U Responds to ongoing challenges
November 2, 2009
A busy summer at the University of Minnesota has given way to an even busier fall, and I am enormously grateful to have so many strong supporters of the University, its mission, and its students hard at work in our classrooms, labs, and offices statewide. I want to take this opportunity to update you with regard to a few of the ongoing challenges we continue to address in this new academic year.
Long-term strategic and financial planning
In mid-June, I shared with you a year-end budget update. I indicated that we must emerge from the current biennium as a more productive organization with a long-term plan in place to sustain our leadership in education, research, outreach, and affordable access for students from all walks of life. The state continues to face a serious budgetary shortfall in the next 18 months and in the next biennium. After one-time money from the federal stimulus bill runs out, we may again be faced with declining state support--along with fewer Minnesota high school graduates, intense competition, and ever-increasing requirements to demonstrate results and earn the public trust.
These are serious challenges, but all were on the horizon when we launched strategic positioning in 2004. In fact, senior vice presidents Tom Sullivan and Robert Jones wrote specifically about them in an April 2005 article entitled "The University's Quest for Excellence" (PDF 108 KB). The economic downturn has provided a renewed sense of urgency, but our strategic plan was developed to enable us to build upon our strengths and comparative advantages to meet these new realities.
Repeated deep budget cuts make it more difficult, yet necessary to continue to embrace an aggressive change agenda. In the past decade, we have significantly reduced costs and increased revenues in several key areas. For example:
- We have raised record levels of private funding, including nearly $300 million in new scholarship support for students.
- We have grown tuition revenue while keeping the total cost of a University of Minnesota education affordable, especially for Minnesota students with need.
- We have expanded our research portfolio to approximately $700 million per year.
- We submitted 870 American Recovery and Reinvestment Act (ARRA) research proposals this year and have already received 226 awards totaling $122.3 million above our usual research activity.
- We have avoided $42 million in energy costs in five years due to a fuel-flexible boiler and natural gas purchasing strategies.
- We reformed our construction management processes to avoid approximately $70 million in unnecessary construction costs.
- We restructured our health plan to save approximately $50 million per year.
- We have saved $8 million a year on prescriptions and reduced third-party administrative costs for our health plan by 3 percent in five years despite the steadily rising cost of care.
- We continue to consolidate academic units and Extension offices in order to reduce costs and improve efficiency while maintaining high levels of service.
This past year, guided by well-established budget principles, every academic and support unit of the University modeled 5 percent and 8 percent budget reductions. Based upon those models, each unit was asked to reallocate up to 8 percent of its FY09 base. We implemented the Retirement Incentive Option (RIO), substantially reduced hiring for both vacant and new positions, deferred important positions and long-term capital investments totaling hundreds of millions of dollars, reduced employee benefits by roughly $6 million, and froze compensation for 2009-10. We also consolidated the University's planning functions and reconfigured the leadership structure and administration of both the Academic Health Center (AHC) and the Graduate School.
These are important initial steps, but we still have more work to do. At a work session during the October Board of Regents meetings, Vice President Pfutzenreuter, Vice President Rosenstone, and I presented the report and recommendations of the all-University Future Financial Resources Task Force. The task force underscored the fact that we are undergoing a fundamental and lasting shift in our finances and that significant change is required to secure our long-term financial future. Difficult choices must be made in every academic and administrative support unit regarding which programs and initiatives to strengthen, which to continue, which to reduce or consolidate, and which to eliminate. We must narrow the scope of what we do without compromising our strengths or our mission. And we must significantly reform our cost structures even as we grow and diversify our revenue portfolio.
During the past several weeks, we have consolidated the University's future challenges into three clusters:
- Scope of the University's Mission and Academic Priorities,
- Financial Planning and Revenue Strategies, and
- Strategies to Reduce Overhead and Streamline Administration.
I am charging an all-University steering committee, including student, faculty, and staff representation, with overseeing the implementation of the recommendations of the Future Financial Resources Task Force and other active working groups as they apply to these three clusters. The committee will work to identify the breakthrough opportunities and gaps in the work we are currently doing, share ideas for improving academic productivity and results, and help to advance this agenda as quickly as possible. You can expect to hear more frequent updates on our progress as we move forward, including monthly updates to the Board of Regents.
University of Minnesota Promise Scholarship
Finally, I'd like to share some very good news. Over the past nine years, the U has demonstrated an unparalleled commitment and leadership with regard to making need- and merit-based scholarships available to students. This year we expanded our need-based scholarship programs to include guaranteed aid for Pell-eligible Minnesota residents (previously branded the Founders Free Tuition Program), as well as Minnesota students whose families make up to $100,000 per year (previously known as the Middle Income Scholarship).
In celebration of this groundbreaking commitment to Minnesota residents, we have renamed these programs the University of Minnesota Promise Scholarship, or the U Promise for short. This academic year, the first year of this expanded need-based scholarship commitment, the U Promise Scholarship benefits more than 13,000 Minnesota students from families earning up to $100,000 a year. Under the U Promise umbrella we will continue to develop innovative ways to increase public and private support and make a University of Minnesota education more affordable for our students.
The good news on our campuses is not limited to financial support for students, of course. This fall our campuses again enjoy strong enrollment and improving academic profiles, retention is now above 90 percent, and alumni, friends, and employers from across the state and around the world continue to value and support the work we do. So while I believe the challenges we face today constitute a new normal for public higher education, I also believe that we are pursuing the right strategies to ensure our continued success.
Of course, none of our accomplishments would be possible without each of you. Thank you again for your hard work and support.
Robert H. Bruininks