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Where does the chancellor spend your money?

Beth Kevit

The recent recession to blame for yawning gaps between spending and revenues in Maine has ushered in a new era of fiscal responsibility for higher education in the state, and many schools are searching for new ways to move forward.

All across Maine, colleges and universities are making new in-roads on the path to reining in budget gaps and academic inefficiencies. Programs and departments are being slashed, curriculums are being streamlined and jobs are being lost when the state can least afford to fall behind. These moves come at a time when some state legislators say college education is crucial to economic prosperity.

In Maine, the only financial entity that oversees public post-secondary education is the University of Maine System.  It consists of seven universities and nine outreach centers with an approximate $200 million annually, the majority of which is accrued from tuition and state appropriations. Additionally, a system office is responsible for governance and coordination among its member schools.

With the economic turmoil of recent years, the system has come under fire as being overly bureaucratic and costly.  The system provides a host of services, but now, and even long before the recession, administrative services operating under the chancellor’s office have been controversial.

Critics of the system point to a pervasive pattern of redundant services. Some say, an office like academic affairs is unnecessary as most schools already pay for such a service independently.

“It’s a matter of unnecessary duplication,” said Tony Brinkley, a faculty associate at UMaine’s Franco-American Centre. “It would be nice to have someone, somewhere in the system, truly sit down and actually address these things because it’s about saving precious money.

“Schools like UMaine and the University of Southern Maine, because of their size, pay dearly for a host of what are really unnecessary administrative services. The savings would be huge without that kind of overhead,” he said.

In the next two years, the state of Maine is facing a  $1 billion budget shortfall. Federal aid was not approved at the level expected, forcing Governor John Baldacci to announce in early October that an additional $10 million would be cut in state spending.

Despite no new cuts to higher education, Baldacci warned that the budget he is preparing to recommend for Maine’s next legislature will not increase appropriations.

State appropriations have been declining as a percentage of the system budget for the past 20 years, according to a statement from the system office. With the state budget shortfall in place, federal stimulus dollars expected to disappear after 2011 and three member schools contributing unbalanced budgets, the system finds itself scrambling to make up for lost revenue, according to its own 2011 operating budget.

Two events last year brought the controversy with the system into full view.

First, as UMaine faces a $25 million budget gap at the end of 2014, it commissioned the Academic Program Prioritization Working Group (APPWG) to make program assessments and cuts, which ended with the elimination of a number of programs including aquaculture, wood science and technology and forest operations.

The move also suspended the departments of public administration, women’s studies and German in addition to downsizing and consolidating certain departments.  Cuts like these saved the university $12.2 million over three years.

Also last year, Chancellor Richard Pattenuade, appointed the New Challenges, New Directions task force to undertake a major restructuring plan in order to avoid future deficits.  At the time the announcement was made, the system was expected to face a $42.8 million deficit over four years.

The board approved a plan that implemented a three-year degree option and made a temporary adjustment to the strategic investment fund — a pool of money proposed to be set aside for the system to strategically invest in areas with the ability to generate new sources of revenue.

For many UMaine officials and faculty, the new plan did little to address the decentralization of duplicate administrative services that continue to cost the school, claiming the plan called for much of the same overhead and unnecessary services that had led to costly deficits in the first place.

“I don’t think that the centralization of services has been well thought out at a central level, and I think it’s continuing to cost a lot of money,” said Judy Kuhns-Hastings, president of UMaine’s faculty senate, in a 2009 interview with The Maine Campus after the first restructuring report was announced (“UMS to release report on restructuring,” Sept. 14, 2009)

In response to criticism of the system’s governance, Rebecca Wyke, vice chancellor for finance and administration at the system office, defended the necessity of the entity and its role in higher education in Maine.

“We acknowledge that there are redundancies and are looking into ways to reduce the problem, but at the same time you have to understand that there is a historic resistance to working together — everyone wants to work independently,” Wyke said.  “Also, the schools need to understand Maine is not going to fund inefficiency. This is why the legislature created [the system structure], because it would be immensely difficult to coordinate services and innovation without it.  It is completely necessary that we have such governance, just as nearly all states do.”

She said that by doing away with administrative services, the schools would fail to properly coordinate on efforts such as making transfers easier between member schools.

THE NUMBERS:

 

In 2009, UMaine had the largest enrollment of any of the seven schools in the system with 11,114 students, followed by USM with 9,145, according to a summary of spring enrollments by the system.

In September of this year, the University of Maine system board of trustees approved a systemwide 3 percent increase in tuition and fees for the 2012 and 2013 fiscal years. From 2006-2010, tuition has increased by an average of 8.6 percent as shown by the system’s operating budget for 2011.

System officials maintain that every effort has been undertaken to prevent significant increases, and the numbers support such a claim with 2011 being the lowest tuition increase in six years, at 4.8 percent.

The system’s base budget for 2010 lists $20.4 million associated with the administrative services offered by the chancellor’s office, such as academic affairs, student affairs and government relations. All services listed under the administrative services section of the system’s base budget, with the exception of the board of trustees and the university counsel, are provided separately at UMaine.

According to UMaine’s preliminary budget for 2011, 36.4 percent of UMaine’s general budget goes toward these services. Compensation and benefits are the single largest cost in the system’s $20.4 million budget at 72 percent, according to its 2011 operational budget; only $3 million of this $20.4 million was reinvested in member campuses.

Critics like Brinkley feel that the cost driver of an entity like the University of Maine system should be investments in students and academics, not an added layer of administrative support.  Brinkley estimates UMaine could save $13 million by significantly reducing or eliminating administrative services like governance, information technologies, finance and human resources.

