Testimony to House Higher Education Appropriation Subcommittee
March 14, 2012
Thank you for giving me the opportunity to tell you about the work under way at the University of Michigan … especially since you’ve already heard a little bit about our campus from my colleague Tony McLain of Lake Superior State last week.
I understand he did a great job of comparing and contrasting our two campuses; each unique and serving our students; each playing a critical role fulfilling the educational needs of our state residents.
The size and scope of our institutions differ in some fundamental ways. Yet in one area, men’s hockey, we are fierce competitors.
On a more serious note, I want to begin my testimony today by thanking you for your support of higher education in Michigan. I know it’s not easy as you work to balance competing interests for what continues to be limited state funding.
The governor’s proposal for a 3 percent increase totaling $36 million in higher education funding to be shared among the state’s 15 public universities certainly is welcome news, especially because it comes on the heels of a 15 percent cut last year that totaled $47 million for our Ann Arbor campus alone.
While we agreed that last year called for shared sacrifice, we now see more encouraging signs.
This year’s recommendation to increase investment represents what we hope is a turning point for higher ed funding in our state, leaving in the past a decade of reductions.
Every day we see proof that higher education, and the University of Michigan in particular, is a solid investment. People are putting their resources — and their trust — in us.
Students and their parents know the value of a U-M education. We’ve had nearly 42,000 applications this year for about 6,000 spots in the fall 2012 freshman class.
That’s a record number of applicants — for the third year in a row. They come from all parts of our state, all 50 states and around the world.
Our enrollment also has been growing, but — intentionally — at a much slower rate. We have more than 27,000 undergraduates on campus this year, up 5 percent from 2007. Our graduate and professional student enrollment stands at more than 15,000.
The number of undergraduate degrees granted on the Ann Arbor campus has increased 10 percent to 6,553 degrees. The number of graduate degrees granted has had a similar increase to more than 4,600.
Donors see U-M as solid investment and are helping to propel university programs and facilities to best-in-class status.
Government leaders are betting on our science. Research funding this year topped $1.2 billion, making U-M the nation’s top public university in research funding.
Graduates know the value of a U-M degree. Nearly 90 percent of U-M graduates have jobs within nine months of graduation.
Don’t just take our word for it.
U.S. News & World Report, which released its latest graduate program rankings this week, ranks 95 U-M programs in the top 10. Only three schools in the nation — Harvard, Stanford and UC-Berkeley — have more top-10 programs.
U-M is ranked as the world’s top public university in the most recent QS World Rankings and is ranked 14th among the 2,000 institutions on this global list.
This is recognition that we — and you — can take pride in acknowledging.
Being able to bring together a diverse student body with our world-class faculty is one of the reasons for the high rankings and the high regard for a University of Michigan education.
We work in a variety of ways to attract students to the university. Our admissions counselors visit more than 450 high schools in Michigan each year.
An initiative that I am especially proud of is the Michigan College Advising Corps. The goal of this team is to increase the number of low-income, first-generation and underrepresented students entering and completing higher education in the state, not just at U-M.
Following in the tradition of the AmeriCorps and Teach for America programs, these recent U-M graduates are recruited, trained and placed full-time in under-served high schools across Michigan. These advisers are currently serving 15 high schools from Benton Harbor to Saginaw, working to foster a college-attendance culture.
We also have a special outreach effort to community colleges and other transfer students. Our admissions website has a dedicated portal for aspiring community college transfer students containing comprehensive information about credit transfer and other issues.
We partner with community colleges to help ensure students successfully plan for transfer if that is their goal. A recent initiative with community colleges in West Michigan doubled the number of Grand Rapids Community College students transferring to Ann Arbor in four years.
A highly educated work force is essential to our ability to increase our global competitiveness. Paying for that education is becoming more of a concern among Michigan families and I know members of this committee share that concern.
I share this concern as well, which is why we have a long-standing policy of meeting the full financial need of all Michigan resident undergraduate students. We are unwavering in that commitment.
We know many of our students and their families are hurting as a result of deteriorating economic conditions. Over the past four years, the university has invested heavily in need-based financial aid to ensure access to the institution for admitted resident students from all socioeconomic backgrounds.
