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Behemoth project at UNMC campus could hinge on $300 million commitment from state

LINCOLN — A massive $2.6 billion proposal to transform the University of Nebraska Medical Center campus may hinge on state funding, as well as commitments from the City of Omaha and Douglas County.

Medical center officials told The World-Herald that they’re asking for a $300 million commitment from the State of Nebraska — as well as hundreds of millions from private donors and some money from the city and county — for a public-private partnership able to win federal funding of perhaps $1.5 billion.

The so-called NExT project would generate an estimated 8,700 permanent jobs paying an average of $74,000 to $75,000 a year.

The proposed, 1,000- to 1,200-bed complex of high rises would combine a state-of-the-art teaching hospital and federally funded wings designed to enhance the nation’s ability to respond to “all hazards,” from national disasters to environmental accidents and highly contagious diseases.

In addition, $1 billion to $1.5 billion worth of private development — in office buildings, hotels and a power plant — is expected, bringing total spending on the project to the $4 billion range.

UNMC Chancellor Jeffrey Gold has worked the halls of Congress, federal agencies and the Statehouse over the past couple of weeks. He said the project is a “once-in-a-generation” opportunity for the state to “catapult itself” into national prominence for its medical care, research and ability to respond to natural and man-made disasters.

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“We want the medical center to continue to be a prime mover in propelling Nebraska’s economy to new heights. This project will do just that,” Gold said. “The scope of this project is huge.”

Initial response from a couple of state lawmakers was enthusiastic, despite the price tag, which, beginning in 2022, would commit 1% of the state’s general fund revenue over six years to the project, if it comes to pass. Senators called the NExT project a “game changer” in terms of new, quality jobs.

“I don’t think we can pass it up,” said State Sen. John Stinner of Gering, who heads the Legislature’s budget committee. “It’s probably one of the best economic development projects I’ve ever seen.”

Said Henderson Sen. Curt Friesen: “It’s the biggest economic development thing that’s ever been done in the state. I have a feeling people will have a hard time voting against it.”

Gov. Pete Ricketts, through a spokesman, was more guarded. Ricketts did not include the NExT project in his budget, which was unveiled Wednesday. Taylor Gage, the governor’s chief spokesman, did not respond to a question about why the project wasn’t included, though drafting of a bill for the project was still underway last week.

“The governor’s number one priority for the session is property tax relief, and he will be working with senators to deliver the relief Nebraska’s farmers, ranchers and homeowners need this year,” Gage said.

A bill seeking $300 million in incentives from the state is scheduled to be introduced in the Nebraska Legislature this week. Gold met Friday with Omaha Mayor Jean Stothert, who has already voiced support for the project. How much money will be sought from the city and Douglas County was not disclosed.

The World-Herald first reported that the massive project was in the preliminary discussion stages a month ago. It would be built on 7 acres on the southeast corner of Farnam Street and Saddle Creek Road, and would require the demolition of the building that now houses the Munroe-Meyer Institute, and possibly some adjoining structures. The Munroe-Meyer Institute is moving to Aksarben Village, freeing up that site by next year.

The NExT project (which stands for “Nebraska Transformational”) is being approached much like the $370 million Fred & Pamela Buffett Cancer Center, which was aided by $50 million in state funding, $35 million from the city and $5 million from Douglas County.

That project also required about $160 million in private funds. Gold said he’s meeting with a “kitchen cabinet” of major donors from Omaha this week about NExT, which would cost significantly more than the cancer center project. What’s their level of interest?

“High,” Gold said.

It is essential, he said, to obtain commitments from the state and other local governments, as well as pledges from private donors, to demonstrate public-private support for the project.

While there’s uncertainty over whether the federal funding will materialize, the chancellor said several factors work in UNMC’s favor.

“The stars are truly aligned,” Gold said.

  • There’s a need. Federal officials have voiced concern about the state of preparedness of the U.S. medical system, compared with other countries, in responding to an influx of casualties in the event of a massive natural disaster, industrial accident, nuclear explosion or outbreak of a highly contagious disease.

