Remarks on the 2009-2010 Budget
June 18, 2009
Good afternoon and welcome to our June meeting.
This is the time of year when we bring to the Board our recommended budget for the upcoming fiscal year. While on paper the budget appears as numbers and columns, it, in effect, represents the goals and aspirations of the University.
My seven years at Michigan have been built upon a depth of experiences in higher education, including tenures at the universities of Texas, Kentucky, North Carolina, New Mexico, and Iowa. Like U-M, all are public universities; and three, like Michigan, are members of the Association of American Universities, with large and robust research enterprises.
However, the University of Michigan stands alone among these institutions. This university is in a different league with its national and international standing, its scholarly breadth, and most of its schools ranked within the top 10.
The opportunities we offer to our students, both undergraduate and graduate, are simply not available at other leading universities. The experiences we accord our faculty are equally impressive. This is the essence of the Michigan Difference.
All this has been at the forefront of our thinking in crafting this year’s budget. And I use the word “craft” deliberately, because this has been a skilled, precise process where no detail has been overlooked.
I cannot overstate the importance of keeping U-M strong during this tough economic time. We are critical to the future wellbeing of thousands of young people. And we are critical to the re-birth of this state. In that sense we represent a larger societal purpose, in addition to our long-standing contributions in teaching and research.
When I reflect on our strengths as a university and our role in society, I am very sensitive to the morale of this place, particularly in our state. I do not want people – whether within the university or in communities throughout Michigan – to be anxious about our financial stability. We are stable – very stable – because of the leadership of this Board and the diligence of our financial team. In fact, I believe morale is high: we are confounding people both here and nationally with our financial stability.
This stability, along with our ability to recruit and retain faculty and staff, as well as attract record numbers of students – all this we lose at our peril.
Four critical facets of university activity have determined our current stability and performance, and are critical to the decisions made in developing our budget, because where we place our resources shapes the future direction of the institution.
First, we have been aggressively focused on what the corporate world knows as market presence. Our impact, in so many areas, is unique. And we are seeing results in all facets of the academy: strong admissions; steady growth in research funding, which we anticipate will continue and be augmented by federal stimulus dollars; economic development activities with genuine impact; strong faculty hiring, at a time when few universities are extending offers; and productive faculty, as evidenced by accomplishments such as membership in the national academies and appointments to prominent national leadership positions.
Second, we are generating funding at a time when revenue growth in most organizations is extremely challenging, if it occurs at all. Our research funding stands at record levels, with a notable increase in industry support. Support from our donors has been historic and continues, even with a downturn that surely is affecting their resources. We are offering more classes in spring and summer terms; treating more patients throughout our health system; and seeing more students transfer from community colleges.
Third, we are insistent about controlling costs. The list is long, and the savings are significant. We have asked people and programs across the institution to make sacrifices. This includes – but is not limited to – changes in employee benefits such as health care and institutional retirement contributions for new employees; closing our television station and moving our university press to an online-only model; being more deliberate in how we use and allocate space on campus; reducing energy usage; and asking our schools, colleges and units to accept budget cuts of anywhere from 1 to 3 percent.
And lastly, the University’s cash and balance sheet management is the envy of higher education. We have an excellent bond rating that represents an external assessment of confidence in our market strength, financial position, and resource management. Our investment strategy has been prudent and is buoying us at a time when other universities are being forced to make drastic cuts.
I earlier mentioned the leadership of this Board. I have been involved in setting university budgets for many years now, and have never, ever, worked with a governing board as engaged and thorough as ours. Since the start of the financial downturn, we have met repeatedly to review the institution’s finances. This includes regular briefings, a retreat focused on the Health System, frequent meetings of the Finance, Audit and Investment Committee, and one-on-one sessions between the provost and individual regents.
Through all of this, Board members have shown an attention to detail and debate that has been unparalleled in my experience as a university president. I want to thank them for their hard work, not only with our budget planning but also throughout the year.
I especially want to thank Regent White for her leadership as chair during an extremely challenging year. She has kept everyone on task and focused throughout the many long briefings on the budget, and has served as wise counsel to me – on this and many other matters – throughout her tenure as chair.
We constructed this year’s budget recommendation on the premise that we would emerge as a stronger institution. Our goal is not merely to hold our own, but to advance against our peers on a global scale. We are not out of the woods – we anticipate more budget challenges in the near future – but are confident in the institution’s ability to move forward. We are joined today by many of our deans, and their leadership is critical to our success.
Earlier this week I had the opportunity to speak at the National Summit in Detroit, where the focus was on setting a course for America’s economic future. Almost all of the speakers agreed that path absolutely must include higher education, because higher education represents our collective future. We must work together to protect, sustain and grow this enterprise, because more than ever, our work matters – in teaching, research, health care, and service to our state and the world.