Overall, 70 percent of Michigan resident undergraduates receive financial aid. Half of the Michigan students in this year’s freshman class receive financial aid.
Undergraduate financial aid from institutional sources totaled $139 million last year, a 13 percent increase over 2009–10. These funds come from a variety of sources including the university’s general fund.
Since 2005–06 our general fund budget for undergraduate financial aid has nearly doubled from $51 million to $91 million.
Those are big numbers. We can all agree on that. But what does it mean to students?
This year’s investment in financial aid was strategically targeted to provide increased grant aid ¬to cover the full increase in the cost of attendance, not just tuition, for undergraduate students with financial need. And I want to underscore grant aid — which, as you know, does not need to be repaid.
And because we were able to funnel those funds into grant aid, there was no increase in the loan burden in the financial aid package of those students.
But here’s the real bottom line — and one of the truly most under-reported stories about the university: As a result of these investments, most students with family incomes up to $80,000 who have financial need, pay less today to attend U-M than they did in 2005–06. Less. That’s not a misstatement. Even families with incomes up to $120,000 who have financial need are paying only slightly more than six years ago.
One of the most gratifying outcomes of our most recent capital campaign was the success of the President’s Donor Challenge, which raised more than $72 million in endowment for need-based undergraduate financial aid. Overall, 20 percent of the university’s endowment is dedicated to providing scholarships and fellowships. I have talked personally with many donors about the need to keep our doors open to deserving students for whom cost will be a barrier, and so many are responding positively; they want to help us in this important mission.
Today we are in the very early stages of developing an approach for our next capital campaign. While there are many decisions still to be made before we launch this campaign, we can safely predict that financial aid, aimed at reducing student debt, will be one of the focal points of that effort.
I believe when we focus on reducing student debt we are targeting the largest challenge for students: Your debt burden should not prohibit you from attending college or pursuing the field of study that is most important to you. We will work hard at student debt reduction over the next few years.
Let me now turn to the university’s role in the state’s economic recovery.
I believe we all can agree that strong universities are essential to the state’s ability to be an active player in the national and global economies. The university’s role in stimulating economic growth our region and in the state has grown by all measures over the last decade.
U-M consistently ranks among the top 10 U.S. universities in technology transfer performance. We had 101 licensing agreements and spun out 11 startup companies in 2011 — that’s one business every five weeks.
In the last decade, the University of Michigan alone recorded more than 2,800 discoveries, 814 license and licensing option agreements, applied for more than 1,300 patents, collected more than $167 million in royalties and equity sales and fostered 93 startup businesses. And, especially important to our state, three-quarters of those startups are located in Michigan.
To turn an invention into a marketable product that can benefit society, you need, above all else, the right people. That’s precisely the premise behind a new statewide program called the Tech Transfer Talent Network. It is led by the University of Michigan and funded through a grant from the Michigan Economic Development Corp.
The network includes seven universities and regions with strong research-based clusters. In addition to U-M, members are: Wayne State, Michigan State, Michigan Tech, Western Michigan, Grand Valley and Oakland University. Each university also is collaborating with its regional economic development organization.
The primary goal of the Tech Transfer Talent Network is to increase the supply of seasoned entrepreneurs and innovators who can lend their expertise to university tech transfer offices — to make us all even more effective.
Our state needs entrepreneurs, and students are our next great innovators. On our campus, 15 percent of our incoming freshmen had started a business before they even set foot on campus.
That’s at least 900 students, in one freshman class, whose entrepreneurial juices are already flowing. So, to help them refine their visions once they arrive, we offer more than 100 entrepreneurial courses, incubator space, venture funding and more.
At the U-M we’re also putting the state’s best to work. The university is the Metro Detroit region’s second-largest employer, helping keep the Ann Arbor area’s jobless rate one of the lowest in the state, even during these difficult times.
We expect, over time, to create up to 3,000 high-quality jobs as a result of research work at the North Campus Research Complex, the former home of Pfizer. Already there are slightly more than 1,000 employees working there with about 15 percent of them new hires.
It’s not just the U-M campus that’s having an impact on the state’s economy.