Language in the 2019 National Defense Authorization Act calls for a “pilot program” to assess possible private-public options to address “Interoperability and Medical Surge Capability and Capacity of National Disaster Medical System.”

The legislation requires a report to be compiled after 180 days for the House and Senate Armed Services Committees that estimates the cost of such a program, if made a permanent part of the Defense Department’s budget. Local officials may know something by May — the deadline to be included in the 2020 Defense Authorization Act — about the status of the NExT project.

Gold said that UNMC is “uniquely qualified” to become the lead facility, or at least one of the five regional sites to be identified. He added that while $1.5 billion in federal funding sounds like a lot, it pales in comparison with the cost of an aircraft carrier, which is over $16 billion.

  • UNMC has a successful track record in working with the feds. Following the Ebola crisis in 2014-15, UNMC assumed a leadership role in treating and training in such outbreaks. It has one of the leading biocontainment units in the world. It now trains Air Force medical teams in how to respond to contagious disease threats.
  • UNMC and its partner, Nebraska Medicine, and Harvard Medical School and its partner, Massachusetts General Hospital in Boston, were the institutions that won a competition in 2018 for a $3 million federal grant to demonstrate how a regional “all hazards” response system could work in a disaster large enough to overwhelm local hospitals.
  • Nebraska has been successful in public-private partnerships. Exhibit No. 1 is the $86 million expansion underway at the VA Medical Center in Omaha, which included $30 million in funding from Heritage Services, the group of Omaha philanthropists and business leaders instrumental in construction of Omaha’s downtown convention center and arena (CHI Health Center), a new home for the College World Series (TD Ameritrade Park) and the Holland Performing Arts Center.

The NExT project comes as the state is pushing hard for “3H” jobs — “high wage, high skill and high demand.” That push was a leading recommendation of a blue-ribbon panel’s recent look at the needs of the state called “Blueprint Nebraska.” And the Legislature is looking to update the state’s economic development incentives to encourage higher paying jobs.

State lawmakers have been in this position before, hastily weighing whether to make a huge investment in an economic development project. But this one, unlike failed efforts to attract an auto plant or lure the Micron computer factory, involves a home-grown entity, with roots in the state.

But carving out another $50 million for the NExT project from the budget in each of the next six years will require some adjustments, said Stinner, who heads the Appropriations Committee.

And questions will be asked about the ongoing expenses of operating the project, if it comes to pass. A consultant hired by the medical center estimated that operational expenses for UNMC/Nebraska Medicine would rise by 15%, but that there would also be increases in patients and spending from out-of-state “medical tourists” and families.

The federal government, Gold said, will pay UNMC to keep 25 to 50 beds open for emergencies. An additional 150 to 200 beds would be used by UNMC for its academic and training purposes. In the event of a catastrophe, those hospital beds and more could be freed up for federal use.

Meanwhile, Nebraska Medicine would lease hundreds of beds for inpatient care. Right now, UNMC and Nebraska Medicine are licensed for 880 beds.

The goal of the “all hazards” beds is to never use them, Gold said, “but to be prepared.”

Stinner, the budget leader at the Legislature, predicted that lawmakers will make funding “work” for the NExT proposal.

“There’s a lot of benefits that accrue with this project,” the senator said. “It will be a heck of a catalyst for a lot of different things. It certainly puts Omaha on the map to attract these kinds of jobs.”

17 rare and unusual health stories out of Omaha

Concern over career prospects and money has spurred a switch to other fields of study

Nicole Abbott, psychology major at Bellevue University

Alexander Law, English major at Midland University

Hailey Thiem relishes art museums, so it was natural that she would follow her passion through college.

But since getting bachelor's and master's degrees in art history from Creighton University and the University of Kansas, the road has been bumpy. Thiem, 28, knocked around for three years after earning her graduate degree.

"Looking for jobs is so hard," said Thiem, who hoped to work in an art museum. "And I think sometimes it can be disheartening."

