Public Universities and the Challenge of Budgeting in a Recession

1. Public Universities and the Challenge of Budgeting in a Recession Teresa A. Sullivan Provost and Executive Vice President for Academic Affairs University of Michigan November 30, 2009

2. Questions to Consider - What does it mean to be a public college or university? - How can we address budgetary challenges?

3. Attributes of a Public University - Mission - Governance - Funding

4. UM Budgeting Strategies • Cost reduction and containment • Revenue enhancement - Reallocation of resources

5. U-M has cut $135M from its recurring budget over the past five years This presentation highlights the basic principles that are documented at: http://www.provost.umich.edu/budgeting/CostContain-2009.pdf

6. Develop a Cost Containment Strategy • Consult stakeholders • Communication plan

7. Giving the budget greater transparency Deans: permanent committee + task forces Faculty: advisory panels Staff: budget administrator committee and Budget and Resources Academy Students: advisory committee Cross-functional: cost-containment ideas

8. Communication is as important as consultation Budget briefing for Regents every month Frequent briefings of faculty groups, staff council, and other similar groups Meetings with donors and alumni leaders Communications with parents Periodic letters from president and provost

9. Keys to Making Progress • Consider incentives to encourage savings • Set targets and establish metrics - Follow a disciplined process

10. Incentives • Provide a way for innovative units to keep at least part of their savings • Emphasize cooperative solutions as preferable to competitive ones • Give credit for good ideas - Engage faculty expertise where relevant

11. Key Taskforces • Best Practices for Centers and Institutes • Creative Staffing and Shared Services • Expansion of Spring and Summer Term Instruction • Marketing to Non-resident Undergraduate Applicants • Nontraditional Educational Programs at UM • http://www.provost.umich.edu/CRRE/introduction.html

12. Targets and Metrics - Assess best practices and use benchmarking - Move to longer-run time horizons: budget now on a three-year cycle.

13. Budgeting process involves a set of principles - Protect and invest in our core educational and research missions • Seek stability and reduce volatility wherever possible • Remain competitive for faculty/staff/students - Leverage our size and scale

14. Principles - Maintain high quality essential services - Eliminate duplicate and lower priority activities - Shift costs from the general fund to other funding sources, where appropriate - Avoid short-term reductions with long-term cost and/or quality implications

15. Principles • Introduce centralization and greater sharing of resources in cases where this will result in higher quality services and/or more effective use of high quality facilities • Consider in-sourcing and outsourcing, when that leads to improvements in service at the same or lower costs - Take advantage of advanced technologies to achieve efficiency of operations

16. Focus on Key Areas Biggest gains are likely to be made at points of “big spend.” Two factors are important: number of dollars spent on a recurring basis, and the rate of growth in the item.

17. Energy Use Planet Blue - 5 building pilot in FY08 6% reduction in energy use $800,000 annual savings when all measures implemented - 30 buildings in FY09 -30 buildings planned in FY10 http://www.sustainable.umich.edu/

18. “But whatever may be the method of endowment of our great schools, may the day never come when they shall be inaccessible to the humblest youth in whom God has lodged the spark of genius, or that more common but sometimes not less serviceable gift of useful talent.” James B. Angell June 1879