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University of Kansas
Report to the Kansas Board of Regents on Efficiencies
10/17/05
Part 1—Tactical Efficiency
The University of Kansas continuously and intentionally identifies and implements cost-
reduction and service-improvement measures on all four campuses. Staff and faculty
university-wide recognize and accept the need to operate as efficiently as possible. They
do this as good managers and good stewards, regardless of the state’s fiscal situation,
recognizing that KU’s resources are finite.
KU began tracking projects that resulted in cost savings or operational efficiencies in
2002. The projects are found in all areas of the university -- support and administrative
units as well as within the academic and research areas. In many cases, departments have
collaborated to improve processes or provide better service to students, faculty and staff.
Often these improvements have been made through a reallocation of already scarce
resources.
In 2002, Chancellor Hemenway appointed a task force to document the efficiency efforts
occurring across the KU campuses. The original task force report dated November 22,
2002 reported on 130 Economies and Efficiencies projects underway in 38
areas/departments of the university. There were several projects in the works and some
suggestions for future consideration. The updated report (February 2005) begins with a
summary of the four “themes” that emerged from the 78 projects that were identified.
The four themes and the attendant projects are summarized in the following section.
Four Themes from February 2005 Economies and Efficiencies Update
1. Delivery of information via the Internet
A recurring theme was the delivery of information via the Internet. Many business
processes and services are now conducted on the Internet from employment applicant
tracking in the PeopleAdmin System to on-line staff portal access to paycheck
information to parking application and payment. With the new Student System and
Portal, students are able to get their bills and grades on-line. At the Medical Center, 70
courses in Nursing and Allied Health are offered on-line. Last fiscal year more than
3,300 consultations were provided via Telemedicine to 47 remote sites in Kansas by the
faculty of the School of Medicine, saving Kansans thousands of trips to Kansas City.
Web-based business processes populate business systems and databases directly, thus
eliminating the substantial workload involved in manual entry from paper forms. Web
delivery of information also enables more accurate data gathering for federal reporting
and more timely access to information while reducing mailing cost.
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2. Reorganizations
Several areas reported reorganizations that not only save staff time, but also allow for
more nimble responses to needs of students, researchers and other constituents.
At the Medical Center, the grant accounting office will report to the KUMC Research
Institute much like the model at the Lawrence campus with the KU Center for Research.
University outreach programs such as the Area Health Education Centers and Continuing
Education report to the same person and are much better positioned to coordinate and
track the multitude of outreach efforts across the state. Compliance responsibilities
including Human Research Subjects Protection, Animal Protection, Conflict of Interest,
HIPPA, EOO, and Safety have been combined into a single unit resulting in a sharing of
administrative, training, and web development staff and capabilities rather than
duplication.
On both campuses, the Libraries and Information Technology have combined business
operations thereby reducing administrative duplication. The offices that comprise Student
Success were completely reorganized and are able to provide better service to our
students. The Campus Dining operations that were operated by Student Housing and the
Kansas Union have been consolidated under the Kansas Union. The consolidation has
resulted in greater selection, better service, and the opportunity to grow the operation.
3. Increased Flexibility and Autonomy
Approximately eighteen months ago, the State Division of Purchases delegated 100% of
purchasing transaction-processing authority to the Lawrence campus as a pilot project.
KU is currently the only agency with this authority. Due to statutory constraints the
Division of Purchases must approve all awards over $25,000, but all processing is done
on campus thus eliminating much duplication of effort and delay. The net result has been
significantly increased levels of service for campus customers.
In an effort to control escalating software costs and provide efficiencies in purchasing
software, Information Services has led in the establishment of a statewide contract with
Software House International, a software large account reseller (LAR). Use of the LAR
will allow all license and software purchase information to be consolidated in one
location for easy access, tracking, and reporting. This will allow better purchasing
decisions to be made, increase our license compliance, enhance our maintenance
agreement renewal tracking procedures, avoid non-compliance penalties, and result in
product cost savings.
4. Space Management
Correctly categorizing space on campus is increasingly important as both campuses
prepare for the renegotiation of the Facilities and Administrative (F&A) rates (also
known as Indirect Cost, or Research Overhead) in FY 2007. Each campus has been
successful in increasing sponsored project funding, which can reduce the F&A rate if
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space utilization is not effectively and efficiently tracked and managed. KU recently
invested in a new position that is responsible for maintaining space inventory for both
campuses.