Concern over career prospects and money has spurred a decline over the past 20 years in the number of liberal arts degrees being pursued by college students. The rising cost of higher education has put students on high alert to the connection between college and career.

Thiem performed secretarial duties, tried accounting and worked in insurance. She found a job with Girls Scouts but feared there wasn't potential for growth. Thiem also worked as a bartender and still does, one night a week.

She has driven down her student loan debt from $72,000 to $43,000. And last year she found a job with Patreon in Omaha, an international company that brings artists together with patrons online and enables them to get a steady income so the artists can produce art. It's not exactly an art museum and it doesn't maximize her degrees, but she likes it.

"I am so happy there," she said. "I definitely feel that I've kind of found my footing."

The liberal arts are designed to give students a broad understanding of the world and the human condition, but students increasingly seek majors that are likely to land them a good job.

Engineering, for instance, is much hotter than English as a major field of study in American universities. The term mentioned repeatedly in higher education today is STEM, which stresses the importance of science, technology, engineering and math.

Many new graduates feel pressure to get in the workforce and start earning money. Some fear being stuck with large student loan debts while working in temporary assignments or coffee shops immediately after graduation.

Census data analyzed by David Drozd at the University of Nebraska at Omaha Center for Public Affairs Research showed the following: Nebraskans under 50 working full time with at least bachelor's degrees in literature, visual arts and liberal arts earned a median yearly wage of $46,317.

That compared with $59,660 for those with business degrees and $74,338 for those with degrees in engineering, computers and math.

Students have taken note. Nationwide, according to the most recent data, the number of students getting bachelor's degrees in engineering increased from 58,209 in 2000-01 to 115,640 in 2016-17. In English language and literature, numbers over the same period dropped from 50,569 to 41,317.

But some experts in business and higher education contend the communication and analytical skills learned in the liberal arts — history, philosophy, English, fine arts, political science, psychology and others — are more valuable now than ever in the business world.

In an age of increasing artificial intelligence and technology, the dean of arts and sciences at Creighton University sees plenty of demand for human skills. Machines can't interact, create, think critically, adapt or imagine, Bridget Keegan said.

"We need to figure out things that machines are bad at," Keegan said. "Those are things nurtured by liberal arts."

Studies, surveys and salary comparisons provide a hodgepodge of results, and it's easy to cherry-pick the desired result. But findings suggest that liberal arts degree winners generally won't compete in the marketplace with engineers and computer scientists.

A study released Tuesday by Georgetown University's Center on Education and the Workforce, however, found that many graduates of liberal arts colleges catch up and surpass others over time.

The study looked at incomes by college and university, and some liberal arts colleges also have engineering, business and computing degrees. So it's not a strict comparison of degrees. Further, two-year and for-profit colleges are among the more than 4,000 colleges that 210 liberal arts colleges are compared against.

But the study gives liberal arts colleges and majors hope. Martin Van Der Werf, an associate director of the Georgetown center, said the study at least indicates that many liberal arts graduates are more imaginative and driven than vast numbers of students in many other kinds of colleges.

Merritt Nelson, a Midland University vice president, said his liberal arts college in Fremont has career-focused majors, including business, education, nursing and criminal justice. But the foundation at Midland involves liberal arts.

"We're teaching them how to be critical thinkers. How to solve problems. How to be a good team member," Nelson said. Alexander Law, an English major at Midland, said he hopes to write for a living. The senior said the near future, though, is hard to predict. "It is a world of uncertainty," he said. "There is always that lingering doubt."

He has a friend in the lucrative field of petroleum engineering, and that puts a certain pressure on Law. He also is considering graduate programs, the law and the military.

Nicole Abbott, a psychology major at Bellevue University, said she would like a nice house and neat car someday as evidence of success. But what she would like most is to help kids who have gone through foster care, as she has.

Abbott, a sophomore, said she thinks a psychology degree will open some doors and enable her to advocate for kids.

"Well, you're not going to be able to do everything with a psych major," she said. Abbott currently is taking a class at Bellevue University called Careers in Psychology, which might provide other job and career ideas.

