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.