Rahm Emanuel, the soon-to-be chief-of-staff of President-Elect Obama, said recently: "You never want a serious crisis to go to waste." While none of us would have asked for the global economic crisis that we now face, we also need to see it as a chance to think about our work differently and to look for opportunities that might not have occurred otherwise. We have a college full of creative people, accustomed to generating inventive ideas under constraints, and so I have no doubt that we will do as well as can be expected in the current recession, imagining new ways of doing things.
The economic situation
Before I get to that, let me first convey what I know so far from my meetings with upper administration over the past few weeks. As you know from the news, the governor has decided to "unallot" the University $20 million as part of his need to erase the $426 million deficit this budget year. The University has notified colleges that they will tap unspent balances and reserves to cover this one-time cut, and we are currently assessing what that might mean for us. Of greater concern is the next biennium, when the state will have a $4.8 billion shortfall ($5.3 billion including inflation). The Governor will announce his budget recommendations for the 2010-11 biennium on or before January 27th, so we don't have long to wait to see how he deals with a record deficit or what cuts the University will suffer.
President Bruininks has mentioned several times that he would like to avoid layoffs as much as possible, not only out of concern for the dedicated staff of the University, but also because layoffs only worsen what has become a deflationary downward spiral in the economy. Instead, he wants to accommodate cuts by not refilling vacant positions, which explains the hiring "pause" that he put in place several weeks ago in which every unit needs to seek approval for all new hires. We have had success this month in getting approval to rehire the researchers and adjunct faculty we need to conduct funded research and to teach core classes, but we may have a more difficult time replacing retiring fulltime faculty or staff in this economic climate.
President Bruininks also wants every college to look for new sources of revenue and for new ways of doing things more efficiently and cost effectively, so that the amount of work adjusts to the size of our staff. We have had some experience with this since becoming a college, demonstrating that we can live within our means and adjust the amount or pace of work accordingly. The practices and processes we have evolved over the last two years will serve us well in the next two.
President Bruininks has asked each unit -- central administration as well as the colleges -- to begin modeling different levels of budget cuts, which we will do over the next month, in preparation for the governor's budget announcement. If there is any consolation, we have plenty of company among universities around the country. At a breakfast meeting of about 40 deans from public and private design colleges in early November, I heard every one of them say that they had been asked to model cuts in the 5 to 10 percent range. Unlike recent recessions, in which public universities had deeper cuts than private ones, this time the tables seem turned, with the decline on Wall Street hitting private colleges and their endowments hard. The U of M Foundation's endowment has taken a hit, experiencing a decline of 18.7% through the end of October, but that pales in comparison to Harvard's endowment loss of $8 billion this year.
Amidst this sobering news, however, opportunities lay just over the horizon. As often happens during recessions, many un- or under-employed people go back to school for further education, and by all indications, that has already begun to happen, with applications to the University up over the already high numbers of last year. We may also see a number of students attending or intending to go to private schools switching to public universities as endowment declines reduce the amount of financial aid available to private-school students. The increase in the quantity and quality of applicants presents us with opportunities we should think about in the coming months.
Likewise, federal initiatives could play to our advantage. The anticipated use of community work as a way of deferring students' college expenses could connect to the many outreach and extension efforts we have underway. Also the Obama administration's planned investment in infrastructure and greening initiatives could connect to the sustainability expertise we have among our faculty and research staff. We will know more after the new administration takes office, but the federal government's move in the direction of our disciplines should help counter some of the cutbacks by the state.
To elicit your ideas about what we might do and how we might respond to the challenges and opportunities we face, we will hold brainstorming sessions early next semester. I would also encourage you to use the governance structure we have put in place with our new constitution to bring ideas forward, through the various consultative committees and the college and faculty assemblies. We will need everyone's involvement.
There may be no time in the history of this University more trying than what lies ahead for us -- or more transformative. This university, like the entire country, will need, as Thomas Friedman said in the New York Times, to be "digging inside of ourselves and getting back to basics -- improving ... productivity, saving more, studying harder, and inventing more." I know that we can do this. Indeed, one of the interesting challenges for our disciplines will be to envision a future in which people buy less and save more, borrow less and produce more. We need to model that in our own behavior as a college even as we imagine that in the behavior of others, and I look forward to working with you on this over the next semester. Until then, I hope you all have a happy, healthy holiday.