“We need to change the funding picture and rethink the way we do business within the system,” Brinkley said. “I’m not saying the schools don’t need unity, but we need to help students, not hurt them. The priorities are skewed.”

Upon an examination of UMaine’s 2011 preliminary budget and the Univesity of Maine System’s 2010 base budget, the cost savings work out. The figures tell the story, but for Wyke it’s not that easy.  To her and others at the system office, the services offered are absolutely essential to the cohesion of  Maine’s public universities.

“It’s erroneous to think that by removing the $20.4 million spent on administration it would land in the laps of a member university like UMaine,” Wyke said. “These are public entities, they simply cannot get away with not having very specific governance in place, especially when you consider the scarcity of resources at this time. They require an effective togetherness, not a disproportionate and unfair kind of isolation wherein one school benefits more than another. The system and its services protect and unify the schools.”

Wyke said only about $2.3 million is spent annually on governance to support the board of trustees and the chancellor’s office.  She said an additional $15 million is spent on systemwide shared services, which would become campus-level expenses if the system did not exist. She reiterated how certain services are redundant, but the system continues to look at ways to reduce such duplications.

“In fact, campus-level expenses would likely be greater if the system did not exist because the sharing of services creates economies of scale that help to keep the services more efficient and cost-effective,” she said.

Wyke went on to note the gubernatorial election and specific proposals from some candidates to combine the university system with the community college system in order to create even greater management and cost-effectiveness in shared services.  She said efforts like these would save money to be reinvested in classrooms, as well as synergies between member schools helping to promote better transitions among transfer students.

“Breaking up the system and having 14 separate institutions each with their own disorganized governance … is again more likely to lead to increased costs and bigger problems. In my lifetime experience as a financial officer working in the governor’s office and for the [University of Maine System], I cannot say it enough,” Wyke said.

But for Brinkley, proposals from gubernatorial candidates have meant something completely different.  He perceives those changes as an entirely new way of focusing on the way colleges and universities are structured.

“The taxpayers and students are grossly affected by a body that, in reality, does little to provide direction and coordination, regardless of financial efficiency,” he said. “For example, when it came time to suspend the German major at UMaine, we had no idea that USM and Farmington were doing the same thing. Don’t you think someone should provide the option for a German major in this state?  It was the [system’s] job to coordinate, and they were nowhere to be found, so plans went forward. They certainly didn’t provide us with the information necessary to make a wise decision for higher education in Maine, and now nobody offers German. There’s problems like this one throughout the system, and they want to talk about coordination and efficiency.”

SOLUTIONS AND ACTIONS:

Officials like Wyke point to the in-depth and focused planning process the New Challenges, New Directions Task Force undertook in implementing its restructuring plan this past summer. They feel it shows the system is more responsive to a changing environment and is working to address system-wide issues that continue to irritate opponents, despite unchanged discontent among critics.

“We issued a wake-up call in initiating that plan. It was an honest assessment,” Wyke said.  “The University of Maine System created a better understanding of what we can and can’t do. We took necessary steps to protect research and development, brought to light the cultural importance of such a unity and demonstrated our responsibility in providing the best possible services.”

The task force’s final report established a public agenda to transform the system economically by making its benchmarks more visible. It focused on how to make administrative services more accountable and re-examined its financial policies to strengthen appropriation, tuition fees and financial aid — three sources of funding the system says were once viewed as independent.

Specifically, Wyke said advisory councils were created to represent each campus, new business plans were drawn up and budget overviews for the seven universities would be scrutinized annually. She also stated extensive steps were being taken to make strategic reinvestment programs better in the coming years, something she said is now visible at places like the AEWC Advanced Structures and Composites Center.

But critics like Brinkley and former system trustee Severin Beliveau argue that the restructuring plan was merely a preservation of a failed system.

“Being satisfied with the status quo and reverting to short-term opportunistic decision making will only ensure a sustained decline,” Beliveau said. “State appropriations to higher education are declining at a time when they should increase.  However, increases are hard to justify without essential reforms.”

Brinkley recommended a plan that would help students.  He said the system and the legislature could reverse a cycle of disinvestments by building a substantial endowment for public higher education.  He said it would be a realistic goal to raise $1 billion in 10 years as an endowment for student scholarships, an investment he said would ease the burden of increased taxes and tuition rates and provide a starting point for reinvesting in a broken system.

Other solutions proposed by Brinkley and Beliveau include imposing mandatory retirement and abolishing tenure, restructuring colleges, streamlining redundant departments and expanding options on all levels of the academic spectrum. In addition, they suggested making significant changes to curriculum for the sake of responsible teaching and cross-disciplinary benefits.

“This is a 42-year-old argument and though the flagship school, UMaine, is critical to the development of the state, it needs to recognize the public and understand that this is how Maine chose to govern higher education,” Wyke said.

“For me, the goal is to see a viable university system by the time I retire,” Brinkley said. “People know what I think, and in my experience, everyone seems to support major change except wherever it affects themselves. Because of entrenched mechanisms, it will be a difficult task.”

Retraction: A story that appeared on page A1 of the Oct. 25, 2010 version of The Maine Campus used incomplete information when referring to overlaps between University of Maine and University of Maine System budgets.

Only 36.4 percent of UMaine’s 2011 preliminary budget was for financial management, development, student affairs and facilities management, part of the president’s office, administration and finance and research, areas also with system budget lines.

This statistic was errantly rounded to 37 percent in that original story and interpreted later in A1 stories on Sept. 8 and Sept. 29 as being indicative of duplication between UMaine and the system office. Online versions of those stories have been edited accordingly.

In an editorial on Sept. 29, it was said UMaine Vice President for Administration and Finance Janet Waldron verified the duplication. She verified the original statistic, but not in the context of duplication.