Interview by CBJ Editorial Board
As CEO of Summit Group, based in Alden, Bruce Rastetter oversees a variety of diverse interests in agriculture and renewable energy; as the president of the state’s Board of Regents – an elected post earned in 2013 after his initial appointment to the board by Governor Terry Branstad in 2011 – he has pushed forward some of the most sweeping changes to the state’s three public universities in decades.
Under Mr. Rastetter’s watch, the Regents have initiated an ambitious transparent inclusive efficiency review (TIER) by national consulting firm, Deloitte, and passed a performance-based funding agreement that will allocate funding for the state’s three public universities according to a 60/40 formula, with 60 percent based on in-state enrollment and 40 percent based on outcome metrics. The CBJ’s Editorial Board spoke with Mr. Rastetter to discuss the Board’s recent moves, and why he believes they are necessary to ensure that higher education in the state remains accessible in the years ahead. The following is an edited transcript of the interview.
Based on the Regents’ new performance-based funding formula, it’s been estimated that the UI stands to lose $46 million over the next three years. How you would respond to concerns that the funding change will impact the quality of education at the UI?
First of all, I challenge the number that the University of Iowa will lose $46 million, because as part of our (the Board of Regents’) proposal, we are asking the legislature to backfill the $12.9 million that would be transferred next year. So that number is, I believe, not reflective of what the Board is doing and asking for when it passed performance funding.
Second, I think that we’ve seen the University of Iowa respond in a very positive way to the performance-funding model. You see the campaign of recruiting Iowans, of re-engaging with Iowans across the state. We saw it when 3,000 people came to a visitation day at the University of Iowa (Sept. 25) that was, by all accounts, a great success. We’re also seeing the University of Iowa respond in areas around that 40 percent metric that revolve around graduate professional students and research.
About the $12 million that the Board requested for the backfill, can you give us some more on that? Is that assured?
What we have tried to do is be very modest in our request for increase in appropriations next year. We’re asking for a 1.75 percent increase in our general appropriations, and then additionally the $12.9 million for the University of Iowa. I think it’s been received in a positive way by a number of people in the legislature and the governor’s office, and very clearly they’re going through their process of what state revenues are going to be, but we’re going to lobby aggressively for it.
Looking at the workforce challenges, it seems easier to recruit workers from outside the state who have attended college in Iowa. What’s your perception of the chance that that the new funding model is going to change or impact the state’s ability to attract workers to the state?
I think it’s going to enhance it. One of the things that you’ve seen is that the out-of-state university (population) is growing quickly, and one of the reasons they’re growing quickly is because of the high job placement that their graduates have. The University of Iowa’s efforts … to grow the university both in-state and out of state is important, and the Regents are supportive of increasing out-of-state residents.
We represent a very good value for them (out-of-state students) on tuition costs and the overall cost of an education, and coinciding with the (UI) Research Park and STEM initiatives – all those things will lead to a higher number of degrees and graduates, and if the jobs are available in Iowa, I think they’ll stay here.
How big can the University of Iowa get, from a realistic standpoint, if we’re going to be recruiting more in-state and out-of-state students?
I think President Mason’s projections on that call for a couple of thousand (students) increase over the next few years – not dramatic growth, but incremental growth, which is why the Board approved a new dorm to be built in addition to the one that’s just being completed. The university knows that students who live in dorms – in particular, during their freshman year – have a higher retention rate and graduation rate. And so a variety of those things are being done.
We’re hearing from a lot of folks in this market who are really concerned with the funding model, and one of the people is Len Hadley (retired CEO of Maytag Corp.), who is a well-respected business leader and who served on the funding model task force. What did he get wrong on the Regents’ funding model?
First of all, I’d like to say I really respect Len Hadley’s service on the committee … One of the recognitions that I think hasn’t always been made about our funding model is we’re talking about just 2 percent of University of Iowa’s annual budget, but also that we’re asking for the $12.9 million this next year to be backfilled, so there would be no loss (in funding).
What we’re talking about is only state taxpayer dollars, which represent a small portion of the University of Iowa budget. So there are significant resources there to manage this, which is why I think you’ve seen their (the UI’s) ability to spend dollars on advertising to enhance their admissions and recruiting areas.
Are there any unintended consequences that you foresee coming about with this funding model, particularly with some of the state’s private, smaller colleges? We have been told that this new funding model may have the potential of putting some private colleges in Iowa out of business.
I am not hearing from either the community colleges or directly from those private colleges and universities that they feel threatened by this. Over the years, they have their specific niche and reasons why students go there, both in-state and out-of-state, and I think you’ll continue to see that.
Jumping to economic development, it seems like the Regents universities are now expected to play more of an economic development role in the state. Can you articulate that role in a little more depth?