Abbott hadn't thought much about going to college, but advisers at Bellevue West High School and Bellevue University told her that she could contribute to society in a big way. "I'd say the light bulb went on about four months before I graduated" from high school, she said. Law school is another possibility, she said.

Cornhusker Bank Executive Vice President Sherla Post said she's looking for graduates who are good with people, have had internships and other experiences, and have been leaders on, say, the debate team or a sports team.

Just having a finance degree or straight A's is not enough. "We kind of just look at what they've done," Post said. "And a lot of it comes down to the interview."

Ann Tschetter, a University of Nebraska-Lincoln history professor and adviser, said those teaching liberal arts "are going to have to step up a little more and help students understand" how they might use their liberal arts degrees in a career.

In a course Tschetter teaches called The Historian's Craft, she asks her students to attend a career fair, meet with a UNL arts and sciences career coach, and make a résumé.

Liberal arts students must take responsibility by considering career options, taking on internships and possibly adding a minor or major, she said.

As for being a history professor, Tschetter said, it's not advisable right now to get a doctorate in history due to a lack of good faculty jobs. Colleges typically have directed their attention and funding in the past few years toward things like business and engineering, she said.

But critical thinking, writing, speaking and analytical skills are vital in the workplace, she said, and liberal arts generally provide those. She tells students if they're in the major that is right for them, they will find a job and career.

Charles Klinetobe, who has a doctorate in history, had hoped to be a professor or mid-level manager at a college. But he has found only adjunct professor jobs in Omaha. An adjunct is a part-time, temporary faculty member without tenure protection. For several years, he has been an adjunct at UNO or Metro Community College or both.

His wife, Kimberly, has worked as the family's primary earner, and her job provides them with health insurance. "It's been terribly frustrating," he said. If he had it to do over, he said, he would major in history but would add prelaw classes or international studies to his academic experience.

Getting a tenure-track history professorship, he said, is like hitting the lottery.

Hailey Thiem said she could have been more aggressive in searching for an art museum job. She should have had internships and networked more, she said. She shied away from moving to New York City, a place with many art museums, because it would have been risky and expensive.

She would have benefited from a class that set out career options and effective ways to get jobs, she said, if such a class had been offered. Today her full-time job and bartending work together garner between $35,000 and $40,000.

But she wouldn't change her major from art history. She still loves art museums.

rick.ruggles@owh.com, 402-444-1123

Plan to fix OPS pension debacle shares pain equally, but ensures 'system is healthy for everyone'

Current Omaha Public Schools retirees and employees would see lower cost-of-living adjustments, newly hired employees would get less generous pensions and the school district would kick in more money annually under a new plan for shoring up the district’s troubled pension fund.

The proposal was hashed out by a working group made up of members of the district’s unions, OPS leaders, retirees and others who spent a year looking for ways to reduce the system’s $800 million-plus shortfall, which was the subject of a World-Herald investigation last year.

The group came up with a plan that includes some pain for all but is designed to put the retirement system on the road to relative solvency within 17 years.

“It’s a path we have to go down to make sure the system is healthy for everyone — our current retirees, our current employees, our future employees and our future retirees,” OPS Superintendent Cheryl Logan said. “Every constituency group is a part of the solution.”

That includes the district and its patrons. The amount OPS has been paying annually to shore up the fund would increase next year from the current $21 million to $35 million. Logan is hopeful the extra money will not require an increase in property taxes.

“We have come up with a solution which does not come with a tax increase,” she said. “We feel pretty strongly about where we are.”

Though agreed to by the stakeholder groups, the plan is sure to be controversial among some retirees and workers who feel that the COLA changes represent a cut in promised benefits.

Any changes in retirement benefits would need to be approved by the Legislature. It’s unclear whether lawmakers would take the plan up this year or wait until 2021.

The new proposal comes in the wake of a World-Herald investigation last year that revealed mismanagement and bad investment decisions by the Omaha School Employees Retirement System that cost the school district hundreds of millions of dollars.

