐defined criteria. 2 $208,350
TOTAL Approved Exceptions 27 $3,638,018
IV. Regents Policy Violations Q2FY21
There are no Regents Policy Violations to report.
Page 276 of 277
January 25, 2021
Elizabeth Lincoln, Director Legislative Reference Library 645 State Office Bldg. 100 Rev. Dr. Martin Luther King Jr. Blvd. St. Paul, MN 55155-1050
Dear Ms. Lincoln:
On behalf of the Board of Regents of the University of Minnesota, I submit the following annual report to the Legislature under Minnesota Statutes Section 137.52(b) regarding the University’s efforts and the efforts of the United States Department of Defense to remedy environmental impacts associated with the former Gopher Ordnance Works (GOW), a World War II smokeless powder production facility located on University land in Rosemount, Minnesota. That land includes Vermillion Highlands: A Research, Recreation and Wildlife Management Area, which is managed under a cooperative agreement between the University and the Department of Natural Resources. Per the requirements set forth in Minnesota Statutes Section 3.197, the cost to prepare this report was $763.20.
The University’s litigation in federal district court against the Army Corps and its contractor for GOW, E.I. du Pont de Nemours and Company (DuPont), is ongoing. In that litigation, the University seeks recovery of a money judgment including the approximately $3.3 million the University has incurred in past investigation costs and a declaration that the Army Corps and DuPont must pay their fair shares of future cleanup expenses.
The litigation has been stayed since June 2020 due to COVID-19 and pending the Court’s ruling on cross- motions for partial summary judgment. In October 2020, the Court granted the University’s motion for partial summary judgment, finding that the University is not obligated under an indemnification provision in a deed transferring part of the property to the University in 1948 to pay the United States’ or DuPont’s shares of the investigation and cleanup costs. All parties participated in a Court-ordered settlement conference in December 2020, but efforts to resolve the litigation were unsuccessful. Discovery and motion practice will now go forward in the case, with a trial anticipated in late 2021 or early 2022.
Sincerely,
Myron Frans Senior Vice President for Finance and Operations cc: Brian Steeves, Executive Director and Corporate Secretary, Board of Regents Douglas Peterson, General Counsel, University of Minnesota Michael Berthelsen, Vice President, University Services Matt Kramer, Vice President, University Relations J.D. Burton, Chief Government Relations Officer, University Relations Leslie Krueger, Assistant Vice President for Planning, Space, and Real Estate Jami Markle, Central Region Wildlife Manager, DNR, Vermillion Highlands Joint Steering Committee
Page 277 of 277