COMMENTARY 383871161

Is MnSCU (as it’s been known) ‘too big to fail’?

The numbers say it’s an ailing behemoth. Its management is engaged in some peculiar responses. (Such as desperate rebranding.) 

The Minnesota State Colleges and Universities (MnSCU) system is the nation’s fifth-largest higher education conglomerate, educating nearly 400,000 students annually, with 31 colleges and universities on 54 campuses, more than 16,000 employees, and an annual budget of $1.9 billion. Chancellor Steven Rosenstone proudly proclaims that he is running a $2 billion business.

Is this behemoth “too big to fail”? A comparison with the big banks is not rhetorical. In 2015, MnSCU announced that 11 of its 31 institutions had failed a financial stress test; four universities and seven colleges had to submit financial recovery plans to the MnSCU office.

In January 2016, the situation was even direr when 19 schools failed the test, with 10 of them in particularly bad shape. This year, six of seven universities and 13 of 24 colleges are operating under strict financial monitoring.

Providing further evidence that this is not a short-term crisis, MnSCU recently announced that it projects a shortfall of between $66 million and $475 million by 2025. The only variable accounting for the differential at this time is whether the market will bear even higher student tuition rates.

Completing a trifecta of doom and gloom is a loss of student market share. From a peak enrollment in 2011 of 158,000, attendance had dropped to only 139,000 by 2015, a decline of 12 percent.

In a report from the Workgroup on Long-Term Financial Stability to the Board of Trustees (which is meeting this week), MnSCU’s management team attempts to deflect responsibility for the fiscal disaster, blaming instead external factors such as a structural decline in state appropriations, tuition freezes and declining enrollment.

MnSCU’s management team would do well to heed Shakespeare: “The fault, Dear Brutus, is not in our stars / But in ourselves, that we are underlings.”

The administration’s claim of a long-term decline in state appropriations is an argument of half-truths. While the biennial funding for 2010-11 and 2012-13 did drop precipitously and appeared to be flatlining, it has little contemporary relevance for MnSCU’s current mismanagement.

The evidence is clear that under Gov. Mark Dayton, the last two biennial budgets indicate that a structural increase in higher education funding is underway. MnSCU received a 9.4 percent increase in 2014-15 and another bump of 9.5 percent for 2016-17. While uncertain as of this writing, the governor’s final biennial budget request in 2017 likely will again call for a double-digit increase for higher education.

In order to offset a decline in state funding for higher education in the early 2000s, MnSCU imposed wildly disproportionate increases in student tuition rates. By 2014, students and legislators finally had had enough. The governor and the Legislature imposed a tuition freeze for 2014-15. For that biennium, the state designated $78 million to subsidize MnSCU for the loss of tuition. MnSCU received an additional $100 million to cover the bulk of further tuition relief for 2016-17.

MnSCU’s persistent claim of financial harm from the tuition freezes is, at best, disingenuous. The system behaves as if the freeze in the current biennium will bankrupt it. Please. After more than a decade of using tuition increases as a limitless ATM, MnSCU need cover only an additional $21 million of tuition relief — mere chump change in a $1.9 billion budget.

MnSCU is now searching for an explanation for the dramatic decline in student enrollment since 2011. Really? From 2002-03 to 2012-13, state appropriations declined by 9.3 percent. During the same years, tuition for college students jumped 77 percent and for university students 87 percent. Unable to keep up any longer with the tuition increases, some students prudently exited MnSCU colleges and universities.

Desperate times call for desperate measures.

Rosenstone’s first act of desperation came in 2013 when he (unbeknown even to the Board of Trustees) signed a $2 million consulting contract with the multinational firm McKinsey & Co. The firm then wrote the script for a covert systemwide initiative directed by Rosenstone called “Charting the Future.”

Forty-six stakeholders who were members of a task force believed that they were full participants in an ensuing process. Only later, after devoting hundreds of hours to the task, did they learn of their deception by an elaborate charade. All of their work had been for naught, as the secret McKinsey plan superseded their efforts.

To this day, MnSCU has not revealed to the public what the $2 million bought. MnSCU’s administration will not disclose the report for “proprietary” reasons.

Under constant scrutiny from a wide range of stakeholders for its missteps, MnSCU recently grasped onto the latest organizational fad — rebranding. Rebranding seeks to change a corporate image. Three common reasons for rebranding are a loss of market share, a negative reputation and a financial calamity. Unfortunately, MnSCU’s situation fulfills all three.

Consistent with its previous pattern of poor leadership, MnSCU contracted with a public-relations firm, PadillaCRT, for branding research. Cost: $272,000. It has now signed an additional $345,000 contract with the same firm for the rebranding effort. What exactly has it gotten for $617,000? A new logo and a cutting-edge “nickname” for the system — Minnesota State.

Obviously, Padilla’s research was perfunctory, because for many non-Minnesotans, the first thing that “Minnesota State” conjures up is a TV show. “Coach” is an American television sitcom that aired for nine seasons on ABC from 1989 to 1997. It is still showing in syndication. Minnesota State is its fictional home; it is a university of mocking derision, run by blustering buffoons.

I have no doubt that a $1,000 prize offered to graduate students in a marketing class would have led to something more inspiring and endearing than Padilla’s pedestrian product.

No one, save the Board of Trustees and a portion of the central office’s nearly 400 employees, has much allegiance to the organization formerly known as MnSCU. Students and their families, faculty and staff members, local communities, and legislators continue to identify strongly with their local colleges and universities, cherishing their distinctiveness and relative autonomy.

MnSCU is not too big to fail. It is time for it to go the way of Lehman Brothers. However, MNSCU’s Wells Fargo bunker should remain as a historical monument to the hubris of autocrats who seek to impose upon us their über-centralized empires.

Monte Bute teaches sociology at Metropolitan State University. This article is intended to reflect his opinions alone.


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