"We need the resources to hire 13 new faculty per year for the next six years to restore it to a level where it can compete for the NIH money, to get the new discoveries, to do the research that's necessary and translate it into new therapies," says Cerra.

NIH is the National Institutes of Health, a big cash cow for the U medical school. Patient fees are another big source of money. A smaller share, about nine percent of the medical school budget, comes from Minnesota taxpayers.

The U's medical center problems catch a lot of people by surprise, because there's little outward sign of trouble. The hospital lobby throbs with activity. Outside, construction workers are putting up new buildings including the new Cellular and Molecular Genetics Center, next to the new cancer center building. In the labs and operating rooms, researchers and medical staff routinely report progress in treating all manner of human health problems.

How has the U gotten itself into this financial pickle? Part of the answer lies in the very nature of what the U medical center does. Take the hospital. The staff treats lots of run-of-the-mill medical ailments. But the U's designation as a cancer treatment center, its organ transplant track record and it's heart surgery reputation attract difficult and expensive cases.

One day, 13 years ago, Gayle Hunter Haglund's doctor in Brainerd delivered the news that she had an aggressive form of breast cancer racing through her body like a brush fire. Haglund, who now lives in Virginia, couldn't believe what she was hearing.

"They predicted I had three months to live, given the stage it was at at that point," recalls Haglund.

Reeling from the shock, Haglund and her family nevertheless swung into action, researching the country's medical institutions, looking for one with a high rate of breast cancer treatment success. The list, which included the University of Minnesota, was short. Late in the same day of her diagnosis, Haglund found the U's cancer hotline telephone number in a directory and called.

"The work that's been done on the bio-artificial liver at the University of Minnesota; I know that particular company is out raising money. Another little company I've done work with in the past has done work in diabetes treatment," says Arnold.

But the medical innovations Arnold and other investors wait for don't happen overnight. Work on the bio-artificial liver began 30 years ago. University of Minnesota surgeon and bio-artificial liver researcher Tim Sielaff predicts the machine will save thousands of lives when it gets federal approval in a few years. (See the bio-artificial liver)

"This is an extraordinarily complicated endeavor. It's not something that can be undertaken by a company by itself, and it's not something that can be undertaken by the university by itself. It really does require a team effort," Sielaff says.

Not far from Sielaff's lab, another scientist is working on a therapy which also shows commercial potential. The U invested $10 million to create the Stem Cell Institute for Dr. Catherine Verfaillie, when officials learned another institution was trying to hire her. Stem cells, Verfaillie says, show a tantalizing potential for fixing an array of illnesses.

AN ACCIDENT IN THE LAB Dr. Catherine Verfaillie says one of her most striking discoveries - that adult stem cells may be much more versatile in repairing damaged body parts than originally thought - was an accident. U officials have spent up to $10 million to build the Stem Cell Institute, and staff it with scientists, in a reaction to the attempts by other institutions to lure her away from Minnesota. MPR's Dan Olson talked with Dr. Verfaillie. Listen.

Verfaillie is ready to begin the next phase of her research and is looking for private-sector money. But university officials worry about becoming too cozy with companies. They don't want investors calling the shots on what research to pursue, who to hire, and who controls the results. For their part, companies don't like to invest in what amounts to scientific trailblazing. They prefer to wait and pay for research that's closer to delivering a product. Verfaillie says the private sector would have pulled the plug on her early research, because it wasn't clear how it would lead to something that can be sold.

"They were sort of accidents happening in a laboratory. If you were a corporation, these accidents would have been put away in a drawer and nobody would have looked at them," says Verfaillie.

The U's medical center money problems are a steep climb, but don't appear to threaten derailment, compared to other events in the institution's rollercoaster-like history. Retired University professor Leonard Wilson has chronicled the institution's ups and downs. In its 112 years of existence, the medical school has survived fires, world wars and meddling of all description. Take l913. Wilson says Dr. Will Mayo, co-founder of the Rochester clinic and also a university regent, decided the best way to deal with its rival medical facility, the U of M's Medical School, was to deliver a knockout punch.

"In 1913, he effectively influenced university President Vincent to ask for the resignations of the whole medical faculty," says Wilson.

The U recovered, and by the l940s and '50s the Academic Health Center's fortunes were rising. Wilson credits Owen Wangensteen, a Lake Park, Minnesota farm boy who became chief of surgery, with creating a spirit of collaboration and innovation which scientists say is intact to this day. Wangensteen, for example, encouraged the career of open heart surgery pioneer C. Walton Lillehei.

"Patients were coming from all over the world to Minnesota for heart operations. Young surgeons were coming to learn the methods of heart surgery," says Wilson.

The U's fortunes dipped again in the '90s over a scandal involving Dr. John Najarian. The world-famous surgeon brought the U acclaim for 25 years of groundbreaking kidney transplantation research, including development of an effective anti-rejection drug known as ALG. The U began production and sale of the drug without final federal approval. The feds closed the operation down. Najarian resigned his faculty spot. A federal grand jury indicted Najarian, citing financial shenanigans. He was acquitted on all counts, and Najarian continues work at the U as a medical doctor. But the episode is fresh in the minds of those who say it demoralized staff and faculty, and added to the medical school's current woes.

Not even self-inflicted wounds obscure the U's string of stellar achievements right up to the present. Supporters cite those achievements in their effort to improve the prognosis for the medical school's financial health. The prognosis is guarded and further treatment is in the hands of lawmakers. Gov. Ventura handed lawmakers a proposed budget which includes much less than the U has requested this session. Rep. Peggy Leppik, R-Minnetonka, chairs the powerful House Higher Education Finance Committee. She says the medical school is in a tight spot, but she doesn't know what lawmakers will do.

"I have not polled everybody, but from the people I have talked to there is concern, there is recognition that the medical school needs to be tended to," says Leppik.

Gayle Hunter Haglund, the breast cancer survivor whose treatment at the U 13 years ago gave her a new lease on life, says saving the medical school should be a top priority. She and her husband still own a business and pay taxes in Minnesota. She says people should ask how they want their money to be used.

"It isn't that easy to create a treasure like the University of Minnesota Health Center, because it isn't being done elsewhere, we know. Before they lose it, they need to recover it, prioritize it," says Haglund.

Lawmakers will likely agree on how much money to give the U in a conference committee near the end of the legislative session in May.