University of Minnesota aims to think bold about tuition costs, enrollment

The University of Minnesota is setting what officials describe as modest goals on tuition for the coming year: limit any increases in undergraduate tuition for Minnesotans and graduate tuition to under the level of inflation, with steeper cost hikes for nonresidents that keep the U in the middle of the Big Ten.

The U's greater Minnesota campuses would see flat tuition or slight increases.

But as President Joan Gabel works on a hotly anticipated systemwide strategic plan, U leaders are also engaged in intense soul-searching about ways to navigate a near future of continuing financial pressures and decreasing public appetite for even modest tuition increases. The university's governing board has signaled to Gabel that members want her to explore bold approaches to enrollment and pricing as well as new sources of other revenue, such as more aggressive efforts to commercialize campus inventions.

In a Thursday discussion about the U's budget outlook, regents again suggested the university should not be complacent about the status quo. For instance, some regents in recent years have advocated for pursuing higher student enrollment to boost revenue.

"Systemwide enrollment goals need to be front and center in our systemwide strategic planning," said Regent David McMillan.

The board will consider a specific proposal on tuition and the U's budget from the Gabel administration later this spring.

Gabel did not weigh in for that discussion, but other university officials said the administration is taking a close look at financial scenarios as it works on a new strategic plan the president is preparing to unveil by the summer.

Tuition remains the single largest source of revenue for the university, with a projected haul of $973.4 million for the 2020 fiscal year. In recent years, as the U has approved marked tuition increases for students from outside Minnesota and states with reciprocity agreements, it has seen a hefty rise in those tuition dollars. Tuition revenue is slightly down for graduate students, undergraduates on the U's greater Minnesota campuses and students from reciprocity states.

Julie Tonneson, the associate vice president of university finance, told regents the administration tentatively envisions keeping most tuition increases under inflation. Nonresident undergraduates might see higher increases, but not those double-digit hikes of recent years.

State funding, which has grown by 2.1% on average in recent years, is the university's other key source of unrestricted dollars, bringing in $694.1 million this year. Meanwhile, over the past six years, other revenue — from fundraising to research grants to invention royalties — has grown by 15%. Since before she started as president last July, Gabel has said she is interested in exploring ways to bring in more such alternate revenue — a plan the governing board has cheered on.

Regents Chairman Ken Powell wondered if the university should bring in an outside consultant to explore other opportunities to revisit its pricing model to boost revenue. For instance, he said, perhaps a small decrease in costs for some students could lead to a growth in revenue by expanding enrollment. He pointed to data from an analysis by consulting firm Huron, also presented Thursday, which showed the U stands out among its peers in seeing a slight enrollment dip as other institutions have held the line or grown their student counts. That report also suggested the university is roughly in the middle of the pack among its peers regarding overhead costs, though it did not offer specific steps for increasing efficiency.

"I was surprised that a place of this quality is losing students," Powell said.

Other regents also argued a smart, balanced approach to enrollment would be key for the U's future financial health.

"That is the next 30-year conversation for an institution like the University of Minnesota," said regent Darrin Rosha. "What should our enrollment be?"

Regent Richard Beeson urged the Gabel administration not to back off from that recent strategy of raising nonresident tuition to the middle of the Big Ten. He noted some administrators had expressed trepidation that the university might be approaching the point when further increases could turn away prospective students from other parts of the country.

"Every year we've done this, we have raised more money," he said, adding, "Don't slow down until the data tells you to."

The university also must keep a close eye on its international enrollment and prepare for possible immigration policy changes and other developments that could curb arrivals of students from China, said regent Janie Mayeron. Those students make up about 45% of the university's international student body, and a drop in enrollment would be "a significant external shock."

Mila Koumpilova • 612-673-4781