President Gilmour's budget statement to the campus community
President Allan Gilmour
Wayne State University
Budget address to the campus community
March 3, 2011
Good morning, everyone, and welcome.
Two months ago, I was pleased and excited to become Wayne State’s 11th President. At the time, I said I was both grateful for the opportunity and honored by the trust our Board of Governors placed in me. I was also aware—as we all are—that Michigan’s economic crisis would present new challenges to the University. Our new Governor was elected on the promise to fix the state’s finances. And he is asking for shared sacrifice to balance the state’s budget.
I of course remain both grateful and honored for the privilege of serving as President. But there is hard work ahead for all of us, and that is why I wanted to talk with you today.
A couple of weeks ago, Governor Snyder presented his Fiscal Year 2012 state budget. In preparing the budget, he was faced with an initial budget gap of $1.4 billion, or approximately 20 percent. In addition, as he changed business taxation, he had the added burden of an additional $1.8 billion—bringing the total state General Fund gap to approximately $3.2 billion.
Specifically for higher education, the Governor’s budget proposal includes a reduction of approximately 21 percent, or almost $300 million in state appropriations. For Wayne State, a 21 percent reduction equates to about $45 million. If the budget were to be adopted as proposed, our state appropriation would be at the lowest level in more than two decades. But this reduction is only the first part of the budget proposal. The second component of the Governor’s budget for higher education includes a “tuition incentive grant.” This allows universities to lower their budget reduction from 21 percent to 15 percent—if the individual university agrees to an undergraduate tuition rate cap of 7.1 percent—which is the average tuition increase among all Michigan universities over the last five years. A 15 percent reduction would equate to $32 million for Wayne State. Assuming a conservative 2 percent base-budget cost increase next year, and including revenue from the maximum tuition increase allowed in the Governor’s proposal, our shortfall would be $27 million. This is a budget cut of six percent, once we back out the items that cannot be cut.
That’s a lot of budget math. But no matter how we calculate it, these cuts will be the biggest reduction in state appropriation we have ever faced at this University. (And to make it worse, the Governor’s budget would no longer allow donors to deduct their university contribution on their Michigan income tax return.)
This is the kind of reduction -- $27 million -- that can cause a lot of anxiety, or even paralysis. But it’s here—and it’s also the kind of challenge that forces institutions to look in the mirror with honesty. To determine what must be changed, improved, or eliminated to meet this task and make the organization stronger in the long run. We must be that type of institution.
This is a big challenge, but it is not bigger than we are. Coming from a large corporation, I have seen similar circumstances in the past. In fact, I’ve been through them more often than I care to remember. Recessions. Reorganizations. The aftermath of the Edsel. Of the Pinto. In every case, we emerged stronger, and better. One of Albert Einstein’s three rules of work states: “In the middle of difficulty lies opportunity.” I’ve seen this. We will get through this, together. And I underline “we.” We are all in it, and we will get through it, together.
To meet this budget challenge, we will look at everything we do, but it is essential that we set priorities. As I mentioned, there are some things we cannot cut. Our debt service; our lease payments; some of our fringe benefits; financial aid. But everything else is on the table.
Cost cutting is never easy. Importantly, we intend to approach it surgically. It doesn’t make sense to do an across-the-board reduction in every area. That just weakens everything equally. We want to preserve and improve those areas where we are strong and unique. Prioritize where there is opportunity for growth and expansion, for greater quality. This will require far more judgment than a straight reduction. But it is the right path if we are to address the challenge in the short term, and to lay the groundwork for vitality in the long-term—for what we all want Wayne State to be.
At the top of the priority list is preserving the academic and research core of the University. This means taking great care not to dilute the quality of the education we provide. Or to penalize students. It means that we must continue to retain and attract outstanding faculty. They are the key to excellence in teaching and research. I’ve asked Provost Brown to lead a thorough analysis of our academic offerings and processes. We must be sure we are doing all we can to maximize the success of our students and our faculty. We must be excellent at our most important priorities. But this doesn’t mean that the status quo is fine. It isn’t. We’ll be looking for how we can do with less—because we will have less.
I’ve asked Rick Nork, our new Vice President for Finance and Business Operations, to do a similar assessment of our administrative functions. Many of our processes are outdated, cumbersome, or worse. We must improve in these areas. Our student-facing services need to become more focused on helping our students. The “Wayne Way”—as it has been called for far too long—must go away.
Rick Nork is bringing in outside consultants to conduct a thorough, systematic, and objective assessment of our processes and services. Our goals are: reducing administrative costs, increasing the efficiency and effectiveness of our systems and processes, and improving the quality of our service. And, in this area in particular, the status quo is unacceptable. Under Rick’s leadership, the consultants will begin their analysis this month; we should see preliminary results sometime in May, with a full report in June.
In those areas where we are weak, or where we have limited potential to meet our education and research priorities, we will face the hard choices of downsizing or elimination. We don’t want to be average in everything. We want to be great in some things, and good in everything else. We can’t accomplish this by treating everything the same.
Much of our academic and administrative infrastructure has remained unaltered for years. In some cases this may make sense. In others, it reflects the kind of inefficiency that tends to build up naturally over time in large, complex, and often successful institutions. This budget challenge is a chance to clean house.