As you know, U-M, Michigan State and Wayne State, make up the University Research Corridor. It’s the collaborative effort we launched in 2006 to leverage the tremendous strengths of the research universities.
Today, the URC ranks among the country’s top university research regions. Michigan ranks fifth compared to seven similar states, regions and cities in terms of invention disclosures, third in patents, and fifth in startups.
Collectively, the URC invested more than $1.8 billion in research and development in 2010 and had an economic impact of $15.2 billion. That’s a return of more than 17 times the state’s investment in state funding for the three URC universities.
We are generating an enormous amount of important research in the life sciences. This is a huge range of activity from basic science to the application of that science in areas such as medical devices and technologies. One area of specialized research that is deeply important in the life sciences area is in stem cells.
Several of our researchers were among the first in the country to receive federal support from the NIH to establish an embryonic research center using federally approved and established stem cell lines authorized by President Bush in 2001. More recently, one of our stem cell researchers recently won a MacArthur Genius Grant award, one of the nations’ most prestigious honors.
The breadth and depth of this research is far-reaching and cannot be represented by the reporting of selected statistics. We submitted to the state in December an exhaustive collection of information on our stem cell research.
The material provided referenced the research progress chronicled in scholarly journals and announced publicly in news releases. In essence, we submitted all the university’s reporting on stem cell research, documenting both our scientific activities advances as well as more general information on our programs we disclosed publicly.
In addition to the university’s substantial efforts in economic development and financial aid, I also want you to know that the university continues the relentless efforts at cutting costs and creating more efficient operations.
Despite the 35 percent reduction in state support over the past decade, our university sits on a stable financial foundation today because we began tackling the cost drivers for higher education long ago.
Over the last decade we’ve reduced or reallocated $235 million in recurring costs. And we are committed to finding another $120 million in savings in the next five years.
We’ve accomplished that through savings big and small. We’ve done it by restructuring the way we clean our buildings and the way we water the grass. We replaced our own Central Stores with more cost-effective strategic vendors in the private sector. Our programs to reduce energy consumption were successful enough to save $5 million in 2010 alone.
Earlier this year Governor Snyder talked about what he saw as “the most under-reported story of 2011.” He said one of the most important government reforms that was “flying under the radar” was the billions of dollars the state would save, over time, by asking state employees to contribute toward the cost of their retirement health care benefits.
It’s a bold move. The savings are significant.
This year, the University of Michigan will have accumulated $400 million in savings since 2003 through a wide range of changes to our employee benefits. These changes come from employees paying a greater share of health benefits — now 30 percent on average — through the greater use of generic drugs, through a one-year waiting period for new employees to receive university contributions toward their retirement savings accounts and through reduced administrative fees paid by the university to its health insurance administrator.
Also, after a year of study and broad campus consultation, we soon will see significant additional savings in retiree health care benefit costs, projected to be almost $9 million a year before the decade is out.
We’ve also kept staff positions in check. The number of full-time equivalent positions paid by the general fund decreased 2 percent from 2009 to 2010. While we’re still hiring, the major growth areas are in research and health care — areas covered by non-state-taxpayer funding.
My own staff is half the size it was when I arrived on campus in 2002.
These moves all contribute to significant cost reduction and avoidance. We will not let up on these efforts.
Nearly all of the statistics and financial information I’ve shared with you today can be found on the U-M website.
This book that I brought today, affectionately known as the Grey Book, details the university’s budget. You can find this information on the Office of Budget and Planning’s website going back 10 years. You will also find our annual financial report available to the public.
With an overall budget approaching $6 billion, the university handles almost 50 million individual financial transactions each year.
With that background, I can tell you today that we are working to produce, in a cost-effective format, the type of financial expenditure information specified in the higher education budget, but it will still take some time to complete that task.
Now I would like us to turn our attention to the budget proposal for higher education.
By all accounts, the University of Michigan is a world-class institution of higher education.
- We have applications from nearly 42,000 students who want to be a part of our next freshman class.
- We have 95 academic programs ranked in the top 10 nationally.
- We get more research funding than any other public university in the nation.
