Interim Provost's Remarks to Senate Assembly

Thank you Bruno. I appreciate the opportunity to talk with you this afternoon.

In his recent book, A Larger Sense of Purpose: Higher Education and Society, Harold Shapiro reflects on the role of universities. He says, “It is [now] more essential than ever for the community of universities to define well its set of values and the sense of purpose that guides its efforts. Otherwise we risk being overwhelmed by values and commitments that are inimical to the world of scholarship and learning, or caught up in both the rampant materialism of our age and the incentive structure of private markets.”

I want to use our time together today to reflect a bit on this concern. To begin, let me quote the University’s mission statement. It reads, “ The mission of the University of Michigan is to serve the people of Michigan and the world through preeminence in creating, communicating, preserving, and applying knowledge, art, and academic values, and in developing leaders and citizens who will challenge the present and enrich the future.”

Our commitment is clear – preeminence. We value excellence in research, learning, and teaching. This excellence is the basis of our standing as a world-renowned institution. We have achieved this position in part because of the historic convergence of economic and political support and in part because of the commitment of our founders to free inquiry. First, there was the recognition by the territorial government 188 years ago that an investment in education would generate benefits to the Michigan territory. Early leaders in the state made this commitment and brought in the talented faculty members who would help Michigan become a true center of learning. Indeed, the state has been willing and able to support higher education at a level that allowed the pursuit of excellence.

The University, from its founding days, also recognized the value of an open academic environment and worked to create it. The earliest conceptions of the University included wide-ranging academic study. The principle of decentralized authority was established in 1817 when President John Monteith was given responsibility for seven of the academic fields and Vice President Gabriel Richard for six others. The University’s autonomy was also established early, roughly in conjunction with statehood in 1837. By the late 1840s, when the legislature had begun to interfere with the University’s internal affairs, the state constitution of 1850 formally established the University as autonomous and this has been reaffirmed in all subsequent revisions of the state constitution.

Historically, both social and financial support for higher education have been high. It is worthwhile to examine the level of support for education today so that we can, together, determine how to meet the challenges we face. We must and we will continue to focus on being the very best at what we do. But we do this in times that are not easy. I want to share with you my sense of the environment in which we are working to sustain and improve the University.

Let me begin with the national picture. The national economy is chugging along, with a 3 to 4 percent growth rate, more or less consistent with its long-term trend. Unemployment is roughly at its sustainable long-term rate and, partly because of Federal Reserve Board policy, the most accurate measures of price inflation are low and stable, in the 1 to 2 percent range.

That is the good news. The bad news is that the federal deficit has returned, reaching levels that impact our collective choices. And this deficit problem is likely to be much worse in a few years when the baby boomers begin retiring. Both now and in the future, there will be many competing needs and interests on the national level and most of them are worthy. But the deficits will constrain our choices. As a nation we face tough decisions about funding social security, renewable energy, Head Start, health care, and a host of other programs.

The federal government’s role in higher education includes research funding and student aid. Each will likely be impacted by the economic constraints caused by the deficit. As you know, federal funds are significant in research, especially in basic research. Protecting these research funds is a serious concern, so much so that last month a bi-partisan group of 27 governors wrote to President Bush urging him to make university-based research support a top national priority. Last week Congress gave tentative approval to the Labor-HHS-Education appropriations bill. It includes little or no increase for higher education research programs. For example, NIH received a 1% increase, it’s smallest in 36 years and a decline in real terms. Moreover, it is likely that Congress will enact a 2% across the board cut on all appropriations for FY06 once the process is complete. Any decrease in federal funds is significant for us. The University is one of the top institutions in terms of research and development funds (in science and engineering, $780 million in 2003, 3 rd in the nation) and much of that is federally funded.

Another area of concern nationally is financial aid for students. The buzzword in Washington is “affordability”. On the national scene calls for affordability are often statements of real concern. College does cost money. Making it possible for all qualified students to attend and develop the talents, skills, and habits of mind required for success in the 21 st Century is as important to our national economic well-being as it is to the quality of life for each individual. Congress has approved an increase in the maximum Pell Grant – a key component of financial aid – but has held all other higher education assistance programs at FY05 levels.

