UW leaders: match Walker’s boldness with boldness

Governor Scott Walker

Governor Scott Walker

Gov. Scott Walker threw the fat in the fire in terms of public support for the University of Wisconsin System, and now he will sit back and watch from the presidential campaign trail as people who run and support the university try to figure out how to put the fire out.

For openers, what’s needed is more straight talk on his proposed $300 million in proposed cuts to the 2015-17 budget and the accompanying freer hand in running the 26-campus system. In no particular order, here are some the salient points for people grappling with the looming reductions:

  • Gov. Walker’s Modus Operandi – His signature MO is to hurl lightning bolts from the mountaintop. His Act 10 was the epitome of launching a major disruption to the established order of things. Almost no one saw that assault on public unions coming. He didn’t mention its possibility during his first campaign for governor. He has used the word “jolt” to describe his UW proposal for conversion to a public authority. The governor obviously believes that bold strokes, without a lot of input, are the best way to get around the entrenched interests that can grind such initiatives to a halt with endless debate and lobbying
  • The Presidential Campaign Rules – Everything Walker does from here on out will be played on two stages: Wisconsin and the nation. He would like to win the GOP primary among a dozen plus contenders, and that invariably means playing to the right wing of the party. Lightning “jolts” play well in the press here and nationally. The fallout from the disruptive policy moves will come well after the 2016 presidential elections.
  • State Fiscal Priorities Out of Kilter– Health care inflation, which neither party has addressed with effectiveness, is crowding out other state priorities, like university education. Just the increase in the Wisconsin Medicaid program in the 2015-2017 biennium will be more than $800 million, roughly half of the new money coming into state coffers. The $300 million in UW cuts is a direct result of that mismanagement of this federal-state program. In contrast, self-insured private companies have tamed that inflationary beast. With the will, it can be done.
  • Cuts Means Fewer People, Positions – University spending is largely for staff. So, at the end of the day, cost reductions equate to position reductions. At the proposed cut of $150 million per year and $65,000 per year in employee pay and benefits, about 2300 positions will have to be cut if no new money is found. That’s about 7% of the UW’s 32,000 employees. About one-quarter is faculty.
  • New Dough, Cuts With the Least Pain – Assuming the cuts go through the legislature, there are places to find money that would have limited effect on the strategic mission of the university system. Cutting across the board is the chicken-hearted way out, and that is probably what is going to happen. UW – Milwaukee, which is in the heart of the state’s biggest poverty problems, should not be cut at all. It is trying to solve those problems. In contrast, Dane County is booming. The smart approaches, some noted in earlier blogs, are to find new revenue sources and to reduce non-strategic spending. Such as:
  • Revenue Side: Tap UW — Madison Foundations – With $6 billion in foundation assets and a typical 5% annual payout, those foundations could send another $100 million per year back to the system.
  • UW Extension: Mission Light – Once vital to the agricultural sector of the economy, today almost no one can articulate the mission of Extension. Its resources could be reassigned to the UW campuses to fill holes from cuts. Up to $50 million could be found.
  • Bloated Health Care Costs – As part of UW’s proposed new “flexibility,” campuses could be enabled to source their own health plans. If they were cut loose from the Employee Trust Funds at $17,000 per employee, 20-30% reductions could be had from UW’s half billion annual bill for health care. Again, the private sector has shown the way to consumer-driven plans, value-based purchasing and proactive primary care. It’s win-win: sharply lower costs; better health care.
  • End Minnesota Reciprocity – Wisconsin taxpayers are subsidizing 15,000 Minnesota students. It’s a one-sided deal, and the Minnesota students go home after graduation. Savings could be $15 million annually.
  • Cut Building Costs – UW System spends about $400 million per year on buildings and maintenance. Everyone agrees these costs could be cut. Bring in a team of seasoned real estate executives to help.
  • Regional Consolidation – UW President Ray Cross has talked about consolidating back-shop operations across his 26 campuses. It’s a good idea, but it is not going put a major dent in the $150 million reduction. It’s small ball. Bigger idea: consolidate campuses on a regional basis and take out whole administrative super-structures at the campuses. The system could operate with eight chancellors instead of 14.