Yet, in the budget proposal that has been recommended, you could erroneously come to conclude that based on the performance measures that were evaluated, the university is a failing institution. I am concerned about a number of aspects of the recommendation that could be improved.
We share many of the concerns about the metrics raised by the Business Leaders of Michigan. This group of 80 CEOs, representing the state’s largest employers, has publicly endorsed renewed investment in higher education and has recommended a more robust set of performance measures. They also noted several main areas of concern about the administration’s recommended metrics:
- They pit the very different 15 public universities against each other.
- They put an emphasis on improvement to the exclusion of achievement.
- They focus exclusively on undergraduate education.
- There is no recognition of the research and development and economic development activities that help to define a major research university.
The metrics compare the state’s universities against each other rather than against their Carnegie classification peers. The funding recommendation looks back and not forward. Achievement counts for little.
Further, the proposal does not take into account the ceiling effect experienced by the most successful institutions. At U-M it would be very difficult to significantly increase the number of degrees granted. Our institution is at capacity. And our six-year graduation rate of 90 percent already is well above the national average of 56 percent. We feel strongly that the metrics must reward achievement as well as improvement.
Another significant aspect of the funding metrics that we believe is important is recognizing the value of professional and graduate education at the state’s universities. Doctors, advanced teachers, dentists, social workers, nurses and lawyers who graduate from Michigan schools are essential to our future. And those who get their training in Michigan are more likely to establish their professional careers here.
Last, in relation to tuition decisions, I believe setting an appropriate tuition level is a decision best left to the individual boards governing each institution. Those board members are in the most informed position to know what is the appropriate level of tuition for their institutions.
I have worked with public and private university boards for more than 20 years, and not a single one has failed in their duty to take into consideration the many factors to consider when setting tuition policy.
Complicating the funding associated with a university’s decision on tuition is the apparent intention that the increase in funding across all the metrics is for one year only. It’s extremely difficult to plan ongoing academic programs with funding that could vanish the following year.
State appropriations for the University of Michigan have been declining since I arrived on campus in 2002. This year, as the state’s economy started to show signs of improvement, the Governor’s recommendation for an increase for the coming year was, indeed, welcomed news. We appreciate the governor’s recognition that higher education matters and we will continue to work with his administration to refine and improve the means of measuring our outputs.
There once was a time when the state supported 80 percent of the university’s general fund budget. Today it’s 17 percent.
On an inflation-adjusted basis the current year’s state appropriation for the university’s Ann Arbor campus is equivalent to what we received in 1964.
Last month you heard directly from the Business Leaders of Michigan group. This group believes our state universities are major drivers of Michigan’s recovering economy.
I certainly agree with Patrick Doyle, president and CEO of Domino’s Pizza, who said, on behalf of the BLM, that increased funding for quality, affordable higher education in Michigan is “one of the most important investments you can make” to ensure continued future economic growth in our state. The governor’s proposal is a step in the right direction.
We simply must step it up.
I say that fully cognizant of how difficult it will be.
Yet we had a very vivid example just this week of this shared commitment to higher education when the Dow Chemical Co. announced it would provide $10 million to fund 300 students from a variety of disciplines to study on our campus and focus on solving some of the world’s most pressing sustainability challenges.
The economic outlook of our state is getting better, although there is a long recovery ahead. Michigan was once a top-10 state in higher education funding. Today we are near the bottom of that list.
I’d like to see the Legislature set a goal of getting the state back into the top 10 of state funding for higher education. I recognize that would be a long-term goal. But setting a goal is the first step toward achievement.
The University of Michigan is fast approaching its bicentennial. In 2017 we will celebrate the bold vision of our founders and your predecessors that the untamed territory of Michigan should have a great university — a great public university — devoted to education and science.
Today, the University of Michigan continues to be a place of bold ideas and action and it is a point of pride for state residents.
If you attend a football game at Michigan Stadium, you will see how important the state is to our campus. Around the concourse of the Big House, perhaps the most recognized icon of our campus, the name of each of Michigan’s 83 counties is inscribed in stone. We want every Michigan resident to feel at home on our campus.
Thank you for your time and attention today. We look forward to working with you to make the higher education opportunities in this state better than ever.