Sometimes calls for affordability are an indirect way to call for more external controls on colleges and universities. For example, Representative McKeon of California has suggested that there be sanctions imposed on universities and colleges that have tuition increases above the rate of inflation. He has also used cost concerns as the basis for a proposal to require colleges and universities to accept almost all requests for transfer of credits, undermining each institutions right to determine its own standards for awarding credit. I’ll address academic freedom issues in a minute, but these are troubling proposals because they are indicative of a belief that colleges and universities should not be autonomous organizations.

Finally, on the national scene, I want to mention globalization and international students. Higher education has long been one of our most marketable products. Students from around the world have come the United States because of the quality of our colleges and universities. We’ve had a dip in number of international students enrolling since 2001. The number went up a bit this year, but has not returned to pre-2001 levels. Michigan is 7th in the nation in the number of foreign students we enroll and they make up about 12% of our student body. Part of this decline is related to difficulties obtaining visas to study here and restrictions on what kind of research foreign graduate students can conduct. There has been some improvement on the visa front recently, with students now getting visas more quickly than they did two years ago. The restrictions on research activities are more difficult to address. We are working with other universities to help Congress understand this issue.

Let me turn now to state level support issues. Before talking specifically about Michigan, I want to look at trends among the states. The short story here is that things are not easy. For example, in Virginia state support for the higher education system is declining rapidly. At the University of Virginia, state funds currently make up just over 8% of the budget. This level of support is so low that there is serious discussion of creating a new kind of university known as a “state-assisted charter institution” rather than a public university. States in the Midwest have generally provided, at best, modest increases of between one and two percent to their higher education budgets in the past few years. As our friend and former president Joe White noted recently, in 1987, seven of the top 26 universities in the U.S. News rankings were public institutions. Today the number is four. Whatever we might think of the rankings, this is not a good omen. A couple of states with stronger economies have been investing more in higher education. The University of North Carolina system and the University of California system, both of which like to recruit faculty from Michigan, have had more significant investment by the state, about a 5% increase in each case.

Historically, the state of Michigan has invested heavily in higher education. There was a clear belief that education was a public good, that investment in it benefited the entire state, not just the individual. Generally, that view carried the day. Over the university’s early history, the state provided support amounting to about 80% of the general fund budget. By the late 1960s, this share had dropped to 60% and now it is down to barely more than 20%. We are getting precariously close to Virginia.

Last week our colleagues in the Economics Department held the annual economic outlook conference. They anticipate a sixth straight year of job losses in 2006 and a job growth rate of only 0.2% over the next two years, resulting in an unemployment rate of 7.6% in late 2007. To make the outlook even gloomier, they note that much of the job loss is in high paying manufacturing jobs while job growth is likely to be in the lower paying service sector.

The state budget situation is no better. Once we take account of mandated spending for schools, transportation, matching grants, and nearly mandated spending for law and order, there is likely to be relatively little discretionary spending available.

We are also addressing a political challenge. Increasingly we hear that education is a private benefit and that its costs should be borne by the students who receive this benefit. But there are important collective benefits from higher education and we have to make them known. It provides society with the educated leaders and thoughtful citizens needed to make democratic government work. This is not a benefit that is easily quantified, but one we must focus on nevertheless. As Kofi Annan has observed, “ We are …convinced that information has a great democratizing power….It is ignorance, not knowledge that makes enemies of men. It is ignorance, not knowledge that makes fighters of children….Education is the premise of progress in every society, in every family.”

Now, I want to turn to the second broad ingredient in the historical success of the University, the academic environment and the freedom to undertake the research that will lead to new knowledge. Fifty years ago Justice Frankfurter wrote of the threat to free society that is posed by governmental interference in academic inquiry. He cautioned that there is “ grave harm resulting from governmental intrusion into the intellectual life a university.” His view was representative of a practice that had prevailed during the development of public higher education. In the early decades of the University of Michigan, political officials had deferred to the faculty on the running of the institution, allowing visionary presidents such as Henry Tappan and James Angell to shape a university which would rise to national prominence.

We must continue to give attention to the climate in which we interact. Six weeks ago I had the opportunity to join many of you in listening to Floyd Abrams talk about academic freedom. He shared many insights into concerns such as the “academic bill of rights” that would impose outside constraints on what universities teach. It was a helpful reminder that we must be vigilant in protecting our right, our ability, and our obligation to explore complex, difficult, and unpopular ideas.