The Walker cuts put university leaders in a hard-cheese bind. The cuts are only five months off, but most of the cost savings, with the exception of terminations, will take several years to realize. And tuition has been frozen until at least 2017.

To get out of that bind, the public servants at the top of the UW pyramid need to match the governor’s boldness, and then he needs to support them as they restructure.

If I were President Cross, I would, of course, consult decisive people within the system and inside the Madison beltway. But I would also pull in executives from across the state who have experience with strategic downsizing. Those experts know how to cut while losing minimal muscle.

Those executives have a big stake in seeing the university thrive as an engine of the economy, so, if asked, they would surely donate their time and talents.

This entry was posted in Business and Education. Bookmark the permalink.
  • Noel Radomski

    I hope that UW campuses, UW System, elected leaders (state, county, city, village), and the media amplify your ideas. Timely. Controversial, but the discussion must lead to change.

  • Badger Backer

    “”Revenue Side: Tap UW — Madison Foundations – With $6 billion in foundation assets and a typical 5% annual payout, those foundations could send another $100 million per year back to the system.”

    Send the money “back to the system,” implying that’s where the money came from in the first place? Are you spending too much time in Colorado? What are you smoking?

    The funds held by the UW Foundation and WARF are earmarked for support of the Madison campus. These are independent, non-profit corporations beyond the reach of Governors and Legislators. (And that’s a good thing — remember how quickly two Governors plowed through the tobacco windfall?) Try to confiscate these funds and there will be litigation, which the state will lose. The Madison Chancellor and the UW Foundation are gearing up for a major fundraising initiative. If the potential donors think that their gifts will be confiscated and used for other purposes, who do you think will be willing to give? After all, it is not the job of donors to provide what the state should be obligated to spend.

    Let us consider the purpose of these entities: to provide the critical difference which the Madison campus needs to remain excellent, even in our relatively poor state. Why do you want to cripple the flagship, John? Who benefits if the UW System is “homogenized” and the Madison campus is “dumbed down” and made “equal”?

    You have been riding this hobby horse for months, John. Isn’t it time you give up on it?

  • Marc Eisen

    Hi, John: in an earlier column, you suggested that Gov. Walker “could use the Wisconsin Idea to create a
    deep-digging commission of experts from across the state as he puts forward the concept of ‘flexibility’ to provide some relief for the cuts he has proposed.”

    I see no mention of that here.

    Has your thinking changed? Or has the moment already passed for the governor to pull together the best minds to devise a new strategy for the UW System?

    I think you astutely assessed the governor’s signature modus operandi “to hurl lightning bolts from the
    mountaintop” without a lot input. That prompts a question that other readers might also ask: What’s your take on Gov. Walker’s proposal to merge the Wisconsin Economic Development Corp. with the Wisconsin Housing and Economic Development Authority? Marc

    • JohnTorinus

      Marc,

      I think I have been consistent in calling for a blue ribbon commission on the future of UW. Last blog calls for pulling in some seasoned executives who have done strategic right-sizing. I should made it more clear that it was an additive idea.
      The UW is too important to our future to leave it to the inside-the-beltway crowd.
      I don’t think merging two agencies, one an authority, one a public-private corporation, would be an easy task. And I don’t see a lot of savings from combing two relative small organizations. It’s small ball. Plus, WEDC was just reorganized and is just getting on its feet after a rocky start. Another reorg would cause more disruption to that work.

  • Gen Gee McBee

    It’s wise to argue against across-the-board cuts, but then implied — only implied, but that can obfuscate meaning — is that layoffs will be across the board, about one-fourth of those being faculty. That is unlikely, as the focus needs to be on continuing to offer classes to get students to graduation, and faculty are far less than a fourth of UW employees, anyway. (For example, UW-Madison has abut 2100 faculty, for about 40,000 students; UW-Milwaukee has about 800 faculty, if for almost 30,000 students; together, those campuses’ enrollments comprise almost half of the students at the 26 UW campuses).

