Testimony of President Mary Sue Coleman
May 16, 2003
to The Senate Higher Education Sub-Committee of
the Senate Appropriations Committee
I would like to thank the committee and Chair Goschka for the opportunity to address you today.
I have made several trips to Lansing, and I appreciate the time that many of you have provided to me for discussions about higher education in this state, and I look forward to getting to know all of you better. I have been very impressed with your level of interest in and dedication to higher education. It means a lot to me.
I especially want to welcome you to our Ann Arbor campus and the Ford Library, which, as you have just heard, is administered by the federal government, via the National Archives and Records Administration.
And I am delighted to be joined here today by the Chancellors of our Flint and Dearborn campuses, Juan Mestas and Dan Little, as well as my colleagues Sam Kirkpatrick and Irv Reid.
Even before I moved to Michigan from Iowa last summer, I knew that Michigan’s policy-makers have had a strong history of support toward public higher education. Like the rest of the country, I admired the excellence and the distinctive missions that Michigan has produced in its colleges and universities.
In fact, this state has set a high standard that other states watch closely. The approach of the Michigan Legislature over the years has been thoughtful and strategic. Both the state and our students have reaped enormous dividends from the public investment. In this nationally constrained economy, the decisions you make will be observed around the country.
Like our automotive industry, our research universities operate on a global level. Just imagine what the automotive industry would be like if it only sold cars in this state. Higher education also draws its strength from its activity on the national and international stage. We hire the best faculty, and are constantly competing with other states to attract and to retain the faculty that make our university one of the top institutions in this country.
It has been said recently that higher education around this country is facing a “perfect storm.” What are the winds that threaten our well-being? They are: the economic recession, the growing need for student financial aid, the dramatic increase in student applications, the proliferation of costly federal regulations regarding medical care and research, and the need to focus our energy on major policy issues, such as homeland security.
But despite all these complex forces, it is critically important for our state to keep higher education as a top funding priority.
Other states have made the decision to spare higher education as much as possible, simply because research universities will be a key factor that will lead us out of the broader economic difficulty.
Just two days ago, California Governor Gray Davis issued a new budget that restored former cuts to higher education. He said his reason is: “Education is the key to California’s future.”
However, I understand the dilemma the Legislature faces, as do all the presidents and chancellors who are appearing before you this month.
We will share in the burden of the current budget challenge, but we hope you will partner with us to preserve our quality and our ability to be a powerful economic force in this state.
The questions you asked us in advance provided us with the opportunity to detail some of the specific issues we are facing at the Ann Arbor campus of the University of Michigan.
Over the past two decades, we have significantly expanded our capacity to teach additional students.
As you can see in Figure A on the handout, our enrollment has increased by 4,500 students since 1985, when we enrolled just over 34,000 students. Our student body has increased 13% since then, to our current total of almost 39,000 students.
And the demand for admission at the University of Michigan is escalating. Every year, we have an increasing number of applications for the seats on our campus.
We all understand the business model that tells us that when demand goes down, production costs must go down as well.
The irony of our situation is that we are facing increased demand, yet at the same time our productivity is increasing, we are being asked to cut back on our expenditures.
So, how are we dealing with the reduction of funding while still maintaining our current enrollment level, and maintaining the high quality our students expect?
Unfortunately, the realities of the current fiscal scenario have forced us to propose reductions even in academic units, where the impact will fall on our students.
We have made the choice to do everything possible to educate our students without cutting at the core of the excellence that provides substantial value to the degrees of our children and alumni.
But our choices will start to erode the services we make available to our students, as well as the quality of the attention they will receive in some of their classes. In total, we expect to eliminate over 300 faculty and staff positions next year.
Let me provide one example of the impact of these cuts on our university.
Our College of Literature, Science, and the Arts is our largest college. It provides courses to over 25,000 students every year. Right now, it is faced with cutting and reallocating over $13 million from its annual budget of $220 million.
This College, which we call LS&A, teaches courses in English, history, languages, biology, chemistry, and over thirty other disciplines that all undergraduates must take. Therefore, a significant cut to LS&A provides an impact across the entire campus.
Some of the planned cuts are reductions of staff – eliminating 50% of the temporary help, eliminating positions in the dean’s office, and reducing hours and eliminating other staff positions throughout the College.
But the cuts that will have the greatest effect on students are the elimination of faculty positions. This year, instead of hiring new faculty in all vacant positions, the College will allow at least 21 faculty positions to go unfilled. This translates into a large number of courses that will not be offered.
Some departments will increase the size of selected classes significantly. Our Department of Political Science will increase some classes from 45 students to 80 students, and other classes from 80 students to 130 students. Some courses will be offered less frequently. But the College is determined to make sure that the courses with heavy demand will continue to be offered in order to meet student needs and to keep students on track for a timely graduation.
I have to applaud our College of Literature, Science, and the Arts for its commitment to maintaining quality and access even as it is dealing with these significant adjustments to the budget.