These two broad areas – economic-social-political support and academic freedom coalesced at different points in the 19 th and 20 th Centuries, leading to the development of a higher education system that is the envy of the world and of which the University of Michigan is a prominent member. Today, by contrast, they are coming together in ways that threaten that system.

Here at Michigan, we are pushing back. We continue to focus on excellence and to demonstrate the multiple benefits this commitment brings to the nation, the state, and the individual. Our commitment means that we will continue to devote resources to the recruitment and retention of a world-class faculty. We rely on the schools and colleges to give us their thoughtful judgment about the academic fields in which investment is most important. In the current budget situation, we will not be able to fund every request, but with your help, we can work on those that are critical. We also rely on faculty to develop imaginative ways to do new things – through team teaching and other interdisciplinary activities.

Policymakers often say that there are two options in dealing with budget problems, to raise revenues or cut expenditures. We’ve been doing some of each. We raised tuition by 12.3% last year and by an average of 7.2% over the last five years. We have made the easy budget cuts – although I would not describe them as having been easy. In the past three years we’ve made internal cuts of $77.4 million, largely, but not entirely, in non-academic areas including things like relying more on web publications, consolidating purchase and use of equipment, eliminating staff positions, and reduction in travel and sabbatical replacement funding. This year our Energy Star Program is estimated to save$8.7 million. With strategic supplier contracts for office and lab supplies and equipment, we anticipate savings of $10.6 million. Centralization of both chiller plants and computer cluster machine rooms will save money and make for more efficient utilization of space. Academic units are contributing to our savings as well. LS&A has worked with the administrative computing office to develop an electronic waitlist system that enables the college to meet enrollment demand more efficiently. The Ross School of Business is increasing its customized offerings in the Executive MBA programs, generating revenue to support activities that would otherwise require general fund support.

We are also addressing the economic situation by encouraging public investment in education as a sound short term and long term strategy. In the Midwest, the CIC universities spend about $6 billion annually in research funds. These funds help to support healthy local economies through employment and through equipment and other purchases. As both Tom Friedman and Jim Duderstadt have pointed out, knowledge will be the “natural resource” of the 21 st century. As oil and iron were the drivers of earlier economic transformations, the one we are in now is driven by knowledge – ideas, innovation, and entrepreneurship. A recent study by the Anderson Economic Group in Lansing notes that the developing technology sector in southeast Michigan has an annual payroll of $22 billion. Higher education trains the workers who make that sector go and its continued expansion depends on investment in education. We are working to be sure that today’s political leaders understand the generalized benefit of investment in education, just as territory leaders did almost 200 years ago.

Another facet of our commitment to excellence is recruiting the best students. This is a task made much easier by the presence of a stellar faculty. We will continue to develop and support programs that make Michigan affordable to all who qualify for admission. This past winter, President Coleman and then Provost Courant announced the M-PACT program that addresses the unmet financial need of resident undergraduates. The Rogel Scholarship program helps non-resident students. Our tuition strategy, using increased tuition revenues to fund financial aid is a textbook transfer system and it is an used as a model by many other universities.

Our success in addressing these areas of concern will be determined by others who assemble here a decade or two from now. If we look back, we see that earlier generations worked, in good times and in difficult times, to create the university that we have today - a university that is a world leader. Our responsibility is to strengthen this institution so that future generations will have the opportunity to understand, challenge, and change the world in which they will live.

Let me close by turning again to Harold Shapiro’s new book. In his essay titled “The Soul of the University” h e says, “ All in all, the Western university has been a remarkably durable and adaptive institution. …Despite their many shortfalls, despite changing demographics and public and private expectations, despite a somewhat deteriorating physical infrastructure, and despite a sometimes shaken faith (internal and external) in their potential civic contribution, these institutions will, I believe, once again prove capable of adapting in a manner that reflects an understanding of the current environment. Universities may have to do more with less….But I believe that their unique potential for learning, which centers around the power of the person-to-person encounter, their demonstrated capacity for largely peaceful interaction across many cultural divides, and their continuing ability to challenge the familiar, will make them indispensable assets for the future now unfolding.”

Thank you. I’d be happy to answer your questions.