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Accomplishments and Challenges for the New Year

 

January 20, 2003

Dear Colleagues:

Welcome back! I hope that all enjoyed a respite over the holiday period. I write today to reflect on the University during my first 6 months tenure and to lay out some of the challenges we will face in the New Year.

The fall semester brought the news that four more of our faculty have been elected to the Institute of Medicine, while three of our young faculty received the Presidential Early Career Award in Science and Engineering. We also announced another MacArthur fellow, a Doris Duke Distinguished Clinical Scientist Award recipient, and another young researcher who has been named one of the top 50 Women in Science.

Fall enrollment reached an all-time high in Ann Arbor and Dearborn, including the arrival of the most competitive incoming class on record. One of our student's inventions won the 2002 Collegiate Inventors Competition, and two of our law students were designated Skadden Fellows for 2003. Our staff received awards from the Michigan Women's Business Council and the Michigan Minority Business Development Council, and the Business School was named the Outstanding Educational Institute of the Year, for the second consecutive year, by the National Black MBA Association. U-M Dearborn and ISR announced they will soon undertake the nation's first comprehensive look at an Arab American community, that of the greater Detroit area; and U-M Flint opened its new William S. White Building for the School of Health Professions and Studies.

Overall, the University is thriving and momentum is strong. Research funding is showing a healthy gain this year. We are actively working to streamline our administrative processes and in doing so have achieved savings in utility costs, commodity costs, and interest expense, as well as implemented simpler business processes for research administration, admissions, p-card administration and in numerous other areas. Several large private gifts have been announced and planning for the capital campaign has been reenergized.

Just this last month the legislature and the governor approved a 2% mid-year cut for higher education in the state. This cut of $7.2 million was not unexpected given forecasts for the Michigan economy. We had prepared for this possibility and are able to absorb this cut by curtailing central administrative budgets, an action taken to protect our academic programs from mid-year cuts. Unfortunately, there is active discussion in State government about another round of cuts yet this year, and should that happen, all units must be prepared to share in them. Regrettably, given economic projections, we must also plan for further cuts in the state appropriation next year.

The State of Michigan is facing a relatively severe budget deficit for the upcoming year. We anticipate that higher education will have to share part of the burden of budget reductions, but we have no way of knowing precisely what cuts may be proposed or enacted. The University of Michigan has been planning proactively for possible cuts in the State appropriation for a year and a half. I believe that our actions have left all of our academic units in a position to weather modest declines without disrupting their most important programs and activities. But, we must be prepared to respond to cuts that go beyond the modest. Foreseeable budgetary difficulties may well challenge us and our ability to maintain our superb academic offerings, as the University of Michigan has long been committed to doing.

Provost Paul Courant, Interim Chief Financial Officer Tim Slottow and Interim EVP Medical Affairs Lazar Greenfield are working with vice presidents, deans, and administrative directors to plan for the budget challenges in the upcoming year. This must and will be a shared effort. We will not implement across-the-board budget cuts, pay freezes, or hiring freezes. The University must continue to invest in its highest programmatic priorities. We should always be looking for more efficient ways to reach our goals, with a clear understanding that some of our priorities are more important than others. It has always been the case that innovations at Michigan have been supported in part through reductions in other areas. In the current budgetary situation continued progress will require that we work even harder to identify activities that can be trimmed or eliminated.

As a general matter, schools and colleges will face the smallest cuts. Continuing— indeed improving—our ability to deliver courses at the level of quality that defines the University of Michigan will be our highest priority. Deans and directors are being asked to plan for General Fund budget cuts that may be in a range of 2 to 6 percent or more. We have asked that our deans and directors examine the possibility of keeping some open positions unfilled for a time, and of using open positions as opportunities to reconfigure their activities. Although salary programs will almost surely not be as strong as they have been over the last several years, one of our guiding principles must be to keep our most outstanding people, even during tough economic times. Therefore, we now anticipate that all of our units will mount at least modest salary programs, although this becomes ever more difficult as the size of the state cut grows. Financial aid will continue to keep pace with increases in tuition. Our policy of meeting the demonstrated need of all resident undergraduate students will be maintained.

One mechanism for dealing with budgetary exigency is to postpone expenditures until better times. Maintenance can be deferred, as can replacement and upgrades of equipment and initiation of new construction and new academic programs. In the longer run—and it is the long run quality and character of the University that must be our focus—it must be recognized that such savings are temporary. Future revenues and reallocations will be required to catch up on things that are postponed today.

Often, I am asked the question why we are building so many new facilities when our General Fund budget is under so much pressure. The answer relates both to the way in which building projects are financed and to the importance of maintaining excellent teaching and research spaces for the University. Most building projects and renovations are not funded with recurring General Fund appropriations. Rather, we use a combination of specific appropriations, private donations, and tax-exempt borrowing to finance building projects. Moreover, if we delay projects that are already underway we will save little or nothing, while jeopardizing our ability to take advantage of the opportunities that the new buildings are designed to afford us. Thus, delaying much-needed buildings will not add funds for other operations and would instead harm those parts of the University that are and should be growing rapidly, e.g., research funding or providing facilities to accommodate increasing student demand. The buildings that are currently under construction will serve us well for decades. Long after the current budgetary exigencies are forgotten, they will be the platform from which to conduct the research and teaching that define the University of Michigan.

In sum, we are facing a challenging new year. However, I know we will be able to work collectively and effectively in managing budget issues so that the University of Michigan will maintain its position as a leader in higher education, providing the best possible environment for education, research, and service.

I ask for your support in responding creatively so as to help the University advance even while confronting momentary budgetary constraints.

Sincerely,

Mary Sue Coleman
President, University of Michigan