Cost cutting is a difficult exercise, but we have some experience. Over the past several years, we have managed to cut more than $50 million in expenses. We have been responsible stewards of our budget. But, as I mentioned, in every organization there is more that can be done.
In anticipation of this reduction, we have already begun the hard work of budget planning. The first phase will be data-driven—the facts on what we do, and where the money goes. And facts on the quality of what we do. Benchmark data will be important. Following data and facts will be an assessment phase—the role of each particular activity in the overall University. Because, when we’re done, we want more than survival—we want success. A great Wayne State.
I’ve appointed a steering committee with five members: Ron Brown, Provost; Hilary Ratner, Vice President for Research; Rick Nork, Vice President for Finance and Business Operations; Rob Kohrman, Associate Vice President for Budget, Planning and Analysis; and me. We’ll start a long series of meetings, in about a month, to discuss plans and recommendations, to develop a final budget, and to present this to our Board of Governors.
- Continuation of the non-academic hiring freeze and suspension of any non-academic searches, except for deans.
- I’ve asked each School, College, and Division for a reduction plan of 10 percent, which will need to look at all possibilities. These plans are due on April 6th. This is not an employment reduction plan per se, but some may be affected as we work to slim down or re-engineer Wayne State. It is too early to tell right now, but we must be prepared.
- Earlier I took you through the math that led to a six percent budget reduction. And before today you may have heard that we need a six percent reduction. And now I am talking about 10 percent. The reason? We need a list of actions that add up to 10 percent so that, working together, we can make tradeoffs—to balance the possibilities so as to maximize the whole University—not just individual parts.
- One area of emphasis: we’ll examine all activities that receive General Fund support.
- We’ll examine less-productive academic programs.
- A good opportunity, I hope, is more revenue. The most important revenue opportunity is enrollment. We will continue our recruitment of first-time college students, but we will work to increase recruitment of community college transfers, international students, and former Wayne State students who have dropped out for various reasons. We’ll work hard on retention. And private philanthropy and competitive research grants are important revenue-generating opportunities. In Development, we will focus first on our short-term needs while we prepare for our next capital campaign.
- And we’ll look everywhere for efficiencies in procurement—in everything we buy.
- We have no hidden reserves, so we have none to draw upon. We do have a “Rainy Day Fund” that I originally thought might help us address this shortfall. But it’s less than half what it should be, given the size of our university, and we cannot plan on state appropriations increasing in the future, or ever returning to previous levels. Since 2004, Michigan’s support for higher education has declined every year but one. Of 50 states, Michigan ranks 50th in increasing support of higher education over the past 13 years. The Governor is talking about new ways of allocating the state appropriation in 2012 – 2013, with potential adverse effects to Wayne State. And the Governor plans to grade on results – and how is unclear. So with the uncertainty of 2012-13, it would not be prudent to tap this fund. We may find we need it more in the future.
We are working, of course, with the legislature and the Governor’s office on Wayne State’s behalf. But it is too early to tell what will happen in Lansing. So we will base our budget plan on the Governor’s proposal. If the proposal is modified in the final bill, we will adjust accordingly.
We need the involvement and dedication of everyone in this effort.
I ask you, first, to stay focused on what you do. Please don’t give in to speculation or rumors. We need everyone doing their best on our important tasks of education and research—every day.
Second, if you have any ideas or creative solutions that can help us improve our efficiency or effectiveness, please submit them to firstname.lastname@example.org. However, having been through similar situations in my past career, I found that, when it comes to cost cutting, it’s always easier to see how the department down the hall can cut costs, rather than your own. Please limit your input to your own area, or those immediately affected. (I have little or no patience with those who find problems or inefficiencies in areas other than their own; please focus on what you’re responsible for.)
Once we have the various inputs – your ideas, the reduction plans of the Schools, Colleges, and Divisions, the academic and administrative assessments, we will construct a preliminary budget. As I said, this process will include much more input and discussion before we produce a final budget. And it may need to be modified again, depending on the final action in Lansing.
One of the things I have seen at Wayne State, and one that I hope to draw on for this effort, is a positive, optimistic attitude. Now is not the time to hope for a different outcome. Now is not the time to dream of the way things used to be. Now is not the time to blame the government or the economy.
A challenge of this magnitude can be an opportunity, if we as an institution have the strength, the will, and the intelligence to deal with it effectively. Wayne State is such an institution. I have seen it. We didn’t ask for this problem, but we will address it. And now is the time to do it.
We’re going to figure out what we have to do – and then do it, no matter how difficult. We may end up with fewer activities, but they’ll be better. Some parts of the University may not be here a year from now. Some of our services and functions will look and operate differently. But we will be leaner. And more efficient – and more effective. In some ways, this will be a re-invention of Wayne State. One that will lay the foundation for excellence. And one that is what we all aspire to.
Over nearly 150 years, Wayne State has a long history of success, through many ups and downs. We have faced challenges before; we’ll face them in the future. And we will weather today’s challenge. What we do today will fix today’s problem. And it will benefit future generations of students as we set a solid foundation for the work of this University. They won’t remember us, but they will reap the benefits of our having the vision and courage to do what had to be done to keep Wayne State University the extraordinary institution that it is.
We will not fail them. We will not fail each other.