    More likely is that layoffs will be of the far larger numbers of other UW employees not in classrooms, from clerical staff to custodial staff, such as carpenters and plumbers and electricians and painters. This will mean delays in admissions and financial aid approvals, in student services, in library service and the like, which will slow down progress to graduation, too. This also will mean more deferred maintenance, bad practice.

    And, of course, this will mean more unemployment, because of the broken promise of 250,000 jobs for the UW workers most likely to be laid off. But, as you say, this pitch is not to Wisconsin and will play well in Iowa — one of the many states that is increasing its investment in the future, in its campuses, for more college graduates.

    • JohnTorinus

      Form a managerial perspective, it would be useful to look at student to faculty rations at all campuses and in all departments.
      Ditto for student to staff ratios.

      Wonder if the faculty 25% share includes TAs and adjunct faculty?

      • Gen Gee McBee

        Agreed on your points.

        As for your question, first, you again repeat the 25% figure. What is your source for that?

        And, as for your question: No, that share should not (by anyone who knows how to read a UW budget) include TA’s and adjuncts (as well as some fulltimers), who are termed academic staff (or academic instructional staff, as compared to academic non-instructional staff aka academic administrators). Faculty, staff, etc., are terms well-defined, with specific meanings.

        From a management perspective, by the way, academic staff offer less flexibility for staffing, as only faculty can teach graduate courses, as well as undergraduate courses. (There are a few exceptions in a very few fields for academic staff allowed to teach at the graduate level, but these exceptions have to be annually requested and approved as aberrations, often specific to one or only a few students for exceptions to service on graduate committees — more of that work outside of the classroom that faculty do but that Walker apparently knows nothing about).

  • Doug Swanson

    What do you think eliminating 2300 positions with a salary of ~$40,000 do to the economy of the State? People seem to forget (as they did with Act 10) that public employees spend the money they earn. At local businesses. And most are paid at a level where almost all of that money is spent. It’s no surprise that after Act10 the Wisconsin economy did poorly compared to others. Yes we generally lag, but not as much as we have this time around.

    As an employee of the UW, watching some processes is maddening to say the least. So I agree that there are efficiencies that could be found. Many involve privately contracting some services (custodians for example), but again that takes jobs that pay enough to support someone for jobs that simply don’t. Others include cutting back on administrative and overhead costs. Regional campuses are a step in the right direction. Closing campuses with low graduation rates would be another idea. Lastly it would be good if the market was allowed to work. Let the UW set tuition at the rate the market calls for. Also let the UW accept more out state applicants since those people pay more than the actual cost. But those things will not happen solely for political reasons.

  • Joseph Kaylor

    It does not take a lot of imagination to cut expenses ( especially when healthcare cost are 17,000 per employee under the Employee Trust Funds- 30% of 500 million equates to 150 million recurring annually) but it does take leadership and creative innovation to grow an educational institution and State. What status quo rock has the UW Administration and State been hiding under for the past 10 or so years? A world class University system is one of the key ingredients and the economic engine of a thriving Wisconsin- however, complacency does not bode well in a world economy.

    Again, the real challenge in Wisconsin is JOBS and that requires growth. Growth, without the dire and defeating consequences of a minimum wage, provides the income needed to buy goods and services. An absentee Governor with a focus on his National ambitions is a disservice to Wisconsin. In lieu of a Blue Ribbon study, I suspect that other large university systems have already laid out a blueprint that Wisconsin could adopt and modify- or maybe we can debate solutions for 15+ years like the continuing MPS debacle.

    There is a symbiotic relationship between the UW System and the State of Wisconsin- divisive or bold- who cares? We continue to lag the nation and I suspect our top educators and students will continue to find better opportunities elsewhere while our legislators continue to focus on their childish agendas having little to do with JOBS. A dose of creative destruction might help!