The paper’s investigation revealed that OSERS trustees — largely made up of school district personnel — bailed heavily on the stock market amid the 2008 market crash, locking in big losses. They proceeded to move much of those funds into atypical and exotic investments like real estate in India and oil in Kazakhstan, many of which proved big losers.

The paper also revealed cozy relationships between OSERS leaders and the firms they did business with, as well as potential conflicts of interest related to the fund’s longtime financial adviser, Connecticut-based Atlantic Asset Management. Atlantic persuaded the OSERS leaders to invest more than half the fund’s $1.2 billion in assets directly with Atlantic or with other firms tied to Atlantic. Those firms collected millions in fees on often poor investments.

The World-Herald calculated that bad decisions and mismanagement by OSERS officials cost the pension fund some $500 million, a figure that grows each year as the fund remains locked into millions of dollars in poor investments. The huge shortfall is now forcing the district to make tens of millions in annual payments to shore up the fund, detracting from its educational mission. OPS educates more of the state’s poor and at-risk students than any other district.

The pension problems landed on Logan’s desk when she assumed district leadership in 2018.

That October, she convened a working group of all the stakeholders in the pension system, including the unions representing teachers and other district personnel, retirees, district leaders and the administrators of the retirement system.

Guided by a facilitator, the group spent months studying what had been done in other states and modeling the financial impact of various changes.

Logan said that when the stakeholders sat down, all agreed they were looking for a “shared solution.” And the final proposal, she said, included some give on all sides.

Currently OPS retirees receive annual cost-of-living adjustments, or COLAs, of up to 1.5%, and they would continue to receive those.

But beginning in 2024, the base benefit amount on which future COLAs are calculated would be locked in place, rather than having the COLA each year applied to the preceding year’s benefit amount.

The effect of that change would be minimal in early years — just a few dollars a month for a typical retiree — but it would add up over time. Just how much would depend on a number of factors.

Every retiree’s pension is different, based on their annual pay at the time of retirement and years of service.

But, for example, assuming the maximum COLA and the current average OPS monthly pension check of $2,065, such a retiree would receive a $2,684 check 20 years from now under the reduced COLA instead of $2,781 under the current system. That’s a reduction of $97 per month, or 3.5%.

Current employees who have not yet retired would see that same COLA base change and in addition would have to wait two or more years after retirement before receiving annual COLA adjustments. The retiree’s COLA would not begin until at least two years after retirement or at age 62, whichever is later.

Current employees beginning in 2022 would also have the option of taking a lump sum payment from the system upon retirement in exchange for lower monthly benefits.

The biggest impact from the changes would be on teachers of the future.

Teachers and other district personnel hired after July 1, 2021, would see a 7.5% reduction in their base pension benefits. When combined with the COLA base change and the delayed COLA provision, the impact on those employees could be significantly higher than that.

District officials pointed out that the reduced benefits could likely lead some teachers in the future to work longer, which would help them offset the change and boost their retirement income. Logan said she’s also hopeful that so many decades down the road the district would be in financial position to enhance the benefits for those teachers upon retirement.

Indeed, it’s projected that with the changes, the pension fund within 30 years would be 100% funded, a far cry from the current 63% funding level. Within 17 years, the fund would be 80% funded, a level at which a pension fund is generally considered to be solvent and no longer troubled.

“We all know where we stand at this point,” said Dan Hoeck, an OPS principal who heads the association of district administrators. “So we all chipped in to put a plan in place.”

The plan would also provide the district more financial certainty. While the district’s annual payment would go up significantly next year, it would be frozen at the $35 million level for the foreseeable future. That will make it easier for the district to budget for the pension fix rather than try to hit a moving payment target each year based on variable projections.

Logan said she and the other district stakeholders were proud of the plan they were able to agree to. Because it involved give-and-take, it should be considered as a package.

“It’s not a la carte,” Logan said. “It’s a whole packaged meal.”

cordes@owh.com, 402-444-1130 twitter.com/henrycordes