The state of Iowa is fortunate to have two of one of the nation’s AAU (Association of American Universities) universities, and there are only 27 public universities that are part of that group, the nation’s largest research institutions. With that, we have two research parks at Iowa State University and the University of Iowa, and the opportunity to take that research and convert it into intellectual property and the creation of business opportunities.
Both universities have a special niche in that – biomedical research at the University of Iowa and ag-engineering biosciences at Iowa State – and if we talk about the number of degrees in those different areas that we have graduates in, the best way to keep students that graduate in Iowa is the creation of high-quality jobs, which the universities have done, but know that they can accelerate.
Look no further than what the Research Triangle has done for North Carolina; that was one of the attractions when we hired Steven Leath as president of Iowa State. He was responsible for that as part of the $1.6 billion research dollars that (North Carolina’s) system receives annually. So the growth of biosciences, the Cultivation Corridor at Iowa State, the expansion of the STEM initiative with Kirkwood, the expansion of the Research Park at Iowa – it’s critical if we’re going to maintain those students and those jobs in Iowa, and grow the corridor between Cedar Rapids and Iowa City.
Do you ever hear any concerns from private industry that state institutions are encroaching upon their turf when it comes to matters of research or economic development?
I haven’t. I hear the importance of public/private partnerships … whether it’s seed development or whether it’s doctors patenting new medical devices. At the last Regents meeting, we had an example of a new medical opportunity that’s going to dramatically improve quality of life … I think the importance, as we have less federal government support in the form of grants, is for private companies to partner with the universities to help develop that intellectual property, the way that they’ve done that for 100 or 150 years.
It’s been reported that Phase 2 of Deloitte’s TIER efficiency review is expected later this fall and is going to involve developing business cases for 17 different areas for further review. Have there been any recommendations that you felt strongly about, either positively or negatively?
I think what you’ve seen is, if you look back at the more global TIER report, there were 117 opportunities identified for cost savings. The Board will take up about a dozen of those business cases in November. We already passed three (cost-savings recommendations) in early September, and the universities are beginning implementation of those.
In terms of these larger business cases, the purchasing of goods and services is an important one that the implementation will begin on … this winter and spring. The universities purchase $900 million-plus dollars of goods and services each year, and so the combination of that purchasing power between the three universities would reflect 2 to 4 percent savings. So if it’s 2 percent, it’s $18 million a year. If it’s 4 percent, it’s $36 million. So, somewhere in that range will be a real opportunity.
The Regents, over the years, have tried to reshape the university system or steer it in a certain direction, but haven’t had a great deal of success in doing that; you’ve undertaken two pretty strategic areas of tweaking with Deloitte’s TIER review and the Regents’ funding adjustment. Is there anything else that you’re envisioning happening?
One of the things that I’d like to mention on that is that when we talk about the funding for the three universities, it hadn’t been looked at in 70 years. There very clearly was a need to do that, because obviously over 70 years universities have changed. And so the responsibility of the Board and our obligation to the state is that we ought to review that, it ought to be transparent, and we ought to be able to articulate that to legislators, the governor and Iowans.
Second, on TIER, there hadn’t been a strategic look at what the universities do … in over 30 years, and the (UI’s) budgets have grown, separate from the hospitals, to about $3.8 billion from around $700-$800 million 30 years ago. So one of the reasons we’re focusing on administration and auxiliary is because at the end of the day, it’s taxpayer dollars or student tuition dollars that primarily pay for everything, and those dollars are precious if we’re going to have sustainable public universities in the future.
It just seems that there’s a tension between the University and the Regents in the Corridor, with the UI being such a big player in the region. Is it because you’re being somewhat effective in reshaping the university?
The goal isn’t to reshape the university. The goal is to make sure that all three universities are positioned for the next 50-100 years and being as efficient as they can with state dollars and with tuition. From 2001 to 2011, the Board of Regents doubled the cost of tuition. If you continue those tuition increases, the idea that our public universities are going to be accessible to Iowans 20 or 30 years from now … is going to be challenging.
I hear a number of times from people in Iowa City that they think this is very important and that there’s real opportunity here. Is there anxiety over change? I think there always is, but I, for one, am not comfortable just voting to increase tuition every year or asking the state for extremely large increases that, when the state has budget problems and appropriations are cut, the historic reaction of the Board is just to backfill with tuition increases. That leads to some of the highest student debt in the country.
So the reflection of that is to look sensibly at where we can have cost savings – that we take those dollars and let the universities reinvest those. And I think that’s what the faculty get: those cost savings are going to be reinvested in programs that are going to make the universities stronger in the future. That’s why we’re doing all of this.