Specific Examples of Tactical Efficiencies
• The University of Kansas was the driving force behind the legislation that
authorized Energy Performance Contracting. The annual utility savings from the
energy conservation projects are leveraged to fund critical deferred maintenance
projects such as the replacement of the main electrical switch serving the entire
KUMC campus. Both campuses have taken advantage of the Energy Performance
Contracting process resulting in self-funding of $30.9 million worth of work and
annual utility savings of $2.5 million per year. The savings are guaranteed by
Chevron Energy Solutions and are used to support the debt service on the project.
• The libraries at both campuses buy electronic content through the Kansas Regents
Libraries Database Consortium, the Greater Western Alliance, the EPSCoR
Science and Information Group, and the Kansas-Iowa Consortium. These
consortial arrangements currently save about $748,000 compared to the cost of
purchasing the same electronic journals and databases on our own.
• KUMC reorganized its Maintenance Division in FY 2004 to better utilize the
skills of the workforce. The previous organization was structured around trades—
plumbing, electrical, etc. This structure underutilized the limited workforce due
to state work rules. All maintenance positions were reclassified as general
maintenance workers. The reorganization also resulted in the elimination of
seven supervisory positions saving $240,000, eliminating some of the restrictive
work rules, and increasing productivity reflected in a 7% increase in the number
of work orders completed.
• The Lawrence campus has recently closed several centralized operations
including the furniture store, office supply store and printing services. In
addition to drastically improving delivery times, these changes reduced the
workforce by two positions and freed up one full-time person in the Purchasing
Office to provide “value added” service to campus departments. Campus-wide
the estimated product savings was $405,000 per year.
• KUMC has established two programs to recycle furniture: a “Furniture Farm” that
recycles modular furniture and a “Furniture Barn” to collect serviceable
traditional furniture. Savings from the two programs so far is approximately
$138,000.
• Two years ago, KUMC closed its Central Storeroom. The warehouse space was
converted to administrative space that allowed for the relocation of support
functions from central campus locations. The more valuable central campus
space was allocated to the School of Allied Health to meet the expanded needs of
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the Clinical Laboratory Science Department. The warehouse space was a critical
component in the competition for the $12 million NIH grant KUMC received to
provide Cancer Information Services for 17 states.
• The University Registrar’s Office converted the class timetable, grade reporting
and certain enrollment permits from paper to on-line forms with an estimated
savings of $70,000. Similarly, the Office of Admissions and Scholarships
converted to Web Based applications and saved about $15,000 per year.
• The dining services in the Department of Student Housing and the Kansas Unions
were merged in the fall of 2004 and are now operated by the Campus Dining unit
within the Kansas Unions. This merger, coupled with the implementation of an
electronic campus ID card, resulted in increased customer service, reduced labor
costs, more effective systems, and sharing of resources. Students now have more
and healthier food choices at more locations -- all without the need for cash.
Retail sales at all campus dining locations increased by 23% since the merger,
which has provided funds for needed renovation and expansion of the Wescoe
Underground. In addition, costs have been reduced by over $740,000 through
elimination of duplicated administrative staff, shift from career labor to student
labor, and consolidated purchasing of food products.
• Over the past three years, KU has achieved an annual savings of about $73,000
through statewide cooperative agreements and will continue to maintain current
cost efficiencies over time.
• The Departmental Executive Management Information System (DEMIS) is a
management information delivery system developed to provide timely operational
and managerial data. The system allows users to create individual reports in
response to a particular data need without the cost and time necessary to generate
a paper report. DEMIS report areas include financial/budgets, academics, human
resources, payroll, and student administration. Over the past five years, the
average number of DEMIS users each day has tripled and the average number of
daily queries has increased from 374 to 1,025.
• The University recently implemented a complex, integrated student information
system to serve student, faculty, and institutional needs in ways that are more
efficient, effective, and accurately reflect the academic policies. The project was
completed under budget and within the timeframe originally anticipated. The
original project cost estimate was about $14 million; however the actual cost was
only about $12.35 million. Although cost is a significant consideration and
measurement, the functionality of the software and the benefits received far
outweigh the cost of implementation. KU has moved from a labor-intensive
admissions and registration process to a real-time, self-service, completely on-line
environment for students and faculty. Approximately 40,000 people access the
student system directly and that number is expected to grow. Previously, only a
few hundred people accessed the six systems that the new student system
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replaced. On the first day of enrollment week in 2003, the new system logged
over 2 million hits; this activity continues to grow daily. Some benefits of the
system include:
o Student applicants know within 24 hours of their completion of an on-line
admissions application whether they have been accepted to KU.
o Students can complete their enrollment schedules on-line and know
immediately what their schedule will be.
o Faculty now input their grades directly into the system, eliminating much
of the tedious paperwork and scanning that was done in the past.
o The institution gains increased quality and accessibility of the information
for decision-making. For example, by having students enroll for courses
earlier, it is possible to gauge demand for courses and open new sections
as needed.
