The following article summarizes the original event which is listed below the summary.
A sobering but optimistic view of University finances
At the UMRA Forum via Zoom on February 23, Myron Frans, the University’s senior vice president for finance and operations, talked with our membership about the daunting financial challenges that face the University as a result of the COVID-19 pandemic. Frans joined the University in August 2020. He had previously served as commissioner of management and budget for Minnesota under both Governors Dayton and Walz. (In was in that capacity that he spoke to UMRA in May for our first-ever forum via Zoom.)
Frans presented a candid and sobering picture of University finances. However, his first order of business was to pay tribute to Richard Henry “Fitz” Pfutzenreuter, who served as the chief financial officer of the University for many years and passed away in January. Frans recognized Pfutzenreuter as an extraordinary financial leader; he was highly respected in the Legislature, by both Democrats and Republicans, and well-loved throughout the University.
The state was facing a projected financial shortfall of nearly $1.3 billion, Frans told us on February 23. He noted that this was, in fact, better news than he had presented to us at our May meeting, when the projected deficit was roughly twice that amount. In the months since May, the state received federal aid in the form of Coronavirus relief, several program-specific streams, direct payments, and loans.
On February 26, the February 2021 Budget and Economic Forecast issued by the state was dramatically different. The new forecast projected a surplus for the state of $1.6 billion, rather than a shortfall. This was attributed to increasing economic activity and anticipated revenues from the Biden COVID relief bill. While Fans did not have a chance to consider or comment on the new forecast, it undoubtedly was good news for the University.
Shortfalls will likely continue
During FY 20, the U experienced a net shortfall of about $65 million. More than 70 percent of these shortfalls were covered by unit balances and central reserves, Frans said. The remainder were covered by federal targeted and institutional aid. His report highlighted so-called rainy-day funds but anticipated a reduction in such fund availability for the future.
Unfortunately, but subject to the new state forecast, the U’s financial shortfalls will continue into the next fiscal year. In December, the U estimated it would have to deal with shortfalls of about $166 million. The planning to address these shortfalls started months earlier with the initiation of a furlough/temporary pay reduction program and a Retirement Incentive Option program.
Additional measures included senior leader voluntary pay reductions, a hiring pause, and a FY 21 merit increase freeze. At the time of Frans’s presentation, the U expected that over FY 21 and FY 22 these measures would save about $120 million, for a net shortfall of about $46 million.
The Office of Finance and Operations is looking for more ways to save while continuing to support the teaching, research, and service mission of the University. They are identifying the strategic commitments to carry out that process, focusing primarily on student success and discovery, innovation, and impact. Much more work is ahead for Finance and Operations to meet all of these challenges.
A potential bright spot
A potential bright spot is improvement in the state situation, as COVID vaccinations increase and economic activity is enhanced. Frans noted that the University request to the State was for the smallest budget increase in some years—2.3 percent, which equates to $15.5 million each year or, in so-called biennial math, a total increase of $46.5 million over the two-year period. Happily, the governor included the whole request in his budget.
Frans answered numerous questions following his upbeat and optimistic presentation, commenting on everything from the new BioMADE institute on the Twin Cities campus in St. Paul to his initial engagements with the faculty governance system. He has enjoyed his engagement with the faculty, he said, and he hoped there would soon be in-person opportunities to meet.
—Bill Donohue, UMRA past president (2019–20)
The University in a new era
Tue, February 23 2021, 12pm
Myron Frans
Senior VP of finance and operations
University of Minnesota
Event to be held via Zoom.
In May 2020, Myron Frans, as Minnesota’s commission of management and budget and our UMRA Forum speaker, told us about the financial challenges facing the State. Four months later, University of Minnesota President Joan Gabel invited him to help the University, in a year of crisis and change, to address what is projected to be a $166 million budget shortfall.
How will the University fare during this crisis? How might things look and work differently when we come out at the other side? What further challenges lie ahead? What resources can we use to help guide us to a new model of efficiency and transparency? For answers to these and other questions, we thought it would be good to visit with Frans again.
You are invited to the UMRA Forum with Myron Frans at 12 noon on Tuesday, February 23, via Zoom.
Today, as the senior vice president for finance and operations, Frans is also chief financial officer and treasurer of the University, with accountability to both President Gabel and to the Board of Regents. As the chief operations officer, he has systemwide responsibility for nearly all of the big and little parts that support the University’s main academic mission: finance, information technology, investment and banking, the budget, and university services that maintain about 22 million square feet of facilities on five campuses and operations all over the state.
His early career was as a tax lawyer, before he served under two governors as Minnesota’s commissioner of revenue for four years and commissioner of management and budget for six.
Please register and join us on February 23.
—Jan Morlock, UMRA president-elect and Program Committee chair