Remarks by Provost Paul N. Courant to the Board of Regents concerning the budget

February 20, 2003

We have received word of two executive orders reducing the State appropriation. The first, in December, was a two percent cut. The second, which we heard about yesterday, was for a 1.5% cut. The sum of the two is $12.7 million for the Ann Arbor General Fund.

We had expected that there would be some cuts mid-year, and have applied centrally-held funds of $7.2 million to these reductions. The remaining $5.5 million will come in the form of general fund reductions of 1.0 percent in administrative units and .5 percent in academic units. The academic units will be taking their cuts from activities other than direct instruction. We will not be increasing tuition during the current academic year.

We anticipate that the fiscal year 2004 appropriation from the state could be as low as 85% of the FY 2002 appropriation (which was the same as the original appropriation for the current year). This would be a reduction of $54.5 million.

In order to meet this reduction we are asking administrative units to plan for cuts of 6.5% in their General Funds and academic units to plan for cuts of 6.0%. We will protect financial aid from any cuts, and we will continue our policy of meeting the financial need of all resident undergraduate students.

All of our units are seeking ways to cut back on current activities and programs in order to protect essential activities and to provide a margin to support the innovations that are essential to the University’s position as a leader in higher education and research. Now is the time for units across the university to look carefully at their operations and their programs identifying essential priorities that address our core missions and deferring, reducing or eliminating all we can that is not essential to the core of our work. Each of our units will share in the cuts, and deans and directors will have flexibility in determining with the central administration how best to absorb the shortfall while still managing our teaching and research functions. Our first priority will be to protect the quality of our students' learning environment – now and in the future. At the same time, we must continue to make a Michigan education accessible to the students of the state.

Each of our units has a unique set of missions and expenditures that support those missions, but a number of areas of scrutiny apply quite broadly across the University. Just as the Governor has done, we are paying attention to every area of expenditure at the University, large and small. These include the following:

1. Eliminating nonessential travel, and when travel is necessary, requiring Saturday night stays where doing so saves money.
2. Holding positions open, and using open positions as an opportunity to reconfigure work so that positions can be eliminated.
3. Reducing the number and use of departmental vehicles.
4. Lengthening the replacement cycle for equipment, notably computing equipment and furniture.
5. Eliminating duplicate subscriptions.
6. Adjusting thermostats and taking care to turn out lights to save on utility costs. The general fund spends $55 million a year on utility costs, and each year if we save even ONE percent it translates into half a million dollars.
7. Reducing the use of messenger services and express mail.
8. Reducing the number of University-provided cell phones.
9. Reducing the use of temporary employees.
10. Eliminating or reducing overtime.
11. Determining appropriate minimum sizes for classes, and determining where we might be able to teach fewer sections with larger enrollments, in cases where larger class size does not significantly reduce learning quality
12. Reducing the number, frequency and cost of publications and reports, using the web as an alternative where possible.

All of this is taking place in the context of an environment in which the demands on the University are increasing. We have more students and more sponsored research than at any time in our history. Thus this budget cutting is not of the kind that goes with a reduced volume of business, as is the case in much private industry over the last several years. Rather, we must reduce, in the most careful way possible, the range of our activities, while still providing a UM-quality educational and research environment to the nearly 39,000 students who come here to study. I must note that we are not immune to the usual cost drivers—salaries, utility costs, health benefits, insurance, and general inflation. Overall, the cost of what we are doing this year will be close to $50m higher than last year, prior to any cuts.

The good news is that our academic leadership in schools and colleges has been taking measures for over a year that will allow them to continue to provide essential programs, and even to grow in areas that warrant growth—from bioterrorism research to the teaching of foreign languages—while reducing activities that, while valuable, are less valuable than what we keep. The Business School is discontinuing a program in Brazil and is teaching courses in larger sections, as are many schools; the School of Social Work has reorganized its computer support function and eliminated some positions, and has economized on the use of rental space, squeezing more people into the space it has. The Taubman College of Architecture and Urban Planning has turned down thermostats and is distributing many of its publications via CD and the web, resulting in the elimination of one staff position.

This is a great university, and its greatness depends on the people who work and study here and on the environment that we provide them to support that work and study. We are continually engaged in examining our activities with an eye to increasing those that are most important at the expense of reducing those that are less so. The State’s fiscal circumstances lead us to accelerate that examination and to do it more intensely. It will lead us to cut some activities that will be sorely missed, no doubt—but the ones we keep will be even more important than those we lose.

And speaking as an economist, I must say that higher education and K-12 are the most productive investments the state can make in the economic future of the state and the economic wellbeing of its citizens.

We have also realized economies in purchasing and in utilities that amount to well over ten million dollars a year relative to what we would be spending without improved management. We will continue to seek opportunities of this kind.

As we get better information about the State’s prospects and a more complete set of plans from our academic and administrative units I will be reporting back to this Board in the months to come.