• In the spring of 2005, the addition of a standard in-class electronic response
system in large lecture classes has freed graduate teaching assistants to assist with
the learning process rather than merely grading and recording scores. In a class of
900 students, a GTA would spend 5 hours grading and recording pop quizzes at
the rate of three quizzes per minute. The grading and recording of scores is now
electronic and instantaneous. Each student has a one-time expense of $6 for an
electronic "clicker" that allows immediate in-class response for such things as
attendance, pop quizzes, and whether concepts have been adequately explained.
The student reaction to this system has been positive, and class attendance is
reportedly improved in large classes in which the system has been used.
• As part of the Energy Performance Contract, KUMC revitalized its automated
building control system that manages HVAC along with other critical safety and
security systems. KUMC also hired an experienced building automation manager
who has reorganized and retrained the staff in the System Shop with a focus on
preventive maintenance (PM). This increased PM has reduced the number of
daily system alarms from 400 to 20 and the number of HVAC service calls on
campus by 25% during the first quarter of FY 2006. As PM efforts increase, even
more improvements in HVAC reliability is expected.
• KU recently invested in a new position that is responsible for maintaining a space
inventory for both campuses. A detailed and accurate space inventory will be
critical as we go into negotiations with the Department of Health and Human
Services for our Facilities and Administrative rate (also known as Indirect Cost or
Research Overhead). Facilities cost is a key component of the rate negotiations
and could lead to increased revenue.
Part 2—Leverage Efficiency
• KU is extraordinarily effective at leveraging the State of Kansas’ direct general
fund investment to create additional economic value for the state. This leverage
has many layers, beginning with what KU itself is as an operating entity and
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extending to the economic value created by what KU actually does. While robust
quantitative estimates of this value are difficult to do with precision, reasonable
estimates suggest that the state’s annual investment yields value in the several
billions of dollars.
• In FY 2004, KU received State funding of $238 million. The total revenues
flowing into the university from all sources, however, totaled $952 million,
implying a direct 4:1 return on each state dollar. Viewed in terms of jobs, KU is
the 6th largest employer in Kansas after Sprint, Boeing, Cessna, Kroger/Dillions,
and Raytheon and the largest employer of Ph.D.’s. Net of State appropriations,
KU represents a “private” corporation of more than $700 million in annual
revenues. If the University of Kansas Hospital (which was transferred to its own
state authority but remains affiliated with KU) is added, KU represents a “private”
corporation of more than $1.1 billion, ranking among the largest economic
entities in Kansas. Using a conventional multiplier of 2x, the overall economic
impact of these revenues – including the additional economic activity that flows
from activities of the university or its employees – can be broadly estimated to
exceed $2 billion annually.
• Additional economic leverage of the State’s investment in KU is created by the
actual “product” of the university, notably the educational, service and research
activities that constitute the work of KU. Focusing on the first of these, studies
have clearly established that additional educational degrees enable individuals to
generate significantly greater economic value – and, therefore, earn higher
incomes – through application of enhanced knowledge and skills. Estimates of
incremental income earned by KU graduates living in Kansas as a result of their
KU degrees range from $1.6 to $1.9 billion annually.
• The economic value created by other “products” of the university are much more
challenging to quantify but, at an intuitive level, would appear compelling.
o Several KU departments or agencies offer services directly to the people
of Kansas that enhance their ability to prosper economically. Examples
include the Kansas Geological Survey, the Kansas Law Enforcement
Training Center, the Schiefelbusch Institute of Lifespan Studies, Kansas
Biological Survey, KU Transportation Center, Policy Research Institute,
Rural Health Education and Service, and KU Small Business
Development Center.
o KU research has led to many discoveries and innovations that hold
significant promise for creating commercial value. To date, this research
has yielded 137 patents issued or pending, 63 commercial licenses and 24
start-up companies.