The question of quality is a very real one to our current students and our alumni. In a complicated machine, it is sometimes possible to replace steel parts with a tin alloy and not notice the difference, but when metal parts are replaced with plastic and paper substitutes, the mechanism become very flimsy.
The same is true in the complex world of higher education. We have a compact with our students, past, present, and future, to offer them a sterling education, and we are determined to find the way to continue to provide that.
The lifetime economic benefits of education are well understood by our students, who seek to join us in record numbers. The rest of the economy may be struggling, but the demand for higher education has never been higher, precisely because students and their parents understand so well that education is the best route to economic security.
In addition to our educational offerings, the state’s research universities provide a direct and powerful link to economic development in the form of federal research dollars.
The infusion of external research funding provides not only a direct economic stimulus, but also provides powerful incentives through subsequent technology transfer, which frequently creates new businesses in the state.
Just as the Governor is working with federal officials to obtain funding for roads and Medicaid, the University of Michigan, along with Michigan State University and Wayne State University, is instrumental in leveraging federal dollars for the state. The result is job creation and economic development.
Think about it this way: this past year, the University of Michigan brought in over $550 million in external funding for targeted research activity, making us one of the largest research universities in the country.
For every job created at the University of Michigan, a total of 2.5 jobs are created in the state.
This research funding, of course, leads to new discoveries and to even more job creation, though technology transfer into the commercial marketplace. In the last three years, 25 start-up companies were generated by the University of Michigan, along with the application for 254 patents and 222 licenses for our discoveries.
Let me emphasize that other states are hungry for the type of economic stimulus we create here. Other states are determined to hire our faculty members who attract large research grants and who generate jobs.
Listen to what Governor Pataki of New York is planning in order to regenerate his state: “[If we] combine the power of our high-tech industry with the strengths of our top-flight academic institutions and we can create a new economy and a new prosperity for New York.” 
Or let us look to the West, where Governor Holden of Missouri has said: “We must make our colleges and universities the engines that fuel our economy of the future.” 
But even though we attract substantial research dollars, the annual appropriation from the state is an important part of the University’s general fund, and one that we cannot do without.
The state provides a large portion of the funding for teaching students. As you can see in Figure B in your handout, our state appropriation is just over 30 percent of our general fund support. With that money, we provide an outstanding educational experience to our students, and we educate and graduate a highly qualified workforce to fuel Michigan’s economy.
The $36 million that the Governor and the House propose to cut from our budget will have real consequences for our University.
In addition, we also face another $40 million in cost increases next year. Many of these increases in operational costs are necessary because of factors outside our control, such as increased costs of utilities, increased health benefit costs, and the growing need for institutional support of financial aid.
I want to note that the University has been working for years to reduce its costs in administrative units.
And although we can always do more, I can tell you that the University of Michigan has exercised strict cost control and has worked vigorously to reduce the cost of its operations.
We will all do our part. I have told my Board of Regents that I will not accept any increase in compensation this year, and each of the University’s executive officers has told me they will not accept any salary increases either. So, we have agreed as a group that the senior administrative leadership team will forgo any raises for the upcoming fiscal year.
Finally, I want to discuss our commitment to tuition restraint and financial aid support.
Our excellence as a public university means little unless we are accessible. In order to keep the University of Michigan as accessible as possible, we are determined to maintain our longstanding policy of meeting the demonstrated financial need of all our resident undergraduate students.
Figure C shows the amount we have increased financial aid over the past twelve years. Please note that our financial aid increases have kept pace—and more—with our tuition increases in order to continue to provide access for those with need – this is a principle to which we are dedicated.
Let me emphasize this: we are determined to meet the demonstrated financial need of all our undergraduate students from the State of Michigan. This requires a combination of grants from the state, grants and loans from the federal government, our own scholarship funds, and student work-study.
When the economy worsens, this need only increases, as more families become dependent on financial aid.
We will always increase our own funding of financial aid sufficiently to honor this pledge of accessibility we have made to the students of Michigan.
And, of course, tuition is very much on your minds and the minds of our students and parents. If you refer to Figure D in your materials, you can track tuition increases in recent history. We have kept tuition increases as low as possible over the past several years, especially in comparison to our Big 10 counterparts.
In this state, the University of Michigan has been a leader in tuition restraint.
We must spend taxpayers’ dollars responsibly, and run our institutions as efficiently as possible.
You and your predecessors have been our partners in this effort.
Wide access to excellent colleges and universities is an important indicator of opportunity in any state. We must have the vision and the determination to provide a long-term solution for a short-term problem. We must be sure that we do not mortgage the future economy of our state and the future achievements of our children because of temporary constraints.
We will work as your partners to help the state find its way to a brighter future. Thank you for your attention today.
1—Governor Gray Davis of California, quoted
in The Chronicle of Higher Education, online edition, May 15, 2003.
2—Governor George Pataki of New York, “State of the State Address," January 8, 2003.
3—Governor Bob Holden of Missouri, “State of the State Address,” January 15, 2003.