• A final category of how KU effectively leverages its State investment pertains to
construction of buildings, particularly research facilities. Recent examples
include the following:
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o The first phase of KU’s Structural Biology Center (SBC) opened in 2004
at a cost of $7.4 million, including the cost of an 800-megahertz NMR and
other instruments. Bonds authorized by the Kansas Legislature provided
$5 million for the cost of the equipment. The remaining $2.4 million was
provided directly by the KU Center for Research, with land donated by the
KU Endowment Association. By leveraging the state bonds with private
contributions, KU was able to expand its Nuclear Magnetic Resonance
Laboratory, a core facility with highly advanced instruments, allowing
researchers from all over the university to learn more about how proteins
interact with the human body and how those interactions can be used to
develop new drugs.
o KU’s Multidisciplinary Research Building (MRB) is under construction
on the West Campus in Lawrence on land donated by the KU Endowment
Association. Funding was provided by $40 million in taxable bonds, to be
repaid by the KU Center for Research using indirect Facilities and
Administration (F&A) cost reimbursement on research grants. No state
tax dollars will be used for the building construction or debt service. The
106,000-square-foot building is designed to accommodate approximately
200 researchers and a variety of externally funded projects. It is part of a
planned, multi-year expansion of KU’s research infrastructure on the West
Campus. The MRB is an innovative and cost-efficient structure, built on a
tight deadline using an economical construction plan. The promise of this
building was instrumental in the recruitment of a new, nationally known
chair of the Department of Medicinal Chemistry. Along with the adjacent
SBC, the MRB will be an effective tool in the recruitment of other
renowned faculty, who in turn will bring sponsored research grants to the
university.
Part 3—Evidential Efficiency
• In 2005, KU was granted a full 10-year accreditation, without stipulations, by the
Higher Learning Commission (HLC) of the North Central Association of Colleges
and Schools (NCA). KU carried out an extensive self-study to prepare for the
university-wide re-accreditation review by faculty and administrators from peer
institutions. Accreditation assures KU students that their academic programs meet
nationally recognized standards. Accreditation is also required in order for KU to
receive federal funds for student financial aid and research.
• In addition to university-wide accreditation, 48 programs on the Lawrence and
Medical Center campuses are individually accredited by disciplinary and
professional accrediting bodies.
• Results of the 2005 KU senior survey were significantly more positive than
previous years demonstrating high student satisfaction with their experience at
KU. The survey has been administered every 4 to 5 years since 1977.
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o 91% of seniors are highly satisfied with their overall education at KU.
Historically, the average has been 78%.
o 92% of seniors would attend KU over again. Historically, the average has
been 88%.
o Satisfaction with many academic experiences is the highest ever.
• A review of the IPEDS data for AAU public universities confirms that the
University is already very lean in the Institutional Support category. In FY 2004,
KU-Lawrence ranks 15th out of 31 at 4.70% of total expenses going to
institutional support with a high at SUNY Buffalo of 11.76% and a low at Illinois-
Urbana/Champaign of 1.54%. If Lawrence and KUMC are combined, our rank is
14th with a rate of 4.75%.
• Moody’s Investor Service (Moody’s) has assigned an “Aa2 issuer rating” to the
University of Kansas (the same rating as the State of Kansas receives from
Moody’s). Rating on specific revenue streams range from A2 to Aa3 based on
the strength of the issuer rating. KU is one of sixteen universities nationwide that
Moody’s has assigned an Aa2 rating and only 8 universities have a higher rating
of Aa1 or Aaa. KU’s excellent credit rating translates into improved capital
market opportunities (access to commercial banks, access to credit enhancement,
taxable or tax exempt debt, less restrictive bond covenants) and a lower cost of
capital (both in interest rates and lower issuance costs.) A recent analysis by the
Kansas Development Finance Authority shows that the total interest cost on a 20
year, $100 million bond rated “AA” is about $2.9 million less than a similar bond
with an “A” rating.
• For the last eighteen months, KU has been working with the State Division of
Purchases (DOP) on a pilot project to delegate more purchasing authority to
agencies. KU is the only university with unlimited transaction processing
authority for all sealed bid transactions. The KU Purchasing Office prepares all
of the paperwork, takes all of the bids and only sends documents to DOP for a
cursory review along the way. This autonomy allows us to process bids much
faster and, more importantly, to better control the specifications so that the
departments more readily receive the supplies they need to do their work.
Part 4 –Forced or Negative “Efficiency”
• From FY 2002 through FY 2005, the University of Kansas absorbed $39.4 million
in State General Fund Budget reductions, increased employer fringe benefit costs,
and the cost of servicing new buildings. The University dealt with these
reductions by reducing or eliminating state funding for 85 positions at the Medical
Center resulting in 19 layoffs; reducing or eliminating 107 positions at the
Lawrence campus resulting in 38 layoffs; reducing library hours; discontinuing an
off-site Physical Therapy Education Program; discontinuing a Neonatal Nurse
Practitioner program; discontinuing the Kansas Geological Survey Statistical
Research Unit, and closing the Museum of Anthropology Public Exhibition
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Space, a campus office supply store and an asbestos unit. The cuts were made
strategically rather than across the board in order to protect the core mission of all
campuses.
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